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The Biz Roundup January 24

Phil Gramm didn’t cause the recession. Well, not all of it, anyway.

Gramm said he arrived in Washington in 1978 convinced as an economist that subsidizing housing and mortgage lending was a bad idea, but was soon won over to Washington’s pro-housing consensus. During his 1990 U.S. Senate campaign, he said, polls revealed that 82% of Texas homeowners supported him over his Democratic opponent. After that, “You didn’t have to convince me that homeownership was a good thing,” he joked. . . .

Gramm’s solution is tougher mortgage regulation. Down payments should be at least 5%, borrowers should be required to provide tangible proof of income, adjustable rate mortgages should only be approved if the borrowers can afford to make the payments after the rates have adjusted upward, home equity loans should be restricted, etc.

(“Phil Gramm Says Crisis Is (Mostly) Not His Fault,” Time.com, January 24) As a corrective to what Gramm calls the “politicization of homeownership, he request regulations requiring a 5% down payment? Borrowers should be required to show proof of income? Borrowers should only be approved if they can make payments on the adjusted interest rates? How, might I ask, did the “politicization of homeownership” require mortgage lenders to stick a straw in their head and suck half their brains out?


Google is feeling very lucky today.

Another inauguration took place in Washington this week — Google Inc. officially became a political power player. In October, Google was only hours from being sued by the Justice Department as a Web-search monopolist. Today, less than three years after it made its first Washington hire, the Internet giant is poised to capitalize on its backing of President Obama and pursue its agenda in the nation’s capital. . . .

At the top of the company’s policy priorities are two that consumer advocates largely champion. First, it wants to expand high-speed Internet access so people can use its Web services more often. It also is pushing for so-called network neutrality: prohibitions on telecommunications companies charging websites for faster delivery of their content.

“Google is not just a benign corporate entity. It has a variety of special interests,” said Jeff Chester, the executive director of the Center for Digital Democracy, who has sparred with Google over data-privacy issues. “They’re in a great position to push their agenda through with the support of the president and the Democrats in Congress.”

(“Google ready to pursue its agenda in Washington,” Los Angeles Times, January 24) I am a fierce advocate of network neutrality and even fiercer advocate for getting the bloody country wired for high-speed Internet (I live in Los Angeles and we’re not even wired for cable, let alone high-speed Internet. Sheesh!). And Google has a monopoly on search and online advertising because, well, they do it so much better than everyone else (what I call a “value’ monopoly). So if Google has finally found its (soon ot be powerful) voice in Washington, I lift my glass to them and say, “Hair’s t’us. Qua’s lik us? Nain, and thair all deid.”


So now the lines at Starbucks are going to get really, really slow.

Diane Daggatt, a managing director at McAdams Wright Ragen, wrote in a note to clients, “Locally, we’re hearing another big round of layoffs is coming at SBUX. Perhaps 1,000 or one-third of SBUX’s headquarters may be cut as well as some district managers and field employees, but not baristas.”

(“Starbucks May Let More Go,” Seattle Post-Intelligencer, January 23) Here’s the million-dollar question: are Starbucks execs going to get bonuses this year? How about we just give them Starbucks gift cards. “Mr. Schulz, the good news is that your bonus is $10 million this year! The bad news? Well, we’re giving you all of that bonus as a Starbucks gift card. Drink up!”


So how do you meet expectations in this economy? Don’t set any.

As a result, corporate earnings outlooks and other forecasts are becoming increasingly rare — and that inability to see around the next corner is compounding an already serious lack of investor confidence.

“You might as well throw out the old models because they don’t work in this environment,” said Jim Young, CEO of Union Pacific Corp (UNP.N) this week when asked why the No. 1 U.S. railroad has not issued its customary earnings forecast for first quarter and full year 2009.

(“In unchartered waters, earnings outlooks dry up,” Reuters, January 22) The only empirical forecast you can make when your business goes off the cliff is that you’re going to hit the ground.


If you lost your job, take heart. You could’ve lost your job in Russia.(“One million Russians lost jobs in Dec-official,” Reuters, January 24)

Or worse. You could’ve lost your job in Silicon Valley.(“Silicon Valley region unemployment jumps to 7.8 percent; California rate up to 9.3 percent,” San Jose Mercury News, January 23)

And you expected the Chinese to say what, exactly, Mr. Geithner? Oops, you caught us, he-he?(“China central bank refutes currency manipulation allegation, warns trade protectionism,” Xinhua, January 24)

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