U.S. regulators stand ready with more bank capital

I am still trying to understand what this means in economic terms. Is the government trying to nationalize the banks? If so, is it good? If not, how different it is?

On more reading, this is what I understood: The government is planning to assess the big banks using something called "stress-test". It is a computer-run simulation program using the banks financial portfolio to estimate what would happen if the economic situation gets worse, for example, with unemployment surging to 10 to 12 percent, home price dropping 20 percent further etc. If the banks show that they do not have sufficient capital and liquidity that they need to provide the credit necessary to restore economic growth, then the U.S. government stands behind them to support them at this financial stress time. In simple term, it means that the banks will get more taxpayers money. In return, the government gets the power to control the banks. This means that the government could take control of the public shares, pick and install new management and boards of directors, change corporate policies and set new corporate strategy.

Well, now I understand what "nationalization" means. But to me it sounds good and not bad. So I went on finding more about nationalization of banks and how it is conceived.

Historically speaking, the banks are under government control for two reasons: either because an administration or regime maintains near-complete control of all business, as in China, Russia, North Africa and South America, or because there is a severe economic crisis that impels the government action. A capitalistic society believes in separating the powers of government and the financial institutions. The government should not get into the way the money is handled in the society. The banks are treated like any other corporate business. If the banks are weak, they must die like any other business. Government's attempt of "nationalization" is only a temporary measure - it won't solve the issue but just defer it to the future. On the other hand, a socialist society believes more in the government controlling the money - it believes that the banks should create an environment to promote the flow of wealth from rich to poor. The government can positively impact the economic crisis situation by helping the bank and thus indirectly helping the people.

Well, now I can sort of understand why the stock market is jittery at the talks of "nationalization" of banks. It is an alien concept to America. Capitalism is the key to America's success. Nobody wants to change that. Therefore, the government is talking not about "nationalizing the banks" but only "temporarily" backing the banks if required. In short term, I don't see how different they are but in longer term, maybe it is just the government's way of saying to the banks that we will support you till the crisis is over; we will back out once we know that you can hold yourself.

California Passes Budget After Scathing Battle

Why am I living in California? Is California the best place to live? Aren't there better places to live in US? The cost of living in California is much higher than other cities in America. The housing is expensive, the schools are average, the roads are pathetic and the taxes are high. California is having budget deficit year after year. It is in debt for so long. Gray Davis made an exit in 2003 that stemmed out of state's fiscal problem. Government changed. Schwarzenegger took over making promises. But yet again we are in the same boat. Not enough money to run our schools, not enough money for the state parks, no budget for public transport system expansion. Top it all, now we have recession in our hands to handle. The state is nearly out of cash. California has $42 billion budget deficit. There is going to be more tax increase and more cost cuttings at various levels. There will be increase in sales, gas or personal income tax and at the same time more cost cutting in schools, roads and other infrastructure projects.

So again the question pops - Is California the best choice of place to live?

Definitely, it is time that we all ask this question to ourselves that why are we living in such an expensive place? Why don't we move to Seattle or North Carolina or Texas or Phoenix? Is it because of our jobs or is it because this place has a charm that other places lack?

California is the technology hub - the "happening" place. Countless companies started up here - this is the root of almost 80% of the tech companies. Not just that, California has the Hollywood under its hood. The rich and famous live in the city of Los Angeles. It is a pity that inspite of all this wealth, California has budget deficit!

Iran launches first homegrown satellite

Iran launched its first satellite "Omid" (Hope) into orbit making itself as the 11th nation to go to space. It was launched on 30th anniversary of 1979 Iranian revolution when the US backed Shah was replaced by an Ayotolla Khomeini's government that declared Iran as an Islamic republic with a new constitution reflecting his Ideals of Islamic government. Since then Iran is growing in power and expanding its nuclear capabilities and has become a matter of concern to the western powers. Although Iran claims that it is expanding its nuclear capabilities only for peaceful purposes to meet the country's domestic needs, the long-range ballistic technology that is used to put satellite into orbit can also be used for launching warheads.

Iran's act in the International political stage reminds me of Germany after first world war. I see a similarity between Germany's action in past and Iran's action in the present . I may be over reacting here. I want to revisit history to highlight my point.

After the first world war, the military in Germany was reduced to minimum. The "League of Nations" formed after the war imposed restrictions on Germany. Adolf Hitler became the Chancellor of Germany in 1933. Almost immediately, he began secretly building Germany's army and weapons and started building warships. It was the time when all the countries were developing the air force. He like all other nation secretly started building German Airforce. Not only did he develop his air force, but he made it public to the world. He withdrew from "League of Nations" and openly started increasing the military power and started violating the "Treaty of Versailles" that was signed after the first world war. In year 1936, Hitler ordered German troops to enter the Rhineland. I believe it was the last time Hitler could be stopped cheaply - in an inexpensive way without the countries going to war. The western powers - Britain and France condemned Hitler's action but nobody did anything to prevent it. Interestingly, Hitler chose a Saturday morning to send the troops to Rhineland as he was aware that the western world will be busy enjoying the weekend. By the time the western powers would get their act together, the news would be 24 hours if not 48 hours stale. This shows how Hitler was manipulating the western powers. Britain and France tried to have diplomatic talks with Germany to stop its action but there was nothing done in concrete terms to curtail Germany's rising military force. Britain and France wanted to avoid another world war. In 1937, Britain's prime minister who believed that the "Treaty of Versailles" had treated Germany badly adopted the policy of Appeasement. The most famous one was the Munich Agreement of September 1938. The Munich Agreement, signed by the leaders of Germany, Britain, France and Italy agreed Sudetenland, a part of Czech, be returned to Germany on the condition that no further territorial claims would be made by Germany. In a years time, Hitler broke the terms of Munich Agreement and invaded Czechoslovakia. The Western powers condemned and criticized once again but waited to go to war till Germany invaded Poland. Historians still debate on the fact that if the war had begun in 1937 or 1938 instead of 1939, Germany would have been defeated much easily.

Coming back to today's world, Iran seem to be following Germany's footstep. Inspite of the UN Security Council imposing sanctions on Iran for refusing to suspend Uranium enrichment, Iran is continuing its nuclear program. Iran has displayed to the world its launching capabilities. Iran is boldly announcing to the world that it had capabilities to develop ballistic missiles and has capabilities to launch warheads with a range of more than 800 miles. It can not only reach Israel but also could reach US bases in Gulf.

The great powers are concerned about Iran's act but there is no action taken to curtail its power. When President Obama offered what he called the hand of friendship if Iran "unclenched" its fist, President Mohmaud Ahmedinejad replied that Ameria should apologize for its past actions towards Iran. It looks like Iran is shunning any act of appeasement shown by west, instead adopting an act of aggression. It maybe too early to judge from these actions but it is not too late to keep a closer watch on Iran's motives and actions.

Obama to Target CEO Pay Ahead of 'Bad Bank' Plan

The stimulus package is aimed to pour money into Wall Street to help the banks come out of their current economic state. Obama's administration is working on a "bad bank" plan that will buy the bad assets owned by the bank and relieve the pressure from the banks so that they can loosen the lending process and get the economy going. I am sure it is not as simple as I have put it here. However, I am happy to see that the CEO pay was considered a higher priority matter over the "bad bank" plan of the stimulus package.
It is indeed a good sign to see that the government is concerned where the money is going go before it makes it available. It is a very justified concern that it should not be pocketed by the CEO's and executives especially in view of the latest release of the executive bonuses in the Wall Street. Last year, inspite of the bad economy, huge bonuses amounting as high as $18 billion were paid to the executives in Wall Street. This amount is comparable to the bonuses that were paid during boom days of 2004. Isn't it a shame? It is not only being greedy and selfish but also being evil! The people in the company are loosing jobs, they are getting pay cuts, going through shut-downs but the executives in the company are getting bonuses! It is ridiculuous. The best part is that they are getting away with it. If I sound like a socialist, then yes I am - a bit of it. I do believe that that people who work hard should be paid a lot. I do believe that people should be paid according to their intellectual capabilities, according to their education and according to the work they put in. But there is a sense of justice and righteousness in this. It doesn't seem right that at a time of deep economic crisis, the rich are trying to become richer on the cost of poor loosing their jobs. Yes, if the company is making profit, then the executives should be rewarded. By the same logic, shouldn't the executives be penalized if the company's profit go down. Shouldn't they be held responsible for the company's loss? Instead, they are still rewarded because they tried but failed. I may sound a bit idealist - but the executives in the company should voluntarily give away their bonus and take a salary cut during crisis time. The CEO and the top grass are the leaders of the company - and this what leaders do!
Instead, the executives are trying to cash in when they can and scoot before the economy goes from bad to worse. They are getting ready for their retirement. But what they don't realize is that they are going to live in the society affected by the deep economic crisis. The recession is going to affect how the society functions. More people are going to be homeless. More kids are going to be pulled away from the schools. More crimes are going to happen on the roads. More poverty is going to surround the society. Yes, ofcourse for now they are safe and cozy - but how long?