• Government Capping Compensation?

As you shelter yourself in a cool closet from the hailstorm of healthcare promotion, Congress and the President are sliding into home plate with compensation controls in the senior offices of financial firms, … for starters. The new Corporate and Financial Institution Compensation Fairness Act will provide no other than the SEC with the ability to establish the rules on how executives are paid, and will enable government agencies to effectively control the “inappropriate risks,” practices of financial companies. Institutions with less than $1 billion in assets will be exempt. This further intrusion into the fiber of corporate America by those who have completely failed in carrying out their responsibilities to the electorate is another misguided kneejerk reaction.

This bill will empower government bureaucrats to control compensation plans that will threaten the safety of financial institutions, or adversely impact economic conditions or financial stability. Have no fear, the newly hired experts will figure this part out, what it means and how to implement it, and they will diligently look after your interests.

There’s hope, however, with some minor good news in this bill that resides in its provision for procedures for shareholder approval of golden parachutes. What this portion of the bill looks like in final form will dictate whether or not it makes any sense, but in the meantime, three cheers for the crumbs thrown at demands for common sense. We shall not hold our collective breath. Another clause that might have provided teeth in a corporate structure fix was the providing of a voice to shareholders on executive pay. It failed miserably in its final form, since the shareholder vote on executive pay will be non-binding, therefore will leave shareholders where they were before, … “we’ll tease you with a little influence on the company you own, but, … naah, just kidding, get lost and go back to your trading screens.” Shareholders, large and small, should have greater influence on the proceedings of the public companies they own, and such influence should be addressed at the Board of Directors level. The government is not improving the lot of shareholders, but is escalating its own intrusion into the boardrooms of America.

We should remember that this is the same Administration and Congress that couldn’t even track the bailout money, or put strings on the money to restrict it from getting dished out in the form of bonuses. This is also the government that threw those billions at financial institutions on the pretext that they had to be bailed, to avert a depression, yet no one in government could tell you where that money actually went. So how was it, exactly, that those bailout billions were allocated? The toxic assets could not be defined or audited, which means that the fear mongering and threats were outright lies. Wall Street skunked this Administration, as well as the last one, and as a result a colossal extortion of the taxpayer was allowed. Did anyone making these horrendous decisions ask the hundreds of thousands of businesses from coast to coast what their banking preferences might be? … Would you rather deal with a gigantic-too-big-to-fail-market-dominant bank headquartered in New York, or a medium or smaller sized regional bank? When did “failure” get expunged from the dictionary of American Capitalism?

Government intervention has reduced competition in the banking sector, allowing the favored few bailout-receiver-therefore-government-backed behemoths to attract investor support, and has enabled their acquisitions of not so fortunate competitors.

All of this frenzied government activity pretends to be response to the outrage against some of the insanity exercised by some like AIG, Goldman Sachs, and Morgan Stanley. The $11 billion plus, awaiting the bonusable at Goldman should soon make for incendiary fireworks, and support the government cause. Using public anger as cover to implement invasive measures is rather expected from a government that has failed to acknowledge or accept any responsibility for the environment that incubated the bubble which burst into a recession. Giving more power to vehicles such as the SEC for example, reminds us of the abject incompetence the SEC demonstrated through the economic extravagance that allowed Wall Street the power and influence to exploit, and then erode, the financial health of the Nation. Did the SEC also not have a front row seat to Bernie Madoff’s implementation of an extensive 40 year long grotesque personal compensation program?

Sweeping expansion of government incompetence into corporations is an invasion that will not be reversed. Other more intelligent policies should be considered instead of launching clusters of bureaucrats to invade company offices in all corners of the country. One could consider implementing laws against monopolies, but it would be more effective to start with segregating the large banking institutions into more pure line of business sectors. It really comes down to reinstating certain portions of the Glass-Steagall Act that was repealed in 1999. Hundreds of millions were expended by the large banking institutions to achieve the repeal of the Act, therefore a reversal would be very difficult. Given the present climate of Washington dependence on Wall Street cash, even “difficult” might be a stretch, however, such reinstatement would bring back some peace of mind to taxpayers in the long-term.

The critical functions provided by undistorted banks operating within narrow guidelines should be reconsidered. The contamination of many banks over the past decade, with the annexation of such things as brokerages, and the underwriting or trading of complex securities, should be reversed. Government should direct existing oversight bodies to perform their duties, including the enforcement of laws dealing with asset requirements, capital ratio leveraging, and lending guidelines. Then, government might provide shareholders with more teeth to bite when necessary, and leave them to rule over freshly formed and more independent Boards of Directors.

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• Government vs. American Capitalism

For a generation, now, we have been accommodated with a front row seat to a rigorous and seemingly intractable advance of government into the whole of America’s social fabric, and into the institutions of its capitalist system. Today we are confronted with a wave of negative wind pushing against the capitalism that has brought America its unprecedented success, as it absorbs the blame for the economic meltdown.

I am not equating capitalism with free markets here as is too often done, because that would imply an inclusion of international communities into a common basket, and there has to be balance and common sense in the application of “free trade,” between participants as we have discussed in previous articles.

Recessions inevitably deliver capitalism a bad rap. Making matters worse, there are usually groups or individuals who have taken advantage of power and influence, or who hustle the provenance of panicked confusion into magnified opportunities for fortune creation. All the while, wide swaths of society are struggling to meet basic needs. Visible abuse of the system that leads to wealth concentration provides thresholds over which those so inclined will leap to promote expansion of government and its insinuation into the corporate fiber of the Nation. Such intrusions usually come from those with little grasp of the elements at the heart of economic growth, human nature, creativity and the human spirit. On the other hand, extravagant, unrestrained, and unconscious excess fosters jealousy, and reaction. It can also propel overreaction, which in turn empowers those in government who seek increases in government intervention at all levels of commerce.

Such exercises in reactive belligerence pretending concern for the public “good,” are actually acts of self-interest intoxicated by ideology, or worse, driven by overwhelming ego. The reactive process ignores long term consequences of hysterically applied policies, and absolutely cannot effectively evaluate the secondary or tertiary repercussions.

We lament the often-declared unintended consequences of unctuously presented self-righteous actions such as the promotion of dubiously structured mortgages. It is reasonable to expect a chicken in every pot. It was, however, unreasonable to have politicized the American dream of home ownership into a structural expectation and promoted it as a fundamental right. Somehow, the “home” became the vessel that would bring forth the promise of collective prosperity. Both of the dominant American political assertions, Republican and Democrat, signed onto the program. Both sides of the political isle bent all rules of common sense to exert pressure in effort to curry favor with the electorate, and corporate benefactors, while satisfying expectations of lobbyists.

The department of Housing and Urban Development from the early ‘90s on, pushed minority applicant quotas on mortgage bankers, and set targets for the purchase of less than median mortgages by Fanny Mae and Freddie Mac (FM & FM). With the taxpayer on the hook for trillions in questionable debt, banks and bank executives were dancing in risk-free ballrooms up to the rafter in money. As the trillions accumulated, FM & FM, with the applause of Wall Street financial institutions such as Morgan and Goldman, “creatively-accounted” for the real value of the toxic assets that taxpayers would one day be required to cover. Oversight? Sure there was oversight – oversight that appropriate kickbacks made their way to all of the proper pockets. The Clinton Administration and Congress pushed banks to adhere to the Community Reinvestment Act (CRA) in order to be allowed to diversify. Again, where was the risk? Thank you FM & FM. No, make that, thank you taxpayers. Then along came George Bush with the American Dream Downpayment Initiative (ADDI) signed into law in December 2003 to increase home ownership rates with funds to be provided to first time buyers for down payments and closing costs.

Making matters more fragile, in came galloping the Morgan and Goldman types, smarter and more ruthless than the deplorable dunces at AIG who were easily perverted into insuring Collateralized Debt Obligations, and seducing banks to over-leverage, using complex instruments the bankers didn’t understand. The financial community availed itself self-servingly of the opportunity created by the government’s intervention. Morgan, Goldman and other investment banks made billions selling tainted goods to banks and to foreign governments. Lack of awareness and understanding by the general community encouraged a galvanization of international endorsements for what were worthless toxic assets from the outset. The long-term consequences of this extensive and forceful government intervention will have unintentionally synthesized some extremely substantive burdens on our grandchildren.

What old and repeated lesson has once more been reinforced from this generation-long exercise?

Government is using taxpayers’ money to build powerful infrastructures that will in effect work against them, and encroach on their freedoms. Uncontrolled government intervention and cronyism are destructive potencies that destroy the fundamental bulwarks of the capitalist system, and Washington has been practicing the schemes for too long. In so doing it has eroded the openness and efficiency of America‘s economic broad-wealth creating environment. I say broad because any government reinforcement of excessive concentration of wealth and power is not conducive to the long-term health of the broader society.

Entrepreneurial energies bloom most abundantly in small clusters. The more the better, but each succeeds best without encumbrance of committees, or group designed strategies. Government on the other hand is by its nature a giant mushrooming amoeba, incapable of creativity, requiring endless approvals, with all departments and agencies in a continuous phase of expansion, justified by egos requiring satisfaction and aggrandizing the turf. Government bureaucracy instills dependence upon itself whenever and wherever possible. History shouts that dependence on government becomes dangerously habitual, and leads to loss of liberty. That goes for individuals, as well as for businesses.

Stifling true entrepreneurial spirit will destroy that critical energy at the foundation of the American economy. It is this fundamentally critical energy that strives to anticipate needs or wants of the broader society, then creatively delivers solutions, and augments output. It strives to become educated in order to better understand whatever might advance its ascent along the risky path to success, and endeavors to minimize its assumptions. Above all it applies as much common sense as it can muster to minimize the chances of failure, and improve the odds of producing something greater than what began. As this energy succeeds, many prosper and benefit. Entrepreneurial independence operating within the boundaries of the Nation’s laws has for two centuries differentiated America from every other country on Earth.

It is understandable that not everyone can be an entrepreneur in the strictest sense, however, each can be entrepreneurial in personal practice and mindset, and each one of us can be thoughtful. At the very least, we can all void jealousies that might restrain that spirit in others, or attempt to obstruct their right to exercise positive natural tendencies and capacities. So doing might quell the demagoguery that is inflating the ascent against the private sector, productivity, and the creation of wealth.

We should not accept deceitful rationalizations artfully packaged through demagoguery and homiletics, or allow them to deliver prepackaged thinking on our behalf. We are presented with economic realities which demand reason, and summon our uncompromised reasoning. The economic challenges presented should apprehend the participation of the whole of population. Such participation is occasion for self-education at a very singular level to understand, as much as is possible, all of the causes that led to the events now chastising the country. The comprehension will guide the electorate toward a more judicious discernment, as it navigates through the political passage ahead. Assuming that others “on The Hill,” will have the answers, would be a gross abdication of rights and capabilities.

Capitalism provides the platform for the individual to push the boundaries of creativity and productivity in the creation of wealth. Government’s role is to protect the environment, through laws, and judicious oversight, within which capitalism is allowed to strive. Broad participation is required, without ambiguity, if there is to be sensible pushback on the advancing and infringing hoards from “The Hill.”

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• Bernanke And The Super Fed Say It's Over

The loud, national sigh we heard this week was America gratefully, but suspiciously, acknowledging Ben Bernanke’s claims that, well, it’s over. The Fed Chair is satisfied that the recession is in a turn around mode, or at least stabilizing. Covering his backdoor, he added that America can look forward to a sluggish recovery. Just in case anyone missed it, he added, with all the vigor and compassion of a snail, “Unemployment will stay high for some time. It’s not going to feel like a very strong economy.”

You cannot get more confident than that, can you? With that level of insight you can now go out and make major decisions for your own future, such as, whether or not to buy a house, upgrade your car, perhaps even fly to Europe on the wings of hope. No? This is the kind of foggy thinking and direction we have come to expect from the independent organization that controls America’s most important economic element – America’s money. Did he define an exit strategy for the money being fed into the system? Did he even describe where, or how, that money is doing anyone any good? Not so much.

Bernanke is the same expert who only last year told Congress wonderful fairytales about housing, the markets, and the economy just as the bubble was beginning its implosion. This is the also the Bernanke who, along with Geithner, in a desperate moment of panic made a deal with J.P. Morgan, taking on $30 billion of toxic derivatives from Bear Stearns. Even former Fed Chairman Paul Volcker thought the deal impelled the Fed to, “extend to the very edge of its lawful and implied powers.” What an incredible understatement. The agreement viewable here, was not a loan as claimed, but an outright purchase of an ephemeral mountain of garbage. It was in effect a gift. Did anyone in Congress jump on this breach of law? Of course not. No one would dare question The Fed. Did anyone explain why Lehman was sent over into the abyss, but not Bear? Don’t ask. You don’t want to know. You also won’t be told how it was possible that giant firms including A.I.G., were allowed to gamble with complex derivatives that their own executives didn’t understand. The crumbs leave a trail from Wall Street, all the way to Congress.

You will note that the first signature on the hastily created agreement (linked above) is Tim Geithner’s. You can judge for yourself with a little analysis of Tim’s “signature,” what help such a massive ego (IMHO), will bring to your neighborhood. While you’re at it, also check out Morgan CEO James Dimon’s scribble on the signature line. Let me know what you think he’s all about. Looking at that signature, I doubt anyone really knows, but in the meantime, understand that he has more influence on your life than most of your friends do. These are some of the egos that were so overwhelmed with arrogance, and so confident in self intelligence, that there was nothing that the economic super-bubble would throw at them which couldn’t be handled. As the world economy melted about their ankles, all they could do was panic, and in turn panic everyone around them.

Bernanke, Geithner and their buddies are effectively in charge of taking good care of the largest members of the banking industry. This does not include your pocket book, or your wellbeing. Although Greenspan was vilified, and slapped into anonymity for having completely missed the housing bubble, Bernanke was right there with him promoting almost non-existent interest rates, downplaying obvious dangers of the bloated borrowing, and belittling concerns of inflation. The fact that no one in America was saving a dime since there was no Interest incentive to do so, didn’t seem to matter. In fact, it still does not seem to matter to Bernanke. How much are You getting on your savings account? How’s your borrowing capacity coming along? Getting any good business loans at cheap interest rates lately? Wall Street will make money if you spend, if you churn, but not so much if you build equity in those resources that matter most to You or if you invest in yourself.

When you listen to The Fed Chairman's claim that he can tighten monetary policy, and actuate programs such as selling securities from its portfolio to take cash out of the market, as needed to head off inflationary pressures, .... based on past record, you can now bet against him. Beyond applying common sense to his present prognostications, his track record suggests that he will not be able to reign-in inflationary pressures. You can assume that with the fast expanding money supply, inflation is returning for a visit that may be reminiscent of the late ‘70s. The amounts flying into the system are enormous, and making the assumption that The Fed will be able to “repurchase,” or appreciably retract the process, is to assume the improbable will occur. When Bernanke says things like, “I don’t regret anything we’ve done,” heed the arrogance in the context of the domain which is his sovereignty. Most importantly take everything else he says with a grain of salt, and let's remember that he’s referring to such things as taking taxpayer money/debt for the bailout of institutions that should have been left to flail in the currents of the options available to them in law.

Are we to believe anything Bernanke, or his pal Tim, tell us? Nothing he did or said in the past was either rational, intelligent, or truthful. Alright, so it’s easy to beat up on him. Oh, but wait, he’s still in charge of The Fed. Along with Geithner, he remains in complete control of all things monetary in America. Why? Because neither the President nor Congress have either the knowledge or the backbone to question The Fed and its friends on Wall Street. They certainly don’t have the intellectual or emotional capacity to implement any serious change at the top of the money food chain where it is most needed.

It is unclear what has misfired in the President’s acumen when we hear yesterday from Bernanke that Obama wants to give The Fed new supervisory powers to oversee the financial system. Isn’t that just what you wanted to hear? The same Fed and Bernanke who have been so intuitive, diligent and ingenious over the past decade will be given more power? They don’t report to anyone now, if they’re not in the mood, so how will more influence be of advantage to the overburdened taxpayers, exactly? How about calling for the observance and application of existing laws, or implementing current oversight capabilities before expanding and swelling expensive government bureaucracies? How about appealing to Washington politicians for some demonstration that they understand why taxpayers have elected them? How about demanding a little transparency? Apply the controls available, without inventing new ones, and refrain from creating a Nation dependent on its government (through politicized cronyism) for financial success. Prosperity has no address on that road.

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• Goldman Sachs: Thank You Mr. President

Dear Mr. President,

This should prove a challenging week on the PR front for us at Goldman Sachs. There are a few situations surfacing for which appropriate clarification will provide you sufficient context in the event that the inevitable questions arise. We also have a couple of suggestions.

Regarding this nastiness of the past week, please do not be too concerned about all this talk surrounding our super high-speed fully automated transaction processors. Also please understand that they are our future. Admittedly, we are enamored with the technological prowess we have acquired. Don’t believe those jealous rumors coming from begrudging low-level corners of the financial community, whining about our “edge.” We run a clean and very efficient business that can withstand any scrutiny. Our company represents about one quarter of all program trading on the NYSE. We realize you are not familiar with our business or what we do, but just know that the billions in valuations that represent our daily trades require extremely fast, exceptionally complex algorithms running on the largest, and fastest processors money can buy, with as close proximity to the NYSE as is physically possible. This is part of our multifaceted long-term strategic plan.

This business is not for the feint of heart. We take risks, but we are extremely adept at minimizing our exposure. That’s all. Don’t listen to noises suggesting that we make money on trades even when we buy and sell at the same price levels to ourselves. Everyone in the business is familiar with our fee structures. What’s a half penny a trade anyway? Nothing. There is no magic. As for front running orders with our faster than light system on stocks or options, well, that is just not the way we work, and it’s not even legal, is it? We’ll get back to you on that. In these difficult times people can become very excited, and reactive to unwarranted rumors. Pay no attention to hearsay coming from bottom feeders. … Front running indeed.

Thank the guys at Justice and the FBI for being so quick to respond, and picking up that frustrated dancer, Sergey Aleynikov. Stealing secret algorithms should be punishable by incarceration for life. Oh, could you check into what’s wrong with that judge who let him out on bail? Bail should be revoked. This is a matter of grave concern, and is of National import. As we said, someone could get a hold of this program and use it to manipulate the markets. OK, not “manipulate,” so much as harm the markets. We would never manipulate of course, but someone else certainly could. This is no superficial matter. This breach and the whole episode must be snuffed out before it develops any legs. This is no time to demonstrate any sign of weakness or lethargy in addressing such a heinous affront to the intellectual property at the deepest core of our business, and in some ways, the characterization of its essence.

You should see what we pay the guys like Sergey who develop and run our systems. It takes half a million a year to get them out of bed, but we tie them up for life with more legalese than they can understand. No matter what precautionary measures are implemented, there always has to be one that must feed a need we can’t fill and he becomes an abomination, turning to criminal activity.

On other matters, thank you for keeping those lovable and sleepy bureaucrats at the SEC off our backs. We also have to express our sincere gratitude for leaving the AIG dogs to die without clamor. Our involvement was very profitable, but if it had surfaced too visibly, the exposure would have been embarrassing. Our boy Tim is pretty slick isn’t he? He left all the folks in place at AIG who rode that trick pony over the abyss. Amazing talent. Keep him in the job for another year, or two, won’t you? Make sure the billions in bailout checks are cashed before sending him to Paris as ambassador. We need to make sure our friends on the Street are still standing. Competition is good for us, to a certain extent. The smaller fish keep prying eyes busy.

On a sadder note, we feel really bad for the Iceland economic implosion, but hey, we didn’t force them to buy our derivative packages. We sell what we can to make money. They had cash that needed to find a home, and we obliged.

We should point out that operating speculative derivative or futures markets outside the bounds of national or international oversight is fundamentally critical and necessary given the world we now live in. How else could we possibly continue to take advantage of events and situations around the globe unfolding at lightning speed and impacting the fluctuations in such things as commodities or financial instruments. You can get more background on this from Tim, but being nimble in a rapidly changing environment is critical to success. Nothing moves faster than money flowing over electronic waves. Agility is part of our very survival.

Naming our colleague Philip Murphy to an ambassadorship in Germany is a nice touch, which should provide our firm with a very friendly ear on governance in the EU at a time when these countries are fighting over each other’s relative “tax advantages.” What a bunch. They’re killing capitalism with their policies. You can’t find a real capitalist over there anymore. Everyone is an employee, from the Chairman to the clerk, no one is an owner, and everybody waits for a paycheck and the year-end bonus. What’s this world coming to?

Speaking of bonuses, you will be hearing some announcements about our historically large earnings for fiscal 2009, which means it is once again bonus time. The numbers might sound really big, really, really big, but keep in mind that we have top-notch employees we aim to retain in branches spread around the world. If we didn’t provide them ample compensation, they would leave for greener pastures. Do you recall when we told you that about the AIG bonuses, and after a few days you succumbed to pressure, making some angry statements about … well you remember, let’s not have a repeat of that sordid week, shall we. We’re putting aside billions to cover all benefits and compensation, so we are good to go. We are simply in great shape. You should be pleased that at least one company in this country really has its act together. This will in turn enable us to be of help to others as we all weather the economic storm together. Do us all a favor and ignore the squawking.

We might point out that California needs a visit. They’re cracking at the seams in Sacramento. Tell Arnold we said hello, and we’ll see what we can do to help out in a few weeks when we get around to it. He’s not hurting badly enough yet. We’ll wait till they repossess his state issued limousine, at which point we’ll have a chat. Don’t you find his IOU business hilarious? Those Californians are just a little too arrogant, thinking all trends start in the West, and all innovation starts there. We like your attitude, or is it Timmy’s, on holding off and making them sweat before sending in the bailout team. What a day that will be. Bailing out a bankrupt State with bailout money created by debt financing.

Please continue to demonstrate insouciance toward rising unemployment which we believe is heading to 11%. Such distractions can be disquieting and being President requires a clear mind, … so many decisions, so much to learn, so many speeches to give, so many trips to take.

One final note to buttress against the reactionary comments from some invidious corners attacking us with “too big to fail,” accusations. Don’t listen to this jealous and frivolous drivel. We are a proud organization seeped in history and what is good for Goldman Sachs is good for America.

Mr. President, please just let the boys take care of that money supply expansion machine, and we will do our very best to manage its trade, efficiently and diligently. We will also endeavor to do our best to always find a home for your debt.

We know you are grateful for our past contributions, and likewise, we thank you for your continuing support in these emotional and turbulent moments.

Sincerely.
Your Friends at G.S.

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• Obama’s Russian Misadventure

The recent representation of America at the Moscow summit delivered a mutually agreed-to target for the removal of some nuclear warheads and launchers. Almost. The relationship was neither improved nor set back, and America achieved little beyond being dealt a little embarrassment at the hands of Putin. The mainstream media (MSM) is applauding the event as a job well done. What meeting could it possibly be writing about with such approval and commendation?

Getting rid of antiquated and cumbersome warheads, 2,200 down to 1,500 or so, and trimming delivery rockets from 1,600 to around 1,000, is a good thing, if it ever happens, but such reduction would have absolutely no impact on either nation’s present realities. Elimination of a few war heads, or WVMDs, (weapons of very massive destruction), leaves entrenched and siloed enough destructive power to annihilate everything living on the face of the Earth a few times over. We shall hear over the coming months whether the Administration’s claims of these reductions ever actually come to pass. The odds are not terribly favorable to the President’s claims. Any part-time student of international affairs knows that Putin will not allow any such compliance under his watch, if the U.S. proceeds with its defense shield deployment in Poland and Czech.

Did America advance ground on obtaining any cooperation whatsoever on its objective of reigning-in Iran? Not a nod. Putin is very comfortable with selling Iran anything nuclear that it wishes to put its hands on. He has to sell Iranians something, anything, since they won’t buy his cars. Iran strategically presents the most critical foreign relations pillar to potential peace in the Middle East, and for now it remains an ace in Putin’s hand.

Countries expected by Putin of remaining within the “Russian sphere of influence,” such as Ukraine and Georgia, are making efforts to slip away from the bear’s grasp through entry into NATO. While the U.S. supports their inclusion, this stance is considered a direct threat to Russian hegemony in the region, further aggravated by the U.S. ballistic missile defense system intentions. Putin is not buying the sales pitch that this deployment is intended as a deterrent against Iran, no matter how the U.S. presents it. Putin just can’t take a joke. Of course it’s intended to protect against Russian aggression, however, in reality, well, it would augment the threat looming over Moscow, … just in case.

When Obama said to a business audience in Moscow, “Along the way, you gave us a pretty good deal on Alaska. Thank you,” was this intended to liven the discussion? Was it delivered to remind them Czar Alexander II, who received less than a penny per acre in gold for it, had shafted them? ... Under 21st Century Russian perception it is worse than a really bad deal. Is this a novel method of referencing a long history of trade? Russians never quite swallowed that pill, and Obama might have thought twice, or thrice, before raising this caustic historical Russian forget-me-not on Russian soil. Given Alaska’s current importance as a source of natural resources, it should have been evident that such recollection would rub some salt on an old wound. It should also have been obvious that it would be received as a backhand smack at Putin’s urgent quest for new productive oil and gas fields in Siberia, and more recently in contested areas of the Arctic. It would serve little here to imagine in much detail how the MSM might have treated Bush, had he made such a gaffe. Obama should understand that he is addressing a humiliated empire, desperate for a return to former glory.

Some of Putin’s highest priorities are oil and gas, their control, and their prices. He will support any measures that can sustain oil prices above $65 per barrel so that he can continue to fund his expensive power base. America's wishes are for something less than $40 per barrel, rendering Putin's ears deaf to any such discussion on this topic. Putin also needs to be seen as the nation’s strongman, and has been almost Hollywoodian in the shaping of that image. He must be seen as the defender of the motherland, and he enjoys approval by a comfortable majority of his countrymen. While Obama’s insecurity surfaces as arrogance, IMHO, Putin’s insecurity effuses as “My ego will take no prisoners, and my superiority doesn’t care what you think.” Any slights to his ego can only result in automatic and deep setbacks to pretense of cozy relations even though there is a long laundry list of expectations by each side.

The MSM has applauded Obama’s appeal to Russia’s youth that they should ignore past agenda (Putin), and take responsibility for a new 21st century agenda. Such communing with young Russians should help negotiations along astonishingly well with the country’s boss. Still, the MSM considers this strangeness, “a solid foundation,” for the future of the relationship. There is always something to be said for looking at a glass as being half full. There is also something to be said for realistic assessment, which provides a viable platform for effective strategic thinking. This U.S. representation in Moscow, IMHO, established absolutely no inroads that might provide launching pads for addressing the serious confrontational bargaining sessions that Putin’s long-established, aggressive and firm belligerence might budge for.

Obama apologists have excused him with commentary that he was simply stating historical fact. Such perception is baffling. Putin has been around a while, perhaps when visiting him, Obama should have taken more care to recall that his title is that of Prime Minister. No one in Russia does anything of import that his iron fist does not pre-approve. This too is historical fact, but perhaps Obama was tired, and when he mentioned Stalin, well, Stalin is part of Russian history after all, is he not?

The Moscow trip was not a favorable photo-op as it turned out, with Putin doing his best to appear nonplussed, and the meetings seemed to have accomplished nothing of substance. What was the point? The warheads will likely stay where they are, the missile shield has a doubtful future, and Putin will continue feeding Iran’s dreams of nuclear power. Putin understands America’s overwhelming military power. He cannot replicate it, however, he will remain an irritant, unwilling to appear acquiescent to any demands from America and the West. We can be assured that any backwards move Putin might relent to, he will extract maximum price for.

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