Tuesday, June 30, 2009

Nobody is above the law

It is easy to get the impression from many news stories and the reaction by Obama that the recent events in Honduras are something like a typical military coup. The circumstances of this case show that the military was merely enforcing the rule of law and providing force to other institutions that operate within the law.

President Manuel Zelaya brought this upon himself by his disregard for process and rule of law.
http://news.yahoo.com/s/ap/20090626/ap_on_re_la_am_ca/lt_honduras_constitution

http://blogs.tnr.com/tnr/blogs/the_plank/archive/2009/06/29/fetishizing-the-presidency.aspx
There were some particularly interesting quotes from the article above.
"Under Honduran law, soldiers are normally responsible for distributing ballots ahead of elections, but the military leadership has opposed the vote. Zelaya has fired the military chief for refusing to support the referendum and vows to ignore a Supreme Court ruling ordering him reinstated."

"Congress — led by members of Zelaya's own Liberal Party — has opened an investigation into his mental stability and could declare him unfit to govern."
"It followed a series of clearly unconstitutional moves on Zelaya's part, including his attempt to unilaterally remove the chief of the army, which, according to Honduras's Constitution, can only be done by a congressional super-majority. "
Zelaya broke the law and put himself above all other insitutions.
"Congress cannot investigate me, much less remove me or stage a technical coup against me because I am honest, I'm a free president and nobody scares me."
He believes himself above the law.

"The Supreme Court, Congress and the attorney general have all said the referendum he is sponsoring is illegal because the constitution says some of its clauses cannot be changed."

"The constitution, approved in 1982 as Honduras was throwing off two decades of nearly uninterrupted military rule, states that any politician who promotes presidential re-election will be barred from public service for 10 years."

The constitution prevents a strongman from developing at least through legal and constitutional means.

The other side of this matter is the complaints of a "rigged system" in Honduras. As in many third world countries, there are huge inequalities in power, wealth, and income. However, these moves by Zelaya do not move Honduras in the right direction. Zelaya was following the typical pattern of a dictator in the making. (much like his ally, Hugo Chavez) of undermining other institutions. This continues until arbitrary and unchecked power is vested in one man or a small group of people. The power of a charismatic leader to undermine institutions for some stated noble goal can be substantial. Sometimes this happens through the consent of an unwary people, while at other times substantial irregularities in electoral process do not reflect what the voters actually want. In either case, this power must be checked before it is too late and no other functioning institutions are left to contend with executive power. Term limits are one attempt to prevent the accumulation of power in one man or branch of government. It is inadvisable to entrust so much power to one man and one institution regardless of how noble he says his purposes are and how great some people think he is.



Wednesday, June 17, 2009

Leaving TARP

I'm catching up on my DealBook, and I caught this article on leaving TARP.

The repurchase of preferred stock is easy to price, but the warrants are more difficult to value. However, using Black-Scholes a reasonable approximation of the value can be made. Basically, there is enough leeway in the assumptions made about pricing and the conditions on the warrants, that the range could be very large for prices that are fair for both parties.