Chadwick's Corner

I woke up in Milwaukee this morning to see Maria Bartiromo on Morning Joe challenging Michael Moore on the subject of capitalism.  Go Maria!!

I had to laugh out loud listening to Mr. Moore freaking out about the top 1% of the population owning 99% of the wealth in the country.  It’s not that I support a vast skewing in the distribution of wealth in a capitalist society.  Rather it was absurdity of the messenger who seemed oblivious to where he fit into the pyramid he decried.  As no one else was in my room, I could only talk back to the television, “Well, count yourself in that group, Mr. Moore.” 

Then Mr. Moore went on to compare the Dow Jones reaching 10,000 to the tragedy of the current 10% unemployment rate in the country.  Maria challenged him, pointing out that the pension and 401K plans of millions of Americans have benefitted from the stock market over the years.  He pooh-poohed her intelligent and totally correct response.

Next he lambasted the big banks, begging people to take all their money out of the big banks and to put it into the small, local banks in their communities.  What he seemed to fail to understand was that the big banks are the ones that employ all the people at the bottom of the pyramid, so if people follow his absurd advice, the unemployment rate will rise, not fall.

Mr. Moore is a mogul in the entertainment industry.  He is a successful capitalist who has benefitted from the deep pockets of capitalism.  That is fine and it is a good example of how capitalism works and how it allows people to make big money. 

Mr. Moore’s hypocrisy is in neglecting to tell his audiences that he himself is included in the class of people he deplores.

I was flummoxed, bowled over and plain stupefied as I read the article by Eric Dash and Jack Healy on the front page of the business section of the New York Times this past Saturday.   On the surface, the story simply defies belief. 

Beleaguered Citigroup has been forced to execute a fire sale of its prize-winning entity, Phibro, because the Federal Government’s ‘pay czar’, Kenneth Feinberg, has ruled that the compensation contract with top level employees at Phibro “promoted excessive risk-taking and ran counter to the public interest”.  (A quote from the article.) 

Okay, I accept the fact that the Federal Government, as the largest shareholder of Citigroup with a 34% equity ownership, can use its muscle.  But why use its muscle in a way that only harms its own very large equity investment?  

I could understand Czar Feinberg’s edict if Phibro were some ordinary subsidiary, making ordinary money and paying out extraordinary bonuses to a vast array of  minions regardless of their contribution of Phibro to Citigroup’s profits.  But Phibro has been anything but ordinary.  In fact it has been a beacon of success in an otherwise sea of disaster for Citigroup, and the enormous compensation of the rainmakers at Phibro has been tied directly to the profits they have reaped for shareholders. 

The success of Phibro has not been a ‘one off’ event.  Since its acquisition by Citigroup in 1997, Phibro has been profitable each year, and (according to the article) generated an average of $371 million in pretax earnings for each of the last five years.  That is a total of $1.855 billion of profit for shareholders!!  Contrast that with the $27.7 billion loss that Citigroup recorded in 2008. 

Somehow if I were a 34% shareholder of Citigroup, I would have done everything in my power to hold on to a subsidiary that made real, solid income year after year.  Given the still desperate shape of the mortgage industry and consumer finances, Citigroup can ill afford to lose money making businesses.  And it can even less afford to essentially give away highly profitable assets.   Occidental Petroleum Corp. paid just $250 million (according to its own spokesperson) for an entity that has generated $1.855 billion of income before taxes over the last five years.  I would have loved to have had a chance to bid on Phibro (except that I don’t have the $250 million to spend). 

I never thought Government was particularly good at understanding how the private sector works.  But I did think that at least it had learned basic fourth grade arithmetic.  That’s why I was so flummoxed on Saturday. 

I have to wonder how Citigroup will be a serious competitor in the dog-eat-dog world of finance in the years ahead.  How can it feel to be the chief executive officer at Citigroup, when your executive powers are usurped by a Federal Government employee?  With powerhouses like Goldman Sachs raking in the profits during this time of chaos, I simply don’t know how Citigroup can be a player in the long run.  

But what is of even greater concern is the idea that if the Federal Government can determine what level of income is too high and what degree of risk taking is too great in one industry, it can do so in another. 

It seems evident that despite a major equity investment with our taxes into a major company, the Federal Government does not grasp the essence of return on investment.  This is a problem for Citigroup today and it could turn into a problem for the entire U.S. economy in the future.

Floyd Norris of the New York Times wrote a very interesting article in that newspaper this past Saturday.  He pointed out that since the 1950s when the Government started keeping track of debt levels in this country, debt growth has never been as slow as it was in the second quarter of this year. 

He went on to explain that the private sector debt actually fell, also a first in over half a century, while Federal Government debt soared, a fact we all know to be true. 

The facts and figures he displayed say a lot about what the U.S. economic recovery is likely to look like.  The Government is the only major source of growth at this time in our economy.  The entire stimulus is emanating from Federal Government borrowings and that stimulus is filtering down into the private sector through one-time Government sponsored incentives to individuals to purchase homes and automobiles. 

The other broad economic sectors of our economy – consumer, non-financial and financial business – are engaged in balance sheet restructuring, which is equivalent to being in a retrenchment mode.  

For years, or better stated, for decades in this country, both consumers and corporations drank the cool-aid of borrowing to spend, believing that all asset prices would logically rise over time and rising debt levels were a healthy way to live.  Unfortunately, that was a pipe dream, and the day of reckoning has come. 

Despite the severity of the recession, the costs of many things have not fallen.  Tuitions for college continue to rise.  Gasoline vacillates in price but for sure it is higher that just a few years ago.  Food prices seem to continue to rise.  The only give-away prices are in areas where the Federal Government is promoting a big sale – auto and housing.  What will happen when the big sale is over? 

The recession appears to have ended and that is good news.  Productivity improvements in the private sector have been impressive and that is also good news, IF you currently have a job.  

But to get a recovery that is meaningful and strong and sustainable, the private sector, NOT the Federal Government, needs to be the driving force.  A Government led recovery will be anemic and will peter out in no small measure because there will simply not be the appetite or the ability to support endlessly rising Federal budget deficits.  

When net borrowing in the private sector starts to grow again, that will be the sign that health is coming back into the economy.   It is difficult to predict when that will happen, and until then, unemployment will remain high and revenue growth will remain sluggish.

Reading Betsy McCaughey’s op-ed article in today’s Wall Street Journal, I understand fully why the elderly are so scared about the possibility of a nationalized health care system.  I believe it is must reading for everyone.  You can read it by going to www.wallstreetjournal.com  and then clicking on OPINIONS.  Please do so.

Dr. McCaughey knows a great deal about health care and has spent the last five years as the Chairman and CEO of RID, an organization which is dedicated to the prevention of hospital-acquired infections.  As a point of clarification, her doctoral degree is not in medicine, but is a Ph. D. in constitutional history. 

The advice that President Obama is receiving from his health adviser, Dr. Ezekiel Emanuel, is scary stuff.  Given that Dr. Emanuel is the brother of the White House Chief of Staff, Rahm Emanuel, one can only assume that he is more than a figurehead.  Importantly, Dr. McCaughey provides numerous quotes from Dr. Emanuel’s writings.  If I were in my 70s (and I am not THAT far away), I would be bombarding my Senator and Congressman with emails and phone calls.

I hope that Dr. Emanuel provides a response to Dr. McCaughey’s piece.  I for sure will read it. 

Reading the responses I have received to my commentary on the health care debate, I would like to add a few responses back.

My “longtime (and profitable?) associations with insurance companies” provides no conflict of interest.  Amica Mutual Insurance Company is solely a personal lines insurance company and has no interests in or involvement with any form of health care.  I have been on that board since 1992.  J.D.Powers and Associates has ranked Amica “Highest in Customer Satisfaction” for seven years in a row.  It is a privilege to be part of an insurance company that serves its customers so well.   The other insurance company on whose board I sat for three years was NEIL (Nuclear Electric Insurance Limited) which insures all the nuclear power plants in this country.  It has no interests in health insurance.

Medicare recipients (of whom my husband is one) generally do give good grades to the service, but they do not foot the entire bill for Medicare.  Their coverage is subsidized by those of us who have not yet reached the age of 65.  Were they to have to pay the entire freight, they would in many cases be broke.  Until President Bush signed into law an expansion of Medicare benefits to cover prescription drugs, many people over 65 had to take out supplemental insurance for their drugs. 

On the issue of tort reform, is it hardly an issue unto itself.  It is a large part of the reason that health care in this country is so expensive.  Republicans and Democrats as well as the White House are to blame for not tackling this issue.  The lawyers’ lobby must be the most powerful in this country to have our legislators so scared to take them on.  Until there is some kind of resolution to the open-ended liability for doctors, they will be forced to practice defensive medicine, which is hugely costly and wasteful. 

Remember 1993 and health care?  It was doomed because Americans did not want Big Government running one more part of their lives.  Why?  Because Government doesn’t do things very well – it’s as simple as that. 

They – the Government – euphemistically refer to its proposed health care plan as simply one option in the public/private marketplace.  But we – the people – know what that plan really is.  It is socialized medicine. 

So here we are again, sixteen years later, and Washington seems to have forgotten the lesson handed to the Clinton Administration.  Or maybe it is finally sinking in – now that Congressmen/women and Senators have gone home and faced the tidal wave of anger, wrath and ire – you name it – from their constituents.

There are some issues in health care that really do need fixing and the Obama Administration could win big time if it would only address them.

First and foremost – tort reform!!!  Why doesn’t Congress deal with tort reform?  Why isn’t that simple?  In all the rhetoric emanating from our Capitol, not a word on the subject – not from President Obama, not from Speaker Nancy Pelosi, not from Senator Dodd, not even from the vast majority of Republicans!   Why?  Okay – we all know the answer – it’s about the plaintiffs’ lawyers’ lobby.  But really and truly – how many millions could they possibly have paid into the coffers of our legislators to make the subject so taboo? 

Why doesn’t Bill O’Reilly or Chris Matthews or Larry Kudlow or Jim Lehrer do a serious interview with both Republican and Democrat lawmakers and grill them on the subject of tort reform?  We – the rest of us Americans – are dying to hear the rationale for Congress’ deafening silence on this critical matter.

True tort reform would reduce the costs of medicine and would go a long way to helping people afford the premiums so many say are the reason they do buy health insurance.

A second easy fix – pre-existing conditions should have no bearing on a person’s ability to get health insurance.  That is not only good policy but it is a matter of ethics.  It is simple to do – it’s just a one line item.   And it won’t run into much controversy and debate because even those who might oppose it know that it is the right thing to do.

The American way of life – the foundation of our success as a nation and an economy – prefers personal decision-making over Big Government edicts.  Our not very long history as a nation is steeped in that doctrine.  The hue and cry being voiced by people of all parties, religions, ways of life and financial means is ignored by our Government at its own risk – the risk of being voted out of office.

That’s exactly what Congress appears to be saying to the American people with its over the top $500 million for the purchase of eight new airplanes that will shuttle them – senators and representatives – back and forth around the world. 

While they excoriate private sector executives for using corporate jets for business trips and are even haranguing business men and women for flying first class seats while on business, they themselves fly überclass on taxpayer money.  Why can’t they simply fly on commercial flights the way the vast majority of business people do?  Even going first class on a regularly scheduled flight would save a huge amount of money compared to private planes.  AND, it would help the airline industry which is struggling and could well afford some more full paying first class passengers.

I guess “Government Class” is a cut above everyone else in this country and while the rest of the population is struggling to find or hold on to their jobs, is scrimping and saving, our elected officials are turning a blind eye when it comes to the ultimate in job-related perks.

The court of public opinion will only bear so much abuse.  Beware what happened to Marie Antoinette. The guillotine may come out on Election Day in 2010.

Last evening I had an experience at Greenwich Hospital that made me realize I don’t want ANY Government interference in the service provided by the wonderful, caring people who work at Greenwich Hospital. 

My 15 year old son very suddenly experienced an earache that was excruciatingly painful.  After unsuccessfully trying to reach our ENT doctor after 6 o’clock in the evening, I decided to take him to the Emergency Room (ER) at the hospital. 

Every single person who assisted us in the ER was compassionate and remarkably professional – from the gentlemen who parked our car to the cheerful receptionist who took our information at the desk, to the nurse who took my son’s blood pressure, to the wonderfully humorous young man who paraded around with his portable computer getting all our details, to the PA (physician assistant) who was so gentle and knowledgeable and who diagnosed my son’s pain as an ear infection from surfing in the ocean, and then so reassured him that all would be well once he took the prescription she ordered. 

And then the most wonderful and kind lady checked us out, as though we were the most important guests at a glamorous spa.  She made us feel special.  Outside, the attendants made light of the fact that I could not find my parking voucher – they simply figured out what car was mine.  Believe it or not, we were in and out of the ER within an hour.

After we got home, at around 11 o’clock, our ENT doctor called to find out how my son was doing.  I told him of our wonderful experience and the medication prescribed, and he totally agreed with the treatment plan.

As if that were not enough to make us grateful forever, today around 4 o’clock in the afternoon, I received a follow up call from a nurse in the Emergency Room who was checking up on my son’s wellbeing.  I was so blown away by the consideration and thoughtfulness of all the staff at Greenwich Hospital Emergency Room.

What I have learned from this experience is that there is a team of dedicated professionals, whose names and faces are anonymous, but who care about each and every patient who comes in for treatment. They are what makes Greenwich Hospital (and hospitals all over this country) so very special.  They may not get the public recognition, but they are the lifeblood of our healthcare system. 

I thank each and every one of the staff at the Emergency Room at Greenwich Hospital for your caring and your professionalism.  You are exeptionally wonderful people.