G. William Miller - Investment Advice from the Treasury Secretary

Legal Tender for All Debts

My favorite mentor is Mike Cardozo, a super gentleman, successful and principled by anyone's standards, who took an interest in me when I was a fun-loving and apparently undisciplined youth in the early 1980's.  We were colleagues for a while at CTM, Mike's stopover between serving as White House counsel on telecommunications to Jimmy Carter, and a long career as a merchant banker.

Cardozo: Prime Mover.  Porter: Disciple.

In the mid 1980's, Mike associated with his Carter administration buddy, 65th Treasury Secretary G. William Miller, and David Rubinstein's wife Alice Rogoff, in the formation of GWM & Associates.  When I was sorely in need of professional advice, I'd pop over to GWM and Mike would take me to the Palm, to impart brutal wisdom (such as "What you need is Officer's Candidate School, Porter!  A little discipline would do you good!").

Gee - The Real William Miller

I got to meet the Secretary several times and, when he was out, used his office on a few occasions to make calls while Mike wound up his pre-lunch meetings.  Miller was debonair, and kind enough to make small talk with me and toss funny ideas around such as those pitched by entrepreneurs who had ideas on re-fitting an extrusion facility in Cleveland, or wanted GWM to bankroll the growing of hydroponic Belgian endive in the US, or the character who was going to teach the Chinese to eat cheese.

The punchline to this story is that, although I toiled in the TV and new media vineyards for several years, I eventually found myself handling finance and investment clients, including a series of engagements for the World Bank and International Finance Corporation (during the James Wolfensohn era).  On one of these projects in 2004, my client called me and my team in for a presentation to the CEO.  My two associates on the project (a major real estate developer and a marketer) were both named "Bill Miller" - but neither one was the Bill Miller of Carter heyday.  Bizarre....  There were chortles and bon mots around the executive table, which I relayed to Mike, and he to GWM.

Secretary Miller passed away in 2006.  Some say he had the strong hand as Fed Chairman in the onset of '70's stagflation in the US economy.  More successful was his subsequent Treasury role in the Chrysler bailout.  No matter - In our paths-crossings, he was solicitous beyond anything that was called for, and had real class.

Mary Schapiro, My Favorite Commissioner

I normally don't call attention to a friendship with someone who's currently in a position of truly extraordinary importance, ... as my associations with some of the other notorious among the Celebrity tapestry could present them with - by what mathematicians call the associative property - a disastrous public liability!  But now that Mary Schapiro has resigned as Chairman of the SEC I can safely reveal that we are friends, and through the most political of Washington connections: the sleepovers, trick-or-treat nights, and classroom hi-jinks of our schoolgirl daughters.

Supply/Demand: D.C. Cupcake Wars

Mary and I were soccer side-liners for years and years as our girls were growing up.  We did our part in the school pageants, fundraisers and field days, and the girls got hula lessons at Mary's house one wild afternoon.  The year that I was a "classroom parent" (don't ever sign up for more than one tour of such duty, please!), we arranged for Ms. Mackie's 5th grade class to venture forth on a field trip from DC to NY, where Mary hosted them at her FINRA offices and arranged a bell-ringing at the stock exchange.  

Here's what Mary looks like when she's about to serve you a designer cupcake.  Or, in my case, two:

She's done a fantastic job getting the SEC back on solid footing.  I did have occasion to visit the SEC on business twice during Mary's tenure (although one of those times she had to duck out for an emergency summons to speak with friends in Congress), and I came away with greater respect for the work and mission of the institution, and of course reinforcement of the deep good feelings I already had toward my friend.  I'm due back there next month and I'll really miss her!

Power Play: look for six at the Sands Casino's high-stakes Texas Hold 'em table: Christina Romer, Paul Volcker, Dan Mudd, Tura Satana, Mary and me . . . !

Feeding the World with Harry Chapin

Harry Chapin - Gone too soon, too soon.

"Hunger is an obscenity and hunger in America is the ultimate obscenity.. We have to stop feeding the symptoms and get to the real root causes of hunger and poverty"

Harry Chapin

Wild About Harry

At the height of Harry Chapin's considerable impact and well-earned acclaim as a troubadour in the pop music world, he was actively involved in a number of social reform movements including the Union for Radical Political Economics.  And in the summer of '79 the URPEs came to Hampshire College for a few days of fomenting to envision a new world order.  Yours truly was earning money before returning to Hamilton College, by scrubbing pots for Food Services in the Hampshire dining hall, and working occasional extra hours at special events.

One afternoon, I joined a couple of co-workers including my brother and signed on to man the cookout grill for these Radical Economists.  Experience on the grill at McDonalds made me a good man for the job.  We clowns did set-up, fired that thing up, and got the burgers and dogs cooking.  Up the hill came marching the grimy throng - one with guitar case in hand.

We the noble laborers watched, rapt, as Harry jawboned with professors and organizers - his eyes lit up, his speech and body highly animated.  It was clear he was passionate on the topic, and very inspiring to those within earshot.  Then we rang the chow-bell, and it was time to line 'em up at the trough.

To Each, According To Need

As they all filed through the line with paper plates, each had to declare "Hamburger" or "Cheeseburger."  Harry requested a cheeseburger, saying "I'll take a Cheeseburger!"  I made sure he got one, responding "Here's your cheeseburger!"

It is worth pointing out that my brother Dave was inclined in these situations to tape a sheet of paper to his apron, announcing the hand-written message "I am the Condiments Man. If you Don't See It, we Don't Have It.  So, Don't Ask Me For It."

Rumor had it that Harry would be performing, campfire-style, to rollick the assembled rabble rousers after dinner as night fell.  And we learned the next day this is precisely what happened.  He'd played Chapin, Seeger, Guthrie, and Kingston Trio numbers.  But we working stiffs had been shoo'd away (by management, not URPE mind you) as soon as the last burger was issued and the grill scraped.

Chapin was then lobbying and cajoling the Carter government to establish the Presidential Commission on World Hunger and - with New World Order subversive Bill Ayres - he co-founded World Hunger Year (now Why Hunger).  The Chapin family continues this work today.

Note: Harry's older brother Jim had graduated from Hamilton College in 1963, and by this time in 1979 Harry's step-daughter, Jaime, was attending Hamilton along with me.  Although we had not previously become acquainted, Jaime and I had a brief and lighthearted moment when I introduced myself to her later in the fall of 1979 to recount my "cheeseburger" anecdote.

31 years ago this week - a year after I graduated, but before Jaime's senior year - Harry was killed in a car accident at 38.  His stories and works live on, and on.

Chapin recorded long narrative ballads ... that told stories about the extraordinary lives of ordinary people, about the social and political events of the day and the angst and struggles of human existence.

(excerpted from a really nice post on Colin Pinter's blog).

On-Island w/ Peter Barnes, the Nantucket Cat

 Arrival 5:00pm today!

With a three year old in tow, my wife and I were strolling out of Black Eyed Susan's on Nantucket's crooked little India Street after a fantastic stack of pancakes (batter made with a special ingredient - Orange Juice), when we spotted a small commotion next door in the children's clothing/toy store.

Turned out to be a book signing, and the kiddie-lit author was (then-)CNBC financial news correspondent Peter Barnes.

Nantucket Islander Peter Barnes

Got to shake hands and speak with him a bit, and we yakked about Washington DC where we then lived, and where he served then as host for the CNBC financial/political analysis show "Capitol Gains."  Today, Pete's the senior Washington correspondent for Fox Business News.  A class act, and a Nantucket fanatic.

Like An Ac-Ro-Bat

There is now an entire genre of formula-driven book titles for kids, with endearing characters (bears, dogs, etc.) set in resort locations.  For instance one can find Barnaby Bear in Nantucket, Martha's Vineyard, Central Park, and probably by now in Aspen and Carmel.  Well, in June, 1997 the formula wasn't yet old and it was a refreshing novelty to find a book set on Nantucket.  Nat quickly became a family favorite.

We enjoyed this book dozens, perhaps a hundred or more times.   And we still recite the sing-song rhymes about Nat and his pal, Captain Pat, whenever prompted.

Let Me Be Perfectly Barney Frank:

. . .this character is going to be missed!  Even among the pantheon of disgraced pols, Barney towers above the rest.  A raucous high note in the fanfare of the cacphonous, ever-sounding American Rhapsody.

BUDDY HACKETT ??

Never - well, not since Marion Barry - has so destructive, so spiteful, and so high-handed a fellow flauted the laws of decency and decorum and ridden his surfboard to re-election after re-election, until Barney Frank.  And in his role as longtime member and (2007-2011 - he oversaw the disaster as it unfolded) Chairman of the House Financial Services Committee, Barney committed his destruction, of the housing market and the financial system, on a global scale.

As a Massachusetts voter, I've reconciled myself to the notoriety he brings our fair Commonwealth.

UMass Press: Big Man On Campus

When he visited the UMass Amherst campus during his book tour in 2010, I wanted to meet Barney.  No axe to grind, but an idea to pitch.  I maneuvered before, during and after his acidic and self-righteous address to the crowd.  Knowing of my intent an unhelpful, second-string UM staffer tried to block my access so I end-ran her, snatched a book and paid for it, got my place in line, and did get the face time.  When Barney heard my pitch he actually stopped, considered what I'd suggested, and took out a card to give me the name of his chief of staff.  And we did indeed follow up!  And I got satisfaction.  They say politics makes strange bedfellows... I'm glad we hit it off.

He lied in a jolly, entertaining way throughout his speech

To recall the Steve Gobie scandal (below)* is almost as rich as to hear this gentleman blame President Bush for failure to adequately regulate Fannie Mae when in fact Frank himself, as partner (1987-1998)  to FNMA senior executive Herb Moses, was neck deep in conflict of interest throughout the decade-plus run-up to the housing crisis and all of the devastation that followed, and still follows, that debacle.

* [from Wikipedia]: In 1985 Frank was still closeted. That year he hired Steve Gobie for sex, a male prostitute, and they became friends more than sexual partners.^[24] Frank housed Gobie and hired him with personal funds as an aide, housekeeper and driver and paid for his attorney and court-ordered psychiatrist.^[24]

In 1987 Frank kicked Gobie out after he was advised by his landlord that Gobie kept escorting despite the support and was doing so in the residence.^[24][25]

I Love You, You Love Me ...

Later that year Gobie's friends convinced him he had a gay male version of Mayflower Madam, a TV movie they had been watching.^[24] In 1989 Gobie tried to initiate a bidding war for the story between WUSA-TV (Channel 9), the Washington Times, and The Washington Post.^[24] He then gave the story to The Washington Times for nothing, in hopes of getting a book contract.^[25] Amid calls for an investigation Frank asked the House Ethics Committee to investigate his relationship "in order to insure that the public record is clear."^[26] The Committee found no evidence that Frank had known of or been involved in the alleged illegal activity and dismissed all of Gobie's more scandalous claims; they recommended a reprimand for Frank using his congressional office to fix 33 of Gobie's parking tickets and for misstatements of fact in a memorandum relating to Gobie's criminal probation record.^[27] The House voted 408–18 to reprimand Frank.^[28][29]

The attempts to censure and expel Frank were led by Republican Larry Craig, whom Frank later criticized for hypocrisy^[30] after Craig's own arrest in 2007 for lewd conduct while soliciting gay sex in an airport bathroom.^[31][32][33] Frank won re-election that year with 66 percent of the vote.

. . . 

Hallowe'en and The Visible Hand of the Market: Trick-or-Treat with Alan Greenspan

Smith got it right*

All Hallow's Eve, 2003 and I am the chaperone to my daughter and her fourth grade friends as we wend our way door-to-door toward the upper end of tony Chain Bridge Road, N.W. in Washington, D.C.

Knock! Knock!  A door swings open and NBC Newswoman Andrea Mitchell beams at the kids. I beam back - I've always thought Andrea was delicious.

Wealth Redistribution

Andrea reaches for the large candy bowl and prepares to offer it, but stops herself short as it's nearly empty and in need of replenishment.

Holding the bowl in mid-air, our lady of the house calls back over her shoulder, "Dear! More candy!"


A rustling of plastic is heard, and then a gnarled hand appears from behind the door, extends over the bowl, and deposits a 4 or 5 "fun size" 3 Musketeers bars.

Greenspan: Visible hand of the market

The hand retracts, then appears again - three more times, the hand extends, like The Addams Family's "Thing," but sporting French cuffs and a suit jacket.


Chairman of the Federal Reserve Alan Greenspan, Ayn Rand acolyte** who freely admits the U.S. income tax system is a wealth redistribution scheme, doling out scarce resources to the needy.

A couple of Romantics

Fun Size from the Fed

...and,

this night, to the irrationally exuberant.



* Smith (1776): "It is not from the benevolence of the Butcher, the Brewer or the Baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages"

** Greenspan (1957): “ ‘Atlas Shrugged’ is a celebration of life and happiness. Justice is unrelenting. Creative individuals and undeviating purpose and rationality achieve joy and fulfillment. Parasites who persistently avoid either purpose or reason perish as they should.” 
(emphasis mine)
 

Roger Mudd and the Fannie Mae Kerfuffle

Newsman Mudd

One afternoon in 2005, on the sidelines at Washington Episcopal School in Bethesda, MD, I met Roger Mudd - star CBS correspondent throughout the 1960's and 1970's, and subsequently host, co-host or contributor to NBC News, Meet the Press, and McNeil Lehrer Newshour.  I knew Roger's son Matt because our daughters were lacrosse teammates and playing against WES that day.

Matt greeted me, introduced me to Dad, and we enjoyed a few moments of sunshine before I told Matt "I just heard your brother on the radio as I was driving here!"   Roger's ears perked up: "How did he do?"  "Fine - they didn't lay a glove on him!"

Dan Mudd: Taught me Laddered T-Bills and Mark-to-Market

At the time - that very day in fact - older son Dan, then the C.O.O. in Franklin D. Raines' Fannie Mae, had spent 2 hours testifying before a senate committee regarding improprieties at FNMA.  These problems, from which Dan himself emerged wholly intact, did reveal substantial wrongdoing by Raines and CFO Tim Howard, in what would be preamble to the unraveling of Fannie Mae as a structural support to the housing and financial markets in 2008 (see Reckless Endangerment for a superb account).

Dan too had kids at the school, and he and I served for 4 years together on the Budget & Finance committee for the small ($6 MM annual budget) operation.  A USMC vet,  he patiently taught me some simple principles and terms of art in the course of our work together.  On one occasion, attending a winter fundraiser together, Dan (well, his driver) jumped the dead battery in my Isuzu Trooper.  Today, Dan is CEO of Fortress Investments.  And today Fannie Mae is asking the U.S. Treasury (that is, you and me) for another $5.1 BB in protection against the consequences of its business decisions.

Of my exchange with Roger regarding Dan, I'll say it was funny to share the news I'd just consumed retail, from NPR, with this giant of journalism, but satisfying to learn he'd suffer this fool gladly, and I guess that he needs to source his facts like anyone else, no matter how dubious the source.  In this case, he was able to get corroboration later - not only from other news sources and intermediaries, but likely direct from the subject.

Roger Mudd at 83 continues to consult on the presentation of documentary programming and and to share historical, political and ethical context on the History Channel.  He has also generously endowed a center for Ethics study at Washington & Lee University in Virginia.  And he's a devoted grand-dad who likes a good lacrosse game once in a while....

Supercharged Senator Warren Mosler, ( I ) CT

What Connecticut truly needed was a second Independent senator!

At a weekend cookout this Labor Day, I ate kosher hot dogs and chewed the fat with Warren Mosler, candidate for U.S. Senate from the Nutmeg State and, I learned afterward, described by some as a "Tea Party Democrat" (?)  Warren, in earlier life a bond trader, hedge fund manager ($5BB under management) and supercar manufacturing entrepreneur, brought his 37 years "insider" finance experience to the table: "Larry Summers, Timothy Geithner, Hank Paulson, Ben Bernanke, - all wrong about everything!"  Siding a bit with Christina Romer, Warren says he is confident that unsecured lending in 2008 would have led directly to liquidity and could have avoided the TARP panic and bail-out bedlam.

Post-Election Mortem:
Warren collected 11,261 votes to "Show" for a third place finish with 1% of popular vote, behind Dick Blumenthal (D, Winner) and Linda McMahon (R, to Place).

In his campaign, Warren proffered a plan featuring an immediate federal stipend to the states @ $500/capita, a payroll tax holiday for employers and workers, and a government paycheck at $8/hour to anyone not already employed, thusly:

The Mosler plan empowers the government to provide public service jobs without limit to anyone willing and able to work in a region with devastating unemployment. By providing a means for the government to employ all the labor that is currently idle in the public sector until private sector demand for labor increases, a peaceful and prosperous environment is promoted. And throughout history a government that can provide full employment and prosperity has always commanded the respect of both its citizens and the world at large.

This was Warren's prescription for the effective 20% unemployment in the US - and identically for the 30% (some say over 60%) among Palestinians.  I disagree that the government can nor should be in the business of creating jobs - although if you convince me that the only alternative is to give the money away as welfare & unemployment benefits, then I could support this idea as a more practical, productive alternative.

Warren Mosler - President, USA (2012) - with his Mosler Consulier and MT900

MOSLER'S LAW: "There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it."

 See Also: Economics Romp

Ben Stein and I: Unindictable Watergate Co-Conspirators

Shave & Haircut: Two Bits.
Less N.P.V. if I let it grow another three weeks and then pay Two Bits...

Walking into the Watergate Office complex for a meeting at The Atlantic on a fall day in 2002, I looked up to see Ben Stein exiting the ground-floor retail area, where he'd just stepped from the Watergate Barbershop with a sharp new trim.

"Hi, Ben!" I ventured.  "Hello Sir!" came the reply.  The full extent of our friendship, to date.

We know Ben Stein for his iconic turn in Ferris Bueller, his Comcast spots with Shaquille "the Real Deal" O'Neill, and "his Money."  Nevertheless, I think of Ben foremost as an economist with lucid good advice.  He's usually got a clear head.  But he had his hair in his eyes on the sub-prime lending and foreclosure debacle....

 I've said to my wife repeatedly, I just want on my gravestone, 'He loved dogs' and 'Bueller, Bueller.'

Ben Stein, 2006

Going to School with Paul Volcker

"Worried about inflation? I've been worried about inflation ever since I went to college and my mother would give me an allowance that wasn't big enough, in wartime"

(Paul Volcker, Princeton '49 - on October 26, 2010)

When Giants Walked The Earth: Thirty years ago, Paul Volcker strode the stage with my graduating class at Hamilton College ('80) as he received an honorary Doctor of Laws degree.  Yesterday, I had the chance to recite for him his words that had inspired me that day, about the role of the entrepreneur in society, when I met the towering former (1979-1987) Federal Reserve Bank Chairman at the Global Absolute Return Congress in Boston.

Towering? This gentleman is 6' 7" tall.  Up close, he struck me instantly as a gentle, very elegant vulture, a Leonard Baskin man/bird hybrid.  He's a warm guy, and he was touched that someone would remember that day, and his particular honor: "It was really the first time I received one of those!" When I mentioned that he'd used a word that day that one of my freshly-educated classmates had never heard before, Paul the cut-up asked me, "Was it 'integrity'?"

Today Volcker is 1st Chair of President Obama's Economic Recovery Advisory Board.

Porter / Volcker - Haircut Review:

The Volcker Rule:  Noting on the spot that he clearly continues to have such a soft spot in his heart for my alma mater, and with nothing to lose (but principal), I took my chance to ask Dr. Volcker his advice on investment strategy for the Hamilton College endowment.

"Well how much is it?"  "About $540M, down from $743M before the crisis."  "Hmm... about a 25% haircut - not too bad."  "Anything in particular that they should be doing?"  "Keep doing what they're doing!"

Commencement Program - Hamilton College, Clinton NY, May 25, 1980 / October 26, 2010

See Also: Christina Romer and the Economics of Celebrity

               Ben Stein and I: Watergate Co-Conspirators

Christina Romer and the Economics of Celebrity

It's hard to predict the outcome of a situation, even when the choices seem so well-defined: 4th and goal - go for it, or take the field goal? Economy melting down - $862BB stimulus, or not?

Christina Romer and her husband Dave left their UC Berkeley Economics positions and came east when she took the role of Obama's Chief Economic Advisor in 2009. She now regrets knuckling under to make the Administration's difficult case that only by enacting the stimulus ("American Recovery and Reinvestment Act") could we cap unemployment at 8% - without the stimulus, the jobless pain could reach 9-10%. Well, the stimulus was passed - and the rate hit 10% anyway (a year and a half later, it still has not dropped below 9.5%). And she's about to return to Berkeley.

As married colleagues, Dave and Christy Romer have shared professional counsel and collaborated on writings during their careers.

Dave and I were classmates in the Amherst public school system through graduation in 1976. In addition to being the sharpest math wiz in the class, Dave was notorious for at least two monumental contributions to the life of the school: first, his grand front yard on Snell Street became the Polo Grounds of Wiffleball for a long-running gang of ruffians (mostly Amherst College brats). And second, he founded and ran Ye Olde Football Pool, and elaborate, dime-a-play weekly contest to predict the winners of all Sunday NFL games, with the winner and score of the Monday Night Game being the tie-breaker. Gambling - particularly by underage schoolkids, for $$, and on school property - being illegal, we merrye olde players used pseudonyms. Mine was 4-Pi-r-cubed (formula for area of the surface of a sphere - or was it the volume of a sphere?).

I note Dave's affectionate thank you to Christina in his fascinating paper on using NFL statistical evidence (the 4th-and-goal scenario noted above) to understand whether and how firms "maximize." If you're an economics neophyte, and a football fan, I highly recommend it.

Perhaps Obama should have listened to Joe Paterno, and David Romer, when calling the plays last year. And should have listened more to Christy Romer, and less (or not at all) to that jackass Larry Summers!