Greed Kills

The American and Chinese management mantra is "substitute cheaper inputs, regardless of quality, to maximize profits and executive incentive compensation." The latest manifestation is tainted baby formula. It killed and sickened thousands of Chinese infants.

The melamine tainted formula caused kidney stones and renal failure in babies. How would you feel if your "one baby" allowed by law was poisoned its formula, by the very thing intended to nourish life?

China, thus the world, has a major quality crisis. Solutions will not come from authoritarian reactions, but from true leadership, from profound knowledge. Dr. Deming is gone, but his followers know the way. How many more will die from greed?

Red & Blue Fight Over PEU's

Republicans and Democrats compete for the right to send trillions in federal spending in the direction of their favored private equity underwriters. The Blue team favors green corporations, while the Red squad likes anything with the potential to provide gargantuan profits.

NYT's Dealbook reported on some of the latest draft choices by notable PEU's:

Governor George Pataki-MidOcean Partners
Vice President Al Gore-Kleiner Perkins Caufield & Byers
President Bill Clinton-Ron Burkle's Yucaipa Funds
President George H.W. Bush-The Carlyle Group*
General Colin Powell-Kleiner Perkins Caufield & Byers
General Peter Pace-Behrman Capital

Governor Jeb Bush-Lehman Brothers

*The Carlyle Group has a scroll like list of ex-government insiders. They even have one of their own, Dov Zakheim, on the President's Commission for Wartime Contracting in Iraq & Afghanistan.

This portends a continuation of the disastrous contracting of critical U.S. government functions and infrastructure. Those who cannot lead or manage, contract. Will they ever learn?

Bush Draws Line in Harbor on Iran

The Jerusalem Post reported the Bush administration imposed sanctions on the Islamic Republic of Iran Shipping Lines (IRISL) and its 18 affiliated companies for aiding the rogue regime in Tehran. There are numerous inducements for businesses and other governments not to utilize IRISL, but the kicker in the article is:

The vessels must be physically blocked should they enter US jurisdiction.

And where is the closest U.S. jurisdiction to Iran? Might it be near the Straight of Hormuz, maybe Iran's uncertain border with Iraq? Look for a Bush/Cheney naval incident, one that can serve as the precipitating event to a wider conflagration. General Petraeus takes over CentCom next week. Something wicked this way comes....

Carlyle Group Grew Mightily During Bush Years

While the average citizen's personal income stagnated under the Bush Presidency, one politically connected private equity underwriter (PEU) made out like bandits. The Carlyle Group went from managing $5.8 billion in assets in 2001 to over $89.3 billion in 2008.

In 2000 the mean household income was $57,047. By 2007 mean household income rose to $67,609.

Carlyle grew its asset base by 1,440% while income rose 18%. Adjusted for inflation, the 18% rise disappears. Households were lucky to hold their own, while Carlyle grew like Jack's beanstalk.

Will the PEU crack $100 billion before the next American President is sworn in? They are poised to do so with several personnel moves. Carlyle senior advisers just landed key jobs as CEO of Freddie Mac and CFO of Wachovia. Why are these moves important? Carlyle expressed interest in buying chunks of troubled banks and government backed mortgage underwriters. They now have people on the inside who can work that same agenda. (P.S. That new Wachovia CFO netted a $4 million sign on bonus and options on 1 million shares.)

Carlyle Group's Moffett to Take Over Freddie Mac

The new CEO of embattled Freddie Mac is David Moffett, Senior Adviser at The Carlyle Group, a politically connected private equity underwriter (PEU). As part of the recovery, the government plans to buy significant amounts of Fannie Mae and Freddie Mac's mortgage-backed securities on the open market. They begin with the purchase of $5 billion worth this month.

Why should anyone be concerned about Moffett's appointment? One, Carlyle has been lobbying that same federal government for looser restrictions on investing in banks. David works in the PEU's global financial services sector. He worked alongside Randal Quarles, the point man for banking rule relaxation.

Two, Carlyle Capital Corporation held residential mortgage backed securities in their failed fund. The roll up is underway. What impact might Moffett's appointment have on CCC? Might Freddie buy their securities first, even paying a higher price? That's something for an auditor to watch.

Bush has a history of doing right by his friends, as well as looking the other way. Carlyle experienced this in early 2006 with their omission from the White House Lessons Learned report on Hurricane Katrina. LifeCare Hospitals, an affiliate of the Carlyle Group, lost 24 patients in the storm's aftermath. This warranted not one mention in W.'s report. What's missing from the latest news release?

Domestic Taxes Prop Up Foreign SWF Investments in Fannie Mae & Freddie Mac

American taxpayers' rescue of huge mortgage lenders Fannie Mae and Freddie Mac benefits their bondholders. Foreign government central banks and investment companies hold large chunks of both companies. The New York Sun reported:

According to data from the Council on Foreign Relations, central banks own $925 billion in debt in the two companies. China tops the list with $420 billion in Freddie and Fannie debt; Russia and Japan come in second with a combined $407 billion in debt. Others countries that hold the debt include Singapore, Taiwan, and several countries in the Persian Gulf.

The issue is bigger than Fannie and Freddie. The U.S. needs to keep its foreign bankers buying our federal debt. A year ago, foreign countries financed $6 trillion of American IOU's.

As of June 2007, foreigners owned $6,007bn of long-term US debt. (Equal to 66pc of the entire US federal debt). The biggest holdings by country are, in billions: Japan (901), China (870), UK (475), Luxembourg (424), Cayman Islands (422), Belgium (369), Ireland (176), Germany (155), Switzerland (140), Bermuda (133), Netherlands (123), Korea (118), Russia (109), Taiwan (107), Canada (106), Brazil (103).

Citizens should know how rich Middle Eastern sovereign wealth funds will benefit from the rescue. Foreign government coffers already bulge from the high price of commodities, especially oil and gasoline. While American citizens struggle to pay their mortgage, they get saddled with an IOU that makes rich SWF's whole. Middle East oil exporters can sleep soundly knowing their $30 billion of debt holdings in Fannie Mae are now secure. Israeli banks cheered the decision, as well.

They not only get your gas money, but a chunk of your taxes. We can't pour gasoline in the harbor, but we can have a key party! Park that vehicle...

McCain's Son on Board of Directors of Failed Bank

Silver State Bank of Nevada became insolvent and was taken over by the federal government. Presidential hopeful, John McCain's son served on the Board of Directors of the failed institution. At least Rick Sanchez from CNN just reported that news.

Research shows Andrew resigned from the board in late July. He was likely aware of the bank's financial quagmire and hoped to avoid dragging his father into yet another Western banking scandal. Dad had Charles Keating of Lincoln Savings & Loan. The son governed Silver State Bank of Nevada, even heading up its audit committee.

Run, McCain, run!