Jed Morey’s Blog

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Posts Tagged ‘Tom DiNapoli

Governor David Paterson

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Something very interesting is happening in Albany.

 David Paterson, the happenstance governor of New York, is finding his footing, getting comfortable in a battle-ready stance and throwing jabs at the legislative body he presides over. And he’s connecting with greater frequency. All of the pundits who have been scoffing out loud at the possibility of David Paterson returning to office next year should sit up and take notice.

 Until this point many have considered Paterson a seat warmer for Andrew Cuomo. His inability to read staff briefings and his refusal to learn braille is a source of constant mockery. Even Rupert Murdoch pointed to Paterson’s impaired vision as a primary reason he is unfit to govern the state. The legislature routinely obstructs his initiatives or ignores him completely. Hell, the President of the United States took time out of his schedule to tell him to step aside next year.

 But an objective look at what has transpired over the past couple of months tells a slightly different story than what the pundits are saying.

 Since being sworn in as Governor, Paterson has gone on a crusade to warn the public that New York State’s finances were spiraling out of control and headed for a wall. His barrage of warnings went virtually unheeded and quickly became verbal wallpaper in the media and in political circles. When NYS Comptroller Tom DiNapoli finally put a figure to the deficit and joined Paterson in a chorus of warnings, the concern grew ever more palpable among New Yorkers while the members of the Assembly and Senate rearranged deck chairs on the Titanic.

 An internal coup during the summer months paralyzed the government and placed a spotlight on their remarkable dysfunction.  This is when an almost imperceptible shift in Paterson’s favor occurred. When Paterson threatened to break the deadlock by appointing a Lieutenant Governor he was ridiculed and brought to court by the legislature. Quietly, a couple of months and appellate court decision later, the governor got his man.

More of a Bad Ass Than We Thought?

Over the past few months the deficit has grown larger while the legislators ignored the governor’s request to get back to work forcing Paterson to once again to take matters into his own hands. He threatened to expand executive authority and begin slashing budgets across the board and forced the legislature back to the table. Say what you will about our beleaguered governor, he is determined to stand up to anyone in his way.

 Some of the insider rap on Paterson may well be true, however. The administration itself is considered by many to be highly disorganized and the governor is said to be increasingly paranoid given how many people are angling to fill his chair. But as the saying goes, just because you’re paranoid doesn’t mean they’re not watching you. Despite some tiny victories, his approval ratings have gone into freefall and talk of his replacement has gained serious momentum. But if the recent local elections are an indication of anything, it is simply that anything can happen. The anti-incumbent wave of emotion may continue unmitigated through next year and send several sitting legislators to the private sector.

The ultimate twist of fate would be if the voters leave Paterson right where he is to captain this ship regardless of what the polls say today.

 Stranger things have happened.


Written by jmorey

December 3, 2009 at 1:27 am

Echo Bubble

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The federal debt now stands at $12 trillion. Historic. New York State Comptroller Tom DiNapoli issued a statement warning New Yorkers that the state is “on track to spend $4.1 billion more this year than it will take in,” characterizing this deficit as “irresponsible and unacceptable.” On Long Island we are being squeezed by every taxing authority under the sun. But the government isn’t alone. Homeowners across America are underwater with mortgages they cannot afford and drowning in the highest household debt ratio in history.bubble-300x267

Incredibly, the Dow Jones Industrial Average has crept above 10,000 in recent weeks despite every indicator contradicting Wall Street’s enthusiasm.  

I’m amazed at the level of blind faith the public places in the voodoo wisdom of Wall Street. In daily conversations, economists, investors and the general public blithely repeat figures that track the upward progress of the Dow Jones Industrial Average or the S&P 500 without putting any thought into how Wall Street arrived at these numbers. Unemployment rises and so does the Dow. Consumer confidence plummets and the market rolls on. Foreclosure rates climb, loan modifications fail and the market forges ahead. Our collective optimism is unparalleled in the world; an admirable trait until it runs into the brick wall of reality—and the wall is closer than you think.

We trust somehow that the savvy Wall Streeter in pinstripes, Polo frames and wingtips actually knows what he is doing. Less than two years ago this same swindler was hawking swaps and derivatives built on bad mortgages, and there was a sucker for every share. Today the only sucker is the blogger or talking head on television pontificating about how the economy seems to be recovering. The fact is the blogger and talking head aren’t investing in the market right now because they don’t have any money. Worse yet, they’re drawing economic conclusions from the surge in the stock market and passing it along as gospel. In reality, virtually all of the growth in the market today is from dollars being poured into the market by unregulated hedge funds.

Here we go again.

The hedge funds are investing in equities because it’s the fastest way to turn a buck. Move the market, make your nut, and dump out. But the hedge funds aren’t receiving any money from individual investors either. They’re getting it from the banks through low interest loans and funneling the money back into the equities market for short term gain. See where this is going? The only banks with enough money to loan to hedge funds are the ones that were bailed out by the federal government which had to borrow the money on the international market to support the banking industry. When these notes are due the federal government will dip into the only available revenue source it has to pay down the debt: You and me—the taxpayer.

One of the missed opportunities during the initial months of the young Obama administration was its failure to address the regulatory environment on Wall Street to provide greater transparency in the financial markets. The central problem remains in the Senate Banking Committee whose members are in the pockets of the investment banks and the hedge funds. Make no mistake, Senators Schumer and Dodd run America’s balance sheet, not the Fed. The contributions they receive from the financial sector are mind blowing, which is why the Senate refuses to lift the veil of secrecy from the financial system. If Americans got the chance to peek under the hood of the fiasco that is our economy it would all come crashing down. Either way, it’s coming. The only difference is that we will not be forewarned.

So despite what anyone tells you, we are not in a recovery. People casually refer to last year’s banking collapse as a tsunami. A fast and furious storm that indiscriminately ravages everything in its path. Remember though, it’s not the first wave of the tsunami that kills. It’s the second. My friend Peter Klein, senior VP of UBS Financial Services, describes the period we’re in right now as an “Echo Bubble.” According to Peter, the term was coined by Nobel Laureate Vernon Smith to describe typical post-bubble activity whereby the initial burst is followed by a secondary bubble “during which market psychology matches the extremes of sentiment displayed in the first bubble. Typically, markets do not find a genuine bear market bottom until after the echo bubble bursts.” Put another way, we are returning to the beach to assess the damage of the first wave unaware of the far more dangerous swell that is fast approaching.

So what happens next? This bubble bursts when the first big hedge fund pulls out of the market. Don’t let the man in pinstripes fool you. It’s around the corner.

Written by jmorey

November 13, 2009 at 10:50 pm

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