EXAMINATION OF THE KERRY WEBSITE

by Russell T. Johnson

Peter Jennings interviewed Senator Kerry on the evening news. Kerry said he caught a glimpse of what it's like to be black in America at a moment when he was the only white guy in a dorm room at Yale.

If you're trying to establish street cred, don't talk about your dorm room at Yale. I'm sure that he experienced the blackest thing the Ivy League had to offer at the time, and I guess this nonsense can be put across in lilly white states like Iowa and New Hampshire.

Here's a quote from the Kerry for President website on his policy regarding the mutual fund scandal.

Some of America's top mutual fund companies enriched themselves through excessive fees and helped big investors illegally profit with so-called "late trades" and "market timing." In a Kerry Administration, this will not be tolerated. Kerry believes that we will only be able to fully revive our economy if we restore investor confidence in the markets. John Kerry has a plan to protect every day investors and restore confidence in the market by requiring all investors are treated fairly. Kerry will curb late-trading and market-timing abuses by fully prosecuting Wall Street insiders that steal from American investors.

In other words he swears to uphold the laws of the United States. This is not a political position. This is in every oath taken by every elected official. I'm only singling Kerry out because he's the front runner at the moment. All the candidate websites engage in this political lip diddling. If he wanted to EXTEND those rules or REPEAL those rules or fund more investigations THEN we'd be talking about public policy.

Here's his plan to stop the foolishness:

Put a Stop to Late-Trading: Right now it is too easy for brokers to circumvent the 4 p.m. deadline in order to receive that day's mutual-fund price by saying that they had received the request in time, even if they did not file until later. John Kerry will prevent big investors from using brokers to send in trades after the 4 p.m. deadline by requiring that all mutual fund companies receive an order prior to the time the fund sets a share price or Net Asset Value for an investor to receive that day's price.

If they're already breaking the rules to do this, I'd doubt if another unenforced rule is going to change much.

Stop Mutual Fund Employees from Market Timing and Assure They Follow the Rules: Today, mutual funds set policies and procedures to stop market-timing. However, they sometimes violate their own policies to help investors with special connections. John Kerry will stop these abuses by making it illegal for mutual-fund employees to engage in market timing trades, by requiring each mutual-fund prospectus to explicitly disclose market-timing policies and procedures, and by increasing penalties for mutual funds that do not follow their own policies and procedures to stop market-timing.

I'm sure all those 401k planholders are looking forward to reading a couple dozen pages of fine print which, if deciphered, will absolve the institution of any and all blame for their abuses. I've read a lot of prospectuses (cover to damn cover) and they are heavy with protection (masquerading as disclosure) for the institutions.

Certify That Assets Are Fairly Valued: John Kerry believes that we must take actions to end stale prices that make market timing attractive. Each quarter he will require investment advisers to mutual funds to certify to the SEC and to investors that they have adequate procedures in place to value their funds assets fairly and currently. Kerry will also outlaw the selective disclosure by mutual funds to large investors of their portfolios. Market timing works only if the mutual fund tells large investors where its portfolio is currently invested.

The plan to outlaw selective disclosure of holdings is such a good idea I thought it was already against the law. However to annually "certify" that they have "procedures in place" is a toothless measure. The website stated in an earlier paragraph that there was a problem with the institutions violating their own published procedures and that Kerry wants a new law to 1) require them to disclose their procedures and 2) punishing them for violating those procedures. Isn't it redundant to have them periodically file those procedures with the SEC in addition to publishing them? This is going to create paperwork that will have to be processed and stored at some expense to the taxpayer. This will be four packets a year from each and every one of the thousands and thousands of mutual funds doing business in the U.S. I think the Kerry people aren't really considering all the possible consequences of these proposals.

Independent Oversight Board to Root Out Corruption: Similar to what was developed by the Sarbanes-Oxley bill for accounting, John Kerry will develop a new independent Mutual Fund Oversight Board to seek out fraud and corruption throughout the mutual fund industry to ensure that mutual funds are taking necessary steps to protect shareholders.

If there's already an effective and properly independent oversight board for securities and/or accounting, why start a new one just for mutual funds? Just allocate the new assets to the old board and let them hire some new folks to do the job.

An Independent Board to Govern Mutual Funds and Compliance Officers to Force Mutual Funds to Play by the Rules: John Kerry believes we should increase the voice investors have in fund management by requiring that independent directors comprise at least three-quarters of the mutual fund board of directors and that all funds have independent chairmen. John Kerry will force mutual funds to hire a compliance officers working for shareholders and reporting only to independent directors to ensure they play by the rules.

Excuse my cynicism, but this stuff about, " John Kerry will force mutual funds to hire a compliance officers working for shareholders....." is a fairy tale. No matter what words you use to describe the guy's job, he knows who is signing the checks. Instead of hiring one more compliance officer, hire one more prosecutor.

Higher Penalties for Defrauding Investors: John Kerry's plan increases the penalties and jail time for breaking laws related to late trading of mutual funds....

It's not the harshness of punishment that deters, it's the certainty. If the threat of ten years in prison doesn't scare them straight, the threat of twenty won't either.

New RICO Penalties to Compensate Investors: John Kerry believes that we should help investors who have lost money due to late-trading schemes. He would help investors recover their losses by making late-trading an offense under the Racketeer Influenced and Corrupt Organization (RICO) Act.

This promises to be a full-employment measure for lawyers. I've been involved in suits like this before, and the least little thing requires tons of paperwork, and of course it all has to be copied and faxed at a buck a page, and it's more complicated than the worst Best Buy rebate you ever tried to get. Then it gets rejected on a technicality, so you reapply, it gets rejected, you reapply it gets rejected, you petition the judge, then it gets accepted. Mind you this paperwork is being demanded in order prove information the institution already has. All this rigamarole is going to discourage the guy with a hundred shares, which serves the interests of the larger shareholders (like the Board of Directors) who don't have to share the class action settlement with all the little people who didn't make it through the gauntlet which was set up by the company lawyers. (How's that for one long run-on sentence. Good coffee!)

Adding more rules helps the big boys. More things to sue for is also more things to defend against, and the big boys don't have to beat you; they just have to defend against you until your lawyer has all your money, and then you go away.

If you want to help us, John Kerry, simplify the rules we've got. Don't add a lot of new rules. That's just more rocks for them to crawl under.

This is just one issue treated on the John Kerry for President web site. There's a link to the site in the title of this article if you'd like to see some of his other brilliant ideas.

I'll bet you thought I only criticized the Republicans.

RTJ--2/4/2004

Reducing our dependence on oil and building a future of clean and abundant energy are urgent national priorities. John Kerry will create an Energy Security and Conservation Trust Fund capitalized by existing oil and gas royalty revenues and dedicated to accelerating the commercialization of technologies -- such as the manufacture of more efficient cars and trucks, the development of biofuels, and the creation of a hydrogen-based energy economy -- that will reduce America’s dangerous dependence on oil.

It sounds like the Energy Security and Conservation Trust Fund is a way to take existing revenues and subsidize the R and D programs of the automobile and energy industries. For a guy who complains about Bush's breaks for the rich, he proposes a few himself. Whatever those royalties are getting spent on now is going to go away or it's going to have to get new tax money from somewhere else. When gas hits five bucks a gallon Detroit's cars will be running on soybeans the very next model year. Until market pressures determine what technologies they develop, alternative energies will be expensive curiosities.

Americans should drive the cars, SUVs, minivans and trucks of their choice, but that these vehicles can be safer, more efficient and affordable. Kerry believes that we should increase our fuel economy standards to 36 miles per gallon by 2015 and will also provide tax incentives for consumers to buy the vehicles they want and incentives for manufacturers to convert factories to build the more efficient vehicles of the future. Taken together these proposals will enhance national security, strengthen the American auto industry, and protect and create jobs.

Let's see, he wants to increase fuel economy standards by 2015, conveniently after the end of President Kerry's second term. "Tax incentives for consumers to buy the vehicles they want..." Is he offering to subsidize everybody's car, even if the choice is a dangerous gas guzzler? "Incentives for manufacturers..." When I see that, and I see a lot of it on the Kerry website, I see that the candidate trusts the government and not the marketplace to decide what will be manufactured.

While John Kerry believes our nation needs a strategy to reduce dependence on oil today, he knows we can harness technological innovation and ingenuity to develop a hydrogen-based economy for the future. Hydrogen has great promise as a clean, domestic, and reliable energy source for the future.  It has the potential to power our cars at 100 miles per gallon without pollution and, with the right technology, can be produced efficiently from natural gas and coal.  Eventually, John Kerry believes that we can build a truly clean and secure economy based on hydrogen -- a clean fuel that we can eventually get entirely from renewable sources from our farms, the wind, solar energy, hydropower and geothermal sources.

The above paragraph says Kerry thinks hydrogen technology would be cool, but there is no policy suggested.

The American economy is twice as efficient today as it was some 30 years ago. In part, that's because we accomplish more with less through efficient technologies. But studies by the Department of Energy and other agencies show that we can save significantly more energy through advances in energy efficient technologies - heating, lighting and manufacturing - that only need to be implemented. John Kerry believes that the government should promote the efficient use of energy in the places that we work and live. Kerry will cut the Government's energy bill 20 percent by 2020 - saving the Federal government $8 billion over the next ten years - and will challenge municipalities, corporations, universities, small businesses, and hospitals to do the same. He will also provide tax credits for energy-efficient buildings and homes.

He had me right up until the last sentence. I think it's a great idea for the government to set a good example by converting buildings and vehicles to more energy efficient technologies in order to save billiions of taxpayer dollars. But if doing this really does save money, why does Kerry have to subsidize businesses and citizens to do it?

John Kerry believes that America needs a national market for electricity produced from renewable energy, such as wind, solar, biomass, geothermal and hydrogen. Kerry supports a national goal of producing 20 percent of our electricity from renewable sources by 2020. This standard will encourage the market to respond by finding the most efficient and effective way of meeting that goal through a credit trading system.

Okay, credit trading system. What does that mean? Cash is a credit trading system. People have suggested a credit trading system for hydrocarbon emissions, and I'm just going to guess that this is something like that. I'm assuming that a concern that produces over 20% of its electricity through renewable resources can sell to another generator the rights to produce less than 20% renewably. The problem I have with these credit trading schemes is that rich markets end up selling their pollution to poor markets, and Arkansas is a poor market. So for instance, Southern California with its vast tracts of empty, windy, sunbaked desert can create wind and solar farms NOT to manufacture renewable energy so much as to manufacture renewable energy CREDITS, which are more valuable, since they can be sold to places like Arkansas. Before you know it you'll be able to trade pollution futures on the NASDAQ.

Natural gas, the cleanest form of fossil fuel, has historically been in abundant supply at a reasonable cost. However, many fear that supply shortages may cause persistently high prices over the next several years. High prices for this fuel hurt lower and middle class families since heat and power are essential services. American families will bear the cost of increased prices for electricity and heating and for goods produced using natural gas. Natural gas, for example, is used in producing fertilizer and other products and as a fuel for industrial processes and producing electricity. These higher costs will hinder economic recovery. John Kerry believes it is imperative that we begin to address not only the supply and demand sides of the equation, but the short-term and long-term challenges for natural gas as well.

O.K. so far, but it sounds a little like a high school research report.

While much of the expected pressure on the natural gas market is due to supply shortages, there have been abuses in the market for natural gas - such as alleged manipulation of capacity in the western markets, inaccurate filing of trade data - that ultimately have an adverse effect on the prices consumers pay. John Kerry will make sure that any abuses are dealt with effectively and prevented from reoccurring. This will require the Federal Energy Regulatory Commission to be more diligent and aggressive in pursuing anti-competitiveness practices.

So Kerry promises to zap the cheaters in the natural gas industry, but dodges responsibility, saying that's really up to FERC.

John Kerry believes that the United States should reach out and develop a long-term partnership with our immediate neighbors and friends Canada and Mexico to develop and expand North America's robust energy supplies. By looking beyond our borders, as well as to our nation's huge stranded gas supplies on the North Slope of Alaska, we have the potential to secure long-term energy supplies that help meet our demand for energy. For example, Canada has huge stranded natural gas capacity that has no way to reach major markets, and Mexico likewise lacks an adequate energy infrastructure to allow it to tie into major North American energy markets. Presidential leadership must be interjected into this equation, and John Kerry would make this a priority issue with our North American neighbors.

"Presidential leadership must be interjected into this equation." Who writes this stuff? Again he doesn't trust the market to motivate the construction of a pipeline. Rather he seems to prefer his own ineffable will.

There are 35 trillion cubic feet of known natural gas reserves on the North Slope of Alaska that have no way to get to markets in the lower 48 states. John Kerry believes that we must build the Alaska pipeline to expand natural gas as a resource and provide important jobs for American workers. As President, John Kerry would bring together the States, Native Americans, producers, pipeline companies, Canada and other interested parties to make this a domestic priority, including providing appropriate regulatory streamlining to get this project built. Encouraging Development in the Gulf of Mexico. John Kerry supports developing natural gas sources in the Gulf of Mexico on areas already open for drilling. He supports temporary incentives that encourage development in this area.

Wants to encourage construction of an Alaska pipeline with "regulatory streamlining." What does that mean? Sounds like a euphemism for something the voters might not vote for if they knew what it was.

We need a domestic pipeline infrastructure that is capable of delivering natural gas where it is needed, when it is needed, in a safe and reliable manner. For example, the lack of pipeline infrastructure may be impeding development of natural gas on public and private lands on the eastern front of the Rocky Mountains, which are believed to hold very significant reserves of natural gas. Over 60 percent of the natural gas reserves in this region are available for lease under standard lease terms, according to a recent government report. John Kerry's plan would ensure that we develop needed pipeline infrastructure and supplies in appropriate areas in an environmentally sound and safe manner.

The above paragraph states that gas reserves are not being used becasue there's no pipeline to get it to market. Another way to state that is that the energy companies can't make enough on that gas to pay for building a pipeline. Another way to say it might be the energy companies aren't going to pay for a pipeline to those reserves if they think that Kerry will get the taxpayers to pay for it. Just a couple of alternate interpretations.

There are ways in which we can improve our ability to import natural gas from reliable foreign sources. The current infrastructure for importing natural gas from overseas is limited as the natural gas must be liquefied at super cold temperatures for shipping overseas and returned to gas form before it can be put in the domestic pipeline system. There are currently only four terminals in the U.S. where liquefied natural gas is delivered and these facilities often raise challenging local issues. John Kerry would support new technologies under development to address some of the local concerns about this transportation system, including development of ship-based regasification systems that would allow the LNG to be regasified offshore and moved to shore by connecting to underwater pipelines.

JK would "support new technologies under development" how? Grants, tax breaks, government funded research, loans, what? I know I sound like a broken record, but energy companies have lots of money. Why can't they build their own offshore regasifiers? Would one cost more than an oil rig?

Advanced technologies, commercially available today, can dramatically increase the efficiency of natural gas use for power generation and end use applications, including heating and cooling. For example, combined heat and power systems which provide both electric and thermal energy to commercial and industrial users can achieve efficiencies greater than 70%, compared with power plants that operate often at half that level.  And gas-fired appliances available today can substantially cut homeowners natural gas bills which may hit record levels this winter.

'kaaaaaay.

John Kerry's plan does not necessarily spend more than the Republican energy bill, he just has different priorities. While John Kerry wants to invest in renewable energy that can reduce our dependence on foreign oil, the Republican bills advocate big subsidies for large, well-financed energy companies. The House Republican energy bill authorizes billions in new spending and tax cuts for the industry. The Senate bill also has subsidies for the industry. John Kerry believes we need an energy policy that puts federal resources into creating the technologies that will create energy security, create jobs and protect the environment.

Hold everything. "...doesn NOT NECESSARILY SPEND MORE than the Republican energy bill...." If he thought it was going to spend less, he would have said so directly. Here he criticizes the Republican plan for subsidizing the industry and in the paragraphs immediately preceeding he has endorsed subsidizing pipelines, regassifiers, automobiles, and the creation of renewable energy credits which energy companies can convert to cash. The pot is really calling the kettle black.

At the same time, John Kerry believes that the nation can save money through targeted policies to improve the management of energy and public resources. For example, we can modernize the sale of mineral rights on public land by ending the sale of public land rights at $5 per acre and save $519 million over five years. John Kerry's plan to cut electricity in the Federal government would save $8 billion over the next ten years. And John Kerry would close a loophole that allows small-business owners to deduct $100,000 for luxury sport-utility vehicles through a law meant to benefit farmers and others from being penalized by the luxury tax when they purchase pickup trucks and tractors.

"Modernize" the sales of mineral rights? No more sales at $5 per acre. Does that mean no more sales at any price? How does that save $519M? Whatever the plan is, I can't tell from this paragraph. And the "plan to cut electricity in the federal government" is unclear as well. I assume we're talking about measures to increase efficiency, weather stripping, tinted windows. And he promises to end the $100k government subsidy on SUV's, but several paragraphs above he proposes, "tax incentives for consumers to buy the vehicles they want." He seems to be on both sides of this fence.

For too long there has been a deadlock between those who support using coal and those who support improving the environment. George Bush tells coal producing regions to fight environmental protections because they will hurt the industry. Others believe there is no future for coal. The reality, however, is that coal is an abundant domestic fuel that is used to produce more than one-half of our electric power. John Kerry believes that coal should be part of the solution to our energy and environmental challenges and that we need to forge a new way to harness technology to develop and deploy clean electric power from coal. At the same time, John Kerry believes that we need clear benchmarks and a flexible framework by which to measure the emissions performance of existing and new uses of coal.

Vague. I guess the best we can do here is assume he has no ideological objections to the use of coal.

John Kerry believes that we need leadership to lower the four leading power plant emissions - nitrogen oxide, sulfur dioxide, mercury, and carbon dioxide. He also is committed to helping the coal industry and the communities that support it be part of America’s energy future. He wants to make the coal industry part of the effort in developing and implementing new cleaner coal technology. John Kerry believes we must invest $10 billion over the next decade - a five-fold increase - to help transition from the current generation of older and dirtier coal plants to cleaner and more advanced coal-fired power plants Kerry believes we must also invest in new research that can make sure clean coal is a major contributor in meeting future energy needs, including playing an important part in the production of hydrogen. This approach will be good for the environment and public health and will assure coal workers and their families are an important part of the next generation of energy technology for our nation.

"Committed to helping the coal industry.... must invest $10B over the next decade...." This sounds like subsidies to the energy industry for capital improvements.

Well that's about enough of that. All of his positions tend to run in the same ruts. He's distrustful of the marketplace, and while he criticizes Bush for being cozy with big business, his own proposals call for lots of tax cuts and subsidies for R and D and for pipelines. He proposes more and more government oversight, more and more entitlements.

This exercise demonstrates why these guys don't talk about public policy in public. It's pretty easy to find contradictions and inconsistencies in their policies. The prose style I think is responsible for some of these inconsistencies. The writer just had trouble making himself understood. There was lots and lots of text there and very little substance. I have to think that was intentional.

RTJ--2/8/2004


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