There is a long list of people who are accused of unfairly profiting from our national financial crisis - Hank Paulson, John Thain, anyone who has ever worked at Goldman Sachs, AIG, Fannie Mae, and Freddie Mac. But no one ever mentions Warren Buffett. The "Oracle of Omaha," however, has arguably benefited as much or more than anyone from the US taxpayer funded bailout of the financial industry.

Consider Mr. Buffett's investment in Goldman Sachs on September 24, 2008 via his Berkshire Hathaway holding company. Goldman stock was trading at $125 when Mr. Buffett offered his cash infusion. In exchange for $5 billion, he received $5 billion worth of preferred stock. His preferred shares included a 10% dividend and warrants, which granted him the right to purchase up to an additional $5 billion in Goldman stock at $115 per share. That price was an 8% discount at the time.

One month after his initial investment, as the financial crisis worsened, Goldman Sachs was trading below $100 per share. The decline from $125 more than offset the value of Mr. Buffett's preferred share's dividend. Mr. Buffett, meanwhile, also had a stake in Wells Fargo that he had increased to over $9 billion in early 2008. Wells Fargo was also struggling with its own large loan losses, which were compounded by the bad decisions made by newly-acquired Wachovia.

Concerned about what was happening with major financial companies, the government began to take extreme measures to support nine institutions that it had deemed "too big to fail." The largest investor in two of them was Mr. Buffett. Wells Fargo received $25 billion of TARP funds. Goldman Sachs, meanwhile, got $10 billion in taxpayer money. Both companies also took advantage of FDIC guarantees to issue new debt, which was far below market rates and did not dilute the existing shareholders. These FDIC guarantees were arguably even more valuable to the recipient companies than the TARP cash injections because without them their futures were in doubt; any attempt to issue debt would have likely resulted in exorbitant interest rates and a reduction in the percentage of the company owned by existing shareholders.

The net result of these actions was a tremendous financial windfall for Mr. Buffett. Goldman Stock rebounded from a low of $52 per share, which was more than 50% below his original purchase price, to climb above $170. Wells Fargo bottomed out below $9 per share but presently trades at over $28. These developments have further enriched Mr. Buffett. Recent published estimates put his profit at over $2 billion on just the Goldman investment.

Mr. Buffett, of course, is renowned for his investing prowess and deserves credit for seeing value in these companies during a crisis. Less insightful investors and economists doubted the futures of Goldman and Wells Fargo. There is, nonetheless, what appears to be an inherent unfairness in Mr. Buffett's returns and those paid to the American taxpayers for their bailout investments. Estimates of Mr. Buffett's profit appear to be 40%+ in less than 12 months. Taxpayers, though, were less fortunate; they invested twice as much in Goldman, paid 20% less than Mr. Buffett for stock, but only received $1.1 billion in profits.

The Goldman case, surprisingly, was not an isolated incident. Mr. Buffett had investments in multiple companies that were receiving federal TARP funds. Publicly disclosed stock holdings show more than 30% of his investments were in companies bailed out by TARP. He also enjoyed the benefit of having his large holdings in these businesses added to the federal TARP list and that relieved them from the burden of having to survive on their own merits in a bad economy, which was the fate of less privileged firms like Lehman Brothers, Washington Mutual, Wachovia and Bear Stearns.

No one is suggesting Mr. Buffett or his firm Berkshire Hathaway have acted unethically. His character and judgment have been above reproach in the investment community. Regardless, there is little doubt that if the exact scenario above had played out with the primary investor being not the affable Mr. Buffett, but instead a multi-billion dollar hedge fund from Greenwich or a state-owned investment fund from China, there would have been immediate Congressional hearings and demands that "profits reaped from a US Taxpayer bailout" be subjected to special taxes or other claw backs. The unasked question is why no one has ever complained about Mr. Buffett's multi-billion dollar bonus provided courtesy of the US taxpayers.

And that's a question worth asking.

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Willem Buiter has just taken on a new role at Citigroup. The news of Willem Buiter's role as Chief Economist at Citigroup comes via DealBook at the New York Times below. Afterward, I have some comments about Dubai contextualizing reluctance by the government to backstop Dubai World - something Buiter warns against.

Citigroup said on Monday that it has hired Willem Buiter, a professor at the London School of Economics, as its chief economist, effective January 2010.

Mr. Buiter will replace Lewis Alexander in Citi's top economics post, in which he will head the firm's economics research unit and join the management team of Citigroup's Citi Investment Analysis and Research group.

"We are delighted that we have been able to attract a thought leader of Willem's experience and track record to our global platform," Andrew Pitt, the global head of Citi Investment Research & Analysis, said in a statement.

Currently a professor of political economy at the L.S.E., a well-known economics commentator and blogger and a consultant to Goldman Sachs, Mr. Buiter previously held posts at the European Bank for Reconstruction & Development and the Monetary Policy Committee of the Bank of New England.

"As one of the world's most distinguished macroeconomists, Willem's deep knowledge of global markets and economies, and emerging markets economies in particular, will be invaluable to our clients," Hamid Biglari, Citi vice chairman, said in a statement.

I see this as a huge positive for Citi because it demonstrates that Citi is looking for fresh perspectives outside the mainstream. Buiter has been one of the finance bloggers most vocal in decrying the policies adopted before and during the panic in the global financial system.

Buiter correctly anticipated the potential for collapse in the Icelandic banking system. Since then he has warned other small open countries like Ireland and Dubai not to follow in Iceland's footsteps in providing sweeping government backstops to bankrupt troubled institutions. This is what he terms the sovereign debt delusion (see "Too big to rescue" for more on this).

His most recent blog entry pointed out the relative insignificance of Dubai in the global system but it warns of the potential for sovereign default -especially in the Eurozone. He agrees with Credit Writedowns' assertion that the US and the UK, as sovereigns that hold debt in their own currencies, are likely to try the inflationary route to mitigate the mounting debt burdens (see "Inflation: The strategy that dare not state its name").

The massive build-up of sovereign debt as a result of the financial crisis and especially as a result of the severe contraction that followed the crisis, makes it all but inevitable that the final chapter of the crisis and its aftermath will involve sovereign default, perhaps dressed up as sovereign debt restructuring or even debt deferral. The Dubai World and Nakheel debt standstill and possible default is of systemic significance only because it may well be a harbinger of future sovereign financial distress, in Dubai and elsewhere.

From Dubai to Iceland, Ireland, Greece, Hungary, Italy, Portugal, Spain, Japan, France, the UK and the USA, the sovereign debt burdens have been at current levels during peacetime only on the way down from even higher public debt burdens incurred during wars.  Watching the public debt to GDP ratios rise to levels likely to reach or exceed 100 percent of GDP by 2014 is deeply worrying, especially with structural primary (non-interest) deficits as high as they are.  The political economy of fiscal burden sharing, inside nations and between nations, will be a major field of enquiry for economists and political scientists during the years to come. I am pessimistic in that regard about countries characterised by deep polarisation and political gridlock.  This includes nations as different as Greece and the USA.

It is clear that nations whose public debt is mainly denominated in domestic currency and whose central bank is either not very independent or can be make dependent by the government of the day are likely to choose inflation and exchange rate depreciation over default as a way out of fiscal-financial unsustainability.  That category would include the USA and, to a lesser extent, the UK.  Because the ECB faces 16 national governments and national ministries of finance, the power and independence of the ECB are much greater vis-a-vis any Euro Area member state than the power and independence of any central bank facing a single national government and Treasury.  That is regardless of the formal independence criteria laid down in laws, treaties or constitutions.

The practical implication of this is that the ECB will not monetise the government debt and deficits of small European Area member states.  Only Germany can really push the ECB around, partly for historical reasons, partly because it is the largest and most powerful Euro Area and EU member state and partly because of the geographic reality that the ECB is on its territory - in the final analysis the German government can order a siege of the Eurotower ...

For small peripheral European nations, the threat of sovereign insolvency is therefore a real one, unless EU fiscal solidarity can be relied upon to bail them out.  When Ireland was about to be swept away by a wave of global financial mistrust triggered by the Irish government's decision to guarantee effectively all liabilities of its banks, the then German Finance Minister Steinbruck made the amazing statement (which he obviously had not checked with his coalition partners, his Chancellor or his voters) that the Eurozone countries would not let one of their own go into default.

The year that has passed since then has made this implicit commitment to a Eurozone, let alone an EU cross-border sovereign bail-out rather less credible.  All EU sovereigns are, to varying degrees, in fiscal dire straits.  We may well see in the next few years the first sovereign default by an old EU15 country since Germany defaulted on its debt in 1948.  If the travails of Dubai wake us up to that possibility, they will have done some good.  Sovereign defaults are not acts of God.  They are the result of choices.  If we continue to play the political game in a business-as-usual mode, there could be quite widespread sovereign debt restructuring throughout the advanced industrial world.  If we grow up, we can avoid the worst.

I agree with Buiter's sentiments. The best post I wrote on this topic was in February called "The European problem." Despite asset market increases, the situation remains critical. Ireland, Greece, Spain, and Portugal are the clearest examples of countries which are storing up major trouble - and without the currency escape hatch - which makes these countries more akin to states like California, Michigan, or New York than the U.S. Sovereign credit ratings have been cut repeatedly in Ireland, Portugal and Greece.  Back in March, everyone was talking about this. But, somehow these concerns have faded from view as equity markets have risen. The exogenous shock in Dubai brought the reality back into the spotlight.

The same is true in the Baltics despite their sovereign currencies because of the Euro currency peg. Here too credit ratings are being cut. This is the reason I continue to be more concerned about Eastern Europe than I am about Dubai. Yes, there could be a butterfly effect with Dubai here but contagion risk is more acute in Eastern Europe where large banks have much greater exposure than in Dubai. I see Dubai as Buiter does - a tempest in a tea pot; the real action is in Europe.

So, hats off to Citigroup for getting Buiter onboard. His blog at the Financial Times, aptly titled Mavercon because of the unconventional ideas he often floats, demonstrates he will bring some critical new thinking to the organization.

Source

Citigroup Hires Buiter as New Chief Economist - DealBook

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Charlie Gasparino, CNBC host and author of "The Sellout: How Three Decades of Wall Street Greed and Government Mismanagement Destroyed the Global Financial System," told Howard Kurtz Sunday that the press shouldn't bear the blame for the financial crisis.

"Here's my problem with blaming the press," Gasparino said during the "Reliable Sources" hour of CNN's "State of the Union." "Now, you know, if you look at a bubble, there's a degree of mass hysteria going on. And if you look at what was going on -- and this is the last 10, 20 years -- you know, there weren't very many people on the inside that thought something was wrong. You know, think about major scandals, Watergate, for instance, right? There was somebody on the inside that saw something wrong. What's interesting about this, this bubble, is that a lot of people on the inside didn't think anything was wrong."

Last year, Gasparino told Kurtz of himself and his counterparts in the financial media, "We all failed."

Watch:

Stocks in Dubai plunged more than 7% Monday, the first day of trading after the Persian Gulf state's debt problems roiled financial markets around the world.

The decline follows last week's news of a conglomerate's struggle with its huge debt. Asian markets are rebounding but European markets fall.

Dubai's main stock exchange dropped more than 7% today and Abu Dhabi markets slid more than 8% on the first day of trading in the United Arab Emirates since officials went public that conglomerate Dubai World was struggling with its $60 billion in debts.

It was the opportunity to drive yet another futuristic car, Chevrolet's Volt, this effort by General Motors a magnificent piece of work, especially its gas/electric powertrain.

Smooth as silk, so quiet Rolls-Royce has competition for their Ghost models, Volt could be a remarkable car which captures the attention of the American public; but getting people into Chevrolet showrooms is the real trick, isn't it? If they don't visit the dealer, they can't buy the car.

Volt won't go on-sale until November, 2010, but Sunday morning I drove the pre-production version of the car and spent well over an hour with Volt's Chief Engineer, Andrew Farah. Farah's been with the Volt almost since its inception.
Near production-ready 2010 (it might ultimately get a 2011 model year designation) Chevrolet Volt

We didn't learn too much more about the Volt that we didn't already know, but the chance to drive the real thing spoke much about the car.

So let's take a drive in a Chevy Volt.

Outside, it's a fairly conventional looking five-door hatchback. GM doesn't want to scare any potential buyers away by depending on only the wind tunnel for all the design touches. Design being purely subjective, and although the car expectedly doesn't look much like (or half as interesting as) the Volt concept, GM has hit what many might think a happy medium between too conservative and too far-out.
Volt's 240-volt receptacle; there are also a 110-volt plug and a gasoline filler

There are three filler doors on Volt: one is for gasoline, one the receptacle for its 240-volt electric line (GM expects Volt buyers to install the charger at home) and there's a plug for a conventional 110 outlet.

The grille is mostly covered by plastic strips, and the engine/motor get their cooling air, like most modern cars, from under the car. Farah pointed out there are several "heat exchangers" (radiators) in the front of the engine compartment, including one each for the gasoline engine and electric motor, one for the air conditioning system, and more.
Volt's rear 3/4 view

Inside, the front seats offer pretty good legroom and headroom; the rear is a different story. While there's a nice amount of rear headroom, legroom is at a premium. I'm about 5'4" and wasn't comfortable in the Volt's rear seat.

Inside, there's more plastic than you can shake a swizzle stick at, but that's the kind of thing which could change before production begins. Unusual designs on the front door inserts are eye-catching but, frankly, a little weird. It's probably the most radical style touch on the car.

Unlike Nissan's Leaf, which has its batteries under the floor of the car giving passengers a flat floor, there's a high and wide center tunnel running between Volt's left- and right-side seats, front and rear, which is part of the battery system (which weighs about 400 pounds; Farah wouldn't give me a total Volt weight figure, but around 3,700 pounds wouldn't be far off).
Instrument panel (computer screen, left) and center stack with nav, rear view and audio and HVAC monitoring and controls and shift lever

There's a computer screen instrument panel in front of the driver, a sophisticated unit which appears to be simple and easy to understand. The center stack contains another screen for the nav system (optional, as heated seats will be, too), rear camera and audio and HVAC status, plus controls for sound and interior air temperature.

Push the "start" button and Volt springs into life, though you might now know it because you won't hear or feel anything. A high-concept center shifter helps you pick your gear. All in all, it's an intuitive area for the driver, and GM drivers especially will feel right at home in Volt. It's a mix of old and new switchgear and screens.

The car is quiet, smooth and fast off the line (electric motors have all their torque at start-up, unlike gas engines which need time to build power). There's a bit more understeer (what racers call "push") than I would like; you except some push in any front-drive car or truck, but it's more pronounced in Volt. The most pronounced noise in the cabin was tire rumble. Farah said that he's not satisfied either, and GM is still working out a final choice for Volt's tires.

There's good driver visibility front, rear and to the sides. Getting in and out of the four-door is easy and naturally it has all the requisite airbags and other expected safety equipment. One more safety item: pull the turn signal lever and a horn gives two quick "toots" to warn pedestrians the car is around. By the time Volt gets to market, there will be a standardized, mandated sound for all "quiet" cars and I can't see the government (or the lawyers) allowing an active system rather than passive.

It goes, runs and stops, fitting most peoples' requirements for transportation.
Yours truly, driving the Volt

Pre-production vehicles like I drove come after the concept and then the prototype stages; the car I drove might look a bit different inside and out when it does go on-sale. The powertrain and drive system, Andrew Farah told me, are pretty much set in stone and almost ready for the production versions. Farah told me that about 80 pre-production cars are being built for media evaluations, demonstrations for governments and utility companies and four of them will be the Volts you'll see at auto shows. Also, we ignore fit-and-finish in pre-production cars, so no comment on Volt's F&F inside and out; the final production cars are always better

The cars are built on a "test" assembly line in Hamtramck, MI, a line being developed as the cars are being put together during this pre-production period. This is how and when they learn to build the cars and shape the assembly line for the actual production cars.

I've driven almost all the gas/electric hybrids out there and even Honda's FCX Clarity hydrogen fuel cell sedan, and all of them are varying degrees of remarkable in their acceleration, interior quiet and, of course, high mileage.
Andrew Farah, Volt's chief engineer, with his baby

In the hybrids we're used to seeing, the car runs mostly on the gasoline engine with assists from the electric motor; Volt turns this around by making the electric motor the only drive system. A 1.4 liter 4-cylinder gas engine, which has no connection to the front wheels, is used to keep the batteries charged during the drive. This also means if there is a major failure in the battery or electric drive system, the gasoline engine is useless for keeping the car moving. So you can theoretically be stranded in a four-cylinder gasoline engine car with a full tank of fuel.

What's the mileage with Volt? GM was ridiculed a few months ago for saying they expected 230 mpg with Volt. That's their story, and they seem to be sticking with it.

Andrew Farah told me, when I asked him two times during the day about the size of the gas tank, that "the fuel tank is large enough to produce a mileage figure of about 340 miles per fill-up". The 40 miles can be had on electric only, then the gas engine kicks-in to keep the batteries charged at a pre-set level so Volt's electric motor can continue to run.

He told me that the actual size of the gas tank, how many gallons it will hold, is still an in-house secret. However, announcements about Volt will be made at the Los Angeles Auto Show's media days this Wednesday and Thursday, and perhaps we'll find out the fuel tank size then.

That most-important announcement -- of pricing -- may or may not come this week. But Farah didn't flinch when I asked about the $40,000 figure which has been floating around for more than a year; he pointed-out that there is a $7,000 tax credit available, and with state and local incentives, pricing might drop below the low-$30's.
Pre-production Volt being put through its paces in a Dodger Stadium parking lot

GM had set-up a coned-off "track", maybe ½-mile long, in a parking lot at Dodger Stadium, similar to the "race track" on the Jay Leno Show. On the Sunday after Thanksgiving, our Southern California weather was bright, clear and 76 degrees in downtown LA. GM certainly got the best possible showcase in terms of weather and the famed Dodger Stadium.

Interestingly, GM officials have generally referred to the Volt as an "extended-range hybrid" when the car was first announced. Now that's changed: it's being tagged as an "extended-range electric car". Trying to have the public think the Volt is all-electric, like Nissan's upcoming Leaf? Could be, but I don't think Volt should be referred to in any way as an EV; its on-board gasoline engine, albeit as small as it is, makes Volt a gas /electric hybrid (or maybe an electric/gas hybrid).

And they wouldn't let us take pictures of the engine compartment. Still not ready for its close-up; not yet as clean and tidy as GM would prefer

More in a future post this week after the Volt announcements at the LA Auto Show.

Now does it sound like the Volt is for you?

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In his epic autobiography, the great Nelson Mandela used the metaphor of the "long walk" to describe his decades-old struggle against apartheid and minority rule in South Africa. In Long Walk to Freedom, Mandela described, among other things, his labor of love trying to steer his nation away from racial and fratricidal war by using dialogue and negotiation to achieve national reconciliation and build a multiracial, multiparty system. His long, hard walk to freedom across the veldt, the cities and townships eventually led South Africans to trade in their fears and tears for hope and faith in a free South Africa. In the process, Mandela became a formidable moral force and an exemplary teacher in the fight for human rights and racial equality throughout the world.

In the annual "Great Ethiopian Run" that was held last week in Addis Abeba, one can see a fitting metaphor for a long and hard run for freedom in Ethiopia. The organizers and sponsors may have seen a clever money making gimmick in the event, but for the Ethiopian runners it was their one and only chance a year to collectively breathe the fresh air of freedom. It was their annual festival and gathering of peaceful mass protest for freedom and justice, and against tyranny and dictatorship in Ethiopia. On the day of the Great Run, Ethiopians who could afford to pay at least 50 birr got to say out loud what has been burdening their hearts, distressing their minds, agonizing their souls and searing every fiber in their bodies for the past year. The assembled crowd of 35,000 runners did not mind paying. Each one of them knew the fresh air of freedom, however fleeting and momentary, is priceless.

In the "Great Ethiopian Run", Ethiopians kept on running down the streets and up the boulevards of the capital. They ran for their own freedom, and the freedom of their countrymen and women. They ran for the true champion of Ethiopian freedom, Birtukan Midekssa. In a deafening crescendo of defiance and daring, they cried out: "Free Birtukan! Birtukan Mandela! Birtukan, the heroine!" Birtukan probably heard them chained in the bowels of Kality prison just on the outskirts of town. They called for the release of all political prisoners. The river of humanity that flash-flooded the city streets on the 10-kilometer stretch denounced the perpetrators of injustice. Thumping their way past the "Federal High Court", they proclaimed, "In this temple of justice, there is no justice." Rolling past the "Ministry of Justice", they charged, "There is no justice in the ministry of justice." Rumbling past the "Ministry of Defense", they scoffed: "There are no men of courage in this building to defend the people." The Great Ethiopian Run proved to be fundamentally an act of mass civil disobedience thinly disguised as a running event; and to the great credit and dignity of the runners, there was not a single incident of violence or breach of the peace.

The multitudes were not just running for freedom, they were also running away from tyranny and dictatorship, despair and hopelessness, and from their daily life of indignity and humiliation under a ruthless dictatorship. Sadly, they were all running in circles in the prison nation Ethiopia has become. But as we have learned from President Mandela, to achieve freedom one must take a long hard walk. For Ethiopians, it will require much more-- a long hard run; and there is much Ethiopians runners can learn from one South African walker. Mandela said, "You may succeed in delaying, but never in preventing the transition of South Africa to a democracy." The dictators in Ethiopia may temporarily thwart genuine multiparty democracy, but they can never, never prevent its ultimate triumph. Mandela defiantly told the masters of Apartheid: "Any man that tries to rob me of my dignity will lose." The dictators in Ethiopia may temporarily succeed in robbing us of our dignity and human rights, but as long as we remain truthful, principled, fair and irrevocably committed to the cause of freedom and democracy, we shall prevail; and they shall find their rightful place in the dustbin of history.

On his long walk to freedom, Mandela discovered the defining truth about tyrants and dictators: "A man who takes away another man's freedom is a prisoner of hatred." The wardens of Prison Nation Ethiopia are prisoners of hatred that has churned and boiled in their hearts, minds and souls for their entire lives. They are consumed by it and driven to genocidal brutality. They deserve our pity for they can not help themselves. But we can help them, by showing them the truth about their evil ways and the path out of the misery of hatred to the ecstasy of brotherly and sisterly love. Mandela taught us that "The victory of democracy in South Africa is the common achievement of all humanity." If we keep on running for freedom, we can make the triumph of democracy in Ethiopia the common achievement of all of Africa. As Ghana has transitioned from a military dictatorship to a genuine multiparty democracy and South Africa succeeded in establishing a tolerant multiracial society, so can Ethiopia forge a real multiparty system, free of the poison of ethnic politics, and one day to become the envy of Africa.

The 10-kilometer run is just a down payment for a long and difficult Marathon for Freedom. That is why each one of us must develop the defining quality of the marathon runner: Endurance. As she pounds the pavement for miles, the distance runner knows the route to the finish line is long, grueling and hard. But she is prepared to give it her best and endure for the long haul. The marathon runner does not say, "It is too long, too difficult... I could never do it." He maintains a winner's state of mind and never gives into self-pity and defeatism. He does not use his energy in bursts of speed, but in sustained steps and calculated spurts. The marathon runner has a plan to win and paces his every step along the way to achieve his goal. The distance runner does not allow herself to be overwhelmed by the miles she has yet to cover. She is committed and focused on the next milestone, the next hill and the next bend in the road until she reaches the finish line. Some of us would much prefer the race to be a quick sprint to the 10-kilometer finish line. We are discouraged and dispirited by the very thought of a long distance run. We are tired and ready to give up before taking the first step. But the Marathon to Freedom does not have a finish line. As Mandela said, "After climbing a great hill, one only finds that there are many more hills to climb."

We can't sit idly by and expect freedom to run to us. As Dr. Martin Luther King said, "Change does not roll in on the wheels of inevitability, but comes through continuous struggle. And so we must straighten our backs and work for our freedom. A man can't ride you unless your back is bent." It could also be said that a man can't ride your back if you keep on running and chase after your freedom.

Ethiopia's great distance runners -- Abebe Bikila, Mamo Wolde, Mirus Yifter, Haile Gebreselassie, Kenenisa Bekele, Elfnesh Alemu, Fatuma Roba, Derartu Tulu and Koreni Jelila and Tilahun Regassa and many others -- gave their very best for the glory of Ethiopia. We are so proud of them! It is now our turn to run and win the Great Ethiopian Run for Freedom, Democracy and Human Rights. Let us not be fooled by their 10-kilometer run. Our course will be much more challenging; we will have to climb the great hills and descend the treacherous canyons and gorges and crisscross the low deserts and the highlands. And those who can't or choose not to run with us should ready themselves to take a long walk...

It is now clear that left alone the current economic recovery will not create substantial additional jobs any time soon. The scheduling a December White House Conference on Jobs would appear to signal recognition by the Administration that economic stimulus alone is not sufficient. We must find mechanisms that actually create jobs. And the more jobs created, the sooner and at the lowest cost per job, the better.

This post will describe three mechanisms that could be used now to create jobs now without busting the budget and without creating new bureaucracies. Subsequent posts will provide more details concerning each mechanism.

One: Replicate on a national basis a temporary jobs program similar to one underway in Los Angeles County. Using Stimulus money, our County has designed a program to create 10,000 new jobs paying $10 per hour for forty hours per week. The mechanism being used is the County's Transitional Subsidized Employment (TSE) program for persons on CalWORKs, California's TANF program for persons who are employable. Participants will be on the payroll of a County contractor and will be placed into subsidized jobs in all sectors of the economy (non-profit (including faith-based), for profit and governmental) and will be matched with jobs that complement their employment goals. The "host" employer must provide supervision equal to 20% of the wage cost and create jobs that do not displace existing employees. Because this program utilizes existing employers who are supplementing their work forces in order to better serve their clients or customers, job creation can be rapid. Because most of the participants would otherwise be receiving a TANF stipend, the incremental cost of creating such a job is relatively low.

Although the incremental costs would vary by state and family size, in Los Angeles, where the TANF stipend averages approximately $700 per month, the net additional out of pocket cost of this program is modest: Under $16,000 per year per participant in California. The savings would be even greater if the person offered TSE would otherwise be receiving extended unemployment insurance.

If implemented nation-wide, thousands of Americans could trade welfare for a job and would acquire on-the-job training, work skills, the dignity of a job and, for a job well done, a recommendation.

Two: Restructure the existing federal programs that are designed to deal with unemployment and poverty to create programs focused on providing jobs. In this way, today's welfare (and extended unemployment) programs can be converted into tomorrow's jobs program. In budgeting for such a program, the CBO should realize that for every dollar spent to provide a job, there are collateral savings with regard to education, criminal justice, unemployment insurance, food stamps and housing. A recent study by LA County found that approximately $3.50 was saved for every dollar spent to relieve homelessness through rental subsidies for those on general relief. While the return from an employment program would be less, there would nevertheless be substantial aggregate long term savings achieved if our Nation would replace its welfare, extended unemployment and related programs with programs providing jobs, a paycheck and dignity.

The experience of the New Deal is instructive. Cash welfare payments at the outset of the New Deal were intended only as temporizing action until actual employment could be provided. Initially, it was easier then--as it is now--to pay money than provide jobs. But money payments were to cease--and did cease--as soon as job projects could be organized. We should be emulating this model rather than continually extending unemployment insurance or providing welfare to those who could work.

Three: In Los Angeles recently, the transit authority let a bid for light rail cars. Although one of the bidders promised to build a factory in Los Angeles and create hundreds of high paying jobs, these factors were not permitted to be considered. But is not the number of jobs to be created entirely relevant--especially when the Federal Government is expending so much to create jobs and there is a real and quantifiable cost to leaving a person unemployed.

To ensure that the federal government as a whole pays the lowest cost, the bidding procedures on infrastructure (and other) projects should be modified to provide a credit for each job created with such credits used only for the purposes of determining the true lowest cost bidder. The credit would be stipulated in the bidding documents, would be calculated for each region's unemployment and would be a measure of the estimated cost to the federal government of an unemployed person in that region (from unemployment insurance, particularly when extended at 100% federal cost, welfare, taxes lost, food stamps and other safety net programs).

Although the cost of a particular project could be somewhat higher to the contracting agency, the federal government as a whole would experience lower costs because the greater employment would result in reduced costs in other federal programs.

Our Nation would benefit from the improved infrastructure and lower total cost while at the same time--maximizing the number of people employed.

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In response to Iran's defiance of the International Nuclear Agency to desist its development, open its nuclear facilities to inspection and to freeze its uranium enrichment, the United Nations took a fateful step. The board of the U.N. nuclear agency voted overwhelmingly to demand that Iran stop building its newly revealed plant and open it to inspection forthwith. Exacerbating the tensions at hand, Iran announced plans to build a further 10 industrial-scale enrichment facilities.

The game changer in this vote was that Russia and China joined the U.S. and its allies in the majority. With Russia and China on board, swift and immediate action becomes possible.

Some 80% of Iran's export earnings come from oil. Oil sale revenues are the paymaster of more than 50% of the government's budget, including the salaries and financing of the Mullah's goon brigades brutally oppressing Iran's brave citizenry.

Iran's oil exports have been ranging in the vicinity of 2.1 million barrels a day, with Japan and China as Iran's largest buyers, each pulling some 500,000 bbls /day. Other major destinations for Iranian oil are India (375 mm/bbls) and South Korea (250 mm/bbls) with South Africa, Italy, France, Spain and Greece all with over 100mm bbls/day each.

An entente between Russia, China, the United States and some friendly persuasion by Saudi Arabia could bring this offtake -- shipments that are the lifeblood of Iran's renegade regime -- to a halt almost overnight.

Firstly, the world is awash with oil. Land storage is filled to capacity and hundreds of millions of barrels of oil are being held in supertankers idling at anchor around the world. A UN sponsored international embargo of Iran's oil would have virtually no impact on the world's immediate day to day oil supply needs.

Going further forward, Saudi Arabia has sitting idle some 4.5 million barrels of oil production capacity that could be brought on stream in very short order. 4.5 million barrels per day is double the shortfall that would result from a 100% embargo of Iran's oil exports. Russia, too, has spare capacity that could be made available. We in the United States have hundreds, if not thousands, of marginal shut in wells and of course our Strategic Petroleum Reserve (SPR) of more than 700 million barrels. The SPR alone could offset the Iranian export shortfall for an entire year. Though there would be little need to dedicate any significant portion of the SPR to the Iranian embargo program, some gesture of solidarity and announced availability of our SPR to other nations participating in the boycott would probably go a very long way toward achieving unanimity of action. (Regardless of the downside of using the SPR, it is an alternative immeasurably better than the open hostilities that might otherwise ensue. To paraphrase, better oil than blood!)

On another matter related to the Iran imbroglio which now, given Iran's intransigence, calls for immediate response, and on which the United States can act unilaterally. The issue is the matter of gasoline exports from Venezuela to Iran (It should be noted that Venezuela voted against the U.N. resolution to censure Iran). In September, Venezuela entered into an agreement with Iran to supply 20,000 barrels of petrol per day (840,000 gallons of gasoline), starting in October. Iran, while bountiful in oil, does not have the refining capacity to cover its domestic needs for gasoline and is heavily dependent on imports. The United States, as a matter of national policy, is responding to Iran's nuclear stonewalling by actively enlisting world producers to curb gasoline exports to Iran. Bloomberg reported that gasoline export sanctions were passed on October 28 by the House Foreign Affairs Committee.

And yet, in spite of the government's stated policy, a major gap is being tolerated. If one considers Venezuela's national oil company, Petroleos de Venezuela, S.A. (PDV) as a single national entity, one could readily conclude that Venezuela is shipping directly, and certainly indirectly, American gasoline to Iran.

Gasoline is in large measure a fungible commodity. Therefore, where it is made is secondary to who owns it. And Venezuela's PDV's wholly owned American subsidiary, U.S. based Citgo Refinery Corporation (CITGO) has refinery locations in Lake Charles, Louisiana; Corpus Christie, Texas; and Lemont, Illinois. So the question becomes not is gasoline being shipped from these locations to Iran, but rather because of the Venezuelan government's (PDV's) farflung refining capabilities, from what location have shipments been enabled to Iran because of PDV's available capacity in the American heartland.

In spirit and in fact it could be construed as a breach of American policy and law. What remedies are available? Perhaps we can learn from Venezuela itself. We could learn from Venezuela's expropriation of the Venezuelan assets of oil service companies such as the Williams Companies, or their decision to simply not pay the bills of companies such as Helmerich and Payne or Schlumberger, who are owed hundreds of millions. Or by simply expropriating drilling rigs and terminals servicing the oil industry. Or by unilaterally amending royalty arrangements, tantamount to nationalization, and in essence canceling agreements with the likes of Exxon, Chevron, and Total of France.

Mr. Chavez's proclivities, however, are not limited to oil and its attendants. He is not shy about going further afield by seizing US food giant Cargill's Venezuelan pasta plant after having simply expropriated their Venezuelan rice mill. But these are but a few examples of how it's done in Venezuela. Maybe we can learn something from Hugo after all?

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There are two kinds of people in this world that go around beardless--boys and women--and I am neither one."- - Greek saying

A woman with a beard looks like a man. A man without a beard looks like a woman. - Afghan saying

Please set aside notions of a carnivalesque bearded woman, for this is not a piece on female facial hair and its removal. But it is about beards, and how my preference for seeing my husband with one has been anything but a private matter.

My good friend S and I were talking about when she first met her now husband on a set-up. I asked if she liked him immediately and she said quite honestly, "No, not exactly. But there's a lot you can do for guys. I had him color the gray parts of his hair and had him grow facial hair so that the engagement pictures turned out the way I wanted them too." Another friend and I had talked in general terms about guys we knew and their post-wedding makeovers. This friend would cite various male acquaintances of ours whose makeovers included more post-nuptial 'groomliness' -- attention to wardrobe, hair and overall style. Eschewing for now the obviously more important virtues like the cultivation of patience, compromise and sacrifice that occur afterwards in (good) marriages, the idea of a subtle male makeover was normalized for me. And while certainly not the hallmark of trend and style, friends have labeled me an aesthete, so just like my husband casually categorizes people in terms of the indie-bands they like, I tend to describe people based on their predilections for/against high-waisted pants and the circumference of their cuffs, for example. And so I had no misgivings about asking my then-fiance to grow a beard so I could see what he looked like. It turned out I liked what I saw. The beard added depth to his face. It added masculinity. And the simple fact of the matter was, I liked it.

The matter, however, has not been simple. While my husband shrugged off my aesthetic preference as an excuse for him to stop shaving, hordes of other people in this Pakistani society (where advice giving is nearly a national pastime) had daily comments to make, especially as the wedding became imminent. While many at his law firm had grown used to his periodic unshavenliness, all were expecting him to shave, especially for me. 'Doesn't Summer hate your beard?' was the most common of the cliched comments, based on the very Pakistani assumption that girls prefer their men clean-shaven and pretty, looking the model of English gentlemen. He would reply that Summer in fact, requested the beard, and that, apparently, prompted more incredulous looks and comments, my preferences apparently (but not for the first time) challenging clean-cut categories about how aesthetics dictate class and education. Perhaps the biggest cliche since 'Anyone but Bush' that I've encountered has been hearing people tell him 'Your beard makes you look like a [insert Taliban, mullah, religious fundamentalist (itself a tired and trite term)].'

So deeply entrenched were the equations of beard = Taliban that even my once eager-to-accommodate fiance started to lament his beard. And while one can perhaps excuse elder uncles and senior family men for their adherence to old-world British notions of 'acceptable' and 'unacceptable' as remnants of their desperately trying to fit in a post-colonial society, what surprised me were the reactions of some of his friends -- young Pakistani men who would take him aside and say, 'Hey man, I bet you can't wait to shave that beard and go back to normal.' All of these friends went to college in America, and some even went to prep schools. Perhaps the onus of trying to fit in gave way to attitudes about shaving and beards.

And so, the night before the wedding, where I had fallen spell to the bridal concern for how my own wedding pictures would turn out, I found myself on the phone with my soon-to-be husband, who was relaying how his uncles had repeatedly said 'So, you're going to shave tomorrow, right?' and was seriously considering giving in to the peer pressure. It took every ounce of my newly-cultivated balance of feminine insistence and casual I-don't-really-care-it's-your-life to guarantee the beard's attendance at our wedding.

And yet... the problem continued. At every destination on our East Asia honeymoon, people asked if we were Arab. While that pleased my Arab-o-phile tendencies, my husband became increasingly irritated for not being seen as a Pakistani. 'Maybe it's because of me,' I would tell him. As they Arabs say, the more time you spend with the Arabs, the more you resemble them (fine by me -- I spent a lot of time in Lebanon). But no, it was blamed on the beard. This was only exacerbated in Bangkok, where tribes of Arabs shifted between trips to the malls and hanging out in the InterContinental hotel lobby. One night an unfortunate beard trimming experiment led to a hole in the famous beard, prompting him to shave the rest of it off. And I returned to find I had a new husband.

It is said that babies and toddlers have a hard time dealing with fathers and close male relatives who suddenly shave. Apparently they don't recognize their fathers after shaving, and the sudden appearance of an unrecognizeable male can be quite traumatic for these young ones. A few parenting websites recommend that fathers shave in front of their babies and children, so that they can see the process of hair removal, thereby alleviating some of the trauma. And while definitely not a baby, I can personally attest to the trauma of instant beard removal. There's an old joke that says 'Men marry one woman and wake up next to another.' Well that's how I felt. In fact, I felt like I was cheating on my husband, because this soft-faced man even smelled different without the scruff. The beard's regrowth was not even discussed -- my husband hasn't touched a razor since. What was discussed were scenarios in which the beard might disappear again. My husband's most vehement insistence was of the instance when he'd travel to the U.S. embassy in Islamabad for his visa application to accompany me back home to California. "Having a beard will severely harm my chances of getting a U.S. visa," he told me solemnly. "Everyone just associates beards with religion, and if you want me to come with you, I'll have to shave it off."

This has has made me quite curious about the history of beards in a non-religious sense, especially about when and why clean shavenliness became 'normal.' A trip to Wikipedia has enlightened me. And although most of your internet connections are undoubtedly faster than mine, I shall recount the more interesting findings. The answer, it seems, lies with the Romans -- and later their metaphorical successors, Europe and corporate America.

According to Wikipedia:

Prior to the Romans the highest ranking Ancient Egyptians grew hair on their chins which was often dyed or hennaed (reddish brown) and sometimes plaited with interwoven gold thread. A metal false beard, or postiche, which was a sign of sovereignty, was worn by queens as well as kings... a fashion existing from about 3000 to 1580 BC.

Mesopotamian civilizations (Assyrian, Babylonian, Chaldean, Median and ancient Persian) devoted great care to oiling and dressing their beards, using tongs and curling irons to create elaborate ringlets and tiered patterrns. (note: perhaps the modern equivalent could include straightening irons?)

The Persians were fond of long beards. In Olearius' Travels, a King of Persia commands his steward's head to be cut off, and on its being brought to him, remarks, 'what a pity it was, that a man possessing such fine mustachios, should have been executed,' but he adds, 'Ah! it was your own fault.'

In ancient India, the beard was allowed to grow long, a symbol of dignity and of wisdom. The nations in the east generally treated their beards with great care and veneration, and the punishment for licentiousness and adultery was to have the beard of the offending parties publicly cut off. They had such a sacred regard for the preservation of their beards that a man might pledge it for the payment of a debt.

The ancient Greeks regarded the beard as a badge or a sign of virility which it was a disgrace to be without; and in the Homeric time it even had a sanctity as among the Jews, so that a common form of entreaty was to touch the beard of the person addressed. It was only shaven as a sign of mourning, though in this case it was instead often left untrimmed. A smooth face was regarded as a sign of effeminacy.

Around 299 BC, after a barber was brought to Rome, most Romans began shaving; being clean-shaven became a sign of being Roman and nor Greek.

And as the Romans are the metaphorical predecessors of the modern-day empire, so they seem to be in their dictation of aesthetic standards.

Beards and the Armed Forces

Again according to Wikipedia, following WW I beards fell out of vogue. One of the main theories for this was the use of chemical weapons that allegedly necessitated soliders to shave to ensure the proper sealing of gas masks. Another interesting fact is that WW I recruitment involved a major migration of men from rural to urban areas. 'The rural lives of some of these bearded men included the "Saturday Night Bath" as a reality rather than a humorism. The sudden concentration of recruits in crowded army induction centers brought with it disease, including head lice. Remedial action was taken by immediately shaving the faces and cutting the hair of all inductees upon their arrival.'

A close friend from Iraq once took out pictures from his younger days in Saddam's Iraq. This friend was a refugee in Syria, but having been part of the intellectual class in Baghdad and a respected journalist (writing under a nom de plume for safety), he was meticulously careful about appearing clean-shaven in Damascus, his attempt at appearing professional and moneyed -- and quite separate from the mass of Iraqis of all cultural cross-sections finding refuge in Syria. Given this impeccable grooming, I was surprised to see him in these pictures, mustachioed. He explained that while he had skipped Iraq's mandatory military service, he had to appear that he had served, and thus grew a mustache to look like he had just completed his service. "Those were some of the worst years of my life," he lamented, referring to the forced mustache, not the tyranny of the Iraqi military police. Interestingly, the new Iraqi armed forces (outfitted in American military fatigues) had some problems with shaving. So entrenched was the affiliation of army with mustache, that apparently the U.S. trainers had to discuss the 'virtues' of clean-shavenliness in the armed forces.

But coming back to WWI, the newly returned soldiers came back to a growing film industry in which the soldier's look was popularized on screen. And of course here it is... the mass marketing of Madison Avenue had the Gilette Safety Razor Company as its early client, thereby ensuring short hair and clean shaven faces for decades to come. And so beards became 'counterculture' -- suitable for beatniks, musicians and academics, but distinctly absent from government, politics, and reinforced by films, tv programs and of course advertisements. And now, especially in Pakistan, the aesthetic domain of the Taliban.

I recently saw an ABC Primetime segment in which an actress in a hijaab was the victim of (staged) discrimination in a bakery. The experiment was designed to gauge the level of customer consternation at anti-Muslim sentiment. Watching this with me, my husband said, "I wonder what would happen if that was not a sweet-faced woman, but a man with a dark beard. How would people react then?" Given that a landing on U.S. soil is expected to be imminent, perhaps we'll find out, or else I'll have to get used to my new husband, again.

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