Archive for September, 2008

Wachovia Forced Sale is A Rip-Off of Employees, Shareholders, and US Citizens

September 30th, 2008

Wachovia was more than just a bank. It was grown through the unification of dozens of excellent regional banks. It was a premium, professional operation with 120,000 employees. The big merger that put them at risk, their bridge too far so to speak, was the purchase of Golden West at a huge premium price of $25 billion. Golden West was known in California for their very easy, lax loan requirements, even compared to competitors that were already among the most lax in the nation.

Even with that extremely serious management error by then-CEO of Wachovia Kennedy Thompson, the vast majority of Wachovia is solid and profitable. Wachovia did not face failure, like Lehman or potentially Washington Mutual, but was about to have it credit rating downgraded by the credit agencies S&P, etc. They did have billions in debt that would be rolling over in the near future, but with a bank of the magnitude, that was normal. The question apparently became could those bonds be refinanced at a reasonable interest rate, or under the present market circumstances at all?

Rather than simply getting them through that issue with a simple bridge loan, Paulson and crew decided to take a much more extreme approach. A shotgun marriage or else.

According to this morning’s Wall Street Journal, Wells Fargo another excellent bank, was very seriously looking to potentially buy Wachovia for $20 billon, which is about $10 a share, and NO GOVERNMENT LOAN guarantees. Somehow, that did not happen, but an already shaky Citibank bought them for $2 billion, under $1 per share, AND GOVERNMENT GUARANTEES to cover all loan losses on mortgage loans beyond $42 billion for the total Wachovia $312 billion mortgage loan portfolio. Meaning if the mortgage loan loss on the Wachovia portfolio is beyond 13.5% of the total (42/312 = 13.5), the government will kick in tens of billions of dollars. Given the loss rate on Golden West mortgages, etc. that is highly likely. This is an extraordinary deal for Citibank, and a terrible deal for the citizens of the USA.

What will Citibank do now? What is the fate of Wachovia’s 120,000 employees? Almost certainly over the next few years, they will close hundreds of former Wachovia local bank branches and lay-off tens of thousands of employees. What they will not do is be motivated to make sure they collect everything they can on that giant mortgage portfolio because the government will cover the losses beyond 13.5% anyway.

Instead of merely making a brief loan to Wachovia or allowing a fair merger, the choice was made to destroy billions in shareholder value (I am not a shareholder), put tens of thousands of Wachovia employees at risk, and cost the taxpayers likely tens of billions of dollars anyway.

How does this make sense? History will judge the many errors in handling this financial situation. The mishandling of Wachovia will be a sad chapter. This rescue looks a lot more like theft.

Todd Lipscomb

Founder of ( a source for USA made products.

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Cadbury’s Chinese Produced Chocolate Laced with The Industrial Chemical Melamine

September 29th, 2008

One of the world’s largest candy producers found that chocolate products produced at its China facility are laced with the dangerous industrial chemical melamine.

Melamine is the same chemical which was recently found in 22 Chinese baby formula producer’s products sickening over 50,000 babies at last known count, as well as the chemical which poisoned thousands of American pets last year in pet food ingredients imported from China.

Why is this chemical used in industrial plastics being broadly found in Chinese dairy products? It makes dairy products test higher for protein content, so it is intentionally being added by distributors and potentially dairy companies.

Cadbury sells these products in China, and exports it to counties including Australia, Taiwan, and Hong Kong. Though Cadbury states the United States was not affected, everyone in international business knows products are often re-exported by distributors to the rest of the world. Poisoned chocolate being shipped to Australia is incredibly terrible, but as it would have been labeled in English, it could have been reshipped to any other English speaking nation.

No word yet on how long this contamination has been going on.

Be safe and check the labels for origin, particularly on food products.

Todd Lipscomb

Founder of ( your source for products made in the USA.

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US Manufacturing Cost Comparison to China: Labor Cost is Just One Factor of Many

September 28th, 2008

The reason typically given for why companies have moved factories offshore is labor cost, but I can tell you from 20 years in international business, including extensively in China, that there are other factors that are just as important.

Rather than actually move a factory, it is much more likely to subcontract to a manufacturing in another countries, particularly China, to make the product.

Yes, the hourly cost of labor is less, but also the subcontractor can bid low on offering to build products because they have very low standards for safety and environmental protection. They are also often in with local officials and know the ropes on getting around what laws do exist in countries like China. Local official corruption may sound like an added cost for those contractors, but actually it helps them reduce cost on many fronts, like avoiding import tariffs on raw materials and even getting subsidized prices for the electricity or oil they use, etc.

These advantages do come back to haunt companies that use such services, as the toy makers found out with the lead contamination and pet food makers with the melamine contamination that poisoned thousands of pets here in the USA and has been the cause of the baby formula disaster in China, where 50,000 babies were recently sickened after consuming melamine laced dairy (melamine makes products appear to have higher amounts of protein).

Having more recently can also be an advantage in many manufacturing areas, for example, if an American factory to build a product was started 20 years ago, it could still be using dated manufacturing equipment today. The subcontactor’s new factory is using newer tooling and assembly equipment. This is not always the case, or an advantage, but it can be significant in some industries, like reducing steps involved, lower energy costs, potentially needing fewer skilled workers. However, as the American factory updates (if it does and if it stays open), this edge will be regained here in the USA, as we start using even newer equipment.

The US does have key advantages – we are by far the biggest market in the world, so producing here means less transit time and cost, and better flexibility. I can literally call my jeans supplier, and they can literally make and ship product within a couple days. Ordering from China would typically mean filling cargo containers, putting them on a boat, and hoping what was really ordered shows up in a few months.

Another advantage is our workers are highly skilled, hard working, and flexible. Theirs are often willing to do 12 hours a day, six days a week, have no real unions, weak labor laws, and a police state to deal with any opposition. Nevertheless, if it were just labor hourly wage cost, many more factories here in the USA would still be open. Forced to go to extreme low prices by retail customers, like Wal-Mart, many manufacturers end up finally going to China in spite of the many issues. The ability of subcontractors to take advantage of local Chinese workers and practically ignore safety and pollution standards is the cost tipping point, and in my opinion unfair advantages that should be considered before imports are allowed.

The final factor we are too often lacking is executive loyalty. Labor costs are extremely high in Japan, yet Toyota invests over twice as much in their home country than they do in their biggest market – the US. They could close Japanese factories and move them to China for export to America and it would probably save several thousand dollars per vehicle, but they don’t. Why? In spite of being international, they know they are Japanese and loyal to their own country. Compare that to Wal-Mart, who imports over $50 billion in cheap goods from China alone. Our American executives are sometimes that loyal, but all too often ready to run to the exit at a moment’s notice. When did becoming an international company equate to no loyalty of many American companies to the USA? I can add with my extensive international experience that no other country’s executives take the extreme view that their country does not matter. We could have never come together to fight and win World War II with that kind of shortsighted, ignorant view. The lack of loyalty is not only wrong, it’s embarrassing. As American business people, we must consider the effect of decisions on America.

Todd Lipscomb

Founder of ( a source for USA made products and information

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Paulson Moved to Protect Chinese Investors While Hurting Hundreds of U.S. Community Banks

September 24th, 2008

In the recent, unexpected move to nationalize mortgage giants Fannie Mae and Freddie Mac, Treasury Secretary Paulson made an unexpected extra effort to protect several billion dollars in lower level debt that would not normally be protected under such circumstances. This debt was held by foreign, largely Chinese investors. Meanwhile hundreds of small community banks, some already battered by the real estate crisis, lost $10 to $15 billion in preferred stock of the two, according to The Wall Street Journal.

Banks must legally keep a certain percent of their assets in “safe” reserve to protect themselves from loan loss. Many small, community banks invested in Fannie Mae and Freddie Mac preferred shares in order to meet this requirement. These are not Wall Street bigwigs, but smaller banks that are the backbone of local communities across the nation. It was a generally accepted, even encouraged, policy to have them invest in these supposedly government guaranteed entities.

The fact is Paulson personally stepped in to include the government safety net over bonds owned by Chinese investors, while causing a heavy blow to hundreds of small banks. If the takeover had been structured like the AIG bailout, the preferred shareholders like these small banks would have been protected, but inexplicably Paulson basically wiped out the value of these assets while personally protecting foreign bondholders.

Most of these banks will survive, but the best case scenario is they will reduce local lending just when the economy needs it most. The worst case, probably for dozens, is that they will not be able to survive this blow on top of other recent losses, like the real estate crisis. For instance, if a bank loaned to several local home building companies that have since gone out of business, they would already be in a weakened state.

I can only guess why Paulson would value protecting Chinese investors over our own small banks, but no scenario imaginable is positive.  He must go.

Todd Lipscomb

Founder of, your source for American-made US products.

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An Expensive 10 Days: Bailouts Could Add Over One Trillion Dollars to U.S. Deficit

September 22nd, 2008

First it came with the surprise nationalization of the Fannie Mae and Freddie Mac, the two giant mortgage insurers. The assumption announced to the population was it would cost up to $200 billion, but since they own a combined total of $5 trillion in USA mortgages, and failure rates are continuing to rise, not just on subpar loans but across the board, but let’s just hold our breadth and assume $200 billion for now.

That fiasco, which still has a lot of detail not in the light of day, was nearly the equivalent of half the deficit for this entire year, but was just the start.

Next was the AIG fiasco, and per The Wall Street Journal, their senior leadership truly had no concept of how many tens of billions they needed. First it was $20 billion, next $40 billion, whoops $60 billion and so on. The final tab was $85 billion, though again no one can really give us a specific accounting of why the biggest insurance company in the country, and indeed a flagship of American industry across the globe is suddenly facing this shortfall. The culprit vaguely cited is the mortgage situation hurting their credit rating, but surely it must go much deeper than that. I will do blog updates as actual facts become available. On the face of it, I think I can say as someone in the business world for twenty years, we are dealing with what could only be called criminal incompetence.

Then we are greeted by the mother of all bailouts – Paulson not just proposes, but appears to be getting support to rapidly ram through a $700 billion fund to buy bad loans and securities. No one seems to know the details, besides Paulson and his minions and they are not talking. Yet momentum seems to be ridding towards allowing this massive, budget busting monstrosity. For example, will every bank be able to dump bad loans onto this fund until it runs out, or is there some standard or limitation? Maybe it is necessary, but they are not yet putting the facts on the table for the citizens of this country to review and understand, so how can we know? One thing is certain – pushing something completely new of this magnitude without details through and without our ability to review it is a recipe for a huge fiasco.

In total, these three add up to a trillion in cost to our citizen taxpayers, and does not even include the Bear Stearns fiasco. Speaking of our citizenry, how does a trillion dollars stake up? A trillion dollars divided by the population end up being roughly $1 million per 300 citizens including everyone, even children, or about $3500 each for every single individual (yes, I realize that includes folks that do not pay taxes, so the real amount per taxpayer would be much higher).

Because the government does not actually show a liability until it borrows that dollar or gets an invoice, this does not “officially” quadruple this year’s national budget deficit, but it might as well if it goes through, because that is the reality of the real cost.

Yes, we need the financial system stabilized, but we also do not have a blank check. These issues alone will help impair our future ability to borrow as a nation at low rates, meaning we will eventually have to pay much more interest to borrow from foreigners, and goodness knows what fiasco is coming next. We are putting our nation at risk.

Watch for updates in the future as I try to drill into the truth on these issues, and please let me know what you learn or think, and join me in contacting your congressman.


Todd Lipscomb

Founder of Made in USA Forever (

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Update on Melamine in Baby Formula Issue

September 19th, 2008

Recently I wrote about how the industrial chemical melamine (the same chemical that poisoned thousands of pets in the USA from imported Chinese dog food components) had been found in 22 Chinese dairy food producers of baby food products. There is some relevant follow-up news on this story:

First, according to Bloomberg, it turns out that melamine makes dairy products appear higher in protein than they would be otherwise, so this poison was added intentionally to make the milk used in the baby formula appear to have sufficient protein.

It is unclear at this point whether the chemical was added by farmers, milk distributors, or the dairy companies producing the baby formula. Apparently it is common for farmers in China to dilute the milk with water to make it appear to be more volume, but seems unlikely they would be sophisticated enough to use chemicals. That leaves the Chinese distributors and dairy companies, or likely some combination of the two.

Secondly, the first company involved has now been found to have exported the tainted milk to seven other nations, but it has not been found to have come to the USA as of yet. No word on the 21 other company’s exports, though they include several of China’s largest dairy producers. This company even donated formula to the Chinese earthquake relief effort, as if there was not already enough suffering. Considering there is no one at USA ports or border crossings testing this sort of food product, the implications of this sort of manmade disaster are worrisome.

The number of infants sickened has already climbed into the many thousands, and who knows how many are not reported or are not showing up yet? I sincerely hope they recover, though realistically it looks bad for many.

Todd Lipscomb

Founder of

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22 Different Chinese Baby Formula Makers Product Found Contaminated with Melamine

September 16th, 2008

Melamine, the industrial chemical infamous for the pet food poisoning issue in the USA last year has reared its ugly head again – this time striking China’s most vulnerable citizens in baby formula.

The Chinese government announced the dangerous chemical was found in 22 different producer’s baby formula, including some of their largest, most famous food producers. The surprising degree of wide-spread contamination, even from what are locally considered safe producers, is alarming.

This latest poisoning issue became apparent when dozens of infants had to be treated for kidney stones, which are very rare in young babies. Chinese officials are preparing for a huge increase in the ongoing health needs of the many children that consumed this poison.

Safety concerns are common in China’s very rapidly growing dairy industry. Revenue has grown to nearly $3.5 billion dollars, up nearly 200% from 2003.

There is no evidence that the tainted formula has been exported to America at this point, though supermarkets in places like Hong Kong have been recalling unsafe formula. However, one should always look at the label of food products to make sure they are from countries known to be safe. This writer was surprised to see apple crisp and soy bean snacks in Costco from China, particularly in that the USA produces so many apples and soy beans. No one is checking imported food safety of this type of product at American ports or border stations.

Todd Lipscomb

Founder of

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OPEC Cuts Oil Production and Signals New Alliance with Russia to Keep Prices High

September 10th, 2008

Per this morning’s Wall Street Journal, OPEC agreed in meeting this week to cut production 520,000 barrels a day.

Several members claim a “glut”, but actually it is a pretty obvious effort to keep oil above $100 a barrel, and indeed oil did spike over $3 per barrel Tuesday to close at $103.26.

Potentially more dangerous in the longer term, Russia sent a 20 person delegation and proposed a formal alliance regarding oil production and pricing between OPEC and Russia. OPEC presently produces 40% of the world’s oil, whereas Russia produces 11%. The combined total would give them dangerous control over the energy market. Included in the delegation was the chairman of Russia’s largest oil producer and Russian Prime Minister Putin ally (read crony), so this is a pretty serious effort. The agreement could be signed by this October.

The USA has twin deficit issues that are rapidly draining our wealth and already forcing unheard of massive borrowing – consumer goods mostly from Asia/China and energy.

This situation with OPEC and Russia highlights the very serious energy situation. Take a look at major oil producers, like Iran, Venezuela, Saudi Arabia, and of course Russia. This is where our trillions of dollars have gone. It is no coincidence that this is happening with Russia just as we show support for the democracy of Georgia, who still has Russian tanks in its territory.

However, a much darker future is out there if we do not get this energy (and consumer goods) deficit in order in the next few years. Imagine a world where America is the largest debtor nation (oops, already there), where the economy is declining (there too), where unemployment is surging (strike three?), but now double or quadruple it – America with no ability to influence world freedom, gas at $10 a gallon, unemployment at 10%++.

We are a great people and can this future, but need to act now no matter what Washington is saying – better energy efficiency, conservation, drilling more, ethanol, wind, safe nuclear, etc.

As individuals, I really like my Ford Escape Hybrid, but even laying of the accelerator and making sure tires are properly inflated can make a modest difference in fuel efficiency now.

We need made in USA energy and products able to deal with the future. Americans can make this happen, I have faith, but will we?

Todd Lipscomb

Founder of your source for made in USA products.

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Foreign Government Pressure Helped Torpedo Fannie Mae and Freddie Mac

September 9th, 2008

As our government suddenly swept in to takeover mortgage giants Fannie Mae and Freddie Mac, effectively wiping out billions in shareholder equity without public hearing, were foreign bond investors, including banks and governments exerting influence on our treasury?

According to this morning’s Wall Street Journal, “In the weeks before the government’s intervention, nervous foreign finance officials barraged Treasury Secretary Henry Paulson and Federal Reserve officials to find out what was happening with the mortgage giants, according to people familiar with the matter.” The story goes on to say, “Among those expressing concern were Asian investors, including the Chinese, say two people familiar with the matter. Foreign banks’ concerns were among the factors that helped prompt the government’s move on Sunday to take over Fannie and Freddie, these people say.”

Even a matter of days ago, Paulson and other government officials assured us that the viability of both mortgage concerns was not an issue, but suddenly they were taken over last weekend. Apparently foreign bond holders have a lot of influence in Washington, and were not about to risk losing a penny.

As our massive trade deficit with China and others continues to grow, we are forced to borrow hundreds of billions of dollars annually from them (of money that just had been our own), to buy cheap goods. As the total debt grows, they really do have greater and greater influence over our own government.

The initial reaction to the nationalization was a stock market surge, and decrease in mortgage rates, but the long term effect will include adding hundreds of billions of dollars to the national debt and in the not so distant years our own government will have to boost the interest rate it pays to sell debt, if anyone will take it.

Today’s “certainty” will come at a very high price tomorrow. A great power should not have its finances dictated to it by other countries. We must reverse the root cause of the massive borrowing, which is the trade deficit with China, etc. We can buy American.

In the short-term, folks should take advantage of the lower mortgage rates to refinance or change variable rate loans to fixed rate, as this low rate situation will not last long.

Todd Lipscomb

Founder source for made in USA products and information American-made items.

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Unemployment Rate Breaks through 6.1%

September 5th, 2008

USA unemployment reached a five year high in August as the economy continued to decay. It was the eighth straight month of declining overall employment. 84,000 jobs were eliminated in August, and the government revised the June job loss to over 100,000.

The weakness has spread from temp jobs and teenage employment to show worrisome declines in employment of longer term employees.

The economic situation is likely to get much worse in the coming months, including continued increases in unemployment and falling housing prices.

Meanwhile, the major American retailers continue to push production abroad, particular to China, in spite of the obvious damage with their customer losing jobs. The trade deficit with China went over $300 billion in 2006 and has continued to surge. Wal-Mart is by far the biggest importer into the USA from China.

At, a website dedicated to products made in the USA, several of our suppliers have indicated recently they have lost access to selling to Wal-Mart, as that retailer pushed Chinese producers to sell below American manufacturers cost. Where in history has one entity done more to undermine a nation’s employment and security?

Buying products made locally not only helps with employment and wages, but is also much better for the environment and safer, as I have seen the extraordinary air and water pollution rates in China firsthand.

Washington may not get it, but we have a choice as individuals about seeing America decline or doing something.


Todd Lipscomb

Founder & President

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