Bank bailout was a mistake - TARP should be suspended

Posted by Shyam Moondra

Secretary Paulson used scare tactics to make the Congress approve the TARP and handout $350 billions to financial institutions. It's amazing that the sole objective of this program was to unfreeze the credit market and induce the banks to start lending more money to corporations, small businesses, and individuals, and yet the lawmakers didn't bother to write the legislation in such a way that it would force the banks to use the funds for that purpose and that purpose only.

The financial institutions pocketed the TARP money and used it for the following purposes:

1. Throwing lavish corporate parties and conferences.
2. Handing out bonuses to the employees, even though they are losing billions.
3. Maintaining dividends when their heavy losses would dictate that they suspend dividends.
4. Maintaining corporate jets.
5. Lobbying in the Congress.
6. Acquiring other banks.
7. Buying back their own securities (e.g., Morgan Stanley and Goldman Sachs have been aggressively buying back their own securities on the open market), thereby making CEOs' stock options more valuable.
8. Speculative trading (especially by investment banks such as Goldman Sachs).

One thing that the TARP recipients are doing very little is to use that money for lending which was the sole objective of the whole program. The TARP is a major failure and it should be suspended. The Congress should not release the rest of the $350 bi TARP funds to Paulson; that money should be used to provide stimulus via infrastructure projects and to stop home foreclosures.
There have been reports that Paulson/Keshkari misused TARP funds to help their former employer, Goldman Sachs. It's reported that Paulson gave a lot of money to AIG because AIG owed money to Goldman Sachs, so it was not about saving AIG, it was more about funneling funds to Goldman Sachs. The Justice Department should investigate Paulson/Keshkari about how they distributed the TARP money. It's shocking that given the size of the funds involved, there are inadequate accounting controls within the Treasury Department as well as lax oversight by the Congress.
In any event, investment banks should never have been included in this program because they are not in the business of lending. They are using the TARP money to do more speculative/manipulative trading for their own accounts and buying back their own securities that don't do much good for the economy.

The Congress should scrap the seniority system and older congressmen should retire

Posted by Shyam Moondra

President George Bush's approval rating has been the lowest compared to that of all other presidents in the modern history. However, the Congress fairs even worse in the eyes of the American people. The Congress, as an institution, is lethargic; it's like an over sized, old, and tired elephant that can hardly move.

While many of our problems are a direct result of Bush's ideology driven governing style, the Congress has failed to provide checks-and-balances as envisioned by the nation's founders. Bush's belief that the government should get out of the way of the private sector led to lax regulations that, in turn, led to the devastation of our free-market economy. Just as crime goes up on the Main Street if the police is not cruising the streets, it was not unexpected that Wall Street will engage in deception and manipulation if the regulators just looked the other way. Bush's doctrine of pre-emptive strike led him to blunder in invading Iraq that led to enormous costs in terms of lives and money. Bush's mantra of "lower taxes," led to disproportionately higher benefits to the rich at the expense of everybody else who are now stuck with a huge national debt that next generations would have to repay. Bush's spiritual belief is that there is no global warming and if there is something going on with our environment it's God's doing and not man-made, and, therefore, we don't really need to do anything. His recent push for health provider's conscience based denial to provide health care is rooted in his firm belief that abortion is a sin and not a woman's right. Bush's ideology driven agenda has brought nothing but ruins that now President-elect Barack Obama has to undo by pursuing more pragmatic ways of governing.

The Congress' record is even bleaker. The senators and congressmen failed to question faulty intelligence on Iraq, they authorized Bush to go to war but failed to provide oversight, they did not properly watch over the regulators who were supposed to regulate the financial sector, and they kept authorizing Bush to spend money that we didn't have. The government of checks-and-balances, as envisioned in the constitution, did not materialize.

One of the reasons why the Congress has turned in such a poor performance is that too many senators and representatives are old and they have been at the Capitol way too long. The median age of senators is 63 years compared with 36.7 years for the entire U.S. population. Most of the committee chairmen are in 70's and 80's, who are not in tune with the needs and thinking of the much younger and more dynamic population.

While older people bring experience and wisdom to their jobs, they generally have less energy and passion to accomplish big things. They tend to be comfortable in their jobs and thus have no zeal for any change. Resistance to change also means that novel ideas and solutions are not easily accepted. The older people are always behind the curve and in reactive mode; they almost never anticipate problems and they are rarely ready with proactive actions to prevent problems from happening in the first place. It's like a slow-motion movie running in reverse, very painful to watch.

Our country faces many difficult and complex problems that would require vigorous schedules and innovative approaches to solve them. The present mix of senators and representatives is out of step with the young and vibrant President-elect Obama, whom the American people chose over the aging Sen. John McCain. Obama has already outlined his ambitious agenda that includes a huge stimulus package to generate 3 million jobs, achieve energy independence during his tenure as the president, stabilize the housing market, tackle the health care crisis, win the war on terror in Afghanistan, and improve our educational system. The real question is if Speaker Nancy Pelosi, Senate Majority Leader Harry Reid, and these tired committee chairmen are the right people to keep up with Obama in achieving grand things for our country. I look upon these old lawmakers as an obstacle in our path to progress.

I think the time has come to get rid of this unwritten rule of seniority in the Congress when deciding who should lead what committee (the House has already begun that process but the Senate has not). The selection of lawmakers for the major leadership positions should be based on who has the capacity, drive, and passion to partner with the young Obama in getting things done. And to those in the Congress who are over 68, it's time they consider retiring and letting the younger generation take over, as was made abundantly clear by the American people who elected the young Obama as the next president. Perhaps, the time has come to also consider term limits for the U.S. senators and representatives.

College education is getting out of reach

Posted by Shyam Moondra

Aside from the ever increasing health care cost, the only other cost which is not showing any sign of slowing down is the cost of college education. The high cost of college education is affecting the finances of an increasing number of middle-class families that are not rich enough to be able to afford it nor poor enough to qualify for financial assistance.

The following trends show that the U.S. higher education system is out of whack:

1. The tuition and other fees are being increased, year after year, far beyond the general inflation rate, rendering college education out of reach for many students and their families.


2. The compensation of the Presidents of educational institutions have increased drastically, in line with the excessive compensation of the executives at the corporations.


3. More and more universities and colleges are spending more and more money on sports activities. Building new stadiums and showering athletic departments with lavish budgets have become fashionable these days. Now the success of schools is judged not based on academic accomplishments but based on the game scores.


4. The endowments of many schools have grown so big as to match the annual budgets of many countries running into billions of dollars, and yet these schools are spending proportionately less and less on education.

Up to this point, the government has introduced tax credits and provided more funding for student loans to help many families pay for college education, but that's just the wrong approach. Rather than finding ways to pay for inflated tuition fees, the government needs to find ways to roll back the artificially inflated tuition by at least 30%. The incoming Obama administration and the Congress need to pass a higher education reform legislation that will have the following elements:

1. Limit the compensation of the administrators of the universities and colleges.


2. Craft the tax laws in such a way that they penalize the schools that increase the tuition fees in excess of the general inflation rate.


3. Impose hefty taxes on rich school endowments that do not spend a specified minimum portion of their incomes on helping needy students with financial assistance. Those schools that fail to spend the required amount must surrender those funds to the government to be used as part of its student loan program.


4. Limit how much money educational institutions can spend on sports activities. More and more schools are spending more and more money on sports and more and more students are spending more and more of their time on sports activities rather than studying. This whole trend of sportization of educational institutions is hurting the standard of our educational system.


5. There are just too many universities and colleges, duplicating the administrative overhead and other expenses for common functions. We should find a way to encourage the institutions to merge to reduce the costs and pass along those savings to the students.

How to fix the broken health care system?

Posted by Shyam Moondra

The escalating health care costs are impacting families and businesses. In the face of government inaction on this issue, many corporations are washing their hands off this problem by cutting back employee/retiree's health benefits and increasing co-pay and deductibles. We already have 40 million Americans without health insurance, and given corporate cutbacks and sharp increases in premiums, the ranks of uninsureds will only increase making this crisis even more serious.

The current free-market model is broken. Most health care providers are milking this cow to the hilt - the greed has taken over their any sense of moral responsibility. Insurance companies, HMOs, hospitals, doctors, and drug companies are all increasing their charges in unrestricted way. There is no free-market competition; what we have is an industry-wide conspiracy to make more and more money.

The present health care system is beyond repair. What we need is a fundamental overhaul of the whole system. Any new system should have the following elements:

1. The government should takeover the health care insurance business. Having the efficiency of a large single carrier and removing the profit motivation from the equation will reduce the costs considerably. This single carrier should offer health insurance to all Americans, either through employers or directly to the people who do not have employer provided benefits (e.g., self-employed people).

2. The government, as a single carrier, should negotiate the lowest possible prices with hospitals, doctors, drug companies, and other service providers.

3. Medical record keeping and billing systems should be automated to reduce the operating costs of the health care system. Special provisions should be made to ensure the security and privacy of medical information of individual patients that's put on on-line.

4. The medical malpractice laws should be reformed to minimize frivolous lawsuits that increase the malpractice insurance premiums and eventually the health care cost. Having more transparency on this issue will also make the doctors stop prescribing unnecessary tests that they otherwise do to just protect themselves from potential malpractice law suits. The malpractice lawsuits should be allowed only in cases of genuine incompetent errors on the parts of doctors and hospitals.

5. Eliminate all tax write-offs for drug companies and other service providers in the industry.

6. Rewrite the patent laws to allow the marketing of generic drugs sooner.

7. Impose limits on marketing campaigns by drug manufacturers and ban the practice of giving kickbacks to doctors for prescribing specific brands of drugs.