Waiting for the second shoe to drop

Economics is as much, or more, about sentiment than it is the various statistics and indices. Vis-a-vis the global economic crisis the sentiment is increasingly that it was a bad scare, but no so bad really. That is why leaders like Rudd and Obama talk up recovery, but even they must be dreading the second shoe dropping – the corporate debt bomb.

When the current financial crisis broke it was pretty much driven by the predictable failure prime lending and dodgy financial instruments. What didn’t show up then was the corporate loan sector and few people seem to have the big collapse on the radar.

Consumer and sovereign debt are bad enough, though they are fairly transparent and quick to manifest. Corporate debt, for which we can thank those overpaid and over clever bastards who bought you the global financial disaster, is far easier to hide – for a while.

CORPORATE Australia is sitting on a $200 billion debt bomb that needs to be refinanced over the next three years…

Quoting from a recent article the corporate bubble is set to start bursting soon and continue over the next three years. Sound as it is Australia is no a big economy like the US, but it is a good indicator:

Right now, a block east of Times Square, the National Debt Clock is ticking: $19,000 per second, $1.1 million per minute, $66 million per hour. …the total rises to $33 trillion. As a percentage of gross domestic product, the grand total of U.S. debt outstanding, now 294 percent, exceeds the previous record of 270 percent set during the Great Depression.

Here is how it works in Australia: Infrastructure is the biggest worry, with more than $31bn in refinancing fall due - Property is also vulnerable, with more than $26bn of near-term debt due - Construction is next, with a total of $15bn of debt coming up in the next three years, then telecommunications, mining, and healthcare

Governments have already increased overall debt levels bailing out banks and some corporations. The basic reasoning is sound, retaining jobs and preventing social dislocation, as was the case with finding alternatives when the ABC learning Centres collapsed. Each of these interventions becomes a debt multiplier, so doubtless other remedies are frantically being sought.

In the US there is a growing feeling that bankruptcy should be the first course for corporations in trouble. I expect the sink or swim idea is tempered by the belief that the corporate vultures out there will compensate to a degree on job losses. I can’t see it personally, but miracles do happen.

Don’t make anything anymore

Back in the 1980s Paul Keating assured Australia we’d be on a level playing field if we adopted the rules of the global market. Then we proceeded to divest ourselves of manufacturing, taking it and jobs offshore to low income markets. So what is left? Nothing much productive or useful, but lots of mining.

Apparently Australia has sufficient coal reserves to export for the next 300 years. All very well, but if the rest of the world survives all that carbon input Australia is unlikely to survive the ravages of extraction.

The latest licenses issued are for potential mines on the rich black soil region of the Liverpool Plains in NSW, fertile soil fed by a massive aquifer. True the fertile soils here have been degraded by cotton farming, but rehabilitation is well under way. Coal mining will destroy both the soil and ground water, but members of the NSW government should do well from consultancies and directorships.

We need to get back to the concept of a broad based economy; one where we grow thing and make things beyond just notional money. The smart nation wasn’t so smart after all and we need to recalibrate aspirations to meet the realities.

Doubtless Rudd is doing well to drive positive sentiment, but the downside now is debate and political engagement is being stifled; sadly the great public think that is wonderful.

Corrupt Bastards Club Redux

These articles were first posted on the defunct galleonpoint.com in September 2006. I’ve recently been able to recover some of these older files and given the number of search queries on this issue decided to repost here.

ALASKA: The FBI is looking for hats or garments with the label of “Corrupt Bastards Club” or “Corrupt Bastards Caucus,” according to the search warrant.

That's the nickname given to 11 lawmakers in after a newspaper column written by a supporter of the so-called all-Alaska gas line listed the legislators' campaign contributions from VECO.

The Corrupt Bastards Club started as a barroom joke last spring among Alaska legislators whose names were linked to large campaign contributions from oil field services company VECO Corp.

A 12th lawmaker, Senate President Ben Stevens, the son of U.S. Sen Ted Stevens, was cited in reports as receiving generous consulting fees from VECO. Stevens has collected more than $240,000 from VECO since 2000. In a apparent attempt at self-deprecating humour, hats were even made with the initials “CBC” on them.

The FBI wasn't laughing when agents served a warrant at VECO's headquarters and raided the offices of six legislators this week, looking for financial ties between the company and lawmakers, and documents having to do with Governor Murkowski's proposed gas pipeline contract and a related rewrite of Alaska's production tax laws.

Included in the search were the offices of legislators associated with the Corrupt Bastards Club: state Senators Donny Olson of Nome, Ben Stevens of Anchorage, John Cowdery of Anchorage, as well as state Reps. Vic Kohring of Wasilla, Pete Kott of Eagle River and Bruce Weyhrauch of Juneau.

A copy of one of the search warrants, obtained by AP, links the investigation to the new production tax law signed last month by Murkowski and the natural gas pipeline draft contract Murkowski and the state's three largest oil companies negotiated.

Among the items to be seized, according to the warrant, “from the period of October 2005 to the present, any and all documents concerning, reflecting or relating to proposed legislation in the state of Alaska involving either the creation of a natural gas pipeline or the petroleum production tax.”

Warrants

VECO and its chairman, Bill Allen, were staunch supporters of the governor's production tax plan, a version of which the Legislature passed in August after twice rejecting it earlier this year. Lawmakers have also twice failed to pass legislation related to the governor's pipeline fiscal contract with BP PLC, ConocoPhillips and Exxon Mobil Corp.

VECO's executives are top contributors to Alaska politicians, mostly Republican. Allen flew to Juneau at the end of the regular session to lobby lawmakers and watch the vote on the new production tax.

The warrant calls for seizure of documents “concerning, reflecting or relating to any payment” to lawmakers by VECO executives Allen and Richard Smith. Agents also looked for documents about contracts, agreements or employment of legislators provided by VECO, Allen, Smith and company president Peter Leathard.

In the warrant served on state Sen. Donald Olson, D-Nome, agents were also authorized to seize any documents related to fuel payments, landing strip fees, storage fees and similar aircraft costs. Olson owns a flying service.

Besides VECO and its executives, agents were authorized to seize any documents related to The Petroleum Club, Republican pollster David Dittman or his company, Dittman Research and Communication Corp., pollster Marc Hellenthal or his company, Hellenthal and Associates, Roger Chan, VECO's chief financial officer, and Olson Air Service, according to the warrant.

A receipt of items seized from Olson's office by the FBI and obtained by The Associated Press lists five things: Olson's 2006 year planner, Murkowski's gas pipeline proposal released in May, a manila folder labeled “APOC,” the Alaska Public Offices Commission, Olson's interim travel file and a binder related to the Alaska Stranded Gas Fiscal contract. FBI spokesman Eric Gonzalez said a total of 20 search warrants were being executed across Alaska, but would not say where.

Those caps

Specific items named in the search for seizure: “Any physical garments (including hats) bearing any of the following logos or phrases: 'CBC,' 'Corrupt Bastards Club,' 'Corrupt Bastards Caucus,' 'VECO.'”

House Speaker John Harris, R-Valdez, said he saw Smith and Kott handing out hats in June during the first special session when lawmakers voted down the petroleum tax bill. But he did not see anything with the “Corrupt Bastards Club” on it.

“They were handing out hats down at the Baranoff (Hotel) at the bar down there. All they had was 'VECO' on them,” Harris said.

Repeat performance

The latest FBI raids in Alaska are not the first time lawmakers have been scrutinized for political influences. Political bribery has led to a legislator going to prison in the past. Sen. George Hohman, D-Bethel, who spent a year in prison on two felony counts of bribery, was convicted on Christmas Eve 1981 for attempting to bribe Rep. Russ Meekins, D-Anchorage, for a vote to buy two Canadian firefighting aircraft.

"A Juneau jury pronounced Hohman guilty of agreeing to accept a bribe and then offering part of that $30,000 to Meekins in exchange for his vote to buy two CL-215 'water bombers' from Canadair Services Ltd.," reported the Juneau Empire on Dec. 28, 1981.

A jury of nine women and three men took only six hours to deliberate on the case that many legal experts felt would go in favour of Hohman. Meekins and Hohman were co-chair of the "powerful free conference committee" that sifted through some 200 requests for more than $500 million of funding when the bribe was made. Meekins alerted authorities that the bribe took place.

Former Gov. Bill Sheffield, also a Democrat, and his administration were under investigation for its role in steering a state office lease in the mid-1980s. The Aug. 15, 1985, edition of the Juneau Empire said the Senate Rules Committee and the full 20-member Senate considered to try Sheffield in the House of Representatives for "his role in the way a 10-year, $9.1 million lease for state office space (that) was awarded to a firm represented by a Sheffield friend and campaign contributor."

Former Watergate attorneys from both sides of the event that led to the impeachment of President Nixon heard testimony and argued the Sheffield case for 10 days prior to the rules panel, declaring that there was not enough evidence that the first-term governor had committed an impeachable offence.

Campaign Funding

From media reports, the most prolific and consistent "investor" in Alaska politics is the oil industry. The employees of VECO Corp. stand out as the largest contributing block.

Between 1998 and 2004, reports show that VECO employees and their family members contributed no less than $914,929 to Alaska political campaigns.

The following totals represent the amount of donations received from only the top seven VECO executives:

• Senate Rules Committee Chair John Cowdery: $24,550.
• Rep. Pete Kott, former speaker of the House: $21,300.
• House Rules Committee Chair Norman Rokeberg: $18,000.
• House Oil and Gas Committee Chair Vic Kohring: $14,708.
• Gov. Murkowski: $6,500 (not including donations to his U.S. Senate races).
• House Finance Committee Co-Chair Kevin Meyer: $12,300.
• House Finance Committee Co-Chair Mike Chenault: $12,000.
• House Judiciary Committee Chair Lesil McGuire: $12,000.
• Senate Labor and Commerce Committee Chair Con Bunde: $11,500.
• Senate Finance Committee Co-Chair Lyda Green: 9,000.
• Rep. Mike Hawker: $8,050.
• House Labor and commerce Chair Tom Anderson: $8,000.

These totals do not include Senate President Ben Stevens' "consulting" contract with VECO; Rep. Meyer's salary and benefits from Conoco Phillips; or the salary, retirement and stock options to the Rep. Hawker household from Conoco Phillips.

Rep. Hawker was apprised of confidential gas line contract negotiation information while under contract to ASCG Inc., a subsidiary of NANA Development Corp., which has contracts for oil field services with VECO and BP.

Shocked

“I was real surprised, of course, along with everyone else,” said Sarah Palin, the Republican candidate for governor.

“Alaskans are shocked, and I'm shocked about this investigation,” said Tony Knowles, the Democratic candidate for governor.

The major party candidates for governor are just two of the political figures in the state still absorbing the news of an apparent influence-peddling investigation by the FBI focusing on VECO.

Palin launched her gubernatorial campaign on the issue of ethics in government, having blown the whistle on Republican Party chairman Ruedrich for doing party business on state time while he was serving with her on the Alaska Oil and Gas Conservation Commission.

Meanwhile, Knowles describes himself personally and his time in Juneau from 1994 through 2002 as “squeaky clean.” They both seem to feel the latest turn of events highlights their good government themes.

Rep. Eric Croft (D-Anchorage) says he saw this coming two years ago during a legislative committee meeting concerning VECO's pitch for a sole-source contract award for a private prison.

“I said at the time, in 2004, on the Whittier proposal, someone's going to jail over this 'cause I could see how corrupt the process was,” said Croft.

Croft says the FBI probe probably kills a planned special session this month. “The special session was on life support anyway,” Croft said.

A troubled state

FBI agents in Alaska have raided the offices of at least six Alaska lawmakers Thursday in a search for any ties between the legislators and oil field services company, VECO Corp., an Anchorage-based oil field services and construction company

The “Corrupt Bastards Club”, the reference first sprouted in a barroom joke, according to state Rep. Mike Chenault, R-Nikiski. It happened earlier this year, after a opinion column highlighting Veco contributions to 11 lawmakers and Gov. Murkowski appeared in the Daily News and other newspapers.

“I can’t remember (who), somebody came up and said, ‘well, you corrupt bastards,’ more as a joke. That’s where that came from. There is no group,” he said. “Somebody thought it humorous enough to have CBC put on some hats.”

While the FBI are guarded about the raids a copy of the search warrant released by Sen. Donny Olson, D-Nome, one of those whose office was searched, the FBI is looking for:

• “Any and all documents concerning, reflecting, or relating to any payment by Bill J. Allen, Richard Smith, and/or Veco to, or for the benefit of, any political candidate, political campaign, or political action committee.”
• •Any documents concerning “any contracts, agreements, or employment” that involves Allen, Smith, or Veco president Peter Leathard.
• •Any documents relating to ethics standards and regulations for legislators “including any materials relating to limits on outside employment, limits on acceptance of things of value, and reporting requirements.”

In addition to information about Allen, Smith and Leathard, the warrant served on Sen. Olson seeks documents concerning Veco chief financial officer Roger Chan, Olson’s Nome-based air taxi company, and the Petroleum Club, an Anchorage private club.

The FBI also searched the offices of two powerful leaders from Anchorage: Senate President Ben Stevens and Senate Rules Committee Chairman John Cowdery, who told reporters he didn’t think he was under investigation.

Agents searched offices of Rep. Pete Kott, a former House Speaker from Eagle River who chairs the Legislative Council; Rep. Vic Kohring of Wasilla, who chairs the House Committee on Oil and Gas, and Rep. Bruce Weyhrauch of Juneau, who chairs the House Ways and Means Committee. All of the six legislators are Republicans except for Olson.

Stevens, the son of Alaska’s powerful U.S. senator, Ted Stevens, has said in required disclosure forms that he was paid $243,000 over the last five years as a consultant to Veco. Neither he nor the company has explained what he did for the money.

The place was crawling with FBI

The FBI has brought in agents from around the country for the investigation. The Internal Revenue Service and other federal agencies also are involved in an investigation which quickly stretched to past legislators, including former Sen. Robin Taylor. R-Wrangell.

Taylor is now a deputy commissioner in the state Department of Transportation.”

Agents with the FBI and IRS also met with the president and two other executives of Cook Inlet Region Inc. Friday afternoon.

Barbara Donatelli, CIRI’s senior vice president for administration and government relations, said the interview “was related to some of the investigation that is currently underway,” but that the agents told CIRI president Margie Brown that the regional Native corporation is not a target of the probe.

Agents also executed a search warrant and spent about three hours Friday afternoon copying computer hard drives at the office of Dittman Research and Communications Corp., said Terry Dittman, the firm’s research director and wife of Dave Dittman, who was duck hunting with his sons and didn’t know about all the commotion.

Department of Justice spokeswoman Jaclyn Lesch said Friday the searches began Thursday and are continuing Friday. FBI spokesman Eric Gonzalez said a total of 20 search warrants were being executed across Alaska, but would not say where.

"Those actions took place yesterday in cities in Alaska as part of an ongoing law enforcement matter. The (Justice Department) and FBI won't be able to comment any further," Lesch said.

Sins of the father

A 2003 article counted at least nine separate cases in which Sen. Ted Stevens (R-AK) has done favors for companies or organizations which paid his son Ben over $1.5 million in salary and "consulting fees." And there have been more since then. (The article, from the Los Angeles Times, was unearthed by the Washington, D.C.-based Sunlight Foundation.)

In late 2003, the U.S. senator finagled a $29 million earmark for "The Alaska Fisheries Marketing Board." Guess who got to chair the group -- which for two years did not disclose its activities? That's right: Ben Stevens. (A spokesman for the father said he merely "recommended" his son for the post.)

And last December, it was revealed that Stevens senior inserted a provision into a bill worth $10 million to a fishing venture for which his son Ben secretly held an investment option. The provision was estimated to be worth $1.5 million to Ben. (In the end, Ben didn't collect that profit, however; the venture soured for unrelated reasons.)

There's no evidence Ted Stevens is of interest to the investigation announced yesterday -- although he does have an office in the same town where one of the FBI warrants was executed. Keep in mind, however, investigators are required to follow up on any evidence of wrongdoing they come across. And judging by the news pictures, the FBI has been wheeling a lot of documents out of those offices. If they've already got reason to believe that evidence as outrageous as "Corrupt Bastards Club" hats exist, who knows what kind of stuff they might stumble across.

Covert revelations ratting the Cheney

Cheney's secret plan pushed legal limits

Paramilitary units key to CIA program

Bush's ghosts threaten Obama's agenda

Given the excesses of the Bush years there are many of us inside the US and elsewhere who want to see a full investigation into illegal activity sanctioned by the administration. Despite the dramatic headlines it is highly unlikely these new revelations will trigger any serious investigations.

New governments are generally reluctant to launch ‘truth commissions’ to launch inquiries into their predecessors, regardless of how serious or provable allegations might be. There are some sound reasons for the reluctance, first and foremost the risk of opening a ‘Pandora’s Box’ with the potential to cross party lines.

The usual reason put, and one with a touch of logic, is the need to go forward and not be distracted by the past. I’m not entirely convinced by that argument, but I can see there are still other issues to be considered. A major one is clear proof of wrongdoing; covert activities for example are designed to exclude paper trails and deniability.

More to the point, these latest Cheney allegations relate to just one set of potentially illegal activities stretching back to the Kennedy years and beyond and implicating numerous foreign governments. Social and political fallout would stretch far beyond Bush’s administration and the USA.

Still little transparency

Part of the problem in each of our countries is that we pay lip service to transparency, but implement it only when it suits the political masters. I’m continually frustrated in my research in Australia by sections of key inquiry reports which remain sealed from public view. This can only happen when supposedly opposing political parties have something to hide.

The inquiries I’ve been looking into, related to international drug trafficking, involve both Australian and US administrations with potential for sanctioned illegal activities and explicit corruption. Fortunately for those powers who choose to hide their activities the general public either chooses to ignore or simply doesn’t care.

My concern is that our democracies only function in name, that we are subject to the whims of those who hold the power and the secrets. We can change governments, but there will always remain key unelected elements to guard the gates of secrecy. Such discussions are quickly dismissed under the label of conspiracy theory, but trite labels do not answer the doubts.

Not that Cheney will answer any doubts. He’s not particularly interested in public opinion and is safe in the knowledge that secrets will remain secret. So investigating the past might remain a dim hope, but rooting out those who continue to infect our governments with sanctioned illegality is something we should be focusing on.

Comparing two economic recovery programs

THE global recession continues to worsen, but the Australian economy is showing signs of recovery.

So goes one breathless media report. Though for the moment, recovery or not, the Australian economy is is far better shape than many others. According to my preferred economic commentator, Ross Gittins of the SMH, a key factor is:

“China's continuing demand for our mineral exports was the main reason for the economy's surprisingly strong performance in the March quarter (at a time when the G7 economies contracted by 2.1 per cent).”

Curiously Canada, with a similar economic dynamic, is not traveling so hopefully. I guess what I'm looking for here are the salutary lessons. Canadians tend to blame the bigger US economy for all there woes, but that probably is an over simplification. At the same time it would be an over simplification to say Australia was free and clear.

The new chief economist for Merrill Lynch Canada has finally landed and published a forecast that is significantly more optimistic about the Canadian economy in the short run, but less enthusiastic for next year. She projects that the Bank of Canada will get carried away with the surge in growth, scale back its economy-fuelling measures too fast, and undermine the recovery.

Australia's Rudd government quickly admitted the economic downturn and put in place a range of stimulus packages, essentially encouraging consumer spending, to counter negative effects on employment. Our central bank recognised the efficacy of the approach and tailored the rates changes to support the moves. Our conservatives bleated and are still bleating.

Canada's conservative Harper government initially rejected the stimulus concept and the central bank dropped rates, encouraging doubtful borrowing. It is one of those things were poor choices are made at the outset the tend to continue on. A second major factor must be the influence of China on the respective resource sectors.

Despite significant commercial argy-barge over pricing, China has continued to buy Aussie iron ore and coal, remaining the countries largest customer. In Canada China is focusing on buying the companies rather than the resources. It's worth noting that some of those companies have significant holdings in the Australian market.

So is there a lesson? It seems to me, admitting certain prejudice, that Canada is still stuck in the discredited conservative stream while Australia seems to be operating from the new pragmatism – let's do what is most likely to work. We really don't know what is happening behind the scenes with Rudd or with China, but at this stage it is working. Whether it really works only time will tell, but we are off to a good start.

Blogging a dead horse for News Ltd

Despite my sentimental feelings for the print media I tend to have a morbid fascination for watching the mediums slow demise. Rupert Murdoch's chief Australian minion, John Hartigan delighted my sick obsession no end when he recently chose to attack a symptom rather than the disease.

Obviously you don't need to have insight or intelligence to be a Murdoch minion, so Hartigan seems eminently qualified for the job. Concerned about shrinking interest in print media he chose to attack bloggers:

• 'all tip and no iceberg' (Incidently stolen from former PM Keating)
• bloggers, he said lacked resources, training and access to key decision makers.
• Bloggers make "radical sweeping statements unsubstantiated with evidence"
• less than 10 per cent of their content was original reporting

Pot calling the kettle black?
I can easily recall Murdoch's media being among those who gleefully promoted a non-existent pandemic, even after the 'deadly' virus was proved to be a dud. Then there where the eager reports of a passenger jet being blasted into the Atlantic ocean, despite there being no available evidence on that mishap at the time of reporting. Oh! Then there were the breathless claims of an incriminating Prime Ministerial email which turned out to be fake. You really need to watch out for those key decision makers.

I'm not about to launch an all out defence of blogging, but will say, lacking the resources of corporate media and depending on genre, blog hits rates are pretty much the same as big media. The fact is there is little by way of new news in either and both systems rely heavily on background and opinion for content.

The future of print
We are undergoing the most dramatic media revolution since Gutenberg, and Gutenberg will doubtless become a hapless victim in the end. Even so, there is still a solid place for print media until the axe finally falls.

My early media training was with a Tasmanian regional paper, The Advocate, under the Harris family. They had a simply and effective rule – local people. They proved that readers wanted stories and pictures which portrayed people in their region, they wanted news of events in their region. This is probably the area Fairfax Media have the drop on News Ltd – Fairfax control much of Australia's regional and local print media.

The old Advocate saw content as more than just something to stop the ads banging together, they saw content as a method to attract readers and buyers. Part of that strategy included outsourcing to local stringers. The fact is there are a lot of talented, potential contributors out there who might better serve print media by being given the opportunity to contribute. Otherwise blogs are one of the few available alternatives.

Still, I doubt Murdoch will understand any of this. After all his publishing failures are more notable than the successes, and News Ltd has only been sustained by... (ooops, I nearly slipped. Sweeping statements unsubstantiated with evidence are the province of corporate media not mere bloggers.)

It’s hardly news

I was inclined to take a swipe at the ‘Jackson distraction’ until I realised it was the current reality; unreality is the current reality. Kevin Rudd knows that, so does Barrack Obama – they realise the great public is sick of politics and looking to pop culture distractions.

In many ways that is why they achieved the confidence of their respective electorates; they are moderate, calm and tend to avoid or disarm contentious issues. They both know that a truth is far more disarming than the easy lie; so they easily avoid most dramas.

The approach was demonstrated by Rudd last week in what has been inanely dubbed ‘the Ute-gate Affair’. It was an opposition attempt to find a chink in the PM’s armour; a claim that Rudd had represented a request on behalf of an old mate, who it seems had once lent Rudd an old ute (pick-up) during an election campaign.

Give me a break, even the PM is still an elected REPRESENTATIVE, for old mates as well as the rest of us. Rudd went on to deny the claim, even after he was told there is evidence by way of an email from Rudd staff to treasury. That produced mega excitement, for the opposition; Rudd lies to parliament!

It turned out that the email was a lie, and Rudd simply stuck to the truth. The story would not have survived the Jackson Distraction anyway, many real political stories are simply withering on the vine. We have the monumentally incompetent NSW government, parliament in fact. But pop culture should be able to cover that.