I tried explaining this in my previous post Marissa DeFranco Misses The Mark.  I’d like to try to make it even clearer in this post.

Suppose there is a company with $400 million in liabilities and $300 Million in assets.  What do you see in such a company?  You might say, a company that will surely go bankrupt if it doesn’t have a huge offsetting income stream.  You certainly wouldn’t invest in such a company if you had a normal (or is that moral) view as to what capitalism and business is all about.

Vulture capitalists see something that you do not see. Vulture capitalists have learned to focus on one thing only, $300 Million in assets.

Without the vulture capitalists, if the company went bankrupt, the assets would cover 70 ¢ on the dollar of their liabilities to their creditors.  When a vulture capitalist buys such a company, the idea is to turn that $300 Million in assets into cash that can be paid out to the vulture capitalists.  Then they let the company follow the path that it already was on toward bankruptcy.  The only difference is that the vulture capitalist comes away with $300 Million and the creditors come away with zip, zero, nada.

What do you suppose happens to some of the creditors who considered a large part of their assets to be the debts that they expected to be repaid by the company to which they sold their goods and services?  Some of them go bankrupt, too.  The vulture capitalist who stripped the assets of the first company now has inside information, because of the temporary ownership or management of that company, as to which creditors of that company to look for as the next victim.

There is nothing magic about a company having a negative net worth (liabilities greater than assets).  The only advantage to such situations for the vulture capitalist may be that the rest of the world shuns the company’s stock and it will be cheap to take it over.  In reality, even companies with positive net worth may be more valuable to a vulture capitalist to strip out the assets than it is to run the company as an ongoing business.

Clearly, the possibility of  a vulture capitalist coming in to strip the assets of a company is such a frightening possibility, that even many well run companies hesitate to build up a large surplus of assets.  So even a company that wants to have a well funded pension plan for its employees, does not dare to do so.  Such an asset would be a very inviting target to the vultures.  If a recession or a depression hits, these well run companies are not in as good a position to weather the storm as they might have been had they not had to alter their plans to ward off the vultures in good times.

We have allowed the laws and regulations of this country to fall into such a state of disrepair and lack of enforcement that the very good parts of capitalism have been turned up-side-down.  The normal incentives to make a company turn a profit and grow and thus provide benefits to the economy as a whole as a natural part of its existence, have been turned into incentives to strip out the assets and leave the economy without jobs and without productive capacity.  Many of the other countries in the world have followed our silly example in a race to the bottom of the heap.  The fact that multi-national companies have become more powerful than most nations may play a role in this nearly universal behavior.

Sharon says to me that you cannot expect politicians who are not business people themselves or who have not studied business to explain these intricacies to the voters.  I remind her, that I am not a business person either, but here I am writing this explanation.  Why is it that I can see this so clearly, and yet, in all the years since I have come to understand this (30 or more), there has been no politician who can get up on his or her hind legs and tell people what is going on in words that they can understand?

Aside from the fact that NECN stupidly labels this video as Will gay marriage be an anchor for President Obama?, Marissa DeFranco gave a very disappointing performance on the key issue of vulture capitalism.

It is not, as the Republican said, a matter of some companies fail and some succeed. It is a matter of vulture capitalists like Bain raiding corporate pension funds, retiree health care funds, plundering the company assets, loading up the company in debt, and then walking away with hundreds of millions of dollars in profits. The employees are far worse off after the Bain “rescue” than if Bain had not stepped in and had let the company fail. Whatever profits Bain made were stolen from the employees, the company, and the new creditors that Bain enticed into lending more money. When you borrow money with no intention of repaying it, that is called fraud if little people like us do it to a bank. When wealthy people like Romney and company do it, it is called capitalism at its finest.

There is also nothing wrong with labor unions investing their pension funds in venture capital which funds the creation of new companies. This is a far cry from vulture capitalists that raid corporations of whatever assets they have not withstanding the fact that these companies already have more liabilities than assets. The fact that Bain may have done both kinds of activities does not absolve them from the part of their activities which should be illegal.

How could Marissa DeFranco fail to make this very important point?

I am afraid that the rabble rouser in Marissa DeFranco has lost the battle for dominance with the publicity and fame seeking Marissa DeFranco.

This reminds me of Marissa DeFranco’s former disdain for Democrats who make a very weak case for their own most important issues.

Inspired by a pin on Marissa DeFranco’s web site

Nation Of Change headlines the comment New French President: My Real Enemy is the World of Finance.

However the real meat of the interview by Democracy Now with William Black is Black’s answer:

And Obama needs to go back to what he originally proposed, which was brilliant. It was a Republican idea: revenue sharing. We all knew that the states and localities, unlike the federal government, cannot run significant deficits, and that there was going to be a financial holocaust that was going to reduce vital services and throw hundreds of thousands of public workers out of work when they were most needed and exacerbate the great recession and dramatically slow the recovery. So, the recovery bill that—the stimulus bill that President Obama proposed had that provision. The Blue Dog Democrats, the conservative Democrats, and the Republicans got together to kill that. And unfortunately, the Obama administration didn’t fight for it.

Here’s what we know. The Wall Street Journal just ran an op-ed saying, don’t allow the federal government to help the states. That tells you that’s what they’re scared of. It would be economically brilliant, it would be politically brilliant, to bring back the revenue sharing provisions, which are, after all, a Republican idea, and make the Republicans make the call that they want a financial holocaust throughout America, and they want us to slip back into a recession.

Leonard Pitts Jr. in The Miami Herald has the commentary Don’t blame Democrats for hyper-partisanship.

I bring attention to it for two reasons. One is that Leonard Pitts, Jr. points out that

this is not a problem caused by partisans “at both ends of the political spectrum.”

Further,

One cannot fix a problem one will not face. And the new cultishness of the Republican Party is certainly a problem. It should concern anyone who thinks democracy is best served when political parties offer coherent alternatives and hash them out in the marketplace of ideas — something the GOP no longer does.

The second reason for featuring this article, is the comment:

In their new book, It’s Even Worse Than It Looks, Thomas E. Mann and Norman J. Ornstein argue that the GOP has “become an insurgent outlier — ideologically extreme; contemptuous of the inherited social and economic policy regime; scornful of compromise; unpersuaded by conventional understanding of facts, evidence and science; and dismissive of the legitimacy of its political opposition.”

This is a book that reader RichardH has mentioned to me.  I had not looked into the book nor listened to an interview with the authors because I never expected a right-wing ideologue such as Norman J. Ornstein would ever have conceded what seems to be the premise of the book.

Apparently the Obama campaign wants you to see the document The Ricketts Plan to Defeat Barack Obama.

A news report this morning exposed an outrageous plan by Republican operatives, and a secretive right-wing super PAC, to spend millions of dollars to spew ugly, divisive slime on TV in hopes of tearing down the President.

Read this incredible story, and you’ll see we’re up against. It’s everything that’s wrong with politics — and the Republican Party — today.

It’s clear that this crowd will say anything, do anything, and spend anything to take the President down and elect Mitt Romney.

Right now, demand that Mitt Romney strongly condemn any hate tactics being used in his name — he can stop them if he wants to:

http://my.barackobama.com/Reject-Hate-Politics

They think they can win by shamelessly dividing our country. Let’s prove them wrong.

I think the implication of the document is the PAC’s intent to reopen the Reverend Wright story to attack the President. Since the original story is the prime example of when the media gets a story wrong they just never let it go, you know you won’t be able to hear the truth from the media.

In fact there may only be a few people in this country who have avoided the mass propaganda infection foisted on us by the press over this story that they went out of their way to distort to avoid revealing what idiots they really are. Sort of like pretending that the Stephen Colbert speech at the Washington Press Corp dinner wasn’t a hilariously funny attack on the media’s own failings, but with more serious consequences.

May 18, 2012

Could we be surprised by a slightly elevated tone of the coming campaign? See Romney moves swiftly to rule out anti-Wright ad.

By the way, does President Obama’s attempts to explain what vulture capitalism is amount to character assassination as so frequently mentioned by Romney in his remarks in the above linked article? Or are Romney’s repeated references to character assassination the real attempt at character assassination?

I report, you decide. Or is it I make innuendos and you decide?

Still May 18, 2012

Gee, this story has more legs than I thought. See The Real Super PAC Menace (Hint: It Has Nothing To Do With Jeremiah Wright Ads). Or is it more angles?

Does this mean that big donors don’t have an impact on presidential elections? Not exactly. Yesterday’s furor over Ricketts’ potential Jeremiah Wright ad proved another important point about the impact of rich individual donors in a post-Citizens United world: They don’t have to write a check to have a big impact, even on a presidential general election contest. They just have to clear their throats.

Who will N.C. marriage amendment backers target next? is an excellent commentary from McClatchy News.

Besides the commentary itself, it quotes something that I always think about and now have an opportunity to post so that I can remember these beautifully written words.

Theologian Martin Niemoller predicted what will happen then when he wrote:

First they came for the communists, and I didn’t speak out because I wasn’t a communist.

Then they came for the trade unionists, and I didn’t speak out because I wasn’t a trade unionist.

Then they came for the Jews, and I didn’t speak out because I wasn’t a Jew.

Then they came for me and there was no one left to speak out for me.

As a Jew, I am one step down on the ladder from most of the rest of you.  Maybe that is why these thoughts speak to me so loudly.

The Warren campaign has just posted Elizabeth Warren | JPMorgan and Wall Street on YouTube.

For the life of me, I cannot figure out what there is about this that the average voter cannot understand.

One other thing to think about in the campaign for the U.S. Senate seat from Massachusetts – can you think of another candidate who has the standing to be asked by all the major media to comment on the recent news about JPMorgan/Chase?

Would such a candidate, after becoming Senator, be able to muster a lot of publicity and public outcry for the type of regulation that she sees as necessary to protect us and our economy? Public demand is the only thing that will give the people in Congress the backbone to stand up to the moneyed interests that threaten to swamp their future campaigns with negative advertising.

Remember, they have the money, but we have the votes. We just need to keep shouting so that our elected officials know we are not asleep at the switch. Oh, and not easily bamboozled by the propaganda of the monied interests. As long as that propaganda seems to be working, the people in Congress feel safe to kowtow to the people with the money.

On the Sturbridge Political Watch blog, Thomas Creamer has written the article “Nightmare Budget”, Doomsday Scenarios, or a Reasoned, Rational Approach.

For the purposes of discussion, I have extracted the following from the Town of Sturbridge Finance Committee Report Fiscal Year 2013.

This proposed budget is an increase of $1,172,795, or 4.6%,over Fiscal Year 2012.

I am not privy to all the background material that, as a Town Selectman, Thomas Creamer is. However, I think I understand the point that the author is making. I have heard this type of discussion many times over in my 50 something years of adult life.  To emphasize the deleterious effects of not raising the budget, proponents of the new budget concentrate all the theoretical cuts needed by a level funded budget in the programs that the citizens want the most.  They do not go through the hard task of finding the programs the citizens need or want least in order to focus the cutting there.  Such an approach might lead to budget cuts that are hardly noticed.  Or at least that is the suspicion when you view the dire warnings.

On the one hand, the proponents of the increased budget will tell you that it is only 4.6%, and as a citizen you can surely afford that.  Yet a 4.6% cut from the proposed budget would bring dire consequences to the town.

Of course the proponents of the level funding are not above their own prediction of the dire consequences of raising spending. They might say that surely we can find 4.6% fat in the budget that should be easy to cut with no harm done.  On the other hand for the citizens of the town to have their taxes raised to cover the 4.6% would be so drastic that they would all find themselves in the poor house with nothing to eat and no roof over their head.

So I think that what Thomas Creamer is asking is for us to put aside the nonsense and try to come up with a reasoned approach about what to do.

For my part, I have no reason to doubt that the Finance Committee and the Selectmen (mostly women) have done their due diligence and put in the hard work of figuring out the best compromises between what we may want and what we can afford.  Unless someone can provide me with strong evidence that these two goups have fallen down on the job in some major way, I am inclined to go along with their recommendations.

If we have to come out in droves to attend the Town Meeting to fight for a rational approach, then that is what we should do.  I intend to do my part.  I am open to arguments to sway my vote one way or another. I just won’t participate in scare tactics for either side.  So I warn both sides, that scare tactics will not work on me.  I will bring along an ample supply of imaginary chill pills to let me hear all sides with calm rationality.

The Life of Julia is the Obama campaign’s  hypothetical example that looks at how President Obama’s policies help one woman over her lifetime – and how Mitt Romney would change her story.

According to a McClatchy opinion piece ‘Life of Julia’ is a life without ambition.  After reading this commentary, I rushed to the Obama site to see the item that this story parodies.

I commented on the McClatchy piece:

Where do you get “life without ambition”?  She starts a web design company, hires people, provides a decent wage for them.  They pay taxes, stay employed, and fund their own benefits and everyone else’s.

The web design company provides a service to their customers which helps their businesses succeed.  This is how a capitalist economy grows.

I don’t see how our economy remains competitive in the world, if Julia gets no education, starts no business, and makes a life out of an ambition to serve hamburgers at McDonald’s for the rest of her life.  How is she going to retire on that income?

Why we like Elizabeth Warren for Senate so much can all be expressed in 30 seconds.

People from across Massachusetts talk about how Elizabeth Warren will fight for working families.

Except for the people who watch old cowboy movies and root for the gunslingers who terrorize the citizens, the thought of a new sheriff in town makes people feel that it is about time.

The NRA members may feel that they can fend for themselves without the sheriff, but these days the biggest crooks don’t use guns. Today’s biggest crooks use their brains to figure out how to con people. That is why we need a smart sheriff to police them.

I thought Republicans and Conservatives prided themselves on being tough on crime. They sure haven’t acted tough on white collar crime.