It's a Coincidence
By Mike Hickerson
Here we are again, California. Attention whore of the country;
we seem to crave the spotlight in ever-increasing doses. Our
latest attention-getting behavior: coming on the heels of
severe economic woes a three ring circus passing for an election
populated with enough fruits and nuts to make a thousand gallons
of Ben & Jerry's. It's the sort of thing the rest of the nation
has come to expect of us - and the only reason it's topical
is due to the fact that we have more resources, more money,
more financial power than any of the third world dictatorships
the Bush Administration is intent on saving us from. Funny
how in modern politics the words "Economic woes"
and "Bush" make frequent appearances in California
conversations, always together, as if predestined by fate.
Much like our predilection for the wacky. The absurd. The
vacuous self absorbed hedonists of La La Land.
Or am I referencing a media myth spun from whole cloth?
One thing is certain, real or not the perception is there.
I point this out because the recall is similar in construct
to our much-famed media image. It's a Hollywood set, a scenery
prop of a smarmy populist movement brightly painted on the
exterior with nothing behind the front. Oh, sure it may seem
substantial enough to many of you, but this California Native
son is telling you it's all a load. Like so much in
the two and a half years since the selection of George W Bush,
the load has been dumped from above by the Deus ex machina
known as the Bush administration.
To be sure, the genesis of this ugly tale starts like all
truly scary Bush stories, with his Zen master Grover Norquist.
Norquist has been doing a star turn of late as his machinations
and scheming on behalf of the Republican Party have become
more noticeable every time we find ourselves thinking "where
the hell did that come from?" when we hear of
a new Bush policy or mandate. The answer is usually: Norquist.
He has made no secret of his outright contempt for bipartisan
cooperation to accomplish goals for the people's business.
the Denver Post in an interview, "bipartisanship
is another name for date rape." He mentions partisan
warfare is the preferred Republican strategy for the near
future. Bush and his minions nationwide have taken him at
There is no secret that California is in a fiscal crisis
today. What seems strange is the unwillingness of Bush and
Co. to help - surely attempts by Washington DC to ease the
economic woes of the most powerful economic engine in the
country would augur some assistance to avoid prolonging the
Bush recession. If Bush put the good of the nation above the
goals of partisan politics, that is. Sadly, this is not to
be. It turns out our suspicions about the evil hands in the
California disaster du jour have actual substance.
This recall is part and parcel of a master plan by evil
geniuses; if not geniuses, then sociopathic obsessives determined
to get their hands on the resources we possess and spirit
them into far-lung banks and financial firms who will reward
their lackeys who make it all possible with absolute political
power. How Romanesque. It all fits rather well as a reflection
of the Pax Americana we struggle with internationally;
the same geniuses who brought us the PNAC view of the world
are brutalizing us domestically as well. The bottom line seems
to be: everything desirable is up for grabs. By Them. It's
as plain as day to anyone willing to look behind the curtain.
Start with the number one reason for this mess, the great
power rip-off of 2001.
Direct cause: deregulation, led by lobbyists
ensconced in the Sacramento power structure headed up by Gov.
Pete Wilson. The same Pete Wilson who is now running Arnold's
campaign. How errrrrr……convenient.
Main benefactor: Enron & Ken Lay, Bush's number one
donor. (Still a free man by the way)
Enron's lead banker: JP Morgan-Chase-Manhattan. Remember
this as it gets rather circular.
Coincidence: JP Morgan-Chase is the lead banker in
the first California bond deal to finance their way out of
the power debt. Chase has interlocking board members with
Citigroup, another California Bond seller. Citigroup is the
7th largest contributor to the Bush Campaign. Citi shares
board members with FOX–NewsCorp, Ltd., 12th largest financer
of Bush's campaign. These same banks funded "The Manhattan
Institute" founded by William
Casey, who later became President Reagan's CIA
Besides subsidies from a number of large conservative foundations
the Institute gained funding from such corporate sources as:
& Gamble and State
Farm Insurance, as well as the Lilly Endowment and philanthropic
arms of American
Lynch. Boosted by major firms, the Manhattan Institute
budget reached US$5 million per year by the early 1990s. Nice,
the way they keep it so in the family. The same guy's firm
whose strategy armed Bin Laden and arguably the entire terrorist
network we now fight, contributes economic and energy policy
to the White House.
So, back at the ranch, it's becoming rapidly apparent that
Pete Wilson's deregulation scheme is coming apart at the seams.
There is definite evidence of fraud by the energy sellers
when dealing with the state. A review of graphs of power usage
shows the rolling blackouts are occurring at arcane times,
not "peak usage." Further, California's power demand
is some 10% less than the two previous years where
no difficulties were encountered. California's energy demands,
portrayed as "skyrocketing" by Lay and the other
Texas energy pirates and repeated by Fox News ad infinitum,
are revealed to be increasing at a rate comparable to Rhode
It seems California is the second most power-efficient state
in the country. Demand has grown at an average of 1.5% a year
in the ten years ending in 2000. It is revealed that in late
2000 power plants in California are shut down at a rate of
32%; when the previous July, which had higher energy demands,
that rate was under 5. (From ConsumerWatchdog.org, Jan. 2002.
A must-read report
for every Californian.)
Fox News reports that these shutdowns are based on maintenance
due to overwork (forgetting that demand was higher the year
before). Energy lobby officials appear and blame the "crisis"
on lack of capacity, implying California's aggressive environmental
laws have stymied power plant construction. Our president
smirkingly refers to the same "rules" when asked
for comment about the problem.
The reality is Gray Davis licensed the first new power plant
within three months of taking office. Under the watch of deregulation
champion Pete Wilson, none were built. Not for any reason
except overcapacity: 170 generation plants were brought on
line in the 1990s. A review of capacity indicates that approximately
47,000 KWH were available to California the year before the
"crisis." This figure is approximately 20% more
than the highest peak demand required during the blackouts.
Okay, the whole "crisis" was generated for monetary
gain. But hold on, campers there's more at work that plain
Arnold Schwarzenegger met with Ken Lay on May 11, 2001.
Do you think that Arnold, who had commissioned a survey in
2000 to see if he could be a write-in candidate for Governor
(too muddy, consultants told him) talked about anything else
with Lay except running for governor? On June 21, 2001, the
Associated Press reported that "Lay met secretly with California
Republicans at the Beverly Hills Hotel and pushed a plan that
called for ratepayers to pay the billions in debt racked up
by the state's public utilities. The plan contended that federal
investigations of price gouging are hindering the situation."
According to William Bradley, the L.A. Weekly's sharp
political columnist who wrote
Why did Schwarzenegger go to a secret meeting with Ken Lay
in the midst of the crisis? Did Schwarzenegger have any dealings
with Enron? Did he hold Enron stock or debt or infamous LLC's
in his portfolio - and if so, when did he sell? Schwarzenegger
will probably attack Davis for the state's energy fiasco,
which cost Californians over $70 billion over the past few
years. But perhaps then someone will ask Schwarzenegger why
he appointed Pete Wilson, the former governor who signed the
misbegotten deregulation bill that caused the crisis, as his
Finally then, we address the constant question inherent
in politics: who benefits? The simple answer: banks.
Remember the lead underwriters in the issuance of California
Bonds? The myriad connections to the major contributors of
the Bush campaign? If the recall passes, the financial community
is poised to pounce upon the hapless prostrate people of California.
The code is there in dry financial tomes on the back pages
away from Fox viewership. But it's plain and serious. Banks
are funny creatures. When inside the beast, as I often am,
you realize that their intricate computer models devise a
rate of return they will accept in a transaction, and one
way or the other, you pay that rate. You may split it up in
the form of "points" up front; you may accept a
higher interest rate over the course of the transaction. But
you always pay what they decide.
I mention this because there are certain "excuses"
that they look for to arrive at that rate of return. Paramount
among them is the "Credit Rating." Ostensibly done
by neutral ratings firms (why are there three if they are
all neutral? And why do the ratings swing wildly between the
ratings agencies? Another article, my friends...)
Here is the crux of the recall issue:
If we give them the excuse of "instability"
we pay the worst rates available. There is no more unstable
form of state government than one where a recall passes.
Sacramento Bee Aug 11: S&P downgrade would cost about
$1 billion, said Mitchel Benson, spokesman for state Treasurer.
This in reference to the latest offering of the State.
From "Rescue California," the lead recall groups
The agencies advised that if the state does not
adopt the governor's revised budget — which includes $8
billion in new taxes and rolling over $10.7 billion of the
shortfall through borrowing — or some variation that does
as good a job bringing the state's finances in order, paying
them back could be a problem.
"This represents the end of the runway,"
state Controller Steve Westley said in reaction. "What it
means is should the state wish or need to do borrowing in
the future and these things have not been accomplished,
there will not be other avenues open." Three bankers and
financial consultants to the state who would speak only
on the condition of anonymity expressed concern about the
failure of the Legislature to be jolted by similar past
messages from Wall Street.
Bond rating agencies have just lowered California's rating
to one notch above "junk" status. Speaking of junk
bonds, did I mention Michael Milken was at the same meeting
with Ken Lay and Arnold? What a coincidence! The S&P release
on ratings cited "a laundry list of structural problems
in how California does business, including its constitutional
requirement that a budget garner the votes of at least two
thirds of the members in each house of the Legislature. Other
flaws that worry investors, according to S&P, include term
limits, legislative boundaries that reinforce partisanship,
interest group lobbying, looming legal challenge to motor
vehicle license fees (also a Pete Wilson program) and the
magnitude of the state's accumulated deficit: "$38.2
billion for a state that in its last fiscal year collected
only $67.8 billion." according to Rick Jurgens, Contra
Costa Times. Those "flaws" mentioned sound like
a laundry list of the long-suffering Republican minority who
wish to capture the statehouse.
Back in D.C.: the Bush administration has shelved a report
commissioned by the Treasury that shows the US currently faces
a future of chronic federal budget deficits totaling at least
$44.2 trillion in current US dollars. The study was commissioned
by then-Treasury Secretary Paul O'Neill. But the Bush administration
chose to keep the findings out of the annual budget report
for fiscal year 2004, published in February, as the White
House campaigned for a tax-cut package that critics claim
will expand future deficits. (Financial Times, May
Yet it is the huge budget deficit of California that recall
leaders, Republicans all, most rail against. Inarguably caused
by a group of Texas companies led by Bush's primary benefactor.
Assisted by a willing Republican ex-Governor who was the leading
proponent of the very deregulation that created the mess.
A man who now heads up the candidacy organization of the leading
Republican who met with the leading Republican presidential
donor six months previously. Willingly financed by a group
of banks who are among the largest corporate donors of the
Bush campaign. Oh, and another coincidence: the S&P analyst
who pulled the trigger on the downgrade is Alexander Fraser,
based in Dallas. DALLAS, TEXAS! Isn't that…..interesting.
Why weren't these downgraders California–based analysts ?
Is it too far-fetched to see a guiding hand in these events?
With the State of California as the prize, anything is possible.
Imagine the windfall to banks that specialize in sState finance
of California's sixth-largest-in-the-world economy.
Charging "junk" rates instead of traditional ones.
Estimates say that an additional $1 billion in interest
costs will be borne by the people of California per issuance.
Many times the state has averaged three issuances per year.
Add this to the $72 billion taken out of the state and the
lascivious drooling over Californian assets by Republican
strategists such as Grover Norquist in that same Denver
Post interview: "California, the state owns a whole
bunch of land and other things that it could sell off it doesn't
need, and it needs to figure out which of those government
jobs need to be in government, and what can be privatized
or contracted out. "
Can anyone in the face of the machinations that have taken
place in Washington D.C. - support of the Energy company rip-off,
the cutting of Federal funds to states, issuance of unfunded
mandates, the meetings between gubernatorial candidates and
Ken Lay, the same banks that financed Enron financing the
bond issuances at inflated cost, an S&P analyst downgrading
California's debt based in Texas - does this sound like a
war on California by an administration whose chief strategist
has articulated a strategy of partisan warfare, or an inept
governor? "…We will have total gridlock and nothing will get
done," worries Jack Kyser, chief economist for the Los Angeles
Economic Development Corp. Doesn't this sound exactly like
Grover Norquist's prescription for the Republican takeover?
The only way to put a stop to this sinister lunge at California's
assets is to vote NO on the recall and send these future and
past felons skulking back to the halls of power in Washington
D.C. and Texas, from whence they came. We should not be the
authors of our own demise, no matter how engaging the spotlight
is, and how appealing a "guvinator" might be.
Mike Hickerson has been involved with the California financial
industry since the 1970's.