"Goodfellas" Part IV - Banksters Cash Out !

First of all, a big H/T to "Tyler Durden" of Zero Hedge for this one.

Like so many other things about everyone's favorite Investment Banking
"Family", this has so much of a ring of truth to it that it has to be included.

First - a disclaimer. The following prospectus is a parody. Any
resemblance between the following and an actual Goldman Sachs
prospectus is purely coincidental.

Anyone who represents to the contrary will be visited by two guys named
Rocco and Louie who will escort you to your new residence six feet
under the Nevada desert. Be Warned!

Prospectus Supplement to Prospectus dated August 19, 2009.

$30,000,000,000 *
(subject to arbitrary increase)

The Goldman Sachs Group Inc.

in conjunction with

United States Treasury Department

is pleased to offer you the following

0% Subordinated HFT Participation Notes

in the

GSBS I (Goldman Sach Bonus Securitization*)
*For legal reasons Goldman Sachs Group will not use the word "Trust" to describe this entity

The 0% Subordinated HFT Participation Notes represent a securitization
of forward-looking executive retention payments, payable to Goldman Sachs employees.

The Notes will pay interest in the form of negative accrual on the notes on
August 19 and February 19 of each year.The first such negative
accrual will be made on February 19, 2010.

The Notes will NOT be guaranteed by Goldman Sachs Group Inc. or any
of its affiliates. The HFT Notes will be collateralized by proceeds
from the bond and an indirect guarantee from the
United States Treasury.

Both the GSBS I collateral and Treasury Guarantee are for the sole
benefit of the Goldman Sachs Group Inc. executive retention program,
not holders of the HFT Notes. In the event that GSBS collateral is
not sufficient to meet the"2010 Bonus Payment Amount", the
United States Treasury has provided a full and unconditional guarantee
for any shortfall in payment amount.

At the earlier of the scheduled maturity date (December 31, 2010) ,
or the "Bonus Payment Date" all principal outstanding for the HFT Notes
will be extinguished. At the maturity, all collateral in the GSBS I
entity will be paid out to executives, which will result in zero
recovery value for the HFT Notes.

In exchange for participating in this HFT Note transaction,
participating holders will be"exempted" from front-running by
Goldman Sachs Group Inc. proprietary and high-frequency

trading activities.

Such exemption will last until the "Bonus Payment Date", at which point
Holders of the HFT Notes will be subject to front-running, dark pools, scalping,
and such other trading actions that Goldman Sachs Group inc. in its
sole discretion deems appropriate.

If Goldman Sachs becomes obligated to pay additional amounts to
non-US investors due to changes in US withholding tax requirements,
Goldman Sachs may redeem the notes before their stated maturity
at a price equal to 100% of the principal amount plus accrued
interest to the redemption date.

Neither the US Securities and Exchange Commission nor
any other regulatory body has approved or disapproved of these
securities or passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
If such a criminal offense is committed by a Goldman Sachs
employee, it will not be prosecuted.

Initial Public Offering Price: 99.858%
$ 29,957,400,000

Underwriting discount 0.450%
$ 135,000,000

Proceeds to Goldman Sachs before expenses 99.408%
$ 29,822,400,000

Proceeds to Goldman Sachs Executives 99.408%
$ 29,822,400,000


Goldman Sachs may use this prospectus supplement and the
accompanying prospectus in the initial sale of the Notes. In addition,
Goldman Sachs & Co. or any other affiliate of Goldman Sachs may use
this prospectus supplement and the accompanying prospectus
in a market-making transaction in the Notes after their initial sale,
and unless they inform the purchaser otherwise in the confirmation
of sale, this prospectus supplement and accompanying prospectus
is being used by them in a market-making transaction.

Goldman Sachs & Co.

United States Government

Disclaimer: any resemblance to bonds or securitization pools,
actual or imaginary, positive or negative accrual, issued by Goldman Sachs
or the United States Government is purely coincidental.

Further Notice: The above-referenced securities having already been placed,
this entire post appears as a matter of record only.

"The Smartest Goodfellas In The Room" - Part III

It was a bright August Friday afternoon as the Made Men of Goldman
Sachs filed once more into the 30th-floor auditorium.

Only this time there wasn't fear - rather, there were smiles all around.

The fellas were swapping jokes - and passing out real Cuban cigars - as
they waited to be called inside.

It had been a remarkable first half of the year for the Goldman fellas.
While every other major investment bank on Wall Street was still struggling,
things at Goldman Sachs had never looked better. The firm had just booked
over 3 billion dollars in second -quarter profits, and the rest of the year was
shaping up to be even better.

And when the word was passed that some of the bonus money would be
passed out NOW, well, that just meant that Christmas would come
twice this year.

Then, the doors opened, and in the same pre-arranged order, the
Made Men filed in - the soldiers and button men first, then the underbosses.

Next, the Caporegimes filed in to their accustomed places in the Front Row.

And then, all stood and applauded as the Dons filed in and took their places
on the stage behind the speaker's rostrum.

And finall, the house lights darkened, and under a rock star's spotlight,
Capo Di Tutti Capi Lloyd Blankfein strode to the podium to thunderous whistles
and applause.

The Man Who Saved Goldman Sachs acknowledged the applause, and then
waved his hands in the air for seats and silence and began speaking:

"Goodfellas!!! (More cheers and Whistles)"

"Gentlemen- we did it! Thanks to the efforts of everyone here, Goldman
Sachs has not only been saved, but is now stronger than ever.
And here's the best part !!"

Just then, from off the stage, two armed soldiers emerged from the stage wings
wheeling an enormous strongbox.

"Fellas" Blankfein continued, " Just as promised, I told you that there
would be rewards if we all stuck together. Now, earlier today, you were notified
that your stock bonuses were credited to your house accounts and
your cash bonuses were directly deposited. But this here is a little
something extra from your Godfather and your Dons. Together,
we are kicking in some of our bonus money to give you guys an extra cash reward. Now it varies according to your longevity and your contribution of
course, but the smallest envelope we are handing out is about 150K
to you newest fellas. Most of you will get substantially more than that. "

"All Together" ...Blankfein tapped the box for emphasis "There's over
Two Hundred Million in Cash in this box, which we are gonna distribute to you
right now" (Thunderous Cheers and Applause).

"But first, before we get to the important events, I just want to go over a few
of the things that I believe made this possible. First of all, regardless of
your functional area of responsibility, it's because of the
remarkable intelligence and work ethic of you guys. Some of you fellas were
really hauled over the coals in the Press. But you manned up and didn't say
anything, as I wanted. I'm very pleased to see that we still have discipline
here in Nostra Famiglia.


" Now, because of our discipline and hard work, we also got lucky. People who
are disciplined and stay focused usually get that way. That discipline made the
market's volatility work for us rather than against us. When times are volatile,
that usually means you can keep the bid/ask margins high - but only if you keep
a sharp watch on the trading desk. Our new high frequency trading programs
have helped - and we all really have to thank Don Mighele for the way in which
he has made the HFT programs such a big part of all our lines of business - but
you have to know what to do with them to make it work. You proprietary traders
have done an outstanding job with the tools we've given you - in equities,
fixed-income, Treasuries, options, everything. We thank you.

" Another thing that helped was reduced competition. Bear Stearns'
and Lehman's disappearance really helped us. Fewer players dividing a
bigger pie.And we've been able to re-sell our clients on the unique value
proposition of GS compared with the other guys. Our clients who are
players and not putzes recognize this. That's why right now we have more
exclusive client relationships than we've ever had. They want an institution
that knows what it's doing. They want us to be profitable.

" Portfolio re-balancing also helped. Everyone's flying to quality now.
Everyone knows that we not only saw this crisis coming, but that we
acted upon it. That means people trust us. The Hedge Fund problems are a
huge help in this regard. They take one look at them and then look at us.
We're picking up by far the lion's share of Hedge Fund redemptions right now.
That's just huge for our Institutional Advisory business. The more the Hedge
Funds shrink - the better we do. Of course, I better say this before Don Carlo
has a heart attack - this doesn't apply to our hedge funds - they're doing
better than ever, right Carlo?"

Don Carlo spoke quietly, in Italian : "Padrino, our Hedge Fund partners
value our guidance as never before. So loyal are they that many of them
even contributed to the celebration we are having this day. "

The Capo Di Tutti Capi continued; "Thanks Carl. Tell your clients we value
their business and thanks to the good work of these guys here, they'll continue
to prosper.

" Another thing that has really helped us is the fact that the 10yr/2yr spread on
Treasuries has been over 200bp for almost two quarters. Since your bond trading
desk almost always has a long bias, for us, at the volumes we do, that's a built-in
profit we don't have to work that hard for. Another thing that helps us is the
preferential access at the discount window as both a Bank Holding Company
and an SLP for the market. Virtually free money. Between 20-30bp.
As much as we want.

" What this has really meant to us is that we've been able to triple our VAR
at any time in our trading operations. In fact,as we speak right now,
we don't have anything at risk for all practical purposes. We're 100%
leveraged - we've been able to use this facility in place of our own capital.
Of course, when we trade, we never lose - so it's perfectly safe.

" And that's because of our High-Frequency Trading initiatives, which
we share with a select few of Don Carlo's hedge fund guys. We owe a lot to
Don Mighele and Caporegime Chen - our very first Asian Made Guy - who
put this together. And thanks to Don Paolo and of course our esteemed
Consigliere Don Enrico, we've located the brains of the system right at the
NYSE's computer facility. What you also need to know is that ever since
we placed our system there, the security for the entire NYSE IT facility
has been placed under the control of Don Giovanni and his men.

" And that's why the Sergei Aleynikov affair is not what it seemed. I can't
tell you everything I know, but I can tell you this - he would have had about
as much chance of stealing any code from us as I would have of stealing the
nuclear war codes from the Pentagon. What this was was a setup. There's
a certain organization in Chicago that wanted to get their hands on the code
that generates our trading algorithms - to try to do what we do. We of course
knew all about them, because they made the mistake of approaching Sergei
-our Made Guy. We decided to play along and really try to burn these guys.
But somehow, they got wind of it. We had to make it look as if Sergei had
stolen the computer code we had given him to plant. But it'll blow over -
Sergei is out on bond-posted by us-and he's enjoying a nice vacation with his
girlfriend safely out of the country. Oh, and by the way, he is getting
a nice bonus and we're letting him keep the $1.4 million those Chicago
guys fronted him for his trouble.

" Another spinoff from our High Frequency Trading Program is that we have
been able to explore new marketing initiatives in our Advisory space. Now,
we're not allowed to give different advice regarding any specific security to
different clients, especially published advice. But what we can do is adjust the
timing. So, when our analysts come up with a recommendation on any specific
item, we "huddle up" and make sure it goes first to our traders and Don Carlo's
hedge fund guys for exploitation. Then, maybe just a few minutes later, to those
clients a bit further down the food chain. An hour later, to our institutional
subscribers, and so on down the line. By the end of the day, when the newsletter
is published on the subscriber website, the same advice has been given out to
everyone - just that some guys got it sooner than others. HFT makes it
all possible. By the time the news appears on the ticker or on the
news networks, we're already covered. And everybody's happy - that's
the key. Everyone who subscribes to our advisory services thinks they're
getting the inside information that the HFT Magic Box has given us.

" It's not magic - the fundamentals of trading and security analysis haven't
changed in half a century. The mechanical and statistical methods are
all the same. A great trader fifty years ago would be an even better trader
today, just because of better and faster tools. That's why I get so tired of people
saying that HFT is like being in a poker game where we get to sit next
to the dealer and see everyone else's cards before they do. You still have to
know how to play poker. HFT sometimes tells us not to even get in the
game at all because the "pot", if you will, isn't large enough to interest us.

" The big thing that HFT does do for us is let us make market
more cost-effectively. The market as a whole relies on us and a few of our
competitors to keep orderly markets in thousands of different equity issues.
Plus, we are required to have the backup liquidity to ensure that things
run smoothly. Especially now that the markets are geared to short-term
trading rather than pure speculation or investment. Keeping everything in line
costs us a great deal of money; and the cost reductions and efficiencies we've
been able to institute because of HFT far outweigh any money we might have
made by "front-running" someone. The other thing that HFT lets us do is to
arbitrage the fees the exchanges pay us to trade on their exchange.
The fees are small - a fraction of a basis point - but it lets us shop for the
best deal whenever we place an order either for a client or for our own
account in real time. And when you deal with the volumes we do, it's
significant - it's just one reason why we make money trading
when others don't.

" Timing and efficiency are everything. It gets back to what I've always
preached - when you take a risk, you should make money. When you
reduce a risk, you should make money. The key is to be able to do
both - and that takes timing, positioning, and influence with the
right people in the right places.

" Now fellas, I've kept you here longer than I intended to. If you'll just form
a line, in the aisle, Don Dominic and his guys are gonna pass out the envelopes.
Now just let me re-iterate, we're being watched - so go out and have a good time,
but keep it discreet. I don't want no scenes out of Entourage with
twenty Goldman guys in a strip club at once showering $100 bills on strippers.
Some of the old Dons and some of our highly-placed friends elsewhere are very
moral, home-family-church type guys. They don't take kindly to that sort of
thing at all. With so many people out of work, and Main Street USA losing
its ass, we're the ugly face of Corporate America to a lot of people.
Keep that in mind - so keep a low profile whatever you do.

" That goes for conspicuous consumption too - I better not see a fleet
of Ferraris and Lamborghinis in the parking garages around here.
Besides, I don't think you need a car at all here in Manhattan; our in-house
car service is discreet, secure, and inexpensive. I use it myself.
And if it's good enough for me, it should be good enough for you.

" So, finally, thanks to all of you for your good work, enjoy your bonuses,
spend or invest them wisely, and have a great weekend - you've earned it. "

And to thunderous cheers, whistles and applause, the Capo Di Tutti Capi
left the room.

Edward Moore Kennedy: 1932-2009

Sen. Edward M. Kennedy (D-MA), passed away last night at the age of 77,
of complications from the brain tumor he had been suffering with for almost a year.

The roar of The Great Liberal Lion of the Senate has been stilled.

For almost 48 years, this Great Voice of Liberalism didn't just "shape"
the Liberal and Progressive perspectives on the issues;
he almost singlehandedly created them.

Had it not been for Teddy, there almost certainly would not have been
a liberal voice on many of the great Issues of our time - from Civil Rights,
The Voting Rights Act, and Medicare in the 60's to Health Care, Iraq,
Climate Change, and the economic crisis today.

For Liberals and Progressives, his policies and politics were the
unbending benchmark by which they measured their own commitment
to liberal causes.

For Conservatives, Teddy Kennedy was the in-your-face liberal boogeyman
they loved to hate for over forty years.

And more than anything else, Teddy relished political combat. As an
unabashed and unashamed Man Of The Left, he was quick to distance
himself from the cautious, calculating, poll-driven centrism of lesser
Democrats such as Jimmy Carter and Bill Clinton.

To Teddy, The Democratic Party represented a choice - not an echo.

But that is not to say he didn't know the Art of Compromise. When he
needed to reach across the aisle to win on an issue he cared about, he found
that even Republican Presidents could be receptive. Even Ronald Reagan,
whose politics could not have been more opposite, found him
an effective legislator and liked and respected him personally.

And that's because whether you agreed with him or not, you always knew
where he stood. Unlike many of his more calculating, finger-in-the-wind
colleagues, he could not be bought or backed down. That made him effective
and dependable in "carrying the water" and delivering on the issues he cared
about most deeply.

And that lesson should not be lost on the White House. Had he been
healthier, there is little doubt that the Health Care debate now causing
President Obama so many difficulties might be turning out differently.

Only a healthy Teddy could have rallied the Democratic base to support
Health Care reform. A healthy Teddy would have countered and silenced
the "crazies " at the Town Hall meetings and right-wing TV and radio.
A healthy Teddy would be putting immense and effective pressure on the
Blue Dogs to get with the Democratic program.

And a healthy Teddy might well be chairing hearings on Wall Street's
predatory kleptocracy that led us into our current economic mess.

Politically, there isn't much that The Thinking Nationalist and Teddy Kennedy
might agree on, with the exception that it is far better to be a man of principle
than a man of expedience.

And as reckless and dissolute as he may have sometimes been in
his personal life, he was equally consistent and honorable in his
political beliefs.

As Barry Goldwater was the Conscience of Conservatism, so
was Teddy Kennedy the Conscience of Liberalism.

And in today's money and opinion-poll driven political world, we
may never see his like again.

The Smartest Goodfellas In The Room ( Part 2)

( Continued From Part 1)

Capo Di Tutti Capi Blankfein took a sip from a glass of water and continued:

" After the others left, it was getting late and I suggested that Don Enrico, Ben,
Geithner and I needed to have a private sit-down to decide the issue. It was
truly up to us; if we didn't do something, it could be 1929 all over again.
It was almost dinner time - nothing like a good meal to get everyone
settled down and everyone's brains working again. The meeting had been
quite contentious - everybody blaming everyone else for the problems and
Geithner, Don Enrico and I having to shout everyone down and keep order.
And now the Press was out - someone had tipped them off about the big meeting
and they were waiting for us. We had to get out of Manhattan quickly together
without being seen.

" So I got on the phone and I had the pool send over Don Giovanni's
stretched armored Cadillac Limo with our best driver and two
soldiers for security. I told them to come in the armored car entrance of the Fed
and go immediately to the bottom level to pick us up. In the meantime,
Don Enrico and I suggested to Ben and Tim Geithner - he's a smart, coolheaded
kid who'll go places, by the way, that they join us for dinner. Geithner actually
suggested that going to any of our usual places without attracting
attention might be difficult and that we should probably dine right there at his
private dining room. I thanked him, but said I thought it best that we get away
from the Press- I motioned him to the window and pointed at the TV
trucks parked right outside. And then I said: "Tim, I got a car coming,
with security. And I know just the place. A Great Italian Restaurant just outside
Jersey City. The chef there used to cook for Silvio Berlusconi. Very upscale,
quiet, great food, everybody minds his own business - and the security?
Real Made Guys. It's perfect for us. "

" Just then, the doors parted and Don Giovanni himself strode into
the room. For those of you who don't already know him, he's our head of
Security and Special Operations - runs our KGB, if you know what I mean.
He came right up to me, kissed my hand and whispered in Italian:

" Padrino, come presto he sentito le notizie, mie sono venuto.
Per favore, Padrino, con permiso che io introdurre e mei soci"

" I was astounded. Only rarely am I privileged to be called "Godfather".
I was touched by this extraordinary courtesy under the circumstances.
And so Don Giovanni, as you are here today, allow me to say in your
native tongue:

"Mio caro amico, molte grazie per suo servizio al suo Padrino quella notte"

" And he took charge right away. Escorted by two of the fiercest-looking
goombahs I've seen this side of the Sopranos, he hustled us all down the
service elevator and into his personal stretched Cadillac limo. He got
behind the wheel himself. When I asked if he knew where we were going,
he said, again in Italian, "Godfather, I know already. Jersey City."
He swung us out, right past the Press , and handled the five-ton car like a
Ferrari through Midtown and into the Holland Tunnel.

" One of the soldiers passed out shot glasses and some chilled grappa,
and I gotta tell you, poor Timmy Geithner thought it was vodka and
damn near choked! Anyway, everybody started to relax and loosen their ties,
and we began to seriously discuss the situation.

" In about twenty minutes, we got to the restaurant - beautiful, real quiet,
even though the place was packed. The proprietor, Salvatore - they call him
"Sally Bananas" in the New Jersey Comizione - whisked us all into his private
dining room and in the blink of an eye, drinks were in our hands.
We were hungry - and when Don Salvatore told us the veal had been flown over
from Italy just that morning, it sounded great.

" Over a great antipasto accompanied by a magnificent Orvieto, we finally
got down to business. Don Giovanni and his fellas got up without a word,
closed the sliding door and posted themselves outside. We were alone,
just the four of us, and we could finally speak frankly.

" I looked Ben Bernake straight in the eye and said "How could you let
this happen? If what I'm reading is right, Lehman isn't gonna last long enough
to get this piece of shit statement published. And when they fold, Greenberg's
shop is next - every counterparty Lehman's got is going to be lined up on the
sidewalk outside AIG waiting to get paid, all before the TV cameras.
And by the time Mr. and Mrs. Middle America see this on CNN or
CNBC, there'll be a run on the banks like you won't believe - FDIC
doesn't have one-tenth of what is needed if that happens.
In just the few days since you briefed me before I went to London,
Lehman's negative net worth has DOUBLED.

" Ben calmly nodded and said: "That's mark-to-market accounting for you.
On a historical basis, they're shaky, but not as bad as it looks. Remember, we
injected fourteen big against their Treasuries just two weeks ago, so we can still
keep them on life support"

" I said HOW? They're gonna blow through that like shit through a goose.
Even the Fed can't lend against this mortgage CDO shit guaranteed by
an insurance company that will itself be bankrupt as a result. And when you talk
about the market for CDO's AND their derivative securities, we're it!
Our exposure right now is thirteen BIG - and if we don't get to the front of
the line at AIG when this shit hits the fan, it's not just us that's screwed - it's everybody!

" Now Ben, let me gently remind you how this all got started. Last March,
when the Bear was getting sick, you and I both agreed that the cause of the
problem was theirexcessive exposure to these mortgage CDO's .
We also agreed that they were, in your words, "too big to fail".
You asked me to intervene, and I did two things. First, I agreed to
make market, to take over, as long as I was covered. AIG wasn't a problem then.
At that time, their reserves were twice the market's collective exposure.
I had been reducing Goldman's exposure since last December, so I thought OK.
We'll get some fee income, and we can wind this whole thing down safely so
nobody gets hurt too bad. The fundamentals of residential real estate have been
out of whack for the last eight years - and if we can just gradually
deflate this thing, we'll get over it. If you remember the eighties and
the RTC, we took some hits - but everyone who matters survived.

" Now, Lehman Bros. is half Bear Stearn's size. You can't tell me that
they're small enough to fail. If we could get the Bear packed away safely,
we can surely get this done. If we can clean this up somehow, I've got
a buyer for Lehman - all I have to do is clean up this balance sheet some
FORTY BIG worth, and Barclay's will do the deal - I've got the word of
the Prime Minister of Great Britain on this.

" Here's what we gotta do. Everybody on this side of the pond has got to
step up for twenty big. I'll get that done. I'll get these assholes in line.
The Fed has got to guarantee the remainder. Ben - all you gotta do is
make the phone call to Mervyn ,your old colleague - and it's done.
Game over. Economy saved. You're a hero.

" Ben replied; "Lloyd, it's not that simple. To clean up Bear, we had
to lay off all that CDO garbage anywhere we could. You know that.
We spread the manure far and wide. And you know who bought?
Dickie Fuld. He bought out the positions of almost everyone we placed
that shit with. What was a problem then is a worse problem now
because it's all concentrated. We laid off Bear's trash at 30 cents
on the dollar - he BOUGHT at fifty, thinking he'd get made whole
either because of AIG or RE market fundamentals. And it's a leveraged
bet - he used borrowed money off-balance-sheet to do it. I didn't know
until today - I swear. I didn't say anything earlier because Jamie Dimon
and the Hindoo would have run right to their trading desks and let
the cats out of the bag.

" I told Ben, "I understand now. It explains everything, including
why Dickie never showed, never returned my calls. Ben, are you
telling me that including the off-balance-sheet borrowing,
it's even worse? "

"Ben said: " Yup. Offhand, I'd say it's in the neighborhood of
eighty to ninety big, maybe more. In my opinion, Lehman's
toast - the best we can do is have them file Chapter 11 right
now, give us some time - Lipton's their law firm, I can call them
in the morning - and in the meantime, we'll have to have some
help from Treasury. Henry, what can you guys do? "

" Don Enrico spoke next. He said, "Being in Washington, I
have to let you know political realities. Bush, as you know,
is an unpopular lame duck. McCain is up in the polls, but Obama
is closing fast. This whole thing is going to tank the economy.
What I would do is get a Troubled Assets Liquidation Facility going-
set up a Treasury-sponsored SPV to buy up all this crap. Hopefully,
the taxpayer will recoup. RTC did the same thing sixteen years ago.

" But if we do this, and the banks get spooked, it's all over. Right
now, the thing that's driving down CDO's is foreclosures - the flippers
who took out all those NINJA loans. But if we start getting to major layoffs
and mass unemployment because the banks won't roll over trade credit,
all bets are off. Even the prime CDO tranches will be affected. This will drive
down home values like nothing we've ever seen. And some folks will wind up
under water and figure it's better to walk away than keep paying - even if
they still have a paycheck."

" In short, Don Enrico continued, "you'll have a huge negative feedback loop
going - things will be circling the drain at an ever-increasing rate. The best
we can do is to put Lehman into BK right now, try to prop up AIG -
because that's the immediate problem - and hope for the best.
But that's not all. If we bail out all the CDO holders - everyone else is going
to come up to Capitol Hill wanting a bailout - the car makers,
the commercial banks - everyone. And the politicians will do it - because
if they don't, they won't get re-elected. All this could tip the election to Obama -
because McCain doesn't know shit about economics and has said as much."

"The bigger problem we have, though, is that we've done a pretty good job
keeping the American worker out of the prosperity loop for the last ten years.
Through immigration, outsourcing, and job exportation, all of which we in
the Investment Banking industry have encouraged, people just have not
been able to earn enough to keep up even a modest standard of living.
They've had to make up the difference by borrowing - mostly
against their homes. And if we knock out home values - and they
lose their jobs - we're screwed. Consumer demand is going to fall through
the floor - another negative feedback loop - and who knows where it will stop?
Now, Goldman has donated pretty heavily to the Democrats this cycle - including
Obama - but just to cover our bets. If that sbirri actually gets into office,
who knows what will happen? But, I can get W. to go along with some aid -
he's a Harvard MBA after all - enough at least to liquidate Lehman in an
orderly manner and keep AIG alive long enough to cover the counterparties."

" After some more discussion along these lines, we got the plan together.
Lehman was toast. They'd be shut down in a few days. Chapter 7. Timmy
Geithner would deliver the bad news to Dickie personally. Don Enrico
would provide as much as was needed to keep AIG alive until all the
CDS counterparties could get out. He'd take the responsibility for
bringing Dubya on board. And, he'd also do something about the
GSE's - Fannie and Freddie - which he blamed more than any of
us on the Street for causing this mess. Ben agreed to provide whatever
liquidity the market required to make this happen, at concessionary
rates. No discount penalties, and all agreed that in the event of any
disputes while this was going on, I would be the final arbiter.

" And as we all know, that's exactly what happened. Now, we know
things are gonna be tough for a while. But the biggest thing we gotta
deal with is uncertainty. In a few months, there's gonna be a new
Administration in Washington. Neither guy is going to give us the
free rein we've had for the last eight years. We actually might be
better off with Obama than McCain because he's a newbie and
we'll be better able to place the right people around him. Both
guys are complete amateurs when it comes to finance and economics;
which, if you'll reflect a minute, works hugely in our favor. In my opinion.
no matter what, we're good.

" So, that's all I've got right now. Let's finish this year strong, tighten
things up, and we'll be OK. We'll have another meeting in a few months,
and by then, I guarantee, you're all gonna be very happy campers here at
Camp Goldman. "

And with that, to cheers and applause, the Capo Di Tutti Capi left the room.

( Continued in Part 3)

Goldman Sachs - The Smartest "Goodfellas" In The Room (Part 1)

It was a cold, gray day in October of 2008 as four hundred Goldman Sachs
employees filed into the massive auditorium on the 30th floor of 85 Broad Street.

For the last two weeks, the news coming from both the trading floor and the markets could be described in just one word - BAD. The overall market was in freefall - in just a matter of days it had plummeted over a thousand points. And there was worse news yet to come.

Home foreclosures, which had been steadily creeping upwards,
had skyrocketed in a matter of weeks. Fannie Mae and Freddie Mac had
just been "nationalized" by the government. Lehman Brothers - Goldman's
main competitor, had just closed its doors in bankruptcy. Merrill Lynch - the
mainstay brokerage to Main Street - had just been forced into a
shotgun marriage with Bank of America , itself on shaky ground.
And Citicorp? That huge, unwieldy "financial supermarket",
under the uninspired leadership of Vikram Pandit (privately referred to
inside GS as "Rajoo the Hindoo"), was nearing a government takeover any day now.

And in the real economy, things were worse. Layoffs were widespread -
and had doubled since last December. General Motors and Chrysler were just
days away from involuntary bankruptcy. And all of this was taking place during
an unprecedented Presidential Election campaign.

For almost everyone on the Street, these were worrisome times.

But for these chosen Four Hundred, no worries. For, regardless of rank,
these chosen few were the key to Goldman Sach's prosperity.
They weren't just employees or officers - they were Goldman's Made Men.

The first to file into the auditorium were the newest "Made Guys" - the young
traders and analysts in equities, fixed income, options, commodities and
derivatives, upon whose efforts so much of Goldman's fortunes depended.
Unlike their "non-made" counterparts, a good number of these young men
did not hail from MBA programs at Harvard and Wharton,
but from proprietary,family-run graduate programs with names like Gambino,
Provenzano, and Genovese. Known as "soldiers", these young men came in
especially handy when a Goldman client or counterparty needed "persuading"
to see things the Goldman Sachs way.

The next to file into the room, in order of precedence, were the
"linebackers" or underbosses. These gentlemen patrolled the trading floors
and client desks to ensure that whatever Goldman wanted to push that day to its
institutional clients got pushed. This group also included the Senior Analysts
who were entrusted with gathering and analyzing the material, non-public
information upon which Goldman's trading for its proprietary accounts depended.

Finally, the next to last group filed in. These were the Caporegimes -
The Managing Directors and Vice Presidents who oversaw all of Goldman's
day-to-day operations. This group also included the key Vice Presidents of
Public and Investor Relations - charged with maintaining Goldman's
all-important public image in a difficult time.

Then, the lights dimmed. And to thunderous whistles and applause, the last group
filed in to take their places on the stage behind the speaker's rostrum.
These twenty-four men - the current Goldman Sachs Board, their key
outside advisers, former Goldman Vice Chairmen and CEO's - were a
Who's Who of American Finance.

They included a former Senator, now Governor of New Jersey. Two former
and the current Secretary of the Treasury, as well as the current and
former Chairmen of the NYSE. Three Deans of the most eminent Graduate
Business Schools in America. Two Nobel Prize-winning economists.
And the remainder were equally well known, appearing daily on the financial
news networks to utter calming words of reassurance to the world's spooked markets.

These were the Dons - the all-powerful rulers of the Goldman Empire who really mattered.

And now, they all stood and applauded as Lloyd C. Blankfein, The CEO - entered
the room.

Balding, tuxedo-clad, small of stature yet imposing in manner, the son of a Bronx postal worker looked and sounded every bit like a real-life Tony Soprano.

As he proceeded towards the podium, he stopped to offer an embrace here,
a handshake there. Some of the Dons even came forward to formally kiss his
outstretched hand. After ten minutes of fervent adulation, he took the podium,
waved his arms for seats and silence, and began speaking:

" Governor, Mr. Secretary, Mr. Chairman, Distinguished Colleagues,
Gentlemen:

" I am pleased to report to you today, that despite the turmoil in the
markets right now, Goldman Sachs at this moment is stronger than ever.
Despite what is shaping up to be a challenging year, we will still be
profitable at year's end. That means, fellas, that though the bonuses will
be smaller, there will be bonuses! (standing applause)

" Now, just a side word here to some of you younger fellas. One of the
downsides of being a "Made Guy" here at Goldman is that the bonus
you receive initially is 65% stock, 35% cash. For the non-made guys, it's the
other way around. You don't get to a majority cash bonus until you are in
our service for seven years. But, unlike the others, should we send you on
assignment to government or elsewhere, your bonus continues - plus, we
make up the difference in your salary; and when you leave your
outside assignment , you are welcomed back here as if you never left.
That's why we have such loyalty. And outside service for Nostra Famiglia
is the fast-track for advancement here. Ask your division Capo or Don if
you got questions. Capece?

" Now, I also realize that the smaller bonuses may put you in a slight cash bind
when it's time to make another payment on that weekend place in the Hamptons
or your Upper East Side condo. I've been hearing noises about people selling
their Goldman stock to make ends meet. I don't need to tell you that those are
noises I don't like hearing. If anything, you need to be buying Goldman stock
- right here, on the inside. But, I understand. I was a young guy once.

" So, for those of you who might be tempted to sell, Don Gary and Caporegime
Dominic, at my direction, have set up a program where you'll be able to borrow
up to 100% of either the market value or the vesting price of your Goldman
shares - whichever is higher - to bridge yourselves, at the 90-day treasury
rate plus 10bp. Can't do it interest-free, guys - there would be tax consequences
if we did that. So if you need the money, it's there. But don't sell the stock .
There are things we're doing, right now, so that six months from now
you'll be glad you didn't sell.

" Now, I want to go over some of the things that have made this a challenging
year for us. I don't think it was a surprise to anyone in this room that these
Mortgage CDO's became an unholy mess. I wouldn't wipe my butt with
this paper and neither would anyone else in this room. But, I don't think
anyone thought that the Structured Financial Products Division of AIG
would go bat-shit crazy and insure absolutely every stupid issue anyone
could come up with.

" Where our exposure came is, that, as you know, we were making a market
in this stuff - otherwise, all these instruments would have been totally illiquid
and the collapse would have come sooner. That's the problem with CDO's -
even first-year MBA's know they're illiquid - and CDO derivatives are
not tradeable at all unless someone with deep pockets will make a
private market in this crap. As you know, this is something we were asked to
do, over my objections, and we made a lot of money at it. But, when the shit
hit the fan over at AIG, we were stuck for Thirteen Big on our worthless
inventory. Now, this wouldn't have put us under, but it could have meant
we'd have become a lot smaller and less powerful awfully damn quick."

" But, that's why we have the Friends we do," The Capo Di Tutti Capi continued.

" That's why we have Don Enrico, our former CEO and esteemed Consigliere,
as Treasury Secretary. And I have to hand it to him. Between him and Old Ben
at the Fed, they came up with EIGHTY Big to keep AIG alive long enough for
us to get out - whole. The other stuck counterparties - Paribas, Credit Suisse -
they got bailed out too. Some of the Dons wanted us to cut a deal with these
damn Euros - like, take them out for fifty cents on the dollar and cash in for
full value. But, I said no. Too risky. If it ever got out that our hands were all
over this AIG bailout, we'd never live it down. It'd cause a diplomatic crisis.
Even our friends and appointees couldn't help us. But, we were able to guide
our European friends through the AIG mess for a small cut - about two and a half
big. Not bad for a few days work. "

" But I would be lying to you if I said that an ill wind doesn't blow some good.
The Dickie Fuld and Lehman Bros.situation for example. I saw this
coming in late 2007, when those fools started really loading up on all this
subprime mortgage nonsense. Bear Stearns too. That's when I said no more
for us, except for what we needed for the market-making operations.
And I wanted that wound down ASAP too. "

" But when Bear went down in March, the transition to JP Morgan went
fairly smooth. We didn't have to get involved. Lehman was another story,
though. When things first got shaky, The Bank of Korea took a look - but once
the Korean regulators saw the ABS portfolio, they said nothing doing.
Barclay's also was set to do a deal, but once the UK Regulators and The
Bank of England took a look, they started to go wobbly. At this point, as
you know, Lehman sent emissaries to us for help-but "Dickie" never showed up.
Can you believe that? Here's this schmuck - making a multiple of what anyone
here earns - including myself - and he won't show the respect, won't come to us
personally as a friend in an hour of need. Instead - he sends five
errand boys to ask for our help. My first instinct was to politely decline;
but, knowing the stakes involved for everyone and after talking with
Don Enrico, Don Lorenzo, Don Giovanni and the others, I decided to see
what we could do.

"First off, we had a little bit of an in with the Brits that Dickie Fuld did not have.
I've known Mervyn King, the Governor of the Bank of England, for
twenty-five years. He was a professor at LSE when I was a fixed-income guy
for Goldman in London. I even lectured in some his seminars. And,
he and Old Ben at the Fed were economics professors together at MIT before that.

" And, Lord Turner at the UK FSA is an old friend. He was at McKinsey &Co.
when I was in London and I helped him get hired later at Merrill Lynch Europe.
The bottom line is that because of those friendships, both the BOE and
FSA are full of Goldman guys - mostly young, British as well as American,
learning central banking and regulation, getting that all-important exposure
before they get Made. And they were all willing to help.

" I went over to London and took a few of our brightest fellas on the Lehman
situation with me. Two of our Dons from London and our European Capos of
M&A and Institutional met us at the airport. One of them whispered to me
that a hefty advisory fee from Lehman had landed in our City account
that morning. We had nothing signed from Lehman at this point,
but since we'd been paid, I decided to go ahead.

" We worked all night to come up with a plan and then we were off to
Threadneedle Street to meet Mervyn King, Lord Turner, and the Barclay Boys.
I won't bore you with the details, but they were blown away with what
we proposed. We were going to hive off all the garbage into an SPV,
and fund it with a mandatory assessment on all the other players in the
CDO market. We'd make the first contribution. I figured that if everyone
took a small haircut now, we'd all avoid getting scalped later.
Pretty much of a replay of the 1998 Long Term Capital Management fiasco.
Had it stopped there, we might have avoided all this.

" But, Lord Turner said he couldn't approve the deal unless we could
get Alistair Darling, The Chancellor of the Exchequer, and possibly the
PM himself to go along. They had been bit hard last year by the failure of
their largest mortgage lender, and had had to bail them out to the tune of
Twenty Big in Sterling (about $34B US). Plus, they had this mess with the
Icelandic internet banks to deal with. I could see what these guys wanted
- political cover.

" At this point, I was starting to give up hope. But - I figured we would have to
make a case to Ten and Eleven Downing Street sooner or later, so it might
as well be sooner.

" Prime Minister Brown met us personally at the door and escorted us in.
For the next two hours, he and Darling listened without saying a word as
we went through the whole dog-and-pony show again. At the end, Darling
stood up, thanked us all for our time, but said he couldn't justify going ahead
unless we could get the SPV built and bring the funds from our side of the
pond to the table first. The PM nodded at this. He told us that as a financier and
an economist, he understood what we were trying to do and he understood the
gravity of the situation. He also reminded everyone that time was of the essence.

" But he also said that the UK was getting bailout-weary and that they were as
impacted with bad CDO paper as we were. Unless we could completely "remove
the rubbish", as he put it, there was no point in going further. Barclays
would have to get a completely clean Lehman, or there'd be no deal at all.

" We knew now we'd have to move quickly. We left straight for the airport,
and on the way I called Ben, Don Enrico, and that kid at the NY Fed, Geithner.
I told them I wanted a sit-down on the Lehman situation first thing
the next morning, with all the heads of the banks in attendance.
Ben said he'd be there. Don Enrico too. Geithner would host and chair
the meeting. I also told Geithner that Dickie Fuld had better be there too
or there'd be hell to pay, after all the trouble I'd been to.

" Well, when we got to the sit-down, everyone was there - except Dickie, of
course. But he had sent over his CFO with their preliminary
third-quarter numbers. I took a quick look and Don Gary and I just about
had a heart attack. It wasn't just bad - it was worse than we could have
ever imagined. Had we known how bad, we'd have never left the States.
Even if everyone around the table had come up with the max, we'd be about
FORTY BIG short of where we needed to be. I let everyone in the room digest
the numbers, say a few words, and then I said: "It's hopeless. This is going
to have to be a matter for the Fed and the government to solve. Now fellas,
I'm going to use every bit of influence I have to get this thing done.
But I'm going to have to ask you to keep quiet - maybe even for a few days,
so I can try to get this stitched together. I don't think I have to remind you what's
at stake here - if this gets out, and the mortgage CDO market crashes, some of
you in the room here may no longer be with us. We all have exposure to this stuff,
but if it's handled right, we just might be able to ride it out. So, that's it, guys, I
want to thank you for coming - and remember, the Press is waiting downstairs -
your only comment is NO COMMENT. "

(TO BE CONTINUED)

Change We Can Believe In - Or Compromise We Can't?

Mr. President:

We've now had seven months to BELIEVE in "Change We Can Believe In".

Where is it?

Today, we learned that the "Public Option" - the centerpiece of your Health Care Reform - has been officially taken off the table. This follows the revelation
two weeks ago, confirmed by the White House, that you agreed NOT to have the
government negotiate with the pharmaceutical industry for "the lowest possible prices".

We have also learned that the non-profit "health care co-operatives"-
the fallback position in case there was no "public option", now
will not happen either. Neither will Medicare reform.

And Tort Reform - the one thing that might take an immediate 15%
right off the top of the national health care bill - wasn't even up for discussion.

How is this "Change We Can Believe In" ?

It looks to me like more of the same.

But now we've got questions - what else has been agreed to behind closed doors
that we won't find out about until later?

Are the Health Insurance Companies still going to be allowed to profit from
denying coverage for pre-existing conditions or dropping coverage of those
who file a claim? Is Big Pharma still going to be able to exert monopoly
pricing over drugs with a blanket veto over any negotiations for lower prices?

Judging by the reactions of the stock market, that seems likely.

In the past six weeks, CIGNA is up 40%. Wellpoint - up 23%. Aetna - up 21%.
Big Pharma? Pfizer - up 20%. Bristol-Myers/Squibb - up 15%. You get the idea.

The Market seems to believe the Fix is in - do you?

This isn't Change We Can Believe In - this is Compromise We Can't Believe Happened.

Now, if the GOP had a majority in the House and Senate, and you
had won a squeaker of an election, we could understand. You would be starting
from a position of weakness. Realistically, you could expect only those small,
incremental changes you could negotiate. And you would be asking, like
many other Presidents before you, for a Congress you could "work with".

But that's not what happened. We gave you a convincing popular and electoral
victory. You have solid majorities in both houses of Congress.
Health Care should have been a done deal. We could understand some
compromise. No Congress, regardless of party, will give a President
everything he wants.

But this isn't compromise. It's a total cave-in to the other side, which has
a vested interest in keeping our health care a sorry mess. And it didn't
have to happen.

There's lots you could have done.You could have made this a matter of party
discipline. You could have pointedly refused to work with the GOP or
conservatives and used the media to tie them to their corporate masters.
This would have covered your moderates and isolated the Blue Dogs.
Remember, most of those Mutts owe you more than you owe them.

And it would have paid off in other ways too. Big Health Insurance and
Big Pharma are poster children for corporate Bad Citizenship that
everyone recognizes. Almost everyone either has had a claim denied,
coverage denied, been put in a financial bind by illness,or
knows someone who has. That makes them unpopular, easy targets.

Get Health Care through, and you do more than just reform Health Care.
You send a Big Message to the other bad citizens - especially Wall Street -
that it's time to play ball and get with the program. Your program.

But fail on Health Care, and you're done. They'll know you can be had.
You'll be compromised and bi-partisaned to death on absolutely everything
else - banking reform, the environment, everything.

Remember, Mr. President; Compromise is a tactic - not a strategy.
Don't forget that. We voted for Change We Could Believe In ; not
compromise we can't understand.

And your beloved Progressives won't forget that - neither will the people.
If joblessness and foreclosures persist into 2010, a lot of good, loyal
Congressional Democrats are going to lose their seats. That won't help you.
And if things don't improve by 2012, you're going to be replaced -
maybe even by a woman.

And I'm not talking Hillary - I'm talking Sarah.

Barack Earl Hoover, Jr. (Part 2 of 2)

(Continued From Part 1)

For both Herbert Hoover and Barack Obama, the problems began early in their presidencies.

Seven months into office, Herbert Hoover witnessed the great Wall Street
Crash of October 1929. In September 2008, two months prior to Obama's
election, Wall Street repeated its 1929 performance, sending stocks to
ten -year lows while wiping out both major investment banks and
millions of hapless investors.

In both cases, the market collapse resulted in mounting bankruptcies,
foreclosures, and quickly skyrocketing unemployment. By June of 1930,
unemployment had doubled to 9.6 per cent. By May of 2009, using a
more expansive measure, unemployment was also 9.6 per cent - and rising.

At first, both Obama and Hoover were reluctant to directly intervene. In Hoover's time, market panics and crashes happened every seven to ten years, and usually corrected themselves in months after the excesses of speculation had been liquidated away. Obama had been forced to divert valuable
campaign time and resources into negotiations with the outgoing Bush
Administration over relief measures, as it became apparent that he would be the
likely winner of the 2008 election and would require some continuity in order to fully address the problems.. Thus, both men chose to start by using the "bully
pulpit" of their office - to try to stem the tide of events by moral suasion.

Hoover began by calling a series of meetings with the "key men" of his time -
bankers, industrialists, and academics - to explain his view of the problems and
what he needed them to do to help correct them. He wanted the banks to
resume lending, the industrialists to hold the line on layoffs, and the academics
to lend theoretical support to his efforts. To get things started, in 1930 Hoover
and the Congress created the Reconstruction Finance Corporation (the RFC);
an unprecedented combination stimulus and banker's relief measure.

(It would later be greatly expanded by the Roosevelt Administration under the New Deal.)

Obama also called in his "key men" from Congress and the business, financial and academic communities to get their support behind relief efforts. Using the Troubled Asset Relief Program (TARP), passed in the waning days of the Bush Administration as a start, Obama, like Hoover, persuaded a frightened Congress to pass an unprecedented RFC-like stimulus program of tax cuts and spending bills, in an effort to "re-light" the flamed-out economy.

In both cases, the "Key Men" listened politely - and went on as before.
The banks hoarded the cash proffered them under both the RFC and TARP
and quickly ceased lending. The financial community - the investment banks
and brokerage houses - used the funds to resume paying their executives and
traders huge bonuses, while the sector as a whole continued to show losses.

A few investment banks even used the relief funds and government
guarantees to speculate against their own customers - using inside information
and proprietary trading.

The response of the business, government, and academic sectors to the
efforts of both men was equally disappointing. Under both Hoover and
Obama, the business community took the assistance and continued to
slash output and employment. The Congress took Obama's stimulus package
and used it to fund thousands of pet "pork barrel" projects in their districts.
Consumers and the wealthy used tax cuts to increase saving and pay down debt
instead of spending. The States used their portion of the funds to
shore up sagging state budgets and preserve the jobs of existing state
employees instead of embarking on new programs. And the academic
community under both Hoover and Obama began sounding the alarm about
"Deficits"and the need to balance the budget.

Conservative economists began to call for slashed spending and increased
"liquidation"of troubled sectors of the economy. Liberal economists began
calling for immediate tax increases on "the wealthy" and for new sources of
government revenue, such as a Value-Added Tax and new carbon-fuels and
energy-consumption taxes.

The end result? Both men, despite their best efforts, managed to do little
more than slow the rate of an inevitable decline. In Hoover's case, matters
continued to drift gradually downward until he was replaced by Roosevelt in 1933.

Obama, seeing the economy shrink to new lows despite the vast amounts
appropriated and spent, began new initiatives on "the green shoots of the Green
Economy" (a sop to the environmental activists of his party), and a quixotic
attempt to reform Health Care.

In both instances, both of these bright, technocratic men fell into The
Technocrat's Trap: that doing what should be done would result in
what must be done. Hoover, ever the cautious and calculating engineer,
believed that his sheer logic and scientific precision would both win over
doubters and persuade opponents.

Of course, that did not happen - and the same high-minded, logical approach
was to lead another engineer President ,James Earl Carter Jr. - to disaster
fifty years later.

Obama. a lawyer and community activist by training, did not have the same
mathematically logical mindset as Hoover. But his years of experience as
a community organizer, attorney and politician led him to believe in the
value of consensus - that what must be done was to first, achieve consensus;
and then the result could be carried through to do what should be done.

Having carefully studied both the problems and the failures of past Presidents
to achieve consensus, Obama also brought a legislative majority and a solid
electoral victory to the table. Combining a desire to seek consensus and
an extraordinary grasp of detail with an even-handed, mature temperament,
he had every reason to believe he would succeed.

But, as they say, the devil is in the details. And in the rough-and-tumble
struggle between reality and idealism, reality usually wins.

Reality saw Obama's Stimulus package bear only the slightest resemblance to
what he had originally proposed. The final product featured non-stimulative tax
cuts, an unprecedented porkfest for politicians, and precious little in the way
of immediate, employment-creating projects and programs. Even worse,
Obama's natural caution has led to a glacial slowness in implementation.

Result? Hooverization.

But it is on Health Care that Obama's efforts most resemble the struggles
of the 39th President. In what can only be described as a Carteresque
mix of idealism, inexperience, and naivete, Obama handed off the responsibility
for this key Administration initiative to the Democratic leadership of the Congress.

Now you don't have to be a hardened cynic to understand that these Solons
are hardly "tribunes of the people". Rather, they are the bought and paid for
creatures of every special interest with business to transact or bring before the
federal government. And one of the wealthiest and most powerful of
those Special Interests is the Health Care industry.

And on this one they are taking no chances. Backed by a 300 million dollar war
chest, they have deployed a brigade of 3300 lobbyists to Capitol Hill. That's
roughly six cash-carrying lobbyists per Member of Congress.

And they aren't stopping there. The demonstrations against "Government
Health Care" have been largely paid for and orchestrated by those same
interests - often by slick, well-paid young organizers in khakis and polo shirts
with the logos of Blue Cross, Pfizer,Cigna, Wellpoint, and United Health,
to name a few. And coverage of these incidents - especially on conservative
or business-oriented networks - has been paid for by these same folks.

Against this, Obama, until very recently, has declined to use the influence
of his office or the Executive Powers of the Presidency to shape the debate.
As a result, the opinion polls are now running 4 to 1 against Health Care Reform.

Mr. President, you've Carterized yourself.

Barack Hussein Obama, meet Barack Earl Hoover Jr.

Barack Earl Hoover, Jr. (Part 1 of 2)

Seven and a half months into the administration of Barack Hussein Obama, the world is gratified at the impression this highly intelligent and purposeful man has wrought.

Whether speaking at a Town Hall meeting or the meeting of the Group of Eight, one gets the feeling that here, at last, is a man with the gravitas and maturity befitting a President of the United States.

Combining the larger-than life presence and charisma of a Ronald Reagan with
the grasp of detail of the most dedicated academic policy wonk, you can almost
hear the sigh of relief in chancelleries and presidential palaces all around the world:

"There could not be a finer man for our times. He understands all the problems.
He has surrounded himself with the Best and Brightest. He understands
science and modern technology. He'll Get Things Done -
and get them done in the right way".

The problem? These words were spoken by Franklin D. Roosevelt in 1920 -
about Herbert Hoover.

Before we hail Obama as the second coming of Franklin Delano Roosevelt,
we would be wise to consider the striking similarities between Mr. Obama
and two other technocratic presidents: - Herbert Clark Hoover
and James Earl Carter Jr.

As Kevin Baker put it in Harper's Magazine , Obama has fallen into The
Technocrat's Trap: he has confused what should be done with what must be done.

Like Obama, Herbert Hoover was born into modest circumstances. Although
a diligent student, the deaths of his parents forced him to leave school at age
fourteen to be apprenticed to his uncle, a Realtor and merchant in Salem, Ore.

By age eighteen, Hoover was not only running the store but attending night school full time. Shortly thereafter, Hoover left his uncle to attend Stanford University, graduating three years later with degrees in both Mining Engineering and Geology.

The next fifteen years of Hoover's life reads like Indiana Jones meets King
Solomon's Mines. In an age when travel meant both danger and adventure, he
found plenty of both - traveling from Australia to Patagonia to Peru to Peking
in search of geologic riches - which he found more frequently than not.

His Peking trip found him in China during the Boxer rebellion - and he escaped
from the besieged Legation to help guide the Western Armies riding to the
relief. After the Boxer Rebellion, Hoover went next to Burma - where he
uncovered an ancient gold mine (along with more valuable iron ore and
manganese), from studying a centuries-old Chinese map and translations
of ancient legends - while besieged in the Peking Legation.
From there, he returned to Australia - where he set up and managed
iron mining operations at the locations he had previously explored and
perfected a means of extracting zinc from exhausted iron ore tailings.
This innovative method made him rich - and is still used today.

In short, if there was a fortune to be made from exploration and mining in
dangerous and war-torn places, this real-life Indiana Jones was in the thick of it.
Returning home, he was a huge draw on the lecture circuit - speaking to both
learned societies and throngs of the merely curious. By age 40, on the eve of
World War One, he was worth tens of millions of dollars and was eager to
begin a second career in public service.

World War One found him organizing relief to German-occupied
France and Belgium, despite the opposition of both the Allies and the Germans.
After America's entry into the war, he organized relief to war-stricken Europe
and was a leading member of the American Delegation to the Versailles
Conference. Lionized around the world, hailed as both a genius and a
humanitarian, both parties eagerly cultivated him for the 1920 Presidential
Elections. He briefly explored the idea - even entering the California primary
as a Republican - but served as Secretary of Commerce in both the Harding
and Coolidge Administrations, in order to put his theories of efficiency
and scientific management into practice.

Had his career stopped there, he would have still gone down in history
as a great man. But ,when Calvin Coolidge declined to run for another term,
Hoover, somewhat reluctantly, stepped forward for the 1928 nomination.
And here's where the similarities with Obama begin.

Like Hoover, Barack Obama did not descend from wealth or privilege.
Like Hoover, he lost his mother to illness while still a young man and was
largely raised by his maternal grandparents. Like Hoover, he traveled and lived
overseas in his early years. Like Hoover, he leveraged not wealth
and connections but talent and ability to an elite education - graduating
with honors from both Columbia and Harvard Law School, where he was
editor of the Law Review.

With this background, Barack Obama could have gone immediately from
Cambridge to Wall Street and made instant millions as an investment banker
or deal-making lawyer. But he didn't. Motivated more by a spirit of public
service than anything else, he returned to Chicago and began his career as a
community organizer. Realizing he could do more for people as a public official,
he ran first for Congress (losing), and then successfully for the State Senate.
From there, he made it to the U.S. Senate, and from there, he made his
historic run for the Presidency.

(Continued in Part 2)

On the Importance of English - A Tale of Two Countries (2nd of a series)

A recent story in the New York Times caught my eye.

In researching a future Thinking Nationalist piece on Asia and Competitiveness, one of the key factors I've noticed is that successful Asian competitors for world markets not only master science and math but also most importantly, English.

India, of course, is famous for having three hundred million plus fluent English speakers. That's why IT and back-office jobs are outsourced there. China, wanting to move up the value chain in manufacturing, is placing renewed emphasis on English. So are Taiwan and the Philippines.

South Korea is even recruiting Korean-ethnic US College graduates to come home to teach English - at higher salaries than they would receive for teaching English in America.

In Japan, The English portion of the Japanese University Entrance Examination
is so arduous and demanding most American students could not pass it.

The message? If you want to lead in the global economy - learn English.

Which is why I could not believe what I was reading. In a move of incredible
backwardness, Malaysia has decreed that, beginning in 2012,
science and math in Malaysian high schools must be taught in Bahasa Malay -
the predominant dialect of the two most populous provinces of Malaysia.

As a sop to its Chinese and Tamil ethnic minorities, Malaysia will
reverse policy and allow all subjects in separate Chinese and Tamil
public schools to be taught in Mandarin or Tamil.

English will, of course, remain on the curriculum; but as an optional
foreign language, and it won't be taught everywhere, so that additional
resources can be devoted to Malay-language instruction
(this according to the Straits Times).

In my opinion - wrong, wrong, wrong. And I'm not the only one saying so.
The Malaysian International Chamber of Commerce is aghast.
So are the universities. Most importantly, so are parents - with the very real
concern that their Malay-educated children won't be able to compete for jobs or
higher education at home or overseas.

But the Malaysian government is hanging firm on this - even though the global recession has hit Malaysia hard. The economy is down almost 20%,with exports - principally apparel, raw materials and low-level electronics - off almost 30%.

And what about public opinion? Last week, there were riots in Kuala Lumpur
over economic conditions. Ethnic tensions and religious conflicts are increasing.
But, the Malay language issue is, regrettably, a non-starter except among the business and professional classes.

To see how differently another nation with the same ethnic mix is handling the
issue, let's take a quick trip down the Malay peninsula and across the Straits of
Johore to that unique island city-state - Singapore.

Now I'll admit that I am an admirer of the Singaporean nation. They have many
things going for them. Singapore is 21st-century modern. It's so clean it's as
if you picked up Switzerland and put it in the middle of Southeast Asia.
It has a thriving middle class and a larger wealthy class than you would
expect in a nation of four and a half million.

The schools and universities are outstanding - so good, in fact, that many
foreign expatriates elsewhere in Asia send their kids to school there.
And the government is a world leader in measures of performance such as
transparency, honesty and accountability. Public corruption is rare -
and harshly punished when detected.

To be sure, the legal system is draconian even by Asian standards.
Even small transgressions can mean jail time and public flogging.
But the judiciary is independent and professional, and adverse decisions
can be appealed all the way to the Privy Council and Law Lords - in England.

Why? Because according to Singapore's leaders, English Law and the
English Language were the keys to prosperity. Of the four official languages
(English, Malay, Mandarin and Tamil), English is the mandatory
language of instruction. A second language is also mandatory
(unsurprisingly, Mandarin is the most popular choice), and fluency
in the other two is strongly encouraged.

In Singapore, all public business is conducted in English. The Language of
Parliament and the Judiciary - English. Business - English, with Mandarin
a strong second.

And the economy? World-class. Singapore is the headquarters for almost
all multinational corporations operating in Southeast Asia. Singapore Airlines
is a global player in international business travel. Its economy is diverse and
high value-added, with Technology, Financial Services, Pharmaceuticals,
Biotechnology, and Travel and Tourism leading the way.

While Singapore was affected by the recession, its economy only
slipped by 6.5% through June, and began to rebound shortly thereafter.
By December, analysts expect only a modest 2% decline from 2008,
owing largely to lagging travel and tourism.

By all accounts, a marvelous performance. And it's largely due to the
influence of a language that isn't native to any of Singapore's ethnic groups.

That Language? English.

Speaking Truth to Stupid

To quote P.T. Barnum: "No one ever went broke underestimating the intelligence of the American People".

And, judging by the financial results of the Fox News Network, nothing could be more true.

While most media outlets (especially print media), are losing money, Fox News' results show increased viewership, advertising revenue, and, spectacularly, a profit.

According to the Wall Street Journal, the network of Farfetched Outrageous Xenophobia had a 50% jump in profit and a 45% increase in viewership this quarter - indeed, it's the only thing making money right now for Rupert Murdoch - that even-handed, patrician arbiter of news and information.

Glenn Beck, Ann Coulter , Sean Hannity, and Bill O' Reilly, you can all be proud of adding so constructively to the national debate, talking about "The Birth Certificate" and "Socialist Health Care". And CNN and Lou Dobbs - that goes for you too.

Lou, you're so thoughtful and temperate you're making Rush and Michael Savage look almost non-partisan. And I can remember when you were just an Economic Nationalist and before that, a corporate shill.

You liberals aren't exempt either - Keith Olbermann and Rachel Maddow, you are so objective on All Things Obama that, listening to you, you'd think the President's every utterance was the Sermon On The Mount.

Bill Maher put it best ... the reason we have a free press is so that Responsible People with a reasonable command of both the facts and their faculties can Speak Truth To Stupid.

Stupid? Yes, Mainstream American Public, I'm talking to you.

Seventy Per Cent of all Americans can name neither a Senator from their state
nor their Congressman. Half think the Bill of Rights was enacted by
George W. Bush after 9/11.

Before the Iraq War,70% of Americans thought that
Saddam Hussein helped Bin Laden create, train and finance Al-Qaeda and
personally helped plot 9/11. Now, Saddam probably would have if he could have,
but he didn't. And it doesn't stop there.

Thanks to Lou Dobbs and the "Birthers", a Third of Republicans don't think
Obama's even a citizen. A Third of Democrats think Bush had prior knowledge of 9/11.

But we know that's wrong - because, as Bill Maher said, any sentence with the words "Bush" and "Knowledge" in it has to be absurd.

And just look at the Health Care debate - on CNN, we saw a man in South
Carolina at a Town Hall Meeting tell the audience to "Keep the Government's
hands off my Medicare!"

Huh? That's like driving across country to protest Interstate Highways.
And why is it that everyone we see in these Town Halls complaining
about "socialist"health care is obese, white and rural with a Southern accent?
I'm sure these folks have great coverage wherever they work. Right. Uh-huh.
Sure.

The reality is, these are the folks the reforms are supposed to help. Tell me,
Liberals, just how does demonizing these people on TV as ignorant rubes help
get Health Care reform passed?

And Conservatives, what kind of fever-swamp nonsense is "The Birth Certificate"?

You got the wrong guy if you're looking for the Presidential Candidate
who wasn't born in the U.S.

Guess what - it's McCain - who was born in Panama. And that's a fact - either
look it up or just ask him. From a purely Geographic standpoint, he might be
the ineligible candidate. But you'd have a hard time convincing me that a
sitting Senator who is the son and grandson of US Admirals isn't
eligible to be President.

And if you expect me to believe that Obama isn't a US citizen or wasn't born in
Hawaii, you smoke funnier weed than I do. And I'm not talking tobacco or dope,
I'm talking dried cow manure.

Your problem is obvious - too many hits on the crap pipe.

And Lou Dobbs, you're the one who told the Republicans that if they just put
that in their pipe and smoked it, they would escape the fever swamp and emerge
as a credible, authoritative, political alternative.

Instead, you've led them from the swamp to the wilderness. Maybe permanently.

And none of this is good for the country. We have some minor problems
that need attention - bankrupt banks, unemployment, foreclosures, two wars
as well as health care, to name just a few.

And making one political party look irrelevant and ridiculous and giving the
other a free pass doesn't make getting things done easier - it actually gets in the way.

You see, in politics Conflict and Negotiation lead to Resolution and Agreement.
Two sides have to tango before there can be Consensus that everyone
can buy into and make work.

It's a basic engineering principle .... you have to have friction before there can be traction.

And that takes intelligence, maturity, and fact-finding. Media, that's where
you come in. Your job is to uncover the facts, which powerful interests will often
try to hide from you, and then use those facts to poke as many holes in the
fatuous and self-serving arguments of both sides as you can.

That's why we have a free press - not to speak truth to power, but to
Speak Truth to Stupid.

A stupid and ignorant citizenry means even more stupid and ignorant politicians.

That's why I can't depend on those in power to tell me the truth -
because most of the time, they wouldn't know what the truth was if it
came up and bit them.

They're not necessarily venal or corrupt - they just don't know any better.

Making sure that both public and politicians "know better" is the job of a Free Press.

In fact, it's your only job. Don't forget that.

Health Care - Final Thoughts

Just a few final thoughts on Health Care before we move on:

First, let's briefly recap what "Health Care Reform" should consist of:

1) A Public Health Insurance Option, made available either though an
employer or through individual purchase. This option should be both
competitively priced and backed with the full tax and regulatory
power of the state;

2) Medicare Reform, based around a transition to HMO-style Managed
Care Plans and a gradual reduction in the eligibility age to 50;

3) Negotiation with the Pharmaceutical Industry for pricing on a par
with Canada and the UK;

4) Removal of Medicaid from the states, making it a fully federal program;

5) Medical Malpractice reform , removing malpractice from the courts and
the tort bar and replacing it with a system similar to that of
Workmen's Compensation.

Are we likely to get any of this? No.

Will the "reforms" being considered by Congress reduce either costs or
the number of uninsured? No.

Instead are we likely to wind up with both higher costs and fewer insured? Yes.

Why?

Because of purchased political influence.

As I've said before, if you can't offer Washington money, Washington can't
offer you anything. And when it comes to our Senators and Congresspeople,
they never met a cash-carrying lobbyist they didn't like.

And it's not just cynicism that makes me say this.

As I'm writing this, I'm watching a fascinating interview on PBS by
Bill Moyers with a interesting gentleman named Wendell Potter.

Mr. Potter was formerly a senior executive at Cigna, a leading
Health Insurer, and assisted in directing their lobbying efforts
on Capitol Hill. Cigna, of course, is one of the leading co-conspirators
in the effort to derail effective health care reform.

Mr. Potter's story is fascinating listening .. that's why I'm linking to it
here.

It's a long interview ... about 40 minutes ... but if you are at all
concerned about the issue, it's well worth listening to.

Also a short essay from Bill Moyers: