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Penny Wise, Pound Foolish 30 September, 2008

Posted by David Anderson in Uncategorized.
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Here is a deal, we can borrow some money to protect us from losing trillions in wealth, doubling unemployment, and causing millions in the third world to die from lack of medicine, infrastructure, and food. We obtain assets worth several times what we pay for them, and be able to resale them at our convenience to make the most off of them. Who wouldn’t favor that type of deal?

People who oppose the financial rescue plan can’t get stuck in opposition. They risk being penny wise and pound (dollar) foolish. Something needs to happen and happen soon. I am not unhappy that it failed, but we will all be unhappy if we don’t get a new bill passed soon. It did not address deeply enough the problems I wrote about in February. We need to address the underlying issue by allowing people to lock in their arms at fixed rate no questions asked. We need to allow the value of the mortgage-derivative securities to be determined by the income they generate, just like we would the underlying mortgages. The Mark to Market (change the value to whatever thy sell for today) rule passed in the get the Enron frenzy is killing us. The former FDIC chairman and Donald Trump have now said the same thing.

The best way to understand the current market problem is with an illustration.

Imagine if you borrowed money to buy your car and someone came to you every week and said you had to see what you could sell it for and adjusted your down payment based on it. One week you had some transmission problems. It would cost you 1500 dollars to fix it. The bank came and demanded that you see what it would sell for today. The answer is nobody would buy it today, wait for a week. The car is still fine. The engine is perfect, the body is great, and it is still worth $6000 blue book. You owe $5000. The bank values the car at $500 and demands repayment. You can no longer afford to fix it so you let them repossess it.

Your friend helps you out by buying the car for $500 and spends $1500 to fix it. He borrowed the money. He then resales the car to you for $3000.

Was your friend the smart one or the foolish one? He borrowed $2000 after all for a broken car. No, he understood the real value. The foolish ones were the one’s who didn’t understand the value and forced the untimely sale.

The Congressional Budget Office (CBO) tell us this rescue bill will not cost us much (25B) in the long run. What will cost us is a deep recession or worse.

Don’t let revenge be an economic policy. Don’t trip over pennies and lose dollars. Let our leaders lead.

Local Response to National Economic Uncertainty 23 September, 2008

Posted by David Anderson in Action Item, Economic Policy, Election 2008, Kent county, Local.
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For Immediate Release
Contact: David Anderson
302-734-0366
ANDERSON DECLARES JOBS AND ECONOMY TOP ISSUE IN LEVY COURT RACE—
NATIONAL SITUATION DEMANDS A MORE PROACTIVE LOCAL GOVERNMENT

At Thursday’s Kent County Federation’s of Republican Women’s meeting, David Anderson candidate for Levy Court will promote a jobs and prosperity agenda for Kent County.
David Anderson believes now is the time to make jobs and the economy a top priority of Kent County Government. Levy Court 3rd District. The current Levy Court is investing $73,000 in economic development. 2008 was $74,000. The 2007 investment was $1,600,000 in grants, land acquisition, and expenditures. A previous year was approximately $900,000. $700,000 was transferred from Economic Development to open space preservation.
The following is a synopsis of Mr. Anderson’s proposal– A Prosperity Agenda!
We need to be pro-business in order to be pro-jobs.  I would like to see our industrial-commercial areas become enterprise zones and international trade zones. We need to work with the chamber of commerce (CDCC) to take advantage of grants available to businesses which export overseas.  With the Internet and parcel post services, it is an easy proposition for more businesses than we think.  There are more than 360 federal economic development programs.  Let’s have a contest with the colleges to see who can come with the best way to tap them. 
 I would also like us to take advantage of alternative energy and science grants.  I would also like to see a tax credit to any business anywhere in the county which expands.  The new expansion portion should be exempt from higher taxes for three years.  I would love to see start ups get a one year tax holiday.  These ideas won’t cost us money but could bring us a real return.
We can also publish all of the available support programs for local and start up businesses.  Every non profit, institution or agency should be known through the county website and a booklet.
Instead of wasting money on lawsuits because we don’t follow state laws, lets build our economy.
My recommendation is to draft an incentive which piggybacks on a program like the SBA small business loan program that requires a business plan. It has a track record of being effective and not abused. For example, proposed legislation might be that if one starts or expands a business in Kent County and one qualified for a small business loan through the SBA program then the County will provide seed money grant each year for three years as long as your location remains Kent County, etc. The amount of seed money could be a percentage of wages paid to encourage job creation, a percentage of taxable income generated by the business, both, or taxpayer’s choice each year. This would inspire all types of business entities: sole-proprietorships, partnerships, corporations, and LLCs.
 I specifically note applicants must qualify for a SBA loan – not have received a SBA loan – because if a person doesn’t need to finance their business start-up/expansion they should not be ineligible. Other similar incentives may be available to entice larger businesses to the area by working with the State Economic Development Office.
What are we doing now?  We hired a professional firm which came up with some good ideas.  We shelved the study and cut the economic development budget to its lowest level in years.  When we need jobs the most, we made that the lowest priority. 

The meeting is sponsored by Kent County Republican Woman’s club. David Anderson will be one of the guest speakers at the monthly luncheon on September 25th at Maple Dale Country Club Dover. The luncheon starts at 11:30.
Mr. Anderson will gladly accommodate any press questions afterward or arrange interviews with any media unable to attend..
End

Our Magic Piggy Bank 17 September, 2008

Posted by David Anderson in Economic Policy.
Tags: , , , , , ,
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I heard it on the radio news. Taxpayers are bailing out AIG. It turned out the Fed(Federal Reserve Bank) was bailing out AIG. That is a big difference. The fact that even the news reporting can’t get this right concerns me. The truth is today, America may have become a temporary corporate state. We are seeing the economic power of America consolidate in the hands of a few planners who have government power to print as much money as they see fit.

In 1913 the United States established an Independent central bank system called the Federal Reserve System headed by the Federal Reserve Bank and its politically appointed board of governors with banker appointed members of the open market committee. It was established to put professionals in charge of monetary policy. The Treasury Department had shall we say varying degrees of success.

The Federal Reserve by law is charged with keeping inflation under control, keeping us from deflationary depression, and keeping us as close to full employment. They have enormous power over the banking industry, the money supply, interest rates and now that depression era laws have been activated, investment banks. The maestros of the privately owned central bank have become the most important people in world. If I can find an hour this week, I will write about the implications of the bankers expanding their control to the insurance, investment banks and commodities. No promises though.

Many people think the Fed is a federal agency. Like Freddie Mac and Fannie Mae it is not really a federal agency, but unlike them (which were publicly held) it is privately owned. It is an amazing innovation. Instead of having political hacks running the money supply and then have to be bailed out by the bankers every 20 years, the professionals run the money supply by controlling the federal bond market, bank margins, and printing the money.

The money that the Fed is using does not come from the federal budget. It is not tax money. This unique ability to print money gives the policy makers a major temptation; it is to treat the Fed like a magic piggy bank (as Greenspan warned us against). It can do amazing things to stabilize the economy, but it comes at a price. Too much money equals inflation which is a silent tax on wages and assets. Allow the Fed to expand its scope too much and it becomes distracted from its historic and vital role. The reason companies like AIG ran into problems is that they became to diversified for anyone to manage. Imagine trying to control the variables of the global economy. No one can do it. If the Fed becomes too preoccupied, it may well miss the next crisis signal. For our own sake, we need an economic policy which restores risk management to the market place, a sound energy policy, and sound fiscal policy, and tax reform.

Palin solidifies West 16 September, 2008

Posted by David Anderson in Uncategorized.
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The likely electorate has become more Republican. The
Western states of MT, SD, ND, and AK are no longer competitive. CO and NM have moved toward McCain giving him the lead in those states for the first time in months. WA state is a two point race. Back east even PA is tied. The lead in the electoral college is no longer Senator Obama’s. The race is too close to call. Palin may be the smartest VP choice since Johnson. (All conclusions based primarily upon Rasmussen reports backed up by Real Clear Politics.)

One Week Later 16 September, 2008

Posted by David Anderson in Election 2008, State.
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How does the political landscape look a week after the primaries?

On the Republican side, it is pretty straight forward. Republicans feel under siege and are anxious to break out. The primary showed it. The primaries brought to the fore people the party most trusted to move its standard forward. In Sussex, it was bold colors not pale pastels. In the 4th Senate in New Castle County, the party turned to a person most associated with reforming the image of the party. Statewide, it backed the convention and went with a trusted, proven vote getter. Rank and file Republicans are determined to put their best foot forward. They believe the state has been grossly mismanaged and want to be the ones to get it right.

The Democrats are more complicated in some ways, yet one simple theme was clear. Democrats want to break from an establishment which failed them. Gordon represented the old ways and went down. A last minute challenge to the sitting county president drew a significant number of votes. The establishment favorite for insurance commissioner didn’t make it. Former Independent party standard bearer Karen Hartley Nagle won handily in the Congressional primary despite being out advertised by her opponents.

The big news was the governor’s race. Jack Markell took on the current administration and won. I had predicted that 25% or lower turnout would be a Carney victory; a higher turnout would be favor Markell. I also predicted record turnout. Markell won with three strengths, an economic plan that inspired the faith of primary voters, his rejection of current school testing, and a call for universal health care. Markell was a curious mixture of hard left and centrist positions. The right mix for primary voters.

Judge Lee’s non-participation in the forums has left him at a deficit. I hear voters feeling like they know Markell better. Judge Lee can change that with a new focus on the fall campaign. The flip side is that people are still ready to focus on him, which they may not have done if they felt like they knew him. The Bill Lee team has made a gamble only time will tell if it pays off.

What we know about the Markell plan is that it avoids answering the pressing problems facing the state. He avoids budget solutions. He avoids any talk of reforming the empty transportation trust fund. It has a lot of specifics except in cost projections. The opening line of the fall campaign that we can’t afford Jack’s book, may be the determining factor.

Jack Markell has not been a factor in calling for spending reform in the lastest budget crisis even when he was running against the administration. His plans call for more spending without the mention of off sets except in education. With less than 2 months, Markell may not be able to maneuver to the fiscal center. He is open to being labeled a tax and spend liberal not generally successful in DLC Delaware. The question is will it stick?

The game of good cop Markell and bad cop Minner could be a gambit to deal with this fact. The idea that a party loyalist like Minner would just be so hurt in public stretches belief. It may have been true that night, but it strikes me more as political posturing today.

9/11 remembered in Prayer 11 September, 2008

Posted by David Anderson in Uncategorized.
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Noontime, September 11th 7 years ago, found almost all of us praying. There is a movement to pray in all 50 State Capitols and D. C. called Cry Out America. The gathering for Delaware is on the Green. Those so inclined are hereby invited.

Time to Move Forward 10 September, 2008

Posted by David Anderson in Uncategorized.
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The primaries are over. It is time to move forward. Republicans in Delaware need to unite this election year. At stake is whether or not we have a two party state. We need to keep the Delaware House of Representatives and add to the state row offices. After 2010 is reapportionment. If we don’t start rebuilding now, we will have a serious problem. We also face the largest proposed expansion of government in the history of the state at a time when our finances are the second worst since the Depression. A Democrat house, senate, and governorship would be a blank check to big government.

I look forward to seeing the uniting of the party in the Senate races. I call upon Mr. Protack to suspend his active campaign because continuing it hinders the reforms he seeks rather than advances them. The Independent Party line is useless without fusion this year unless a candidate has substantial resources to remake the political map. Mr. Protack is not that candidate. It would be a long run negative for those of us who support fusion and for Mr. Protack’s political future to continue. I would have loved to see Mr. Protack on the ballot for New Castle County President right now, it was a bad choice not to purse that opportunity once the Democrats became divided. We all make mistakes. The wise person doesn’t compound them.

Congratulations to both the winners and losers. I have found that if you stay in the game, you can advance your objectives regardless of which side of the results you came out on. It is all about the community. Don’t give up.

What a night! 9 September, 2008

Posted by David Anderson in Election 2008, State.
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Jack Markell won and faces Republican Bill Lee who also won. The pace of change has quickened a bit in Delaware. With the budget crunch, Mr. Markell will face the inevitable question–how are you going to pay for it? Tonight it is time for him to celebrate. There is tomorrow for questions.

THE LINEUP:
D R
Governor: MARKELL v. LEE

Lt. Governor: DENN v. COPELAND

Ins. Commissioner: WELDIN STEWART v. BRADY

Congress: HARTLEY NAGLE v. CASTLE

US Senate: BIDEN v. O’DONNELL

I am On WHYY tonight 9 September, 2008

Posted by David Anderson in Uncategorized.
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Get the best in Primary analysis on channel 12 or WHYY.org. You also can get my perspective between 8 and 9:30.

Why is it you and I never get a deal like this? 8 September, 2008

Posted by David Anderson in Uncategorized.
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The Fed has decided to avoid allowing the uncertainty in the market to devolve into a financial panic. It is has fired the executives of the federal mortgage companies Fannie Mae and Fannie Mac. There failure would have pulled the entire world into recession and the U. S. into economic turmoil. The executives who lost their jobs didn’t fare too poorly. One had the board insert into his contract last July after it was known they would need a government bailout, a nice departure clause. The bottom line is while taxpayers are at risk, pensioners have lost, and banks are undermined directly as a result of his mismanagement, he gets an extra bonus. What a deal?

Here a quote the NYTimes aticle.

But even after the government seized the mortgage finance companies on Sunday and dismissed their chief executives, the companies’ outgoing leaders could see big paydays — a prospect that angers many investors, particularly because ordinary stockholders could be virtually wiped out.

Under the terms of his employment contract, Daniel H. Mudd, the departing head of Fannie Mae, stands to collect $9.3 million in severance pay, retirement benefits and deferred compensation, provided his dismissal is deemed to be “without cause,” according to an analysis by the consulting firm James F. Reda & Associates. Mr. Mudd has already taken home $12.4 million in cash compensation and stock option gains since becoming chief executive in 2004, according to an analysis by Equilar, an executive pay research firm.

Richard F. Syron, the departing chief executive of Freddie Mac, could receive an exit package of at least $14.1 million, largely because of a clause added to his employment contract in mid-July as his company’s troubles deepened. He has taken home $17.1 million in pay and stock option gains since becoming chief executive in 2003.