Friday, October 31, 2008

Dissent Will Not Be Tolerated

Obama runs a tight ship. His campaign has been disciplined, steadfastly on point, and scripted. This is an amazing feat, considering his legions of aides, surrogates, and campaign supporters throughout the country. He has out-campaigned and out-strategized McCain on virtually every front. It is not difficult to imagine that should Obama win the election, he will run an equally disciplined White House.

Certainly he has not done this alone. In one of my previous blog posts, I cited the non-partisan Pew Research Center's study which demonstrated that Obama has been the beneficiary of significantly positive mainstream media bias throughout the campaign. Further analysis by Fox News has also pointed to the sharp contrast in coverage between Obama and McCain, with Obama receiving upwards of 78% positive media coverage from some newspapers and news stations versus 29% positive for McCain. Never before has the media been so slanted in its coverage as it has in this election cycle.

But what of those who have not shown bias in Obama's favor? Barbara West, a reporter for an Orlando news station, asked Obama's running mate, Joe Biden, specific pointed questions about Obama's proposed policies. This did not sit well with the Obama campaign, and the station was immediately cut off from further interviews with the Obama camp. Today, three major newspapers which endorsed McCain for President, were suddenly kicked off of the Obama news corps plane, despite having followed his campaign from the beginning. And then there's Joe the Plumber, a guy playing football with his 13 year old son in his yard when Obama stopped by his driveway on a campaign stop. Joe asked a question about how Obama' plan might effect his taxes, and subsequently became an icon representing McCain's tax argument against Obama. Since then, the Obama camp has done everything it can to smear this private citizen's name. Is this the kind of treatment dissenters can expect under an Obama administration? Bullying, intimidation, investigations of private citizens, and cutting off of any press which happens to ask questions he does not like?

I have stated before that beneath Obama's cool, elegant veneer is something that doesn't sit right with me. Cold ruthlessness, enormous ambition and ego, intellect and strict discipline combined with a refusal to tolerate dissent smacks of past and current leaders around the globe who represent the worst the world has to offer. It feels like the antithesis of freedom. It feels like we are about to embrace a dictatorship.

Thursday, October 30, 2008

So Worth Watching, So Worth Fighting For

This is the most watched election related video on Youtube and speaks for itself far more eloquently than I ever could. Don't miss it.

Obama's Healthcare Plan: Get in Line

My husband is a physician who sees patients five days a week, and he still has a wait time of at least four weeks to see new patients in his practice. He is the only specialist of his kind in the area, despite the fact that he practices in Massachusetts, the state with the highest percentage of physicans per capita. In addition, primary care physicians are leaving in droves, because the stress, time, and effort required of the profession eventually just beats them down. Primary care is a tough job, and there are not a lot of new physicians coming out of medical school who want it.

In the Presidential race, we have heard alot of the two candidates' plans for revamping the healthcare system in America. Obama's ultimate plan is for a universal system. He would add 47 million people to the ranks of the insured, including the 12 million illegal immigrants already in the country. With the exodus of primary care physicians in an already overstressed environment, who is going to take care of all of these new patients?

Ultimately, it's a simple issue of supply and demand. We saw what happened when the Democrats forced banks to lend to unqualified buyers through the Community Reinvestment Act. Suddenly a huge number of people who were not eligible to purchase a house in the past entered the buying pool. Increase in demand for homes, without a commensurate increase in supply of houses, led to a bubble in which prices rose faster than at any time in history. A similar phenomenon will arise with Obama's plan for universal healthcare, except this time the end result will be rationing. An increase in patients, without a commensurate increase in healthcare providers, will result in much longer waits to see your physician, to get that CT scan, or to receive surgery for that stent.

And this does not even address the cost of providing care to 47 million new patients. Americans are used to receiving the best the world has to offer in healthcare technologies. They demand the latest in drugs, some of which cost upwards of $300,000 per year, MRI's at will, antibiotics for the sniffles. NO universal healthcare system in the world allows such extravagances. With a larger pool of patients, and costs which continue to spiral out of control, Americans will be forced to drastically alter their view of what kind of healthcare they "deserve". That drug for breast cancer, which given early might save your life, will be out of reach until terminal stages of the disease, when it's too late. The line for by-pass and other life saving surgeries will result in the deaths of some people who just cannot wait. I saw this first hand when my cousin from Canada came to America on vacation and suffered a heart attack while in Boston. He was rushed to the hospital, received surgery, and 20 years later, is still alive. Had he been in Canada when he suffered that heart attack, he states that he would have died waiting for the life saving surgery. He thanks God every day that he was in America when his heart failed.

In an environment of limited resources, there arises the scariest and most subjective form of rationing; that of who most "deserves" to receive a specific therapy or surgery. Who will get thrown overboard- the young immigrant with his whole life ahead of him, or the 72 year old woman with diabetes and high blood pressure? The government will effectively take on the role of God and decide who gets to live and who dies. Are Americans really willing to put their lives, and the lives of their parents and children, in the hands of Nancy Pelosi and Barney Frank?

Wednesday, October 29, 2008

The Jewish Imperative

It's well known that Jews in America are far more inclined to vote Democrat than Republican. Various reasons abound to explain this allegiance, one of which is the common belief that Democrats are more likely to sympathize with the oppressed and to accept all comers, regardless of nationality, religion, sexual orientation, etc. History may play a factor- the Nazi party, after all, was a far right political organization.

But in America 2008, the Jewish population cannot ignore a glaring difference between the two candidiates running for President of the United States. On one hand, the Republican, John McCain, is a military hero and a staunch supporter of Israel. He would no sooner let Iran or terrorist organizations annihilate the Jewish homeland without repurcussions than he would allow an attack on our own soil to go unpunished. He has made this clear, and there is nobody, on the left or right, who could dismiss or confuse his intentions to protect Israel.

On the other hand, Barack Obama, while he expresses his support of Israel, has a far more questionable past in regards to his intentions to maintain strong pro-Israel US policy than he would like us to believe. His association with Rev. Jeremiah Wright, an anti-semetic black liberation theologian gives some pro-Israel supporters pause. But it is his friendship, recently come to light, with PLO spokesman Rashid Khalidi, that demonstrates his true allegiance.

An LA Times article states that his many talks with the Khalidis, Obama said, had been "consistent reminders to me of my own blind spots and my own biases. . . . It's for that reason that I'm hoping that, for many years to come, we continue that conversation -- a conversation that is necessary not just around Mona and Rashid's dinner table," but around "this entire world."

Today, five years later, Obama is a U.S. senator from Illinois who expresses a firmly pro-Israel view of Middle East politics, pleasing many of the Jewish leaders and advocates for Israel whom he is courting in his presidential campaign. The dinner conversations he had envisioned with his Palestinian American friend have ended. He and Khalidi have seen each other only fleetingly in recent years.And yet the warm embrace Obama gave to Khalidi, and words like those at the professor's going-away party, have left some Palestinian American leaders believing that Obama is more receptive to their viewpoint than he is willing to say.Their belief is not drawn from Obama's speeches or campaign literature, but from comments that some say Obama made in private and from his association with the Palestinian American community in his hometown of Chicago, including his presence at events where anger at Israeli and U.S. Middle East policy was freely expressed.At Khalidi's 2003 farewell party, for example, a young Palestinian American recited a poem accusing the Israeli government of terrorism in its treatment of Palestinians and sharply criticizing U.S. support of Israel. If Palestinians cannot secure their own land, she said, "then you will never see a day of peace."One speaker likened "Zionist settlers on the West Bank" to Osama bin Laden, saying both had been "blinded by ideology."

The LA Times refuses to release a tape of this farewell dinner at which Obama toasted his friend, Rashid, (and which purportedly Bill Ayers and his wife attended), despite requests from Fox News and the McCain campaign. One wonders what they are hiding.

The protection of Israel is more than just a Jewish imperative. Israel is our staunchest ally in the Middle East, a bastion of democracy in a largely theocratic and unpredictable area of the globe. Without strong US backing, the region could easily erupt into war, which would drag the rest of the developed world into the chaos. When violent neighbors are intent on your destruction, your only hope of survival is for someone even stronger to have your back. Dear Israel, does Barack really have your back?

Tuesday, October 28, 2008

It's About Reparations, not Socialism

Based upon Obama's ties to radical Afrocentric leaders, I have long thought that he would revisit the issue of reparations for slavery if elected President. Of course, his campaign would never bring up this issue for fear of alienating vast groups of independents and even democrats, but a good look at his record and associations makes this claim not hard to imagine. I am apparently wrong on this issue, however, as Obama has been asked his thoughts about reparations and the answer he gave was that he did not believe in them because, in his words, "reparations do not go far enough". Exactly what does he mean by that?

Well, now we know, as a radio interview from 2001 has surfaced, when Obama was a part-time professor at the University of Chicago Law School and an Illinois State Legislator. In the radio interview, Obama delved into whether the civil rights movement should have gone further than it did, so that when "dispossessed peoples" appealed to the high court on the right to sit at the lunch counter, they should have also appealed for the right to have someone else pay for the meal.
Obama said the civil rights movement was victorious in some regards, but failed to create a "redistributive change" in its appeals to the Supreme Court, led at the time by Chief Justice Earl Warren. He suggested that such change should occur at the state legislature level, since the courts did not interpret the U.S. Constitution to permit such change.
"The Supreme Court never ventured into the issues of redistribution of wealth and sort of basic issues of political and economic justice in this society, and to that extent as radical as people try to characterize the Warren Court, it wasn't that radical," Obama said in the interview, a recording of which surfaced on the Internet over the weekend.
"It didn't break free from the essential constraints that were placed by the founding fathers in the Constitution, at least as it has been interpreted.
"And the Warren court interpreted it generally in the same way -- that the Constitution is a document of negative liberties, says what the states can't do to you, says what the federal government can't do to you, but it doesn't say what the federal government or state government must do on your behalf, and that hasn't shifted.
"And I think one of the tragedies of the civil rights movement was that the civil rights movement became so court-focused, I think there was a tendency to lose track of the political and organizing activities on the ground that are able to bring about the coalitions of power through which you bring about redistributive change, and in some ways we still suffer from that," Obama said.

So now we know that Obama's agenda is NOT just about redistributing the wealth, in a socialist fashion similar to the European model. It is driven by his Afrocentric belief that whites must "pay back" blacks for the horrible injustices done during the time when this country allowed slavery. No matter that the bloodiest war in our history was fought by whites to free the slaves 150 years ago. No matter that government has attempted to unright these wrongs via social policies such as affirmative action, welfare, the push for sub-prime mortgages, etc. No matter that the ancestors of most whites in this country today did not own slaves, and were not even Americans at the time. In fact, many whites were, at the time of the Civil War, oppressed in their own countries of origin, resulting in their ultimate journey to this land of opportunity.

Nobody dares utter Obama's real agenda for fear of being called a racist. What's incredible, is that he has uttered the words himself, and in 2008, half the country appears to be suffering from an incurable case of deafness.

Sunday, October 26, 2008

Mad Mom Participates in McCain Super Saturday

Yesterday, I had the privilege to work for the McCain Super Saturday event, making calls and rallying outside our local headquarters. Here in "true blue" RI, I had visions of tomatoes being hurled from the cars as they passed by our signs. This was hardly the case, however, as car after car, truck drivers, and commercial vehicles were incredibly positive, giving us thumbs up and blasting their horns in support. Of course, we did get a number of thumbs down, shaking heads, and a few nasty finger gestures, but who would have thought that Lil' Rhody, one of the strongest Democrat bases in the country, would harbor such a large group of McCain supporters? Not me. It was shocking and inspiring.

Friday, October 24, 2008

The Tax Tipping Point

A very pertinent article from the Wall Street Journal concerning the America we may soon realize.

Obama and the Tax Tipping Point
How long before taxpayers are pushed too far?
What happens when the voter in the exact middle of the earnings spectrum receives more in benefits from Washington than he pays in taxes? Economists Allan Meltzer and Scott Richard posed this question 27 years ago. We may soon enough know the answer.
Barack Obama is offering voters strong incentives to support higher taxes and bigger government. This could be the magic income-redistribution formula Democrats have long sought.
Sen. Obama is promising $500 and $1,000 gift-wrapped packets of money in the form of refundable tax credits. These will shift the tax demographics to the tipping point where half of all voters will receive a cash windfall from Washington and an overwhelming majority will gain from tax hikes and more government spending.
In 2006, the latest year for which we have Census data, 220 million Americans were eligible to vote and 89 million -- 40% -- paid no income taxes. According to the Tax Policy Center (a joint venture of the Brookings Institution and the Urban Institute), this will jump to 49% when Mr. Obama's cash credits remove 18 million more voters from the tax rolls. What's more, there are an additional 24 million taxpayers (11% of the electorate) who will pay a minimal amount of income taxes -- less than 5% of their income and less than $1,000 annually.
In all, three out of every five voters will pay little or nothing in income taxes under Mr. Obama's plans and gain when taxes rise on the 40% that already pays 95% of income tax revenues.
The plunder that the Democrats plan to extract from the "very rich" -- the 5% that earn more than $250,000 and who already pay 60% of the federal income tax bill -- will never stretch to cover the expansive programs Mr. Obama promises.
What next? A core group of Obama enthusiasts -- those educated professionals who applaud the "fairness" of their candidate's tax plans -- will soon see their $100,000-$150,000 incomes targeted. As entitlements expand and a self-interested majority votes, the higher tax brackets will kick in at lower levels down the ladder, all the way to households with a $75,000 income.
Calculating how far society's top earners can be pushed before they stop (or cut back on) producing is difficult. But the incentives are easy to see. Voters who benefit from government programs will push for higher tax rates on higher earners -- at least until those who power the economy and create jobs and wealth stop working, stop investing, or move out of the country.
Other nations have tried the ideology of fairness in the place of incentives and found that reward without work is a recipe for decline. In the late 1970s and throughout the 1980s, Margaret Thatcher took on the unions and slashed taxes to restore growth and jobs in Great Britain. In Germany a few years ago, Social Democrat Gerhard Schroeder defied his party's dogma and loosened labor's grip on the economy to end stagnation. And more recently in France, Nicolas Sarkozy was swept to power on a platform of restoring flexibility to the economy.
The sequence is always the same. High-tax, big-spending policies force the economy to lose momentum. Then growth in government spending outstrips revenues. Fiscal and trade deficits soar. Public debt, excessive taxation and unemployment follow. The central bank tries to solve the problem by printing money. International competitiveness is lost and the currency depreciates. The system stagnates. And then a frightened electorate returns conservatives to power.
The economic tides will not stand still while Washington experiments with European-type social democracy, even though the dollar's role as the global reserve currency will buy some time. Our trademark competitive advantage will be lost, and once lost, it will be hard to regain. There are too many emerging economies focused on prosperity and not redistribution for the U.S. to easily recapture its role of global economic leader.
Tomorrow's children may come to question why their parents sold their birthright for a mess of "fairness" -- whatever that will signify when jobs are scarce and American opportunity is no longer the envy of the world.
Mr. Lerrick is a professor of economics at Carnegie Mellon University and a visiting scholar at the American Enterprise Institute.

Thursday, October 23, 2008

Liberal Media's Bias Busted

The Pew Research Center's Project for Excellence in Journalism preformed a comprehensive analysis of this year's campaign coverage, reviewing "more than 2,000 stories from 43 news outlets from print, online, TV and radio, during six critical weeks of the general election phase from the end of the conventions through the final presidential debate."
Their findings? John McCain received nearly twice as much negative press coverage as did Barack Obama. According to the report, 57% of the stories about John McCain during the period between September 8 and October 16 were "clearly negative in tone," compared to 29% for Obama. Conversely, stories that were "clearly positive in tone" favored Obama over McCain by a factor of more than two to one, 36% for Obama to just 14% for McCain.

No doubt the media will try to spin the findings of this study to fit their agenda and deflect blame. But it does validate those who have been saying this for some time. The bigger issue is the lack of accountability we will have going forward if we have a left wing President and legislature, and an equally liberal press. Who will be watching the hen house and ensuring that corruption is brought to light? Not government, which has been throwing around blame for the financial scandal instead of addressing the issues to move the country forward. And not the press, which gets all warm and tingly when Obama utters a syllable. This is the sort of thing we hear about in countries far removed from the US. Places where freedom of information is squelched, and propaganda is unilaterally preached to the masses. Our founding fathers must be turning in their graves.

Wednesday, October 22, 2008

Palin Rap

This cracks me up every time I watch it.

Tuesday, October 21, 2008

Batten Down the Hatches

Sen. Joe Biden, D-Del., on Sunday guaranteed that if elected, Sen. Barack Obama., D-Ill., will be tested by an international crisis within his first six months in power and he will need supporters to stand by him as he makes tough, and possibly unpopular, decisions.
"Mark my words," the Democratic vice presidential nominee warned at the second of his two Seattle fundraisers Sunday. "It will not be six months before the world tests Barack Obama like they did John Kennedy. The world is looking. We're about to elect a brilliant 47-year-old senator president of the United States of America. Remember I said it standing here if you don't remember anything else I said. Watch, we're gonna have an international crisis, a generated crisis, to test the mettle of this guy."
"I can give you at least four or five scenarios from where it might originate," Biden said to Emerald City supporters, mentioning the Middle East and Russia as possibilities. "And he's gonna need help. And the kind of help he's gonna need is, he's gonna need you - not financially to help him - we're gonna need you to use your influence, your influence within the community, to stand with him. Because it's not gonna be apparent initially, it's not gonna be apparent that we're right."

Why is Joe Biden preparing us for the worst, an international incident that will perhaps make our current financial crisis seem like a mild cold? Because he knows that Obama is viewed as soft by rogue nations and terrorist groups, who will capitalize on his inexperience and poor judgement. Are we so blind (or ignorant) as a country, to elect this man, who even his own VP nominee recognizes will invite an international incident, and just expect to take it on the chin?

And what does he mean by his comment that Obama will make an unpopular decision? That remark is almost as scary as the thought that we will be a big fat target under an Obama administration. Will he reinstate the draft? Will he increase taxes on everyone (sorry to you 95%who thought you were getting a nice check in the mail)? Someone needs to ask Biden what he means, and what he knows. Because when a Vice Presidential running mate tells the electorate to batten down the hatches, a storm is coming, this is no longer just a debate about economic policy. It's a debate about our very survival.

Monday, October 20, 2008

It's Socialism, Stupid!

One of the biggest frauds perpetrated in the current Presidential campaign is the notion that the economy and the current financial crisis is a positive for Obama and the Democrats. Poll after poll shows that most people feel that Obama would handle the economy better, and that McCain would continue with failed Bush economic policies. While the current situation is complex in it's details, and there is plenty of blame to go around, the basic issue at hand is not the "deregulation" argument repeated ad nauseum by Obama. Without a government backed toxic product to sell, the market for toxic securities would never have existed, at least not to the level they now do. Sure, the geniuses on Wall Street could have concocted something to chop and dice into credit derivatives, but even they could not have found a market so VAST, and so TOXIC, with a defacto US government seal of approval behind it to lure millions of customers into a false sense of security. Without the social engineering experiment perpetrated by Acorn, (an organization with which Obama was involved and to which his campaign recently gave $832,000 for what may be a fraudulent get-out-the vote effort) and the Democrats, which demanded that banks provide mortgages to unqualified buyers, the current financial crisis would not have been born. By failing to regulate Fannie and Freddie, the Democrats made the situation even worse, because the market of toxic mortgages was allowed to erupt in size, with a US government stamp of approval. A complete fraud. A complete failure in social engineering, which is the Democrats' ideal in government policy. Why has McCain not pointed this out? Do we need a "Joe the Accountant" to ask Obama the question to get the message across to Americans?

Do we want more of these failed economic policies to drive us deeper and deeper into a hole? We will suffer the consequences, and that will be a cruel punishment. But if the cold eye of history, and our children and grandchildren look back and blame the crippling debt they inherit on us, it will be a travesty. What will we say to them?

Make no mistake, social engineering will explode, should Obama win the Presidency. Socialist policies do not work. How often do you hear about Denmark as a world leader in anything? But we ain't seen nothin' yet.

Sunday, October 19, 2008

Waking Up in France

On November 5th, there is a very likely chance that we will wake up to a new America, one that will in short order veer sharply from the principles upon which this Republic was founded i.e "Life, liberty, and the pursuit of happiness". Instead, the new guiding principles will be more closely aligned with that of socialist countries, such as France or Denmark, in which the goal of government is to, as Obama puts it, "spread the wealth around." I happen to love France. To visit, not to live there. The Wall Street Journal had an opinion column yesterday which lays out how the Triumvirate of Obama, Pelosi, and Reid will reinvent the government in ways we have not seen in the past 40 to 75 years.

A Liberal Supermajority
Get ready for 'change' we haven't seen since 1965, or 1933.

If the current polls hold, Barack Obama will win the White House on November 4 and Democrats will consolidate their Congressional majorities, probably with a filibuster-proof Senate or very close to it. Without the ability to filibuster, the Senate would become like the House, able to pass whatever the majority wants.
Though we doubt most Americans realize it, this would be one of the most profound political and ideological shifts in U.S. history. Liberals would dominate the entire government in a way they haven't since 1965, or 1933. In other words, the election would mark the restoration of the activist government that fell out of public favor in the 1970s. If the U.S. really is entering a period of unchecked left-wing ascendancy, Americans at least ought to understand what they will be getting, especially with the media cheering it all on.
The nearby table shows the major bills that passed the House this year or last before being stopped by the Senate minority. Keep in mind that the most important power of the filibuster is to shape legislation, not merely to block it. The threat of 41 committed Senators can cause the House to modify its desires even before legislation comes to a vote. Without that restraining power, all of the following have very good chances of becoming law in 2009 or 2010.

- Medicare for all. When HillaryCare cratered in 1994, the Democrats concluded they had overreached, so they carved up the old agenda into smaller incremental steps, such as Schip for children. A strongly Democratic Congress is now likely to lay the final flagstones on the path to government-run health insurance from cradle to grave.
Mr. Obama wants to build a public insurance program, modeled after Medicare and open to everyone of any income. According to the Lewin Group, the gold standard of health policy analysis, the Obama plan would shift between 32 million and 52 million from private coverage to the huge new entitlement. Like Medicare or the Canadian system, this would never be repealed.
The commitments would start slow, so as not to cause immediate alarm. But as U.S. health-care spending flowed into the default government options, taxes would have to rise or services would be rationed, or both. Single payer is the inevitable next step, as Mr. Obama has already said is his ultimate ideal.
- The business climate. "We have some harsh decisions to make," Speaker Nancy Pelosi warned recently, speaking about retribution for the financial panic. Look for a replay of the Pecora hearings of the 1930s, with Henry Waxman, John Conyers and Ed Markey sponsoring ritual hangings to further their agenda to control more of the private economy. The financial industry will get an overhaul in any case, but telecom, biotech and drug makers, among many others, can expect to be investigated and face new, more onerous rules. See the "Issues and Legislation" tab on Mr. Waxman's Web site for a not-so-brief target list.
The danger is that Democrats could cause the economic downturn to last longer than it otherwise will by enacting regulatory overkill like Sarbanes-Oxley. Something more punitive is likely as well, for instance a windfall profits tax on oil, and maybe other industries.
- Union supremacy. One program certain to be given right of way is "card check." Unions have been in decline for decades, now claiming only 7.4% of the private-sector work force, so Big Labor wants to trash the secret-ballot elections that have been in place since the 1930s. The "Employee Free Choice Act" would convert workplaces into union shops merely by gathering signatures from a majority of employees, which means organizers could strongarm those who opposed such a petition.
The bill also imposes a compulsory arbitration regime that results in an automatic two-year union "contract" after 130 days of failed negotiation. The point is to force businesses to recognize a union whether the workers support it or not. This would be the biggest pro-union shift in the balance of labor-management power since the Wagner Act of 1935.
- Taxes. Taxes will rise substantially, the only question being how high. Mr. Obama would raise the top income, dividend and capital-gains rates for "the rich," substantially increasing the cost of new investment in the U.S. More radically, he wants to lift or eliminate the cap on income subject to payroll taxes that fund Medicare and Social Security. This would convert what was meant to be a pension insurance program into an overt income redistribution program. It would also impose a probably unrepealable increase in marginal tax rates, and a permanent shift upward in the federal tax share of GDP.
- The green revolution. A tax-and-regulation scheme in the name of climate change is a top left-wing priority. Cap and trade would hand Congress trillions of dollars in new spending from the auction of carbon credits, which it would use to pick winners and losers in the energy business and across the economy. Huge chunks of GDP and millions of jobs would be at the mercy of Congress and a vast new global-warming bureaucracy. Without the GOP votes to help stage a filibuster, Senators from carbon-intensive states would have less ability to temper coastal liberals who answer to the green elites.
- Free speech and voting rights. A liberal supermajority would move quickly to impose procedural advantages that could cement Democratic rule for years to come. One early effort would be national, election-day voter registration. This is a long-time goal of Acorn and others on the "community organizer" left and would make it far easier to stack the voter rolls. The District of Columbia would also get votes in Congress -- Democratic, naturally.
Felons may also get the right to vote nationwide, while the Fairness Doctrine is likely to be reimposed either by Congress or the Obama FCC. A major goal of the supermajority left would be to shut down talk radio and other voices of political opposition.
- Special-interest potpourri. Look for the watering down of No Child Left Behind testing standards, as a favor to the National Education Association. The tort bar's ship would also come in, including limits on arbitration to settle disputes and watering down the 1995 law limiting strike suits. New causes of legal action would be sprinkled throughout most legislation. The anti-antiterror lobby would be rewarded with the end of Guantanamo and military commissions, which probably means trying terrorists in civilian courts. Google and would get "net neutrality" rules, subjecting the Internet to intrusive regulation for the first time.

It's always possible that events -- such as a recession -- would temper some of these ambitions. Republicans also feared the worst in 1993 when Democrats ran the entire government, but it didn't turn out that way. On the other hand, Bob Dole then had 43 GOP Senators to support a filibuster, and the entire Democratic Party has since moved sharply to the left. Mr. Obama's agenda is far more liberal than Bill Clinton's was in 1992, and the Southern Democrats who killed Al Gore's BTU tax and modified liberal ambitions are long gone.
In both 1933 and 1965, liberal majorities imposed vast expansions of government that have never been repealed, and the current financial panic may give today's left another pretext to return to those heydays of welfare-state liberalism. Americans voting for "change" should know they may get far more than they ever imagined.

Saturday, October 18, 2008

There's Something About Obama

David Brooks had an interesting op-ed piece in the NY Times yesterday, entitled "Thinking About Obama". David has an ability to cut through a lot of extraneous stuff and get right to the heart of the characteristics that define a person, and how they may effect their actions. In the piece, he focuses on Obama's unflappably cool demeanor. In the 20 months or so of this unending campaign, Obama has time and again shown a calm, cool, analytical reserve; a detached demeanor that goes right to his core. David notes that this quality could serve him well, and could help make him a great President.

On the flip side, David opines, that coolness can be attributed to a lack of passion and courage, perhaps even a certain dullness. He may very well sit back and let government happen around him. This is not a difficult scenario to imagine, as he will probably have even larger majorities in both legislative branches who will do the dirty work for him. I have a feeling that Nancy Pelosi and Harry Reid will be more than happy to oblige.

I found this article interesting because there has been something about Obama that has been gnawing at me, and I think that his almost inhuman coolness goes to the heart of it. Under the perfectly orchestrated veneer, is he actually cold, detached, and ruthless? We know he is aggressively ambitious. To gain his seat in the Illinois State legislature he had his opponent, the incumbent, thrown off the ballot on a technicality. In the US Senate, he has never rocked the boat, avoiding unwarranted negative attention from the Democratic leadership. We have seen him lie about his radical associations, using them when they can help, and eschewing the relationships when they hurt him. We've seen him go after not just McCain with a vengeance, but also an ordinary citizen who disagreed with his master plan.

What does all of this mean? How will it play out should he win the Presidency? Will he be cool under fire? A non-leader who lets others play the game of government, letting others take the blame when it is politically expedient, and grabbing the spotlight only when things look good? Is there a ruthlessness there that all those who question him should fear? I don't know. My gut tells me that there is something about Obama and it is not a good feeling.

Friday, October 17, 2008

Maligning a Regular Joe

Like most Americans, I tend to be fairly middle of the road in my political views- a little to the left on this issue, a little to the right on that one. I make sure that I read articles from all sides of the political spectrum to be sure I get the full story, because I find that usually the truth lies somewhere in the middle.

Things have shifted with this current election cycle. The mainstream media has always veered towards the left, and talk radio to the right. Lately though, the mainstream has gone off the edge and is taking with it our civil liberties and the true notion of Freedom of the Press. If the press presents only one argument, and maligns ANYONE who disagrees with their view, it then veers into the sort of propaganda machine we see in restricted societies such as China and Russia. Part of the blame goes to the American people, for taking the sound bites that the press feeds them, and feeling satiated. For not taking the time to question what they read or hear. In less free societies, the people have no recourse- information from the other side is not allowed in any format. But in the USA, we do have options to learn both sides of a story.

Take the latest celebrity story of Joe the Plumber, a regular guy who asked Obama a question on tax policy during a campaign stop. His question was valid and reasonable. It was a question that should have been asked by many people long before now, weeks to go before the election. McCain picked up on it, as well as Obama's answer to Joe, and used it as a centerpiece in the final Presidential debate. Frankly, Joe got across a point that McCain himself has been unable to make alone. It resonated with people. And that scared the pants off of the press, who have worked so diligently to get "their man" elected. So they wasted no time in tearing this ordinary citizen to shreds. No plumbing license (he is currently taking a course to procure his license)! Tax liens (one old, one current, to the tune of about $1000)! etc. etc. This is a guy who works 10-12 hours a day to provide a good living for himself and his 13 year old son. He lives in a modest ranch house outside Toledo. He wants to buy a business. He simply asked a question.

It is shameful. And scary.

Tuesday, October 14, 2008

Where's the Outrage?

In yesterday's lead article, USA Today outed Congressional misbehavior and criminal negligence concerning the financial meltdown. So now we should all be aware that BOTH political parties, along with myriad other villains, are to blame. As ordinary citizens, the only group over whom we have any control is Congress. So my question is this:

Where is the outrage?

Why have the Democrats, who engineered and protected the great social experiment in home ownership for millions of unqualified buyers under the guise of Fannie and Freddie, been left unharmed, at the ready to gain additional seats in Congress, whilst Republicans bear the brunt of the blame? Do we want policies coddling those who default on mortgages (and you just wait and see- credit cards as well) to expand?? Has personal responsibility become a quaint, old fashioned notion?

Don't get me wrong. I still feel that members from both parties ought to be fired, and a new legion of uncontaminated Congressmen and women be offered a seat at the table. Should they too become corrupted by the influences in Washington, then good riddance to them next election. But to keep the current batch of foxes and weasels who raided the henhouse on watch demonstrates either complete ignorance of the issues at hand, or unbridled partisanship. In the current economic climate, when we need to be thinking as AMERICANS, both characteristics are deplorable.

Monday, October 13, 2008

All the King's Idiots

Check out this article from USA today which describes how Congress screwed up our financial system. If the culprits cannot even admit that they were bought off by Wall Street and Fannie and Freddie, why should we trust them to put Humpty Dumpty back together again?

FYI,the article does not mention this, but Barack Obama received the second highest dollar contributions from Fannie and Freddie. Hmmmm, Why did they like him so much?

How Congress set the stage for a fiscal meltdown

By Ken Dilanian, USA TODAY
WASHINGTON — During last week's presidential debate, John McCain and Barack Obama sparred over what caused the financial crisis.
"The match that lit this fire," McCain said, came from the government-sponsored mortgage companies Fannie Mae and Freddie Mac, which backed risky home loans "with the encouragement of Sen. Obama and his cronies … in Washington."
Obama shot back: "The biggest problem was the deregulation of the financial system. … Sen. McCain, as recently as March, bragged about the fact that he is a deregulator."
It was a classic example of Washington finger-pointing. McCain and the GOP blame Fannie and Freddie — which were taken over by the government last month — because the troubled mortgage agencies' biggest backers were Democrats who said they wanted to increase access to homeownership.
Meanwhile, Obama and other Democrats highlight Republicans' longtime focus on limiting regulations for the financial industry.

No single government decision sparked the crisis, but collectively the candidates had a point: Both parties in Congress played important roles in setting the stage for the ongoing financial meltdown.
They did so in moves that reflected not just their ideological priorities, but also the wishes of special interests that have spent millions aggressively lobbying Washington and contributing to lawmakers' campaigns.
By not reining in increasingly risky investments made by Fannie and Freddie — and by keeping complex financial instruments known as derivatives free from most government oversight — Congress chose not to impose barriers that economists widely agree could have helped stave off the crisis that continues, even after lawmakers approved a $700 billion emergency bailout package for Wall Street.
Here is a look at how Congress' actions on two key fronts became significant factors in the financial crisis:
1. Not checking derivatives
In 2000, a united financial services industry persuaded Congress to allow a vast, unregulated market in derivatives, which are contracts in which investors essentially bet on the future price of a stock, commodity, mortgage-backed security or other thing of value.
Derivatives — so named because their value derives from something else — also are known as hedges, swaps and futures. They are designed to lower risks for buyers and sellers, but in some cases, economists now say, they gave investors a false sense of security.
Today, derivatives are compounding the risks to a shaky economy because they are tied to complex mortgage securities that have plummeted in value. Instruments called credit default swaps, for example, were supposed to insure investors against default of mortgage-backed securities. With a mass collapse of those bonds, it's not clear how the swaps can pay off.
The ultimate fear, as Fortune magazine put it, is that swaps can cause "a financial Ebola virus radiating out from a failed institution and infecting dozens or hundreds of other companies."
Derivatives are traded privately, and their estimated national value is huge: $531 trillion. Losses from derivatives helped bring down Wall Street powerhouse Lehman Bros., and led the government to spend nearly $123 billion so far bailing out the giant insurer AIG.
The bill barring most regulation of derivative trading was inserted into an 11,000-page budget measure that became law as the nation was focused on the disputed 2000 presidential election. It was sponsored by Republican Sens. Phil Gramm of Texas and Richard Lugar of Indiana — with support from Democrats, the Clinton administration and then-Federal Reserve chairman Alan Greenspan. Few opposed it.
Sen. Tom Harkin, an Iowa Democrat who help negotiate the bill for Democrats, says he put aside his qualms because Wall Street and Greenspan were adamant that less regulation would help the stock market.
"All of the Wall Street crowd, all of the investment firms, the Morgan Stanleys, the Goldman Sachs … that steamroller just rolled over anything," he says. Wall Street promised to police itself "and Congress bought it."
Better regulation could have provided greater transparency and ensured that enough collateral was in place for derivatives to meet their obligations, says economist Susan Wachter of the University of Pennsylvania's Wharton School. "It's totally obvious in retrospect that this was not good public policy," she says.
But a decade ago, many saw derivatives as a way to smooth the gears of free-market capitalism. That's why the financial industry was alarmed in March 1998, when a little-known agency called the Commodity Futures Trading Commission sought to regulate derivatives.
Financiers erupted. They feared the plan would invalidate existing contracts, and they argued derivatives often were uniquely tailored hedges against risk that could not abide one-size-fits-all rules. Greenspan, then-Securities and Exchange Commission chairman Arthur Levitt and then-Treasury secretary Robert Rubin said in a statement they had "grave concerns" about regulating such agreements.
A report by President Clinton's economic team recommended against regulation. At congressional hearings, Greenspan argued that sophisticated market players would check one another, and if derivatives were regulated here such investments would go overseas.
A bill barring derivatives from being regulated as futures contracts passed the House in October 2000, by a vote of 377-4.
But Gramm, chairman of the banking committee, was not satisfied. Gramm told USA TODAY at the time he wanted language making clear that banking products could not be regulated by the commodities agency. After the fall election, leaders of both parties cut a deal and in December 2000 inserted it in the budget bill.
"The work of this Congress will be seen as a watershed, where we turned away from the outmoded, Depression-era approach to financial regulation," Gramm said then.
The wall against regulation was a watershed in another way. Financial services employees and political action committees made $308.6 million in political donations in 2000, up from $175 million in the previous presidential election year, says the Center for Responsive Politics. Wall Street and the banking, insurance and real estate industries spent $3.2 billion on lobbying in the past decade, the center reports. AIG spent $73 million.
More than a quarter of the $3.9 million in campaign money Gramm raised from 1997 through 2002 came from the financial services sector, and nine of his top 10 donors, grouped by economic interest, were employees of financial companies that use or trade in derivatives, according to election records compiled by the center.
Gramm, who left office in 2003 and went to work for UBS, was a top economic adviser to GOP presidential nominee John McCain until he stepped down in July after saying the USA had become "a nation of whiners" about the economy.
Noting that he has always favored deregulation, Gramm scoffs at the idea he was influenced by campaign money. The derivatives provision didn't cause the credit collapse, he adds.
"The crisis was caused by government," Gramm says. He cites the Community Reinvestment Act, which he says "forced banks to make subprime (mortgage) loans" to people who couldn't afford them.
Democrats, including Harkin, and many economic analysts dispute that. As for what he learned, Harkin says, "Don't pay attention to Wall Street when it comes to issues like this."
2. Protecting Fannie, Freddie
In 2005, Congress rejected a Republican-sponsored bill aimed at curbing risky investments by mortgage giants Fannie Mae and Freddie Mac, thanks to resistance from mostly Democrats. It was the latest in a string of unsuccessful attempts to rein in the two agencies. In this case, Congress ignored Greenspan's warning about the financial risks Fannie and Freddie were taking on.
The agencies were designed to expand homeownership by injecting money into the home mortgage market and encouraging banks to lend more. They buy loans from banks and guarantee them, holding some in their portfolios and selling others as mortgage-backed securities.
With implicit government backing, Fannie and Freddie have been able to borrow money at below-market rates. In recent years, the companies borrowed to buy billions' worth of complex mortgage-backed securities. The investments earned big returns. Fannie and Freddie's stock soared. Their executives were paid tens of millions of dollars.
Republicans sought to reduce the size of the companies' portfolios, arguing they were too risky.
Then the housing bubble burst. Fannie and Freddie didn't cause the financial meltdown, but they fueled it by becoming one of the biggest purchasers of toxic mortgage products, says Harvard economist Kenneth Rogoff.
"There was tremendous coddling of Fannie and Freddie in the face of a lot of evidence that they really weren't helping homeowners all that much," Rogoff says. "I think it was very, very clear what was coming, and that they were a huge, huge risk to the American financial system. … It really was criminal neglect."
Fannie and Freddie spent $175 million on lobbying in the last decade, according to the Center for Responsive Politics. The companies' employees and PACs gave nearly $5 million in contributions since 1989, by the center's count.
Until they were taken over, Fannie had 13 lobbying firms on its payroll this year; Freddie had 33. Both packed their boards with politically connected people such as Democrat Rahm Emanuel, a former Clinton aide who joined Freddie's board in 2000 before he became a congressman. Both hired well-connected lobbyists such as Rick Davis, now McCain's campaign manager.
In seeking to crack down on Fannie and Freddie, Republicans were encouraged by banks that didn't want government-subsidized competition. But there also was a chorus of warnings that the highly leveraged corporations could pose a risk to the economy.
In 2003 and 2004, both companies were wracked by accounting scandals that led to the ouster of top managers.
In 2005, Sen. Richard Shelby, R-Ala., sponsored legislation to shrink the agencies' portfolios. McCain later added his name as a co-sponsor. The bill passed the Senate Banking Committee, but every panel Democrat voted against it. That signaled that the bill wouldn't get the 60 votes needed to pass in the Senate. Obama was not on the banking panel; there is no record of him doing anything on the bill.
Sen. Chris Dodd, D-Conn., a senior member of the banking committee, is the largest recipient of political contributions from Fannie and Freddie employees and PACs, having received $165,400 since 1989, according to the center.
Dodd said he backed Fannie and Freddie because they encouraged homeownership. "I've never ever in my life been affected by a campaign contribution," he said in an interview. He noted that when he became banking committee chairman, he helped pass a bill restricting mortgage agencies' investment practices in 2007. By then, it was too late to stop the financial disaster.
In the House, Republicans and Democrats agreed on a different bill that passed easily. But the Bush administration opposed it, calling it weak. The effort failed.
The next year, Freddie Mac paid the largest election fine ever, $3.8 million, after regulators found it used corporate funds illegally to pay for fundraisers. From 2000 to 2003, Freddie Mac held 85 events that raised $1.7 million, mostly for Republicans on the House Financial Services Committee, regulators found.
Rep. Barney Frank, then the ranking Democrat on financial services and now the chairman, says he and his colleagues were not soft on Fannie and Freddie. "Yes, they lobbied strongly, but I was one of the most successful ones in challenging them."
Frank had no apologies. Rep. Artur Davis, D-Ala., by contrast, offered a rare Washington mea culpa: "Like a lot of my Democratic colleagues, I was too slow to appreciate the recklessness of Fannie and Freddie," he said in a statement. "Frankly, I wish my Democratic colleagues would admit, when it comes to Fannie and Freddie, we were wrong.

Thursday, October 9, 2008

Credit Crisis for Dummies

An excellent explanation of the credit mess sent to me by a friend in the financial industry...

Around the world, banks must comply with what are known as Basel II regulations. These regulations determine how much capital a bank must maintain in reserve. The rules are based on the quality of the bank's loan book. The riskier the loans a bank owns, the more capital it must keep in reserve. Bank managers naturally seek to employ as much leverage as they can, especially when interest rates are low, to maximize profits. AIG appeared to offer banks a way to get around the Basel rules, via unregulated insurance contracts, known as credit default swaps. Here's how it worked: Say you're a major European bank... You have a surplus of deposits, because in Europe people actually still bother to save money. You're looking for something to maximize the spread between what you must pay for deposits and what you're able to earn lending. You want it to be safe and reliable, but also pay the highest possible annual interest. You know you could buy a portfolio of high-yielding subprime mortgages. But doing so will limit the amount of leverage you can employ, which will limit returns.So rather than rule out having any high-yielding securities in your portfolio, you simply call up the friendly AIG broker you met at a conference in London last year. "What would it cost me to insure this subprime security?" you inquire. The broker, who is selling a five-year policy (but who will be paid a bonus annually), says, "Not too much." After all, the historical loss rates on American mortgages is close to zilch. Using incredibly sophisticated computer models, he agrees to guarantee the subprime security you're buying against default for five years for say, 2% of face value.Although AIG's credit default swaps were really insurance contracts, they weren't regulated. That meant AIG didn't have to put up any capital as collateral on its swaps, as long as it maintained a triple-A credit rating. There was no real capital cost to selling these swaps; there was no limit. And thanks to what's called "mark-to-market" accounting, AIG could book the profit from a five-year credit default swap as soon as the contract was sold, based on the expected default rate.Whatever the computer said AIG was likely to make on the deal, the accountants would write down as actual profit. The broker who sold the swap would be paid a bonus at the end of the first year ? long before the actual profit on the contract was made. With this structure in place, the European bank was able to assure its regulators it was holding only triple-A credits, instead of a bunch of subprime "toxic waste." The bank could leverage itself to the full extent allowable under Basel II. AIG could book hundreds of millions in "profit" each year, without having to pony up billions in collateral.It was a fraud. AIG never had any capital to back up the insurance it sold. And the profits it booked never materialized. The default rate on mortgage securities underwritten in 2005, 2006, and 2007 turned out to be multiples higher than expected. And they continue to increase. In some cases, the securities the banks claimed were triple A have ended up being worth less than $0.15 on the dollar.Even so, it all worked for years. Banks leveraged deposits to the hilt. Wall Street packaged and sold dumb mortgages as securities. And AIG sold credit default swaps without bothering to collateralize the risk. An enormous amount of capital was created out of thin air and tossed into global real estate markets.On September 15, all of the major credit-rating agencies downgraded AIG ? the world's largest insurance company. At issue were the soaring losses in its credit default swaps. The first big writeoff came in the fourth quarter of 2007, when AIG reported an $11 billion charge. It was able to raise capital once, to repair the damage. But the losses kept growing. The moment the downgrade came, AIG was forced to come up with tens of billions of additional collateral, immediately. This was on top of the billions it owed to its trading partners. It didn't have the money. The world's largest insurance company was bankrupt.The dominoes fell over immediately. Lehman Brothers failed on the same day. Merrill was sold to Bank of America. The Fed stepped in and agreed to lend AIG $85 billion to facilitate an orderly sell off of its assets in exchange for essentially all the company's equity. Most people never understood how AIG was the linchpin to the entire system. And there's one more secret yet to come out...AIG's largest trading partner wasn't a nameless European bank. It was Goldman Sachs.I'd wondered for years how Goldman avoided the kind of huge mortgage-related writedowns that plagued all the other investment banks. And now we know: Goldman hedged its exposure via credit default swaps with AIG. Sources inside Goldman say the company's exposure to AIG exceeded $20 billion, meaning the moment AIG was downgraded, Goldman had to begin marking down the value of its assets. And the moment AIG went bankrupt, Goldman lost $20 billion. Goldman immediately sought out Warren Buffett to raise $5 billion of additional capital, which also helped it raise another $5 billion via a public offering. The collapse of the credit default swap market also meant the investment banks ? all of them ? had no way to borrow money, because no one would insure their obligations.To fund their daily operations, they've become totally reliant on the Federal Reserve, which has allowed them to formally become commercial banks. To date, banks, insurance firms, and investment banks have borrowed $348 billion from the Federal Reserve ? nearly all of this lending took place following AIG's failure. Things are so bad at the investment banks, the Fed had to change the rules to allow Merrill, Morgan Stanley, and Goldman the ability to use equities as collateral for these loans, an unprecedented step.The mainstream press hasn't reported this either: A provision in the $700 billion bailout bill permits the Fed to pay interest on the collateral it's holding, which is simply a way to funnel taxpayer dollars directly into the investment banks.Why do you need to know all of these details? First, you must understand that without the government's actions, the collapse of AIG could have caused every major bank in the world to fail. Second, without the credit default swap market, there's no way banks can report the true state of their assets ? they'd all be in default of Basel II. That's why the government will push through a measure that requires the suspension of mark-to-market accounting. Essentially, banks will be allowed to pretend they have far higher-quality loans than they actually do. AIG can't cover for them anymore.And third, and most importantly, without the huge fraud perpetrated by AIG, the mortgage bubble could have never grown as large as it did. Yes, other factors contributed, like the role of Fannie and Freddie in particular. But the key to enabling the huge global growth in credit during the last decade can be tied directly to AIG's sale of credit default swaps without collateral. That was the barn door. And it was left open for nearly a decade.There's no way to replace this massive credit-building machine, which makes me very skeptical of the government's bailout plan. Quite simply, we can't replace the credit that existed in the world before September 15 because it didn't deserve to be there in the first place. While the government can, and certainly will, paper over the gaping holes left by this enormous credit collapse, it can't actually replace the trust and credit that existed... because it was a fraud. And that leads me to believe the coming economic contraction will be longer and deeper than most people understand.

Wednesday, October 8, 2008

Mad Mom Goes to Washington

Mad Mom is off to the snake pit tomorrow. When I return on Monday, I'll share any insights I'm able to gather there regarding who bears responsibility for our financial crisis and what they are saying about it in Washington. No doubt it will be the same finger pointing as usual. Perhaps Mad Mom's entourage can make some Citizen's Arrests...

CDOs Explained

Many in the financial industry believe that dodgy ratings devised by ratings agencies (such as Standard and Poors and Moodys) of various mortgage backed financial products are a significant cause of why the economic meltdown occured. And one of those financial products, CDOs, is particularly to blame for the collapse of the financial sector. CDOs or Collateralized Debt Obligations are "derivatives" or financial products derived from the mortgage market. Here is a great explanation of CDOs from khanacademy (which incidentally has a series of great videos on the whole housing mess) on You Tube.

Next we'll explore why the ratings agencies gave Triple A ratings to some CDOs when they clearly knew that the products were backed up sub-prime mortgage loans given to people who were highly likely to default. Why were they able to commit such fraud, and who was in charge?

Monday, October 6, 2008

Financial Weapons of Mass Destruction

Last evening, 60 Minutes aired a segment on the "Shadow Market" of Credit Default Swaps".

Bear with me for a minute with this, but the technical definition of a credit default swap (CDS) is a contract in which a buyer pays a series of payments to a seller, and in exchange receives the right to a payoff if an associated credit instrument goes into default or on the occurence of a specific credit event named in the contract (such as bankruptcy or restructuring). The associated instrument does not need to be associated with the buyer or the seller of this contract.
Originally used as a form of insurance against bad debts, these instruments became a tool for financial speculation when the Commodity Futures Modernization Act of 2000 , signed by president Bill Clinton, specifically barred regulation of these trades.

What the heck does this mean and why is it important in light of the financial crisis? I am not an economist and have never worked in the financial industry, but I will attempt to explain as I understand it, in simple terms.

With a global flush of cash looking for a home, Wall Street financial institutions bought up mortages, chopped them up into tiny chunks and sold them as mortgage backed securities to gobs of willing investors. As more and more sub-prime mortgages came into the market, the math geniuses at rating agencies came up with complex algorithms which were supposed to assess the risk of each security so they could be sold off in rated tiers and spread the risk around. To offset risk, particularly with the lower rated securities, credit default swaps were sold along with the securities. These CDSs are basically a form of insurance against a security should it defaut or should the seller go into bankruptcy. Because they are termed "swaps", they are not subject to insurance regulations, which would require that the insurer actually have capital to back up the insured product. Prices for the CDSs varied based on the degree of risk, and Wall Street made a fortune selling these so-called "derivatives", valued at $60 TRILLION, without having to put aside the funds to back them up. CDSs became the most widely traded derivatives on the market, and investors all over the globe bought them. When people began to default on their mortgages, the financial institutions such as Bear Stearns and Lehmen Brothers did not have the capital to fund these liabilities, and went bust. This doesn't make the unfunded liabilties of $60 trillion go away. Someone has to pay for them, and it's one of the many reasons why the crisis continues to spiral out of control globally despite Congress' intervention with the $700 bailout.

Warren Buffet famously called these CDSs "Financial weapons of mass destruction", and has warned against them for years. So my question is "Why didn't the members of Congress see this train wreck coming?" Anyone with half a brain knows that you can't guarantee to insure something if you don't have the funds to back it up. What were all of the members of the banking, financial and insurance sub-committees in Congress doing? Were Senators Dodd, Shumer, Frank, Reed, and others asleep at the wheel, or did they intentionally turn their heads the other way, so as not to upset their big money donors who made gazillions with this Ponzi scheme? At best, it's criminal negligence; at worst, it's conspiracy to commit fraud, ultimately at the taxpayers expense. And what about Phil Gramm, godfather of CDS's? Why aren't they going to jail?

Sunday, October 5, 2008

Covering Their Fannies

While Senators Chuck Dodd (D-CT) and Barney Frank (D-MA) play the part of "avenging angels" as stated below in the UK-based Independent, and lay all blame for the financial crisis square on the Bush administration, many Americans are unaware that their fingerprints are all over the root cause of the mess.

Meanwhile, Charles Shumer (D-NY) and Jack Reed (D-RI) have made lots of noise recently decrying the executive severence pay for Mr. Raines and Mr. Mudd, CEO's of Fannie and Freddie. Guess who blocked reform of these very institutions back in 2005 as members of the Senate Banking Sub Committee in a party line vote? Senators Shumer and Reed. As a consequence, the reform bill never even made it to the full Senate for a vote.

From The Independent, Friday, October 3rd,, is this piece by Dominic Lawson outlining the real story behind Fannie and Freddie's implosion.

"Dominic Lawson: Democrat fingerprints are all over the financial crisis";
The least well off are going to face the most stringent terms for mortgages
Friday, 3 October 2008

Of all the characteristics of a successful politician, none is more essential than bare-faced cheek. Never has this been more evident than in the past fortnight, as senior Democrat members of the US legislature have sought to lay all the blame for the country's financial crisis on the executive arm of Government and Wall Street.
Neither of these two institutions is blameless – far from it. Yet when I see such senior Democrats as Barney Frank, Chairman of the House Financial Services Committee, and Christopher Dodd, Chairman of the Senate's Banking Committee, play the part of avenging angels – well, I can only stand in silent awe at the sheer tight-bottomed nerve of it. These are men with sphincters of steel.
What is the proximate cause of the collapse of confidence in the world's banks? Millions of improvident loans to American housebuyers. Which organisations were on their own responsible for guaranteeing half of this $12 trillion market? Freddie Mac and Fannie Mae, the so-called Government Sponsored Enterprises which last month were formally nationalised to prevent their immediate and catastrophic collapse. Now, who do you think were among the leading figures blocking all the earlier attempts by President Bush – and other Republicans – to bring these lending behemoths under greater regulatory control? Step forward, Barney Frank and Chris Dodd.
In September 2003 the Bush administration launched a measure to bring Fannie Mae and Freddie Mac under stricter regulatory control, after a report by outside investigators established that they were not adequately hedging against risks and that Fannie Mae in particular had scandalously mis-stated its accounts. In 2006, it was revealed that Fannie Mae had overstated its earnings – to which its senior executives' bonuses were linked – by a stunning $9.3billion. Between 1998 and 2003, Fannie Mae's executive chairman, Franklin Raines, picked up over $90m in bonuses and stock options.
Yet Barney Frank and his chums blocked all Bush's attempts to put a rein on Raines. During the House Financial Services Committee hearing following Bush's initiative, Frank declared: "The more people exaggerate a threat of safety and soundness [at Freddie Mac and Fannie Mae], the more people conjure up the possibility of serious financial losses to the Treasury which I do not see. I think we see entities that are fundamentally sound financially." His colleague on the committee, the California Democrat Maxine Walters, said: "There were nearly a dozen hearings where we were trying to fix something that wasn't broke. Mr Chairman, we do not have a crisis at Freddie Mac and particularly at Fannie Mae under the outstanding leadership of Mr Franklin Raines."
When Mr Raines himself was challenged by the Republican Christopher Shays, to the effect that his ratio of capital to assets (that is, mortgages) of 3 per cent was dangerously low, the Fannie Mae boss retorted that "our assets are so riskless, we could have a capital ratio of under 2 per cent".
Maxine Walters' complaint about previous attempts to bring the great state-sponsored housing finance bodies under stricter control was partly a reference to Bill Clinton's efforts. Last week the former President acknowledged that "responsibility" for the absence of proper regulation rested "with Democrats who were resisting any efforts of Republicans in Congress, and earlier when I was President and tried to impose tighter standards on Fannie Mae and Freddie Mac". Then, as now, members of his own party saw all such initiatives as unwonted attacks on the chances for low-earners, and particularly African-Americans, to own their own homes.
From its inception in 1938 Fannie Mae (and later Freddie Mac) was designed to make housing finance available to "ordinary Americans". This was a noble aim. In the 1970s another Democrat President, Jimmy Carter, introduced legislation which demanded that such bodies enhance their lending to minorities. Again, this was based on a noble idea: to stamp out racism in the mortgage market. Thus by 1998 you had the Federal Reserve Bank of Boston producing a document entitled "Closing the Gap: a Guide to Equal Opportunities Lending", which instructed banks that an applicant's "lack of credit history should not be seen as a negative factor" in obtaining a mortgage. As Stephen Malanga of the Manhatta *Institute notes: "Of course the new federal standards couldn't just apply to minorities. If they could pay back loans under these terms, then so could the majority of loan applicants. Quickly, these became the new standards in the industry. As the housing market boomed, banks embraced these new standards with a vengeance. Between 2004 and 2007, Fannie Mae and Freddie Mac became the biggest purchasers of subprime mortgages from all kinds of applicants, white and minority, and most of these loans were based on lending standards promoted by the Government."
One of the few journalists to see where this would lead was Jeff Jacoby, of the Boston Globe. Last week he reminded his readers what he had written in 1995: "Our banks are knowingly approving risky loans to get the feds and the activists off their backs... When the coming wave of foreclosures rolls through the inner city, which of today's self-congratulating bankers, politicians and regulators plans to take the credit?". Jacoby adds now: "Barney Frank doesn't. But his fingerprints are all over this fiasco."
It's true that the improvident lending was not initiated by Fannie and Freddie: their role in this was to buy these loans and sell them on – but then the music stopped. Cynical students of the American political system will note that the biggest recipient of campaign contributions from the munificent duo of Fannie and Freddie over the past 20 years was one Christopher Dodd, Democrat Chairman of the Senate's Banking Committee.
Rather surprisingly, given that he has only been in the Senate for four of those years, the second biggest beneficiary was Barack Obama. In August the Washington Post reported that Obama's presidential campaign team had sought the advice of Franklin Raines "on mortgage and housing policy matters". Perhaps Mr Obama's team just wanted to know where all the bodies are buried – there are rather a lot of them.
The saddest outcome of all this within America – apart from the crippling cost to the nation's taxpayers – is that the very people the Democrats had intended to help will be the biggest victims: for many years to come banks will demand the most stringent terms for mortgages to the least well off.
In the meantime, let us praise Congressman Artur Davis of Alabama, who confessed this week: "Like a lot of my Democrat colleagues I was too slow to appreciate the recklessness of Fannie and Freddie when in retrospect I should have heeded the concerns raised. I wish my Democrat colleagues would admit that we were wrong." I fear Congressman Davis will not go far with this attitude – but at least he will be able to look at himself in the mirror.

Saturday, October 4, 2008

It is Time to Send Them Packing

Disgusted. Worried. Out of control. Fed up. I feel all of these the day after the people we voted into office passed the largest bail-out in American history; almost a trillion dollars laden with pork. I won't debate the merits of passing this repugnant bill, or whether more palatable alternatives could have been sought. It is a Done Deal, and we, the taxpayers, and our children, and our children's children, have been burdened with something the size and ramifications of which we cannot even begin to comprehend. No, my focus is on holding accountable those who caused this mess in the first place.

There are many villains whose actions resulted in this debacle, a Perfect Storm of corruption, greed, and utter denial. There are the Wall Street Fat Cats, who enriched themselves at the cost of their shareholders, and who are still sitting pretty on their huge piles of cash. There are the leaders of Fannie Mae and Freddie Mac, who changed the rules determining their compensation packages so that the more mortgage business they pulled in, whether good or bad, the bigger their personal pay load. There are ordinary Americans, who lived in denial, above their means, and bought houses and cars and flat screen TV's that they simply could not afford, and thought the band would continue to play on and on. And there are our Representatives in the House and Senate, who went to Washington to serve us, and instead, continously betrayed us, their constituents. The corruption and back room deals, the lobbying and pork, and the arrogance of the "We know better than you" attitude. It is unconsionable, and we do our best trying to get though our hectic days as they trample all over us, confident in the fact that we are not paying attention. Until it hits us head-on like a Mack Truck, as it has these past few weeks.

What can we do? We are left feeling powerless . We cannot control Wall Street or CEO greed. We cannot control our neighbors' fiscal irresponsibility. We cannot demand that the FBI investigate who did what and when. The web of responsibilty for this mess is unspeakably tangled. Congress promises to investigate, but guess who will be in charge of the investigations? The very Congressional leaders who benefited most from the crooks with whom they danced our futures away. Do you think it is likely that the most egregious parties will be held responsible? I think not. Not while the Inmates are running the Asylum.

A recent poll showed that 98% of Americans feel that Congress needs to be reformed. The last group of people to unite Americans so resoundingly flew planes into our buildings. Then, with One Voice, we said "Enough!". We went after the criminals with military weapons, and the fight goes on. We are once again faced with an unimaginably frightening challenge, the soundness of our economy and futures of our families, but this time, the criminals come from within. Once again, with One Voice, we must say "Enough!". Only this time, our weapon of choice is the most powerful one of all, the one which our founding fathers bestowed upon us; our Vote.

As Americans, not as Democrats or Republicans or Independents, we need to root out the corruption at its source. Congress has become a den of thieves, and make no mistake, ALL parties bear responsibilty. We must Send Them a Message with this election and VOTE OUT EVERY INCUMBENT in Washington. No partisanship. No "But I like my guy" or "He's been in office for many years and does good things for our state". If he's been in office for a long time, he had plenty of time to Stop the Nonsense, and he did not. He became part of the problem. If you cost your company 8% of it's gross earnings for the year through incompetence or corruption, you would be fired. Period. That's approximately the amount of our GDP that the bailout equals. These people will not take us, their constituents, seriously, until we tell them, "You're fired!". Perhaps then, the remaining Representatives and Senators will recognize that they must look out for OUR interests, not their own. History tells us that rampant, uncontrolled government corruption preceded the fall of the Roman Empire, whose principles our founding fathers used to forge our democracy. Use the power of your vote to say "Enough!" and save us and this country from the snakes lying within.