COMMENTARY:

Thinking About Clocks

You see literally the day after the 2008 presidential election, the Obama transition team publicly began its gargantuan task of preparing for the transition of power that will officially take place on January 20th. Replacing the executive branch’s third of the US government is no small task in the best of times. Given the financial, economic, fiscal, military, diplomatic, and environmental crises facing this nation; a seamless passing of power takes on much greater urgency and significance. Any delay or misstep in corrective/remedial intervention will prove both devastating and costly. Corrective action is needed on so many fronts, time is of the essence, and the clocks keep ticking.

President-elect Obama showed the people how seriously he regarded the mandates of the 44th Presidency when he selected Senator Joe Biden of Delaware as his running mate. This is a man, who if need be, could aptly function as the leader of the free world. Last week’s press events provided further insight into the direction of an Obama administration. They give tacit testimony to the severity of the problems we face as a nation and extreme nature of the actions which will be required. Tick, tick, tick.

The choice of US Congressman Rahm Emanuel, Illinois 5th Congressional District, as Obama’s Chef of Staff was both revealing and significant. Emanuel is focused, driven, ruthless, and hardnosed. That position is literally the gatekeeper to the Oval Office and to the President himself. One cannot understate how critical it will be to keep the Presidential calendar and the President’s time on focus and on schedule. Who else but an “Emanuel-like Chief of Staff” would put Senate Majority Leader Reid, Speaker of the House Pelosi, and/or even “the Oprah,” on hold, or... tell them to wait for a call back?

Anyone familiar with my columns knows how vocal I have been regarding our present financial/ economic abyss(es). I have vigorously questioned the steps taken both to ignore or erroneously address these problems. It would appear that President-elect Obama has no intention to sugar coat either the maladies, or the treatments. The present approach of bailouts, escalation in issuance of Federal debt instruments, and wonton expansion of our money supply may have been viewed as solutions in the past, but these have the side impact of sowing the seeds for runaway inflation. Given all the other messes out there; little, if any, lip service has been given to the big “I” of inflation. Bringing the former FED Chairman Paul Volker back onto the stage tells me that the Obama Administration is aware of the compounding negatives of inflation and is prepared to take the necessary steps to circumvent them!

In the former S&L crisis, the financial institutions were hemorrhaging money. They lent long term at fixed rates and covered those credits short term at variable rates. Because they had a documented negative spread, you could literally determine the day and hour of each take over. Financial institutions again face looming insolvencies, but the causes here rest on prior bad lending/ investment decisions. This battlefront is only temporarily contained as all write-offs/ write downs have not yet occurred!

The auto industry is also hemorrhaging money. They are not selling the vehicles necessary to cover either their fixed costs, or their sunk costs (mostly retiree pensions and health care). Again... one can literally determine the day and the hour of their insolvencies. Will the fix here be one of bankruptcy restructuring? A cash bailout/ infusion by Uncle $ugar? Liquidation? A merger/ takeover? The clock keep ticking...

I’m Fred Cederholm and I’ve been thinking. You should be thinking, too.

Copyright 2008 Questions, Inc. All rights reserved. Fred Cederholm is a CPA/CFE, a forensic accountant, and writer. He is a graduate of the University of Illinois (B.A., M.A. and M.A.S.). He can be reached at asklet@rochelle.net.