Today the Financial Accounting Standards Board (FASB) voted to ease one of the accounting standards that is used in the complicated process of determining the value of assets owned by financial institutions.

When this happened the Dow Jones Industrial Average immediately traded up about 300 points and certain stock market pundits began proclaiming "The Depression is over!"  -  clearly, this decision was important and we will attempt to explain why:

The business health of financial institutions is measured by the value of the assets they own.  When a bank makes a mortgage loan it puts forward the money to buy the house and allows you to live in that house and call it yours as long as you make timely mortgage payments according to your mortgage agreement.  Your house is pledged to the bank as collateral for your mortgage loan, which means that if you do not pay your mortgage the bank will claim ownership of the house.

The fully collateralized and current paying loan is an asset for the bank and it has a market value.  If you do not make your mortgage payments, your loan declines in value but that value is replaced by the value of the collateral, your house.  One way or another, the bank will eventually get most if not all of its money back either through you paying off your mortgage or through the bank reposessing and selling the house.

Some banks are considered healthier than others and this impacts their ability to borrow and their cost of borrowing money just as your own credit score impacts your ability to borrow money to buy a car or house.  As mentioned above, the health of the bank depends on the value of the assets it owns.

During times of financial crisis the market value of these assets will temporarily decline and that can damage the bank's ability to borrow money to finance its operations because, until today, the bank was required to state the value of its assets according to what the current market would pay for them.  When the market value of a bank's assets declines,  it is said that the bank's capital position has weakened  - and it doesn't matter whether this weakening is only temporary due to a crisis. 

The idea of marking-to-market during times of crisis means that the bank may not be able to get back the money it has loaned if it has to immediately sell off its assets, even though over time it may still be able to recover all of its money by either waiting for the loans to pay off, selling the loans, or selling the collateral.   In truth, there may be no reason to sell off these assets and therefore there is no real need for the bank to worry that it won't get its money back.  As soon as the crisis is over, the assets may return to their previous value and all will be well.

When Fed Chair Bernanke and Treasury Secretary Paulson marched into a meeting with top Government officials and told them unspeakable tales of financial collapse and ensuing misery, what prompted this action was the market-wide realization that if banks and certain other institutions were to mark their assets to market, their capital positions would look extremely weak and their creditworthiness would be greatly diminished.  In other words, their normal borrowing activities became impossible because they were forced to value long-term hold assets at current market value.

Since the FASB eased the mark-to-market standard to allow financial institutions to mark long-term hold assets to a valuation model that more accurately reflects their true value over time, it has suddenly resulted in an improvement in the capital positions of most of the major financial institutions.  This should help to ease the credit crisis and allow funds to return to a more normal flow between financial institutions and, eventually, should result in their ability to work out some of their problem loans rather than write them off immediately.

So easing mark-to-market restrictions has helped ease the current financial crunch, but the reason the mark-to-market provision was created in the first place was the tendency of banks and other financial institutions to assign totally unrealistic values to their non-performing assets in order to keep the dismal condition of their capital position secret.  That is why, amid all the optimistic talk today, you are also hearing from people who are proclaiming that changing the mark-to-market rules will allow the financial institutions to misrepresent the soundness of their financial health.



 

        

As we find out more about the AIG situation, the more amazing it seems to be.  However, having been a 'Master of the Universe' for over twenty years, I must say I am not surprised.  There is a thoughtless quality to much of what Wall St has become.  It wasn't always that way.

It amazes me that Edward Liddy allowed his people to be thrown under the bus when he so easily could have stepped forward and explained that the people getting paid were people brought in to unwind the Credit Default Swap mess.  It is also amazing to me that he didn't have enough sense to make sure their compensation wasn't called a 'bonus'.

Something happened on Wall St during the 1980s.  Where once there had been a patrician prudence to the character of Wall St, in its place there grew a greedy arrogance that completely eclipsed the best interests of the clients and the all-important foundation of trust that enabled billions of dollars to be traded on word of honor alone.

The entire AIG mess was caused by weak management that didn't stand up to rogue employees because they were making a lot of money for the firm.  The same thing happened at Drexel Burnham Lambert when Fred Joseph didn't have the guts to fire Michael Milken. 

I loved working on Wall St.  There is no place like it that I have ever been because so many of the people you work with are extremely bright.   Unfortunately, it is a standard complaint that the top managers are often not the brightest bulbs in the chandelier.  This is because the geniuses are all doing the deals and don't want to be bogged down with dull management duties. 

It used to be that the Partners or the Boards would demand prudent adherence to certain conservative leverage ratios, but as the products became more exotic it was more difficult for many of them to decipher the risk involved, so they sometimes held their questions for fear of looking stupid.  I remember one particularly brilliant mathematician who set out to devise a way to hedge Corporate Bonds.  He came up with all kinds of formulas and charts and assured everyone it would work.  Those of us in the trenches knew it would never work, but he had the department managers snowed.  Fortunately, a few of us sat him down and pointed out why his idea wouldn't work before the firm dropped a $billion into the scheme!

Wall St really needs to be cleaned out.  Much of it is currently like having a bunch of teenagers running a munitions factory  - it needs adult supervision again.  

        

It used to be that 'bonuses' were given out of company profits. If the company didn't make money, no bonuses were paid

Even when your department was profitable, if the company lost money you did not receive a bonus. Your department's profits went toward keeping the company afloat by filling the gap between revenues and expenses. This was a good practice that produced strong companies that did reliable business because it created an internal culture of cooperation for total enterprise excellence. If your department was profitable but one of the other departments was losing money, it was in your best interest to try to do whatever you could to help that department get its act together.

At some point during the 1980s companies started to assign profit/loss accounting to individual departments and, sometimes, to individual producers. This created internal competition in the company between departments trying to out perform each other. This was thought to be a good thing but, in fact, it destroyed a lot of very profitable business.

An example of the dark side of internal competition: One evening a client and I were eating sushi at Hatsuhana in New York. He complained that because his fund's investment indenture limited his investments to U.S. Government guaranteed or fully collateralized investments, his short maturity fund could only invest in Treasury Bills and 2-year Treasury Notes while his competitors at other investment advisors were buying high quality commercial paper and making at least 25 basis points more in yield. We applied our brilliant minds to this problem and decided that auto loans and credit card receivables would be great collateral for what we called Collateralized Commercial Paper. So the next day I went back to my firm, a top-tier institutional broker/dealer, and proposed we create a new product: Collateralized Commercial Paper. The Corporate Finance Department informed me that they wouldn't be interested in working on the project because they would be doing the legal structuring work of creating the product and selling the idea to companies that might want to issue this Collateralized Commercial Paper, but the Commercial Paper Desk would get credited with all the profits. They knew it would be extremely profitable for the company but they didn't care because it wouldn't benefit their particular department. I reported the unfortunate news to my client who took our idea to Merrill Lynch. A couple of months later Merrill issued $8-Billion in Asset Backed Commercial Paper which was hailed as a brilliant and phenomenally profitable new financial product.

This is how we end up with outrageous situations such as paying huge bonuses to departments that created such enormous losses that they threatened the entire World financial system, as we see with AIG.

Whose great idea was this 'individual department P&L' system? Not only that, but whose idea was 'retention bonuses' that allowed the recipients to collect their money and leave the company? Does this idiocy fall on the shoulders of Human Resources? As a former executive in big-time business, I often found HR policies to be naive, ill informed, and arrogantly self-protective. Somebody in the company must accept the responsibility for negotiating faulty contracts that benefitted only the employees who grabbed the money and ran. While Barney Frank grills the top executives of AIG, perhaps he should be looking at the HR Department and its legal staff for the answer to why this happened. I have worked with these 'best-of-the-best' executives and I know them to be often over rated. What usually differentiates them is their attornies' negotiating abilities.

It is vital that we return our business culture to reality. What has happened is not complex at all. It is merely a situation where fast talking negotiators created an unrealistic imperative that foolish folk bought without fully understanding how unrealistic it truly was.

        

I have been peripherally involved with the SEC Special Advisory Committee on Smaller Public Companies.  The reason I got involved is because I became outraged while watching my SME clients struggle with SOX compliance requirements appropriate for a Fortune 500 company.  Of course, the outcome remains less than what was hoped. 

 

The SEC is made up of recent law school graduates and accountants.  These people do not understand the workings or the culture of Wall St. and are too often impressed by the marble floors and fine art, which we all know have nothing to do with the quality of the firm.  How many times in the past have we seen representatives of the SEC become bamboozled by the likes of Ivan Boesky, Michael Milken, and now, Bernie Madoff?  They are also bamboozled by complex financial products that any experienced denizen of Wall St can tell you won’t work. 

 

On the other hand, they torture entrepreneurs who are struggling to build a business and create value for their shareholders.

 

There is clearly a need to split the SEC into specialized groups with experienced people directing the efforts.  There needs to be a separate group of investigators who know enough to pull out a copy of the Wall St Journal to check to see if the prices Bernie Madoff claimed on his transaction tickets were actually the prices traded that day.  There needs to be a separate group of investigators who understand that when everyone is hedging, hedges don’t work.  There needs to be a separate group of investigators who understand that while Enron can set up thousands of distant subsidiaries in which to hide their secrets, a struggling entrepreneur can barely maintain a 3-room headquarters office.

 

Some common sense and experience must be applied.

 

The people who operate the SEC do not love our financial system.  Being small people, they love sitting in big chairs.   I love our financial system.  I love the memory of watching two equity block traders getting all mushy and misty eyed at Harry’s, talking about how wonderful it is to be able to trade hundreds of millions of dollars on one’s word of honor alone.  I love the memory of sitting at my place on the trading desk, hardly daring to breathe while watching the door to the corner office where important leaders from the top Wall St firms were meeting to figure out what to do to avoid a global crash in the wake of a major bank failure.  I love the memory of helping my clients immunize their pension fund portfolios.  I love the memory of everyone working together to create excellence.  There is much to be said about the sterling high minded qualities of Wall St, but there is also much to be said about the crooks.  Those of us who love our financial system have always been able to spot most of the crooks.  Unfortunately, those who hate our financial system miss the crooks every time because they are too busy trying to figure out why people on Wall St will work 12 to 18 hours a day under high pressure conditions and extremely high goals.  They can’t understand why people will do this, because they don’t understand what it really is to love what you do.  

 

Like so many shallow and inexperienced people, they are infatuated with the sex and distrust the love.

 

        

I have recently been arguing with an entrepreneur about how to approach the subject of company valuation when talking with a potential investor.

My suggestion is always to let the investor put forward a valuation and you can then begin your negotiations. 

The best way to learn how to negotiate effectively is to try to sell a diamond in the Diamond District.  As all good diamond merchants know, the person who quotes a price first, loses. 

The way you start the negotiations is the most important part of the whole experience! If you want to make a big mistake you go into a store, plunk down your diamond, and say you want $15,000. The merchant will either say yes or no, but you really don't know what axe he has in the deal, and because of this, you don't know if $15,000 is too expensive or too cheap a price. You have spent your time and energy, revealed your deal, and made either a good or bad impression on someone you might be able to do future business with - and you have received nothing. Or, you have sold your diamond at possibly a very cheap price, and you will never know.

The smartest way to start this negotiation is to go into the store and nose around asking questions. Remember the TV show Colombo? He was a detective who solved the unsolvable crimes by wandering around asking questions and appearing naive. That is what you want to do because your most valuable tool is always knowledge. So you keep looking at diamonds and asking questions that will draw out information. Your goal is to [1] know whether the merchant is looking to buy any diamonds today and what kind [2] what price diamonds similar to yours are selling for, [3] what the market for diamonds is doing in general, [4] what problems the merchant has that you might be able to solve (in other words, will he give you a better price on your diamond if you buy some saphires), and [5] what style of business the merchant does and whether you like or trust him.

Armed with the above knowledge, you can either repeat the exercise at another gem shop or two, or you can pull out your diamond and say "What do you think this is worth?" and if he wants your diamond, he will tell you. Then you ask what he would pay for it.

The diamond merchant will do anything to avoid giving you a price because he wants to be able to buy your diamond for a low price. By this stage of the negotiations you have a little information that may or may not be correct, but at least you have some knowledge. So you can formulate a price that you believe to be too high, and when the merchant says "No!" and walks away, you know the price is too high. So you act naive and offer a lower price. If the merchant grabs your offer immediately you are probably selling at a low price. However, if you need to sell the diamond even a low price, as long as it meets your need, is okay. This goes back to the old win-win negotiation theories.

Applying this method to negotiating with an investor, you begin by asking for advice about your company. Most Angel Groups will put you through a 'boot camp' which serves to prepare your knowledge base in much the same way questioning the diamond merchant gave you knowledge of price and the merchant's interest in buying.

Even though the very most important part of the negotiation, in YOUR mind, is the amount of money you will get, the most important part to the investor is whether s/he will receive any return on this investment and whether it will end up being nothing but a big headache!

Put yourself in the shoes of your investor: If you are going to give someone $1-million+ you want to have some feeling that person is going to talk with you if they hit a brick wall. You want that person to be wise enough to be looking for the value-add investor. You don't want to give all that money to someone who is so stubborn and defensive that s/he will be difficult to work with and might spend the money incorrectly.

As an entrepreneur, your goals are much the same unless you are too inexperienced to appreciate an investor who adds value to your company beyond the investment amount. Money is not the only thing your company will need, after all.

So, when negotiating with your potential investor, proceed on a win-win basis and do not make any demands or set any firm price until you have acquired as much knowledge about the investor's interest as possible.

        

The Economy - Regardless of loud claims of another Great Depression on its way in 2009, that is unlikely to happen unless the US ceases to be regarded as a ‘safehaven’ for the World’s money. The domestic US economy should hold up because there are safety nets in terms of deposit insurance and social services that will help avoid some of the more drastic effects experienced during the Great Depression, and offshore investors will continue to invest in the US, financing the economic restructuring because of its safehaven reputation. Nevertheless, the US Economy will continue to decline until it begins to bottom in Summer or Fall of 2009. The recovery will be slow and may take until late 2010 or longer.

Outlook for Start-Ups – Global economic difficulties favor the flow of investment money to the US. VC money will continue to get more conservative, focusing on companies with revenue history. Wealthy individual investors will underweight hedge funds, the stock market and real estate, and will focus on local small business and start-ups as they did during the 1950s. Smaller Angel Groups will proliferate as a few wealthy friends join together to form investment partnerships. Green products and services, alternative energy, cost cutting technologies in healthcare and manufacturing, and basic businesses will receive their investment., People will favor investment in infrastructure over investment in a managed mutual fund. Investors will want to take a hands-on interest in their investments. They will want to watch ‘their’ bridge being built. They will also want their money to do broad social good so venture philanthropy will expand.

Unemployment – Although reported unemployment at the end of December 2008 is approximately 6.7% or 4.5-million people, many analysts argue that contract workers, consultants and freelancers who have been let go or are unable to find work, plus all those workers who have exceeded their unemployment benefits, bring the real number closer to 12%. In 2009, layoffs in retail, business and consumer services, commercial real estate, consumer durables manufacture and related industries, and State and Local Government will bring reported unemployment to approximately 8.5% with total unemployment, as defined above, ranging as high as 15% by some reports. Industries that will do well and provide employment opportunities are collection agencies, debt restructuring, liquidation services, legal services, green products and services including alternative energy, heavy infrastructure construction, and other similar industries

The Bling-Bomb - Look for luxury goods to lose their attractiveness as people attempt to sell their expensive cars and other belongings for spending money. Only the elite jewelry stores will remain in business while mall jewelers will go out of business. It will become unseemly to display lavish spending and people will be more value conscious in their purchases. While those with significant wealth will continue to buy luxury items, people of average wealth will no longer be a prime target market for upscale products. Similarly, entrepreneurs who display lavish spending habits will receive scrutiny from their investors.

Real Estate – The real estate cycle is historically one of the most reliable, with approximately 17 years cycle length. This would put the next peak in home prices in approximately 2022 and the bottom sometime after approximately 2011. In 2009 commercial real estate will suffer. Shopping malls and downtown areas will have significant numbers of vacant stores. Industrial parks and office buildings will experience similar vacancies and late in 2009 and early 2010 this will begin to benefit business start-ups with move-in promotions and low rents

Big Business – 2009 will mark the loss of some brand name companies similar to the experience of the early 1980s when we lost companies like Sperry, Remington, RCA, Smith-Corona because of the advent of personal computers. Companies seen as more in touch with the environment will rise in their places. New technology that favors increased efficiency in design, construction, maintenance, manufacture, management, and communication will replace older methods.

Small Business – 2009 will be a good year for small business because small business will be able to operate without the burden of legacy costs and layers of bureaucracy. Green products and services, efficient energy technologies, technology that promotes cost efficiencies in the rebuilding of our infrastructure, biotech companies that create cost efficient medical test and treatment products, and new communications products developed out of Web 2.0 will rise to replace old guard companies.

Retirement – History will show that the only generation able to take full advantage of the dream of retirement was the parents of the Baby Boomers. Only a portion of the Baby Boom will retire fully. Most will carry on with part time work and a large percentage will have their own businesses or will invest in local start-ups. Tech and business savvy Boomers will find themselves desired employees because their employers will not have to pay health and retirement benefits. 2009 will mark the beginning of this trend.

Employment Benefits – Another beginning trend will be the gradual disappearance of employer paid health and retirement benefits. Employees will choose continued employment over benefits. The US government will begin the creation of a very modern and highly efficient health system using new technologies currently in development.

North America – With the decline in the price of oil, significant problems have arisen for Mexico and, to some extent, Canada. It may become necessary for the creation of a North American trade currency in order to keep our neighbors economically stable. Whether this will obviate the $US, remains to be seen. With regard to the US economy, some types of manufacturing will return to the US and it will be kept cost competitive by the use of technology. Facilities will decline in price and State and Local Governments will be willing to offer excellent incentives to companies to do their manufacturing domestically.

Miscellaneous Possibilities :

• Dollar Decline – If the $US declines against other currencies it will favor US manufacturing and export of goods and services.
• Higher Energy Costs – If the price of oil rises it will favor US manufacturing, alternative energy development, new oil exploration, North American cooperative trade, technology, and biotechnology.
• Gold Standard – If there is a return to the Gold Standard as a backing to the $US it will favor investment in the US, low or no inflation, gold mining, development of alternative energy, new digital and mechanical technologies, infrastructure, and biotech.

        

I understand how you would have compassion for those poor people who got talked into bad loans by mortgage brokers who were primarily interested in making as much commission as possible.  It used to be that the real estate broker filtered out people who could not afford to buy certain homes and the mortgage broker filtered out people who could not afford to pay those mortgages. It used to be that a buyer needed to put a certain percentage down to buy a house. It used to be that if you could pay for a 30-year fixed-rate loan, you could get a 30-year fixed-rate loan.

Things have changed and some people definitely got suckered in.

The Recovery Billions were supposed to be used to buy distressed assets from the banks so the banks could continue lending without having to deal with the ‘distressed assets’. The government would then take over working with the homeowners to help them stay in their homes.

Unfortunately, many of the loans are not ‘assets’ anymore. Some are loans on houses that have been abandoned. Some are loans to people who don’t have a hope of paying even deeply discounted monthly payments. There is also the problem of the steep decline in the values of homes. There are homes for sale on my block that were sold for $600,000 a couple of years ago but have been on the market for months at $400,000 and have no hope of selling because they are only 800 sq ft cottages and should be worth no more than $250,000 if you take their value 5 years ago and apply even a very aggressive price appreciation factor. So, you have a lot of mortgages for $600,000 on houses only worth $300,000. This is a big problem. Why stick the taxpayers with that mess?

If the Recovery Billions are spent on buying these worthless assets, it is just money given to the banks that made these loans, and since the assets are worthless, we would never get that money paid back. If we ‘invest’ in banks, we give them the money to deal with those assets, and part of the deal is for them to pay back the American taxpayer. One of the reasons we are in this financial mess is our government’s willingness to put taxpayer money out to ‘friends’ with no requirement that the money be paid back. These programs always look good because they are couched in terms of ‘helping the poor people who are suffering’, but they really do no such thing.

If the Recovery Billions were spent on buying loans, it would have taken months and $millions to identify the loans to buy and run them through the bureaucratic process.

When we invest in the banks, we are actually strengthening their capital positions which have declined because they have been forced to write down the value of their loan portfolios. This allows them to retain their credit ratings and that allows them to borrow money without paying a premium for declining credit. It also allows them to tolerate the problem loans and work with the homeowners. In other words, it removes the urgency to write off the loans and get them off the books, which makes it possible for the banks to work with the borrowers.

        

As I write this, the price of oil is threatening to sink below $60/barrel. That has me thinking about what will happen to all the new drilling that has started in areas where it is only financially feasible to drill when oil is trading above $100/barrel. In fact, new exploration spending is expected to decline 15% over the next year according to Petroleum News.

What does this mean to the much aclaimed oil sands of Canada and our own oil shale deposits? What does this mean to the huge finds in the very deep water areas? Will these all be too expensive to develop? And what does this mean to "Drill, baby, drill"?

I am beginning to think we will see another Petroleum Industry shake-out that may not be as large as what devastated Texas in the 1980s, but will nevertheless result in unemployed workers, abandoned houses and bankrupt companies. We are told this is because demand is down and the speculators are driving the commodity prices down. I am skeptical. Something tells me to wait until after the Election to declare the Oil Price Crisis over. After all, it is in the Petroleum Industry's interest to support the election of John McCain, and it could easily be done by dumping a little supply on the markets just in time to drive gasoline prices back under $3/gallon for the Election.

Gas prices are there now. Does that mean people will start buying Hummers again? Will Hybrids all moulder on the lots at car dealerships? Will General Motors stay in business? Will the Alternative Energy Industry be quashed? I am not so sure General Motors should stay in business but I sincerely hope people are smart enough not to abandon alternative energy development. Personally, I am hoping those cute little high mileage cars build up on the lots and go on sale! I have my eye on a white Honda Fit, and would like to make a good deal.

Lower gas prices should mean lower prices on groceries, but I haven't seen lower prices at the supermarket and I haven't yet seen trucks making as many deliveries as they used to. Inside the store I don't see shoppers with full baskets, either. I also don't see anyone driving around to the yard sales here in town on the weekends. And while the unemployment numbers continue to climb, I kind of doubt that lower gasoline prices will usher in a new wave of prosperity.

If the stock market falls to about 7800 on the Dow Jones Industrial Average, the market will have declined the same percentage amount as it did in the Great Crash of 1929. That means there is a lot of blood on the streets in terms of lost savings and retirement funds. This time around people won't be losing their bank deposits, their company plan pensions, or the cash in their brokerage accounts. However, the losses are in their 401-K plans and personal investment accounts. Even the very wealthy are hurt. On 60-Minutes, T. Boone Pickens admitted to losing $2-Billion and rumor has it that Buffet is down multi-$Billions as well.

Folks are pretty much broke. Lower gas prices help, but times are still going to remain difficult and will probably get worse. What will weigh heavily in the future will be the disasters taking place in foreign countries that depend on the United States as a consumer of their products or services. Even Dubai is having a problem with money as oil prices decline and US and European companies close their expensive offices and resort to meetings via webinar and conference call. Even China and India are experiencing serious declines in their growth, and this might prove to be a much greater problem than one would expect because their huge populations have become used to higher wages and being able to afford to buy consumer goodies like computers, cell phones, and cars. Disappointing these people, who have histories of violent civil uprisings, may prove disasterous.

I don't have the answers but I suggest asking questions and thinking about what the answers might be. It is one way to prepare for what the future might hold. It is also one way smart people spot opportunities, and opportunities will be plentiful for those who are aware.

        

What happened to the total disaster that had been predicted only a few weeks ago? It was supposed to happen by now if we didn't do exactly as we were told. What happened?  We are still alive.  We are only nearing the greatest percentage drop in the Dow, from the high of a year ago, since 1929.  We did exactly as we were told.  We gave Hank and Ben everything they asked for and saved ourselves from total obliteration ... or did we?

The answer is that the disaster has been happening since the beginning of 2008 but Ben Bernanke and Hank Paulson only got worried about it when it began happening to their friends.

Everyone I know has had their credit lines cut and their interest rates quadrupled, and some have had their credit cards abruptly closed. The better the payment record, it seems, the more likely the interest rates would be raised. At the same time, the banks are busy throwing in all kinds of new charges and rules that result in even more new charges.

Nobody is sending me emails about refinancing my mortgage, anymore. Now the emails are about clearance sales. The alcohol and drug treatment programs are new in the spam filter. They seem to be outnumbering the Viagra ads, which is interesting from a sociological standpoint.

Alan Greenspan is shocked, SHOCKED to think that there just may be a tiny flaw in his reasoning. I only wish someone in Washington D.C. had come up with this realization a year ago when all the rest of us did. But these people all live in Penthouses many stories above all the rest of us way down here on ground level. The 'Penthouse People' only get worried when the mess is so deep and pervasive that it reaches their lofty lifestyles. And now that they are aware of the mess, they are worried that it might include them.

        

As a former Steely-Eyed Bond Woman / Master of the Universe turned entrepreneur / start-up consultant, these hearings on the ‘Bailout Package’ are causing me an identity crisis!

My Master of the Universe identity keeps jumping up cheering “That’s our Hank!” It is quite clear that he is creating a super-institution to hire all his friends and most of the out-of-work investment bankers; a neo-investment-bank that has at last found the ultimate deep-pockets client: the US Government. Oh, it warmed my cold black heart as I listened to his promise to take $700-Billion, apply the secret sauce, and VOILA! Typical of Government workers, the Senators ruined it all by wanting to know exactly what VOILA would be in terms of results. That is their problem: no creative vision.

My entrepreneur identity, on the other hand, is mad as Hell and not going to take this anymore! I am outraged that, while I and my clients go without our pay in order to keep our companies afloat during these difficult economic times, there seems to be a lily-livered reluctance to ask the same sacrifice of the C-Level executives at the banks, brokers, insurance companies, hedge funds, and Fortune 500 corporations. These are the people who are benefitting from this Bailout Plan. These are the companies that depend on the credit markets. For months now there has been very little credit available to companies under $500-million in revenues, and nothing available to those of us who operate more modest enterprises. There also seems to be a fantasy-based thought that applying a little secret sauce will keep house prices from declining further. Where is the reality, here? If 5 years ago people needed interest-only loans in order to support the monthly payments on houses at prices back then, how can they possibly afford homes that are still at least 50% higher in price, now that everyone is broke and losing their jobs? Hank and Ben need to live on $50,000 a year, paying for their own commute costs, their own food costs, their own lifestyle costs. They just do not have a clue about what is going on at street level - and I do not mean Wall Street level.