The United States may lose its AAA rating by defaulting on its debt and it will be very hard to get that rating back, says Robert Wiedemer, financial commentator and best-selling author of "Aftershock."
Lawmakers are at an impasse on agreeing on terms to lift the government's $14.3 trillion debt ceiling and avoid an Aug. 2 default.
Republicans and Democrats want to lift the ceiling but disagree on how to reduce the deficit in exchange for lifting the White House's borrowing limit.
They will probably strike a deal and lift the ceiling, Wiedemer says, but they may not do it in time, and credit ratings agencies may strip the country of its AAA ratings.
You don't get those back that easily, says Wiedemer, managing director of Absolute Investment Manager.
"I don't think we are going to work our way back to AAA," Wiedemer tells Newsmax.TV.
"Any downgrade I think is ultimately going to be based more on fundamental issues. We have a huge debt now almost eight times our tax revenues. That's massive. It's fundamentally a toxic asset."
A downgrade won't mean the end of the world for the financial system, says Wiedemer, who recently released an updated edition of his best-selling book, "Aftershock."
Economists at the ratings agencies themselves have said that much.
But Americans will feel the pinch when investors demand higher interest rates in U.S. debt auctions, which will trickle down to loans like mortgages and student loans.
"Any kind of nick does do long-term harm to our credibility, but is the immediate impact catastrophic? No, of course not. But is the long-term blow to our reputation a problem especially if our economy sees more inflation and other problems? It just piles on," Wiedemer says.
"If it was the only problem, I wouldn't worry about it. But it's indicative of a much larger problem."
After default, the United States enjoys the unique position in that the Federal Reserve can print money and buy U.S. Treasurys to keep them as affordable for the government as possible.
The problem with such a move is that it would threaten to pump up inflation rates even if it does prevent ratings from falling too far below AAA.
"If we have any real trouble selling our bonds, Ben [Bernanke] will just step in and buy them with printed money. And there's really no limit to that other than when he does that, that's going to create inflation."
"But in the short term, that limits the amount of downgrades you can get. The longer-term problem is more insidious, and that's inflation."
China to Take a Hit
Political parties may suffer fresh beatings in popularity polls after the debt-ceiling impasse, and those that elected them will suffer as well in the form of a sluggish economy threatened by high debt levels and rising inflation rates.
The Chinese, meanwhile, may also take it across the chin if default occurs.
China has invested heavily in U.S. debt but has also manipulated its currency in such a way that it has gained an edge in global trade.
A weak Chinese yuan makes its exports more competitive.
But a disruption in global markets stemming from a U.S. default could mess up Beijing's plans.
"Anybody who invests in something that defaults, they get hit and they take a big loss. I think the Chinese could be in for a really big hit by betting so heavily on manipulating the dollar. It's not a smart bet, fundamentally, to manipulate foreign exchange," Wiedemer says.
"That's why few countries do it. Certainly our largest trading partner Canada doesn't do it. I think it's a dumb bet, and I think they are going to lose heavily on it."
Standard and Poor's, meanwhile, says it would like to see the country shave $4 trillion off of its deficits over the long term. "$4 trillion would be a good down payment," says John Chambers, chairman of the company’s sovereign rating committee, according to Bloomberg.
"A grand bargain of that nature would signal the seriousness of policy makers to address the fiscal situation in the U.S."
Sunday, July 31, 2011
Greenspan: Fed Should Have Let Banks Fail
Former Federal Reserve Chairman Alan Greenspan is taking government regulators to task for not letting more big financial houses fail back during the credit crisis.
Every rich-country government must choose between setting aside wealth to contain catastrophes or use that wealth for its own prosperity.
Since the 2008 crisis began, the U.S. government has erred heavily on the side of caution to the detriment of its own growth, Greenspan writes in an Op-Ed in the Financial Times.
“American policymakers, in recent years, faced with the choice to assist a major company or risk negative economic fallout, have regrettably almost always chosen to intervene,” Greenspan writes.
U.S. banks are holding on to $1.6 trillion in reserves as buffer capital courtesy of the Federal Reserve. This is the result, Greenspan contends, of the U.S. decision to bail out Bear Stearns rather than letting it crash.
If the investment bank had been allow to collapse, he writes, banks such as AIG and Lehman might have put more money aside to protect themselves from the same fate. They clearly did not, and the government was forced into the market to save them.
Since banks now can sit on their Federal Reserve money and earn interest at no risk they have less incentive to lend it and the U.S. economy is stagnating, Greenspan writes.
“This bias leads to an excess of buffers at the expense of our standards of living,” he maintains.
Meanwhile, investors nervously eye the latest potential calamity — a presumptive default by the U.S. government within days — and it’s unclear whose head is on the chopping block, if anybody’s.
"If there is a financial meltdown and panic, you don't know where investors will go," Gifford Combs, a portfolio manager at Dalton Investments, told The Associated Press.
Every rich-country government must choose between setting aside wealth to contain catastrophes or use that wealth for its own prosperity.
Since the 2008 crisis began, the U.S. government has erred heavily on the side of caution to the detriment of its own growth, Greenspan writes in an Op-Ed in the Financial Times.
 |
| Alan Greenspan (Getty Images photo) |
U.S. banks are holding on to $1.6 trillion in reserves as buffer capital courtesy of the Federal Reserve. This is the result, Greenspan contends, of the U.S. decision to bail out Bear Stearns rather than letting it crash.
If the investment bank had been allow to collapse, he writes, banks such as AIG and Lehman might have put more money aside to protect themselves from the same fate. They clearly did not, and the government was forced into the market to save them.
Since banks now can sit on their Federal Reserve money and earn interest at no risk they have less incentive to lend it and the U.S. economy is stagnating, Greenspan writes.
“This bias leads to an excess of buffers at the expense of our standards of living,” he maintains.
Meanwhile, investors nervously eye the latest potential calamity — a presumptive default by the U.S. government within days — and it’s unclear whose head is on the chopping block, if anybody’s.
"If there is a financial meltdown and panic, you don't know where investors will go," Gifford Combs, a portfolio manager at Dalton Investments, told The Associated Press.
Hedge Fund Manager Loeb: Obama Fueling Class Warfare
President Barack Obama is fueling class warfare with scare tactics over the debt-ceiling and other issues, says hedge fund manager Dan Loeb.
"The budget is not the only thing in deficit today, as a paucity of leadership has left the country without a stable framework in which businesses can conduct business, investors can invest, and consumers can consume without a high degree of uncertainty and fear," Loeb writes in a letter to his clients at Third Point, according to Dealbreaker.
The government is approaching its $14.3 trillion debt ceiling, and unless Congress approves an increase to that limit by Aug. 2, the country could default.
Obama has proposed tax hikes as part of his plan to narrow deficits in exchange for congressional approval to lift the ceiling, although he has been scaring people on what might happen if he doesn't get his way.
"Scaring senior citizens about the possibility of not receiving their Social Security and Medicare checks, lambasting the corporate jet industry, and calling for higher taxes on managers of private partnerships is not a constructive approach to handling a multi-trillion dollar problem that will have a multi-generational impact," Loeb says.
"It's increasingly difficult to avoid that conclusion that while Washington burns, President Obama is fiddling away by insisting that the only solution to the nation's problems — whether unemployment, the debt ceiling or deficit reductions — lies in redistribution of wealth."
Treasury Secretary Tim Geithner, who first warned of the problem back in January, says the situation is getting urgent.
"It's taken us seven months to get to the place where we are now," Geithner tells CNN. "We're almost out of runway."
"The budget is not the only thing in deficit today, as a paucity of leadership has left the country without a stable framework in which businesses can conduct business, investors can invest, and consumers can consume without a high degree of uncertainty and fear," Loeb writes in a letter to his clients at Third Point, according to Dealbreaker.
The government is approaching its $14.3 trillion debt ceiling, and unless Congress approves an increase to that limit by Aug. 2, the country could default.
 |
| President Barack Obama (Getty Images photo) |
"Scaring senior citizens about the possibility of not receiving their Social Security and Medicare checks, lambasting the corporate jet industry, and calling for higher taxes on managers of private partnerships is not a constructive approach to handling a multi-trillion dollar problem that will have a multi-generational impact," Loeb says.
"It's increasingly difficult to avoid that conclusion that while Washington burns, President Obama is fiddling away by insisting that the only solution to the nation's problems — whether unemployment, the debt ceiling or deficit reductions — lies in redistribution of wealth."
Treasury Secretary Tim Geithner, who first warned of the problem back in January, says the situation is getting urgent.
"It's taken us seven months to get to the place where we are now," Geithner tells CNN. "We're almost out of runway."
Europe Declares War on American Ratings Agencies
As the financial crisis that began on Europe’s periphery — Greece, Ireland and Portugal — moves closer to the major economies of the center – Italy and Spain – and now threatens the continued viability of the euro currency, European leaders are scrambling to find a containment strategy. Their preferred course of action: shift responsibility by blaming the Americans.
European officials struggling to prevent the collapse of what has been described as “a giant Ponzi scheme” are angry — very angry — at American credit ratings agencies for downgrading the creditworthiness of several European countries and thus publicly exposing the true extent of Europe’s debt crisis.
Far from acknowledging the self-inflicted nature of Europe’s financial problems, European officials are pointing fingers across the Atlantic, portraying the ratings agencies as part of an “Anglo-Saxon” (i.e., neoconservative free market capitalist American) conspiracy to destroy the euro currency and, by extension, Europe’s broader pretensions to superpower status.
The three leading ratings agencies criticized for being American – Standard & Poor’s, Moody’s Investors Service, and Fitch Ratings, which actually is majority owned by a French company — rate the creditworthiness of companies and countries, as well as the quality of funds and stocks. Their assessment determines the conditions under which firms, banks, or countries may borrow money on the capital markets.
The agencies, which collectively hold a global market share of roughly 95 percent, exert considerable influence over Europe because European companies active on U.S. markets are required by securities laws to have ratings that are issued from these firms.
But European politicians are now accusing these companies of outside meddling, as if American ratings agencies are responsible for the bankruptcy of countries like Greece, Ireland, and Portugal. In a frantic effort to regain control over the narrative that was carefully crafted over many years that Europe is a global model of socialist utopia, European elites (as always in denial), are, once again, reaching for the tried and true fall-back position of anti-Americanism.
The latest bout of anti-American rhetoric was triggered by the July 5 decision by the New York-based Moody’s to downgrade Portugal’s credit rating to “junk” status. The downgrade was made just as Portugal was to implement austerity measures in return for a €78 billion ($110 billion) EU-IMF bailout, and as the eurozone was struggling to craft yet another rescue package for Greece.
Consider, for example, the reaction of Viviane Reding, the European commissioner for justice. Reding told Germany’s Die Welt newspaper: “Europe cannot let itself be destroyed by three American private companies.” She added: “I see two possible solutions: either the G-20 states agree together to smash the cartel of American rating agencies. Or independent European and Asian rating agencies are established.”
European Commission President José Manuel Barroso accused the agencies of “mistakes,” “exaggerations,” “conflicts of interest,” and of having an anti-European “bias.” Barroso asked: “Is it normal to have only three relevant actors on such sensitive issues where there is a great possibility of conflict of interest? Is it normal that all of them come from the same country?”
Attacking the domination of the ratings sector by the Americans, Barroso continued: “It seems strange that there is not a single rating agency coming from Europe. It shows there may be some bias in the markets when it comes to the evaluation of the specific issues of Europe. It is important that we do not allow others to take away our ability to make judgments.”
The unelected Barroso also said it was time for a European ratings agency to emerge as a counterweight to the U.S.-dominated groups: “We know that when there are oligopolies there are sometimes attempts to abuse the dominant position or market manipulation, so the more competition the better — this is our credo.”
German President Christian Wulff said it was shocking that the rating agencies continue to exercise so much power, and warned of the need for policymakers to “re-conquer the primacy of politics.” German Finance Minister Wolfgang Schaeuble said he “cannot decipher” the recent ratings downgrades of Portugal. “We need to examine the possibilities of smashing the rating agency oligopoly,” he added.
European Commissioner for Internal Market and Services Michel Barnier said something must be done to cut the “power and influence” of the American agencies. In true Eurocrat fashion, Barnier also issued a veiled threat: “I invite the agencies, which are under the control of national supervisors, to be extremely careful to fully respect EU rules. They should learn the lessons from the past.”
Greek Foreign Minister Stavros Lambrinidis criticized the behaviour of the agencies as “the wonderful madness of self-fulfilling prophecy” because it made it harder for insolvent countries like Greece and Portugal to borrow to keep afloat. Never mind the “madness” that European leaders have allowed themselves to believe they can borrow forever without ever having to pay back the debt they have accrued.
European Commissioner for Economic and Monetary Affairs Olli Rehn accused Moody’s of “so-called clairvoyance.” Greek Prime Minister George Papandreou said the ratings agencies were “seeking to shape our destiny and determine the future of our children.” As if the rating agencies accumulated the mountains of Greek debt.
Luxembourg Prime Minister Jean-Claude Juncker said the influence of American credit rating agencies was “disastrous.” The Italian chief economist of the OECD, Pier Carlo Padoan, said of the ratings agencies: “It’s like pushing someone who is on the edge of a cliff. It aggravates the crisis.”
German Foreign Minister Guido Westerwelle called for the creation of a European rival to the three agencies. “It is necessary to establish an independent European rating agency. This must be a goal that we all work on intensively,” he said.
Not all politicians in Europe agree, and some have warned that attacking the ratings agencies was a ploy aimed at distracting attention away from deeper structural problems in European economies. Kay Swinburne, a British member of the European Parliament, said: “The EU seems determined to find scapegoats for the current crisis. The problems in the eurozone are predominantly as a result of poor fiscal policies of some EU governments, not because of the decisions of ratings agencies to downgrade them.”
Sharon Bowles, the British chairman of the European Parliament’s Economic Affairs Committee, has also warned against demonizing the rating agencies: “They are being shot as the bringer of bad news. I am not entirely convinced that the [rating] system is broken,” she said.
To be sure, many analysts say the rating agencies deserve much of the criticism that they have received over the past several years. By giving investment grade ratings to American sub-prime mortgage debt, the ratings agencies helped bring about the international financial crisis that the world is still recovering from.
But others say that because of these earlier failings the rating agencies have become more proactive in warning investors of risks facing the financial markets. To rein them in now because they are increasing investor awareness about just how troubled the finances of countries like Portugal, Ireland, Italy, Greece, and Spain have become would be a giant step backward.
Wolfgang Franz, the chairman of the German Board of Economic Advisors, told the Frankfurter Allgemeine Zeitung newspaper that the ratings agencies should be applauded for doing the job they are supposed to do: “Of course the rating agencies failed in the run up to the subprime crisis. But then one should not complain that the agencies are pointing out heightened default risks in government borrowing.”
The ratings agencies, which fear their brand names could be damaged by any suggestion that they are caving in to political pressure, have pushed back hard against the criticism.
For example, the head of S&P in Germany, Torsten Hinrichs, recently defended his record on German public television. He told viewers: “The assertions are completely made up out of thin air and factually wrong. They are either based on ignorance of the facts or are politically motivated comments that neglect the facts. There are about 100 ratings agencies in the world. The importance given to the big three stems from the fact that they have proven to be accurate in their ratings” over a period of many years. Hinrichs added that S&P will not put 150 years of credibility on the line “to enable politically motivated push-ups” of Greece.
Steven Maijoor, the Dutch head of the European Securities and Markets Authority, a pan-EU markets watchdog based in Paris, said Europe wants to break the monopoly currently held by the major American ratings companies, and enforce its own operating regulations. “We shouldn’t blindly adopt the regulatory system of a third country,” Maijoor told the Financial Times Deutschland.
But apart from public posturing, it remains unclear as to what European politicians can really do to limit the influence of American ratings agencies. International investors are unlikely to put much faith in an Orwellian-like European ratings agency that is funded by the state and created for the sole purpose of providing European countries with ratings that are more favorable than the ratings assigned by its American competitors.
In case there is any doubt, there are myriad examples of what a politically managed EU ratings agency would look like. For example, while the big three U.S. credit rating agencies downgraded Greek debt to “junk” more than one year ago, Germany’s Euler Hermes ratings agency currently gives Greece their top AA rating, citing the country’s “very strong business environment.”
Another example involves the European Banking Authority (until just recently it was known as the Committee of European Banking Supervisors), which in July 2010 stress-tested European banks. It concluded that the Bank of Ireland and Allied Irish Banks were capitalized to meet even the most adverse of scenarios. But just a few months later, the two banks needed €18.5 billion of new capital to remain afloat.
European policymakers are now drafting laws designed to curb the ratings agencies by increasing their legal liability, among other things. But a proposal to make the agencies legally liable if a downgrade of a country turns out to be incorrect is facing conceptual problems: officials have yet to come up with a clear definition of the word “incorrect.”
In any case, the new laws are not expected to be in place until the end of 2012. By then, Europe’s financial fate may already have been decided.
European officials struggling to prevent the collapse of what has been described as “a giant Ponzi scheme” are angry — very angry — at American credit ratings agencies for downgrading the creditworthiness of several European countries and thus publicly exposing the true extent of Europe’s debt crisis.
Far from acknowledging the self-inflicted nature of Europe’s financial problems, European officials are pointing fingers across the Atlantic, portraying the ratings agencies as part of an “Anglo-Saxon” (i.e., neoconservative free market capitalist American) conspiracy to destroy the euro currency and, by extension, Europe’s broader pretensions to superpower status.
The three leading ratings agencies criticized for being American – Standard & Poor’s, Moody’s Investors Service, and Fitch Ratings, which actually is majority owned by a French company — rate the creditworthiness of companies and countries, as well as the quality of funds and stocks. Their assessment determines the conditions under which firms, banks, or countries may borrow money on the capital markets.
The agencies, which collectively hold a global market share of roughly 95 percent, exert considerable influence over Europe because European companies active on U.S. markets are required by securities laws to have ratings that are issued from these firms.
But European politicians are now accusing these companies of outside meddling, as if American ratings agencies are responsible for the bankruptcy of countries like Greece, Ireland, and Portugal. In a frantic effort to regain control over the narrative that was carefully crafted over many years that Europe is a global model of socialist utopia, European elites (as always in denial), are, once again, reaching for the tried and true fall-back position of anti-Americanism.
The latest bout of anti-American rhetoric was triggered by the July 5 decision by the New York-based Moody’s to downgrade Portugal’s credit rating to “junk” status. The downgrade was made just as Portugal was to implement austerity measures in return for a €78 billion ($110 billion) EU-IMF bailout, and as the eurozone was struggling to craft yet another rescue package for Greece.
Consider, for example, the reaction of Viviane Reding, the European commissioner for justice. Reding told Germany’s Die Welt newspaper: “Europe cannot let itself be destroyed by three American private companies.” She added: “I see two possible solutions: either the G-20 states agree together to smash the cartel of American rating agencies. Or independent European and Asian rating agencies are established.”
European Commission President José Manuel Barroso accused the agencies of “mistakes,” “exaggerations,” “conflicts of interest,” and of having an anti-European “bias.” Barroso asked: “Is it normal to have only three relevant actors on such sensitive issues where there is a great possibility of conflict of interest? Is it normal that all of them come from the same country?”
Attacking the domination of the ratings sector by the Americans, Barroso continued: “It seems strange that there is not a single rating agency coming from Europe. It shows there may be some bias in the markets when it comes to the evaluation of the specific issues of Europe. It is important that we do not allow others to take away our ability to make judgments.”
The unelected Barroso also said it was time for a European ratings agency to emerge as a counterweight to the U.S.-dominated groups: “We know that when there are oligopolies there are sometimes attempts to abuse the dominant position or market manipulation, so the more competition the better — this is our credo.”
German President Christian Wulff said it was shocking that the rating agencies continue to exercise so much power, and warned of the need for policymakers to “re-conquer the primacy of politics.” German Finance Minister Wolfgang Schaeuble said he “cannot decipher” the recent ratings downgrades of Portugal. “We need to examine the possibilities of smashing the rating agency oligopoly,” he added.
European Commissioner for Internal Market and Services Michel Barnier said something must be done to cut the “power and influence” of the American agencies. In true Eurocrat fashion, Barnier also issued a veiled threat: “I invite the agencies, which are under the control of national supervisors, to be extremely careful to fully respect EU rules. They should learn the lessons from the past.”
Greek Foreign Minister Stavros Lambrinidis criticized the behaviour of the agencies as “the wonderful madness of self-fulfilling prophecy” because it made it harder for insolvent countries like Greece and Portugal to borrow to keep afloat. Never mind the “madness” that European leaders have allowed themselves to believe they can borrow forever without ever having to pay back the debt they have accrued.
European Commissioner for Economic and Monetary Affairs Olli Rehn accused Moody’s of “so-called clairvoyance.” Greek Prime Minister George Papandreou said the ratings agencies were “seeking to shape our destiny and determine the future of our children.” As if the rating agencies accumulated the mountains of Greek debt.
Luxembourg Prime Minister Jean-Claude Juncker said the influence of American credit rating agencies was “disastrous.” The Italian chief economist of the OECD, Pier Carlo Padoan, said of the ratings agencies: “It’s like pushing someone who is on the edge of a cliff. It aggravates the crisis.”
German Foreign Minister Guido Westerwelle called for the creation of a European rival to the three agencies. “It is necessary to establish an independent European rating agency. This must be a goal that we all work on intensively,” he said.
Not all politicians in Europe agree, and some have warned that attacking the ratings agencies was a ploy aimed at distracting attention away from deeper structural problems in European economies. Kay Swinburne, a British member of the European Parliament, said: “The EU seems determined to find scapegoats for the current crisis. The problems in the eurozone are predominantly as a result of poor fiscal policies of some EU governments, not because of the decisions of ratings agencies to downgrade them.”
Sharon Bowles, the British chairman of the European Parliament’s Economic Affairs Committee, has also warned against demonizing the rating agencies: “They are being shot as the bringer of bad news. I am not entirely convinced that the [rating] system is broken,” she said.
To be sure, many analysts say the rating agencies deserve much of the criticism that they have received over the past several years. By giving investment grade ratings to American sub-prime mortgage debt, the ratings agencies helped bring about the international financial crisis that the world is still recovering from.
But others say that because of these earlier failings the rating agencies have become more proactive in warning investors of risks facing the financial markets. To rein them in now because they are increasing investor awareness about just how troubled the finances of countries like Portugal, Ireland, Italy, Greece, and Spain have become would be a giant step backward.
Wolfgang Franz, the chairman of the German Board of Economic Advisors, told the Frankfurter Allgemeine Zeitung newspaper that the ratings agencies should be applauded for doing the job they are supposed to do: “Of course the rating agencies failed in the run up to the subprime crisis. But then one should not complain that the agencies are pointing out heightened default risks in government borrowing.”
The ratings agencies, which fear their brand names could be damaged by any suggestion that they are caving in to political pressure, have pushed back hard against the criticism.
For example, the head of S&P in Germany, Torsten Hinrichs, recently defended his record on German public television. He told viewers: “The assertions are completely made up out of thin air and factually wrong. They are either based on ignorance of the facts or are politically motivated comments that neglect the facts. There are about 100 ratings agencies in the world. The importance given to the big three stems from the fact that they have proven to be accurate in their ratings” over a period of many years. Hinrichs added that S&P will not put 150 years of credibility on the line “to enable politically motivated push-ups” of Greece.
Steven Maijoor, the Dutch head of the European Securities and Markets Authority, a pan-EU markets watchdog based in Paris, said Europe wants to break the monopoly currently held by the major American ratings companies, and enforce its own operating regulations. “We shouldn’t blindly adopt the regulatory system of a third country,” Maijoor told the Financial Times Deutschland.
But apart from public posturing, it remains unclear as to what European politicians can really do to limit the influence of American ratings agencies. International investors are unlikely to put much faith in an Orwellian-like European ratings agency that is funded by the state and created for the sole purpose of providing European countries with ratings that are more favorable than the ratings assigned by its American competitors.
In case there is any doubt, there are myriad examples of what a politically managed EU ratings agency would look like. For example, while the big three U.S. credit rating agencies downgraded Greek debt to “junk” more than one year ago, Germany’s Euler Hermes ratings agency currently gives Greece their top AA rating, citing the country’s “very strong business environment.”
Another example involves the European Banking Authority (until just recently it was known as the Committee of European Banking Supervisors), which in July 2010 stress-tested European banks. It concluded that the Bank of Ireland and Allied Irish Banks were capitalized to meet even the most adverse of scenarios. But just a few months later, the two banks needed €18.5 billion of new capital to remain afloat.
European policymakers are now drafting laws designed to curb the ratings agencies by increasing their legal liability, among other things. But a proposal to make the agencies legally liable if a downgrade of a country turns out to be incorrect is facing conceptual problems: officials have yet to come up with a clear definition of the word “incorrect.”
In any case, the new laws are not expected to be in place until the end of 2012. By then, Europe’s financial fate may already have been decided.
Losers All Around in Debt Limit Debate
The House narrowly passed John Boehner’s debt ceiling, debt reduction package on Friday with no Democratic votes. Senate Majority Leader Harry Reid , due to the 60 votes needed to break a filibuster, is unlikely to get much further than his 53-vote majority for his own version of the legislation, and even if he did, his bill, in its current version, could not pass the House.
The president continues to tell the American people to email, call, and tweet GOP members of Congress on behalf of a “balanced approach” (to include “revenues” ), though even his fellow Democrat, Harry Reid, abandoned such an approach a week ago, instead offering a spending cuts only approach to deficit reduction. Reid, of course, is trying to protect his members from having to cast a vote to raise taxes, given that near half of the 23 Democratic -held Senate seats up in 2012 are potentially at risk.
A few dozen Blue Dog Democrats in the House walked the plank voting for ObamaCare in March 2010 and, after the 2010 midterms, were out of a job. For the uninitiated, “revenues” are the new code word for “higher taxes,” much as “progressive” has replaced “liberal” in the political lexicon. From now on, April 15th is “Revenue Day,” and Democrats only seek more revenue, not higher tax rates.
We have on our hands a colossal mess, in which no one seems to have improved their standing with the public, and it is unclear how this will get worked out in the next few days. The investment markets, after assuming this was politics and posturing, as usual, and that everything would work out in time, are now considering for the first time the real possibility of a deal not getting done by the Treasury Department’s announced deadline of Tuesday, August 2. That date may be a soft deadline, it turns out. The stock market had its worst week in a year in the week ending Friday, and if no resolution appears imminent on Monday, it could be the start of another heavy down week. Harry Reid is hoping Senate Minority Leader Mitch McConnell can save him and the president from appearing to be the obstructionists to getting a deal done, now that the House for the second time in a week has acted and passed a bill that he and the Democrats tabled.
The bond rating agencies, which have warned that raising the debt ceiling may not be enough for the nation to maintain its AAA credit rating, without a significant deficit reduction effort in the coming years, may now conclude that Washington is too dysfunctional to take any crisis seriously. That dysfunction, as Charles Krauthammer suggested on Friday, is inevitable with divided government between two political parties with significantly different visions for the country’s future. President Obama, who has run up annual deficits of $1.5 trillion a year, will have more than doubled the nation’s total external debt by the end of his first term. That number is now $9.7 trillion (out of total national debt of $14.3 trillion, the remainder representing debts the government owes itself) and Obama has added nearly $4 trillion to that total in 2.5 years.
Add another $2.4 trillion for the remainder of his term, and near 55% of total external debt for the country’s 200 plus years will have been accumulated in just four years. But listen to liberal members of Congress or the president, or read liberal writers like Jon Cohn of the New Republic and Paul Krugman of the New York Times, and the real problem is that the debt is not growing rapidly enough — that the stimulus should have been larger and needs a second giant tranche now. And these writers have dreams of future entitlement growth, and “vital” new spending programs (clean energy, education, high speed rail). Just as any cuts to existing programs are draconian, all new spending is vital to “winning the future” and job growth. The possibility that the Keynesian approach of massive deficit spending as the way to work a nation out of a recession has been consistently proven wrong, or has achieved its goal only during World War 2 (when economic growth was an afterthought to spending to win the war), is simply not considered. The nation is now experiencing an extraordinarily weak recovery, perhaps a double dip recession, and government stimulus (the gap between spending and “revenues”) is 45% of total spending, and over 10% of GDP. But this is not enough stimulus for the left. That next injection is the one that will create jobs and growth.
For the GOP, their commitment is to cut not just the rate of growth in government, but to roll back some of the great “achievements of the left,” such as ObamaCare. Some in the GOP and some pundits on the right seem to think that control of the House is enough to dictate the results of divided government, and hence, the House Republicans are wimping out by not pushing for more cuts, sooner. This view is about as realistic as Krugman’s call for more spending to create the jobs the previous spending did not. Exactly how does the GOP force its way to victory when Democrats control the Senate and Obama is the president?
As Krauthammer argues, Obama won in 2008 and set out to remake America. He got pretty far with his work, with ObamaCare the paramount achievement. Of course, ObamaCare is considered a deficit reduction bill for the next ten years by the CBO, so no one need worry about the $200 billion a year in new spending for what will turn out to be largely a middle class entitlement, since it is “paid for.” If enough companies drop health insurance coverage, pushing lots of people into the exchanges — people the CBO assumed would remain insured by their companies — the cost of the bill will skyrocket.
The Class Act, the new long-term care entitlement program in ObamaCare, was scored as a $72 billion deficit reduction program in the first ten years, since premiums were collected for years before any payouts. This Ponzi scheme was so obvious a long term loser for the government that even some Democrats have come around and support killing it. The $14 plus trillion in current debt (internal and external), plus the near ten trillion to come over the next ten years — including the “savings” (deficit reduction) from ObamaCare — are just the start. If interest rates rise, and if economic growth remains well below forecast (near 4%), the total debt numbers will rise more rapidly.
It is in this environment that Harry Reid proposes $2.2 trillion in deficit reduction over ten years with more than half of it artificial, coming not from spending as much as in prior years for wars that are already being wound down. And yet even this extremely modest back loaded effort at debt reduction is drawing fire from the left.
So how will this get resolved by Tuesday, if it does? The president is adamant that there can not be another vote on the debt ceiling before the 2012 election. The fact that votes to raise the debt ceiling have occurred on average every 8 months over the last 50 years is simply inconvenient history for Obama. The Democrats now say they do not want another debt ceiling vote that would spoil Christmas for shoppers in late 2011, perhaps the lamest attempt at argument in a month of weak parries. In reality, the president’s approval numbers have tanked to new lows (-12 in both Gallup and Rasmussen today), with 42% average approval for these two tracking polls.
Obama and his team do not want to give him another chance to fail on the job, and have the debt issue front and center before the election. His mishandling of the debt ceiling/ debt talks has revealed a president who seems severely lacking in leadership and negotiating skills. He has appeared alternately unengaged, or angry, and has not gained the trust of members of either party. Having coasted for so long, he seems unable to deal with a situation where everything is not going his way. The deal that Reid and McConnell offered to Obama last Sunday, which he rejected, may still be the only thing than can pass both houses, though largely with Democratic votes in the House.
In essence, we seem headed for a package that will be advertised as over $2 trillion in deficit reduction over ten years, but will, in fact, be far less. The spending cuts will be backloaded and gimmicky, particularly if it is Reid’s bill that becomes the model. There may be two tranches of debt ceiling increase, but the second piece will be fairly certain to occur, and not involve the haggling that accompanied this negotiation. There will be no new revenues. There will be no grand bargain. And every incumbent, from the president to members of the House and Senate, will have an uphill battle explaining what was accomplished.
As Krauthammer argues, Round 3, the rubber match between the parties, will be in November, 2012. The big issue then will almost certainly be the state of the economy — not the deficit number. The unemployment rate, and underemployment rate, and the rate of GDP growth will matter more, I think, than the deficit number. If all that spending did not produce jobs or economic growth, but only much bigger debts, then the political party which has argued for bigger government will likely lose.
The president continues to tell the American people to email, call, and tweet GOP members of Congress on behalf of a “balanced approach” (to include “revenues” ), though even his fellow Democrat, Harry Reid, abandoned such an approach a week ago, instead offering a spending cuts only approach to deficit reduction. Reid, of course, is trying to protect his members from having to cast a vote to raise taxes, given that near half of the 23 Democratic -held Senate seats up in 2012 are potentially at risk.
A few dozen Blue Dog Democrats in the House walked the plank voting for ObamaCare in March 2010 and, after the 2010 midterms, were out of a job. For the uninitiated, “revenues” are the new code word for “higher taxes,” much as “progressive” has replaced “liberal” in the political lexicon. From now on, April 15th is “Revenue Day,” and Democrats only seek more revenue, not higher tax rates.
We have on our hands a colossal mess, in which no one seems to have improved their standing with the public, and it is unclear how this will get worked out in the next few days. The investment markets, after assuming this was politics and posturing, as usual, and that everything would work out in time, are now considering for the first time the real possibility of a deal not getting done by the Treasury Department’s announced deadline of Tuesday, August 2. That date may be a soft deadline, it turns out. The stock market had its worst week in a year in the week ending Friday, and if no resolution appears imminent on Monday, it could be the start of another heavy down week. Harry Reid is hoping Senate Minority Leader Mitch McConnell can save him and the president from appearing to be the obstructionists to getting a deal done, now that the House for the second time in a week has acted and passed a bill that he and the Democrats tabled.
The bond rating agencies, which have warned that raising the debt ceiling may not be enough for the nation to maintain its AAA credit rating, without a significant deficit reduction effort in the coming years, may now conclude that Washington is too dysfunctional to take any crisis seriously. That dysfunction, as Charles Krauthammer suggested on Friday, is inevitable with divided government between two political parties with significantly different visions for the country’s future. President Obama, who has run up annual deficits of $1.5 trillion a year, will have more than doubled the nation’s total external debt by the end of his first term. That number is now $9.7 trillion (out of total national debt of $14.3 trillion, the remainder representing debts the government owes itself) and Obama has added nearly $4 trillion to that total in 2.5 years.
Add another $2.4 trillion for the remainder of his term, and near 55% of total external debt for the country’s 200 plus years will have been accumulated in just four years. But listen to liberal members of Congress or the president, or read liberal writers like Jon Cohn of the New Republic and Paul Krugman of the New York Times, and the real problem is that the debt is not growing rapidly enough — that the stimulus should have been larger and needs a second giant tranche now. And these writers have dreams of future entitlement growth, and “vital” new spending programs (clean energy, education, high speed rail). Just as any cuts to existing programs are draconian, all new spending is vital to “winning the future” and job growth. The possibility that the Keynesian approach of massive deficit spending as the way to work a nation out of a recession has been consistently proven wrong, or has achieved its goal only during World War 2 (when economic growth was an afterthought to spending to win the war), is simply not considered. The nation is now experiencing an extraordinarily weak recovery, perhaps a double dip recession, and government stimulus (the gap between spending and “revenues”) is 45% of total spending, and over 10% of GDP. But this is not enough stimulus for the left. That next injection is the one that will create jobs and growth.
For the GOP, their commitment is to cut not just the rate of growth in government, but to roll back some of the great “achievements of the left,” such as ObamaCare. Some in the GOP and some pundits on the right seem to think that control of the House is enough to dictate the results of divided government, and hence, the House Republicans are wimping out by not pushing for more cuts, sooner. This view is about as realistic as Krugman’s call for more spending to create the jobs the previous spending did not. Exactly how does the GOP force its way to victory when Democrats control the Senate and Obama is the president?
As Krauthammer argues, Obama won in 2008 and set out to remake America. He got pretty far with his work, with ObamaCare the paramount achievement. Of course, ObamaCare is considered a deficit reduction bill for the next ten years by the CBO, so no one need worry about the $200 billion a year in new spending for what will turn out to be largely a middle class entitlement, since it is “paid for.” If enough companies drop health insurance coverage, pushing lots of people into the exchanges — people the CBO assumed would remain insured by their companies — the cost of the bill will skyrocket.
The Class Act, the new long-term care entitlement program in ObamaCare, was scored as a $72 billion deficit reduction program in the first ten years, since premiums were collected for years before any payouts. This Ponzi scheme was so obvious a long term loser for the government that even some Democrats have come around and support killing it. The $14 plus trillion in current debt (internal and external), plus the near ten trillion to come over the next ten years — including the “savings” (deficit reduction) from ObamaCare — are just the start. If interest rates rise, and if economic growth remains well below forecast (near 4%), the total debt numbers will rise more rapidly.
It is in this environment that Harry Reid proposes $2.2 trillion in deficit reduction over ten years with more than half of it artificial, coming not from spending as much as in prior years for wars that are already being wound down. And yet even this extremely modest back loaded effort at debt reduction is drawing fire from the left.
So how will this get resolved by Tuesday, if it does? The president is adamant that there can not be another vote on the debt ceiling before the 2012 election. The fact that votes to raise the debt ceiling have occurred on average every 8 months over the last 50 years is simply inconvenient history for Obama. The Democrats now say they do not want another debt ceiling vote that would spoil Christmas for shoppers in late 2011, perhaps the lamest attempt at argument in a month of weak parries. In reality, the president’s approval numbers have tanked to new lows (-12 in both Gallup and Rasmussen today), with 42% average approval for these two tracking polls.
Obama and his team do not want to give him another chance to fail on the job, and have the debt issue front and center before the election. His mishandling of the debt ceiling/ debt talks has revealed a president who seems severely lacking in leadership and negotiating skills. He has appeared alternately unengaged, or angry, and has not gained the trust of members of either party. Having coasted for so long, he seems unable to deal with a situation where everything is not going his way. The deal that Reid and McConnell offered to Obama last Sunday, which he rejected, may still be the only thing than can pass both houses, though largely with Democratic votes in the House.
In essence, we seem headed for a package that will be advertised as over $2 trillion in deficit reduction over ten years, but will, in fact, be far less. The spending cuts will be backloaded and gimmicky, particularly if it is Reid’s bill that becomes the model. There may be two tranches of debt ceiling increase, but the second piece will be fairly certain to occur, and not involve the haggling that accompanied this negotiation. There will be no new revenues. There will be no grand bargain. And every incumbent, from the president to members of the House and Senate, will have an uphill battle explaining what was accomplished.
As Krauthammer argues, Round 3, the rubber match between the parties, will be in November, 2012. The big issue then will almost certainly be the state of the economy — not the deficit number. The unemployment rate, and underemployment rate, and the rate of GDP growth will matter more, I think, than the deficit number. If all that spending did not produce jobs or economic growth, but only much bigger debts, then the political party which has argued for bigger government will likely lose.
ILLEGAL ALIEN SCAMS ELDERLY COUPLE OF LIFE SAVINGS
A news release titled: "Former home healthcare aide guilty of defrauding an elderly couple" appeared on the ICE Website a few days ago. The excellent work by the Special Agents of ICE was carried out by ICE's New York Office, the office where I spent my entire career. Certainly the agents who conducted this investigation did an excellent job and should be commended for their achievement.
A few serious questions, however, remain.
First of all, my concern is how many other criminals and illegal aliens (and potentially terrorists) have been able to obtain United States passports in false names in order to get jobs and travel freely around our country and, indeed, around the world?
In fact, although not noted in the press release- you have to wonder if she actually made any international trips using that fraudulently obtained passport! This could have enabled her to board airliners and enter countries even if her true name was on every watch list in the world!
You also have to wonder at the hell she likely created for the woman's whose identity she stole in order to receive an actual United States passport. It is also extremely disturbing that she was actually issued a valid United States passport by the State Department- think of how easily she might have traveled to countries all over the world in a false identity and with a United States passport that she was certainly not entitled to possess! If she was able to do this- you have to believe that many others have succeeded in doing the same sort of thing and may well still be "out there!"
Meanwhile, think about how, in the name of national security, the searches that passengers seeking to board airliners must undergo, are becoming ever more intrusive it would also be worthwhile to know how Isabel Wilson, aka Isabel Freeman entered the United States in the first place. It would also be worthwhile knowing how her husband, presumably an alien, entered the United States and what efforts, if any, have been made to locate him.
This case illustrates a number of points that need to be considered and very much need to be addressed by the ICE. The issue to which I refer is immigration fraud.
Immigration fraud involves two basic varieties- the creation of counterfeit or altered fraudulent identity documents, the gaming of the various bureaucracies on the city, state or federal level to acquire actual official identity documents and the gaming of the immigration benefits program to acquire lawful immigration status and even United States citizenship by defrauding the immigration system that is administered by USCIS (United States Citizenship and Immigration Services).
In fact, the very first time I was invited to provide testimony before a Congressional hearing was when then House Immigration Committee, Lamar Smith and then Chairman of the House Judiciary Committee, Henry Hyde, invited me to testify before a hearing convened by the Immigration Subcommittee conducted on May 20, 1997 on the topic:
"VISA FRAUD AND IMMIGRATION BENEFITS APPLICATION FRAUD"
You can review the transcript of that hearing, in its entirety here.
This hearing was, in large measure called because the terrorists who participated in two terrorist attacks in 1993- first at the CIA in January of that year and then at the World Trade Center the following month, were all foreign nationals (aliens) who had gamed the visa and/or the immigration benefits programs in order to enter the United States and embed themselves in our country in order to be able to carry out those attacks.
Clearly Immigration fraud involves a serious potential threat to national security and to the safety of our citizens.
The use of identity documents to conceal the true identity of individuals is also extremely problematic. Most criminals, both United States citizens and aliens, almost invariably use multiple false identities to conceal their true identities, and cover their tracks. This is why law enforcement agencies routinely fingerprint suspects of crimes in order to attempt to determine the true identities of these individuals. I have seen arrest records ("rap sheets") of criminals who had so many false names that their records required more than one page to list all of the aliases that they criminals employed. Indeed, change of identities provide the same sort of camouflage for a criminal that the change of coloration is employed by chameleons and other such creatures who use those changes as a means of hiding in plain sight. The 19 terrorists who attacked our nation on September 11, 2001 employed more than 300 false names and variations of false names for this very purpose as they embedded themselves in our country in preparation for their deadly attacks.
Illegal aliens often make false claims to being United States citizens and although such false claims constitute a felony, it is unusual for these false claims to be criminally prosecuted unless their are extenuating circumstances. In this case, it is clear that Ms Wilson was extremely adept at acquiring false identities and using those identities in order to victimize an extremely vulnerable, elderly couple.
One of the other nagging thoughts that come to mind is the potential that she may have carried out similar crimes in the past, victimizing still other people.
If a chain is as strong as its weakest link, where so many of the various components of our federal government's bureaucracy are concerned, it would appear that all that we have are weak links and all but nonexistent links!
It is unbelievable that there are still so many people who steadfastly oppose the enforcement of our nation's immigration laws. In point of fact, those laws are intended to protect our nation and our citizens from foreign nationals (aliens) whose presence in our country pose a threat to our security and well being. I have often referred to such opponents of immigration law enforcement as being "Open borders advocates." In reality, I believe a more appropriate description for these folks is "Immigration Anarchists!"
The often cited claim that the enforcement of immigration laws is about being xenophobic or racist. In point of fact, the immigration laws are utterly blind as to the race, religion or ethnicity of people. The only distinction that these laws make is whether or not a person is a citizen or not!
There are precious few Special Agents of ICE and State Department who are actively engaged in conducting these critically important investigations into fraud that is committed to defeat our nation's borders and the borders of other countries around the world. This case should serve as an example of how easily the system can be gamed and how this imperils the well being of our nation and our citizens.
A country without secure borders can no more stand than can a house without walls!
If our country is to survive and if our children and their children are to get their share of the "American Dream" the citizens of this nation must take their citizenship seriously!
We the People must be the best citizens we can be, citizens who are worthy of the gallantry demonstrated by our valiant men and women in the military, law enforcement and firefighters, who routinely go in harm's way in defense of this nation and our citizens.
ECONOMY: THEY CAN FIX IT IF THEY WANT
Watching Congress create a fear-based crisis over the debt ceiling limit this past week has been anything but entertaining. It’s like watching someone with one foot nailed to the floor run in circles, thinking because he/she is moving, it represents progress.
It’s interesting that whenever “they” want to achieve something major… whether it’s the Patriot Act or war in the Middle East or an enemy called “terrorists” that will unify the nation… they use fear as the primary motivator. Fear is one of the strongest. The only thing stronger is faith.
The entire process reminds me of an end-around run. The President, as quarterback, hands the ball off to John Boehner (wide receiver) who passes – but the ball is intercepted by Harry Reid (pass defender) – who changes the direction of the play. When anyone gets close to a touchdown, the President moves the goal posts and the game remains scoreless… but the cheering squads on the sidelines keep chanting the message of one team or the other. Barry and Harry’s team shout “Look out you senior wrecks, come August there will be no checks!” The Boehner team’s cheerleaders tell the people “Listen not to Barack’s demagoguery, your check will come because of our choreography!”
And that’s how political football is played… with your money and mine, of course. It is shameful that the security of the elderly was a playing card in this disgusting deck.
There is a core problem causing our economic woes and everyone ignores it either out of insufficient insight into what is required to get us out of this mess, or because someone thinks it’s a good idea for the American economy to fail. It reminds me a bit of taking your car to a poor mechanic to make it run properly. He can fix the tires, the windshield wipers, change the oil, check the water and cooling fluids, and a myriad of other things – but he doesn’t know a damned thing about the engine. How much help will that mechanic be when your car has serious problems?
Washington is filled with economists and lawyers… they understand our problems from a theoretical perspective. If you move “Piece A,” it will impact “Pieces B and C” this way. They look at the economy like a chess board and understand investment banking in its relationship to the game. They know little or nothing about commercial banking – which is the engine of a capitalist economy. We can thus say the mechanics of our economy tinker, they don’t repair. They are the poor mechanics who got us into the mess – and it requires greater minds than those that caused the problems to solve them.
There are things that can be done to turn the economy around and none of them are even under consideration. For example:
The hardest hit middle class Americans have taken during the past four years is in primary residential real estate. Whether you realize it or not, the lost value of real estate impacts everything else. It is the way our economy is structured – and is largely responsible for credit drying up (which is largely responsible for no business growth – which is largely responsible for no job creation).
The economy is not going to turn around until a firm floor is put under the residential real estate market. It can be done – but elected officials and bureaucrats must understand how commercial banks work. And, they do not.
Most secured loans utilize as collateral a second trust deed on the borrower’s residence. I’m not just talking about mortgage loans; I’m talking about home improvement loans or vacation loans or college (non-federal student) loans, etc. In the early 1990s and while Alan Greenspan was Federal Reserve Chairman, the Fed kept lowering the cost of funds. It encouraged people to re-finance their mortgages. The first time you ever heard of a personal line of credit called a residential credit line was in the early 1990s. People were encouraged to take out a residential credit line, which placed a second trust deed on their primary residence as collateral. In fact, the only way to get this personal line of credit was by putting a lien on the property – usually a second mortgage behind the first lien holder.
Until recently – just before the Lehman Brothers bankruptcy, coincidentally – when you bought a home, you had to put 20 percent down. Lehman was keeping its head above water by using liar loans from mortgage companies it owned – lenders that specialized in making them. It did that so it could create mortgage-backed derivatives. It – along with Goldman Sachs, J.P. Morgan Chase, Morgan Stanley and others – almost bankrupted the world. In fact, the jury is still out on whether they succeeded.
Get ready, because here comes some banker lingo… it can’t be said any other way. When we used to buy a home and made a 20 percent down payment, it resulted in an 80 percent collateral margin on the loan. In other words, the collateral value of the home plus the down payment gave the bank a 100 percent collateral position. Here are some numbers that may help:
Home purchase price: $200,000
Down payment, 20%: 40,000
Balance/Mortgage: 160,000 -- 80% of home value, 1996
Down payment, 20%: 40,000
Balance/Mortgage: 160,000 -- 80% of home value, 1996
Bank regulations used to require an 80 percent margin be maintained on home loans – whether it is evaluated against a first or second trust deed. Today, that regulation is used selectively.
In 2007, the housing market began its steady decline. By 2010, the above home was re-appraised at $150,000. OMG! You are out of margin! When the FDIC or Comptroller of the Currency auditors come to your bank, your loan will be graded, even though you haven’t missed or been late with a single payment! Regardless of your faithfulness in making payments, the collateral is out of margin. It is an unsafe loan. This is a legitimate claim, by the way.
Chances are, your bank has a large number of such loans because using a borrower’s home has always been the preferred form of loan collateral in the commercial banking industry. Residential real estate has increased in value annually for generations so the risk was minimized… until 2007. Suddenly your bank finds itself on the regulatory watch list because it has too many loans that are out of margin. An otherwise healthy bank is threatened with closure. Some more numbers:
Loan balance:
$150,000 (after ten years of mortgage payments)
2010 Home value:
150,000 (after the real estate market drop)
$150,000 (after ten years of mortgage payments)
2010 Home value:
150,000 (after the real estate market drop)
There is no margin. To be in margin, an additional $30,000 must be added to the bank’s collateral position.
For the bank to have enough personal collateral from you, $30,000 of good assets must be added to bank’s collateral basket. Most people don’t have that amount sitting around to give the bank as collateral. The bank will soon tell the borrower to bring $30,000 more in assets to put the loan back in margin or the bank will be forced to call the loan and foreclose on your property. The auditors are screaming at the bank because of the margin lapse. They have to do something.
“But I’m not behind in a single payment!” you say, certain the bank won’t foreclose on your home loan just because of some bank regulation. If you’ve been thinking that all of the home foreclosures in process are caused by people who bought a house that was too expensive for them, think again. If you think they’re all people who aren’t making their house payments, think again. If you think the banks aren’t lending money because they don’t have money to lend, thing again. What they don’t have is access to a reliable form of collateral… like your house. Since the residential real estate market is still in a downward spin (and no one in Washington is doing anything intelligent to stop it), what asset does the middle class have available to provide the bank for collateral? Answer: None. No collateral, no loan access.
That explains why your local bank may be in trouble even though most of its loans are not (and thus it is a great takeover target for banksters). This also explains why banks aren’t lending: Without a healthy real estate market, they don’t have a solid collateral base. Too, their personnel’s time is spent dealing with loan margin problems or foreclosures. Only so much can be done in a single day by the same number of people.
Real estate is impacting jobs? Remember, 70 percent of all jobs in America come from independent business… middle class people who own homes and often use them as collateral for business loans are independent business owners.
And now you know why there are no new jobs: There are no homes with reliable dollar value available as loan collateral. Independent business owners can’t hire people. The economy, of course, has some impact on independent business growth because fewer people have money to spend on goods and services. And, there are banks that loaned too much money to contractors who were building new homes and got caught in the housing crunch… and bankers are notoriously bad at handling work-out loans in a way that benefits everyone.
I’m not an economist; just a commercial banker with God-given common sense. My common sense tells me the best way to put a floor under the falling real estate market has nothing to do with the $600 billion the Federal Reserve System plans to inject into the economy this fall. It will do about as much good as the TARP and TALF funds did (read: little to none – it’s the engine that needs help, not the windshield wipers or oil filter – and a limited number of people will have remarkable investment opportunities). If TARP funds had been used to stabilize the housing market rather than bailing out investment bankers who perpetrated fraud on the public, we would be in serious economic recovery by now. Our economy wouldn’t continue to waver between recession and depression.
Ben, rather than throw that $600 billion into greedy hands that do nothing to solve the nation's economic problems, create a real estate stabilization fund. When a bank's mortgage loan (either first or second trust deed) gets out of margin, guarantee that portion of the loan that is out of margin… in the example given above, $30,000. This gets the Comptroller of the Currency (or FDIC) auditors off of the banks' back (which you could do anyway, if you so chose), and it gets the bank off of the backs of consumers who have sacrificed in many ways to repay their mortgage loans and who have a good repayment track record.
This would not apply to new loans… it's not a something for nothing vote-getting kid of deal – which will automatically kill it before it gets started. It's a program designed to put a floor under the housing market to prevent it from falling any further and to stabilize it. It's not a loan. It's a guarantee. Thus, the $600 billion you plan to throw into the greedy hands of the already rich will result in few loan losses. If you really want to save the economy, stabilize the real estate market.
To top that information off, here’s a press release from the Bureau of Economic Analysis, held for release until Friday morning, July 29, 2011:
“Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.3 percent in the second quarter of 2011, (that is, from the first quarter to the second quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.4 percent.”
In other words, the President of the United States has lied to us about recovery. He has been telling us that though the economy is slow to recover, it is recovering. How can an economy “recover” when 99.6 percent of the economy did not grow? It cannot!
Now, if a little old lady who lives at the base of a big mountain in the countryside can figure that out, why can’t all of those economists in Washington, D.C.?
Below are pictures – each red dot in each picture represents broken hearts, shattered dreams, broken homes, and Americans who have had their false sense of security ripped from their formerly unrealistic view of life. They used to think things like “This is America; we’ll recover.” Or, “Everything is in God’s hands; I just have to trust Him.” They have learned the lesson that taking no action to stop fraud when it occurs is accepting fraud as the standard. They now know that everything is in God’s hands, but we are expected to protect and defend what His hands have so graciously given us.
Tell them all – the President, the Vice President, the Chairman of the Federal Reserve System, the Secretary of the Treasury, your U.S. Senators and Representatives – tell them all to stop lying to the American people!
Obama Kills Another 500,000 Non-Union Jobs
Obama just destroyed another 500,000 jobs for Americans- at least ones who aren’t unionized. .
Flanked by flunkies from the government-dependent auto makers, the world’s largest shareholder in the American auto industry, Brarack Obama, imposed increased fuel standards on companies making cars in the United States. By 2025 auto makers will have to meet fuel efficiency standards that brings “new cars to 54.5 miles a gallon by 2025, roughly double the current level, in a bid to reduce U.S. oil consumption,” says the Wall Street Journal.
According to the Journal effort by the administration to raise the current fuel standard just to “the 35.5 mpg target by 2016 will cost the industry more than $50 billion.” The administration didn’t provide the Journal with costs for the 2025 standard but expect it to cost a ton, jobs-wise and financially.
$50 billion is about 100,000 American jobs- that’s non-union jobs.
That, in short is where all the jobs have gone under the Obama administration.
Makes one wonder if the only reason why the president doesn’t ban cars altogether is because of the union jobs.
Non-union jobs just aren’t that big of a deal.
As the foreign auto makers point out the rules are written to favor the Detroit, union-controlled, domestic auto makers.
“Not all auto makers support Mr. Obama's plan,” says the Journal.
“German auto makers Daimler AG and Volkswagen AG both declined to send representatives to Mr. Obama's announcement. Representatives for both companies, whose sales in the U.S. are dominated by passenger cars, said the deal would put their companies at a disadvantage, by setting relatively modest requirements for large pickups like the kind that Detroit auto makers like GM, Ford and Chrysler have long produced.”
Coincidentally, the United Auto Workers have targeted German automaker Volkswagen AG’s Tennessee plant as “a focal point in union efforts to gain a foothold among foreign auto makers' U.S. manufacturing operations,’ reports the Journal in a separate story.
On Thursday I wrote about how the SEIU is facing racketing charges related to possibly using federal regulatory pressure against private companies in order to facilitate union organizing in non-union shops.
While thus far there have been no allegations regarding the UAW, there certainly is the consequent regulatory pressure.
As The Journal notes: “The union has run into particularly stiff opposition at foreign-owned plants in Tennessee and other Southern states, where cultural sentiment against unions runs deep and right-to-work laws allow workers to opt out of unions where they exist. Nissan workers in Tennessee rejected UAW representation by 2-1 ratios in 2001 and 1989.”
Ah, but it’s nothing a little regulatory pressure can’t get around.
Flanked by flunkies from the government-dependent auto makers, the world’s largest shareholder in the American auto industry, Brarack Obama, imposed increased fuel standards on companies making cars in the United States. By 2025 auto makers will have to meet fuel efficiency standards that brings “new cars to 54.5 miles a gallon by 2025, roughly double the current level, in a bid to reduce U.S. oil consumption,” says the Wall Street Journal.
According to the Journal effort by the administration to raise the current fuel standard just to “the 35.5 mpg target by 2016 will cost the industry more than $50 billion.” The administration didn’t provide the Journal with costs for the 2025 standard but expect it to cost a ton, jobs-wise and financially.
$50 billion is about 100,000 American jobs- that’s non-union jobs.
That, in short is where all the jobs have gone under the Obama administration.
Makes one wonder if the only reason why the president doesn’t ban cars altogether is because of the union jobs.
Non-union jobs just aren’t that big of a deal.
As the foreign auto makers point out the rules are written to favor the Detroit, union-controlled, domestic auto makers.
“Not all auto makers support Mr. Obama's plan,” says the Journal.
“German auto makers Daimler AG and Volkswagen AG both declined to send representatives to Mr. Obama's announcement. Representatives for both companies, whose sales in the U.S. are dominated by passenger cars, said the deal would put their companies at a disadvantage, by setting relatively modest requirements for large pickups like the kind that Detroit auto makers like GM, Ford and Chrysler have long produced.”
Coincidentally, the United Auto Workers have targeted German automaker Volkswagen AG’s Tennessee plant as “a focal point in union efforts to gain a foothold among foreign auto makers' U.S. manufacturing operations,’ reports the Journal in a separate story.
On Thursday I wrote about how the SEIU is facing racketing charges related to possibly using federal regulatory pressure against private companies in order to facilitate union organizing in non-union shops.
While thus far there have been no allegations regarding the UAW, there certainly is the consequent regulatory pressure.
As The Journal notes: “The union has run into particularly stiff opposition at foreign-owned plants in Tennessee and other Southern states, where cultural sentiment against unions runs deep and right-to-work laws allow workers to opt out of unions where they exist. Nissan workers in Tennessee rejected UAW representation by 2-1 ratios in 2001 and 1989.”
Ah, but it’s nothing a little regulatory pressure can’t get around.
Saturday, July 30, 2011
Now Gov’t Trying to Ban Sale of Your Supplements
Sen. Orrin Hatch blasted a new bill that health experts are calling a government takeover of the vitamin industry.
New legislation proposed by Sen. Dick Durbin, D-Ill., earlier this month would crack down on the testing, labeling, and sale of dietary supplements nationwide.
“I don’t know why we should add more regulation when what we have on the books is working,” Hatch, a Utah Republican, told Newsmax.
The increased regulation almost certainly will deny many Americans easy, affordable access to the natural health products they rely on daily, experts warn.
“This unnecessary power grab would benefit FDA regulators and pharmaceutical companies by taking their competitors off the market, and it would harm the American public,” says Michelle Minton, director of the Insurance Studies Project at the Competitive Enterprise Institute, a Washington D.C. watchdog group.
Sens. Durbin and Richard Blumenthal, D-Conn., quietly submitted the Dietary Supplement Labeling Act of 2011 over the July 4th weekend.
Despite its innocuous title, the bill would force a massive reclassification of food additives and dietary supplements to be managed by the Food and Drug Administration.
Durbin’s bill was made public on the same day the FDA issued proposed new guidelines that would alter the way the agency approves and polices vitamins and dietary supplements.
“Regulatory hurdles such as these are a means by which government bureaucrats get in the way of individuals’ ability to make their own decisions about their healthcare,” warns Minton.
The combination of the two anti-supplement initiatives would force natural health manufacturers to submit to expensive government testing, adopt new labeling, and compete for market share with well-funded pharmaceutical makers who already have long-standing and mutually lucrative relationships with the FDA, health industry insiders say.
Popular supplements now being sold without government interference would be removed from shelves, in some cases for years, pending FDA tests and approval. The cost of all dietary supplements would likely spike as a result of the additional regulatory burden.
Under existing law, the FDA already has enough authority to ensure supplement safety, said Sen. Hatch. “In fact, several former FDA commissioners have said that the agency already has the appropriate and sufficient level of oversight of this industry," he said. "I don't know why we should add more regulation when what we have on the books is working."
Sen. Durbin claims his bill is aimed specifically at the gray area of food and drink products that pose risks or make questionable claims based on dietary supplement ingredients. The issue gained traction in the wake of a number of hospitalizations of children who ate pastries laced with the sleep-aid supplement melatonin. The foods are marketed under the names Lazy Cakes, Kush Cakes, and Lulla Pies.
“Walk down the aisle of your local convenience store and you will see products targeting young people with names like Lazy Cakes, Drank , and Monster Energy Drink,” Durbin said. “These products market themselves as dietary supplements that are safe ways to relax or get a boost of energy, when in reality they are foods and beverages taking advantage of the more relaxed safety standards for dietary supplements.”
The Durbin bill is now before the Senate committee on Health, Education, Labor and Pensions. The HELP committee is chaired by Sen.
Tom Harkin, D-Iowa, a well-known advocate for natural health supplements. Insiders hope Harkin’s influence along with other HELP members known to support the supplements industry, including another outspoken advocate Orrin Hatch, R-Utah, will result in the death of the proposal.
Unwilling to take chances, however, advocates of natural healthcare are already lining up to oppose the Durbin measure.
"The supplement industry has an excellent safety record, and burdensome, duplicative new regulations are not needed,” says John Gay, Executive Director and CEO of the Natural Products Association, a trade industry group.
Adds Minton: “The decision about which supplements are right for whom ought to be left to consumers and their healthcare providers.
“The Durbin and FDA proposals do nothing to improve the safety of the supplement marketplace and likely will eliminate many of the available products.
“The increased cost and decreased variety will mean that many consumers, especially low-income ones, will be forced to stop taking the vitamins and nutrients that can benefit their long-term well-being.”
New legislation proposed by Sen. Dick Durbin, D-Ill., earlier this month would crack down on the testing, labeling, and sale of dietary supplements nationwide.
 |
The increased regulation almost certainly will deny many Americans easy, affordable access to the natural health products they rely on daily, experts warn.
“This unnecessary power grab would benefit FDA regulators and pharmaceutical companies by taking their competitors off the market, and it would harm the American public,” says Michelle Minton, director of the Insurance Studies Project at the Competitive Enterprise Institute, a Washington D.C. watchdog group.
Sens. Durbin and Richard Blumenthal, D-Conn., quietly submitted the Dietary Supplement Labeling Act of 2011 over the July 4th weekend.
Despite its innocuous title, the bill would force a massive reclassification of food additives and dietary supplements to be managed by the Food and Drug Administration.
Durbin’s bill was made public on the same day the FDA issued proposed new guidelines that would alter the way the agency approves and polices vitamins and dietary supplements.
“Regulatory hurdles such as these are a means by which government bureaucrats get in the way of individuals’ ability to make their own decisions about their healthcare,” warns Minton.
The combination of the two anti-supplement initiatives would force natural health manufacturers to submit to expensive government testing, adopt new labeling, and compete for market share with well-funded pharmaceutical makers who already have long-standing and mutually lucrative relationships with the FDA, health industry insiders say.
Popular supplements now being sold without government interference would be removed from shelves, in some cases for years, pending FDA tests and approval. The cost of all dietary supplements would likely spike as a result of the additional regulatory burden.
Under existing law, the FDA already has enough authority to ensure supplement safety, said Sen. Hatch. “In fact, several former FDA commissioners have said that the agency already has the appropriate and sufficient level of oversight of this industry," he said. "I don't know why we should add more regulation when what we have on the books is working."
Sen. Durbin claims his bill is aimed specifically at the gray area of food and drink products that pose risks or make questionable claims based on dietary supplement ingredients. The issue gained traction in the wake of a number of hospitalizations of children who ate pastries laced with the sleep-aid supplement melatonin. The foods are marketed under the names Lazy Cakes, Kush Cakes, and Lulla Pies.
“Walk down the aisle of your local convenience store and you will see products targeting young people with names like Lazy Cakes, Drank , and Monster Energy Drink,” Durbin said. “These products market themselves as dietary supplements that are safe ways to relax or get a boost of energy, when in reality they are foods and beverages taking advantage of the more relaxed safety standards for dietary supplements.”
The Durbin bill is now before the Senate committee on Health, Education, Labor and Pensions. The HELP committee is chaired by Sen.
Tom Harkin, D-Iowa, a well-known advocate for natural health supplements. Insiders hope Harkin’s influence along with other HELP members known to support the supplements industry, including another outspoken advocate Orrin Hatch, R-Utah, will result in the death of the proposal.
Unwilling to take chances, however, advocates of natural healthcare are already lining up to oppose the Durbin measure.
"The supplement industry has an excellent safety record, and burdensome, duplicative new regulations are not needed,” says John Gay, Executive Director and CEO of the Natural Products Association, a trade industry group.
Adds Minton: “The decision about which supplements are right for whom ought to be left to consumers and their healthcare providers.
“The Durbin and FDA proposals do nothing to improve the safety of the supplement marketplace and likely will eliminate many of the available products.
“The increased cost and decreased variety will mean that many consumers, especially low-income ones, will be forced to stop taking the vitamins and nutrients that can benefit their long-term well-being.”
Default on US Debt Is Obama’s Choice
The United States will default on its debt only if President Barack Obama makes a conscious decision to do so. Despite the over-the-top Nazi death camp analogies that the president’s staff has used in relation to the debt ceiling increase, America can pay its necessary bills for a long time.
It is indeed true that the government will run about a $160 billion deficit in the month of August, and it does not have the cash at the moment to cover it, but this does not mean the president is without options.
The government is receiving an average of about $6.5 billion a day in revenue and is spending $11.8 billion a day. Interest on the debt, Social Security and Medicare/Medicaid payments just about absorb all the monthly tax revenue, leaving no money for other things, including the military.
However, the federal government has trillions of dollars of assets that it can legally sell in order to pay its bills if it cannot issue more debt.
Imagine that your family has been living well but far beyond its income, to the point where creditors say “no more.” You have a choice: radically reduce your spending and/or sell assets, such as your vacation home, expensive vehicles, art work, etc.
Assume that August 3 arrives and Congress has not increased the debt limit. If you were president, what would you do?
You are legally bound to pay the Social Security (SSI) checks because there are more than two trillion special purpose government bonds in the SSI trust fund that you can sell to get the cash to pay Social Security recipients (but which would require you to reduce other expenditures).
You could stop paying federal salaries, including those of members of Congress, and expenses for government departments. Or you could start selling assets.
The federal government has about $400 billion in gold, which the president has the legal authority to sell. The president also could sell many of the hundreds of billions of dollars of mortgages, housing bonds, and other special-purpose bonds the government owns.
He also could sell government equity holdings in companies like General Motors. The government also owns hundreds of billions of dollars of unnecessary buildings and military bases, as well as stockpiles of metals and other unneeded goods. Combined, this stuff is estimated to be worth more than $2 trillion.
In addition, the federal government owns about one-third of all U.S. land. Even after excluding national parks, national monuments, and environmentally sensitive areas, the government still owns at least a quarter of the country. If this were sold in an orderly fashion over a period of years, it would likely bring in trillions of dollars in revenue.
Plus, the privately owned land would be better managed and the owners would have to pay property taxes. (If you doubt that the private sector would manage the land better, take a walk through the forest lands owned and managed by responsible companies like Weyerhaeuser, and then walk through the lands managed by the U.S. Forest Service. The difference will be obvious.)
The Obama administration, rather than holding up the sales of onshore and offshore oil and mineral leases, could reverse course and start aggressively selling them.
The extreme environmentalists will, of course, go nuts about proposals to sell any federal land, but if the alternative is shutting down popular government programs, it ought to be politically doable.
The basic fact is that the president has many options even if the debt ceiling is not increased. The hyperbole about default and the disabled people not getting their checks is nothing more than irresponsible scaremongering.
A combination of both reducing spending on cost-ineffective and unneeded programs, coupled with a general trimming of all government activities, including many inflated government salaries and asset sales, could lead to a smaller, more effective, and more efficient government. A win-win-win.
The debt-limit fiasco should be viewed as an opportunity to get things right rather than as a crisis.
It is indeed true that the government will run about a $160 billion deficit in the month of August, and it does not have the cash at the moment to cover it, but this does not mean the president is without options.
The government is receiving an average of about $6.5 billion a day in revenue and is spending $11.8 billion a day. Interest on the debt, Social Security and Medicare/Medicaid payments just about absorb all the monthly tax revenue, leaving no money for other things, including the military.
However, the federal government has trillions of dollars of assets that it can legally sell in order to pay its bills if it cannot issue more debt.
Imagine that your family has been living well but far beyond its income, to the point where creditors say “no more.” You have a choice: radically reduce your spending and/or sell assets, such as your vacation home, expensive vehicles, art work, etc.
Assume that August 3 arrives and Congress has not increased the debt limit. If you were president, what would you do?
You are legally bound to pay the Social Security (SSI) checks because there are more than two trillion special purpose government bonds in the SSI trust fund that you can sell to get the cash to pay Social Security recipients (but which would require you to reduce other expenditures).
You could stop paying federal salaries, including those of members of Congress, and expenses for government departments. Or you could start selling assets.
The federal government has about $400 billion in gold, which the president has the legal authority to sell. The president also could sell many of the hundreds of billions of dollars of mortgages, housing bonds, and other special-purpose bonds the government owns.
He also could sell government equity holdings in companies like General Motors. The government also owns hundreds of billions of dollars of unnecessary buildings and military bases, as well as stockpiles of metals and other unneeded goods. Combined, this stuff is estimated to be worth more than $2 trillion.
In addition, the federal government owns about one-third of all U.S. land. Even after excluding national parks, national monuments, and environmentally sensitive areas, the government still owns at least a quarter of the country. If this were sold in an orderly fashion over a period of years, it would likely bring in trillions of dollars in revenue.
Plus, the privately owned land would be better managed and the owners would have to pay property taxes. (If you doubt that the private sector would manage the land better, take a walk through the forest lands owned and managed by responsible companies like Weyerhaeuser, and then walk through the lands managed by the U.S. Forest Service. The difference will be obvious.)
The Obama administration, rather than holding up the sales of onshore and offshore oil and mineral leases, could reverse course and start aggressively selling them.
The extreme environmentalists will, of course, go nuts about proposals to sell any federal land, but if the alternative is shutting down popular government programs, it ought to be politically doable.
The basic fact is that the president has many options even if the debt ceiling is not increased. The hyperbole about default and the disabled people not getting their checks is nothing more than irresponsible scaremongering.
A combination of both reducing spending on cost-ineffective and unneeded programs, coupled with a general trimming of all government activities, including many inflated government salaries and asset sales, could lead to a smaller, more effective, and more efficient government. A win-win-win.
The debt-limit fiasco should be viewed as an opportunity to get things right rather than as a crisis.
Senate GOP Pledges to Reject New Reid Debt Plan
All 43 Republicans in the U.S. Senate have signed a letter, released on Saturday, saying they will not vote for a Democratic plan to raise the debt limit in a sign that the measure does not have the support it needs to advance in Congress.
Democrats need at least seven Republican votes to clear a procedural vote in the 100-seat chamber. That vote is scheduled for 1 a.m. EDT (0500 GMT) on Sunday.
Senate Republicans will block Majority Leader Harry Reid’s debt-limit plan this weekend, said a spokesman for Minority Leader Mitch McConnell as the partisan impasse over deficit reduction continued days before a threatened default.
“It will be defeated,” spokesman Don Stewart said today in Washington. He said Reid’s measure likely won’t be the vehicle for a final agreement. Any deal would probably start anew with action in the House and then the Senate would begin its work, he said.
After President Barack Obama appealed to party leaders yesterday to reach a compromise, the Senate rejected a plan the Republican-controlled House passed hours earlier with no Democratic support. It would have required congressional approval of a constitutional amendment to balance the budget and forced another debt-limit vote by lawmakers in about six months to continue the nation’s borrowing authority beyond early 2012.
Congressional leaders “need to start working together immediately to reach a compromise that avoids default and lays the basis for balanced deficit reduction,” White House Press Secretary Jay Carney said in a statement after the two votes.
Reid, a Nevada Democrat, who offered modifications to a Democratic plan that he said are designed to attract Republican support, accused Republican leaders of rebuffing his efforts to negotiate.
Reid said when he attempted to engage McConnell, a Kentucky Republican, in talks, “we had no one to negotiate with.”
Missing Republicans
“We’re missing Republicans,” said Senator Chuck Schumer, a New York Democrat, though with the default deadline coming up Aug. 2, “that could change.”
House Speaker John Boehner, an Ohio Republican, speaking before the House vote, said his party has “done everything we can to find a common-sense solution.”
Shortly after the Senate rejected Boehner’s plan, the House scheduled a preemptive vote for today on Reid’s proposal -- planning to defeat it even before the Senate takes it up. The House, back in session, plans to vote at about 2 or 2:30 p.m.
The Senate resumed debate today with an initial vote on Reid’s plan at about 1 a.m. tomorrow. A Senate vote then could be held at about 7 a.m. on Aug. 1, allowing the measure to return to the House before the Aug. 2 deadline.
Financial markets were restrained in reacting to the Washington impasse yesterday. Treasuries rallied, sending yields on 10-year notes to the lowest level since November. The yield on 10-year Treasury note yields declined 15 basis points to 2.79 percent in New York. Stocks fell as economic growth trailed forecasts. The Standard & Poor’s 500 Index slipped 0.7 percent and tumbled 3.9 percent this week for its worst slide in a year.
Confidence ‘Slightly Eroded’
Christine Lagarde, the new chief of the International Monetary Fund, said confidence in Treasuries is “slightly eroded” as politicians continue to squabble over the debt limit. “There was a positive bias toward the United States of America, toward Treasury bills,” Lagarde said in an interview on CNN’s “Fareed Zakaria GPS” to be broadcast tomorrow.
“The current crisis is probably chipping into that very positive bias,” she said, according to a CNN transcript.
The modifications Reid proposed in his plan yesterday bring it closer to one McConnell proposed earlier this month.
Borrowing authority would be provided in two separate $1.2 trillion installments, one immediately and one in several months as the nation again nears its borrowing limit.
All but the first $416 billion could be blocked through a joint resolution of Congress, though opponents would have to muster supermajorities in both chambers to override a veto.
Debt Savings
The new plan would yield debt savings of $2.2 trillion -- about the same as the total borrowing authority extended -- and call on a 12-member bipartisan congressional committee to draft legislation to lower the deficit to 3 percent or less of gross domestic product.
Senator Scott Brown, a Massachusetts Republican, said his staff has been working with Reid’s to put “more teeth” in the joint committee plan.
Senator Lisa Murkowski, an Alaska Republican, said “absolutist” lawmakers aligned with the Tea Party have put the U.S. “on the brink.”
“I am really worried about where we are standing, and I think part of that has come about because you have individuals that say, ‘It is my way or the highway,’” Murkowski said in an interview at Bloomberg’s Washington office. “That is not how you govern.”
Potential Talks
Obama may invite congressional leaders back to the White House for more talks, according to a Democratic official. No decision has been made about further discussions between Obama and Democratic and Republican congressional leaders, said the official, who wasn’t authorized to speak publicly about the administration’s strategy.
While Obama and Vice President Joe Biden have been in contact with lawmakers, as of late yesterday the president hadn’t spoken with Boehner for days, the official said.
A House Republican leadership aide said today that talks are essentially motionless until Reid gives specifics on what Obama would sign.
“If we don’t come to an agreement, we could lose our country’s AAA credit rating, not because we didn’t have the capacity to pay our bills -- we do -- but because we didn’t have a AAA political system to match our AAA credit rating,” Obama said earlier yesterday at the White House.
Obama said with Democrats and Republicans in “rough agreement” on plans to raise the nation’s debt limit within days of a threatened default, the time for compromise is “now.” The president and the Republicans used their weekly addresses on the Internet and radio to continue the debate.
‘Unacceptable’
The House-passed plan was “unacceptable” and would mean another debt-ceiling extension in less than a year, Obama said today. “There are plenty of ways out of this mess,” he said, noting the parties aren’t that far apart on spending or how to tackle entitlements and the tax code. “But there is very little time.”
Jon Kyl of Arizona, the second-ranking Republican in the Senate, said in the Republican address that Obama and the Democrats are “too committed to the European style of big government.”
Still, he said, the consequences of missing the Aug. 2 deadline could be “severe,” with markets dropping in value and hurting Americans’ retirement savings. “Republicans believe we must solve our debt crisis, and we believe we can solve it if Democrats will work with us,” he said. “If we don’t do something about our spending problem now, the scenes we’ve seen playing out all across Europe could happen in America.”
Aug. 2 Deadline
The Treasury Department has said the U.S. will breach its borrowing limit and run out of options for avoiding default if the $14.3 trillion debt ceiling isn’t raised by Aug. 2.
Senate Budget Committee Chairman Kent Conrad expressed confidence that lawmakers will head off a default.
“Work expands to fill the time. We certainly know that’s true here,” Conrad, a North Dakota Democrat, said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend. “Leaders on both sides are sufficiently responsible that they understand if there were a default, it would be a disaster for this country.”
Behind the scenes, Democratic officials said, talks on a potential deal centered on how to force future deficit-cutting by Congress, by setting up consequences -- such as automatic spending cuts or tax increases, or some combination of the two - - if the savings aren’t achieved.
“If we need to put in place some kind of enforcement mechanism to hold us all accountable for making these reforms, I’ll support that, too, if it’s done in a smart and balanced way,” Obama said.
Contingency Plans
The Treasury is preparing contingency plans to pay the government’s obligations should Congress fail to raise the borrowing limit in time. Carney said Treasury officials may reveal the plans this weekend.
Federal Reserve Bank of St. Louis President James Bullard said a resolution of the debt-ceiling impasse may remove a key unknown that has restrained economic growth in the U.S. “Once this last uncertainty is resolved, the path to faster growth may be open,” Bullard said, according to prepared remarks for a speech yesterday in Jackson Hole, Wyoming.
Obama’s Stance
Carney reiterated that Obama would accept a short-term debt ceiling extension of a few days only if needed to finish work on legislation lifting the limit for a longer period.
House Republican leaders revised their bill after failing to win enough support for a vote the previous night. It would allow a debt-limit increase now and require Congress to work out a second increase agreement within months. The second debt-limit increase would occur only if a balanced-budget constitutional amendment is passed by Congress and sent to the states.
Representative Mo Brooks, an Alabama Republican, said the decision to include the balanced-budget amendment turned 10 to 20 Republican votes in favor of the measure.
The House approved the measure 218-210, with no Democrats voting in favor. In the Senate, the measure was tabled 59-41, with all 51 Democrats joined by two independents and six Republicans in opposition to the plan.
Democrats need at least seven Republican votes to clear a procedural vote in the 100-seat chamber. That vote is scheduled for 1 a.m. EDT (0500 GMT) on Sunday.
Senate Republicans will block Majority Leader Harry Reid’s debt-limit plan this weekend, said a spokesman for Minority Leader Mitch McConnell as the partisan impasse over deficit reduction continued days before a threatened default.
“It will be defeated,” spokesman Don Stewart said today in Washington. He said Reid’s measure likely won’t be the vehicle for a final agreement. Any deal would probably start anew with action in the House and then the Senate would begin its work, he said.
After President Barack Obama appealed to party leaders yesterday to reach a compromise, the Senate rejected a plan the Republican-controlled House passed hours earlier with no Democratic support. It would have required congressional approval of a constitutional amendment to balance the budget and forced another debt-limit vote by lawmakers in about six months to continue the nation’s borrowing authority beyond early 2012.
Congressional leaders “need to start working together immediately to reach a compromise that avoids default and lays the basis for balanced deficit reduction,” White House Press Secretary Jay Carney said in a statement after the two votes.
Reid, a Nevada Democrat, who offered modifications to a Democratic plan that he said are designed to attract Republican support, accused Republican leaders of rebuffing his efforts to negotiate.
Reid said when he attempted to engage McConnell, a Kentucky Republican, in talks, “we had no one to negotiate with.”
Missing Republicans
“We’re missing Republicans,” said Senator Chuck Schumer, a New York Democrat, though with the default deadline coming up Aug. 2, “that could change.”
House Speaker John Boehner, an Ohio Republican, speaking before the House vote, said his party has “done everything we can to find a common-sense solution.”
Shortly after the Senate rejected Boehner’s plan, the House scheduled a preemptive vote for today on Reid’s proposal -- planning to defeat it even before the Senate takes it up. The House, back in session, plans to vote at about 2 or 2:30 p.m.
The Senate resumed debate today with an initial vote on Reid’s plan at about 1 a.m. tomorrow. A Senate vote then could be held at about 7 a.m. on Aug. 1, allowing the measure to return to the House before the Aug. 2 deadline.
Financial markets were restrained in reacting to the Washington impasse yesterday. Treasuries rallied, sending yields on 10-year notes to the lowest level since November. The yield on 10-year Treasury note yields declined 15 basis points to 2.79 percent in New York. Stocks fell as economic growth trailed forecasts. The Standard & Poor’s 500 Index slipped 0.7 percent and tumbled 3.9 percent this week for its worst slide in a year.
Confidence ‘Slightly Eroded’
Christine Lagarde, the new chief of the International Monetary Fund, said confidence in Treasuries is “slightly eroded” as politicians continue to squabble over the debt limit. “There was a positive bias toward the United States of America, toward Treasury bills,” Lagarde said in an interview on CNN’s “Fareed Zakaria GPS” to be broadcast tomorrow.
“The current crisis is probably chipping into that very positive bias,” she said, according to a CNN transcript.
The modifications Reid proposed in his plan yesterday bring it closer to one McConnell proposed earlier this month.
Borrowing authority would be provided in two separate $1.2 trillion installments, one immediately and one in several months as the nation again nears its borrowing limit.
All but the first $416 billion could be blocked through a joint resolution of Congress, though opponents would have to muster supermajorities in both chambers to override a veto.
Debt Savings
The new plan would yield debt savings of $2.2 trillion -- about the same as the total borrowing authority extended -- and call on a 12-member bipartisan congressional committee to draft legislation to lower the deficit to 3 percent or less of gross domestic product.
Senator Scott Brown, a Massachusetts Republican, said his staff has been working with Reid’s to put “more teeth” in the joint committee plan.
Senator Lisa Murkowski, an Alaska Republican, said “absolutist” lawmakers aligned with the Tea Party have put the U.S. “on the brink.”
“I am really worried about where we are standing, and I think part of that has come about because you have individuals that say, ‘It is my way or the highway,’” Murkowski said in an interview at Bloomberg’s Washington office. “That is not how you govern.”
Potential Talks
Obama may invite congressional leaders back to the White House for more talks, according to a Democratic official. No decision has been made about further discussions between Obama and Democratic and Republican congressional leaders, said the official, who wasn’t authorized to speak publicly about the administration’s strategy.
While Obama and Vice President Joe Biden have been in contact with lawmakers, as of late yesterday the president hadn’t spoken with Boehner for days, the official said.
A House Republican leadership aide said today that talks are essentially motionless until Reid gives specifics on what Obama would sign.
“If we don’t come to an agreement, we could lose our country’s AAA credit rating, not because we didn’t have the capacity to pay our bills -- we do -- but because we didn’t have a AAA political system to match our AAA credit rating,” Obama said earlier yesterday at the White House.
Obama said with Democrats and Republicans in “rough agreement” on plans to raise the nation’s debt limit within days of a threatened default, the time for compromise is “now.” The president and the Republicans used their weekly addresses on the Internet and radio to continue the debate.
‘Unacceptable’
The House-passed plan was “unacceptable” and would mean another debt-ceiling extension in less than a year, Obama said today. “There are plenty of ways out of this mess,” he said, noting the parties aren’t that far apart on spending or how to tackle entitlements and the tax code. “But there is very little time.”
Jon Kyl of Arizona, the second-ranking Republican in the Senate, said in the Republican address that Obama and the Democrats are “too committed to the European style of big government.”
Still, he said, the consequences of missing the Aug. 2 deadline could be “severe,” with markets dropping in value and hurting Americans’ retirement savings. “Republicans believe we must solve our debt crisis, and we believe we can solve it if Democrats will work with us,” he said. “If we don’t do something about our spending problem now, the scenes we’ve seen playing out all across Europe could happen in America.”
Aug. 2 Deadline
The Treasury Department has said the U.S. will breach its borrowing limit and run out of options for avoiding default if the $14.3 trillion debt ceiling isn’t raised by Aug. 2.
Senate Budget Committee Chairman Kent Conrad expressed confidence that lawmakers will head off a default.
“Work expands to fill the time. We certainly know that’s true here,” Conrad, a North Dakota Democrat, said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend. “Leaders on both sides are sufficiently responsible that they understand if there were a default, it would be a disaster for this country.”
Behind the scenes, Democratic officials said, talks on a potential deal centered on how to force future deficit-cutting by Congress, by setting up consequences -- such as automatic spending cuts or tax increases, or some combination of the two - - if the savings aren’t achieved.
“If we need to put in place some kind of enforcement mechanism to hold us all accountable for making these reforms, I’ll support that, too, if it’s done in a smart and balanced way,” Obama said.
Contingency Plans
The Treasury is preparing contingency plans to pay the government’s obligations should Congress fail to raise the borrowing limit in time. Carney said Treasury officials may reveal the plans this weekend.
Federal Reserve Bank of St. Louis President James Bullard said a resolution of the debt-ceiling impasse may remove a key unknown that has restrained economic growth in the U.S. “Once this last uncertainty is resolved, the path to faster growth may be open,” Bullard said, according to prepared remarks for a speech yesterday in Jackson Hole, Wyoming.
Obama’s Stance
Carney reiterated that Obama would accept a short-term debt ceiling extension of a few days only if needed to finish work on legislation lifting the limit for a longer period.
House Republican leaders revised their bill after failing to win enough support for a vote the previous night. It would allow a debt-limit increase now and require Congress to work out a second increase agreement within months. The second debt-limit increase would occur only if a balanced-budget constitutional amendment is passed by Congress and sent to the states.
Representative Mo Brooks, an Alabama Republican, said the decision to include the balanced-budget amendment turned 10 to 20 Republican votes in favor of the measure.
The House approved the measure 218-210, with no Democrats voting in favor. In the Senate, the measure was tabled 59-41, with all 51 Democrats joined by two independents and six Republicans in opposition to the plan.
Mandated Mischief: Obama’s 54.5 MPG Standard
President Obama today announced a deal with 13 automakers to boost new-car fuel economy standards from 35.5 mpg in 2016 to 54.5 mpg in 2025. Obama claimed the new standards will save Americans $1.7 trillion over the lifetime of vehicles and $8,000 per vehicle by 2025.
But you’ve got to wonder, if the fuel-saving technologies requisite to meet the new standards are such a great bargain, why do we need a law forcing automakers to adopt them? After all, auto companies are in business to make money, they compete for customers, and there’s not a consumer alive who enjoys pain at the pump.
What we can likely expect from the new fuel economy standards is more costly vehicles that impose net losses on consumers, lighter vehicles that provide less protection in collisions, and a less competitive auto industry.
The U.S. government’s 40-year-old corporate average fuel economy (CAFE) program is a case study in unintended consequences. During its first 25 years, CAFE boosted domestic sales of Japanese and European imports, which typically had a 50% higher mpg rating than American automobiles in 1975. Partly as a consequence of CAFE, the U.S. market share of foreign-designed vehicles increased from 18% in 1975 to 29% in 1980 and 41% in 2000 (National Research Council, p.15). Few members of Congress anticipated or desired such disastrous results when they created the CAFE program in 1975.
There are two main ways to increase a car’s fuel economy: (1) downsize the vehicle and (2) add new technology. Adding new technology raises new car prices, “forcing some consumers, especially those with low incomes, to hold on longer to their old cars,” observes my colleague Sam Kazman. In general, old cars are more polluting than comparable newer vehicles. In any event, lawmakers did not think they were voting to keep clunkers on the road when they created CAFE.
In addition, Kazman notes, CAFE “restricts consumer choice, since manufacturers are forced to pay more attention to what the law requires rather than to what consumers want.” Indeed, CAFE destroyed the market for what once was America’s most popular family car — the large station wagon. Automakers could not comply with CAFE and produce millions of large, low-mpg station wagons. In 1975, how many members of Congress knowingly voted to kill the family car?
A related unintended consequence was the much-derided SUV boom of the 1990s. No longer able to purchase big wagons, consumers started buying trucks with car-like body designs. Fuel economy zealots decried what they called the “SUV loophole” in the CAFE rules. But to millions of consumers, the supposed loophole was an escape hatch. The caption of a New Yorker cartoon on bureaucratic myopia should be required reading on Capitol Hill: “These regulations will fundamentally change how we get around them.”
Last and certainly not least, CAFE kills. This is hard for some folks to swallow, but it’s a matter of physics. Fuel economy regulation restricts the sale of larger, heavier vehicles. Such vehicles get fewer miles to the gallon than similarly equipped smaller vehicles, but they provide more protection in collisions. Heavier vehicles have more mass to absorb collision forces, and larger vehicles provide more space between the occupant and the point of impact.
A 2002 National Research Council study (p. 26) estimates that in a typical year (1993), CAFE contributed to 1,300-2,600 additional auto fatalities and ten times as many serious injuries.
We’re often assured that the reformed CAFE program established via the 2007 Energy Independence and Security Act (EISA) fixed the problem (often by the same folks who denied there was a trade-off between fuel economy and safety under the original CAFE program). However, even under the reformed program, which supposedly constrains down-sizing in favor of technological innovation, EPA and the National Highway Traffic Safety Administration (NHTSA) estimate that achieving fuel economy standards of 47 to 62 mpg will require weight reductions of 15% to 30% (Interim Joint Technical Report, p. 3-8).
Automakers will undoubtedly incorporate new technology to meet the 54.5 mpg standard. Nonetheless, Kazman explains, “No matter what fuel-saving technologies we put into the car of the future, adding weight to the car will both lower its fuel efficiency and increase its safety.” Inevitably, fuel economy standards prevent people from buying all the vehicle safety they’re willing to pay for.
Why did automakers agree to the deal? “Government Motors” has to be careful about defying a White House that props them up financially. Auto companies also feared ending up with something even worse: a 62 mpg standard enforced via a “patchwork” of state-by-state fuel economy regimes spearheaded by the California Air Resources Board (CARB).
Auto industry analyst Henry Payne notes another reason:
CAR estimates that a 56 mpg standard would impose on consumers a net loss (sticker price increase minus fuel savings) of $2,858 over five years if gasoline prices average $3.50/gallon. The 62 mpg that CARB, green groups, and (very likely) Obama preferred would impose a net loss of $6,525. Without regulatory coercion limiting our options, most consumers would avoid this “bargain.”
Fuel economy standards compel automakers to please government planners rather than satisfy consumers. That’s a recipe for an auto industry with lower sales, reduced profits, and fewer jobs.
Team Obama and their green allies undoubtedly think it is great fun to gamble with other people’s assets and livelihoods, even if it means imposing safety risks on motorists. If we were living under a constitution of liberty, that sort of mischief would not be allowed.
But you’ve got to wonder, if the fuel-saving technologies requisite to meet the new standards are such a great bargain, why do we need a law forcing automakers to adopt them? After all, auto companies are in business to make money, they compete for customers, and there’s not a consumer alive who enjoys pain at the pump.
What we can likely expect from the new fuel economy standards is more costly vehicles that impose net losses on consumers, lighter vehicles that provide less protection in collisions, and a less competitive auto industry.
The U.S. government’s 40-year-old corporate average fuel economy (CAFE) program is a case study in unintended consequences. During its first 25 years, CAFE boosted domestic sales of Japanese and European imports, which typically had a 50% higher mpg rating than American automobiles in 1975. Partly as a consequence of CAFE, the U.S. market share of foreign-designed vehicles increased from 18% in 1975 to 29% in 1980 and 41% in 2000 (National Research Council, p.15). Few members of Congress anticipated or desired such disastrous results when they created the CAFE program in 1975.
There are two main ways to increase a car’s fuel economy: (1) downsize the vehicle and (2) add new technology. Adding new technology raises new car prices, “forcing some consumers, especially those with low incomes, to hold on longer to their old cars,” observes my colleague Sam Kazman. In general, old cars are more polluting than comparable newer vehicles. In any event, lawmakers did not think they were voting to keep clunkers on the road when they created CAFE.
In addition, Kazman notes, CAFE “restricts consumer choice, since manufacturers are forced to pay more attention to what the law requires rather than to what consumers want.” Indeed, CAFE destroyed the market for what once was America’s most popular family car — the large station wagon. Automakers could not comply with CAFE and produce millions of large, low-mpg station wagons. In 1975, how many members of Congress knowingly voted to kill the family car?
A related unintended consequence was the much-derided SUV boom of the 1990s. No longer able to purchase big wagons, consumers started buying trucks with car-like body designs. Fuel economy zealots decried what they called the “SUV loophole” in the CAFE rules. But to millions of consumers, the supposed loophole was an escape hatch. The caption of a New Yorker cartoon on bureaucratic myopia should be required reading on Capitol Hill: “These regulations will fundamentally change how we get around them.”
Last and certainly not least, CAFE kills. This is hard for some folks to swallow, but it’s a matter of physics. Fuel economy regulation restricts the sale of larger, heavier vehicles. Such vehicles get fewer miles to the gallon than similarly equipped smaller vehicles, but they provide more protection in collisions. Heavier vehicles have more mass to absorb collision forces, and larger vehicles provide more space between the occupant and the point of impact.
A 2002 National Research Council study (p. 26) estimates that in a typical year (1993), CAFE contributed to 1,300-2,600 additional auto fatalities and ten times as many serious injuries.
We’re often assured that the reformed CAFE program established via the 2007 Energy Independence and Security Act (EISA) fixed the problem (often by the same folks who denied there was a trade-off between fuel economy and safety under the original CAFE program). However, even under the reformed program, which supposedly constrains down-sizing in favor of technological innovation, EPA and the National Highway Traffic Safety Administration (NHTSA) estimate that achieving fuel economy standards of 47 to 62 mpg will require weight reductions of 15% to 30% (Interim Joint Technical Report, p. 3-8).
Automakers will undoubtedly incorporate new technology to meet the 54.5 mpg standard. Nonetheless, Kazman explains, “No matter what fuel-saving technologies we put into the car of the future, adding weight to the car will both lower its fuel efficiency and increase its safety.” Inevitably, fuel economy standards prevent people from buying all the vehicle safety they’re willing to pay for.
Why did automakers agree to the deal? “Government Motors” has to be careful about defying a White House that props them up financially. Auto companies also feared ending up with something even worse: a 62 mpg standard enforced via a “patchwork” of state-by-state fuel economy regimes spearheaded by the California Air Resources Board (CARB).
Auto industry analyst Henry Payne notes another reason:
“We’ll agree to anything that’s 15 years out,” a highly-placed auto industry insider told me today about the fairy tale 54.5 mpg-by-2025 mandate for America’s auto fleet that Barack Obama and Big Auto execs finally — officially — announced Friday in Washington.Environmental groups claim there’s no problem because automakers could comply even with a 56 mpg standard just by selling lots of hybrids. But according to the Center for Automotive Research (CAR), the market share for hybrids would have to increase from less than 3% in 2011 to 76% by 2025 — almost eight times higher than the projected market share. And mass reductions of at least 15% would also be required, reducing vehicle safety in crashes.
The rule has no grounding in reality. An engineering rule of thumb is that gas engine efficiency improves by 1.5 percent a year (a gain that, in the cheap gas U.S. market, has traditionally gone to power upgrades rather than mpg improvements). The EPA’s rule will mandate that light trucks gain 3.5 percent a year and cars, 5 percent. Really.
CAR estimates that a 56 mpg standard would impose on consumers a net loss (sticker price increase minus fuel savings) of $2,858 over five years if gasoline prices average $3.50/gallon. The 62 mpg that CARB, green groups, and (very likely) Obama preferred would impose a net loss of $6,525. Without regulatory coercion limiting our options, most consumers would avoid this “bargain.”
Fuel economy standards compel automakers to please government planners rather than satisfy consumers. That’s a recipe for an auto industry with lower sales, reduced profits, and fewer jobs.
Team Obama and their green allies undoubtedly think it is great fun to gamble with other people’s assets and livelihoods, even if it means imposing safety risks on motorists. If we were living under a constitution of liberty, that sort of mischief would not be allowed.
Gunwalker: One Step Closer to the Oval Office
The cover-up is always worse than the crime: considering the Gunwalker scandal, it’s hard to know if that is true — for the moment. America is now a bit closer to that answer, and is also closer to an answer for the question at the heart of all Washington scandals: what did the president know, and when did he know it?
July 20: The Examiner reported that the State Department, through a little-known program called “U.S. Direct Commercial Sales,” supplied considerable small arms to the Zeta cartel. In fact, a Zeta leader has said that all of their weapons were purchased in the U.S. Evidence indicates that weapons not obtained through the State Department were obtained through straw purchasers in the Gunwalker investigation.
The Zetas apparently purchased land in Columbus, New Mexico, which was used as a transshipment point for taking weapons directly across the border. Another method reportedly saw weapons flown out of Alliance Airport north of Ft. Worth, an air operations center of the Drug Enforcement Agency.
July 25: Fox News reported that two of the 20 people indicted in Operation Fast And Furious for making straw purchases of firearms which were primarily shipped to Mexican drug cartels were cleared by the FBI to make those purchases. Federal officials refuse to explain how this occurred.
Those who have been following the case will recall that when it began to blow up in public, 20 people — all bottom-level straw purchasers — were arrested, and claims were made that no guns were allowed to walk across the border (claims that have been exposed as false). The FBI runs the instant check system (NICS) that must be used to allow anyone to purchase a firearm, yet two convicted felons — apparently in the system as felons — were allowed to buy more than 360 weapons. The FBI has had no comment, however an ATF source told Fox that whenever the NICS flagged a felon trying to buy guns, the ATF in Phoenix was called. Obviously, the ATF and FBI allowed the purchases to go through.
July 26: The Examiner reported that in the fall of 2009, ATF agents in Mexico noticed an unusual number of American guns coming into Mexico, and were surprised to learn that many were traced back to the Phoenix ATF office. Over the year that followed, ATF agents in Mexico complained, and were told only that things were “under control” and that the investigation would end soon — but it did not end until the murder of Border Patrol Agent Brian Terry in January 2011.
The agents sent their concerns to Phoenix, and up the chain of command to ATF headquarters and to the Department of Justice. This caused ATF agent Darren Gil to get into a screaming match with ATF International Affairs Chief Dan Kumor.
DOJ Assistant Attorney General for the Criminal Division Lanny Breuer, on a visit to Mexico, praised the operation, to the horror of the agents in Mexico. The ATF withheld information from their own agents because they did not want the Mexican government to know what was going on.
July 27: The Los Angeles Times reported that shortly after the death of Border Patrol Agent Brian Terry, ATF officials in Arizona and D.C. made several arrests of straw purchasers. Also, William Newell — ATF head in Arizona — sent several e-mails to his D.C. superiors, one of which admitted that guns were “walked” across the border. He defended the operation, saying: “I don’t like the perception that we allowed guns to walk.”
After Terry’s murder, top ATF officials claimed that none of the guns found at the scene of Terry’s killing were used to kill him. FBI forensics reports, which came to light last week, prove that the ATF claim was at best misleading. Ballistics testing could not conclusively indicate which weapon was actually used to shoot Terry, but the weapons found were walked across the border during Operation Fast and Furious. The ATF continues to claim that their misleading statement is accurate because they saw a distinction between guns found at the scene and guns “used” in the murder.
July 27: Hot Air reported that before Rep. Darrell Issa’s committee on July 26, William Newell testified that in September 2010 he discussed the Gunwalker case with White House National Security Director for North America Kevin O’Reilly. In relation to that communication, Newell sent O’Reilly an e-mail in which he wrote: “You didn’t get this from me.” Newell explained that O’Reilly was a long-time friend, and he shouldn’t have informed him.
The revelations of this week not only support or confirm much of what was already known, but add new, more disturbing dimensions to the scandal. It has long been known that heads of the FBI and DEA were informed about the program, as well as officials in the Department of Justice, Homeland Security, and the State Department. However, the State Department’s role in selling significant quantities of military surplus and military grade weapons and other equipment to the Zeta cartel, possibly through a thinly veiled front company, was not previously known.
The FBI certainly had to have known that the ATF was misrepresenting their forensic findings in the Terry murder, but did nothing to correct that misrepresentation to Congress or to the public, and had no comment regarding this revelation.
The most significant revelation of the week is that someone in the White House was made aware of the operation. Did the president or his chosen officials not only allow but encourage the illegal purchase and smuggling of arms into Mexico, a foolish and cynical attempt to further gun-control policies unobtainable through the legislative process? We now know that knowledge of the program was within a few steps of Obama.
Meanwhile, the MSM continues to avoid perhaps the most important, most deadly scandal in modern American history.
July 20: The Examiner reported that the State Department, through a little-known program called “U.S. Direct Commercial Sales,” supplied considerable small arms to the Zeta cartel. In fact, a Zeta leader has said that all of their weapons were purchased in the U.S. Evidence indicates that weapons not obtained through the State Department were obtained through straw purchasers in the Gunwalker investigation.
The Zetas apparently purchased land in Columbus, New Mexico, which was used as a transshipment point for taking weapons directly across the border. Another method reportedly saw weapons flown out of Alliance Airport north of Ft. Worth, an air operations center of the Drug Enforcement Agency.
July 25: Fox News reported that two of the 20 people indicted in Operation Fast And Furious for making straw purchases of firearms which were primarily shipped to Mexican drug cartels were cleared by the FBI to make those purchases. Federal officials refuse to explain how this occurred.
Those who have been following the case will recall that when it began to blow up in public, 20 people — all bottom-level straw purchasers — were arrested, and claims were made that no guns were allowed to walk across the border (claims that have been exposed as false). The FBI runs the instant check system (NICS) that must be used to allow anyone to purchase a firearm, yet two convicted felons — apparently in the system as felons — were allowed to buy more than 360 weapons. The FBI has had no comment, however an ATF source told Fox that whenever the NICS flagged a felon trying to buy guns, the ATF in Phoenix was called. Obviously, the ATF and FBI allowed the purchases to go through.
July 26: The Examiner reported that in the fall of 2009, ATF agents in Mexico noticed an unusual number of American guns coming into Mexico, and were surprised to learn that many were traced back to the Phoenix ATF office. Over the year that followed, ATF agents in Mexico complained, and were told only that things were “under control” and that the investigation would end soon — but it did not end until the murder of Border Patrol Agent Brian Terry in January 2011.
The agents sent their concerns to Phoenix, and up the chain of command to ATF headquarters and to the Department of Justice. This caused ATF agent Darren Gil to get into a screaming match with ATF International Affairs Chief Dan Kumor.
DOJ Assistant Attorney General for the Criminal Division Lanny Breuer, on a visit to Mexico, praised the operation, to the horror of the agents in Mexico. The ATF withheld information from their own agents because they did not want the Mexican government to know what was going on.
July 27: The Los Angeles Times reported that shortly after the death of Border Patrol Agent Brian Terry, ATF officials in Arizona and D.C. made several arrests of straw purchasers. Also, William Newell — ATF head in Arizona — sent several e-mails to his D.C. superiors, one of which admitted that guns were “walked” across the border. He defended the operation, saying: “I don’t like the perception that we allowed guns to walk.”
After Terry’s murder, top ATF officials claimed that none of the guns found at the scene of Terry’s killing were used to kill him. FBI forensics reports, which came to light last week, prove that the ATF claim was at best misleading. Ballistics testing could not conclusively indicate which weapon was actually used to shoot Terry, but the weapons found were walked across the border during Operation Fast and Furious. The ATF continues to claim that their misleading statement is accurate because they saw a distinction between guns found at the scene and guns “used” in the murder.
July 27: Hot Air reported that before Rep. Darrell Issa’s committee on July 26, William Newell testified that in September 2010 he discussed the Gunwalker case with White House National Security Director for North America Kevin O’Reilly. In relation to that communication, Newell sent O’Reilly an e-mail in which he wrote: “You didn’t get this from me.” Newell explained that O’Reilly was a long-time friend, and he shouldn’t have informed him.
The revelations of this week not only support or confirm much of what was already known, but add new, more disturbing dimensions to the scandal. It has long been known that heads of the FBI and DEA were informed about the program, as well as officials in the Department of Justice, Homeland Security, and the State Department. However, the State Department’s role in selling significant quantities of military surplus and military grade weapons and other equipment to the Zeta cartel, possibly through a thinly veiled front company, was not previously known.
The FBI certainly had to have known that the ATF was misrepresenting their forensic findings in the Terry murder, but did nothing to correct that misrepresentation to Congress or to the public, and had no comment regarding this revelation.
The most significant revelation of the week is that someone in the White House was made aware of the operation. Did the president or his chosen officials not only allow but encourage the illegal purchase and smuggling of arms into Mexico, a foolish and cynical attempt to further gun-control policies unobtainable through the legislative process? We now know that knowledge of the program was within a few steps of Obama.
Meanwhile, the MSM continues to avoid perhaps the most important, most deadly scandal in modern American history.
Obama, Geithner Hold All the Face Cards in Debt Ceiling Fight
There are still a number of conservative voices — including some presidential contenders — who are smugly watching the approach of the debt ceiling deadline and treating it like a paper tiger. Their argument, in essence, is that our spending addicted government is in need of a rehab style intervention, having all of its credit cards cut up in front of it and locking Washington up in a Betty Ford Center for Terminal Shopaholics. This, they conclude, is precisely the sort of foul tasting, cod liver oil style medicine which will put the system to rights and strong-arm us back onto the path of reason.
I have a confession to make here. In some of my darker moments, I find the idea appealing. But then I recall the law of unintended consequences and remind myself to be careful what you wish for.
But when does this remarkable transformation begin, and what happens when it arrives, both in practical and political terms? The date is somewhat cloudy, though the White House continues to insist that it falls on August 2nd. Other analysts feel that there could be anywhere from an additional one to two weeks before the bean counters finally run out of tricks. But regardless of when it happens, our date with destiny is on the way.
By most estimates, barring some sort of 11th hour deal, the federal government’s revenues in August will come up approximately $135B short of the total bills coming due. Thirty days after that, in some hypothetical world where we never again increase the debt ceiling, we’ll reach the end of Fiscal Year 2011 and can start working 2012 numbers. By current CBO projections, Washington revenues for next year will be approximately $2.6T with spending currently estimated at $3.7T. This works out to an average monthly shortfall of just over $91B allowing for seasonal variances.
The bottom line is that some checks won’t be going out. So how does that work and who will be figuratively receiving the short end of the financial stick?
This is where the situation begins to get sticky for the Republican Party, and seasoned hands in the establishment GOP have doubtless already begun pondering the problem. Congress is, of course, responsible for setting the future spending agenda. (Or they would be, had the Democrats bothered to actually pass a budget in the last 800+ days.) But once the deal is done, the revenues have been collected, and the bills come due, they really don’t retain much control beyond that point. The sad fact of the matter is that it will be pretty much exclusively the executive branch bean counters — under the watchful eye of President Barack Obama — who will be sending out those checks and deciding who gets paid and who doesn’t.
Now, I understand that most of you reading this have nothing but the utmost respect for the office of the presidency and would never suspect Mr. Obama of having political ulterior motives when making these decisions. But what if he and the leaders of the Democratic Party did? Well, the president actually has quite a few options on the table.
He’s going to pay the interest on the debt, as well as sending out all of the Social Security checks. It would be essentially illegal and/or politically suicidal not to do so. From there, one of the first and easiest choices would be to furlough some government workers. At first blush, conservatives might nod approvingly, noting that the federal government is too darned large anyway. But those are real people with real families, friends and relatives. When it’s you losing your job, long held political beliefs may sail out the window, the conversation becomes much less theoretical, and you may rest assured that they will be tuning in to the news every day to hear Barack Obama saying, “I really didn’t want to send you all home, but the Republicans wouldn’t…”
You know how the rest goes.
After that, the president finds himself in a truly target rich environment. Randall Hoven at the American Thinker has done a lot of the leg work on this, breaking out the various pockets of bills coming due and how they might be trimmed. One of the biggest targets on the radar will be defense spending. Clearly Obama would not be foolish enough not to pay the troops, but more than $575B of the estimated $738B defense budget goes to things other than military pay. These possible targets could include:
Next up we find a clever way to get the seniors out in the streets. As previously noted, Obama would obviously send out all of the Social Security checks, but he doesn’t have to pay everything associated with Medicare. One immediate option would be to reduce or cancel some reimbursement payments to doctors. Might that result in physicians cancelling appointments or refusing to take new patients who are in the program? This one hits seniors right in the breadbasket, traditionally a demographic that supports the Republicans disproportionately.
But it’s not just direct payments to providers that might be on the table. There’s a lot more gold to be mined in them there hills. There are a multitude of secondary programs in Medicare which take up resources every month. They take care of a host of mundane programs such as reducing the cost of prescriptions to subsidizing bulk items like ace bandages, disinfectants or… replacement oxygen tanks.
As I recently wrote in piece titled “Plan Nine from the DNC,” there are political opportunities aplenty waiting in all of those bookkeeping nooks and crannies, assuming the Democrats are willing to play politics with something like this. (Not that I’m insinuating Debbie Wasserman-Schultz’s crew would ever stoop so low, mind you.) But if you stop and think about it, it’s a fairly simple matter to fail to send out a check or two to some medical supply companies. And when that happens, the Democrats find a young boy named Timmy in a wheelchair that didn’t get his replacement oxygen bottle this week, and suddenly he and his bedraggled, single working mom are instant television stars in political advertisements which run non-stop until the Republicans finally cave in.
But the Democrats would never actually do that… right?
I have a confession to make here. In some of my darker moments, I find the idea appealing. But then I recall the law of unintended consequences and remind myself to be careful what you wish for.
But when does this remarkable transformation begin, and what happens when it arrives, both in practical and political terms? The date is somewhat cloudy, though the White House continues to insist that it falls on August 2nd. Other analysts feel that there could be anywhere from an additional one to two weeks before the bean counters finally run out of tricks. But regardless of when it happens, our date with destiny is on the way.
By most estimates, barring some sort of 11th hour deal, the federal government’s revenues in August will come up approximately $135B short of the total bills coming due. Thirty days after that, in some hypothetical world where we never again increase the debt ceiling, we’ll reach the end of Fiscal Year 2011 and can start working 2012 numbers. By current CBO projections, Washington revenues for next year will be approximately $2.6T with spending currently estimated at $3.7T. This works out to an average monthly shortfall of just over $91B allowing for seasonal variances.
The bottom line is that some checks won’t be going out. So how does that work and who will be figuratively receiving the short end of the financial stick?
This is where the situation begins to get sticky for the Republican Party, and seasoned hands in the establishment GOP have doubtless already begun pondering the problem. Congress is, of course, responsible for setting the future spending agenda. (Or they would be, had the Democrats bothered to actually pass a budget in the last 800+ days.) But once the deal is done, the revenues have been collected, and the bills come due, they really don’t retain much control beyond that point. The sad fact of the matter is that it will be pretty much exclusively the executive branch bean counters — under the watchful eye of President Barack Obama — who will be sending out those checks and deciding who gets paid and who doesn’t.
Now, I understand that most of you reading this have nothing but the utmost respect for the office of the presidency and would never suspect Mr. Obama of having political ulterior motives when making these decisions. But what if he and the leaders of the Democratic Party did? Well, the president actually has quite a few options on the table.
He’s going to pay the interest on the debt, as well as sending out all of the Social Security checks. It would be essentially illegal and/or politically suicidal not to do so. From there, one of the first and easiest choices would be to furlough some government workers. At first blush, conservatives might nod approvingly, noting that the federal government is too darned large anyway. But those are real people with real families, friends and relatives. When it’s you losing your job, long held political beliefs may sail out the window, the conversation becomes much less theoretical, and you may rest assured that they will be tuning in to the news every day to hear Barack Obama saying, “I really didn’t want to send you all home, but the Republicans wouldn’t…”
You know how the rest goes.
After that, the president finds himself in a truly target rich environment. Randall Hoven at the American Thinker has done a lot of the leg work on this, breaking out the various pockets of bills coming due and how they might be trimmed. One of the biggest targets on the radar will be defense spending. Clearly Obama would not be foolish enough not to pay the troops, but more than $575B of the estimated $738B defense budget goes to things other than military pay. These possible targets could include:
- “Yard bird” pay for civilian workers at shipyards and military installations
- Maintenance, refitting, and salvage of the “ghost fleet”
- Civilian base workers in maintenance and related fields
Next up we find a clever way to get the seniors out in the streets. As previously noted, Obama would obviously send out all of the Social Security checks, but he doesn’t have to pay everything associated with Medicare. One immediate option would be to reduce or cancel some reimbursement payments to doctors. Might that result in physicians cancelling appointments or refusing to take new patients who are in the program? This one hits seniors right in the breadbasket, traditionally a demographic that supports the Republicans disproportionately.
But it’s not just direct payments to providers that might be on the table. There’s a lot more gold to be mined in them there hills. There are a multitude of secondary programs in Medicare which take up resources every month. They take care of a host of mundane programs such as reducing the cost of prescriptions to subsidizing bulk items like ace bandages, disinfectants or… replacement oxygen tanks.
As I recently wrote in piece titled “Plan Nine from the DNC,” there are political opportunities aplenty waiting in all of those bookkeeping nooks and crannies, assuming the Democrats are willing to play politics with something like this. (Not that I’m insinuating Debbie Wasserman-Schultz’s crew would ever stoop so low, mind you.) But if you stop and think about it, it’s a fairly simple matter to fail to send out a check or two to some medical supply companies. And when that happens, the Democrats find a young boy named Timmy in a wheelchair that didn’t get his replacement oxygen bottle this week, and suddenly he and his bedraggled, single working mom are instant television stars in political advertisements which run non-stop until the Republicans finally cave in.
But the Democrats would never actually do that… right?
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