America's Credit Catastrophe

Not surprising at all because the USA is the biggest "communist" country on earth - part two

Then, how does this off-shoring impact the company? Let’s have a look at the truth.

1. The large IT infrastructure is very important and critical to our financial security – now the bank has to depend on foreign technical staff to control and manage this critical financial infrastructure of our country

2. The large financial IT infrastructure is not making tennis shoes – it needs a highly educated and very experienced workforce to design, build, and operate. These systems take year to learn. If we do not have our own engineers working on them, soon, (with no exaggeration at all) nobody in the US understands these large and high complexes, but powerful technical systems. Is this good for our country?

3. Losing these highly paid and highly technical jobs send out a powerful message to our young people who will not get into engineering and technical areas. For example, our computer science education in the past 5 years has consistently gone down across the country.

Our business leaders know all of these, but they will still off-shore IT jobs. Why? Because by all means, the incentive structure for executive compensation does not give them any real motivation to serve the company or the country, but make themselves richer faster. By the way, they themselves and their friends make the incentive packages for themselves. Since they are not the real owners of the companies, they do not really care.

In this particular sense, we have allowed the United States of America become the biggest country in the world in terms of public ownership of businesses. In addition, it is a twisted public ownership because by all means, it is call “private ownership” though in any possible economic means, it is a pure public ownership.

Public ownership does not work. Communism in whatever format will fail. Without fixing the divorce between ownership and managerial power of our large companies, we will get out of mess only find ourselves in another, possibly a worse one.

Ken Lay of TX @ Oct 15, 2008 23:05:09 PM

Not surprising at all because the USA is the biggest "communist" country on earth

The US decline is not surprising, because it is the biggest ‘communist” country on earth. Its private companies, the backbone of the country, such as AIG actually are very public, with so numerous owners that by all means they belong to the general public.

However, the false assumption of private ownership, the executives of these companies pay no attention to the long-term health of the companies and the interest of the general public, but focus on how to get fatter faster. The divorce of power and ownership is the key of American business and economy failure. From Enron to Wachovia, it has proven that the leaders of our large “private” companies have no other interest but satisfy their own tremendous greed by all possible means as long as they can get away with it.

The divorce of ownership and managerial power also eloquently explains the constant power struggles, absurd reorganizations, and violent turbulent typical of large American companies. Alas, the best brains of our country are employed with laser focus to fight each other for more power and more money!

Have a look at real private such a SAS where none of such stupidity and absurdity exits. For example, a large bank has off-shored its IT operations. On the paper, with the salary difference, there are huge savings. The executives get big bonus as a result. In fact, due to the loss of productivity resulting from loss of intellectual capital and experience, there are tremendous business losses in IT system stability. However, there are no laws forcing companies reporting how their IT divisions operate. In addition, every company in its right mind will not publish its IT operation problems. Therefore, the fact that this off-shoring is losing large amount of money is not generally known. Therefore, the executives who are responsible for the loss continue to harvest huge amount of bonus. When all the tier one executives have a reward of a few more million dollars, who will speak up and tell the truth that the bank is losing big money on this off-shoring deal of IT operations?

Then, how does this off-shoring impact the company? Let’s have a look at the truth.

1. The large IT infrastructure is very important and critical to our financial security – now the bank has to depend on foreign technical staff to control and manage this critical financial infrastructure of our country

2. The large financial IT infrastructure is not making tennis shoes – it needs a highly educated and very experience workforce to design, build, and operate. These systems take year to learn. If we do not have our own engineers working on them, soon, (with no exaggeration at all) nobody in the US understands these large and high complexes, but powerful technical systems. Is this good for our country?

3. Losing these highly paid and highly technical jobs send out a powerful message to our young people who will not get into engineering and technical areas. For example, our computer science education in th

Ken Lay of TX @ Oct 15, 2008 22:55:01 PM

Beyond Uncle Sam's Big Bailout

This email was sent on Sept 24, 2008 to my congressman and to the McCain Campaign. I'm glad to see the idea catching on, but it should have been the 1st line of defense, not an afterthought.

My Honorable Congressman, Zack Wamp

The Investment Banking Crisis

We are told that the Mortgage Paper crisis is because of home loans

made to people who are not able to meet their payments, and that these

mortgages have been bundled and sold as securities to these big

investment banks. Now, that the ratings on these 'securities' have

dropped, these big banks are now stuck with them. We are further told

that the only way out is to have the Feds buy these unattractive 'securities', so

that the banks can once again make loans to keep our economy

functioning.

It certainly seems to me that the 'shrewd' operators in these big

investment banks, who spend all their time developing new schemes to

make money for themselves mostly at someone else's expense are more

than capable of outsmarting the Feds in the actual application of the

bailout.

If the underlying problem is mortgages made to people who cannot keep

up with their payments, why can't the confidence of the financial

markets be restored by having the government essentially put their arm

around the overextended homeowner and guarantee their payments will be

made...not for free, but only making up the difference between what

they can do and the contracted payments...at a price: The homeowner

is giving up his equity in proportion to the input from the

government. When he/she decides to sell (not a forced sale at give

away prices), any equity would be divided between them and the

government. When their economic situation improves, they could pay

back the government's help and recover full ownership of their house.

This should only apply to one home per family. This would keep people

in their homes, prevent a boom in rental properties, slow the plunging

housing market, and require far less up front capital from the Federal

Government than buying up the mortgages.

Where am I going astray in my thinking?

Sincerely,

Doug Mashburn

I would also like to see some means implemented to discourage the

upward push for bigger and more expensive houses, which take more

energy to heat and cool, and will only make our energy crisis deeper.

Douglas Mashburn of TN @ Oct 13, 2008 05:28:04 AM

America's Credit Catastrophe

The author says..

Rogoff says tighter credit will make the downturn in home prices, adjusted for inflation, roughly a third worse than it otherwise would have been. He expects home prices to stabilize toward the end of 2009 after falling some 30 percent from peak levels. Of course, some cities are already there. Prices in Las Vegas are down 29.9 percent just in the past year.

====================================

But if you look at Nevada generally, they accepted a huge number of illegal aliens into their state with drivers licenses and very good loans. While they were doing that, the water in Nevada, and particularly Las Vegas, was running dry. Investing in Vegas housing was a mark of sheer stupidity without the illegal aliens that built the homes being removed, and water being secured. Frankly, I don't think the northern states will give Nevada the water to boot. Until we consider this article, we don't know where we are.

------------------------------------------------------

ILLEGAL ALIENS & THE MORTGAGE MESS

http://www.nypost.com/seven/09242008/postopinion/opedcolumnists/illegal_aliens__the_mortgage_mess_130482.htm

By MICHELLE MALKIN

AS panicked politicians prepare to fork over $1 trillion in taxpayer funding to rescue Wall Street, they've fingered regulation, deregulation, Fannie Mae and Freddie Mac, the Community Reinvestment Act, Jimmy Carter, Bill Clinton, both Bushes, greedy banks, greedy borrowers, greedy short-sellers and minority-home-ownership promoters for blame.

But there's one villain that has slipped notice: how illegal immigration, crime-enabling banks and open-borders Bush policies fueled the mortgage crisis. It's no coincidence that the areas hardest hit by the foreclosure wave - Loudoun County, Va., California's Inland Empire, Stockton and San Joaquin Valley, and Las Vegas and Phoenix - also happen to be some of the nation's largest illegal alien sanctuaries. Half of the mortgages to Hispanics are subprime. A quarter of all those subprime loans are in default and foreclosure.

============================================

of @ Oct 11, 2008 08:41:15 AM

Obama's snarky campaign

Anyone who doesn't see John McCain as one of the greatest political animals since Lyndon Johnson (present company notwithstanding) hasn't been doing his reading. This man is hot tempered and a huge flip flopper on whatever suits his needs. At one point he was almost liberal until that direction stopped him. He, in charge, would set about crashing the country (as all neo cons try to do) like the three planes he managed to wreck. Train wreck? Plane crash more likely. Obama isn't old enough to have this kind of record, and he doesn't have a hot temper and frat boy mentality, either.

Judy of NY @ Oct 10, 2008 10:41:19 AM

Ode to Obama

Geraldine, snarky comments trying to send up one candidate and deflate another are typical in this envionment. We are not going to get anyone to vote for Obama with such an attitude. The Congressional Record is clear: McCain had nothing to do with this debacle and apparently tried to rein in Fannie and Freddie excesses. I'm sorry to say that it appears it was a failed social experiment, a form of Affirmative Action in the finanacial sector. Markets apparently do not work that way.

Was Obama part of the Barney Frank and Chris Dodd cabal and in bed with Franklin Rains? I hope not and we don't clearly know yet, but so far he is the 2nd larger receipient of their political donations. Time will tell. McCain? Yes, he is not the right choice--that much is clear. I was initially an Obama supporter but now I'm not sure. I may just sit this one out.

Esteban Cafe of SC @ Oct 10, 2008 10:16:16 AM

The Clown John McCain

Just look at the ugly scowl on "that one's" face. He has no business thinking he can run this country. He is the most devisive man to run for office in my lifetime and I am 70. I am working on Barack Obama's campaign and just this week in the calls I am making, people are defeting to Barack Obama because McCain has become a crude has been and can't take the heat. Why doesn't he focus on what is wrong with America instead of creating racial and class warfare. A bigger joke of a person I have never seen running for public office.

Gwendaline of AK @ Oct 09, 2008 23:17:48 PM

Scare Tatic

"The credit crisis that the Republicans are making us believewe have is a scare tactic and Senator McCain hasn't got a clue how to solve it."

You have got to be kidding me? Why would the republicans attempt to impose a scare tatic? It would be totally against them.

Greg of AL @ Oct 09, 2008 19:44:47 PM