A continuing theme in this blog is that there is a huge need for financial literacy in the United States. After reading some of the comments on the SEC’s newly-proposed Regulation Crowdfunding I’m beginning to think that the need is just for regular literacy. Possibly also a need for some folks to repeat junior high civics classes.

Here’s the thing. The JOBS Act set some very specific constraints around securities crowdfunding and instructed the SEC to implement that legislative mandate. THE SEC CANNOT CHANGE THE LEGISLATION. If we did let an unelected government agency do that, it wouldn’t be very democratic, would it? So the legislators make the law, and the SEC has to implement it. That means when Congress imposes a $1 million limit on a crowdfunding raise, the SEC has to follow that. The SEC says so in its Proposing Release; people should read it.

So let’s be clear:

1. The $1 million limit on a crowdfunding raise was imposed by Congress, so anyone with problems with that should take it up with their Representative or Senators. In fact, the SEC is doing the best it can to expand that $1 million limit by saying that you can do an unlimited accredited-only raise at the same time as your crowdfunding raise, which I think is going to become standard practice.

2. Investor limits: also Congress’s idea, not the SEC’s.

3. No-one is planning to touch donation and rewards crowdfunding. If you’re not offering securities, the SEC is not planning to impose any regulations on you at all. You and your zombie movie are the FTC’s problem, not the SEC’s.

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You guys, this is so sad. We all know that sometimes it’s hard to be a rockstar engineer or coder in the Valley. Long nights, stale pizza, smelly t-shirts, worthless options. It’s hard to find friends of the opposite sex. But it’s even worse than we thought! Even the guys at Twitter don’t know any lady people! We know this because they didn’t find any to put on their board, despite the fact that it is 2013 and there are OODLES of qualified wimminz just ready to corporate governance the !^%$ out of TWTR’s audit committee. The problem might have been that the TWTRs didn’t go more than a Segway ride away from the cafeteria, but EVEN IN THE VALLEY there are qualified women. (Although why they don’t run away screaming I do not know.)

So let’s not call Twitter management lame, blinkered misogynists. Let’s do them all a huge favor and introduce them to some nice ladies who know all about finance, and tech, and corporate governance and risk management, and who they might be able to have a nice non-threatening relationship with.

Encourage them gently with the hashtag #TWTRXX.

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See here for the introduction to the ZBI.

Just when I thought I might retire the ZBI, Congress decided to push us to the edge of the cliff/abyss/insanity again. So yay for that, I guess. I’m promoting Ignorance to the number one spot as the biggest factor in driving us all to living on roadkill and bathtub gin.

1.  Populist rage and financial illiteracy amongst the populace, the populace’s representatives and the fourth estate. This is truly driving me nuts right now. The people, the people’s representatives and the people who explain stuff to the two former groups are (a) pig ignorant (b) wrong and (c) influencing other people. Oh lord. So let’s start with the People. Here’s how badly-informed the people are. (Actually the comments to that story are actually more depressing than the Stupid the data reports, which is remarkable. Oh, the apostrophe’s!) And then we have Congress, where some folks seem to think that you can say something isn’t a default and then it isn’t, on account of they are qualified large animal veterinarians or dentists and thus understand something about the international financial markets. I am a size 00 supermodel. (Damn, just saying it didn’t make it so, how does that not work?) See, Congressman CowDoctor, it is not you what decides whether something is a default, nor what will cause the markets to value Treasurys at some different price, nor what will determine whether or not said Treasurys continue to remain adequate collateral for major investment banks’ repo contracts which will determine whether we are going to have cascading margin calls all across the markets. What determines whether something is a default, in point of fact, is often a matter of contract law, made between private parties, and I’d think that you would respect that. But enough, you are qualified to pull baby cows out of mommy cows’ whatsits so who am I to judge? And then we have financial illiteracy promoted by the press. Oh, this is sad. I work in an area where legal research often consists of a Google search by some entrepreneur’s brother-in-law who is an immigration lawyer, so it is actually important that the financial press get it right now and then. But the NYT so totally mushed up a story on the JOBS Act that it was unrecognizable [even the correction to that one is wrong], and the WSJ published an interview on the JOBS Act that misstated the law without any factual corrections, so can the small biz folk trust the established media?  And online, here’s a couple of right doozies, from the same source. In what is supposed to be “analysis,” a commentator counts the words in the Risk Factor section on the Twitter IPO S-1 and asks whether Twitter is more risky than Facebook’s IPO because it has more words in it. But it’s a good comparison because he has taken extraneous words like page numbers out! Where to start? Actually, that’s easy. Reading the words rather than counting them, that might be a really good place to start. And the same source asserts that Microsoft’s hidden problem is its “ancient board“: how can old farts understand how to sell to youngsters? Let’s ignore for the moment that the board is there for reasons of corporate governance, not sales, and that the people who do the selling are in the sales department. Let’s just ask “Yeah, and with only two women on the board, how can they hope to sell to lady people, either?” [Actually, good question...] Current rating for financial illiteracy as the biggest threat to life as we know it: eleven out of ten zombie cows and rising by the minute.

2. Bank provisioning. So the banks are  recording humongous numbers for settlements, legal costs and oversight costs. But I STILL do not understand why some of the seemingly easiest lawsuits have never been brought. If you have an agreement that says Party A is responsible for making sure that Asset Pool X consists only of assets with the following attributes and it turns out that much of the stuff in the asset pool does not have anything like the attributes it’s supposed to have, there’s a cause of action against Party A, right? Right? [Sound of crickets...]  Current rating: 10 zombie bears, 5 years out.

3. Europe.  So Europe’s still essentially bust. In its chocolate-and-lace soaked heart, Europe still wants to impose the FTT. But it won’t work, also illegal, so at some point won’t they just give up and focus on proper banking union instead? Current rating: 5 zombie bears.

4. Actuaries and pensions.  Current rating: 5 zombie bears.

5. Math/Algorithms.   Current rating: somewhere between one and an infinite number of zombie bears; variable.

6. Hackers.  Still the greatest threat to markets, according to DTCC. Current rating: 8 sleeping (?) zombie bears; stable.

7. Cross-border equity custody. Current rating: one lonely zombie bear.

8. Bitcoin or something like it. Haha, my friends at SecondMarket made an ETF in bitcoins, so bitcoins are now mainstream among the FinTech crowd. I am still not buying any. If you buy gold, you like to know where the gold mines are and have some idea of the metallurgic likelihood of gold in various areas.  I am not qualified to know whether it is true that there is a limit on the number of bitcoins “mined” and I do not trust a fiat currency fiat-ed by someone who may or may not exist, or who may have a serial identity like the Dread Pirate Roberts. Plus, I do not need any drugs today, thank you. I am sticking to SPY like always. Current rating: two zombie bears; increased on account of now hipsters are going to invest in this thing.

9. Megabank’s Boring Transactions Division. Current rating: no zombie bears for now.

10. Commercial Real Estate. Current rating: no zombie bears; we are still pretending they aren’t there. And maybe they aren’t, but if that were the case, why is so much office space in my neck of the woods still vacant?

Posted in Zombie Bear Index | Leave a comment


So the SEC adopted the rules that will (when effective in mid-September) permit offerings made in reliance on Regulation D to “generally solicit” providing all sales are made to accredited investors. Huzzah! I run a company that provides services to people doing the kind of online offering that will now be permitted, so I’m happy.

But we now need to face the fact that the ingenuity of the average American entrepreneur is limitless when it comes to promoting his or her company’s products, and now its securities offerings. Expect billboards, skywriting, ads on t-shirts, ads on t-shirts for dogs, songs about the offering, Vine clips, social media posts and when someone figures out how to do it, details of offerings singed into catbeards.

Offerings that are intermediated by broker-dealers will at least have the discipline of a FINRA-regulated entity that is subject to advertising and social media rules. But only 11% or so of Regulation D offerings use an intermediary. So independent issuers may be out there doing their solicitation completely unaware (and in a few cases aware but uncaring) that Rule 10b-5 applies to their solicitations and how ridiculously easy it is to violate 10b-5 when you make the kind of statements I see every day on the major crowdfunding donation/reward sites. So there’s chaos battlefield #1. An SEC statement along the lines of “when we said in the release that anti-fraud rules still applied, this is what we meant” would be an excellent idea.

The other type of chaos derives from the SEC’s proposal that issuers submit their general solicitation materials to the SEC for a couple of years so the SEC knows more about the market it has to deal with and the way in which issuers are communicating. Good idea in principle, but the manner in which it’s proposing to acquire this knowledge won’t work. There’s going to be an “intake page” on the SEC’s website whereby issuers can upload all their solicitation materials. Those materials are going to include all the various documents I mentioned above, in all the possible formats that can be used to create files. The processing system and database are going to have to be truly robust (and expensive) to be able to do that without crashing (and I speak as one who is writing very large checks for the development of a robust database). And is that money worth it for a temporary program? Especially in light of the fact that people don’t like the idea of giving the SEC offering information that is not otherwise required. (They think the SEC might use it for purposes other than its own education.) I predict that people will try to break the intake page by uploading catbeards as soon as it’s launched. The SEC would be much better off forming a subcommittee of one of its small business advisory groups to keep the Commission informed of market practices.

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Rational people (and I’m only talking about people who don’t comment on the intertubes here) know that the SEC has a hard job. Examples from this last week were the throwing out of its disclosure rule on payments to foreign governments for natural resources and a story in today’s WaPo about the delay in getting a rule done that discloses how much more CEOs get paid than their minions.

Who is to blame for these failures and delays? Congress.

Let’s revisit what the SEC is for: The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.

So what part of the SEC’s mission is served by making it write rules that prescribe disclosure of payments made to foreign governments for oil concessions and the like? As an investor, I care about  total costs for royalties. As an investor, I don’t much care about the exact amount that goes to the Despot of Doodly. (As a human being I might care a lot, but that’s a different story.) And what part of the SEC’s mission is served by working out how much more the CEO of Squidbank gets than his average worker shrimps? As an investor, I care how much he earns, I care how much the company pays out in HR expenses, but I do not care about the ratio of CEO-to-minion paycheck measured according to some metric that must by its nature be totally arbitrary. (How do you calculate that? Do you include foreigners? Interns? Do you weight by seniority? By weight? It’s going to be totally meaningless and it’s clearly intended as an indirectly punitive measure.)

The SEC is there to protect investors and foster capital markets. It’s not an agent of social change. By requiring the SEC to undertake this kind of rulemaking, Congress perverts the SEC’s function and distorts the market. If you want to make things better in the Congo, use the State Department. If you want to express disapproval of overpaid CEOs, use the Department of Labor or someone. I’d love to have the SEC make companies disclose how badly they behave to animals, but that’s not what it’s for.

I’m not saying that getting this information is not a good objective; my favorite human charity, Oxfam, is strongly behind the rules that require disclosure of royalty payments and whether raw materials are sourced from conflict areas. But the SEC is the wrong instrument. (Sorry Oxfam, will increase my monthly donation for saying this.)

And making the SEC write rules that are not in its core area of competency distracts it from the tasks that are. Like getting crowdfunding rules written.

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See here for the introduction to the ZBI.

Hello, did you miss me? While I was tooling around running a startup in an industry that is taking its time to start up, empires rose and fell. Well, Cyprus and Bitcoin collapsed a bit. But on the positive side, goats started a Ponzi scheme. Which is nice because goats occupy such a small part of the intertubes these days.

1. Bank provisioning. Gretchen Morgenson correctly describes this as one of the most pivotal cases of the financial crisis. What I do not get, though, is why there are so few cases of this type. But it is clear that litigation of various types (and the accompanying legal fees) is a continuing drag on bank profits. Current rating: 10 zombie bears, 5 years out.

2. Europe.  Just when Europe was getting boring it got exciting again in the wrong way.  So depositors got landed with some of the bill in the Cyprus bail-out, which is not the way it’s supposed to work.  Moral of the story: don’t be Russian or bank where Russians bank.  On the good news side, the truth about the magic money from the banks that the FTT (won’t) bring in started to sink in.  Yes, it’s a terrible idea.  Current rating: 5 zombie bears.

3. Actuaries and pensions.  Commissioner Gallagher refers to “Armageddon” in munis and he’s not wrong. Muni bankruptcies will continue, and driving many of them are insane pension liabilities masked by laughable actuarial assumptions. Current rating: 5 zombie bears.

4. Populist rage and financial illiteracy amongst the populace, the populace’s representatives and the fourth estate. Current rating: 4 zombie bears.

5. Math/Algorithms.  Zero Hedge finds interesting comment letter on HFT, pre-flash crash.  While I was away Twitter broke the algorithms. Current rating: somewhere between one and an infinite number of zombie bears; variable.

6. Hackers. (Very necessary) Wall Street war games Current rating: 8 sleeping (?) zombie bears; stable.

7. Cross-border equity custody. Current rating: one lonely zombie bear.

8. Bitcoin or something like it. Yes, Bitcoin could pose a threat to the current structure of the state.  As I’ve been saying for nearly two years now. And although it’s too late now to draw anyone’s attention to the fact that a bitcoin ATM featured in the Cyprus meltdown, I thought you might be amused by this.  Current rating: one zombie bear.

9. Megabank’s Boring Transactions Division. Current rating: no zombie bears for now.

10. Commercial Real Estate. Current rating: no zombie bears; we are still pretending they aren’t there. And maybe they aren’t, but if that were the case, why is so much office space in my neck of the woods still vacant?

Posted in Zombie Bear Index | Leave a comment

FB and FD

It’s not often that I disagree with Joe Grundfest, but I am going to take exception to one of the points he makes about the Netflix/Facebook disclosure.  As most people know, Netflix’s CEO made a comment about Netflix subscriptions on his Facebook page.  (He has more than 200,000 followers on Facebook.)  The SEC reckons that the comment was material, and therefore violated Regulation FD, which requires companies not to make selective disclosure of material information to shareholders and investment professionals.  Material information is supposed to be disseminated by a method reasonably designed to provide broad, non-exclusionary distribution of the information to the public.  In his otherwise excellent article, Professor Grundfest reckons that the Facebook post, which was picked up by other forms of social media immediately, was disseminated by such a method.

I don’t agree.

I don’t think we should ever treat a fee-based service as being compliant (“non-exclusionary”) dissemination under Reg FD, and Facebook is essentially a fee-based service.  It has a price.  You don’t have to pay cash but you do have to pay in terms of information, which is just as valuable.  Facebook requires you to sign up in your own name, and uses the information it gleans about you to sell advertising.  So that looks like contract “consideration” to me.  (There’s another price, which is the time you spend dealing  sifting through Facebook’s astonishingly high noise-to-signal ratio to filter significant information from the news that Freddie has a “complicated” relationship, Lee is growing pretend lettuces on an imaginary farm and Suzie “likes” Lee’s lettuces.)  The fact that you must purchase Facebook’s services with your identity distinguishes it qualitatively from other social media outlets such as Twitter, where you can sign up in the name of your cat, or someone else’s cat.

And what happens when Facebook inevitably becomes a has-been and other social media take over from it?  How do you know where to go to get information about the companies you follow?

I know I’m sounding seriously old-school here, especially for someone who operates in the world of Finance 2.0, but there is something to be said for (a) certainty in knowing where to look for breaking news about a company and (b) not having to pay the price of joining all the various networks where information might get disseminated.  I’m voting for material information needing to show up first on the company’s website, and on the SEC’s (admittedly antiquated) EDGAR system.  Possibly someone has created a free push service for filtered material corporate information or wants to get in touch with me so we can create the FeeD (FD Feed, get it?) together, but until that time, I’m with the SEC and its old-timey attitudes on social media.

Twitter: @saracrowdcheck

Facebook: not ever; who are you kidding?

Posted in Securities Regulation | Leave a comment

WHO WON 2012?

You know, there’s just something so appealing about government employees who get on with their job like grownups and do something really freaking cool like landing something the size of a phone booth on a planet millions of miles away exactly as they had planned it.  Also cool . . . private market scientists.  Who won 2012?  Scientists.

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See here for the introduction to the ZBI.

So I was right not to include the Fiscal Cliff, right?  Was I right when I predicted that we’d head to the precipice and then create half-baked solutions kicking most of the cans down the road?  Sadly, that wasn’t a hard call.

ICYMI: Zombie houses.  Not a threat to the financial system, but very threatening to community stability.  Do zombie houses eat other houses’ heating systems or what?

1.  Bank provisioning.     Current rating: 10 zombie bears,  5 years out.

2.  Europe.    Europe just shifts from one kind of crisis to another.  Plus ca change.  Except that they are all going ahead with the FTT.  And it’s going to have some seriously weird effects.  Current rating:  5 zombie bears.

3.  Actuaries and pensions.       Good Economist piece on UK moves to address (not really deal with) the defined benefit pension problem.  Current rating: 5 zombie bears.

4.  Populist rage and financial illiteracy amongst the populace, the populace’s representatives and the fourth estate.   Current rating: 4  zombie bears.

5.  Math/Algorithms.      Rep. Markey (who has been in the House since the Jurassic age, or at least since I was a nipper) tries to get some SEC action on HFT.  “Clear and present danger,” he says.  Also, check out this totally awesome chart, which despite being awesome DOES NOT make the case for a financial transactions tax.  You do not tax something just because there’s a lot of it, or you don’t like it.  If you don’t like it because it’s dangerous, stopping it rather than taxing it would seem to be the way to go.  On the good news side is the SEC’s continuing ability to get people with serious numbers capabilities to come on board.  Chairman Schapiro started this promising trend.  On the other hand, maybe people with serious numbers abilities will just go off and become quant day-traders instead.  That can’t be bad, can it? Current rating: somewhere between one and an infinite number of zombie bears; variable.

6.  Hackers.   Current rating: 8 sleeping (?) zombie bears; stable.

7.  Cross-border equity custody. Current rating:  one lonely zombie bear.

8.  Bitcoin or something like it.    Current rating:  one zombie bear.

9.  Megabank’s Boring Transactions Division.  Current rating: no zombie bears for now.

10.  Commercial Real Estate.    Current rating: no zombie bears; we are still pretending they aren’t there.

Posted in Zombie Bear Index | Leave a comment


I am an old woman now, and many memories have faded.  But the clearest memories I have are of the events one Christmas that nobody quite agrees about.  All of us who were there know that something happened, but when we try to describe it, the facts and details slide through our minds and become insubstantial, inchoate.  Like things you see from the corner of your eye; when you turn, they aren’t there at all.  But let me try.

It was many years ago, at a time of extraordinary bitterness and partisanship.  You may think today’s politicians are divided, but our President goes on vacation with the family of the Speaker, a representative of a party that her party has no alliances with.  That would never have happened in the days of which I speak.

In those days, there were a series of battles between Congress and the Administration on fiscal matters. Over several years and a couple of sessions of Congress, the two (or many) sides would propose solutions to reduce the nation’s deficit, always totally unacceptable to the other side.  Equally unacceptable counter-proposals were proffered, and the arguments would continue until the markets became nervous and some inadequate compromise was reached.  At some point the compromise started to take the form of Government in effect taking a gun, pointing it at its own head and saying “don’t make me pull this trigger.”  It was stupid enough the first time it happened, when it was dubbed the “Fiscal Cliff,” but that was followed by the “Fiscal Chasm” and then the “This-Time-We-Really-Mean-It Fiscal Abyss.”

My story relates to the Fiscal Abyss.  The end result of the Chasm talks was that if no agreement had been reached on tax reform by the target date, government would effectively stand down.  Apart from those deemed essential and most of the uniformed services, government employees would be furloughed and most government services would cease.  And the target date was midnight on Christmas Eve.  It was believed that this was such a Draconian solution that it would focus everyone’s minds, and that the target date was an incentive to get people to work things out and enjoy the holidays.  Unfortunately, they forgot who they were dealing with, which was themselves.

Despite that, some progress was made.  By the end of the summer, a tax reform bill was roughed out.  Pretty much everyone hated something in it, and pretty much everyone loved something in it, but the one thing everyone loved was the fact that 1040s got much shorter.  The problem was, the tax reform bill was only part of the package that had to be sorted out by Christmas Eve.  The Chasm resolution was that both budget and Tax Reform Act had to be adopted at the same time as the debt ceiling was raised, so there was no wriggling out later.  And the budget was proving troublesome.  As fall turned into winter, the Tax Reform Act passed both House and Senate, but budget discussions were getting nowhere.

By Christmas Eve, things were pretty desperate.  Various government departments readied the furlough plans that they hoped never to have to use.  Families bought fewer presents, thinking that they might not be able to pay off the credit cards, and what presents they did buy tended towards the practical, like socks and Hamburger Helper.  Parents tried to get tiny tots with their eyes all aglow excited about the prospect of underwear from Santa.  “Black Friday” took on a new meaning that year.  The recovering economy headed south and when markets closed early on Christmas Eve, the Dow was down 11.9% for the year.  Yields on the 10-year T-bond reached 5%.

No-one had left town.  Congress had to stay till the last minute, in case a compromise was reached and they needed to vote on raising the debt ceiling.  Senior officials in the government departments had to oversee the closing down of their operations and the transition to emergency status.  I was at that time Deputy Assistant Secretary of the Treasury for Financial Affairs (Acting) and pretty much everyone at Treasury had been confined to their offices for weeks at that point, working round the clock.

In the late afternoon of Christmas Eve, the Secretary of the Treasury headed to meet with the Speaker of the House and the Majority Leader.  The meeting was billed as a last-ditch effort to reach agreement on the Abyss, but we all knew that it was pure political Kabuki as usual.  There was no hope of reaching a solution, but no-one wanted to look like they weren’t trying.

The Secretary of the Treasury must always be properly staffed.  He can’t just turn up on his own to an important meeting with Congress.  But all the senior Treasury staff were involved in emergency planning that afternoon, and I was already over on the Hill trying to work out the possibility of getting some revenues from a Financial Transaction Tax, so my boss, the Honorable Isaac Moran, Assistant Secretary of the Treasury for Financial Affairs, asked me to meet the Secretary at the entrance to the Longworth House Office Building and attend him to the meeting.

He was running late, of course, so I chatted to the security officers there.   The holders of true power in Washington?  Security staff.  Whether it’s the FBI Police or the US Capitol Police or the actual police Police, they are the people who can make or break your day.  They are capable of being total dicks to people who get dickish to them, but they can also save your life.  They are the people who may let you slip by them when you’ve left your ID on your desk, ignore the fact that the knife you are bringing in to slice up birthday cake might be regarded in some circles as a weapon, and look the other way when you need to smuggle a cat into one of the independent agencies, which happens more frequently than you’d think.

“You know the thing that annoys me most?” asked Warren, one of the officers, tall, athletic, tending to a slight paunch.  “It’s that our damn budget is tied up with the federal money.  There’s a whole bunch of things that aren’t any business of the Feds.  Stuff DC needs that no-one else in the country has to get approval from Washington to spend on.”  This was, of course, in the days before DC statehood.  It turned out that in his spare time, Warren ran a basketball program for orphans.  Orphans?  There are still orphans?  “Well, they ain’t exactly Little Orphan Annie type of orphans.  They’re big and some of them are kind of mean.  But they need help just as much.  These are kids with bad home situations, you know?  They come to us after school and we play a little ball and let them do their homework and talk a bit.  We call it the Four O’Clock Club.  But the finance for it has to be approved by the House.“  He looked around for a moment.  He was, after all, in the LongworthOffice Building.  “It just isn’t right,” he said, in a lower tone.  “I know there’s a problem with the whole budget.  But this isn’t even federal money.  It just needs to get approved by the Feds.”

At that point, the Secretary arrived.  The Secretary of those days was a pompous, formal man, still resentful of the fact that running a nation was nothing remotely like running a large oil company, and feeling that if somehow he could find and fire the right people in the entrenched bureaucracy, he could make the trains run on time.  We walked to the Speaker’s office, and found him ensconced in his personal conference room with the Deputy Whip, a weasel-faced woman known to want the Speaker’s job someday, so long as that day was soon.  They were drinking Old Roadkill, one of the best-known products from the Speaker’s district.  The Secretary and the Speaker, despite being from different parties, had no personal animosity.  They knew how the game was played.  The Congressfolk stood for the Secretary and ushered him to a chair.  The Speaker poured him a glass of Old Roadkill without asking.  He waved the bottle vaguely in my direction, neither expecting nor getting any reaction.  I took a seat on the edge of the conference room.

“Well, unless you got some news for me (the Secretary raised his empty palms) ain’t nothing getting done tonight,” said the Speaker.  “Just way too many open issues still.”  His Southern accent always got stronger under the influence of stress and Old Roadkill.  “You’d need to be ol’ Santy Claus hisself to sort out all this . . .”

His mouth remained open but words stopped coming out.

The Speaker, the Secretary of the Treasury and the Deputy Majority Whip were staring at the chair at the end of the conference table.  In it was sitting a bearded man of astonishing, exuberant embonpoint, dressed in a suit of red velvet with white fur trim.

“I was wondering when you’d work that out,” said Santa Claus.

The Speaker managed to close his mouth only to open it again.  “How did you get in here?” he asked.

“Of all the things you could ask, that’s the one you choose?” asked Santa.  “An officer called Warren let me though.  He seemed to think you people could use some help.  And you certainly could.   For centuries I’ve run the biggest logistics operation in the universe.  Demographics, estimates, assessments, transportation, inventory control, delivery, you name it.  There’s nothing in your budget that I can’t fix.  I just need a bit of time and a bit of cooperation.”

“But . . .” started the Deputy Whip, staring at the ornate clock on the credenza.  Santa followed her gaze.  “It’s OK, honey, I have good time management skills.  Quantum mechanics helps, otherwise I couldn’t be here and in Cairo right now.  Oh, I’m sorry, pumpkin,“ as she stared blankly, “are you from the party that doesn’t believe in science or the party that’s too dumb to understand it?”  The Deputy Whip had never in her life been called pumpkin, and it wasn’t clear whether it was that, or the sudden appearance of Father Christmas in the Longworth Building that was throwing her off.  She rose from her seat, sat down again, opened her mouth, closed it.

“OK,” said Santa.  “We’ll need the latest version of the budget.”  He tapped on the table and a huge, bulky laptop appeared.  He tapped again, and an abacus appeared beside it.  “Easier for quantum work,” said Santa.  “Ben,” addressing the Secretary, “Can you get the fat guy from the OMB over here, now?”

“Perhaps Mister Secretary’s staffer could contact Jack Harris at the OMB,” said the Deputy Whip, looking at me.

“Ben can make his own damn calls,” said Santa.  “I’ve known him all his life, and he’s a lazy SOB.  Been on the wrong List most of his life, this one.  I know if you’ve been bad or good, you know.”

Benjamin N. West, III, the 77th Secretary of the Treasury of the United States of America, turned a deep and unappetizing crimson.

“Oh, for goodness’ sake, not that,” said Santa.  “That’s perfectly normal.”

“OK,” said Santa.  “We’ll need the skinny guy from the CBO too.  We’ll be scoring this sucker.  You get him here.”  He turned to the Speaker.  “I’ll have a glass of Old Roadkill, too, and one of those Havana cigars in your desk.”

“They’re not from Hav. . . “ started the Speaker, but a raised white eyebrow silenced him.  Santa stood, threw off his jacket and rolled up his sleeves.  With bourbon in one hand and cigar in the other, he started pecking one-fingered at the laptop.  Within minutes, Jack Harris, OMB Director, arrived in the Speaker’s office.  He took one look at the figure sitting at the conference table and would have walked straight out of the room had not the Speaker blocked his exit.

“Yes, it’s me.  I’m real.  Christmas 1980.  You wanted a dog.  You got a chemistry set.  And wasn’t that the right decision?”  Santa beckoned to Jack to sit beside him.  “Sit.  I want to walk through some of these projections.”

While Jack was on the phone to his staff back on the other side of town, Mitch from the Congressional Budget Office arrived.  He showed absolutely no surprise at finding Jolly Saint Nick stripped down in the conference room of the Speaker of the House and working on Medicaid projections.  When you’ve worked at the CBO as long as Mitch had, working with imaginary figures is kind of par for the course.

For the next few hours, Santa smacked the beads on the abacus, entered numbers on his laptop, and called “his people” back at HQ for things like demographic growth projections for Texas and weather predictions for the Midwest for the next ten years.  “They’re mostly quants from CalTech and MIT,” he said.  “If it helps, you can think of them as elves.”  He summoned people from all parts of the Administration and all parts of the Hill.  And they came when summoned.   Goodness knows who they thought they were going to encounter, but Santa was able to convince them all of his credentials by reference either to gifts requested on some previous Christmas or to childhood misdemeanors.

On several occasions he snapped and yelled at people if their numbers weren’t solid.  The Speaker tried to intervene at one point.  “Look here, Santa, you can’t be treating people this way,” he said, as Santa ripped one particularly lame explanation of CPI adjustments to shreds.  Santa turned on him.  “Oh, you were expecting the jolly old elf,” he said, sarcastically.  “You know who gets to see the jolly old elf?  Good boys and girls, that’s who!  Now do you think there is the remotest argument in Hell that any of you wasters, you people who have pushed the world economy to the brink three times, are good boys and girls?  There isn’t enough coal in the Appalachians for you people.  Now sit down and shut it.”

It seemed that time was passing very slowly, but it was passing.  Several times I saw Santa look at the ornate clock.  He seemed to be relieved when he entered a final number into his laptop and said “OK.  Now it’s time to get folks to agree to some spending cuts.  Some pet projects here that need to be killed.”  He handed the Deputy Whip a list of names.  “Where’s your counterpart?  Here’s his list.  Get these people in here.”

He then threw everybody out of the room, so we never did hear the arguments he made about the programs he was cutting as each of the people on his list came into the conference room.  Nor did we how he persuaded all the Congressfolks to accept those arguments.  But you have to assume that when there are two parties to a negotiation, and one of those parties knows whether the other party has been bad or good since the day of birth, you’re dealing with a pretty severe case of information asymmetry.  No Congressperson was in that room for more than a minute.

It was eleven pm when Santa summoned the OMB and CBO guys back into the conference room.  “Just check these one more time,” he said, turning the laptop to face them.  After a couple of minutes, they nodded.

“Time to vote,” said Santa.  Everyone headed towards the corridor.  The Majority and Minority Whips, who were both with us at that point, exchanged glances.  Santa rolled his eyes.  “It’s done, you bozos.  All the paperwork is on every desk, in both Houses.  All you have to do is get your guys to vote.  Do. You.  Think.  You.  Can. Do. That?”  They nodded.  Suddenly all the clocks on the Hill lit up with the combination of lights that signal an imminent vote.

In the movie version of this tale, Santa would have addressed a joint session.  Or at least taken the floor of the House.  He would have talked of the eternal meaning of love, and how so long as just one person took the time to care about the orphans of the Four O’Clock Club, the true meaning of Christmas would prevail.  He didn’t.  He stood at the entrance of the House floor (others said they saw him in the Senate) and said to the Members, “for once in your pathetic , everloving, mothermunching lives, will you all just do your duty and get this done?”  Never had a vote happened so fast in either house.  And everyone there voted “aye”.

But time was running out.  Washington appeared to have a clock with a very large bell, and it was beginning to strike midnight.  How had none of us ever heard that bell before?  Of course, all the Abyss paperwork had to be signed before midnight.  By the President.  At the other end of Pennsylvania Avenue, sixteen blocks away.

“I got this,” said Santa.  He grabbed the paperwork.  He grabbed the Speaker.  And as I heard it from Warren, who was on duty at that exit, he sprinted from the Capitol onto the West Lawn, where twelve very large reindeer were happily destroying the lower branches of the Capitol Christmas Tree.  Yanking an evergreen bough from the lead reindeer’s mouth, and smacking the caribou upside the head with it, he leapt into the sleigh that the animals were harnessed to.  And it took off.  Into the Washington sky.  Even after the events of that evening, the people watching weren’t entirely ready for that.

The people who watch the skies from the roof of the White House have roughly nineteen seconds to react to any threat that veers off course from National Airport.  It’s even less when the potential threat comes from the Hill (although really, where do you expect the threat to come from?).  These days, thanks to the FOIA request filed by Wonkette, we know the nature of the weapons that sit atop the White House.  We have to assume similar weapons were deployed in the old days too.  The Duty Officer that night later stated that probably two seconds elapsed between the word “INCOMING” and the targeting of the airborne threat.  He knew that because somewhere above Washington, a clock (one he’d never heard before) was striking midnight.  Two seconds after that, he heard “NORAD SAYS STAND DOWN.  IT’S SANTA.”   And then he heard hooves smashing swingsets and tearing up lawns and saw a red and white blur head towards the Rose Garden.  And at some point he heard HO HO HO echoing over Pennsylvania Avenue, but things were getting pretty confused by then.

The photos of that night show the President looking cool but vaguely puzzled, the Speaker with his toupee askew and mouth open, and the Senate Leader staring at something blurry and possibly red and white.  The President only used one ceremonial pen to sign the tax reform legislation, as he signed exactly on the twelfth stroke of the clock, but he still handed out a couple dozen pens as usual.

Back on the West Lawn, we were hardly aware of Santa’s having left before he and his menagerie were back, divots flying.  “Now I have to get back to work.  Anyone want a ride home?”  And when one of the most recently-elected House Members said “But I live in North Dakota,” Santa didn’t sigh or roll his eyes, but kindly said “I’m going there anyway.”

I wish I could say that everyone got on after that.  We didn’t.  But things did improve a bit.  We tried a bit harder.  We never again drove the economy to the cliff, and we were never again downgraded by rating agencies.  None of the programs that Santa wrote out of the budget that year turned out to be the least bit useful or missed.   And the Four O’Clock Club?  Approved as part of the DC budget that year, and one of its most famous alumni is our current President.  Santa winked at Warren as he left that night.  He knew.

Merry Christmas to all who have done their jobs this year.

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