IDIOTS AND FOOLS, III

President Obama's firing of GM CEO Rick Wagoner has raised many eyebrows, and has the crazies from the Right in a tizzy over the increasing role of the state in the market. They could care less that Mr. Wagoner had 8 years to turn General Motors around but, instead, he presided over collapsed market share, tumbling stock prices, and, ultimately, the deterioration of a 100-year old organization. Still, the crazies - who ignore that Wagoner probably should have been fired four years ago - are asking "What's Next"?

If you ask me, what should come next are more firings and even criminal prosecutions. Here's why ...

WASHINGTON - Just months before the start of last year's stock market collapse, the federal agency that insures the retirement funds of 44 million Americans departed from its conservative investment strategy and decided to put much of its $64 billion insurance fund into stocks.

Switching from a heavy reliance on bonds, the Pension Benefit Guaranty Corporation decided to pour billions of dollars into speculative investments such as stocks in emerging foreign markets, real estate, and private equity funds.

In a few words, you had a few decision-makers making bigger and bigger bets with other people's (retirement) money because they could. Jon Stewart got it right when he told CNBC's Jim Cramer that it looks like "we're capitalizing your bets." If the bets pay off the institutional players win big and get bigger bonuses. If they don't, we suffer the losses. Head you win, tails we lose.

Incredibly, the former agency director who implemented the strategy until the Bush administration left, Charles E.F. Millard, is not concerned over the losses. A former managing director of Lehman Brothers, Millard said flatly that "the new investment policy is not riskier than the old one." There was no word on whether Millard shoveled the money into Lehman Brothers or toward other "friendly" institutions.

Asked whether the strategy was a mistake, given the subsequent declines in stocks and real estate, Millard said,

Ask me in 20 years. The question is whether policymakers will have the fortitude to stick with it.

I don't know which is worse. Millard's arrogance or his ignorance. Either way I smell a rat.

- Mark