Friday, December 09, 2011

Friday Flotsam - Fraudsters, Hypocrites, Liars and Politicians. But I repeat myself.

Time once again for the Dividist to stroll down our metaphorical beach and take note of the detritus that has washed ashore and cluttered this little island of rationality in the great big blogospheric ocean.

Much of what attracted our attention this week were items that have washed ashore here before. Again and again and again. The Dividist simply does not have the arm strength to throw this garbage far enough into the sea to keep it from washing back on our beach. Pity.

ITEM - "Will No One Rid Me Of This Meddlesome Priest Just Fix It?"
The Dividist has been covering "The Case Of The Missing Billion." since it was revealed that heretofore sacrosanct legally segregated client funds were apparently tapped to backstop Jon Corzine's ill-advised "bet the company" wagers at MF Global. Little noticed in his testimony to the Agricultural Committee on Wednesday was this tidbit that foreshadows some coming legal attractions, to whit - The Becket Defense. From Huffington Post:
"Lawmakers asked Corzine to lay out how he may have "unintentionally" contributed to the mixing of customer and firm money. He pointed to the chaos of the hours leading up to MF Global's bankruptcy filing on October 31. "Someone could misinterpret 'You gotta fix it,' which I said the evening of October 30th,'" Corzine said."
Yes, "You gotta fix it" could easily be misinterpreted to mean something like "Raid the client accounts if you have to, but get me the time to sell this piece of crap before the street figures out we're insolvent." That kind of misunderstanding happens all the time. Consider this innocent off-the-cuff remark by King Henry II, acted on by nearby knights in his employ, and the next thing he knew, through no fault of his own, he learns the Archbishop of Canterbury was lying in a pool of blood. These things happens.

Thursday, December 08, 2011

Corzine Agonistes

Credit where it is due. Jon Corzine has reappeared and is testifying before the House Agricultural Committee. He is not taking the 5th, as I'm sure his lawyers would prefer. It's being covered live on CNBC, and attracting blogospheric attention:
Corzine: ‘I Simply Do Not Know Where The Money Is’ — A contrite Jon S. Corzine will express both sorrow and a firm defense of his actions Thursday in his first public appearance since the collapse of MF Global Holdings Ltd. in late October. — “Recognizing the enormous impact...
While he is indeed testifying and answering questions, it does not mean that he is being forthcoming. His prepared testimony was previewed by the WSJ:
"Much of the day's testimony is likely to focus on a significant shortfall in customer funds at MF Global. As Mr. Corzine scrambled to stabilize the firm in its last days, it was discovered that hundreds of millions of dollars were missing in customer accounts.

The trustee overseeing MF Global's liquidation estimates the amount at $1.2 billion. Mr. Corzine will say in his testimony that he had little to do with the mechanics of moving customer cash and collateral and that he was "stunned" when he learned on Oct. 30 that the money was missing.

"I simply do not know where the money is..."
This last is almost certainly true. The money was lost in highly leveraged, high risk trades that Corzine authorized as CEO, and he truthfully doesn't know who has the money now. But - he is disingenuously answering an irrelevant question.

The real question is not where the money is now, the real question is: How was segregated client accounts illegally mixed with MF Global trading accounts, and who authorized client accounts to be tapped for this purpose? The answer to that question points to a culprit in criminal negligence or fraud.

In the early going, Corzine was asked the relevant question whether he authorized the transfer of segregated client funds. CNBC:
"Questioned directly about the transactions leading to over $1 billion in missing client funds, Corzine could not offer clarification."I never intended to break any rules. I'm not in a position given the number of transactions to know about the movement of any specific funds. I certainly would never intend to have segregated funds moved," said Corzine."
Well. There you go. It wasn't his intent. Isn't that special? Maybe he authorized it. Maybe he didn't. But it wasn't his intent. How convenient. I wonder - who did intend for a billion or so of client funds to be moved? Could it be... SATAN???

Divided and Balanced.™
Now that is fair.

Thursday, December 01, 2011

CFTC Chairman Gary Gensler to Senate Committee: "Jon who? MF Global What?? Are you talking to me?"

In "The Case of the Missing Client Money" at bankrupt MF Global, the relationship between regulator and the regulated is again coming to the fore. Obama administration appointee Gary Gensler – Chairman of the Commodity Futures Trading Commission - recused himself from participating in the investigation of MF Global because of his close ties to CEO Jon Corzine. Fine and good. But he did not recuse himself from meeting with Corzine about potential CFTC rule changes on segregated client accounts earlier this year. You know - the same rules that would have governed use of the very funds that are now missing from the bankrupt MF firm.

Sunday, November 27, 2011

Blog Demolition Day

Although I switched to "New Blogger" four years ago, I never quite got around to utilizing the New Blogger templates. Since then, some blog elements have been behaving badly, plus I want to take advantage of some of the newer features and I am just kind of bored with the old look.  So the time has come.

I'll be putting up a new template over the next day or two, and things are going to look pretty messy around here in the meantime.

Friday, November 18, 2011

Refresher Course: Honest Graft vs. Dishonest Graft vs. The STOCK Act

John Boehner and Nancy Pelosi at the feet of George Washington Plunkitt

In a recent feature story on 60 Minutes, Steve Kroft detailed how many in Congress use their privileged access to information on pending legislation, investigations and regulations to line their own pockets. Much of the piece was based on research of Hoover Institute fellow Peter Schweizer from his book “Throw Them All Out”. Among the surprising revelations in the book – Congress is exempt from prosecution for the same kind of insider trading that would send the rest of us to jail.

Coincidentally, ├╝ber-lobbyist and felon Jack Abramoff was saying much the same thing to anyone who would listen while promoting his new book "Capitol Punishment". CNBC has been covering the story for a while and offers a succinct summary:

Sunday, November 13, 2011

Ranked-choice Voting: Epic Fail in Oakland.

Mayor Quan releases dove at religious conference.
The dove was reportedly killed shortly thereafter, struck by a wayward bullet
while flying over the Occupy Oakland encampment.

One year ago, Jean Quan was elected mayor of Oakland. She never led in any poll at any time during the campaign. She always trailed front-runner Don Perata in every minute of the campaign from beginning to end.

On election day, 36% percent of Oakland voters said they wanted Don Perata as their mayor. Only 24% of Oakland voters said Jean Quan was their first choice to be mayor. In prior years, a runoff election would have followed and voters would have chosen between Perata and Quan in a head to head runoff election. Not this year. This was Oakland's first Ranked-choice Voting election for Mayor. The other candidates on the ballot were eliminated and the second and third choice votes on their ballots were added to Quan and Perata's totals. Jean Quan became mayor. Oakland saved the cost of conducting a runoff election.

Thursday, November 10, 2011

Meanwhile, in the People's Republic of San Francisco...

... over 2/3 of our citizenry did not bother to vote in Tuesday's election for Mayor, Sheriff, and District Attorney. Of those who did vote, many did not understand the "Instant Runoff" Ranked Choice Voting used for the first time in the mayoral race.

Before we get to the results, your loyal blogger wishes it to be known that there was something good to come out of this election season. Specifically, the best thing to come out of this election season was rediscovering The Argonaut by way of their current election edition (the image at the top of this post is from the front page of their latest edition).

The Argonaut is a San Francisco institution the dates back in various incarnations to 1877. As near as I can tell, it is published whenever they damn well feel like it. The preface to their election recommendations in this edition is a pitch perfect articulation of my loathing for this election. I can't say it better, so I won't try:
"... let us express our complete and unqualified contempt for the city’s system of ranked choice voting and taxpayer financing of campaigns – to the current (already spent and still climbing to the highest mountain peak) whistle of over 14 million dollars of taxpayer financial underwriting by a bone-broke city of candidates campaigns. Many of them had no business running in the first place – but the city’s idiotic law makes it impossible for them to drop out of the rat race because if they do the practical thing and drop out of a race they know they have no chance of winning, the prudent candidate is has to pay the city back for the taxpayer money received, which most of them can’t afford to do. But if they wait and stay in the race and go ahead and lose as everyone in town including the candidate him (or her) self knows they will. Just how stupid is that? Very."
Exactly. As noted here before, between the Ranked Choice Voting and public funding of candidates, this election was pregnant with disaster. We have no one to blame but ourlselves. As long as we continue to elect these clowns to the Board of Supervisors, we deserve the unconscionable idiocy and incompetent governance we get in return.

Tuesday, November 08, 2011

Chinese Communist leader eviscerates European welfare state. Really.

Image from The Economist

Al Jazeera's Teymon Nabili recently interviewed Jin Liqun, Chairman of China's Sovereign Wealth Fund. The remarkable interview has garnered well deserved attention in the blogosphere and MSM. It is well worth the 30 minute investment of time, but for those who want to skip right to the good parts, I'll offer a few highlights.

First, Jin Liqun explains with crystal clarity the prerequisite conditions for China's potential role as a "white knight" riding to the financial rescue of the Eurozone. To whit - if it is not good for China, and it is not a good investment, China is not going to participate in the European Financial Stability Facility (EFSF):
“You cannot come to me, asking me ‘Hey! Why don’t you pump money in this kind of… projects, or investing the banks that are in trouble… we are in trouble, and our two countries are friendly, so why don’t you come in?’, this is actually in stark contrast to the requirement imposed on our sovereign wealth fund”, “the recipient countries should treat sovereign wealth funds fairly… as any other financial investors…”
This is a perfectly reasonable investment posture, but apparently a surprise to the European leadership.

Even more interesting, is the explicit, no bullshit, no mincing of words, no diplomatic artifice with which Jin Liqun lectures Europe on exactly the problem with the Eurozone labor laws and welfare state:

Saturday, November 05, 2011

After only 10 months in office Mayor Jean Quan unifies Oakland

Ten months in office, and Oakland Mayor Jean Quan has done what most people would consider impossible. She has united the citizens of Oakland. A recent CBS 5 poll reports that 85% of the Oakland do not think she is doing a good job as mayor. Occupiers, Anarchists, Business Owners, Protesters, The Chamber of Commerce, Conservatives, Liberals, Centrists and Anarchists all standing shoulder to shoulder with this this single shared conviction and unity of purpose. Amazingly, an even higher percentage are united in the belief that she is doing a terrible job handling the protests.

Thursday, November 03, 2011

The Corzine Caper

Corzine and Obama - joined at the wrist?
Does this sound familiar? - A high risk "bet the company" culture, huge leverage, "smarter than you" corporate arrogance, regulators asleep at the switch, a"rock star" CEO cozying up to the President of the United States, questionable accounting, bankruptcy, investigations, and criminal prosecutions.

How about Enron, "Kenny-Boy" Lay, and the Bush administration?
How about MF Global, "Jonny" Corzine, and the Obama administration?

Most of the mainstream media coverage of the MF Global failure has focused on the leverage and the highly speculative bad business bets made by CEO Jon Corzine. But with the SEC and FBI looking under the covers, Dan Primack of Fortune Magazine goes where the NYT fears to tread:
Is Jon Corzine going to jail?
By Dan Primack November 2, 2011: 2:57 PM ET

This may just be the beginning of Jon Corzine's troubles.

Jon Corzine is unlikely to ever again work in finance, after overseeing this week's collapse of brokerage MF Global. But he may have much bigger things to worry about. Like going to jail.

Federal officials reportedly say that MF Global (MFGLQ) has admitted to transferring hundreds of millions of dollars of client money into company accounts, perhaps to cover investment losses. This is on top of Craig Donohue, CEO of the Chicago Mercantile Exchange, saying that MF Global wasn't "in compliance" with the CMOE's cash management regulations.

"The first thing you learn on the first day of your first financial job is that client money is not to be mixed with corporate money," says a source familiar with MF Global. "Nobody could have done this by accident."...

"If this was a former Republican senator and governor, the press would be all over it," argues a GOP-affiliated investment professional. "They'd be talking about how it is emblematic of corruption on Wall Street. But because it's a Democrat, everyone keeps focusing on bad investments rather than the possibility of fraud."
CNBC talks to Primack about his column:

Curiouser and curiouser. As mentioned in a comment on Tully's recent post:

Dipping into the client's funds to backstop the firm's heavily leveraged and high risk bets on European debt is about as serious as it gets. We're talking - Federal Felony / Criminal Fraud / Grand Theft / Go To Jail / Do Not Pass Go / Do Not Collect $200 / Throw Away The Key / - that kind of serious.

This is where the special relationship with the President and the related special provisions of the "Investment Grade" debt offerings from MF Global only two months ago get interesting:
"The futures broker sold $325 million of five-year unsecured notes, the company said today in a statement. The notes will pay an extra percentage point of interest if Corzine is named to a federal post and confirmed by the Senate before July 2013, New York-based MF Global said yesterday in a regulatory filing.

“That seems crazy,” said William Larkin, a fixed-income portfolio manager who oversees $500 million at Cabot Money Management Inc. in Salem, Massachusetts, and has 22 years of experience. “I’ve never heard of something like this.”...

A Democrat, Corzine is among the biggest fundraisers for President Barack Obama’s 2012 re-election campaign. He has been the subject of speculation about administration jobs such as Treasury secretary or White House economic adviser, said Christopher Allen, an analyst at Evercore Partners Inc. in New York...

Corzine’s employment contract is written with a view to future government service. It stipulates that he’ll be paid his $1.5 million retention bonus on a pro rata basis if he leaves to work for any “U.S. federal, state or local government” before March 31, 2014."
I wonder if Corzine's retention bonus and the bond interest kicker will be invoked if it turns out that Corzine's federal employment is working in the laundry of a Federal Prison?

Meh - probably not worth worrying about that "Investment Grade" Bond Interest kicker. These bonds (sold last August and having yet to pay a coupon) were trading at 40 cents to the dollar on Monday. BTW - Thank you S&P for another great call. In the same time frame that S&P was downgrading US Debt early this summer, they rated this MF Global bond offering "Investment Grade". U.S. Treasuries have increased in value since that rating. The MF Global bonds? Not so much.

The Bush Justice Department prosecuted and convicted Ken Lay. Let's see what happens to Corzine.

UPDATE: 11-5-11
Jon Corzine resigned, lawyered up, and as of today, the missing money is still missing.

Wednesday, November 02, 2011


With the call from Occupy Oakland for a General Strike, the epicenter of the Occupy Wall Street/D.C. /San Francisco/Oakland/Sesame Street movement moved to the left coast today:
"OAKLAND, Calif. — A week after police in riot gear rousted and then tear-gassed Occupy Oakland protesters, supporters of the movement have rebuilt their encampment in front of City Hall and are calling for a general strike on Wednesday that will include an attempt to shut down the nation’s fifth-busiest shipping port. “We call for a general strike around the country, and around the world, because we know that the wealth of the 1 percent is produced by the work of the 99 percent,” said Louise Michel, one of the protest organizers, at a news conference."
What better day to end my 60 day strike against my own blog and re-occupy this space in solidarity with the "movement". In no particular order, some thoughts on the unfolding events that are currently occupying my mind:

Strike Status
Upon awakening this morning, the first thing I did was check out the traffic cam for the Bay Bridge connecting Oakland and San Francisco. I expected to seen this primary commuter route to be deserted as the oppressed 99% flexed their collective muscle and answered the call for a general strike against the oppressing 1%. As you can see in the screen shot at the top of the page, the bridge superficially appears to be jammed with commuter traffic at 6:45 AM, pretty much as it is every day at this time. I can only assume that this is attributable to the 99% streaming across the bridge to Occupy San Francisco. Or something. I may have to walk down the hill and see how my Occupy San Francisco brethren are doing in Justin Hermann square. Or not

Monday, October 31, 2011


Holy Carp, Batman! I almost let a month go by without an entry. Blame it on the real world, which insists I have higher-priority obligations than entertaining my seven regular readers. Speaking of the real world, it seems that Jon Corzine has done to MF Global what he almost managed to do to New Jersey:

MF Global files for bankruptcy after deal unravels
"MF Global Holdings Ltd, the futures broker run by former Goldman Sachs chief Jon Corzine, has filed for Chapter 11 bankruptcy after a tentative deal with a buyer fell apart.

The firm's meltdown in less than a week is a stunning setback for Corzine, who sought to turn MF Global into a mini-Goldman. Corzine became CEO last year after losing his governorship of New Jersey, and his big bets on euro-zone debt sealed the company's fate."
Guess that whole revolving-door thing doesn't work as well when there's no massive government bailouts available.

Regulators Investigating MF Global for Missing Money
"Regulators are examining whether MF Global diverted some customer funds to support its own trades as the firm teetered on the brink of collapse.

The discovery that money could not be located might simply reflect sloppy internal controls at MF Global. It is still unclear where the money went. At first, as much as $950 million was believed to be missing, but as the firm sorted through its bankruptcy, that figure fell to less than $700 million by late Monday, the people briefed on the matter said. Additional funds are expected to trickle in over the coming days."
Also wik: Others note the obvious ...

Big Three Nets Omit Corzine's Party ID as Feds Investigate His Firm

But of course.

Sunday, August 28, 2011

And now for something completely local - 16 Candidates

As a direct consequence of our new public financing rules for the mayoral race in San Francisco, we now have a cavalry charge of 16 candidates running for mayor. C.W. Nevius explains:
"It would be safe to say that many San Franciscans don't understand public financing...

Raise $25,000 and you get $50,000. Scare up $100,000 and you get a 4 to 1 match for $400,000. No wonder there are 16 candidates for mayor. It's political happy hour... this is a poor use of public funds. This is the first mayoral race with public financing and voters are learning that it allows candidates to get easy money and, in some cases, to waste it.

The weird catch-22 of San Francisco's system is that once the money is spent, a candidate can't drop out of the race unless he or she pays it back. The problem is that a 2007 change in the law made it possible to start pulling in the money nine months before the election. By the time August rolls around, candidates may be hundreds of thousands of dollars in the hole and can't afford to quit."
So we have candidates who are only in the race because we the citizens of SF are paying them to run for mayor with our money. And the peculiarities of our public finance rules mandate they stay in the race in order to continue to suckle at The City's bountiful teat. But this is all fine because - you know - we in SF have a lot of extra money lying around to finance any candidate who wants to run for mayor. Why would we not want to spend $9 million of our tax dollars for the privilege of sorting through sixteen mayoral candidates? I sure can't think of anything better to do with that money.

As Ron Popeil might say - "But that's not all!" At no extra charge we will now throw all sixteen candidates into the mix-master of our first ranked voting / instant runoff election for mayor. On November 8th, all San Francisco voters will cast three votes for mayor in rank order of preference. "Rank" being the operative word in that sentence. Rich Deleon ruminates about the election and The City's progressive future in Sunday's SF Chronicle Insight:

Monday, August 22, 2011

When Bipartisanship Happens to Good Partisans
A meditation on debt ceilings and deficit reduction.

In the dark days before the debt ceiling compromise vote, with the doomsday "debtapocalyspe" countdown dominating the media, several polls struck a common theme: The public demands bipartisan compromise! Taegon Goddard's Wire summarized the gestalt of the moment:

"A new Pew Research poll finds 68% of Americans say that lawmakers should compromise on the debt ceiling debate, even it means striking a deal they disagree with. Just 23% say lawmakers who share their views should stand by their principles, even if that leads to default."
So it follows that when our representatives and leaders in Washington D.C finally got together and crafted a truly bipartisan deal, the country cheered wildly. Or not:
"A majority of Americans disapprove of the deal struck Sunday by President Barack Obama and congressional leaders that will raise the country's legal borrowing limit, and three out of four believe elected officials have acted like "spoiled children."
Since that legislation was signed, nothing but cries, lamentations and the rending of garments has been heard across the land. The animus from the right, left and center for the debt ceiling compromise is quite extraordinary. Q&O had a good survey of the early reaction and little in the popular assessment has changed in the weeks since.

Congressional and presidential approval levels plunged to new lows. When describing the debt ceiling deal and the process and the process to get there, the pejorative of choice is : Our government is... OMG ! DYSFUNCTIONAL! And it must be true. I mean ~750,000 Google search hits on "debt ceiling dysfunctional" can't be wrong. Who am I to argue with that? But maybe, just maybe - dare I say it? Our government is working exactly as it was designed to work, and our representatives are doing exactly what we, the voters, sent them to Washington to do.
For all of the lip service paid to the virtues of bipartisan compromise from pundits and bloggers across the political spectrum, there appears to be very little support for a picture perfect example of a bipartisan centrist compromise when Congress does enact one.

Consider the actual vote for the debt ceiling legislation:
Senate Vote: 74 For 26 Against
Republicans: 28 For 19 Against
Democrats: 46 For 7 Against
House Vote: 269 For 161 Against
Republicans: 174 For 66 Against
Democrats: 95 For 95 Against
There is simply no way to characterize this vote except as an overwhelming bipartisan compromise victory. Moreover, to the extent that “Centrist” actually means anything in concrete policy terms, this was a purely Centrist piece of legislation. The extremes of both parties voted against it. It required a bipartisan coalition of more moderate, centrist, practical Democrats and Republicans to pass this legislation. Liberal votes were not needed. Tea Party votes were not needed. It passed overwhelmingly. It is exactly this model that future deficit reduction legislation will follow.

Thursday, August 04, 2011

Hypothetically speaking - "Americans Elect" could disenfranchise New York State (or any other state) in the 2012 presidential election.

Americans Elect (AE) is an organization that intends to qualify for the 2012 presidential ballot in all 50 states, then field a presidential slate through an open nomination process on the internet.

The Dividist took note of the organization when they received favorable coverage after "de-cloaking" a few weeks ago. Realistically, we can expect "Americans Elect" to have as much impact on the 2012 election as their predecessor organization "Unity08" had on the 2008 election. Which is to say - none. They can probably be safely ignored until such time as they show some real traction.

Still, this is an organization that proposes to dramatically change the way we select our President and they appear to have the financial support and the legal wherewithal to succeed with their ballot initiative. As such, it is prudent to take a deep dive into Americans Elect representations and bylaws, ask questions, and look for unintended consequences. Some are already working this beat.

Jim Cook of Irregular Times is skeptical and has been frustrated getting his questions answered. Sol Kleinsmith of Rise of The Center is more favorably inclined, has been promised an interview, and is soliciting his readers for questions to ask the organization. It should be an interesting interview.

Out of the subsequent discussion at RoTC an interesting artifact of the America's Elect proposed process for nominating and electing our president emerged. The Dividist considers the scenario intriguing enough that it deserves a post of it's own.

Here is the scenario. Let's say American's Elect has successfully obtained ballot status and fielded a credible presidential candidate in 2012. They lose the election but win a plurality in one or more states and consequently neither the Republican or Democratic candidate have a majority of electoral votes. This is a plausible scenario (unlike actually winning the presidency for an AE candidate – which has a zero possibility). While there is no history of third party candidates winning the presidency, they have on occasion won the electoral votes for one or more states. One could easily envision an AE candidate with a strong geographic appeal winning a plurality in a state and secure their electoral votes as a favorite son. In those circumstances AE would broker the decision between the Republican and Democratic presidential candidates for the entire country.

Americans Elect anticipated this scenario in their bylaws:
9.4.2. Coalition Agreement.
The Americans Elect ticket receives fewer popular votes nationally than the ticket of at least one of the major political parties and the Americans Elect Delegates have convened in convention after the popular vote but before the Electoral College vote and endorsed a candidate of either major political party on such terms and conditions as may be reflected in the vote of endorsement, in which case the person serving as Elector shall vote solely in the affirmative for the endorsed candidate and for no other candidate.
This says Americans Elect intends to reconvene an on-line convention and through a vote of their delegates (theoretically any registered voter who opts-in - The Dividist being one) decide whether the Republican or Democratic candidate will be our president. Specific details of how this AE re-convention would take place are sparse, but lets just take AE's representations at face value and look at this through the prism of a hypothetical scenario:

It is November 7, 2012. A plurality of the people of New York state have voted to put their confidence in AE candidate Michael Bloomberg. In a close election, neither Democratic candidate Barack Obama or Republican candidate Mitt Romney have secured a majority of electoral votes. New York's 31 electoral votes will now determine who will be president.

All of the registered voters of New York are not AE delegates. They voted in a general election for a candidate – Michael Bloomberg. Yet by AE bylaws, Michael Bloomberg is now sidelined and will not decide how to cast the New York electoral votes on behalf of the people of New York. Instead, Americans Elect delegates will decide whether Obama or Romney receive New York's 31 electoral votes and the presidency. As a practical matter, the people of the state of New York will be completely disenfranchised in the 2012 electoral college vote. How do you think they will feel about Texans, Floridians and Californians deciding whether their 31 electoral votes will be cast to make either Obama or Romney president? If clearly understood, would any New York voter to take that risk?

These are rhetorical questions. The answer is obvious.

The Dividist thinks that in their haste to put together bylaws for their ballot initiative, AE did not think through the political ramifications of this provision. Assuming they get on all 50 state ballots and come up with a credible candidate, they can easily be undone by this provision alone. It is just too easy to run against. If an AE candidate shows any strength in any state, the consequences of an AE win in that state will be shouted from the rooftops by competing campaigns, bloggers, pundits, partisan of both parties, and the mainstream media. The message is simple and easy to communicate: The state will be disenfranchised in the Electoral College if the AE candidate wins that state.

From a tactical political campaign perspective, this is the equivalent of leading with your chin in a boxing match. The Dividist suspects that AE has a glass jaw and it would not take much of an uppercut to put them on the canvas. One has to believe that once Americans Elect realizes this problem, they will change these bylaws if they can.

If nothing else, this is a cautionary tale on the importance of transparency and the need for a deep dive when vetting those advocating new ways to elect our president. If the top gun political public relations professionals that run AE missed something like this, you've got to wonder what else they missed. The Devil is in details. The details need to be out in the open where we can look for the bugger.

Divided and Balanced.™
Now that is fair.

Saturday, July 30, 2011

BREAKING: Divided Government to the rescue on the debt ceiling "crisis"

ABC's John Karl reports that a deal in principle has been struck between our Democratic President and Republican leadership in Congress:

"Here, according to Democratic and Republican sources, are the key elements:

  • A debt ceiling increase of up to $2.1 to $2.4 trillion (depending on the size of the spending cuts agreed to in the final deal).
  • They have now agreed to spending cuts of roughly $1.2 trillion over 10 years.
  • The formation of a special Congressional committee to recommend further deficit reduction of up to $1.6 trillion (whatever it takes to add up to the total of the debt ceiling increase). This deficit reduction could take the form of spending cuts, tax increases or both.
  • The special committee must make recommendations by late November (before Congress' Thanksgiving recess).
  • If Congress does not approve those cuts by December 23, automatic across-the-board cuts go into effect, including cuts to Defense and Medicare. This "trigger" is designed to force action on the deficit reduction committee's recommendations by making the alternative painful to both Democrats and Republicans.
  • A vote, in both the House and Senate, on a balanced budget amendment."
Hmmm. Let's see - significant cuts across the board, cuts to the military, cuts in entitlements, a vehicle for revenue enhancement and even more cuts later, and all on the brink of default to the dissatisfaction of both the right and left.

This will pass on a narrow bipartisan vote over even narrower bipartisan opposition from the extremes of both parties. Just the way it is supposed to work.

The Dividist is not one to say "I told you so". But - just this once - He would like to take this opportunity to mention that - um - he told you so.

Divided and Balanced.™
Now that is fair.

Friday, July 29, 2011

They're B-a-a-a-a-ck!
Draft Bloomberg
Americans Elect
rises from the grave.

A "new" national organization focused on the 2012 presidential election uncloaked their semi-stealth operation over the weekend. After getting special access over the last few months, columnists Tom Friedman and John Avlon were released from their press embargo and obligingly wrote fawning reviews. Others were a bit more circumspect.

Americans Elect is a 501(c)4 corporation. This means they are not required to disclose donors. The reader may be more familiar with this particular corporate classification within the context of the Citizens United vs. Federal Election Commission Supreme Court decision. Citizens United was a 501(c)4 corporation.

Taken at face value, the objectives of the organization are novel, ambitious and exciting. They intend to qualify for the 2012 Presidential Ballot in all 50 states, then field a presidential slate that is nominated through an open process on the internet by means of a virtual on-line convention.

Getting on the ballot in fifty states for any third party is a Herculean task. Or Sisyphean. Or both. Given the legislative roadblocks and partisan landmines used by the the two party duopoly to ambush third party electoral efforts, it is easy to rationalize the need for well-heeled donors to kick start the effort. As it turns out, Americans Elect secured some well heeled New York donors to kick start the effort. We don't know who they all are because, you know, Americans Elect is 501(c)4 corporation and they are not telling us.

Taken at face value and considered in a vacuum, while looking at them sideways and squinting slightly, one could get excited about this new high-concept high-tech initiative to reinvent our political process. Problem being, this is really not a new organization, and we have some recent history to consider, and considering that recent history, we learn we cannot take what they say at face value.

Americans Elect is Unity08, or more precisely - they would have been Unity12 until they got the shiny new name. Unity08 started at about the same time as I started this blog. I subsequently burned a few posts chronicling the Unity08 journey through the '06 midterms and the run up to the 2008 presidential election. In early 2008, well before a promised internet convention to nominate a "unity ticket" for the presidential election, Unity08 suddenly went up in flames and shuttered their site. Miraculously, only days later, the site emerged phoenix-like from the ashes, using the same address, infrastructure, a domain purchased a year earlier by Unity08, and staffed by many of the same people. This led some to speculate that the entire enterprise was nothing more than a Bloomberg stalking horse from the beginning. Cynics. Anyway, after Unityo8's rather unseemly demise (chronicled here and on Donklephant - the comments were particularly entertaining), I considered them dead and buried. Certainly I did not expect to see or hear from them again.


Jim Cook of the Irregular Times has been obsessively stalking this particular white whale since it's inception, and brings us up to date:
  • The corporate address reported by Unity08 in the first half of 2009: 1775 Pennsylvania Avenue Suite 1212, Washington DC 20006
  • The corporate address reported by the Unity12 Task Force in the second quarter of 2010: 1775 Pennsylvania Avenue Suite 1212, Washington DC 20006
  • The corporate address reported by the renamed Americans Elect in the third quarter of 2010: 1775 Pennsylvania Avenue Suite 1212, Washington DC 20006
  • Americans Elect is the intentional extension of Unity08, as Americans Elect Chair and Unity08 Director Peter Ackerman made clear when sitting for a deposition in a lawsuit filed by Unity08: "If Unity08 is successful in this litigation, Unity08 has a clear and definite intent to resume its activities -- renamed 'Unity12' -- for the 2012 presidential election. The 'Unity' mission remains as critical today for the 2012 presidential election as it was in 2006 for the 2008 presidential election." The only matter Ackerman didn't anticipate was the name change from 'Unity12' to 'Americans Elect.'
So here we are. Americans Elect, backed by a bucketload of New York mystery money, is hiring petition gatherers, fighting expensive legal battles, and doing the hard grunt work necessary to get on the ballot in all fifty states. All in order to field a presidential candidate - To Be Named Later. So - if you are considering putting your idealistic heart and soul into this brave new political operation, make sure you understand exactly what you are getting into.

Americans Elect is the Mike Bloomberg for President campaign. They probably need to maintain the Americans Elect facade to keep their 501(c)4 status. But if Mike Bloomberg is not heading their ticket in 2012, Americans Elect will go the way of Unity08. Now, if you want to see Bloomberg run as a spoiler in 2013, by all means - sign up. As for me, my views about this organization has not changed since January, 2008:
"Unity08 had over 120,000 members and raised about a million dollars. Not much by presidential campaign standards, not as much as they wanted, but nothing to scoff at. Actually, I liked the idea of a Hagel/Bloomberg Unity08 candidacy, which is why, although dubious, I signed up as a “delegate”. I feel bad for those who put their heart and soul into the effort, as they have been treated rather shabbily by the organization. The whole thing smells so manipulative, so contrived and betrays such cynical contempt for the Unity08 supporters that I would find it difficult to support Bloomberg now."
Look - I like Mike Bloomberg. Under the right circumstances, I might even be tempted to vote for him for President. But not as a 3rd Party candidate in 2012. He could not win but he could garner significant support and, like all "successful" 3rd party presidential candidates, function as a spoiler.

My guess is that in 2012 he would be more likely to pull votes from Obama than the Republican candidate. I would not have minded that in 2008, as we might have avoided the subsequent disastrous 2 years of Democratic One Party Rule. However, I am also not interested in seeing a return to equally disastrous One Party Republican Rule. The GOP will probably take control of the Senate in 2012. Reelecting Obama is the only way to avoid that particular calamity and retain our happily divided government.

Sorry Mike. Let me know when you start hanging around with a better class of 501(c)4 corporations.

Divided and Balanced.™
Now that is fair.

Wednesday, July 27, 2011

SPOILER ALERT! How the debt ceiling "crisis" ends.

Well played gentlemen!

Kabuki Theater - a traditional form of Japanese drama characterized by highly stylized postures and exaggerated gestures accompanied by familiar songs and plots rooted in historical tragedy (or comedy). The audience knows the story and knows how it ends. The art is in the quality of the performance and not in the plot. In the United States, this art form is more easily recognizable as "The Debt Ceiling Crisis." A few weeks ago the Dividist commented on the Outside The Beltway blog, describing the show we were about to witness:
"The only thing that provides political cover for a compromise for both sides is the dire consequences of missing the deadline. So there will be a compromise. The compromise will include some formula for revenue increases, (probably in the form eliminating deductions while reducing rates), it will include cuts to the military, and it will include deep meaningful and substantial cuts in spending in the overall budget. And the compromise will be agreed on the brink of default to no one's satisfaction. In the meantime, we have six weeks of Kabuki theater to enjoy while the eventual compromise is hammered out. Both tribes will have ample opportunity to point at the feckless hypocrisy of the other. Enjoy the show."
While the Dividist is not ready to take a victory lap, he does not see any reason to change that prediction. The debt ceiling will be raised, because all leadership on both sides of the aisle say it will be raised. There is no politician of consequence in Washington who is saying otherwise. We know how this story ends. It is all about the performance that takes us there.

This is not to say that the performance is unimportant. Quite the contrary. The performance will determine public opinion and the final shape of the compromise. Whether looking at the more recent temporary measures proposed by Reid, McConnell and Boehner, or the "Grand Bargain" that was being negotiated between Obama and Boehner - the fact is that the two sides are very close, as Ezra Klein explains:

"Now, remember that the deal Obama offered Boehner about a week ago now, or maybe a little bit less than that was $1.2 trillion in tax increases for $4 trillion in deficit reduction total. Boehner walked from that. but Boehner did say he would be okay with an $800 billion tax increase if there were $4 trillion in debt reduction total. So in some strange way, the two aren't as far apart as you would think, but they can't bridge that final gap. so now Boehner's arguing for no tax increases at all, but Obama is sort of held to that same deal and is trying to continue to offer it to Boehner."
The "Grand Bargain" is still on the table. That became clear in the dueling press conference "arias" sung by the two principal actors Monday evening. Despite Harry Reid proposing a plan with no revenue increases earlier in the day, Obama ignored Reid's plan in his speech and continued to make the case for his version of the "Grand Bargain" - including revenue increases. Despite Boehner himself proposing a stop-gap measure earlier in the day - he spent most of his press conference arguing the case for his version of how the "Grand Bargain" negotiation broke down. Conclusion - they are still negotiating the big deal in earnest.

Boehner is playing his supporting role exceedingly well in the shadow of Obama's scene stealing dramatics. Still - the President has an edge, successfully portraying himself to the press and most of the public as the more reasonable party in the negotiation. Last week he attempted to press this advantage to push for full $1.2 trillion in revenue increases. That was when negotiations broke down. He pressed it again on Monday with a call for public support to apply pressure in the House. Boehner played his last best move, exiting stage right, proposing a stopgap, knowing that Obama really wants the "Grand Bargain". But Obama knows that Boehner wants it too. The plot thickens.

The simple fact is that the $400 billion difference is not all that significant in the context of the complete $4 trillion deficit reduction plan. These last few moves are about how that last $400 billion will be split. So far - advantage Obama - but it's not a big advantage. The Dividist predicts Boehner will move off of his $800 billion "revenue enhancement" cap, but it will stay under $1 trillion.

The problem - both now and throughout the process - is that this "blink contest" negotiation cannot be settled except on the brink of a looming disaster deadline. Neither side can satisfy their constituency with the inevitable compromise. Our representatives on both sides take considerable political risk if they compromise too early - i.e. before a doomsday deadline. We've seen this every time the sides get close. Liberals and Democrats are furious at Obama and Reid. Conservatives and Republicans are furious with Boehner and McConnell.

The compromise solution requires a hard deadline. The key variable determining when an agreement is reached will be when we - The People - agree whether the deadline is real and exactly when it takes place. This is part of what we heard last Friday, with both sides upping the rhetoric to make the case that the deadline was really on Monday. Nobody bought it. So we are back to the August 2 deadline, except that may not be a real deadline either. Boehner's stopgap plan moves the deadline ahead another six months. Nobody really wants that either. The Dividist continues to believe the most likely scenario is that we will get a real compromise by Monday.

A suggestion: Instead of assuming that one side or the other are intransigent hypocrites, consider the possibility that both sides are arguing from principle (i.e. sincerely believing they are fighting for a position that their constituency holds dear). If you accept this framing, then it follows that both sides must maintain the posture that they are willing to walk right up to the brink of a debt ceiling default rather than compromise their principles. To do otherwise would undermine their negotiating position and be a betrayal of the people who elected them.

Monday night the President said - "The American people may have voted for divided government, but they didn’t vote for a dysfunctional government." A good line, but it misses the mark. We have a divided government because we have a divided country.

There is a significant faction of the electorate who would like to see our country more closely emulate a European style social welfare democracy. There is an equally significant faction of the electorate who would like to see our country move back to the more limited government concepts on which it was founded. To a large extent the Democratic and Republican politicians we elected to represent us are doing exactly what we expect of them - representing our views - just the way we want them to. Our government is not dysfunctional, it is behaving as designed to resolve conflicts between large and opposed factions in the populace.

Oddly, The Dividist is filled with optimism and almost euphoric watching this peformance. It reinforces his belief that he does not need to put any faith in the motivations of the politicians of either party. It is enough to know that we have a system that was designed to anticipate this kind of political conflict - in fact - to insist on it and institutionalize it. As James Madison said in Federalist #51 when arguing for our constitutional division of power: "Ambition must be made to counteract ambition." Out of the conflict inherent in a government run by men and not angels we get better results than we would in the absence of the checks they put on each other. Madison again in Federalist #10:
"The influence of factious leaders may kindle a flame within their particular States, but will be unable to spread a general conflagration through the other States. A religious sect may degenerate into a political faction in a part of the Confederacy; but the variety of sects dispersed over the entire face of it must secure the national councils against any danger from that source. A rage for paper money, for an abolition of debts, for an equal division of property, or for any other improper or wicked project, will be less apt to pervade the whole body of the Union than a particular member of it; in the same proportion as such a malady is more likely to taint a particular county or district, than an entire State. In the extent and proper structure of the Union, therefore, we behold a republican remedy for the diseases most incident to republican government."
The time to worry is when the factions are not fighting each other to a standstill. That usually means the system is not working as it should and power is too concentrated. Or it means we are going to war.

The Dividist's primary rationale for supporting divided government is that it leads to more fiscal responsibility and spending restraint in our federal government. The Dividist is interested in the result, not the histrionics that are necessary to get there - no matter how entertaining. The kind of giant cuts envisioned in the "Grand Bargain" can only happen when we are teetering on the brink and can only happen with a divided government. Pay attention to the result - not the performance. Divided government may be winning and winning big.

Bravo, gentlemen. Play on.

Divided and Balanced.™
Now that is fair.

Friday, June 24, 2011

MItch McConnell explains why voting for divided government is always a good idea.

The left-o-sphere is all a-twitter about comments made by Senate Minority Leader Mitch McConnell at a Christian Science Monitor breakfast meeting this week. McConnell was explaining GOP support for cutting off funds on the Libya action by saying members are more likely to vote their principles if the President is not of the same party:

MCCONNELL: "The only thing I can tell you at this point is that there are differences. I’m not sure that these kind of differences might not have been there in a more latent form when you had a Republican president. But I do think there is more of a tendency to pull together when the guy in the White House is on your side. So I think some of these views were probably held by some of my members even in the previous administration, but party loyalty tended to mute them. So yeah, I think there are clearly differences and I think a lot of our members, not having a Republican in the White House, feel more free to express their reservations which might have been somewhat muted during the previous administration."
This comment is being trumpeted on the left as prima facie evidence of the venal, party-first, hypocritical nature of many congressional Republicans. This is, of course, completely true, as that is indeed their nature. The irony is that the Democrats making that point fail to note that many congressional Democrats are behaving exactly as McConnell notes on exactly the same issue.

Democrats are ignoring their principles to support a clearly unsupportable war authority assertion by the Democratic President. They are supporting the President in this claim for no other reason that he is "on the same side" making them equally venal and hypocritical. It seems to the Dividist that this should be painfully obvious to anyone. Except,of course, for the partisans obsessing about the speck in other partisan's eye and not noticing the plank in their own.

As the Dividist noted in a previous post, President Obama put us on a path to spend over a billion dollars deploying a carrier attack group, launching air strikes and cruise missile bombardments of military targets in a foreign country. Yet he is making the Orwellian claim that this action does not yet meet the definition of "hostilities" as a rationale for ignoring the War Powers Act. How many Democrats would have supported these actions if it was George W Bush making these claim?

Bush/Cheney may have misled the Congress and the country into the Iraq War, but they recognized the legal obligation to secure congressional approval. We now have a President who is asserting that it is completely within his authority to commit our military resources to strikes against another country, and never be required to request the authority of Congress. This is a claim of executive war power far beyond anything that was ever asserted in the Bush/Cheney administration. Regardless of whether you support our actions in Libya, all Americans should be concerned and outraged by this claim. It is nothing less than a subversion of the War Powers Act and the Constitution. Yet many Democrats (not all) are supporting him in this claim.

Ann Althouse asks the right question - "...does the need for a check on the President justify the pressure from whichever party happens to be the opposing party?" - but does not take it far enough. The need for a check on the President and t0 ensure that our constitutional checks and balances function as intended justifies a divided government voting heuristic - always voting to maintain a divided government state at the federal level. Always.

Stephen Slivinski and William Niskanen have made the statistical case that we are less likely to become embroiled in extended wars during periods of divided government. Mitch McConnnell simply explained why.

Divided and Balanced.™
Now that is fair.