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The Roundup July 31

Pile of money $100 bills
They’re having a great recession on Wall Street!

The big bonus was for scamming the Bush Administration.

Nine banks that received government aid money paid out bonuses of nearly $33 billion last year — including more than $1 million apiece to nearly 5,000 employees — despite huge losses that plunged the U.S. into economic turmoil.

(“Bank Bonus Tab: $33 Billion,” Wall Street Journal, July 31) Think about it. California is releasing prisoners, abandoning public school students, closing state parks, and throwing state workers out of their homes in order to save $24 billion over the next few months. ‘Nuff said. Now, as Anton Ego says, let’s have a little perspective with our wine. When you break down these bonuses, a sizable chunk are being paid out in banks that didn’t want TARP funds. Remember? Henry “Dr. Manhattan” Paulson locked them in a room and wouldn’t give them any Campari until they all agreed to take the funds. And there really was an emergency — we faced a total breakdown of the financial system. Now, back to the wine: all the banks listed had a big hand in creating the bubble that nearly sank the world financial system back in September. Somehow rewarding them for driving the financial system into a iceberg seems a bit backwards. And, considering that these bozos are supposed to be financial wizards, nine banks paid out more in bonuses than they earned in profits. Citigroup lost nearly $28 billion but paid out $5.3 billion in bonuses; Merrill Lynch also lost close to $28 billion and paid out $3.6 billion in bonuses. And Wells Fargo, bless their cold little hearts, paid out nearly $1 billion in bonuses in a year in which they lost $43 billion. Yes, I understand that some parts of the bank units were profitable, but there has to be some sort of balance or the red ink will sink these banks. Clawing back previous bonuses? Like for the folks who bought and sold all this CDO garbage? How about paying bonuses in stock only? At least in this way the bonuses are tied to the overall performance of the company. But a bonus system that is little more than robbing the corpse just doesn’t ring true as smart business.


Aren’t you tired of the good news always being bad news that isn’t as bad as it used to be?

Preliminary commerce department figures showed on Friday that US gross domestic product declined by an annualised rate of 1 per cent in the second quarter after declining by a revised 6.4 per cent during the first three months of the year. While the contraction was less severe than the in the previous three quarters, it was the first time since official figures started in 1947 that the US has suffered four consecutive periods of declining output. . . .

The economic slowdown was cushioned by a boost in government spending, a reduction in imports and smaller declines in business investment and spending on non-residential structures. Federal spending grew by 10.9 per cent compared with a drop of 4.3 per cent in the previous quarter, as an aggressive programme set in.

“Savings – rather than purchases – have been supported by lower taxes and higher transfers. Consumption remains constrained by large job losses, negative wealth effect and scarce credit,” noted economists at BNP Paribas.

(“US GDP contraction slows to 1%,” Financial Times, July 31)The not-so-bad news is this. The slowdown in the recession had much to do with Obama’s economic stimulus. But only a veritable trickle has come out of that stimulus; expect the sluice gates to open considerably wider. Even with states like Pennsylvania and California slashing spending and tossing crowds of people into unemployment, the increased federal spending may push up GDP growth. But as Yogi Berra once said, it’s not over until it’s over. And there’s a lot more of this recession game to play out.


What exactly is that naked lady doing with that bicycle?

Alabama’s ban on a wine that features a nude nymph on the label has become a business opportunity for a California vintner who is preparing a marketing campaign to capitalize on being “Banned in Bama.”

The Alabama Alcoholic Beverage Control Board recently told stores and restaurants to quit serving Cycles Gladiator wine because of the label.

Board attorney Bob Martin said the stylized, art-nouveau rendition of a nude female with a flying bicycle violated Alabama rules against displaying “a person posed in an immoral or sensuous manner.”

Bill Leigon, president of Hahn Family Wines in Soledad, Calif., said Thursday that visits to the company’s website increased tenfold since news of the ban broke late last week, and that callers from across the country have been asking where they can buy the wine.

Because of the interest, he’s developing store displays that say “Banned in Bama” and “Taste What They Can’t Have in Alabama.”

(“For Alabama pinot noir lovers, it’s no bottoms up,” Associated Press, July 31) Is there a word in English for bicycle fetish? Please, someone tell me how a nude woman flying with a bicycle is immoral or sensuous — and what the hell is going on in that label anyway? Ban it for being nonsense. But I had a serious point here. What was it? Oh, I remember. All good marketers understand that being “banned” somewhere can be a powerful marketing tool. The Catholic church “banned” The Last Temptation of Christ; not only did this ban have no effect on ticket, it drove far more people into the theater than otherwise would have gone. So the Catholic hierarchy has learned to be circumspect, choosing to silently sit out offensive garbage like Angels and Demons rather than provoke interest. There’s no difference here. Hahn Family Wines has gotten millions of dollars of free publicity from this ban and is jumping all over this ban as a marketing tool. Remember about this as you develop the labeling for your next product.

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