Exploding Stars In a stunning series of events, the last few weeks irrevocably changed Wall Street. With aftershocks that not only affected Pratt Street in Baltimore, these events may have determined who will occupy 1600 Pennsylvania Avenue next year.

The exploding stars that were sucked into the black hole of the mortgage and credit crisis included the biggest names in investment banking and insurance, and Baltimore’s own Constellation Energy.

The best and the brightest weren’t very good or very bright as it turns out; but they were at least smart enough to give themselves great salaries and bonuses while the fun lasted. And while the good times rolled, they gamed their boards of directors into handsome golden parachutes without regard to whether their companies went down the drain sucking shareholders’ value with it.

As Chairman and CEO, Mayo Shattuck probably implored Warren Buffet to, "Take Constellation Energy, please!" Nominally an energy company, CEG made outsized profits mainly from its energy trading operation that was built on the same type of leveraged borrowing that took down Lehman. The company put itself at risk by betting that its ratings would not get downgraded, knowing (or should have) that it never had the collateral it would need if it did. Where, you might ask, was the board of directors when these decisions were made to bet the company?

Shattuck will be able to attend his last Constellation Golf Classic next month knowing that he will be rewarded with an $18 million + payout that he will take from the sale of CEG. Not so lucky are the thousands of CEG shareholders who saw the value of their shares cut in half in one day.

This latest example of excessive CEO compensation is all the more outrageous given the circumstances around this latest collapse. Let's hope it translates into legislation that places limitations around what companies pay their CEOs, and makes boards of directors more accountable.

It is apparently a goal that the two presidential candidates share, yet neither inspired much confidence in the face of the panic that has enveloped the financial system. Oblivious to the fact that what motivates Wall Street is greed (no one ever accused investment bankers of being in business to make America better), McCain blamed greed even as he defended his own advisor Carla Fiorina’s $20 million severance from Hewlett Packard. Missing that little bit of irony is another example of the cluelessness that is becoming a worrisome pattern for the GOP nominee. But "the best defense is a good offense" (unless it’s the Ravens), as McCain used the line to dodge responsibility for the laissez-faire policies he supported that are at least partially responsible for the excesses he now claims to deplore.

At first, Obama didn’t do much better when his running (at the mouth) mate Biden decreed that they opposed a bailout of AIG. But Obama recovered quickly by supporting Paulson and Bernanke’s rescue plans that, for the time being, stopped the hemorrhaging.

This latest economic kick in the groin should give Obama the election he is seeking. However, with almost a trillion dollars more debt piled onto the Bush deficits and worries of a recession giving way to depression fears, he'll be getting no honeymoon.  4:11 PM •  0 Comments • Links to this post

Obama’s Presidential Pretensions Last week, there was mostly fawning in the press over Obama’s tour d’Europe while ridicule accompanied McCain’s tour of a grocery store.

While the democratic nominee was acting presidential, McCain helped a mom pick groceries in Pennsylvania. Obama scaled oratory heights in Berlin; McCain just looked awkward in Bethlehem. Obama’s trip was a tour de force; McCain’s grocery store visit was a tour de farce.

The press fed the excitement over Obama with one reporter rhapsodizing that the trip was “a slam dunk success”. (Where have we heard that phrase before?) Obama honed his foreign policy credentials as he lunched with the troops, rode in a helicopter with General Petraeus and met with Prime Ministers and Presidents.

Though McCain was once in command, the press liked the image of Obama acting in command. Obama’s speech in Berlin was favorably compared to ones given in the same city by Presidents Kennedy, Reagan and Clinton. All that was missing was a band playing “Hail to the Chief”.

The political winds are blowing Barack Obama’s way. The economy is in the tank, and it costs more to fill your tank. Your house is worth less, and many Americans are losing theirs. Abroad, we are still bogged down in Baghdad, the Taliban is back in business and Iran is increasingly irrational.

If you are Obama or a democrat, you have to like his chances. What’s not to like?

For starters, Obama is acting like he is president before being elected president. With all the pomp and circumstance surrounding his excellent European trip and the accolades to which he returned, the risk for Obama is that people at home might view him more pompous and presumptuous than presidential.

We Americans don’t much like people who get too big for their britches. We tend to want to cut them down to size. In elections, that usually means we vote for the other guy. Al Gore was smarter than George Bush and wanted you to know it. Gore was too much of a smarty pants. Bush was the guy you wanted to have a beer with and shoot the breeze. John Kerry gave the impression that instead of shooting the breeze, he would rather enjoy the breeze on his veranda with a glass of champagne–hardly something most voters would relate to. Well, isn’t Obama, with his soaring eloquence more like JFK? Well yes, but JFK was also a war hero and we listened to his rhetoric knowing that he had paid his dues.

Obama lost the primary in Pennsylvania because he bowled gutter balls without removing his tie, and wouldn’t drink shots like Hillary. To the voters of Pennsylvania, Hillary was more of a guy than the guy.

With polls saying that voters are more concerned about the economy than foreign affairs (we needed a poll to tell us that?), the picture of McCain looking like a shlub shopping in a Safeway, empathizing with a mom over the price of milk while Barack was in Berlin and Paris, just might turn out to be shrewder politics than we or even McCain first thought.

Obama’s trip might have been a slam dunk success, but the last time we heard the term “slam dunk” was before we invaded Iraq. McCain is hoping that Obama’s foreign foray will lead him to a similar fate.  4:10 PM •  0 Comments • Links to this post

July Campaign Follies The contrast between what Barack Obama and John McCain were doing this week tells a lot about the state of the two campaigns. While Obama was on a rockstar-like tour of the Middle East, McCain was in Baltimore (hardly a GOP bastion) for a fund raiser at the Center Club.

Obama was trailed by the three network anchors, and his meetings were front page news.

Meanwhile, McCain and his Maryland supporters couldn’t even fill the room in the cozy confines of the Center Club, which is hardly the kind of venue one would associate with a presidential fundraiser. The Maryland GOP spun the fundraiser saying that even though just 200 people attended, the event raised over $1 million dollars. Their economic analysis of the fundraiser is as fuzzy as McCain’s economic plan- even at the maximum of $2,300 a head. At best they raised about half a million dollars, which is 1/100th of what Obama was able to raise in June.

According to David Nitken at the Sun, McCain’s refrain at his Center Club soiree was that he knew how to “win wars”. McCain has contrasted his support for the successful surge in Iraq and “winning” there with Obama, who, on his plane dubbed “O Force One”, has proposed getting out of Iraq in 16 months and putting more military oomph in Afghanistan.

Instead, however, the challenge for the next president may be how to win a war with Iran.

The not so quiet talk is the growing likelihood that Israel will conduct a pre-emptive strike against Iran’s nuclear facilities. The window for such an attack is narrowing as Iran continues to improve its air defenses with weapons purchased from Bush’s buddy, Vlad Putin. And, as with previous attacks against Iraq’s and Syria’s nuke facilities, the Israelis won’t ask for permission from the U.S. before bombing. They will also know that the Bush Administration would support such an attack – which is another reason why Israel may want to act before the new president takes office next January.

Israel has to be hopeful that Arab countries, which are equally fearful of a nuclear Iraq, will be quietly supportive; and that Iranian moderates will be emboldened to take down Ahmedinejad and the religious radicals.

But it’s a big gamble. Iran will retaliate. Iraq, which appears stable now, may see its Shiite majority rise up to support their Muslim brothers in Iran and attack U.S. forces. Other countries in the region may be drawn in despite intentions to the contrary. At the least, the price of oil will rise dramatically over fears of supply disruptions. Get ready for $200/barrel and $6 gas.

Beyond that, all that is clear is that the next president will have a hell of a mess on his hands.

And as far as McCain’s boast at the Center Club this week that he knows how to win wars, he just may get a chance to win another.  9:18 PM •  0 Comments • Links to this post

Baltimore Beefs Two recent articles have me pondering the glacial ways of government and how process has become more important than progress.

In early May, Mayor Dixon held a "summit" regarding the proposed Red Line rapid transit route in Baltimore. The Red Line would run from the Social Security headquarters on the east side of town, through downtown and Harbor East, to the Johns Hopkins Bayview campus. In the face of increased traffic and expected population growth from new jobs moving to the area because of BRAC, the project’s benefits were obvious even before gas prices hit $4 a gallon.

This project has been on the drawing board for years. Two years ago, I went to a community meeting in Canton where city and state transportation officials presented schematic drawings of possible routes and station locations. What caught my eye was the comment that construction on the project could begin by 2012 with completion in 2016 (subject to funding, the website is quick to note).

That is eight years from now!

Mayor Dixon stated that community involvement is crucial. That's fine and important; but it is hard to understand why that should take more than the two years it has already been going on. As for funding, yes, it won’t come cheap at around $1 billion (think of the jobs). Nevertheless, this ought to be a pretty high priority for our political leaders at both the state and local level.

A second article noted that the City Board of Estimates' approval of a PILOT for the Fitzgerald, a new apartment project and parking garage that will benefit the University of Baltimore, was delayed nearly three years after requests for proposals were submitted. The developer of the project noted that, had he been doing the project on his own, he could have broken ground a year ago. What was the cost of that delay?

Last year I went to an exhibit in New York on Robert Moses. Moses built parks, highways, bridges, playgrounds (658 of them), housing, tunnels, beaches, and civic centers; and he is largely credited (and criticized) for the New York City we all know today.

Moses was controversial and not all of his projects were considered successful. Like our Mayor Schaefer, he was a “get it done now” kind of leader who was impatient and disdained his critics. Moses famously said, “Those who can, build; those who can’t, criticize”.

We could use a little of that spirit in getting the City’s Red Line built a lot faster.

One cautionary note, however: Since I didn’t build it, I am going to criticize the new Hilton Hotel that now pollutes the view from beyond Camden Yards. The hotel may be necessary, but was it necessary to make it so ugly? Its presence detracts from the beauty of Oriole Park and will be a stain on Baltimore’s skyline for generations.

Note to Mayor Dixon, please get it done now, but make sure it looks nice. Generations of Baltimoreans will thank you.  11:15 AM •  1 Comments • Links to this post

Should Obama Punch Hillary’s Ticket? After almost five months of primaries and caucuses, with almost as many elected and super delegates as Obama, Hillary Clinton and her supporters can make a case that she deserves to be on his ticket.

It’s a legitimate case, worthy of some consideration, but not much. Hillary’s negatives would be a burden to Obama.

When Hillary went negative to negate Obama, her negatives soared. In New Hampshire, Obama said that Hillary was likeable enough, but today not enough people like her. Polls show that her negatives now outweigh her positives.

Plus, Hillary and Bill are now a double negative that has been over exposed. Bill accomplished what his impeachers couldn’t. His petty performance diminished him, and deep-sixed his wife.

As the first serious woman candidate for president, Hillary could have claimed the theme of change from Obama. Voters wanted inspiration, not experience. In a year of change, she didn’t get it so she won’t get it.

That said, Obama needs to extend an olive to the branch of the party that supported Hillary. Too many Hillary supporters say they will vote for McCain or stay at home. A dream ticket is doubtful, so who else is on the list?

A double play would be New Mexico’s Governor Bill Richardson who could counter McCain’s foreign policy experience and appeal to Hispanics whom Obama needs to capture. But Richardson is too nice a guy, and Clintonistas like Carville consider him a traitor for switching his allegiance to Obama.

How about Hillary supporter Strickland of Ohio. Who’s he you ask? So will most Americans.

In keeping with his theme of change and to capitalize on Hillary’s support with women, a particularly intriguing choice would be Missouri’s Senator Claire McCaskill.

But Obama himself epitomizes the change that he espouses. Too much change may be too much.

What Obama needs to do is reassure a public that will like his youth but question his experience. He needs to reach out to the moderate democratic demographic that supported Hillary. He needs someone tough to tackle McCain. The GOP is already selling fear. He needs someone that the Republicans will fear.

And if he can swing someone from a swing state, so much the better.

Memo to Barack: the tough guy you need has been a district attorney and a big city mayor. He carried Clinton to a win in the key Keystone State that you’ll need in November. This is a guy who can land a punch on the GOP for you. Pick the man from PA – Ed Rendell.  8:59 AM •  0 Comments • Links to this post

Maryland’s Democratic Delegate Math According to CNN, as of today, Barack Obama leads Hillary Clinton by 139 delegates in the race for the Democratic Party nomination. Only real political junkies can explain how the Democratic Party apportions its delegates; but the net effect of this arcane process is that if Obama and Hillary continue to split the remaining primaries, Obama will still lead in the number of committed delegates when the voting is all done. He is also likely to continue his lead in the national popular vote and will have won more states than Hillary.

That’s why the focus is on the Party’s “super delegates” and how they will vote. Clinton says that each super delegate needs to make his or her own judgment and vote for the candidate who can win in November. Obama says super delegates should follow the popular will of democratic voters in the primaries and vote for the candidate who has won the most delegates.

After the primary election in 1980 when Ted Kennedy tried to pry away delegates committed to Jimmy Carter, the Party created the Hunt Commission to come up with new rules to govern how delegates elected in primaries or caucuses should vote. Rather than requiring elected delegates to be bound to a particular candidate, the guidelines were loosened to require elected delegates pledged to a particular candidate to vote for that candidate “in good conscience”. But Members of Congress still complained that they didn’t have enough say in the party nominating process; so the Hunt Commission created the concept of super delegates. Like the old soviet politburo, party officials were given a special role in the nominating process. The concept was that by virtue of their exquisite political sensibilities, elected officials would be best able to respond to “changing circumstances" and exercise their judgment to pick the best nominee.

Since then, the primary process has served up the nominee without controversy, and the judgment of super delegates hasn’t been put to the test. Though in retrospect, the savvier of them might have saved the Party from the Dukakis debacle of 1988.

It is pretty clear from reading the Hunt Commission report that super delegates were created precisely to deal with a situation like that Party is facing today. Jim Hunt, the eponymous chair of the Commission said that elected officials could serve a role choosing the Party’s nominee by making a “reasoned choice" when the will of the voters is not clear.

What is at stake is the meaning of "reasoned choice". If “reasoned choice” means responding to “changing circumstances”, then it is hard to see what circumstances would require super delegates to reverse the vote of Democratic Party voters.

The case for following the will of the voters is especially compelling here in Maryland. Super delegates would be hard pressed to give a reasoned explanation as to why they should allow Hillary to win a majority of their votes after Obama won Maryland’s democratic primary by a super margin of 25 percentage points (61% to 36%). Obama won 27 delegates to Clinton’s 19. Yet by one count, of the 27 Super Delegates in Maryland, ten are committed to Clinton and only four are committed to Obama; 13 remain undecided. For Obama to equal his margin of victory in the primary, he would need to get a total of 16 super delegates. To do that, he would need 12 of the remaining 13 uncommitted delegates, or get some committed to Hillary to switch their allegiance.

The Hunt Commission gave the super delegates the ability to exercise discretion. But absent a compelling reason, Maryland’s super delegates ought to reinforce the will as expressed by the voters in last month’s primary and cast their votes for Obama.  9:47 AM •  0 Comments • Links to this post

Cell Phony The past three days, world markets have been whipsawed over concern that the credit crisis is going to lead to a recession in the US. Congress and the President in a rare moment of bi-partisanship are rushing a stimulus package to bring confidence back to the markets, even while it is acknowledged that whatever stimulus is agreed to won’t have an immediate effect.

In Maryland, it is time to throw out last fall’s revenue projections as the downturn in the real estate market will likely extend through 2008. The sales tax increase may only soften somewhat the decline in retail sales tax receipts as worried consumers extend their cautious buying well into the New Year.

Prices at the pump are pinching consumers’ pockets and declining home sales are going to similarly pinch the flow of revenues into the state’s bank account.

The state’s revenue picture will be much worse than projected last fall. The Governor has already played his hand on taxes in the special session last fall before the extent of the credit and housing crisis was known. Now he won’t have much room to maneuver and will have to look to spending cuts to balance the budget.

When the world is falling around your ears, it’s better to find other things to talk about. If you are a member of the Maryland General Assembly and are powerless to stop the credit crisis or the decline in the value of everyone’s home, and you want improve the common good, what do you do? How about introducing a bill to ban the use of hand held cell phones while driving?

Telling people they can’t use hand held phones in their cars is like telling teenagers to just say no to sex. It sounds nice but it isn’t reality. Cell phones have become one of life’s necessities, like cars and computers. We all drive and talk on our phones even though we know it is distracting and potentially dangerous. You don’t need to look at statistics to know that. I use a hands free and I still find that distracting, but no more distracting than kids fighting in the back seat or having an argument with your girlfriend (mine once got pulled over for going 85 in a 60 mile hour zone while yelling at me about something that I am sure justified the $150 fine she had to pay).

Even if a law is passed, this one is guaranteed to be broken by everyone. Enforcement will necessarily be selective. Like speeding, everyone will do it and take the chance of being caught.

Legislators are always looking for ways to do something to justify their pay and existence. It is an understandable human trait. In this case, instead of doing something, we should be satisfied to pay them just to stand there.

Labels: cell phones, legislature, Maryland

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