White House Supports Brunswick Group's Business Forward

Incestuous political relationships exist on the blue team. Business Forward is the greatest form of flattery to red Republican K Street. The Hill reported:

“We are very pleased to have the support of the administration, but this is an opportunity created by the 2008 campaign. We want to create a way to have these people stay involved and speak as business leaders, not just as supporters,” Jim Doyle, Business Forward’s executive director.

Founding businesses pay $75,000 to join, while small businesses pony up $1,500. Money buys connections, a point established by Mr. Doyle. Who benefits?

The Brunswick Group, a public relations giant. Four of the five people mentioned in the article work for Brunswick. Many have ties to the Obama campaign and White House staffers.

Doyle said Business Forward is seeking a 501(c)(6) tax status, which is for trade groups, from the IRS. “We are going to focus on events and policy briefings. We do not expect to lobby,” Doyle said.

How much lobbying or regulatory scrutiny work will Brunswick Group get from Business Forward?

The formation of the new association comes at a time when the White House has ramped up its criticism of K Street.

The names may change, but the pattern remains the same, influence for sale. Step right up! Is Business Forward the restarted securitization production line? Are politics salmonella tainted peanuts or pistachios?

It's buyer beware in all cases. While I wish a pox on the red and blue houses, their leadership delivers disease to our door. Check the label, folks.

Peanuts & Pistachios

A friend indicated his second bout with a bad intestinal illness. The first occurred around the time of peanut salmonella outbreak. I wondered if food made him and his wife sick. The news indicated pistachios as the latest dangerous product foisted on the American people. Reuters reported:

Because the pistachios were used as ingredients in a variety of foods, the FDA said the recall is likely to impact many products.

The supply chain is so fragmented that many companies don't know their supplier. Managers employ practices that encourage shipment of goods for profit, not for safety. Fortunately, Kraft Foods tested pistachios, finding four serotypes of salmonella. Over 1 million pounds of potentially bad nuts are being tracked for recall.

While the FDA dickers, citizens must look for pistachio ingredients on the label. Let's hope producers figure out how to deliver quality products to consumers. Hint, it involves profound knowledge.

Wasting Away in Shadow Bankingville

Who's drunk on taxpayer's money? Auto and financial firms line up for repeated shots of bailout cash. Customers fled from auto's and junk financial products. Today, the President spoke to his auto plan.

“When the American auto industry sheds its own waste”-Barack Obama

Meanwhile, taxpayers eat trillions in waste from the shadow banking system. Citizens finance public-private partnerships with up to 97% public money. The 3% private sector comes from, the same shadow bankers, who stand to make a 25% rate of return.

Guess what production line just restarted? Debt securitization, as popular as SUV's with $4 a gallon gasoline. Confused yet?

It seems our elected officials in Washington keep shedding waste on citizens. Disgusted yet?

Tom Green County Indigent Health Care 1998-2006

San Angelo's Health Access Coalition operated from 1999-2003. Increasing access to care for the uninsured was its noble aim. Nearly 30% of area citizens have no health insurance. After years of overspending on Indigent Health and asking the State for supplemental funding, a HAC work group helped Tom Green County spend funds more effectively.

Overspending prior to HAC consultation ($1,252,772)

Changes were made to program coverage that stopped State back filling. The plan covered outpatient surgery, eliminating numerous one night hospital surgical stays. It added payment for nurse practitioners, a less expensive physician extender. Local experts did not charge the county for consultation. The implied deal had the county increasing income qualification to cover more people. County indigent care addresses only the poorest of the poor.

Savings during HAC's existence $1,701,811

The county got an excellence award for the changes showing up in 2001. Some data became available after the coalition ceased operation. Area hospitals chose to end collaboration on the uninsured, due to intense competition for covered patients.
Nationally the number of uninsured grew to 45 million, yet Tom Green County continued to put unspent Indigent Health Care dollars in the general fund. It sat alongside tobacco settlement money.

Savings after HAC's cessation $2,407,237

One question remains. Did qualifying income (percent of federal poverty level) change from 1998-2006? Regardless, Tom Green County netted major funds over a six year period, money previously expended on care for the poor.

Budget Not Spent-Six year total $4,109,048

During this time Tom Green County collaborated with area providers to lever state and federal funds for increased coverage for citizens. That doesn't minimize its backsliding on Indigent Health. TGC spent $5.1 million from 1998-2000. It took six more years to beat that three year total. From 2001-2006 Indigent Health spent $5.6 million. I don't recall the cost of health care going down. The data implies Tom Green County didn't pull its weight.

Conaway Goes Whacky on Tobaccy Regulation

In response to a Congressional proposal to regulate tobacco, my Congressman weighed in:

"I'm not convinced that FDA is the right agency to provide regulation," said Rep. Mike Conaway, R-Texas, in his first hearing as the senior Republican member of the House subcommittee dealing with specialty crops, rural development and foreign agriculture."They're having problems with food safety and other areas. They have not done a spectacular job."

Point #1-Only producers make quality goods or products. Inspectors can only screen out the bad. Inspection is a notoriously poor process for ensuring quality.

Point #2-Leaders know nothing about producing quality goods. From Wall Street to the Capital, leaders applied bad management theory. Profound knowledge is needed. Dr. W. Edwards Deming taught theory and methods for producing quality. It is widely ignored.

Point #3-Leaders substitute cheaper alternatives to maximize profit and game executive incentive compensation. The first dump was defined benefit pensions to 401(k)'s. CEO's widely cheated by backdating stock option incentive comp over a ten year period. Then came contracting production to low cost areas like China, India and Vietnam. That cost America over 2 million jobs. Over the last decade, many companies shed their R & D function. Secretary of Energy Dr. Chu recently talked about using America's national labs for business R & D. Next on the list is transferring employer sponsored health insurance to the individual.

Rep. Mike Conaway is on this third term in the House. What did the Agriculture Committee member do to improve food safety during his term? Melamine tainted pet food happened on his watch. Poisonous heparin came from China. It killed hospital patients while Conaway served the people. Citizens are at risk every time they take a medication with a Chinese supplied ingredient. Buyer beware came back in spades under President Bush.

America's leaders haven't done a spectacular job, Conaway included. The return to basics starts with quality.

Rep. Drew Darby to Provide No Oversight

Texas State Representative Drew Darby sits on the Business and Industry Committee, serving as its Chairman of Budget and Oversight. One might expect oversight for promises made by companies getting millions in Texas taxpayer dollars, via the Texas Enterprise Fund.

For $35 million dollars, Vought Aircraft Industries promised to add 3,000 jobs by 2009. During the time of their commitment, Vought employed 3,300 in the Dallas-Fort Worth metroplex. That makes their job total 6,300. They don't employ that company wide.

New jobs were to come from shutting down Nashville operations and locating Boeing 787 Dreamliner production in Texas. Neither happened. Vought took $52 million in South Carolina taxpayer money for a factory building Dreamliner fusilages. They manufactured badly enough, that Boeing blamed a Vought JV for production backlogs.

Vought's CEO blamed an internal liquidity crisis for slow plant operations start up. Lack of capital? Hardly, Vought is owned by The Carlyle Group. Not long ago the private equity underwriter bragged of $40 billion in dry powder.

Which leads us back to original $35 million in Texas taxpayer funding. One might expect a Texas legislator charged with "industry oversight" to have Vought's promise high on his agenda. He stated in his correspondence:

"While I understand and support your concern for the inappropriate use of the state's Texas Enterprise Fund, at this time the 81st Legislature is not addressing this particular issue."

But they might in 2011, when Vought's goal is two years in the rear view mirror? Sorry, Rep. Darby. The time is now. Texans could use the promised 3,000 additional jobs or a $35 million refund. That is, if he really serves the people? Can one reach Chairman of Oversight for Business and Industry these days without kow towing to American branded multinationals?

(Note: Rep. Darby later provided information as to how the State plans to hold Vought accountable for job promises)

The Business of Health Reform

"I'm in business," Nancy-Ann DeParle, director of the White House Office of Health Reform.

Yes, she is. It took the Chicago Tribune four weeks, but they noticed. The LA Times just caught up. San Angelo blogger beats national newspapers by a month. Who'd have thought?

Sad State of Journalism

Four incidences of inept journalism reveal the flat lining condition of the Fourth Estate. What's missing? The list includes a factual basis, elementary questioning, and use of theory.

#1-"Too big to fail" means Treasury should expand power to wind down firms. Why not deal with too big to fail by breaking up financial giants? Because the big money boys don't want it. The D. C. boys, White House and Congress, love their donations.

#2 Bill O'Reilly took offense for the Alexa Foundation, which never shared any concern publicly. The manufactured story continues spinning out of control. The sinkhole has Fox-O'Reilly against NBC-MSNBC-Think Progress. News time is spent on a non-story and the cycle of offenses.

#3 A United Nations panel recommended shifting from the dollar as the world's reserve currency to a basket of currencies. This was reinforced a week later by a Chinese leader. Glenn Beck and Rep. Michelle Bachmann turned this story into a "one world currency" Chicken Little episode. Their position has no basis in fact.

#4 Republicans offered their budget proposal to NPR, which failed to question the logic behind tax cuts for the wealthy and corporations. If NPR doesn't challenge the drive to the lowest global common denominator on taxes, who will? What happens when disaster capitalism turns to worker pay/benefits or financial regulation?

No wonder people tune out much of the media.

CorporaCrat Evan Bayh Jokes at WSJ's FFI

Senator Evan Bayh spoke to the financial Masters of the Universe at the Wall Street Journal's Future of Finance Initiative. Economic Policy Journal shared the good Senator's Mark Twain quote:

"You can lead a man to Congress, but you can't make him think."

Funny, although I expected Twain to say:

"You can buy a seat in Congress, then you own his vote."

Senator Bayh spoke to an elite group of financial bigwigs, two of which work for Bayh's seventh largest lifetime donor, The Carlyle Group. Co-founder David Rubenstein and Senior Adviser Arthur Levitt happen to lead global and U.S. efforts to reform the financial system. How might the Carlyle Group and private equity underwriters (PEU's) fair in reform? Sweetly, I presume.

Geithner's New Powers

Treasury Chief Tim Geithner wants power to seize nonbank financial firms. Federal receivership would allow the federal government to take control and run struggling financial firms. How is this different from bankruptcy?

One, equity holders could retain a portion of the company. Equity holders, management and board members should not benefit from exercising risky strategies that placed the company in peril. Yet, they may under Tim Geithner's plan.

Two, if the company continues as a going concern under Uncle Sam, credit derivatives may not come due. It could open the market for a new credit bet. Debt holders would need to buy CDS coverage for bankruptcy and another one for federal receivership.

If the problem is too big to fail, why isn't the strategy to break up huge global financial firms? Having Treasury increase the possible intervention pie to insurance companies and hedge funds does nothing to address the problem.

Is this the setup for another round of taxpayer sponsored corporafornication for America's shadow banking system? When will it end? Optimizing the financial system for equity holders, existing boards/senior management, and credit bettors will suboptimize the whole.

Financial houses need to produce quality products. Restarting securitizations of all stripes and expanding credit wagering is hair of the dog medicine.

More Problems to Unwind

While the NYSE cheered the Geithner public-private partnership plan, two other problems hit the wires. Second mortgages prevent resetting of primary mortgages under the Obama plan. Reuters reported:

Bank of America held $148 billion in second liens at the end of last year, while JPMorgan Chase held $131.4 billion and Wells Fargo & Co. held $129.9 billion, according to Inside Mortgage Finance.

Early this month, Treasury officials promised that they will present a payment schedule to buy out second liens but they have not yet released details.

The next round of corporafornication for the big money boys? Recall their carnivorous behavior last summer and fall. Bloomberg reported:

The biggest bankruptcy in history might have been avoided if Wall Street had been prevented from practicing one of its darkest arts.

As Lehman Brothers Holdings Inc. struggled to survive last year, as many as 32.8 million shares in the company were sold and not delivered to buyers on time as of Sept. 11, according to data compiled by the Securities and Exchange Commission and Bloomberg. That was a more than 57-fold increase over the prior year’s peak of 567,518 failed trades on July 30.

The SEC has linked such so-called fails-to-deliver to naked short selling, a strategy that can be used to manipulate markets. A fail-to-deliver is a trade that doesn’t settle within three days.

“We had another word for this in Brooklyn,” said Harvey Pitt, a former SEC chairman. “The word was ‘fraud.'"

Market makers had the ability to naked short sell. Major investment banks savaged peer Lehman Brothers. When the razor blade flipped, storied investment houses fled to the safe harbor of commercial bank status.

Guess who stands to benefit from Geithner's public private partnerships (PPP's)? The same institutions that ganged up on Lehman. Wall Street is now joined at the hip with banks, institutions hoping to offload toxic products at premium prices. Taxpayer subsidies should favor banks, now able to sell at book value.

Ex-Wall Street firms could also partner with the government in PPP's. They meet Treasury's criteria. Giethner's sweet deals should produce returns in the teens, 13% or greater.

The financial sector is nowhere near done suckling on the taxpayer tit. The second lien issue portends more corporafornication.

Production Regardless of Quality

Financiers at AIG were awarded millions in bonuses based on transactions completed, not the consequences of those transactions.

'I figured my job was to get the transaction done... Whatever came after the transaction - that was on him, not me.'

Incentive pay, commissions, bonuses and incentive pay drove poor quality financial products. Junk instruments ranged from risky credit bets to packaged mortgages. Both blew up to the detriment of many.

Can you envision nurses and doctors saying the same thing? How about teachers or professors? Get ready. President Obama wants to spread the poison of pay for performance to health care and education.

Populist Charge = Rational Opposition to Continued Greed

When part of a system is optimized, it suboptimizes the whole. When executives optimize their pay, customers and employees are suboptimized. Citizens could've paid attention over the last decade. Did they note?

1. 30% of executives backdated stock option compensation over a 10 year period. The practice is unethical and in most cases illegal. Stock option awards were touted as the most pure form of incentive pay.

2. CEO's received huge bonuses for contracting out production to Asia, costing America over 2 million jobs.

3. The differential between executives and employees grew to 400 times. CEO's make 400 times the average worker.

4. American contractors and Chinese producers don't understand quality. Profit maximizing substitutions killed and sickened living beings, ranging from pets to infants to sick adults needing medication.

5. Many American branded companies get the federal government to do their research. Dr. Chu proposed federal national labs take up where Bell Labs ended. The Department of Energy does drilling research for oil companies.

6. The preferred tax status of carried interest, profits from investments made by private equity underwriters. Congress reigned in unfair AIG compensation, but leaves the PEU boys gravy train alone.

7. The Treasury and the Fed have $13 trillion in interventions to save the financial system. That's the same amount Americans lost in investment holdings. Only most aren't feeling the impact of Uncle Sam's largess.

For years Americans watched these trends. They watched coworkers disappear one by one in a series of buyouts. They noted their pay not keeping up, while executives pocketed millions.

Greed and leverage imploded Wall Street and the fallout took down the global economy. If leverage can reset from 30 or 40 times, executive pay can recalibrate as well.

Concern over executive pay is not angry, populist action. It's a rational response from people who care about their country, their workplaces and want them on a more sustainable track. For real change theory is needed, specifically profound knowledge. It's sorely lacking in corporate board rooms and our hallowed halls of government.

The current plan to restart greed, leverage and reprime the pump of executive incentive compensation is hair of the dog medicine. How bad will the headache be from America's next Obama induced bender?

While President Obama won't respond to anger, he does apply bad management theory. His repetition is taking on fractal like qualities. Can you wait for greedy private companies in public-private partnerships? How about spreading the poison of pay for performance to education and health care? America needs leadership and finds a Skinnerian in the White House. Keep hitting the bar people. Will the legions of mice get pellets or a shock? A perceived lack of reward can come off as punishment. It stifles intrinsic motivation, the natural joy found in learning and doing a good job.

Obama Ignores Decade of Stock Option Cheating in Revising Executive Pay

Thirty percent of executives backdated stock option grants, once cited as the most pure form of pay for performance. Backdating is unethical and frequently illegal under SEC rules. Few executives were charged with crimes for their decade of backdating. Many returned their ill begotten gains.

The Obama administration considers changing executive pay practices. The NYT reported:

One proposal could impose greater requirements on company boards to tie executive compensation more closely to corporate performance and to take other steps to ensure that compensation was aligned with the financial interest of the company.

Executives already failed by cheating on the most pure form of aligned incentive compensation. The financial interest of the company is to focus on customers, improving existing processes and innovating to give the customers things they don't know to ask for. Incentive pay harms both efforts.

Executive incentive compensation caused CEO's to undertake riskier strategies. Financial firms produced junk vaporware products. Quality was abandoned to keep the money wheel churning. Much of the junk was produced by major investment banks. When the crisis hit, all but a failed Lehman Brothers fled to the safe waters of commercial banking, which provided immediate capital injections.

The groups left unregulated include hedge funds and private equity. The NYT piece addressed hedge funds, but makes no mention of private equity underwriters (PEU's). With The Carlyle Group's David Rubenstein and Arthur Levitt heading financial reform efforts, it's no surprise the PEU boys get a free pass.

Greed and leverage took down the system. PEU's were a major primer of the greed and leverage pump. The big money boys win again. Obama corporafornicates in Bush-like fashion.

Perverting Pay for Performance to Remain, Says Bernanke & Bair

Bad management takes the fifth or sixth item on a list of motivators and designs a complex bribing scheme to manipulate employees toward the "corporate aim". Pay falls well down the reasons people work. Sure, if it's not enough, it can become a demotivator. That's why Alfie Kohn and Dr. Edwards W. Deming offered:

"If you want people to do a good job, give them a good job to do." Dr. Deming

"Pay people well. Pay people fairly. Then do everything possible to take money off people’s minds." Alfie Kohn

America is disgusted by the AIG pay for performance example. Note how defenders shifted the performance bonus to a retention purpose. Others call it part of an expected pay package. This shows how rewards become punishment when taken away. Alfie Kohn clearly talks about this in his book, Punished by Rewards.

Pay for performance is the eighty/twenty rule in reverse. Design a complex, demotivating scheme around the variable that has a minor impact on motivation. Plans foster internal competition, a negative for organizations wanting to deliver quality goods and services.

Lazy leaders contract out departments or production. Clueless leaders hire consultants to craft pay for performance packages. The world has a crisis in quality. That is clear. It's time to substitute leadership, not tinker with bribing schemes

Sheila Bair, Ben Bernanke, President Obama, Congress and those occupying plush board room chairs haven't a clue. Not only do taxpayer supported banks get to keep P4P, this administration spreads the poison to education and health care. Sad days, indeed. When we need human leaders most, only Skinnerians can be found. We're just rats in a cage.

U.S. Corporacrats Visit Russia

An odd assembly of American dignitaries were in Russia. The list includes James A. Baker, III, Henry Kissinger, William Perry, George Schultz, and Sam Nunn. It seems America's Government-Industrial Monstrosity wants to get money making back on track. The NYT reported:

Mr. Baker said the United States should show a new humility in international relations.

“We ought to be big enough on both sides to admit that blame can be directed at both countries for this deterioration in Russian-U.S. relations,” he said. “There’s nothing wrong with doing whatever we can to get this relationship back on the track it was on up until the last few years."

Yes Mr. Baker, America's heavy hand and hubris made the world more dangerous. It's vaunted financial innovation imploded the global economy. Maybe a tail between the legs will open up more world markets for American branded commerce. President Obama mentioned it in his address to Iranians.

Who stands to benefit from the Russian visit? At least three Corporacrats.

James A. Baker, III was in Moscow for a conference on the politics of Caspian Sea oil and natural gas riches. Both Russia and the West are maneuvering for access. Baker is advisory chairman for Energy Future Holdings and senior partner to law firm Baker Botts. Historically, Baker served as Senior Counselor to The Carlyle Group, which happens to have an energy joint venture, Riverstone Holdings. A common link is Lord John Browne, ex CEO of BP and member of the executive team at Riverstone. While at BP, Browne hired Baker to investigate the Texas City plant explosion. Baker went light on Lord Browne in his assessment. Baker blamed BP's safety culture. Shortly after the report's release, Browne fled to Carlyle's Riverstone. The insider big money boys look after one another.

Henry Kissinger is partner with Mack McLarty in the Kissinger McLarty Associates, strategic adviser and advocate for a select group of U.S. and multinational companies. The firm provides high-level intervention on special projects, assists its clients to identify strategic partners and investment opportunities, and advises clients on government relations throughout the world. McLarty is senior adviser for The Carlyle Group. He also is partner with BET billionaire Robert L. (Bob) Johnson in a number of car dealerships. Bob Johnson also has a joint venture with Carlyle. They target minority investments, capable of drawing federal money.

William Perry is Chairman of Global Technology Partners, LLC, a defense oriented investment firm. He also sits on the board of several high tech firms.

The private equity underwriter (PEU) boys and their buds visited Russia. Corporafornication, I mean Commerce, awaits!

GOP Finally Learns How to Conduct Investigation

The GOP played Barney Fife for eight years under the corrupt bleedership of President George W. Bush. House Republicans couldn't provide basic oversight for the NRCC during that time. CFO Chris Ward treated donor funds in a Bernie Madoff like fashion. Eric Cantor and company twiddled their thumbs while no audit was performed over five years. But they finally learned how to investigate, or steal CondeNast Portfolio's research.

Friends of Angelo included:

Senator Chris Dodd (D-CT)
Senator Kent Conrad (D-ND)
Richard Holbrooke (Democrat, also on the AIG Board since 2001, Perseus PEU, Obama adviser on Afghanistan/Pakistan)
Donna Shalala (Democrat, also on numerous corporate boards)
James Johnson (Democrat, Fannie Mae's former CEO, sat on seven corporate boards & Perseus PEU)
Alphonzo Jackson (Bush's HUD Director)

V.I.P.'s received better deals than those available to ordinary borrowers. With five prominent Democrats and only one Republican, the GOP investigated.

WaPo reported:

House GOP Report Details Countrywide’s Efforts to Benefit VIPs

Executives at Countrywide Financial, one of the biggest names of the housing boom, routinely violated internal company policies to provide below-market rates on home loans to the politically connected and powerful, according to a congressional report to be released today.

Actually, the investigation was done in May 2008 or earlier. House Republicans are a day late and a dollar short.

I'm still waiting for answers to my Hurricane Katrina questions regarding the White House Lessons Learned report. The trail leads to D.C. based private equity underwriter (PEU), The Carlyle Group. George W. Bush sat on the board of Carlyle affiliate CaterAir in the early 90's. Brother Jeb landed a cush seat on Tenet Health's board after Bush omitted any mention of 34 hospital deaths, shared between Tenet's Memorial Hospital and renter LifeCare Hospitals, owned by the Carlyle Group. That's right, Republicans don't investigate their own.

The public is getting very, very angry.

The Author President

While President Bush gaffed over authoritarian vs. authoritative, President Obama went straight for the author designation. The NYT reported:

President Barack Obama already has a job lined up after his presidency: writing another book. The best-selling author reached a new book deal a few weeks before his inauguration. A financial disclosure report released this week shows Obama amended his agreement with Crown Publishing Group to deliver a new nonfiction book after he leaves office.

Crown publishing? How symbolic for the Chief Executive of the Government-Industrial Monstrosity, Eisenhower's MIC on steroids. Will it detail the front stage soaring rhetoric or the back stage corporafornication? I'm all a twitter.

AIG's Bonus Plan

The notorious insurance company described AIG's bonus plan in its SEC filings.

Annual cash bonus.

Annual cash bonuses are intended to reward overall AIG, business unit and individual performance during the year. The bonus paid to each participant in the executive bonus pool is generally based on an assessment of business unit performance and individual performance for the year, taking into account the individual’s target bonus level for the year.

In addition, to provide the overall AIG performance element, the Committee establishes the annual executive bonus pool for participants (excluding the Chief Executive Officer) at the beginning of the year based on a total bonus level intended to be comparable to market competitors. The annual pool is adjusted by the Committee at year-end within a range of 0 to 150 percent based on AIG’s overall results relative to the current year’s performance objectives, the prior year’s performance, market conditions and estimated performance of competitors. This adjusted pool amount acts as a ceiling for the total annual bonuses to participants and provides an overall AIG performance component.

Does it sound like taxpayers owe executives money for creating a $170 billion black hole? Not in the least.

Black Hole A.I.G. Meets Continental UBS

Risky credit betting A.I.G pushed $5 billion in U.S. taxpayer funds to chronic tax cheater UBS. This is on top of $59 billion in capital injections via the Federal Reserve and the European Central Bank. How did UBS respond to taxpayer largess? They helped 17,000 clients illegally avoid taxes via offshore accounts.

Because of the financial crisis, UBS will pay a $780 million fine over time, much less than the anticipated $1 billion or greater. They had to reveal a paltry 250-300 names. What about the other 16,750?

How does the UBS punishment compare with other bad corporate behavior? In 2006 Tenet Healthcare paid $900 million for unlawful billing practices. HCA was fined $1.7 billion for the same sin. It seems the giant Swiss bank got off light. UBS contributed $513,919 to the Obama campaign and was #3 on Rahm Emanuel's lifetime donor list.

UBS isn't the only financial firm riding the Uncle Sam gravy train. Between September and December 31, Goldman Sachs got $12.9 billion, while Bank of America/Merrill Lynch received $12 billion. A.I.G. paid out $93 billion to reduce counterparty risk. In December 2007 A.I.G. estimated their credit derivative exposure at $50 million. That's a $92.95 billion margin of error. Management must be proud of their performance.

Obama's Focus on Food Safety Laws

President Obama wants to upgrade America's food safety laws for the 21st century. Laws alone will do nothing. Causes must be addressed, production process improved.

Salmonella peanut butter and e coli ground beef sickened many. The companies used laws to limit their exposure. They declared bankruptcy. WaPo reported:

"There are certain things only a government can do," Obama said. "And one of those things is ensuring that the foods we eat, and the medicines we take, are safe and do not cause us harm."

Wrong, only producers of food and medicine can assure their products are safe. Producers make products. They're now worldwide. Poisonous heparin arose from hundreds of Chinese home labs. An American firm contracted production through a joint venture. The FDA dragged its feet for months, exposing more patients to potential harm. Many chemicals used in pharmaceuticals are made in China, a country with a concerning quality record.

Repeatedly, Chinese firms substitute dangerous ingredients to maximize profits. Cases involve more than blood thinner. They include pet food, infant formula, milk, candy, cough syrup, toys, and tires.

America knows the cost of poor quality. Wall Street imploded as a result of profit maximization, greed and leverage. Politics is infected with hypercompetition and both parties desire to keep the fundraising spigot wide open.

The world needs transformation of management. New laws won't make things safer. A return to quality is needed. Instead, corporate board rooms and America's hallowed halls of government want to restart greed and leverage. Buyer beware remains. Profound knowledge is lacking.

Teacher Pay for Performance and A.I.G. Bonuses

If anyone thinks teacher (or doctor) pay for performance won't distort education (or health care), consider the curious case of A.I.G. The division, that wrote trillions in risky credit default swaps with no capital reserves, will pay $165 million in bonuses to executives who imploded the firm.

How can anyone get a bonus for digging a $170 billion hole? It's legally required in A.I.G's pay for performance plan. From corporate board rooms to our hallowed halls of government, leaders operate from bad theory.

Don't spread the poison, President Obama. A.I.G. is but the latest gross example.

Obama's Health Care Czar to Convert Community Hospitals to For-Profit?

What's more disturbing than using a "czar" title to reform health care? The background of the person in charge. Nancy Ann-DeParle's positions and pocketbook carry a clear for-profit healthcare bias. Her Legacy Hospital Partners struck a deal transforming a nonprofit community hospital in Idaho into an investor owner facility. This is important, as community hospitals struggle financially. The Chicago Tribune reported:

Robert Gibbs, the White House press secretary, tried to explain how authority would be divided between DeParle and Sebelius in steering health reform through Congress.

At first, he declared DeParle that “will be in charge.” Then, he acknowledged a role for Sebelius and others.

“I think obviously this is something that spans across many platforms, not unlike, say, something like energy independence, that a lot of people that work in this building and in different agencies will be involved in,” he said, pledging to get back to reporters with details about how the bifurcated health policy team will work.

The author of the czar system is John Podesta, President Obama's White House Transition Director. The Tribune reported:

Before the inauguration, Obama’s transition director, John Podesta, said in an interview that Obama was deliberately building a strong, centralized White House organization, one that grew naturally out of Obama’s disciplined presidential campaign.

Podesta saw little potential for the czars to undermine the authority of cabinet agencies. “As long as the White House staff is respectful of the power and authority of the people in the cabinet, as I know they will be, I think it will be a very workable model,” Podesta said last January.

Senator Robert Byrd isn't taken with the czar model. A Byrd spokesman said:

If the czars are working behind the scenes and the secretaries will be the mouthpieces of the administration, it calls into question who is actually making the policy decision,” he said. “Whoever is making the policy decisions needs to be accountable and available to Congress and the American public.”

That's not the plan, Senator Byrd. Rahm Emanuel and Nancy-Ann DeParle must rework health care for corporations in the shadows. Obama czars can't push the global lowest common denominator on worker health insurance in the light of day. Nonprofit community hospitals can't become cheap acquisition targets for their for-profit counterparts under transparency and accountability. Virginia Governor Tim Kaine led the way with a similar appointment, President Obama's team follows.

Done well, transparency and accountability are insufficient for comprehensive management transformation. Performed manipulatively, they haven't a chance.

Washington Post Cuts Business Section

What business stories won't make the Washington Post in the future? The venerable paper plans to cut back on business coverage. Considering the stories they missed to date, the loss might not be great.

1. The Carlyle Group purchased affiliate debt for 23 cents on the dollar. They got an Obama stimulus tax break to boot. When do mortgage holders get the same break?

2. The sale of HCA and Triad Hospitals added over $2 billion in interest expense to America's health care system. That's 1/17th of hospital uncompensated care for 2007.

3. White House health care reformer Nancy-Ann DeParle worked for a private equity underwriter (PEU) and sat on numerous for-profit health care boards. Her annual board compensation for 2007 was $450,000. Ms. DeParle made $1.4 million from the sale of previously mentioned Triad Hospitals.

4. Mrs. Evan Bayh sits on five for-profit health care boards. Susan's annual compensation associated with health care is $770,000. That's nearly four times her husband's Senate pay.

5. Hospital uncompensated care reached $34 billion. Exxon's profit rose to $45.2 billion in 2008. For the fourth year in a row, one company's profit could've paid all bad bills for U.S. hospitals from the prior year, with almost $10 billion leftover.

Who will report these stories? Jon Stewart abused Jim Cramer for keeping important business news under wraps. Did he scare the Post off the business pages?

Sticky Fingered Politicians Tackle Health Care

Health care reform is on the way. It's brought to you by the same Congress that ensured peanut butter safety, so boil everything. Any bills face the Senate Finance and the House Ways & Means Committees. For-profit hospital firms know this fact well. PAC donations show:

HCA (owned by KKR, a private equity firm) gave $142,750 to House members and $122,800 to Senators in the last election cycle. Donations to key committee leaders included:

Rep. Charlie Rangel (D-NY) $10,000
Sen. Chuck Grassley (R-IA) $9,000

HCA has no hospitals in New York or Iowa. There are no constituents to represent, just corporate interests.

Triad Hospitals (purchased by Community Health Systems, another for-profit chain. CCMP Capital partners had a signed deal, but was outbid by CHS). Their PAC donated $79,000 to the House and $72,651 to the Senate. Donations to keep committee or chamber leaders included:

Sen. Max Baucus (D-MT) $5,000
Sen. Chuck Grassley (R-IA) $5,000
Sen. Harry Reid (D-NV) $10,000
Rep. Charlie Rangel (D-NY) $5,000
Rep. Jim McCrery (R-LA) $5,000

Triad's 2007 annual report showed no hospitals in Montana, Iowa, New York. They did have facilities in Nevada and Louisiana.

The new White House appointed a Bush worthy health care reformer, given her deep industry ties. Nancy-Ann DeParle worked as Senior Adviser for CCMP Capital Partners, a private equity underwriter. She bought and sold for-profit health care companies. While serving on Triad's board of directors. Ms. Deparle made $1.4 million from the sale of Triad.

The relationship did not end there. Former Triad Hospitals CEO Denny Shelton advised Ms. DeParle on health care acquisitions. She sits on the Legacy Health Systems board, where Shelton is CEO. Do corporate representatives have greater access than struggling citizens or safety net caregivers? Maybe so.

Disturbing Sign for Obama Health Care Reform

What position does the U.S. have trouble filling? The fighting soldier. CNN reported:

Veterans Affairs Secretary Eric Shinseki confirmed Tuesday that the Obama administration is considering a controversial plan to make veterans pay for treatment of service-related injuries with private insurance.

Uncle Sam wants to shed that pesky health care cost as badly as the U.S. Chamber of Commerce. I suggest they start with members of Congress. The race to the lowest global common denominator on worker pay/benefits and taxes continues. Is it a move to turn VA health care from a cost center into a profit division? Maybe, it's both.

(HT-Economic Policy Journal)

Two Numbers Reflect Sad State of Health Care Reform

Hospital uncompensated care reached $34 billion. Exxon's profit rose to $45.2 billion in 2008. For the fourth year in a row, one company's profit could've paid all bad bills for U.S. hospitals from the prior year, with almost $10 billion leftover.

For the last two decades, politicians ignored the will of the people. Elected leaders favored their corporate sponsors. Is the pattern broken? Nancy-Ann DeParle, the White House health care reformer, has deep for-profit healthcare roots. Time will tell.

Bayh Household Finance Update

This post is an update on Susan Bayh's stock holdings and annual board compensation. It is timely as Senator Evan Bayh (husband) considers health care reform. Mrs. Bayh currently sits on the board of five health care corporations. Add two prior health care directorships and Susan sat on seven health related corporate boards.

DYAX Corporation (biotech). Mrs. Bayh has 50,000 beneficially held shares of stock. She earned $61,021 in compensation for her board service in 2007.

Curis Inc. (therapeutic drug development). Susan holds 276,250 shares. Her 2007 board compensation was $102,313. Mrs. Bayh serves on the board compensation committee.

Dendreon Corporation (biopharmaceutical). Her 2007 board pay amounted to $139,000. Stock holdings include 102,721 shares of stock and options. She sits on the compensation committee.

WellPoint (health insurance). Mrs. Bayh earned $334,750 in compensation for 2007. She holds 10,068 beneficially held shares. (She flipped past stock options for over $1.5 million the last few years.)

Nastech Pharmaceutical/MDRNA (pharmaceutical). Susan holds 87,500 shares, including options. She sits on the compensation committee. Her 2007 compensation was $134, 015.

Emmis Communication (diversified media). Her board pay for 2007 totalled $66,788. She holds 86,904 beneficially held shares, including options.

Past board memberships include Cubist Pharmaceuticals, Inc., a pharmaceutical company, from 2000 to 2004, and Esperion Therapeutics, Inc., a biopharmaceutical company, from 2000 to 2003.

Susan Bayh's health care board pay for 2007 equalled $770,000. All board pay roughly totalled $840,000. That's over four times Evan's Senatorial pay. Her potential holdings are below, the actual number depends on option exericise prices:

Curis--$290,062
Dendreon--$338,163
DYAX--$120,500
Emmis--$25,000
MDRNA--$23,000
WellPoint--$362,500

With over $1.1 million in potential family holdings, what kind of health care reform can the public expect from Senator Evan Bayh? One that maintains private sector profits and executive pay for performance? Highly likely.

Fredo Returns, Orzag on Health Reform

In testimony worthy of Attorney General Alberto Gonzales, White House Budget Director Peter Orszag dodged questions on President Obama's health care reform plans. WaPo reported:

"But on exactly what the administration does and does not favor on the benefits and coverage side, you should not expect and you will not be receiving definitive answers from me," Orszag said.

Wow, impressive for an open and transparent administration.

White House Press Release Gets a 95

Did this really come from the White House Press Office? The Chicago Sun Times reported:

The President will teacher quality by dramatically expanding successful performance pay models and rewards for effective teachers, scaling up federal support for such programs in up to an additional 150 school districts nationwide.

It needs improvement, in more ways than one. Pay for performance imploded Wall Street. CEO's widely cheated on executive stock options over a decade. Options were touted as the most pure form of pay for performance.

Why will it work better with teachers? Doubtful. Lazy, ignorant managers bribe people with pay systems that foster internal competition. Teacher carrot chasing can destroy innovation and kill intrinsic motivation.

Dramatic expansion of P4P should dramatically increase educator competition and stifle teacher motivation . If they're as smart as CEO's, expect selfish pay optimizing behavior, maybe widespread cheating. That's a theory based prediction.

"If you want people to do a good job, give them a good job to do." Dr. W. Edwards Deming

Rep. Mike Conaway Gets Another Chance to Use CPA

A House subcommittee was formed to study Defense Department purchasing. West Texas Congressman Mike Conaway netted the ranking member slot. Conaway is a certified public accountant. That skill didn't show when he hesitated to ban naked credit default swaps. He didn't speak from his deep financial knowledge when he voted against the Wall Street bailout, before he voted for it. Maybe he'll do better in this role.

Will Carlyle's Booz, Allen, Hamilton advise Conaway, Congress or the Pentagon? Vice President Dov Zakheim sits on the Commission on Wartime Contracting. Indefinite quantity, indefinite delivery contracts became ubiquitous during the Bush administration, when Zakheim was the Pentagon's Chief Financial Officer.

President Obama Encourages Use of Theory in Science, Discounts Its Application to Management

In a speech on restoring scientific integrity, President Obama said he would make decisions on facts, not on ideology. Here’s the contrast:

Science= Theory-test-results-(confirmation, revision or rejection of theory)

Government Leadership=Facts, not ideology-(this means operating without theory)

It’s an odd contrast, even a conundrum. Facts alone won't put America on a different course. Profound management could, but our corporate board rooms and hallowed halls of government haven't a clue. The heavy losses continue.

How Taxpayers Help Banks, Let Me Count the Ways

Treasury and the Federal Reserve Bank pumped money into major financial institutions numerous ways. Here are three of the many:

1. Direct capital injections
2. Equity injections-preferred stock, much of it converted to common stock with no dividends
3. AIG counterparty unwinding

The Wall Street Journal reported on #3:

About $50 billion of more than $173 billion that the U.S. government has poured into American International Group Inc since last fall has been paid to at least two dozen U.S. and foreign financial institutions.

The newspaper reported that some of the banks paid by AIG since the insurer started getting taxpayer funds were: Goldman Sachs Group Inc, Deutsche Bank AG, Merrill Lynch, Societe Generale, Calyon, Barclays Plc, Rabobank, Danske, HSBC, Royal Bank of Scotland, Banco Santander, Morgan Stanley, Wachovia, Bank of America, and Lloyds Banking Group.

Morgan Stanley and Goldman Sachs declined to comment when contacted by Reuters. Bank of America, Calyon, and Wells Fargo, which has absorbed Wachovia, could not be reached for comment.

Watch to see who lines up for Treasury's public-private infrastructure. Will any get taxpayer money for cheap loans and investment guarantees, on top of the taxpayer booty to date?

Were any sovereign wealth funds, private equity underwriters or hedge funds on the AIG counterparty payment list? They're the other source of private money for Treasury's public-private partnership.

National Security Agency Behemoth?

How big can the National Security Agency get? Two news reports suggest General James L. Jones is consolidating power. America's Cyber Security Chief stepped down as a result. Reuters reported:

Former Silicon Valley entrepreneur Rod Beckstrom said in a resignation letter published by the Wall Street Journal it was a "bad strategy" to have the National Security Agency, which is part of the Department of Defense, play a major role in cybersecurity.

The other story highlighted a recommendation to move America's nuclear labs under the NSA, thus under the Defense Department. WaPo reported:

The nation's nuclear weapons laboratories would be spun out of the Energy Department and become the center of an independent Agency for National Security Applications.

Though still in its initial stage, the OMB idea of putting the nuclear complex under the Pentagon has already drawn widespread criticism from Capitol Hill and elsewhere.

The militarization of America continues. Is General James L. Jones the driver or benefactor? Or is he a fractal, revealing patterns in America's Government Industrial Monstrosity, Eisenhower's MIC on steroids?

HealthSouth, Colombia/HCA, & Tenet Health

What do for-profit healthcare firms HealthSouth, Colombia/HCA and Tenet Health have in common? They were fined by federal authorities for fraud.

HealthSouth overstated earnings by $2.7 billion between 1996 and 2003. They paid a $100 million fine.

Colombia/HCA paid a $1.7 billion fine for fraud, physician pay for referral performance, and illegal kickbacks.

Tenet Health is a serial ethics abuser. One look at Tenet's 10-K shows numerous government settlements. One was a $54 million fine for performing unnecessary cardiac procedures at their Redding, CA facility. Litigation and investigation costs for 2006 were $766 million, primarily consisting of legal settlements with the federal government and costs to defend Tenet in various lawsuits. (The picture above is Tenet's Memorial Medical Center after Hurricane Katrina. 34 patients perished in that building).

Why are these three firms and their past fines important? For at least three reasons. One, the White House health care czar spent the last eight years deeply entwined in for-profit healthcare. Nancy-Ann DeParle served on eight for-profit healthcare boards. Triad Hospitals and Legacy Health Partners, are for-profit hospital chains, like HCA and Tenet.

Two, Richard Scott hit the news again. The former Colombia/HCA CEO challenged President Obama's reform efforts.

Three, former Alabama Governor Don Siegleman's legal appeal hit the news. His partner in conviction was Richard Scrushy, former HealthSouth CEO.

Illegal activity, huge fines, bad CEO's repackaged, and a private equity underwriter (PEU) leading health care change. Reform or deform? More likely the latter. (Bonus fact: Bob Kerrey D-NE and Jeb Bush R-FL serve on the Tenet Health Board)

Clueless Congress Can't Legislate Sound Management

CNBC suggested elected leaders are upset over government supported firms firing Americans and hiring H-1B visa foreign workers. Will Congress next legislate hiring and firing?

Knowledge isn't constrained by borders. Profound knowledge, the body of management theory gelled by Dr. Edwards Deming, is missing from corporate board rooms and America's hallowed halls of government. Suboptimization is rampant.

People should learn before legislating. Theory, not vacuous pragmatism, is required. Yet, ignorance and practicality rule. We may rue this day.

Frances Townsend Recommends Militarization of America's Nuclear Labs

Ex-White House Homeland Security Adviser Frances Townsend has been busy since she flew to Saudi Arabia rather than help with Hurricane Katrina. She got a new job, even after producing a whitewash investigative report on Bush's Katrina response. Who leaves out the hospital with the highest death toll post landfall? Frances Townsend did.

Her latest "public service" came as chair of the Stimson Task Force, a bipartisan group addressing America's nuclear laboratories. The task force recommended changing the status of Los Alamos, Lawrence Livermore and Sandia National Laboratories. It proposes making wider use of the labs for other research.

Currently the labs are a semi-autonomous part of the Energy Department. They would shift to National Security. Past proposals had the labs moving to the Pentagon. It's not clear from the WaPo piece if the new independent agency would be under General James Jones or Pentagon Chief Bob Gates. (Fran worked alongside National Security Adviser Gen. Jones at the U.S. Chamber of Commerce). Either way it shows America's continued deterioration into a warrior culture.

Senator Vitter Offers to Take Planned Parenthood's Place

"Take your condom with you," instructed Senator David Vitter, "and find a prostitute you can trust." WaPo reported:

The Louisiana senator has introduced an amendment to the omnibus spending bill before the Senate to drastically cut funding for family planning programs.

Vitter's amendment states that "none of the funds appropriated under this Act shall be made available to Planned Parenthood for any purpose under title X of the Public
Health Service Act."

It's nice of him to volunteer to teach people about condom use. Leadership by example. I thought those days were long gone.

Hillary Does Cheney Like War Tour in Middle East

To Hillary Clinton's "surprise", the #1 topic of her Middle East tour has been Iran. Consider the list of people citing Iran as the biggest problem in the region. Didn't Israel just spend 25 days pummeling Gaza? Does that mean people below were in uniform agreement (like Tony Blair, Hillary Clinton and General Jones) on Israel's razing of Gaza?

Netanyahu
Olmert
Livni
Barak
Abbas

Palestinian Authority leader Abbas said Iran was his biggest problem? Not settlements, not Gaza, not illegal weapons, not lack of basic goods for Gazans? Odd.

Hillary did repeat Condoleezza Rice's frequent comment that Israeli settlements are "unhelpful." Everyone has their lines. Hillary's "surprise" is one of them. This is orchestrated. Summer is the D-Season, between Bushehr start up and Iranian elections.