Big Sky Cairn

In 2006, you couldn’t pick up a newspaper without hearing about how many Burns staffers took jobs as lobbyists. I believe Montana Democrats used the phrase “revolving door” quite a few times. I actually never had too big a problem with this since realistically there was nothing he could have done to prevent it. If a staffer wants to take a new job with a giant pay increase and more perks there’s not much to be done about it. It’s still a free country.

As Max Baucus could undoubtedly explain since he too has to deal with a lot of staffers heading for the gold-laced hills of lobbying.

Since 1996, a fifth of U.S. Sen. Max Baucus’ highest-paid staff members have left their jobs to become lobbyists, usually for industries regulated by the powerful committee that Baucus heads, a Gazette State Bureau analysis shows.

I’m not going to fault Baucus for this. As with Burns, Baucus doesn’t have any way to prevent this. My problem is with how the Montana media covered the Burns story in 2006. Knowing that the “revolving door” wasn’t just Burns’ problem in 2006 would have helped shape the corruption story that proved Burns’ undoing.

If the media had spent a few hours doing the research that they did for this story about Baucus, it would have been clear that the “revolving door” was not just Burns’ problem but one that afflicted any powerful Senator as a natural course of their power. Their influence gives their staff influence that makes them attractive to the private sector - which has a lot more money.

I managed to catch this little blurb on CNN today. Being CNN, Chistiane Amanpour of course takes the opportunity to take a jab at the Bush administration, nothing new really. What got me was how Amanpour manages to put an internal 2003 Justice Department memo on roughly the same level as the genocidal killings of 2 million people in Cambodia. Stunning for its lack of perspective, but does anyone expect anything different from the Communist News Network?

Finally, the subject of the best known account of what happened in Cambodia, Dith Pran, passed away last month. His story is an amazing account of what happened when the United States left SE Asia thirty-five years ago and serve as a warning for contemporary situations in Iraq.

I read a recent Billings Gazette opinion on the Bear Stearns buyout by JP Morgan. I have to say, I chuckled a little bit at the resident economists on the Gazette editorial board. My favorite line was that Bush bailed out his capitalist buddies on Wall Street.

On March 9, the Federal Reserve, along with JP Morgan announced a $236 million deal to buyout Bear Stearns assets. The fall of an 80 year big five investment firm took less than 72 hours, one of the largest economic collapses in history. Bear Stearns had been a leading pusher of the now, essentially, worthless portfolios of mortgage backed securities.

Under the terms of the deal, JP Morgan will buy out BSC for $2/share, and assume risk on all but the riskiest $30 billion in mortgage securities. That $30 billion in paper will be backed by the Federal Reserve under an expansion of a depression era law allowing the government to intervene in extreme circumstances.

Somehow, as alluded to at the start, this has been construed as a bailout to the shareholders of Bear Stearns.

The two largest stakeholders in Bear Stearns were UK billionaire Joseph Lewis with a 9.6% stake and Chairman/former CEO Jimmy Cayne with a 5% share.

Joseph Lewis bought up approximately 15.9 million shares last summer and fall at the average sale price of $104, for a grand total of around $1,650,000,000. Now it is hard to be sympathetic to the financial woes of anyone with the ability to spend $1.65 billion on anything. However, that investment, per the fed brokered deal is now worth a little over $30 million. Even under the revised JP Morgan buyout (more on that below) , Mr. Lewis is looking at a loss of over $1.5 billion in under 12 months.

From market close on the Friday before the original deal was reached, Bear Stearns was trading at $34, by the time markets opened Monday, that stock was worth $2 a share. Or to put in terms of Mr. Lewis, this was a loss of $500 million in one weekend.

Again this is not to drum up sympathy, it is to dispel the myth that the fed’s actions were a bailout for investors. This was a supervised fire sale. Unlike the Long Term Capitol Management deal in the ’90’s; investors in Bear Stearns suffered huge losses. I am comfortable that the fed stepping in here will not create moral hazards against risky investments.

In response to the protests of shareholders, the original $2/share sale price has been increased to $10/share. I am in the school of thought that this is a good thing. Under the new terms, JP Morgan will assume $1 billion in risky Bear Stearns securities that were previously backed by the fed, and more importantly the new deal better reflects Bear Stearns market value. A total sale price of $236 million was insanely low; the property value of the Bear Stearns HQ in Manhattan could sell for five to ten times over that price.

The end product of these two weeks of minor chaos is that the Federal Reserve is more tied to Wall Street’s fortunes than it has been since the depression. In addition to the $29 billion in Bear Stearns assets, two other major firms have taken loans totaling $28 billion under the six month window opened by the fed.

Despite the risk to taxpayers, this needed to be done. Our economy right now depends on lending. When lenders balk at backing securities pushed by a big five firm we are in trouble. Hopefully this move will shore up confidence so the crisis on mortgage-based securities passes and we can continue on.

Some may think these problems are solely those of the Wall Street fat cats, but it does filter down to Montana. MHESAC failed to sell another round auction bonds. These bonds are some of the safest possible investments, yet lenders balked at repurchasing them. The inability to secure lines of credit from lenders showed it showed itself most spectacularly in Bear Stearns, but it does ripple down to us here in Big Sky Country.

Erik Iverson and the Montana GOP took a lot of flack for their February 5 presidential caucus. Most of that came from Montana Democrats expressing their outrage at the “elitist” approach of the caucus. But the chickens are coming home to roost - although the Media is sort of missing the boat on this one.

Roy Brown credits the caucus with increasing interest and participation in the Republican Party at all levels.

Republican gubernatorial candidate Roy Brown said the state party’s Feb. 5 presidential caucus helped spur more interest early in politics, which he said will help statewide GOP candidates like him.

We’ve personally heard similar stories of interest among Republicans here in Missoula. Republicans who didn’t vote in the caucus, but who felt that they had a role to play - and continue to play in the process. Participation in a democracy is about more than the simple act of voting and oversimplifying civic duty to casting a ballot is patronizing.

Remember, participation in the caucus didn’t require any money or official title. That’s an important distinction because the Montana Democrats have been touting their party’s primary plebiscite as less elitist than the Montana Republican caucus. Let’s look at the Democrat’s version of inclusion:

Meet the Presidential Candidates in Butte (if you were lucky enough to be one of the few that could afford to buy tickets and have a computer and have an internet connection and not have a job that prevented you from logging on at 9 am exactly or a well connected friend to give you tickets).

Meet the Hillary in Missoula (if you can afford the $250 minimum donation).

Every vote counts the same to decide how Montana’s 16 delegates vote (unless you’re one of 8 Superdelagate from Montana whose votes will count for roughly 100,000 times more than the average Montana vote).

It’s 3 am. I’m not sure “elitism” is a grenade the Montana Democrats want to be throwing…

Rack this one up to media bias.  Yes, Rehberg voted for Real ID.  It’s all over the papers and in every news story about Baucus and Tester.  Usually the article also mentions that Renberg changed his position on the law after the state unanimously passed legislation refusing to comply.

So I find myself wondering why, in every article I’ve read about Baucus and Tester opposing Real ID, there is absolutely no mention of how Baucus voted.  It seems like in an article about their opposition to a law, it would be relevant to know how they originally voted when that law was made.  And I figure the reporters know it’s relevant because they mention Rehberg’s support for the law even when the story isn’t about Rehberg at all.  But Baucus’ press release probably didn’t have that information in it, and as busy as it gets, it was probably too much work to determine if he ever supported Real ID.  After all, its not like anyone would try to use this as a political issue.

Fear not dear readers; I did the 2 minutes of research on Google.  Turns out, that like 99 of his colleagues in the Senate, including the other Senator from Montana, Max Baucus voted for Real ID.  Doesn’t that seem newsworthy to you?