I've gotta admit that I am getting Really, Really, Really Freaked Out (RRFO)
here lately, and I spend too, too, too much time whining and crying about it.
As a result, I desperately seek the solace of gold, silver, oil and
large-caliber guns while safely ensconced in the Big, Beautiful Mogambo Bunker
In fact, it was while I was in there that I learned that the new Leading,
Coincident and Lagging Indicators came out, and it was just more bad news; the
Leading Indicator (economic activity a year from now) was down, the Coincident
Indicator (economic conditions right now) was down, while the Lagging Indicator
(burdens and inflation) was up! Yikes! Stagflation, the worst of all worlds!
Perhaps this is why Andrew Ross Sorkin of the New York Times
is as chilled as the rest of us by the fact that "the Treasury secretary -
whoever that may be in a few months - will be ... vested with perhaps the most
incredible powers ever bestowed on one person over the economic and financial
life of the nation", as the Troubled Asset Relief Program, popularly known as
TARP, gives Mr Paulson a massive $700 billion bailout that Mr Sorkin says shows
"the lack of transparency and oversight that got our financial system in
trouble in the first place", and which actually "seems written directly into
the proposed bill."
He says to look at the original draft of the bill, as first presented to
congress, and you will see such unbelievable horrors as "The secretary is
authorized to take such actions as the secretary deems necessary to carry out
the authorities in this act without regard to any other provision of law
regarding public contracts", and that "Decisions by the secretary pursuant to
the authority of this act are non-reviewable and committed to agency
discretion, and may not be reviewed by any court of law or any administrative
My God! This is beyond belief! The secretary of the Treasury will be above the
law! My God! I was going to wax loudly indignant, as should all thinking
people, when Mr Sorkin eclipsed me by characterizing it as "Treasury Secretary
Henry M Paulson Jr's $700 billion proposal to bail out Wall Street is both the
biggest rescue and the most amazing power grab in the history of the American
Naturally, this precipitated the now-delayed Mogambo Loud Harangue Of Outrage
(MLHOO), wherein I paraded down Central Avenue wearing the cutest little
ballerina tutu and tiara, shouting through a bullhorn "Meet and greet your
doom, you miserable lowlife bastards! $700 billion of new taxpayers' money at
the total discretion of the same corrupt idiots who got us into this damn mess
is just for openers! It will get worse and worse, and you should buy gold,
silver and oil right now, because the dollar is freaking toast because the
brains of the people running the show are likewise burned to a crisp, probably
by rays from the Russian mafia and the CIA, or aliens from outer space!"
Well, I did not get all that far along on my heroic Paul Revere mission to
inform the populace at every Middlesex village and farm that "The red ink is
coming! The red ink is coming!", as was I was soon apprehended, as one should
expect from the ubiquitous police state that has become the American economy.
Like I said, I was already really, really, really getting freaked out when I
got an email from Junior Mogambo Ranger (JMR) John H, who made sure that I got
the startling news reported in the New York Times that "With little notice,
regulators at four agencies that oversee the nation's banks and savings
associations proposed a significant change in accounting rules to bolster banks
and encourage widespread industry consolidation by making them more attractive
to prospective purchasers."
Being naturally curious, suspicious, and paranoid, we ask ourselves "How to do
this?" The answer is: By doing more of the same! Hahaha! Too much! The article
goes on, without any evidence of deliberate sarcasm or irony, "The regulators
and the Bush administration have decided to resort to further loosening of the
accounting rules to try to get the industry through problems that some experts
have attributed in large part to years of deregulation." Hahaha! Deregulate to
solve the problems caused by deregulation! Hahahaha!
And what "accounting rules" are they suspending? "The action by the four
banking agencies provides more favorable accounting treatment of so-called
goodwill, an intangible asset that reflects the difference between the market
value and selling price of a bank."
In short, a good name and a swell reputation of a company is its goodwill, and
is reflected as a premium built into the valuation of the company. Adam Levitin
at Credit Slips admits that "Goodwill is a very problematic asset - it doesn't
have much (if any) liquidation value and can't be sold by itself."
So what is it, exactly, that these "regulators" are going to do with goodwill?
"Under the proposal issued this week, the regulators would permit buyers of
banks and thrifts to count some of the goodwill toward meeting their regulatory
Initially staggered at the unfathomable corruption involved in letting
"reputation replace money" as capital reserves against deposits, I soon felt
that maybe I had made a mistake in laughing, as this new concept is actually a
wonderful invention! I love this!
No longer will I even be required to put real IOUs in the employee pension fund
when I dip into it to satisfy my need for a little extra cash, and instead my
reputation as a good guy is, alone, now enough to cover the debt! I love this!
I'm surprised I haven't heard of it before this, as The Times notes, "We've
been here before - in the S&L crisis, when the Federal Home Loan Bank Board
(now OTS) permitted thrifts to count goodwill toward regulatory capital. The
results weren't pretty, as counting goodwill toward capital masked
institutional insolvency and permitted thrifts to get even more leveraged
relative to real assets." Hahaha!
So it is the same old wheeze: The government used reputation-as-money as a
smokescreen to let the S&Ls get into worse trouble!
I look into your eyes. You look into my eyes. We both look at gold and silver.
We both know what the other is thinking.
PS: In a previous edition of the Mogambo Guru newsletter ("Each issue more
stupid and worse than the last!"), I made a series of mistakes concerning Jon
Nadler of Kitco.com, the first of which is that I misspelled his name as
"John", which I was hoping was the result of my computer's spell-checker
"correcting" the name "Jon" into "John", but I now see that that ain't what
And then I discovered that you can't cover it up by taking "Jon" out of the
computer's internal spell-checker dictionary so that it WILL change "Jon" to
"John", either! Damn! Why is everything always against me? It's not fair!
The second mistake is that there seems to be some mix-up between what Mr Nadler
actually said versus what he was quoting Mark Hulbert as actually having said.
My Official Mogambo Plea (OMP) is, of course, "Not guilty, your Honor!", and I
blame everything on ... (looking around the courtroom for a victim) ... Greg,
my editor at DailyReckoning.
Unofficially, and this is just between you and me, I am sure that it was a
confluence of my own problems, starting in 2nd grade when we first learned that
little Mogambo "Does not read with comprehension" (which is just for openers,
and the tally finally ends with "Does not get along well with others", even
though I maintain that I would have gotten along with them if they weren't such
morons, but they were, so to hell with them!).
Now, combine that natural incompetence, suspected brain damage and a
pathological lazy-yet-superficial attitude about everything that does not
involve food, sex or new ways to hit a golf ball 300 yards right up the middle,
with the sheer tonnage of medications I am taking these days, two of which
specifically warn "may cause confusion", which is, unfortunately, only one of
the entire freaking constellation of side effects stemming from each of them,
and all of them interacting with one another, including emergent multiple
personalities and hearing voices that demand "Burn! Burn everything!", but when
I go back to the doctor and say, "Hey, man! You gotta do something about all
these pills making me dizzy, tired, achy and spaced out! I think I can see
through time, for God's sake!" he gives me another prescription for another
pill that will mask the symptoms. Damn!
Anyway, my apologies to Jon Nadler for the confusion, my apologies to anybody
who actually thought I have a clue about what I am yammering about, but I will
strongly insist on my First Amendment rights under the constitution, and thus I
stand proudly and say "Not Guilty! It was Greg! Greg did it!"
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on those
who desperately deserve it.