News Cut: September 26, 2008 Archive

The things that keep you up at night

Posted at 7:17 AM on September 26, 2008 by Bob Collins (3 Comments)
Filed under: Economy

Let's get right to the story that has had everyone talking at the office water cooler for days, and kept us up late at night worrying about what would happen if things didn't go as well as we had all hoped.

Relax, the Twins swept the Chicago White Sox and are in first place.

Oh, and the U.S. experienced the largest bank failure in history yesterday when it seized Washington Mutual and sold it to J.P. Morgan Chase. Today, all the personal finance experts are making the rounds on the TV talk shows, telling people not to worry and that their money is safe. "Nothing will change" with the bank's crisis, Fox's business anchor, Liz Claman, just told us. I'm not sure at this point anybody wants to hear "nothing will change" and "bank crisis" in the same sentence, but there you go.

Rep. Barney Frank, the point Democrat on the talks to broker a deal on the massive government bailout (which, at last check was still being called a bailout by its proponents and not the Freedom to Still Have a Financial System bill), and Sen. Richard Shelby, the Republican's captain on the issue, are sniping after talks broke down.

Sen. John McCain is now hinting he'll be at the debate with Barack Obama tonight. Sen. Lindsey Graham dropped a hint this morning that McCain will be at the gathering, where one of the questions probably won't be, "hey, how 'bout those Twins?"

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More questions about the economy

Posted at 8:32 AM on September 26, 2008 by Bob Collins (5 Comments)
Filed under: Economy

Q: How does the current crisis affect the traditional notion of a personal safety net?
A: You need 3-6 months of cash reserves

Q: When will things get better for people seeking credit?
A: If you don't have a FICO score in the mid-700s or higher, it'll be difficult. If the bailout plan is approved, 6-12 months before credit eases.

Q: What about credit card debt?
A: What about it? Stop using it (if you're carrying a balance). And make double payments if you can.

Q: I'm close to retirement, I have a diversified portfolio. Do I cash it out?
A: The markets are down 25% in the last year. The key is to have the cash and liquidity. You're probably better off to put it into bonds. A younger person should look on this as a buying opportunity.

Q: Why should I bail out the banks?
A: The alternative is more extreme. The credit markets aren't functioning and will put accounts at risk. There's no good answer.

Q: I'm 10 years away from retirement. What do I do?
A: Now is crunch time. You have 10 years to make it up. You save as much as you can and put it in 401K, reduce your expenses, get your kids out of the nest if they're adults. You can't get a loan for retirement.

Q: I'm a person with a fixed-rate mortgage, no credit card debt, and a good amount of money saved. What should be my biggest concern with the current economic situation?
A: If your money saved is in money markets, getting back dollar for dollar could be a concern. "Breaking the buck" a term known for money market failures began to occur last week in some money market accounts at brokerage houses. Also, your investments like 401K's will tank if the market heads further south.

Q: If the bailout is passed, when is a good time to reinvest and buy stocks? I know there is a lot of money to be made with all the cheap stock options right now.
A: You're exactly right. There are bargains out there. Anticipate an initial spike in the markets and then the sluggish results in the economy to slow market recovery, however.

Q: How long will it take for the stock market to recover?
A: Sometimes recovery comes more quickly than expected. Back in 1987, the stock market fell 22% in a single day -- equivalent to about 2300 points on the Dow Jones Industrial Average at today's level. But for that calendar year, the Dow managed to eke out a meager gain. Of course, sometimes recovery can take quite some time. The Nasdaq Composite Index has yet to recover its dotcom-bubble high of 2000. And the Dow Jones industrials didn't reach their pre-crash levels of 1929 until 1954. While chatter about the markets is decidedly dark, few anticipate that kind of scenario unfolding.

Q: Fed chairman Ben Bernanke told Congress that it risks a recession, with higher unemployment and increased home foreclosures, if lawmakers fail to pass the Bush administration's plan. Is that true?
A: The bailout has been sold as preventing another depression. If its going to be a recession, well, we haven't had this kind of massive bailout in dealing with any of the previous post World War II recessions. We're in a recession, and its going to get worse. No way the bailout stops that.

(Sources: Ray Martin, CBS financial advisor; Gib McEachren, WGHP, NC; David Kansas, WSJ; Chris Farrell, My Two Cents)

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Bad timing

Posted at 10:20 AM on September 26, 2008 by Bob Collins (7 Comments)
Filed under: Crime and Justice, Health

There's never a good time to have a scandal in a gubernatorial administration, but the one that's apparently hitting Gov. Tim Pawlenty is especially ill-timed.

The St. Paul Pioneer Press, citing sources, says an employee of the Department of Human Services allegedly stole $1 million from the Medical Assistance program for the employee's personal use.

How does one person in an agency of 7,200 people steal a million dollars by him or herself without anyone noticing until now?

According to the paper, that question -- and any others -- will go unanswered:

Terry Gunderson, a spokeswoman at the Minnesota Department of Human Services, said no information about any ongoing investigation would be made public.

Now, about that timing thing. The state just went hat in hand to the federal government (most of the money that funds the state's Medical Assistance program is federal money), asking for more time to explain why Minnesota shouldn't lose $130 million in federal assistance to provide health insurance to low income adults.

Federal Medicaid money is normally targeted for kids, but Minnesota already insures low-income kids through the state-funded (with a tax on health care providers) MinnesotaCare program, so Minnesota uses the money to insure their parents, by virtue of a waiver from the federal government allowing it to do so. The feds are threatening to eliminate the waiver.

Minnesota isn't the onliy one fighting this kind of battle. The feds are also threatening to strip the cash from Massachusetts, which also has a state-subsidized health care program. That state is trotting out a heavy hitter in the battle, Sen. Ted Kennedy, who is Kennedy, who is the chairman of the Senate Committee on Health, Education, Labor, and Pensions,

It's been that kind of political year; Ted Kennedy may turn out to be Tim Pawlenty's best friend on the issue.

Update 1:48 p.m. By way of MPR's Tim Pugmire at the Capitol we have an update from Sen. Linda Berglin:

Berglin, who heads the committee that oversees state health care funding, said the embezzlement stretches back more than six years and began before current anti-fraud measures were put in place.

Berglin said she suspected that the employee invented a fictional health care provider to skim payments.

"If this would have happened today it would have been discovered right away," said Berglin, who heads the Senate Health and Human Services Budget Division. "The systems that are in place today were not in place when this began."

Berglin said she didn't know how the fraud was detected, but called it a huge breach of trust.

So now the question isn't when did it begin, but when did it end?

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Not everyone is wringing hands today

Posted at 1:12 PM on September 26, 2008 by Bob Collins (4 Comments)
Filed under: Surveys and trivia

Let's step back from the ledge for a few minutes, just long enough to remember that it's still OK to have a little fun.

For sheer, gee-I-wish-I-could-do-that-if-I-weren't-so-chicken daydreaming, nothing fits the bill better than Yves Rossy, who jumped out of an airplane over France this morning, and landed about 13 minutes later in England.

He wore a jetpack-powered wing on his back:

Rossy's wing was made from carbon composite. It weighs about 121 pounds when loaded with fuel and carried four kerosene-burning jet turbines. The contraption has no steering devices. Rossy, a commercial airline pilot by training, wiggled his body back and forth to control the wing's movements.

He wore a heat-resistant suit similar to that worn by firefighters and racing drivers to protect him from the heat of the turbines. The cooling effect of the wind and high altitude also prevented him from getting too warm.

Why? What the heck! Why not? It beats sitting around watching the 401K free-fall.

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What's your favorite presidential debate moment?

Posted at 3:14 PM on September 26, 2008 by Bob Collins (2 Comments)
Filed under: Politics

I'm trying to remember if any debate moment is so burned into my consciousness as this one, even if it wasn't a presidential debate:

Unless it's this one...

... which wasn't a presidential debate either. Many of these debate moments we laugh at. That one, however, was just plain sad for every reasonable person. Admiral James Stockdale, who was Ross Perot's vice presidential pick, was the very definition of an American hero.

Some of the pundits have been pontificating this week that debates rarely swing presidential elections anymore. Is that true? You couldn't tell by Mike Dukakis who botched his election with a goofy ride in a tank and a botched wonky answer:

For others interested in history, Belmont University, where a presidential debate will be held next month, has been put together a pretty interesting series of videos with behind-the-scenes glimpses of presidential debates.

A reminder: Tonight I'll be live-blogging the debate at the MPR debate-watching party here on News Cut. If you're using Twitter, follow @mpr_debates, and I'll be happy to spotlight your analysis. Keep in mind, I'm not going to be posting on Twitter during the debate, however.

We also hope you'll take part in the discussion by posting your comments and in-depth analysis here on News Cut. I'll set up the post around 7:30 this evening.

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Petters and Fingerhut

Posted at 5:11 PM on September 26, 2008 by Bob Collins (1 Comments)
Filed under: Crime and Justice, Economy

Clearing out the inbox.

People are still trying to figure out why federal agents raided the worldwide headquarters of Petters Group earlier this week. Tom Petters has his hands in many different business, but a look at a statement released by Fingerhut yesterday indicates the involvement of Petters in the operations there has been somewhat diluted:

Minneapolis -- Fingerhut Direct Marketing, Inc., a leading direct-to-consumer marketing company, today announced its business operations continue as usual and are not affected by the investigation of Petters Group Worldwide by law enforcement agencies.

Fingerhut is an independent, standalone company in which Petters Group Worldwide is a passive minority stockholder. Petters Group has no involvement in the day-to-day management of the company.

Fingerhut's financial strength is excellent, having recently completed a new round of equity financing of more than $50 million of additional capital from controlling investors Bain Capital and Battery Ventures.

Fingerhut Direct Marketing, Inc. is an online and catalog retailer of general merchandise featuring more than 500 national brands and nearly 25,000 items. The Fingerhut brand has been in existence for more than 50 years and has enhanced the lives of millions of customers through its commitment to high quality merchandise, convenient and flexible credit terms and extraordinary levels of customer service. FDM Inc. is headquartered in Eden Prairie, Minn.

Bain Capital. Controlling investors. Sound familiar at all? It's the company founded by Mitt Romney.

Update On the bigger issue, a warrant has been unsealed that provides a glimpse into what the feds think they've got on Petters.

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A quiz for the elite

Posted at 6:10 PM on September 26, 2008 by Bob Collins (4 Comments)
Filed under: The Quiz

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Live-blogging the first debate

Posted at 6:40 PM on September 26, 2008 by Bob Collins (34 Comments)
Filed under: Politics

LIVE BLOGGING

6:52 p.m. Eight questions the debate could answer (Washington Post). It says the first debate is usually the most important.

8:00 p.m. - We're underway. Welcome to all of you who have already given up on the Twins tonight.

8:03 p.m. - Lehrer outlines the specific. Nine-minute segments. The audience has promised to remain silent. (They won't).

Where do you stand on financial recovery plan

Obama: We're at a defining moment. Two wars and the worst financial crisis since the Great Depression. His plan (a) Oversight (b) Taxpayer protection (c) None of money to go to CEOs (d) Help homeowners. He's outlined the Democratic proposals.

McCain Opens with concern for Ted Kennedy who's in the hospital. McCain says he's feeling better because Republicans and Dems are talking to each other.

"This is the end of the beginning," McCain says. Calls for an end to dependence on foreign oil.

8:10 p.m. McCain says he will vote for the plan. Calls for more accountability. Obama says "we need it but not just when there's a crisis."

8:12 p.m. The bailout plan is still a standoff. McCain says he'd vote for it, however it's constructed, apparently.

8:16 p.m. - McCain hits Obama for "earmarks." Obama says earmarks accounted for $18 billion in lat budget, says McCain is asking for $300 billion in tax cuts for wealthy.

8:19 p.m. Fact Check. Wall St. Journal last spring pegged cost of McCain tax cuts at $400 billion.

8:22 p.m. McCain hits Obama on cost of Obama's 'earmarks' Obama talks about loopholes. Says FactCheck.org:

Obama said he could "pay for every dime" of his spending and tax cut proposals "by closing corporate loopholes and tax havens." That's wrong - his proposed tax increases on upper-income individuals are key components of paying for his program, as well.

8:24 p.m. - Question: What are you going to have to give up in terms of priorities, to pay for the rescue plan?

Obama says it's hard to anticipate, acknowledges there are things that won't be able to be done, but doesn't answer the question, restating stump speech of what must be done instead.

8:28 p.m. - Lehrer should utter the magic words, "you didn't answer my question."

8:29 p.m. - McCain says he'd do away with ethanol subsidies. I wonder what people would be asking Tim Pawlenty if he'd made the #2 spot on the ticket. Still, that's the only item he indicated he'd cut... at least specifically.

Lehrer says "neither one of you wants to change government significantly as a result of the bailout?" Again Obama talks about what he would do, not what he wouldn't. He says he may cut programs that haven't even been implemented yet.

8:32 p.m. - Lehrer incredulous that neither candidate sees the bailout affecting the government.

McCain calls for a spending freeze (did I hear a groan in the UBS Forum?). Obama says that's using a hatchet where you need a scalpel.

8:35 p.m. Via Twitter:

Erik Hare -McCain responds with a shibboleth and an attack. At least he's on the problems with Defense spending, but not what people care about.

8:38 p.m. - Quick review from the comments section:

It's like they're just restating their standard stump speeches... over and over and over again. "Excuse me, if I may, Senator." Lehrer is doing a pretty good job as a moderator. And did McCain just suggest a spending freeze? You know his aides are sitting there, cringing.

Question: Much has been said about lessons of Vietnam, what about the lessons of Iraq?

8:39 p.m. - McCain, "You can't have a failed strategy that nearly leads to losing the conflict."

8:41 p.m. - Obama: The first question is how we got into the war in the first place.

8:43 p.m. - via Twitter:

dslunceford Anyone else notice that Obama refers to McCain as "John," while McCain refers primarily to "Senator Obama?"

8:44 p.m. I think Obama is trying to work Palin into this. He talks about Joe Biden handling Senate Foreign Relations Committee. Obama acknowledges things are better in iraq, "but that was tactic to confine the damage of the previous four years of mismanagement." Says McCain talks like the war started in 2007.

8:46 p.m. - McCain says Sen. Obama "refused to acknowledge that we're winning in Iraq." Obama says "that's not true." And, indeed, if you look at the above paragraph, it's not.

Afghanistan: More troops?

8:50 p.m. Obama: Yes.
8:53 p.m. McCain: I think he said "yes" although he never said "yes." Now, he's on to Pakistan, so he's not prepared to threaten it.

Which brings this comment from Twitter (actually it came before McCain mentioned it)

planetrussell NATO statement today in re Pakistani forces opening fire on 2 US copters near Afghanistan-Pakistan border. Gentlemen, what say you?

McCain says Marriott bombing was a sign from terrorists. He also says the tactics in Afghanistan will be the "same ones Obama has opposed."

Obama says nobody is talking about attacking Pakistan. "Coming from you, someone who's talked about extinction in North Korea.... " (drowned out by laughter in the UBS Forum. I presume it had to do with the "Bomb Iran" Beach Boys thing.)

8:59 p.m. - McCain injects the bracelet of the dead soldier story. I'm betting he's about to show the bracelet. He didn't, though. I wonder if he's still wearing it. (My error, he showed it.)

9:03 p.m. - Question: What is your reading from the threat from Iran?

McCain: If Iran acquires nuclear weapons, it's a threat to the state of Israel and other countries in the reason, who'll want to acquire nukes. "We cannot allow another Holocaust." Military strike? No, a League of Democracies to meet to impose "significant sanctions on the Iranians."

9:06 p.m. Obama - "I believe the Republican Guard is a terrorist organization." He says "the notion that we not talk to our enemies has not worked."

9:08 p.m. "What about talking," Lehrer asks. McCain says Obama has said he'd talk to head of "terrorist states" without precondition. Note: McCain has said he wouldn't speak to Spain.

>> Kansas City 7 Minnesota 1 (Couldn't see that coming, could you?))

9:14 p.m. McCain was stumbling through the economic section, but steeled himself during the foreign policy portion of the debate. Obama forceful, but is being put on defensive consistently. Who's "winning"? You tell me.

RUSSIA

9:16 p.m. - Obama: "Our approach has to be evaluated. Their actions were unwarranted. Russia must leave the two Georgian provinces, but doesn't say how that's going to happen."

9:19 p.m. McCain: Uses "naivete" for the third time in the debate to describe Obama. No accident, of course. "We want to work with the Russians, but we have every right to expect the Russians to behave." McCain does a nice explanation of the role Ukraine will play in the conflict.

Obama says he and McCain agree. Cleverly (desperately?) steers the conversation to energy and drilling for oil.

CHANCE OF BEING ATTACKED AGAIN

9:26 p.m. - Less than it was Says he's proud of getting 9/11 reforms written into law. The heads of the 9/11 Commission have a different view. They said the country is still "dangerously vulnerable."

9:29 p.m. Al Qaeda is operating in 60 countries, we can't just fight them in Afghanistan and Iraq, Obama says.

9:33 p.m. - Obama talks about the war in Iraq and says we can't fund Veteran's Care or provide health care for children. Fine, but why didn't he say what the new bailout would have us NOT doing when he was asked earlier in this debate?

9:35 p.m. - McCain: "I know how to heal the wounds of war." End of debate, but don't go away! We're just starting here at the debate-watching party.

WHAT THE PEOPLE THINK

9:40 p.m. - No "undecideds" have been swayed. Poor Curtis Gilbert of MPR was going to do a story on what the "undecideds" think. That'll be tough, now.

9:42 p.m. Undecided: "I saw an Obama who provided information, but I didn't like his character. McCain seemed less clear, but I liked his character."

"Which is more important to you," moderator Jeff Horwich asks.

"Over the months I thought Obama had better stump speeches, but I didn't see that tonight so I'm in more of a quandry than before."

9:45 p.m. - John (Undecided) - "I thought McCain was a cadaver." OK, there's some political analysis. "He looked like he was just out of storage. He says he's now in the Obama camp.

9:46 p.m. - Tina (Undecided): "McCain was condescending."

9:49 p.m. Mitch Berg (McCain supporter and writer of Shot in the Dark blog) "I thought McCain mopped the floor with him on gravitas and experience." In the first few minutes, he think McCain looked stiff.

9:51 p.m. Obama supporter: She was originally a Clinton supporter and says Obama 'takes away the cowboy effect we've gone with the last few years."

9:52 p.m. Jamie (Undecided): Was a Clinton supporter. During the debate "I made the joke to my friend that I think they gave McCain a nap because he looked more alive than I expected. I felt they both seemed nervous in the beginning. McCain seemed to have more of a presence."

9:55 p.m. Barry (Independent) "I'm bummed out. We still don't know how we're not going to be (in Iraq) for 100 years."

9:58 p.m. That didn't take long, there's already an ad out:

10 p.m. Matthew (Obama supporter): "I felt McCain was as divisive a character as Bush, even if he did some bipartisan work years ago."

We're done here. Thanks for sticking with me this evening. Keep on talking in the comments section. I'll be here off and on through the weekend.

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