Sunday, November 24, 2013

How Very "Improper" Of Them. Now Let's Move On, Shall We?

     There was a Looney Tunes-like quality to South Dakota Attorney General Marty Jackley's blow-off of any further state investigation of that 550 grand of the State of South Dakota's grant money being diverted from a meat packing plant (Northern Beef Processors) in Aberdeen to a private contractor.  The AG seemed to be saying the political equivalent of "that's all, folks"  in a Dirk Lammers/Bob Mercer-bylined article published in yesterday's (11/23) Rapid City Journal about the subject.  No state charges have been filed as a result of Jackley's conclusion that the grant money was, as the RCJ piece put it,  "improperly diverted" to a private entity that used it to pay off some of its obligations.  AG Jackley further went on to say that his office would assist the U.S. Attorney and the U.S. Department of Justice in their investigations of the matter.  The money was part of a $1 million dollar grant that was handed over in 2011 to the failed Northern Beef Packers venture in Aberdeen, South Dakota, intended to be spent on construction and equipment costs. Next thing you know, $550 thousand of it went to a private firm called SDRC that used it to pay "immigration loan monitoring fees" that were probably accrued as part of its business of seeking out foreign investors (via the federal EB-5 program) to put money into American ventures in return for visas that could lead to permanent residency in the United States.
     That  this was deemed "improper" strikes me as one of the classic understatements in recent official rhetoric, as I think words like "outrageous" and "incomprehensible" are probably more descriptive of this occurrence.  That Jackley announced no plans to investigate further strikes me as a weak response to what should be an alarming breakdown in the granting process itself.  I have no doubt that South Dakota's grant system has controls in it to make sure that grant money is used for its intended purposes and I want to know why those controls weren't applied to the meatpacking plant, which got the million for capital costs and turned over more than half of it to a separate, privately-held entity to help that entity cover its operating costs.  To me this seems absolutely incredible and more than worthy of deeper investigation.
     I recently urged Governor Daugaard to step into this whole venture and call for a comprehensive state audit of every single transaction between and among the State of South Dakota, Norther Beef, SDRC and any other individuals involved in our state's involvement with the EB-5 program.  More immediately, I want to know whose oversight went missing when a significant chunk of cash was ripped off from a state grant and handed over to an enterprise that had nothing to do with the grant's intended purpose. 

Friday, November 22, 2013

Too Many Windmills, Not Enough Tilt

     I spent a couple of hours last night at the "debate" between GOP U.S. Senate candidates Stace Nelson and Annette Bosworth.  The South Dakota Tech-hosted event could attract just those two out of a field of 4 candidates running for the GOP nod in the coming primary (Larry Rhoden and Mike Rounds were absent, both pleading "prior commitments").  That Nelson and Bosworth showed up just the same said much about their commitments to their unrealistic shots at the nomination.  That they couldn't break out of their standard Tea Party/right wing fringe rhetorical parameters said even more about the near-impossibility of their respective crusades.  Don Quixote himself would shake his head at the futility of their prospects. 
     They lashed out at the national debt (though neither had much of an answer to my question about how they would stimulate the economy to generate tax revenues as a way of reducing the debt, Bosworth saying she would get rid of regulations that stifle free enterprise, Nelson resoundingly announcing that he'd repeal Obamacare--two answers that are pablum for the extreme right but don't resonate in real life), decried the bloated bureaucracy in D.C. (a rhetorical safe harbor for would-be federal officials who don't have much in the way of realistic plans to reduce the size of government), denounced the Affordable Care Act (Bosworth calling it "evil", Nelson comparing it to what he considers the overly-bureaucratized and poorly  delivered health care that he gets from the Veterans Administration.  Neither candidate gave up much in the way of how they would fix this country's healthcare status quo.  Bosworth said she would remove the layers of people who get between physicians and their patients and move toward a direct cash payment system at the points of contact--and she wasn't kidding. Nelson said he would let the free market work, whatever that means.) 
     The choir these two were preaching to was small (around 60) in numbers but sizable in enthusiasm, with repeated bursts of applause for answers that to me seemed generally incoherent and rambling.  Nelson was especially fond of interspersing his comments with irrelevant references to his service in the United States Marine Corps that apparently were intended to make some sort of a point but essentially carried him off into tangents that had little to do with the discussion at hand.  Bosworth explained that she decided to go into medicine because, having been raised on a farm, she "hated to do hog chores," which struck me as a rather flip, if not altogether disdainfully condescending, disregard for the huge bloc of voters that will come from the agricultural production communities in this ag-oriented state of South Dakota.
     Anyway, after two hours of this I got the idea and left during the break.  All I can say is that I appreciate the willingness of Bosworth and Nelson to get into the process of serving as elected officials and I wish them both well in their campaigns and coming endeavors. 

    

Thursday, November 21, 2013

South Dakota needs to look at this EB-5 thing.

     Okay, I get that the Attorney General's office and the U.S. Attorney are concurrently investigating the EB-5 investment program that financed the meatpacking plant fiasco in Aberdeen with funds provided by foreign investors who, as part of their inducement to put money into emerging enterprises in the United States, are also able to obtain green cards for legal entry into the U.S.  Excellent conventional media reportage by Bob Mercer (available in the Rapid City Journal and other papers around the state) and aggressive blogosphere look-sees by Cory Heidelberger over at The Madville Times (just google that phrase, you'll find it) will provide plenty of background and details.
     From the avalanche of facts available so far, it's clear that the State of South Dakota, through its Governor's Office of Economic Development, worked closely with  a privately held firm called SDRC, Inc. on a contractual basis that gave administrative functions involving the EB-5 program to SDRC.  Last September, the contract was canceled by South Dakota "for cause."  Okay, that's fine.  But what I want to know is, what was the "cause?"  I'm perfectly willing to accept that both the state and federal  investigative forces need to operate in their respective vacuums of confidentiality at this stage of the game, but have every reason to expect to know the specifics about a contract revocation between South Dakota and SDRC, particularly since there was no indication that the "cause" was itself a subject of investigation by state and federal gumshoes.
     More  than that, I think an audit of the entire relationship between South Dakota and SDRC is perfectly in order, considering that state time and expenditures were no doubt part of the dealings involved here.  When asked to initiate such an audit during the past few days, a spokesman for Governor Dennis Daugaard's offce was reported by Dirk Lammers of the Associated Press (note:  I inadvertently attributed this quote to Bob Mercer in my original post and regret the error.)  as saying that the contract between our state and SDRC "did not give the Governor's Office of Economic Development the authority to audit all of SDRC records."  I'm sorry (and believe me, I consider myself a friend and supporter of Governor Daugaard) but this does . . . not . . . wash.  Granted, SDRC's records involving affairs that have nothing to do with South Dakota are rightfully off-limits to SD auditors--but what about dealings involving public time and money that are directly done with our state?  Speaking as a law-abiding, tax-paying citizen of this great State of South Dakota, I think I'm well within my rights to demand an audit of every single transaction that took place between my state and SDRC.
    So how about it, Governor Daugaard?  Let's be up-front about this and open those books. 

Monday, November 11, 2013

Memo to Wall Street Bashers: Lighten Up.

     Outrage is often more reflexive than reflective.  A case in point is the blogosphere-wide, anti-Wall Street reaction to the recent passage by the U.S. House of Representatives of a bill listed as H.R. 992 (a good recap comes from the Congressional Budget Office at http://www.cbo.gov/publication/44064--you'll  have to c&p for now, I'm still figuring out linkage).  As it stands now, Dodd-Frank excludes firms that engage in legitimate hedging transactions from financial back-ups provided by the United States and the Federal Reserve.  H.R.  992 would reverse that, significantly expanding domestic markets for affected firms and streamlining their operations by allowing them to bring their separately maintained risk management operations into their corporate folds..  
     There's no question in my (or any rational thinker's) mind that many of Dodd-Frank's provisions were and are imperative in the constant quest for maintaining fair and orderly markets.  This aspect of it, however, is an over-extension that puts domestic banks at a competitive disadvantage against foreign competitors and really has nothing to do with curbing through regulation and oversight the ridiculously speculative extremes that derivatives trading reached during that go-go era that crash-landed a few years ago. Financial institutions have to be reined in from letting this type of trading get out of hand.  Keeping those that engage in the commonly accepted and long standing practice of risk management from going to the federal window and borrowing cash as necessary for the regular maintenance of their operations when money tightens up is an overreach of Dodd-Frank's restrictions.
     Yes, H.R. Bill 992 was crafted by the financial institutions that themselves are subject to its provisions, which is not necessarily the best thing, but to my way of thinking the only practical thing.  Speaking as a 20-year veteran of market-making in stock options and aggressive trading and hedging of grain and livestock futures here in the Dakotas (10 as a member of the Chicago Board Options Exchange, another decade as a principle in a commodity futures brokerage firm), I understand the complexities of derivative-trading and doubt that there's much expertise in the field anywhere in the halls of Congress.  The crafting of a bill as complex as this (try reading it, it's referenced in the CBO site I posted above) is best left to experts and then digested as necessary by congresspeople and their aides, who have plenty of time to consider and come to a reasonable understanding of the nature of the bill before they vote on it.
     As I understand the bill in its CBO recap and a reading of the bill itself, the nature of the trades specified as being exempt from Dodd-Frank's exclusions are hedging transactions similar in nature to those of, say, a corn farmer using the futures and options markets to hedge against a downside risk in prices, or a grain processor hedging against an upside risk in the price of that commodity.  In  this case, the risks being mitigated are more along the lines of volatility in the  interest rate and currency markets.  As with all legitimate hedging transactions, this is all about risk-transfer, not risk-creation.  Those kinds of trades are essentially being brought back into the fold of exemptions allowed by Dodd-Frank.  In the meantime, all generally accepted and required standards of recording and reporting will be a part of these trades.  As ever, transparency is of the essence
     That the bill passed with 292 ayes means that a sizable contingent of Democrats (70 to be exact) joined virtually all of their Republican counterparts in accepting the reasonableness of this legislation.  That  those same congressional types were aggressively lobbied by the financial institutions promoting the passage of H.R. 992 is indeed a sad and disgusting commentary that speaks more to the nature of how legislative business has to get done in this country than the substance of the bill itself.
     
     
    


Saturday, November 2, 2013

Yo! Politicos who publicly identify with Christ . . . where's that Biblically mandated compassion these days?

     As I prepare my thoughts for Sunday services tomorrow, which is the first Sabbath after the automatic cut in food stamps took place a day ago,  I'm wondering how many of the committed Christians in Congress, generally, and among Republicans, specifically, are considering the consequences of the summary end of the the SNAP (Supplementary Nutrition Assistance Program--food stamps, for short) benefits extension that was granted a few years back as part of Washington, D.C.'s economic stimulus program.  For that matter, I wonder if a sense of moral crisis occurred within the Obama family, whose backgrounds as community activists within some of the most financially hard-up neighborhoods in Chicago must make them acutely sensitive to the nutrition needs of the poor in this country.  From the figures, it looks like the typical family on this program is losing anywhere from 5% to 10% of their benefits.  The Feeding America organization says that the typical food stamp recipient got about $1.50/meal, so the cuts will probably take a dime or better off each meal.  Put another way, USA Today calculates that the cut will cost the average SNAP-enrolled family of four the equivalent of 21 meals a month.  That strikes me as pretty harsh. 
     I wonder if the Obamas and other Christians who are in the political class in D.C. will think about this when they attend services tomorrow morning.  At some point I hope they encounter Isaiah 58 and take these words to heart:  If you extend your soul to the hungry and satisfy the afflicted soul, then your light shall dawn in the darkness, and your darkness shall be as the noonday.  Their hearts may be hardened by the real problems of mismanagement and fraud that I have no doubt are embedded in SNAP, but in their pursuit of purging those issues out of the program, I think they're doing some significant damage to millions (there are 47 million of them now) of Americans who simply need this help in order to get some decent food into their systems every day.
     Yes, the extended benefits were set to expire on October 31, and yes, everybody was informed well in advance.  That doesn't mean there shouldn't have been some consideration and discussion of the issue--after all, this federal government has been dealing with having to extend deadlines for years now, and it seems to me that extensions are typically granted.  Why should some consideration of a program extension affecting our neediest class of citizens be exempt from the process? 
     As a Republican, I'm particularly chagrined by the blithe dismissal of our claim to being "compassionate conservatives" as nary a peep from officials in our party in defense of extending these benefits was forthcoming.  And for those who often make a public show of their commitment to Jesus Christ and his teachings, I'm extremely disappointed that there was no attention paid to the moral quandary attached to the  taking of food away from the poor.