Howzit Howard

Congress makes financial markets sweat

After months of working almost around the clock, and pressed by my bosses to take a day off for goodness sake, I took a day off. And look what happened! Not having ridden Hawaii Superferry before, I decided to take a trip to Maui on the big catamaran and experience it for myself. More on that in another post. But because of the trip, I took Monday off and got home around 3:30 p.m. Monday to discover that Wall Street had developed a case of the vapors after the surprise rejection of the revised Wall Street bailout package. Rebel Republicans in the House killed the first version of the deal, insisting that some way be found to make Wall Street financial firms pay, even if only eventually, the cost of the rescue. A mechanism for that was devised and the Monday vote was supposed to close the deal. Instead, the House rejected it. There was some entertaining posturing over whose fault it was. House Speaker Nancy Pelosi gave a speech blaming the crisis on lax regulatory oversight by the Bush administration. Not altogether accurate -- it was caused by lax regulatory oversight by the last four or five administrations, Republican and Democrat. But that's what she said, and afterwards the Republican leadership in the House said it lost about a dozen votes on her partisan remarks. To which House Banking Chairman Barney Frank, a Democrat who sounds like Elmer Fudd, replied that anyone who would vote against the national interest because his feelings were hurt should get out of Congress because he isn't tough enough. Sideshow aside, Wall Street lost roughly 7% of its entire value in one day because of the failure of the bailout to pass. Airline and oil stocks fell that much or more. Hotel stocks fell almost that much. Other Hawaii stocks did a little better. The really funny thing about the sideshow is that both Democrats and Republicans seem to think Republicans killed the bailout, but Hawaii's two members of the House, Neil Abercrombie and Mazie Hirono, both Democrats, also voted against it. The fact is that congressmen who are up for re-election are getting a lot of mail from people who want Wall Street to pay and don't realize that a series of additional Wall Street failures will probably result in a deeper global economic slowdown and the loss of hundreds of thousands of American jobs. If you want someone to pay, dig this: Fannie Mae and Freddie Mac executives have been served with grand jury subpeonas. I think the Bush administration could redeem itself very nicely if it put a few of these boys in jail for misrepresenting the risk of the investments they sold until investors tumbled to the truth, stopped buying them, and precipitated the credit crisis.

The failure of the bailout

A lot of interesting detail is coming out about what happened Thursday to kill the Wall Street bailout package. Part of what makes it interesting is how the divide opened up, not between Republicans and Democrats, but between two factions of the Republicans. Treasury Secretary Henry Paulsen, who comes from Wall Street and is regarded by all sides as being a financial executive who is not especially political, pushed for the plan. He evangelized the belief that Wall Street needed to be stabilized before its spasms messed up the entire economy. Federal Reserve Chairman Ben Bernanke backed him up and said a global recession could result from not bailing out the financial services industry, by purchasing securities that no one else wants to buy at the moment. Most of the key players bought into this. President Bush, who has an MBA, signed off on the idea. Key Democrats, including Senate Banking Chairman Chris Dodd and the House Banking Committee's Barney Frank, agreed to push a bipartisan deal after the president accepted some features they wanted, including oversight for all the money Treasury would be spending. On the House side, Republican leaders seemed to buy into the plan, but, we now know, some of them were getting a lot of heat from rural district representatives whose constituents wanted Wall Streeters to feel some pain. Congressional aides worked through the night from Wednesday into Thursday morning, produced a package, and Congressional leaders signed off on it, heading for a meeting at the White House that was supposed to culminate in President Bush leading everybody out to a photo opp. John McCain made headlines with the announcement that the financial crisis was so important he would suspend his campaign and fly to Washington to take part in solving it. Barack Obama kept campaigning, and objected when McCain wanted to postpone a Friday debate. (I thought the announcement would have made more sense -- assuming it was heartfelt and McCain really wanted to play a role -- had it been made a couple days earlier before Congressional negotiators hammered out a plan.) President Bush welcomed McCain into the final meeting and even extended an invitation to Obama, who decided he would come, too, so he and McCain could stand together and support the plan in the bipartisan spirit President Bush sought. Treasury Secretary Paulsen was blindsided by what happened. We infer that from the fact that he spent time trying to make sure Democrats would kill the deal. In one of the few lighthearted moments in the talks, Paulsen reportedly went down on bended knee to plead with House Speaker Nancy Pelosi not to say anything in the White House meeting jeopardize the deal. Instead, rebel Republicans, defying their president, said they had "an alternate plan" in which Wall Street firms would be required to pay for their own bailout by purchasing insurance. Voices were raised, one senator stormed out early (he recovered his composure by the time he faced the stakeout of reporters on the grass) and suddenly the deal was off. Some back-bench Democrats accused McCain of messing up the deal with his decision to insert himself into the process. Indirectly they might be right, but it looks to me like he didn't deliberately sabotage the agreement. The rebels briefed him on what they were up to, according to some reports, and solicited his support. But participants in the White House meeting said McCain spoke neither for nor against the president's plan. Friday morning it was announced that the rebel view would be represented by House Minority Whip Roy Blunt, father of the governor of Missouri, husband of a tobacco lobbyist, and congressman to a rural Ozarks district. Barney Frank, who complained earlier in the morning that he no longer knew who he was negotiating with, now knew. But it was unclear how such delicate talks would proceed with negotiators named Frank and Blunt.

The bearded cat

I've been getting a lot of requests for information about the Howard cat that appears behind me on "Sunrise." Grant Kagimoto handpainted it in May 2004 and sent it to me. I thought it was witty and kept it on my cluttered desk at Pacific Business News, but when I joined KGMB9 and we decided to choose just two or three items a day to display, I decided to promote the cat and make it a regular fixture. Google for more information on Grant, who does a number of different kinds of arts and crafts, and co-owns the art company Cane Haul Road.     Grant Kagimoto, owner of Cane Haul Road, sells his goods now at Native Books and Beautiful Things, as well as from a storefront in Moiliili

How bad can our economy get?

Eric in Kailua is a bit frustrated. Recent coverage of the Wall Street crisis has led us away from the issue of what's going to happen to the average person. "While some are saying that if we act quickly we may be able to avoid a recession (which I thought we were already in) others seem to suggest that we are as close to a second Great Depression as we have ever been," he writes. "What can the average non-millionaire family expect in the next few months?" One reason you don't hear more specific predictions, either for Hawaii or the nation, is that the Wall Street crisis is currently driven by loss of confidence by investors, and it is harder to measure nerves than such palpible stuff as supply and demand. Economists can't even agree on a definition of "recession," though I can tell you what the government thinks a recession is. I'm not an economist but I do understand words. Recession is economic shrinkage. Hawaii's tourism economy is in recession because it is shrinking. Hawaii's overall economy is still growing, however, so Hawaii is not in recession. How long does the economy have to shrink for the government to call it a recession? The U.S. Commerce Department says, two quarters. We have not yet had two straight quarters of economic shrinkage. There is an old joke. If your neighbor loses his job, it's a recession. If you lose your job, it's a depression. Like many jokes, this one hints at a truth. For you personally, it's all about what happens to you. And your own economic situation depends mostly on whether you have a job. Eric independently arrived at the same perspective. "For most people who count on a regular old paycheck to keep their family's economy going, their biggest fear is losing their job. How many jobs could be lost and in what sectors of the economy?" Because Wall Street, meaning the financial services industry, pays so well, it is tempting to say, jobs will be lost in the affluent sectors of the economy, affecting affluent tourist destinations like a Hawaii, but otherwise the country will be okay. It's not that simple, though. At a time when oil was already expensive on soaring demand in other countries, Wall Streeters scared by the stock market pulled out the money they were managing and put it into commodities, creating immense demand for contracts for future delivery of crude oil. Oil prices soared, accelerating the shift of consumers away from the big gas-guzzling vehicles that had become the mainstay of American auto manufacturers. That industry has laid off tens of thousands of people on the mainland, with more to come. So what lies ahead? If the Wall Street bailout plan "works," there will still be more job shrinkage on the mainland in companies that manage money or need petroleum. Many companies fit one description or the other. Farmers need fertilizer and the chemical process for making professional fertilizers uses petrochemicals.The worst may be over but the job loss won't be over. Neiman Marcus just reported lower profits as the rich curb their shopping. Ripples continue. Hawaii economists think we may escape recession altogether but our economic cooling will last another year, year and a half. Fifteen jobs are going away this weekend when Compadre's closes. The school system may trim some positions if state tax revenues keep slowing. Military deployments are hurting shops in Wahiawa. Ripples continue. Great Depression? No. Economists who say that are insulting people who really lived through the Great Depression. We're very lucky by comparison.

Senator Akaka warns about bailout

Sen. Daniel Akaka, a member of the Senate Banking Committee, warned his colleagues Tuesday that there was potential for abuse and corruption in the plan to rescue Wall Street financial firms by purchasing securities that no one else will buy at any price. There is already a sign of trouble: the lack of specifics on how to price those securities. The closest thing to a sensible idea proposes a reverse auction. The New York Times reported Monday that the trade association for Wall Street investment houses was lobbying for the broadest possible definition of securities that the feds can snap up, while some firms are angling for contracts to manage those assets for the feds. Members of Congress are also concerned about the fact that the plan provides major direct financial relief to the companies that got us into this mess but only theoretical indirect assistance to affected homeowners. The problem, which both Congress and the White House now realize, is that a number of Americans with math skills are figuring out that it would be much cheaper to simply bail out homeowners who are in arrears on their home loans. It's amusing to hear Wall Streeters explain why this is such an awful idea because their objections are Main Street objections to the bailout plan turned inside out. Tee-hee.

Covering Angel

Angel Pilago came in second in the Big Island mayoral race and wins a run-off berth against the top vote getter Billy Kenoi, former aide to Harry Kim. I got a nice email from a Hilo viewer wondering why Pilago didn't get more coverage, and some nasty emails which, while not directed at me personally or even at the station, represented an assumption that Pilago was being deliberately ignored for one reason or another. This warrants an explanation, if only to remind us all of Occam's Razor, which cuts through conspiracy theories with the enjoinder, if you hear hoofbeats, don't think "zebras." Often there is a simpler and more benign explanation than always to assume something nefarious is going on. KGMB9 was the only TV station to broadcast live from Hilo on primary night and we needed to bounce the signal up to a satellite and back down to Honolulu to manage it. It was expensive and tricky. A satellite truck had to be shipped to the Big Island by barge, which meant we couldn't use it on the transport days no matter how big a story broke. What happened on primary night was very simple. The top vote getter was in Hilo and the second-running finisher was in Kona. It wasn't physically possible to be in two places at one time. We didn't even have the option of cutting out early and racing across on the Saddle Road because in the first round of ballots Lorraine Inouye was in second place. We wound up having to cover Angel Pilago the following day. (Kenoi was late to his own victory party because he campaigned in Kona all afternoon and was driving in the opposite direction.) We had more than 50 people working election night including a crew on Kauai whose reports were transmitted by FTP over the Internet. For our station, staffing the primary meant 100% turnout. We did more broadcast and Web coverage than any other station. But as you might guess our resources are not infinite and our planners are not omniscient. In covering Angel, the devil was in the details. But nobody did it on purpose.

Cocktails and candidates

Voters sent a mixed message on mixing drinks and driving. Jon Riki Karamatsu, who was vice speaker of the Hawaii House of Representatives until he drove drunk and crashed his car, won his primary re-election bid against community leader Ty Cullen. State Sen. Ron Menor, who had his own DUI arrest and spent two days in jail, was defeated for re-election by Michelle Kidani, a former aide to City Councilwoman Rene Mansho. The mixed message came despite the fact that their districts overlap so some of the same voters were making choices in both races. As someone who doesn't drink much -- dunno why, I just don't like it as much as most people do, and when I do order a drink it's usually something wussy like a White Russian -- I haven't walked a mile in their shoes and don't have the heartfelt opinion that either a two-fisted drinker or a reformed drinker might have. But it does occur to me that there were some subtle differences in the two cases. My impression was that Menor tried to partially excuse his conduct after his arrest, while Karamatsu was more of a stand-up guy, stepping down as vice speaker before anyone could make him do it. But during the actual campaign I assume Menor was more contrite. Another possible factor, not related to the DUI issue, could be the relative strength of the challengers, but I was under the impression that Cullen was actually better known than Kidani. Backlash may have played a role, too: someone mailed an anonymous note to everyone in Karamatsu's district slamming him on the DUI. Everyone denied sending it. It just doesn't seem fair for someone who doesn't even like alcohol to moralize on drinking, but I do a lot of driving and don't approve of anyone pretending that impaired driving of any sort is anything but serious. It's hard enough to see people in crosswalks when you're sober.

Notes from the primary

Mufi Hannemann is pleased to have come so close to outright victory with two major opponents doing tag-team attacks on his rail stand. Ann Kobayashi says she's pleased to have gotten 30% when her campaign started late and she was up against an incumbent. Who is right? Both are right. Kobayashi did start late, raised less money than the mayor did, and the mayor did have the power of incumbency. She did well, considering. While she struck me as a negative candidate who was specific in her attacks but vague in taking stands of her own, others including the mayor praised her budget skills, and in times like these that's an important skillset to have. On the other hand, the virtual candidate "No Rail" had been running for months and Kobayashi was seen as part of that ticket, so to speak. Hannemann took a specific stand for rail, never waffled on it, and made himself a giant target for the local allies of the highway lobby. Kobayashi brought up various forms of transit and said she supported transit but the most specific thing she said was that she thought steel-on-steel was too expensive. I think this means the election will have the practical effect of being a rail referendum. If I'm misreading Kobayashi's position then I think others are doing the same thing and she will benefit from clarifying this. Hannemann and Kobayashi have been allies in the past and I am sorry to see that both of them now see the other as fighting below the belt. This partly stems from the actions of their supporters, for whom they might be held accountable but which they might not have ordered, and partly stems from the fact that both of them are astonishingly thin-skinned, even touchy, for public officials. Kobayashi reminded us that she enthusiastically supported Hannemann the last time he ran and still considers him a friend. I'm so sorry so see the way political campaigns strain friendships and think it ought to be worth the effort to focus campaigns on finding clever ways to promote their candidate instead of finding clever ways to zing the opposition. It will also be good if the candidates can say more about their views on matters other than rail, especially property taxes and land use issues.

How many fiberglass technicians are running?

Boning up on the candidates, one of the most interesting aspects is the diversity of professions you can find among the candidates. Not the major candidates, mind you. They are overwhelmingly incumbents or former aides to other sitting lawmakers, or lawyers. For example, Billy Kenoi, a Hilo lawyer running for mayor of the Big Island, was once an executive assistant to Harry Kim. A former city council aide is running against state Sen. Ron Menor. You can even put Ann Kobayashi in this category, since the city councilwoman is also a former aide both to Jeremy Harris and Ben Cayetano. But when you get past that lot, the challengers are a more varied group. Every third resident of Kauai is running for county council including a former hotel general manager (incumbent Jay Furfaro), a librarian (Lani Kawahara, but she also used to be an aide to Sen. Gary Hooser so I guess we can also put her in the semipro column), a fiberglass technician and surf forecaster (Bruce Pleas), a landscaper (Ken Taylor), a farmer (Daryl Kaneshiro), an entertainer (Rhoda Libre), a wedding planner (Linda Pasadava), a painter (Bob Cariffe), and an archeologist (Nancy McMahon). We've got a mortgage lender running (Bill Sanborn wants to be on the board of education) and a postal worker (Paul Bryant, ditto) and a financial advisor (Janis Akuna, ditto). Even the Honolulu mayor's race includes the owner of a Chinatown auto repair shop (George Nitta) and a UPS driver (Cameron Datanagan -- what can Brown do for you?) A jeweler is running against Honolulu Councilman Romy Cachola and a First Hawaiian investment office is running against Nestor Garcia. A law firm computer manager is running for the open Maui council seat in Kihei. One of the candidates for the council seat from Lanai is Alberta De Jetley, who so far as I know is the only working farmer left on that island. Then there is 19-year-old Resa Tsuneyoshi, also running against Menor. She is a former U.S. Senate page. Good to know she still has faith in democracy!

Have you voted?

I swung by my polling place on the way into work and there were only a few people in line. Really hot, but maybe that's just because I was trying out the new electronic equipment with the flywheel. It wasn't hard to use, but because it was new I didn't grasp every step on the first try. And, like many other voters, I'm not happy about being forced to choose just one party, restricting my choices. I was one of the younger voters, and that concerns me, because no matter how vibrant a fellow I might be, I'm not in my twenties any more, or else why do the twentysomething staffers in the KGMB newsroom keeping called me sir? Do I look like a sir to you? I didn't think so. Maybe the younger part of the electorate comes at a different hour. Your comments on the election, and on your own voting experience, are welcome, and maybe I'll be able to mention some of them on the air tonight, and on this website, where they're gonna have me streaming coverage to you.