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Dionne Jr. says the Republican primaries have opened up an overdue discussion on what American capitalism is, and what the right kind of capitalism is, not just what Europe is.

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The WSJ's Peter Nicholas, Carol Lee and John McKinnon describe the events leading to the election of Obama to a second term as U.S. president. A significant move by the Obama campaign was to spend heavily in the early part of the campaign to show Romney as a predatory capitalist by focussing on his record a a private equity business executive who focussed on profits. More voters perceived Obama as caring about people like themselves. The voter turnout was also carefully executed especially for minority voters. For the first time since Mondale's loss to Reagan fewer white voters supported a presidential candidate- only 38% of the white vote went for president Obama compared to 60% for Romney. Obama's campaign focussed on protecting the middle class and working class from sharp spending cuts. Voters major issue was the economy, with unemployment at 7.9%. Yet voters largely did not hold Obama responsible for the economy and considered Wall Street and the previous George W. Bush administration responsible for the events leading to the 2008 financial crisis....

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The WSJ's Latour, Browne, Tejada and Wei interview Lou Jiwei, chief executive of the China Investment Corporation (CIC), China's sovereign wealth fund. He says it is too early to talk about eurobonds as the financial arrangements necessary have still to be put in place. CIC is reducing its exposure to Europe. CIC is interested in infrastructure investments and sees infrastructure investment as the way out of the economic crisis for the U.S. and Europe. He has the most confidence in investing in China. Other locations are in emerging markets Brazil, S. Africa, Latin America. CIC's target is to have 50% of the assets in long term investments in infrastructure investments, commodities, real estate and direct investment and private equity, etc. and the other half in public securities. But this will pose challenges and CIC has not reached this level. It is learning from ATP, the Danish pension fund, Calpers, TRS, and CPP, the Canada pension fund. The portfolio is mark to market which creates pressures to reduce short term volatilities....

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Scott Sperling, co-president of THL Partners, one of the oldest private equity firms, says rather than be anticapitalist the Obama administration is capitalism at work, as the restructuring is rebuilding two auto companies through bankruptcy by reducing unsustainable legacy obligations and making the bankruptcy process work right for these two companies. It also helps these firms get a new start. The process of "creative destruction" that helps make capitalism work is put to work in an enlightened way so there is creation as well as destruction, destruction through the tough choices that all stakeholders had to make, and creation through the new structures that are coming up. Preservation also works here through keeping what was good in these firms, which are the employees who had no part in management's mistakes, and workers who may be just as badly trapped in union ways. Scott also explains why the government's offer of 10% ownership shares to debtholders is fair, considering that without the government's money Chrysler would be worth little....

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Hubbard was Chairman of the Council of Economic Advisors under President Bush. His plan is for the government and Congress to allow all residential, mortgages on private residences to be refinanced into 30 year fixed rate mortgages at 5.25% and place those mortgages under Freddie and Fannie. The idea is to have a low enough rate to support house prices. Where the homes are worth less than the total amount of the loan balance the mortgages would be refinanced into a 30 year fixed rate loan to be held by a new agency modeled on the 1930's era Homeowners Loan Corporation. New mortgages would be made of upto 95% of the current value of a home, with owners and servicers of the loan splitting the losses on refinancing the mortgage with the government agency. Servicers would have to accept refinancing on all or none of their mortgages, no cherry picking. And the government could take an equity position in return for the mortgage writedown so that taxpayers do well with a better housing market....

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The FDIC chairman, Mr. Gruenberg has defined the agency's strategy under the "orderly liquidation authority" given by the Dodd-Frank legislation to deal with financial firm failures. The Lehman Brothers collapse ruffled fianncial markets worldwide because of the lack of such authority and a organzed well defined plan to deal with bank failures. Gruenberg described the plans to the WSJ. Once the Treasury Department and federal agencies agree that a financial institution has to be taken over, the FDIC would first unwind the parent holding compay of the firm by putting it in receivership and revoking its charter. Unlike the situation for Lehman, the firm's subsidiaries can continue to operate, with financial support from the FDIC held parent company provided by the U.S. government under Dodd-Frank legislation. The next step would be for FDIC to create a "bridge company," with most of the firm's assets going into it. At that point equity holders would be wiped out and a debt for equity swap would be made with creditors. The firm would come out of this process as with a Chapter 11 bankrupcy, as a new recapitalized private firm. The FDIC is trying to build credibility in the markets that it has the ability to do this smoothly, and Gruenberg admits that till it happens its hard to convince markets in a decisive way. Another problem is that 85% of the international assets and derivatives of top U.S. banks are in the UK. Former Fed chairman Volcker is guiding the FDIC, and he sees the FDIC's efforts to work closely with the UK very favorably. These efforts are significant and vital to avoid the worldwide disruption in financial markets that ocurred after the Lehman collapse, and provide a well planned action plan in place of an ad hoc day by day response....

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Stuart Stevens, the chief strategist of the Romney campaign points to the Romney campaign's success in getting a majority of votes of people making over $50,000, a majority of white voters under 30 by a 7 point margin, winning the votes of a majority of America's middle class, and falling short of a win of the Electoral College by 320,000 votes. He says Obama turned Democratic party weaknesses of being too liberal and too dependent on minorities into advantages. The Pew Research Center and other expert opinion cited as the principal reaon for the defeat, Romneys failure to empathize with voters. He appeared callous in his image with Hispanic voters with his self-deportation stand, and similiarly his position on the auto bailout was shown as callous in a barrage of political ads by the Obama campaign in the midwestern states, the remark about the 47% dependent on government help simply reinforced this notion of being insensitive to concerns of the less affluent. The candidate never succeeded in shaking off impressions in the minds of voters of being a private equity executive who could not empathize with weaker sections of the community, which were reinforced by heavy negative advertising in the 2012 election. Stevens says nothing about the short sightedness of a callous immigration policy of self-deportation adopted by a former governor of Massachusetts, in the face of Census statistics showing more children of minorities, especially Hispanics, born each year than children of any other demographic group in the U.S. The changing demographics may have made a crucial difference in many states....

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Steven Mnuchin, a former Goldman Sachs executive is the new Treasury Secretary in the Trump administration. His ties to Goldman Sachs go beyond his own work at the firm. His father joined Goldman in 1957, and worked for his entire career at the investment bank. Steven's brother Alan also worked at Goldman. During the campaign Trump was severe in his criticism of his opponents Cruz and Clinton's ties to the bank. Ironies abound, not only is the new Treasury Secretary from Goldman, his connections go back a generation. The Treasury Secretary under Clinton was Goldman Sachs executive Robert Rubin. Under Bush who followed Clinton the Treasury Secretary was Goldman Sachs executive Henry Paulson. Under Republican and Democratic administrations Goldman Sachs executives have held key positions. Mr Mnuchin was campaign finance chairman for Trump for 6 months leading to him being chosen for Treasury Secretary. Mnuchin joined Goldman in 1985. During the campaign Trump was also severe in his criticism of financier George Soros, making this a key point in a debate with Clinton for taking Soros's support. This report by Das and Ensign points out that in 2002 Mnuchin left Goldman to run a credit fund set up by George Soros. In 2004 Mnuchin founded hedge fund Dune Capital Management LP with Soros support.  When IndyMac bank collapsed a deal with the government was arranged that covered a part of any future loan losses being taken by FDIC, and Dune was one of several hedge funds and private equity funds including Soros funds that acquired it for $1.5 billion. The renamed IndyMac bank was called OneWest with Mnuchin as chairman. OneWest was sold in 2014 at a large profit to CIT Group Inc. This report says CIT Group took a $230 million charge in July 2015 for accounting problems at OneWest.  During the latter part of the Trump campaign after he joined it in May 2016, Mnuchin set up a joint fundraising agreement with the Republican National Committee. This made it possible for major donors to give to the Republican party and Mr Trump. The head of the Republican National Committee is Mr. Lewis Eisenberg. Having run the technology division at Goldman, Mnuchin was prominent in Goldman and investment banking circles in New York.    ...

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Lee Myung-Bak says Korea's experience with its banks and troubled assets in 1998 can provide useful guide to solving the problems at American banks. First take strong decisive action rather take incremental steps. Korea raised money from various sources for a fund of $127 billion, or 32% of GDP between 1997-2002, to resolve impaired assets and recapitalize its banks. Second, recapitalization and bad bank solution were both applied simultaneously. Korea setup the Korea Asset Mnagement Corporation (Kamco) as its bad bank. And the Korea Deposit Insurance Corporation helped recapitalize the banks. Kamco also did things in a unique way which may have lessons for the USA. Kamco purchased the bad assets and settled the gains or losses with the banks once their assets recovered in value. It acquired assets at $30.9 billion, the book value which was $85.1 billion by 2002, and recovered $33.9 billion by 2008 by reselling to private investors through various methods including public auctions, direct sales, international tenders, securitization and debt-equity swaps. Lee points out that its useful fro government to purchase the impaired assets at a price agreed to with the banks , and make the final settlement of gains and losses with the banks after reselling. Another useful lesson for the US is to have a clear exit strategy with a clear time frame. This makes nationalization a temporary measure only and with a time frame by which shares held by the government in banks or nationalized failed banks, should be turned over to the private sector. This is Korea's contribution to the G-20 summit in London in early April 2009....

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Andrew Rosenfeld, a senior lecturer at the University of Chicago Law School, and chief executive of an investment advisory firm, says the Public-Private Investment Program proposed by Secretary Geithner has serious flaws. It risks government money, and expects too little from private investors. The government will essentially finance the private investor's purchase of these toxic assets at an auction, with the private investors putting some money of their own, to buy these assets at prices emerging from the auction. It runs right smack into the problem that Secretary Paulson under President Bush faced when he suggested the auction plan as a way for these toxic assets to be sold off to buyers. It was never clear how shuch an auction would work, and whether it would work at all. Meantime the worsening credit crisis required direct injection of capital into banks. Now Secretary Paulson's abandoned effort has been essentially revived in the Geithner program, with the same problems but with the carrot of government taking up most of the risk with its financing. Rosenfeld argues that under this plan the government assumes all the risk of losses, and if private investors make too much money off of it it will create a public outcry and the risk of an AIG type situation. This might lead to lower bids and the money generated for the banks might end up being too small to make a difference. There is a better way he says, and this is for the government using existing authority to seize banks that look insolvent. Its fairer because the government will own the toxic asets, and the bank, and the proceeds for the sale of the bank, and these would be offsetting the cash that it would inject to recapitalize the bank. The way it would do it is to inject cash in the form of Treasury notes as equity in the bank, and at the same time remove the bank's toxic assets and place them in the basement of the Treasury building, while it waits to see what they turn out to be worth. Bank regulators would swap Treasury securties for the toxic assets "at par," which is at the amount of the original purchase price of assets removed. Within a short time, a month or a few months, the bank could be sold to private investors. This is sounder because it takes away the pricing problem which looks like its never going to be resolved, as banks and investors are never going to agree on toxic asset price. And the new bank could start clean and start lending flowing in the economy. If the bank turns out to be so badly managed and with so many bad bets that it cannnot be sold, its essentially insolvent and irrecoverable, so it should be liquidated. Nobel winner Krugman says some of the same things in his columns in the NYT. He has a sense of despair seeing the return of the failed Paulson solution of auctions with a new twist, even as the economy is flailing in the wind, with job loss numbers over 600,000 and jumping each month....

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The Wall Street Journal has examined 77 businesses in which Bain Capital invested during 1984-1999, the period in which Mitt Romney headed the firm. Its findings show that 22% of the firms filed for bankruptcy by the eighth year after Bain first made its investment, some with large job losses. Additional 8% of the firms were in such bad shape that Bain lost all of its invested capital. Only a small number of firms produced most of the returns- 70% of the gains come from 10 firms. Of these 10 firms, four were later found in bankruptcy court. Another aspect mostly overlooked is that where large job gains were made they were mostly in lower wage retail jobs at Domino's Pizza, Staples and Sport's Authority, and did not involve the kind of innovation that produces sustained advantages.

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UN projections show median age of Chinese citizens will overtake that of Americans in 2020. Yet China's median income is only a quarter of that in the U.S. Life expectancy in China today is 76, very close to that in America. In 1960 a Chinese person born that year had life expectancy of 44 years.  China is aging at the pace of Japan, and a bit slower than South Korea, but wealth per capita was three times higher in South Korea and Japan than China when the aging accelerated. A Chinese woman fertility rate today is 1.6 compared to 4.6 in 1973. A prominent Chinese economist says in a recent report that median age in China in 2050 will be nearly 50 compared to 42 in America and 38 in India. WSJ cites figures showing China will have gone from 9 working age adults per retired person in 2000 to just two by 2050. So how to pay for retirement of all these workers today? Government spending on retirement is a tenth of GDP, about half the level in older wealthier countries, and increase in spending will impact growth. Today this is about 6.2% potential growth rate. It also pushes wages up with a shortage of workers in cities such as Shenzen and X'ian even with the use of new technology and robots in factories.  Solutions are to raise retirement age currently set at 60 years, increasing labor force participation of women as Japan has done, and increasing productivity. China has transferred 10% equity stakes in four state owned financial firms to the national pension fund to shore up its finances as estimates from the Chinese Academy of Social Sciences show it running out of money in 2035. Traditionally children supported families in old age but the one child policy leads to situations where the child is working or in another city. In Suzhou near Shanghai, a retirement business sends 1800 helpers to private homes and 130,000 retired people, in a new trend. The city administration of Shanghai plans 400 neighborhood care centres for elderly by 2022, with health clinics, drop in facilities, and homes. 12,000 elderly people use one centrre in central Shanghai area of Changning. ...

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Deep losses in commodities lead to selloffs in Carlyle's hedge fund Vermillion Asset Management, with holdings dropping from $2 billion to $50 million in 2015, according to the WSJ.

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Carl Schramm of the Kauffman Foundation which supports entrepreneurship says Venture Capital Funds have failed in recent years. With less and less of the partner's capital as low as 1% and more money from pension funds and other sources with short term pressures for performance, and the VC funds own 2-20 model (taking 2% each year as management fees and 20% of profits at time of IPO's) these funds have gone more into keeping companies only for afew years and selling them off rather than nurturing for the long run. In an earlier era the VC funds tried to nurthure the companies and did not take in so much in fees and profits. Today they are flipping more like the private equity firms do.And with the poor results turned in by the funds Schramm points out that returns are negative since 1997 for many of these funds. So VC funds are not supporting the new investments in biotech and clean energy even though there is a big need for investments. VC funds invested only $4.8 billion in 637 companies in the 3rd quarter of 2009 down 33% from $7.2 billion and 994 businesses in 2008 acccording to Price WaterhouseCoopers and the National Venture Capital Association....

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Microsft acquires Skype for $8.5 billion. EBay bought Skype in 2005 for about $3.1 billion, then took a charge of $1.4 billion for the acquisition in 2007, after failing to make a fit for it in EBay. Only 18 months ago EBay sold a 70% stake in Skype to a group of investors led by private equity firm Silver Lake Partners. That deal valued Skype at $2.75 billion. This suggests that Microsoft's Steve Ballmer is paying a steep price for Skype. This is especially true because Skype has failed to bring in many paying customers. Losses were $7 million last year. Skype has 170 million users but most of the calls are made free between computers. Increasingly its use is as an app on smartphones so that users do not have to pay higher fees to wireless carriers for calls. How Microsoft integrates Skype into its own products and how it makes the acquisition work is a challenge for Microsoft. Because of Microsoft's purchase, EBay will end up making $1.4 billion profit on Skype. Skype is based in Luxembourg, and Microsoft will use cash it holds overseas for the acquisition, money that could not be repatriated to the U.S. without paying taxes of more than 30%....

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Most of the problems in Eastern Europe follow from overborrowing by the privae sector , consumers and corporate borrowing, in foreign currencies. According to David Roche of Independent Strategy, private sector foreign currency debt rose to 126% of foreign exchange reserves between 2002 and 2007. Roche is former head of research and global strategy at Morgan Stanley. As a result he says, 50% of household debt is in foreign currency in Hungary, 30-40% in Poland and Romania, and over 70% in the Baltic states. The debt in lowcost foreign currencies like Swiss Frances, Euros, and even yen, also expanded in the corporate sector. BY mid 2008 non-financial corporate debt in foreign currencies reached over 45% of corporate laibilities in Bulgaria, over 30% in Ukraine and Baltics, and over 20% in Hungary and Russia. To get an idea of the way the foreign subsidiaries of major western european banks expanded their lending, note that lending to homeowners between 2002 and 2007 doubled each year in Romania, rose 60-80% in the Baltics and Bulgaria, rose 20-30% in Poland and Hungary. And lending to corporations grew 20-30% a year. There is aclear suggestio of reckless lending and reckless borrowing in these numbers just as was seen in the way mortgage lending ocurred in the USA. The history of this kind of lending goes back to the reckless lending in Latin America in the eighties that led to lost decades many years before, and is a recurring story. Now Roche sees loss of GDP of 5%-6% for Turkey, Russia, Romania, Czech Republic and Poland, and 8-10% in Hungary, Bulgaria and the Baltic states. That would take 40% of foreign exchange reserves in Turkey,Czech Republic, Poland, Hungary and Ukraine. And this will have a human cost in jobs lost, crime, poverty, and years of progress lost in these countries. And it will ricochet back to the parent companies of the European banks that did a lot of this lending, with $130 billion additional losses, and a loss of 10% of tier one capital (equity capital plus disclosed reserves) of Western European banks....

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An off the cuff remark by Romney in Nashua, New Hampshire- "I like to fire people who provide services to me"- referred to health insurers that are not providing good care. Perry, Gingrich and Huntsman, the other candidates in the Republican primaries seize on this reference to firing, and another about pink slips made by Romney, to focus attention on the people Romney fired at the companies he acquired for Bain Capital. Huntsman tells reporters in Concord- "Governor Romney enjoys firing people, I enjoy creating jobs." Gingrich tells NBC's "Today" show- "Look I'm for capitalism, but if someone comes in, takes all the money out of your company and then leaves you bankrupt while they go off with millions, thats not traditional capitalism."