Archive for September, 2008

Working Together

Saturday, September 20th, 2008
Perhaps we should slow things down a little bit. I have recently suggested that in a time of great change and potentially great peril it is important to be thoughtful and cautious. Before we obligate every man, woman and child in America to pay for a $1,000,000,000,000.00 bailout, maybe we should think carefully about the full consequences of this bailout. … Reposted from The Nation.

Paulson Bailout Plan a Historic Swindle

William Greider

Financial-market wise guys, who had been seized with fear, are suddenly drunk with hope. They are rallying explosively because they think they have successfully stampeded Washington into accepting the Wall Street Journal solution to the crisis: dump it all on the taxpayers. That is the meaning of the massive bailout Treasury Secretary Henry Paulson has shopped around Congress. It would relieve the major banks and investment firms of their mountainous rotten assets and make the public swallow their losses–many hundreds of billions, maybe much more. What’s not to like if you are a financial titan threatened with extinction?

If Wall Street gets away with this, it will represent an historic swindle of the American public–all sugar for the villains, lasting pain and damage for the victims. My advice to Washington politicians: Stop, take a deep breath and examine what you are being told to do by so-called “responsible opinion.” If this deal succeeds, I predict it will become a transforming event in American politics–exposing the deep deformities in our democracy and launching a tidal wave of righteous anger and popular rebellion. As I have been saying for several months, this crisis has the potential to bring down one or both political parties, take your choice.

Christopher Whalen of Institutional Risk Analytics, a brave conservative critic, put it plainly: “The joyous reception from Congressional Democrats to Paulson’s latest massive bailout proposal smells an awful lot like yet another corporatist lovefest between Washington’s one-party government and the Sell Side investment banks.”

A kindred critic, Josh Rosner of Graham Fisher in New York, defined the sponsors of this stampede to action: “Let us be clear, it is not citizen groups, private investors, equity investors or institutional investors broadly who are calling for this government purchase fund. It is almost exclusively being lobbied for by precisely those institutions that believed they were ‘smarter than the rest of us,’ institutions who need to get those assets off their balance sheet at an inflated value lest they be at risk of large losses or worse.”

Let me be clear. The scandal is not that government is acting. The scandal is that government is not acting forcefully enough–using its ultimate emergency powers to take full control of the financial system and impose order on banks, firms and markets. Stop the music, so to speak, instead of allowing individual financiers and traders to take opportunistic moves to save themselves at the expense of the system. The step-by-step rescues that the Federal Reserve and Treasury have executed to date have failed utterly to reverse the flight of investors and banks worldwide from lending or buying in doubtful times. There is no obvious reason to assume this bailout proposal will change their minds, though it will certainly feel good to the financial houses that get to dump their bad paper on the government.

A serious intervention in which Washington takes charge would, first, require a new central authority to supervise the financial institutions and compel them to support the government’s actions to stabilize the system. Government can apply killer leverage to the financial players: accept our objectives and follow our instructions or you are left on your own–cut off from government lending spigots and ineligible for any direct assistance. If they decline to cooperate, the money guys are stuck with their own mess. If they resist the government’s orders to keep lending to the real economy of producers and consumers, banks and brokers will be effectively isolated, therefore doomed.

Only with these conditions, and some others, should the federal government be willing to take ownership–temporarily–of the rotten financial assets that are dragging down funds, banks and brokerages. Paulson and the Federal Reserve are trying to replay the bailout approach used in the 1980s for the savings and loan crisis, but this situation is utterly different. The failed S&Ls held real assets–property, houses, shopping centers–that could be readily resold by the Resolution Trust Corporation at bargain prices. This crisis involves ethereal financial instruments of unknowable value–not just the notorious mortgage securities but various derivative contracts and other esoteric deals that may be virtually worthless.

Despite what the pols in Washington think, the RTC bailout was also a Wall Street scandal. Many of the financial firms that had financed the S&L industry’s reckless lending got to buy back the same properties for pennies from the RTC–profiting on the upside, then again on the downside. Guess who picked up the tab? I suspect Wall Street is envisioning a similar bonanza–the chance to harvest new profit from their own fraud and criminal irresponsibility.

If government acts responsibly, it will impose some other conditions on any broad rescue for the bankers. First, take due bills from any financial firms that get to hand off their spoiled assets, that is, a hard contract that repays government from any future profits once the crisis is over. Second, when the politicians get around to reforming financial regulations and dismantling the gimmicks and “too big to fail”institutions, Wall Street firms must be prohibited from exercising their usual manipulations of the political system. Call off their lobbyists, bar them from the bribery disguised as campaign contributions. Any contact or conversations between the assisted bankers and financial houses with government agencies or elected politicians must be promptly reported to the public, just as regulated industries are required to do when they call on government regulars.

More important, if the taxpayers are compelled to refinance the villains in this drama, then Americans at large are entitled to equivalent treatment in their crisis. That means the suspension of home foreclosures and personal bankruptcies for debt-soaked families during the duration of this crisis. The debtors will not escape injury and loss–their situation is too dire–but they deserve equal protection from government, the chance to work out things gradually over some years on reasonable terms.

The government, meanwhile, may have to create another emergency agency, something like the New Deal, that lends directly to the real economy–businesses, solvent banks, buyers and sellers in consumer markets. We don’t know how much damage has been done to economic growth or how long the cold spell will last, but I don’t trust the bankers in the meantime to provide investment capital and credit. If necessary, Washington has to fill that role, too.

Finally, the crisis is global, obviously, and requires concerted global action. Robert A. Johnson, a veteran of global finance now working with the Campaign for America’s Future, suggests that our global trading partners may recognize the need for self-interested cooperation and can negotiate temporary–maybe permanent–reforms to balance the trading system and keep it functioning, while leading nations work to put the global financial system back in business.

The agenda is staggering. The United States is ill equipped to deal with it smartly, not to mention wisely. We have a brain-dead lame duck in the White House. The two presidential candidates are trapped by events, trying to say something relevant without getting blamed for the disaster. The people should make themselves heard in Washington, even if only to share their outrage.

Copyright 2008 The Nation


National affairs correspondent William Greider has been a political journalist for more than thirty-five years. A former Rolling Stone and Washington Post editor, he is the author of the national bestsellers One World, Ready or Not, Secrets of the Temple, Who Will Tell The People, The Soul of Capitalism and due out in February — Come Home, America. more…

Working Together

Thursday, September 18th, 2008
This is Barack Obama’s plan to fix our economy as posted on his website this morning.

Bring about real change to our economy

Barack Obama

$1,000 Tax Cut for Middle Class American Families

Obama and Biden will cut income taxes by $1,000 for working families, because the economy needs to be revitalized from the bottom up, not top down. Read more

Energy Rebates

Obama and Biden will enact a windfall profits tax on excessive oil company profits to give American families an immediate $1,000 emergency energy rebate to help families pay rising bills. Read more

Create Jobs through Fair Trade

Obama and Biden believe that trade with foreign nations should create American jobs, not send them overseas. They will stand firm against agreements that undermine our economic security. Read more

Create 5 Million Green Jobs

Obama and Biden believe that we should invest in innovation and manufacturing jobs in the growing clean energy market, freeing us from our dependence on foreign oil within a decade and creating 5 million green jobs. Read more

New Jobs Through National Infrastructure Investment

Obama and Biden believe that rebuilding our highways, bridges, roads, ports, air, and train systems will create jobs, ensure safety, and bolster our long-term competitiveness. Read more

Technology, Innovation and Creating Jobs

Obama and Biden will increase federal support for research, technology and innovation for companies and universities so that American workers can lead the world in cutting edge jobs and products. Read more

Support Small Business

Obama and Biden will level the playing field for small business by eliminating all capital gains taxes on start-up and small businesses. Read more

Labor

Obama and Biden will strengthen the ability of workers to organize for good wages, healthcare, and secure pensions. Obama and Biden will fight for passage of the Employee Free Choice Act. Obama and Biden will ensure that labor appointees support workers’ rights and will work to ban the permanent replacement of striking workers. Obama and Biden will also increase the minimum wage and make sure it remains a real wage year over year. Read more

Protect Homeownership and Crack Down on Mortgage Fraud

Obama and Biden will crack down on fraudulent brokers and lenders. They will make sure homebuyers have honest and complete information about their mortgage options, and they will give a tax credit to all middle-class homeowners. Read more

Address Predatory Credit Card Practices

Obama and Biden will establish a five-star rating system so that every consumer knows the risk involved in credit card borrowing. They will establish a Credit Card Bill of Rights to stop credit card companies from exploiting consumers with unfair practices. Read more

Reform Bankruptcy Laws

Obama and Biden will reform our bankruptcy laws to protect working people, to ban executive bonuses for bankrupt companies, and to require disclosure of all pension investments. Read more

Work/Family Balance

Obama and Biden will help working families by doubling funding for after-school programs, expanding the Family Medical Leave Act. They will provide low-income families with a refundable tax credit to help with their child-care expenses, and encourage flexible work schedules. Read more


See the video

Working Together

Wednesday, September 10th, 2008

I practice medicine in an Urgent Care Clinic on the central coast of California. In the summer, our clinic is popular with the many foreign tourists visiting our community. And so I get to see patients from all over the world, and visit talk with them. 

This summer they are all very interested in our Presidential election.  They fear Bush. They don’t know what he will do. How his actions might endanger their lives. Will he bomb Iran? Will he send troops into Georgia? They have the similar fears about McCain. They remember McCain’s statement that the Iraq war might last a 100 years. They remember when he sang “‘Bomb bomb bomb, bomb bomb Iran,’ to the tune of the Beach Boys’ song Barbara Ann.

They are concerned about our economy as well as their own economies. They seem to know that in a global culture, there is only one economy. Their Euros may go farther this summer, but all too soon hard times will be coming to the rest of the world even China.

They would like to see us elect a President that will work with the rest of the world to solve the problems facing all of us.

For this reason they strongly support Obama. They believe he will co-Operate with the rest of the world. They often ask me who will win the election in November?

Of course I don’t know, but I tell them I would NOT be too surprised if McCain and Palin win. Politics in America is very strange. We don’t seem to select the best qualified candidates, but rather choose the one we feel most comfortable with. This is probably a good approach for inviting guests over for a dinner party, but may not be the best way to select a president in 2008.

Yesterday, the BBC published a world poll by GlobalScan that showed Obama was strongly preferred over McCain by the rest of the world. Why?

I think it is because Obama seems more thoughtful and cautious in actions and words. He seem willing to work with his fellow humans in other lands to solve our global problems without anger and violence. Isn’t that a good thing?

John McCainTake a look at the photo on the right.

Apparently, a reporter asked McCain the wrong question. I don’t know what that question was, but it makes me nervous to have someone in charge of our country who allows himself to get this angry.

How stable is this guy? He seems a very different person than the fellow who ran for President in 2000 against George Bush.

Then there is Ms. Palin. In many ways she is an amazing person, and easy to like. Certainly the males of our species find her easy to look at. But is she really a WISE choice to have “on deck” if McCain blows an aneurysm? …

That does not mean that I think Obama and Biden are perfect, and will solve all of our problems. They are also very human figures with very real weaknesses of their own. There is an enormous amount they don’t know, and the problems facing our country are huge. However, I do think Obama and Biden are more thoughtful, and cautious than McCain and Palin. And, I think that being thoughtful and cautious is a very good thing.

I don’t think we will have to worry about the usually stereotypes concerning the Democrats and the Republicans. Who ever is elected will soon be taught by the school of hard knocks the rules of pragmatism. We are already seeing evidence of this change. Over the weekend, the Republicans NATIONALIZED two of the largest corporations in the world–Freddie Mac and Fannie Mae. That is behavior by Republicans that is almost unthinkable. The times are a changing.

If Obama and Biden win, they too will have to function in the new reality. They will find themselves doing things that for Democrats are almost unthinkable. Perhaps it’s time to move beyond being Republican or Democratic–beyond being American or foreigner. Perhaps its time to just be human beings living on the same planet where we must share the water, the air and the energy.

If we continue politics as usual, then it won’t matter who gets elected. Whoever wins the election will just get blamed for the continuing meltdown, and probably be impeached anyway.

Its time to move beyond politics. It’s time for thoughtfulness and caution. Obama and Biden may not be ready for the difficult realities we face, but McCain and Palin offer us no future.

Below is excerpt from Frank Rich’s column in the New York Times, in which he expresses some concerns about McCain’s behavior that I share, and finally a letter written by an Alaskan mom who seems to know Sarah Palin better than most of us. To me, her opinion seems fair and objective. But, you can judge that for yourselves. –Timothy



Is McCain Competent to Govern ?

Frank Rich

Sarah Palin makes John McCain look even older than he is. And he seemed more than willing to play that part on Thursday night. By the time he slogged through his nearly 50-minute acceptance speech – longer even than Barack Obama’s – you half-expected some brazen younger Republican (Mitt Romney, perhaps?) to dash onstage to give him a gold watch and the bum’s rush.

Still, attention must be paid. McCain’s address, though largely a repetitive slew of stump-speech lines and worn G.O.P. orthodoxy, reminded us of what we once liked about the guy: his aspirations to bipartisanship, his heroic service in Vietnam, his twinkle. He took his (often inaccurate) swipes at Obama, but, in winning contrast to Palin and Rudy Giuliani, he wasn’t smug or nasty.

The only problem, of course, is that the entire thing was a sham.

As is nakedly evident, the speech’s central argument, that the 72-year-old McCain will magically morph into a powerful change agent as president, is a non sequitur. In his 26 years in Washington, most of it with a Republican in the White House and roughly half of it with Republicans in charge of Congress, he was better at lecturing his party about reform than leading a reform movement. G.O.P. corruption and governmental dysfunction only grew. So did his cynical flip-flops on the most destructive policies of the president who remained nameless Thursday night. (In the G.O.P., Bush love is now the second most popular love that dare not speak its name.)

Even more fraudulent, if that’s possible, is the contrast between McCain’s platonic presentation of his personal code of honor and the man he has become. He always puts his country first, he told us: “I’ve been called a maverick.” If there was any doubt that that McCain has fled, confirmation arrived with his last-minute embrace of Sarah Palin. …

Given the actuarial odds that could make Palin our 45th president, it would be helpful to know who this mystery woman actually is. Meanwhile, two eternal axioms of our politics remain in place. Americans vote for the top of the ticket, not the bottom. And in judging the top of the ticket, voters look first at the candidates’ maiden executive decision, their selection of running mates. Whatever we do and don’t know about Palin’s character at this point, there is no ambiguity in what her ascent tells us about McCain’s character and potential presidency.

He wanted to choose the pro-abortion-rights Joe Lieberman as his vice president. If he were still a true maverick, he would have done so. But instead he chose partisanship and politics over country. “God only made one John McCain, and he is his own man,” said the shafted Lieberman in his own tedious convention speech last week. What a pathetic dupe. McCain is now the man of James Dobson and Tony Perkins. The “no surrender” warrior surrendered to the agents of intolerance not just by dumping his pal for Palin but by moving so far to the right on abortion that even Cindy McCain seemed unaware of his radical shift when being interviewed by Katie Couric last week.

That ideological sellout, unfortunately, was not the worst leadership trait the last-minute vice presidential pick revealed about McCain. His speed-dating of Palin reaffirmed a more dangerous personality tic that has dogged his entire career. His decision-making process is impetuous and, in its Bush-like preference for gut instinct over facts, potentially reckless. …

“Often my haste is a mistake,” McCain conceded in his 2002 memoir, “but I live with the consequences without complaint.” Well, maybe it’s fine if he wants to live with the consequences, but what about his country? Should the unexamined Palin prove unfit to serve at the pinnacle of American power, it will be too late for the rest of us to complain.

We’ve already seen where such visceral decision-making by McCain can lead. In October 2001, he speculated that Saddam Hussein might have been behind the anthrax attacks in America. That same month he out-Cheneyed Cheney in his repeated public insistence that Iraq had a role in 9/11 – even after both American and foreign intelligence services found that unlikely. He was similarly rash in his reading of the supposed evidence of Saddam’s W.M.D. and in his estimate of the number of troops needed to occupy Iraq. (McCain told MSNBC in late 2001 that we could do with fewer than 100,000.) It wasn’t until months after “Mission Accomplished” that he called for more American forces to be tossed into the bloodbath. The whole fiasco might have been prevented had he listened to those like Gen. Eric Shinseki who faulted the Rumsfeld war plan from the start.

In other words, McCain’s hasty vetting of Palin was all too reminiscent of his grave dereliction of due diligence on the war. He has been no less hasty in implying that we might somehow ride to the military rescue of Georgia (“Today, we are all Georgians”) or in reaffirming as late as December 2007 that the crumbling anti-democratic regime of Pervez Musharraf deserved “the benefit of the doubt” even as it was enabling the resurgence of the Taliban and Al Qaeda. McCain’s blanket endorsement of Bush administration policy in Pakistan could have consequences for years to come.

“This election is not about issues” so much as the candidates’ images, said the McCain campaign manager, Davis, in one of the season’s most notable pronouncements. Going into the Republican convention, we thought we knew what he meant: the McCain strategy is about tearing down Obama. But last week made clear that the McCain campaign will be equally ruthless about deflecting attention from its own candidate’s deterioration.




I Disagree with Sarah Palin

Anne Kilkenny

I think that one of the great things America and western democracies have contributed to the world is the ability to distinguish between disliking someone and disagreeing. We all need to work toward being able to agree to disagree. I like Sarah Palin. I disagree with her.

I wrote this letter to friends and family on August 31. It has since circulated throughout the Web.

About Sarah Palin

I am a resident of Wasilla, Alaska. I have known Sarah since 1992. Everyone here knows Sarah, so it is nothing special to say we are on a first-name basis. Our children have attended the same schools. Her father was my child’s favorite substitute teacher. I also am on a first name basis with her parents and mother-in-law. I attended more City Council meetings during her administration than about 99% of the residents of the city.

She is enormously popular; in every way she’s like the most popular girl in middle school. Even men who think she is a poor choice and won’t vote for her can’t quit smiling when talking about her because she is a “babe”.

It is astonishing and almost scary how well she can keep a secret. She kept her most recent pregnancy a secret from her children and parents for seven months.

She is “pro-life”. She recently gave birth to a Down’s syndrome baby. There is no cover-up involved, here; Trig is her baby.

She is energetic and hardworking. She regularly worked out at the gym.

She is savvy. She doesn’t take positions; she just “puts things out there”and if they prove to be popular, then she takes credit.

Her husband works a union job on the North Slope for BP and is a champion snowmobile racer. Todd Palin’s kind of job is highly sought-after because of the schedule and high pay. He arranges his work schedule so he can fish for salmon in Bristol Bay for a month or so in summer, but by no stretch of the imagination is fishing their major source of income. Nor has her life-style ever been anything like that of native Alaskans.

Sarah and her whole family are avid hunters.

She’s smart.

Her experience is as mayor of a city with a population of about 5,000 (at the time), and less than 2 years as governor of a state with about 670,000 residents.

During her mayoral administration most of the actual work of running this small city was turned over to an administrator. She had been pushed to hire this administrator by party power-brokers after she had gotten herself into some trouble over precipitous firings which had given rise to a recall campaign.

Sarah campaigned in Wasilla as a “fiscal conservative”. During her 6 years as Mayor, she increased general government expenditures by over 33%. During those same 6 years the amount of taxes collected by the City increased by 38%. This was during a period of low inflation (1996-2002). She reduced progressive property taxes and increased a regressive sales tax which taxed even food. The tax cuts that she promoted benefited large corporate property owners way more than they benefited residents.

The huge increases in tax revenues during her mayoral administration weren’t enough to fund everything on her wish list though, borrowed money was needed, too. She inherited a city with zero debt, but left it with indebtedness of over $22 million. What did Mayor Palin encourage the voters to borrow money for? Was it the infrastructure that she said she supported? The sewage treatment plant that the city lacked? or a new library? No. $1m for a park. $15m-plus for construction of a multi-use sports complex which she rushed through to build on a piece of property that the City didn’t even have clear title to, that was still in litigation 7 yrs later–to the delight of the lawyers involved! The sports complex itself is a nice addition to the community but a huge money pit, not the profit-generator she claimed it would be. She also supported bonds for $5.5m for road projects that could have been done in 5-7 yrs without any borrowing.

While Mayor, City Hall was extensively remodeled and her office redecorated more than once.

These are small numbers, but Wasilla is a very small city.

As an oil producer, the high price of oil has created a budget surplus in Alaska. Rather than invest this surplus in technology that will make us energy independent and increase efficiency, as Governor she proposed distribution of this surplus to every individual in the state.

In this time of record state revenues and budget surpluses, she recommended that the state borrow/bond for road projects, even while she proposed distribution of surplus state revenues: spend today’s surplus, borrow for needs.

She’s not very tolerant of divergent opinions or open to outside ideas or compromise. As Mayor, she fought ideas that weren’t generated by her or her staff. Ideas weren’t evaluated on their merits, but on the basis of who proposed them.

While Sarah was Mayor of Wasilla she tried to fire our highly respected City Librarian because the Librarian refused to consider removing from the library some books that Sarah wanted removed. City residents rallied to the defense of the City Librarian and against Palin’s attempt at out-and-out censorship, so Palin backed down and withdrew her termination letter. People who fought her attempt to oust the Librarian are on her enemies list to this day.

Sarah complained about the
“old boy’s club” when she first ran for Mayor, so what did she bring Wasilla? A new set of “old boys”. Palin fired most of the experienced staff she inherited. At the City and as Governor she hired or elevated new, inexperienced, obscure people, creating a staff totally dependent on her for their jobs and eternally grateful and fiercely loyal–loyal to the point of abusing their power to further her personal agenda, as she has acknowledged happened in the case of pressuring the State’s top cop (see below).

As Mayor, Sarah fired Wasilla’s Police Chief because he “intimidated” her, she told the press. As Governor, her recent firing of Alaska’s top cop has the ring of familiarity about it. He served at her pleasure and she had every legal right to fire him, but it’s pretty clear that an important factor in her decision to fire him was because he wouldn’t fire her sister’s ex-husband, a State Trooper. Under investigation for abuse of power, she has had to admit that more than 2 dozen contacts were made between her staff and family to the person that she later fired, pressuring him to fire her ex-brother-in-law. She tried to replace the man she fired with a man who she knew had been reprimanded for sexual harassment; when this caused a public furor, she withdrew her support.

She has bitten the hand of every person who extended theirs to her in help. The City Council person who personally escorted her around town introducing her to voters when she first ran for Wasilla City Council became one of her first targets when she was later elected Mayor. She abruptly fired her loyal City Administrator; even people who didn’t like the guy were stunned by this ruthlessness.

Fear of retribution has kept all of these people from saying anything publicly about her.

When then-Governor Murkowski was handing out political plums, Sarah got the best, Chair of the Alaska Oil and Gas Conservation Commission: one of the few jobs not in Juneau and one of the best paid. She had no background in oil & gas issues. Within months of scoring this great job which paid $122,400/yr, she was complaining in the press about the high salary. I was told that she hated that job: the commute, the structured hours, the work. Sarah became aware that a member of this Commission (who was also the State Chair of the Republican Party) engaged in unethical behavior on the job. In a gutsy move which some undoubtedly cautioned her could be political suicide, Sarah solved all her problems in one fell swoop: got out of the job she hated and garnered gobs of media attention as the patron saint of ethics and as a gutsy fighter against the “old boys’ club” when she dramatically quit, exposing this man’s ethics violations (for which he was fined).

As Mayor, she had her hand stuck out as far as anyone for pork from Senator Ted Stevens. Lately, she has castigated his pork-barrel politics and publicly humiliated him. She only opposed the “bridge to nowhere” after it became clear that it would be unwise not to.

As Governor, she gave the Legislature no direction and budget guidelines, then made a big grandstand display of line-item vetoing projects, calling them pork. Public outcry and further legislative action restored most of these projects–which had been vetoed simply because she was not aware of their importance–but with the unobservant she had gained a reputation as “anti-pork”.

She is solidly Republican: no political maverick. The State party leaders hate her because she has bit them in the back and humiliated them. Other members of the party object to her self-description as a fiscal conservative.

Around Wasilla there are people who went to high school with Sarah. They call her “Sarah Barracuda” because of her unbridled ambition and predatory ruthlessness. Before she became so powerful, very ugly stories circulated around town about shenanigans she pulled to be made point guard on the high school basketball team. When Sarah’s mother-in-law, a highly respected member of the community and experienced manager, ran for Mayor, Sarah refused to endorse her.

As Governor, she stepped outside of the box and put together of package of legislation known as
“AGIA” that forced the oil companies to march to the beat of her drum.

Like most Alaskans, she favors drilling in the Arctic National Wildlife Refuge. She has questioned if the loss of sea ice is linked to global warming. She campaigned “as a private citizen” against a state initiative that would have either a) protected salmon streams from pollution from mines, or b) tied up in the courts all mining in the state (depending on who you listen to). She has pushed the State’s lawsuit against the Dept. of the Interior’s decision to list polar bears as threatened species.

McCain is the oldest person to ever run for President; Sarah will be a heartbeat away from being President.

There has to be literally millions of Americans who are more knowledgeable and experienced than she.

However, there’s a lot of people who have underestimated her and are regretting it.

CLAIM VS FACT

  • “Hockey mom”: true for a few years

  • “PTA mom”: true years ago when her first-born was in elementary school, not since

  • “NRA supporter”: absolutely true
  • social conservative: mixed. Opposes gay marriage, BUT vetoed a bill that would have denied benefits to employees in same-sex relationships (said she did this because it was unconsitutional).

  • pro-creationism: mixed. Supports it, BUT did nothing as Governor to promote it.

  • “Pro-life”: mixed. Knowingly gave birth to a Down’s syndrome baby BUT declined to call a special legislative session on some pro-life legislation

  • “Experienced”: Some high schools have more students than Wasilla has residents. Many cities have more residents than the state of Alaska. No legislative experience other than City Council. Little hands-on supervisory or managerial experience; needed help of a city administrator to run town of about 5,000.

  • political maverick: not at all

  • gutsy: absolutely!

  • open & transparent: … Good at keeping secrets. Not good at explaining actions.

  • has a developed philosophy of public policy: no
  • “a Greenie”: no. Turned Wasilla into a wasteland of big box stores and disconnected parking lots. Is pro-drilling off-shore and in ANWR.

  • fiscal conservative: not by my definition!

  • pro-infrastructure: No. Promoted a sports complex and park in a city without a sewage treatment plant or storm drainage system. Built streets to early 20th century standards.

  • pro-tax relief: Lowered taxes for businesses, increased tax burden on residents

  • pro-small government: No. Oversaw greatest expansion of city government in Wasilla’s history.

  • pro-labor/pro-union. No. Just because her husband works union doesn’t make her pro-labor. I have seen nothing to support any claim that she is pro-labor/pro-union.

WHY AM I WRITING THIS?

First, I have long believed in the importance of being an informed voter. I am a voter registrar. For 10 years I put on student voting programs in the schools. If you google my name (Anne Kilkenny + Alaska), you will find references to my participation in local government, education, and PTA/parent organizations.

Secondly, I’ve always operated in the belief that “Bad things happen when good people stay silent”. Few people know as much as I do because few have gone to as many City Council meetings.

Third, I am just a housewife. I don’t have a job she can bump me out of. I don’t belong to any organization that she can hurt. But, I am no fool; she is immensely popular here, and it is likely that this will cost me somehow in the future: that’s life.

Fourth, she has hated me since back in 1996, when I was one of the 100 or so people who rallied to support the City Librarian against Sarah’s attempt at censorship.

Fifth, I looked around and realized that everybody else was afraid to say anything because they were somehow vulnerable.

CAVEATS: I am not a statistician. I developed the numbers for the increase in spending & taxation 2 years ago (when Palin was running for Governor) from information supplied to me by the Finance Director of the City of Wasilla, and I can’t recall exactly what I adjusted for: did I adjust for inflation? for population increases? Right now, it is impossible for a private person to get any info out of City Hall–they are swamped. So I can’t verify my numbers.You may have noticed that there are various numbers circulating for the population of Wasilla, ranging from my “about 5,000″, up to 9,000. The day Palin’s selection was announced a city official told me that the current population is about 7,000. The official 2000 census count was 5,460. I have used about 5,000 because Palin was Mayor from 1996 to 2002, and the city was growing rapidly in the mid-90′s.

Reposted from the Huffington Post.

Working Together

Monday, September 8th, 2008
Always tell only the truth, and all the truth, and do so promptly — right now.” –Buckminster Fuller

The Day the Wheels Came Off

James Howard Kunstler

    Why do the big deals always happen over the weekends? So the big boyz in government and finance can take off their neckties when they bargain with each other? So the markets will be closed and unable to register a response one way or another? So the shrinking fraction of the US public that pays attention to anything besides Nascar and pornography won’t catch the news Saturday evening?

     This weekend’s big deal was the US government taking over the “government sponsored enterprises”(GSEs) Fannie Mae and Freddie Mac that guarantee trillions of dollars in mortgages. The “guarantee” is supposedly accomplished by converting bundles of mortgages from the banks and loan companies that originate them (that make the contracts with the buyers of houses) into bonds that can be sold downstream. Risk was theoretically dispersed among the holders of these bonds. This all seemed to work during the long stable period when our cheap oil economy was chugging along, and house prices maintained a consistent relationship with incomes, and people paid their mortgages dependably. The whole system ran like a reliable machine — like a Chrysler slant-six engine!

     Until the cheap oil age came to an end. Then, all parts of the system shook apart. It was the end of cheap oil that catalyzed the housing collapse and, by extension, the current huge financial crisis. But the run up to it was like a bounce off a high diving board into an empty pool. The bounce came around 2001 when it became apparent that the US standard-of-living could not be maintained on incomes in a post-cheap-oil economy. The trauma of 9/11 prompted a new and utterly insane consensus to form that the US standard of living could be switched over from income to massive debt. All the normal brakes against irresponsible lending and borrowing came off — embodied in Alan Greenspan’s absurd statement that it was a good time to assume an adjustable rate mortgage when interest rates were at a historic low — meaning they could only be adjusted upwards. Why hold Greenspan responsible? Because he was at the apex of the authority vested with establishing norms, and he shoved our behavior into the realm of the recklessly abnormal, and he should have known better.

      The public went along with it because “free money” and high living are fun. Their behavior was reinforced by other authorities — for instance, President Bush, who told Americans to go shopping after the 9/11 attacks. (They went shopping with credit cards.) Things really wobbled in 2005 — which was, coincidentally, the year of all-time world-wide peak conventional oil production — with hurricanes Katrina and Rita ripping through the Gulf of Mexico oil rigs as a dramatic highlight. (It was also the year that The Long Emergency was published.)

      Since then, the US economy and the financial part of it that became a nine hundred pound tail wagging a thirty-pound dog, has been held together with baling wire, duct tape, and band-aids. All the debt run up by all parties — home-owners, credit-card holders, business, banks, hedge funds, government — is not being paid back reliably, and all the leveraged arrangements that depend on it being paid back are coming apart. Thus, capital disappears. The wealth of a nation disappears. All that remains is the pretense that we are still a wealthy society.

    Fannie and Freddie are near the center of this black hole of debt. So far, the black hole has been “papered over” by the old stage magician’s trick of diverting the audience’s attention. The systemic wound that Bear Stearns represented, was covered up with a band-aid applied by the Federal Reserve’s exchange of loans for worthless securities. In fact, the capital of Bear Stearns actually did disappear — a mere residue of it, a few cents on the dollar, was shifted to JP Morgan as payment for taking the wrapper off the band-aid. But, basically, the money is gone.

     Now, the same thing has happened with Fannie and Freddie, except that the scale is an order of magnitude greater. This time, the US Treasury Department is assuming worthless paper and paying out much larger loans to enterprises that are functionally bankrupt. The exact nature of the government’s chartered “sponsorship” has always been ambiguous. Professional opinion has generally held that government backing was implied rather than explicit — but that’s a ridiculous internal contradiction that went unchallenged for decades as Fannie and Freddie’s Ponzi-style operation lumbered on (and their executives made off with obscene payouts). Now the government’s role has suddenly been made explicit. It will probably only make things worse, since the enterprises are too big and over-scaled to work under any circumstances, let alone insolvency.

     One thing this points to is a truth that is uniformly overlooked by kibitzers: that what we developed over the past decade in America was not an
“information economy” or a “consumer economy” but a suburban sprawl building economy, meaning an economy dedicated to building a living arrangement with no future. The climax of the sprawl building economy occurred in absolute lockstep with the climax of peak oil. You can date it virtually to the month — May, 2005. After that, the future asserted itself and all the financial expectations bound up with sprawl-building went up in a vapor — including the value of mortgages on suburban houses. Everything that followed has been an attempt to cover up this basic reality: that the way we live in America can’t continue.

     The reason our energy debate is so hollow and idiotic is because we can’t face this basic reality. The fantasy-du-jour among both political parties is that we can become “energy independent.” By this they mean we can keep on living the way we do by means other than oil. This is just not true. We have to make profound changes in everything we do from the way we inhabit the landscape to the way we produce our food. Lately, the only change we’ve shown any interest in is changing what our cars run on. But that is not going to rescue us, not even a little. Our inability to talk about anything else except the cars will drag us down into poverty and turmoil.

     The housing market is not coming back. Ever. In the form that we knew it. The suburban project is over. That version of the American Dream is over. We’ll be a lot better off if we put aside dreaming altogether for a while and start focusing on reality instead — that part of the day when we’re awake and capable of actually doing things. We’ve got a lot to face and a lot to do.

     The government takeover of Fannie and Freddie is just another papering-over of our fundamental problem — that until we embark on new ways of being a nation, of living differently and working differently on different things, the other nations of the world will not have confidence in us, or the paper we issue, and we will not really have confidence in ourselves.

     I have believed all along — and said as much in The Long Emergency – that we would not get through this crisis without passing through a period of hardship. We’re entering it now. Even if the stock markets shoot up five hundred points today on the basis of the Fannie-Freddie deal (and the mistaken belief that our troubles are over), we are only at the beginning of a very painful workout. Personally, I think we’re in for financial carnage before the election. The Fannie-Freddie deal may be the place where the wheels really come off.

Copyright 2008 James Howard Kunstler


The author’s new novel of the post-oil future, World Made By Hand, is available at all booksellers. Read more at his website.

Working Together

Saturday, September 6th, 2008
ìTake a load off Fanny, take a load for free;
ìTake a load off Fanny, and (and) (and)
ìYou put the load right on me.”

 – The Band, ìThe Weight,” 1968

Take a Load Off Fanny: Bailout or Nationalization

Ellen Brown

Fannie Mae and Freddie Mac own or guarantee nearly half the $12 trillion U.S. mortgage market. Not long ago, they were the darlings of Wall Street, ranking next to U.S. bonds as among the safest and most conservative investments in the world. They are called ìgovernment-sponsored enterprises” (GSEs), although they are entirely privately owned and specifically disclaim government backing on their prospectuses. The market has taken these disclaimers with a wink and a nod and has assumed that the GSEs are ìtoo big to fail,” forcing the government to save them from their reckless investment schemes. Fannie and Freddie´s preferred shares have been considered so safe that banking regulators let banks count them in the capital required as a cushion against loan losses. This is now proving to be a serious problem, because both the common and preferred shares of the distressed duo are suddenly plunging. Between May 15 and August 25, Fannie´s common shares lost 77% of their value, while its preferred shares lost 58.8% in that short time. Freddie Mac´s preferred shares plunged even more, down 65.5%.1 That could be a disaster for many banks, which are loaded to the gills with these preferred shares. Banks already reeling from losses on mortgages and mortgage-backed securities are now being hit at the core, shrinking their capital base. Loss of bank capital works as leverage in reverse: at a capital requirement of 10%, $1 lost in capital wipes out $10 in loans.

Ironically, the recent plunge in Fannie and Freddie shares has been blamed on the bailout plan that was supposed to save them.  In July, Treasury Secretary Hank Paulson sought and was granted the authority to extend an unlimited credit line to the GSEs, which now have liabilities totaling about $5 trillion; and to capitalize them by buying their stock, effectively nationalizing them.  At a July 15 hearing in Washington, Paulson assured a group of Senators that Congress probably would not have to go through with the plan. ìIf you have a bazooka in your pocket and people know it,” he said, ìyou probably won´t have to use it.”  But bazookas can spook the very people they were supposed to reassure.  After the plan was approved, foreign central banks slashed their Fannie and Freddie bond purchases by more than 25%, and shareholders rushed to dump their stock.  On August 22, Moody´s downgraded Fannie and Freddie´s outstanding preferred stock by a full five notches, from A1 to Baa3 (or slightly above ìjunk”), and their Bank Financial Strength Ratings from B- to D+ (a one-half notch above D, something reserved for companies in default).  Since the private sector isn´t buying, the Treasury is likely to wind up capitalizing the companies by buying new stock itself, seriously diluting the value of existing shares.  A government bailout would be expected to wipe out the common shares, but it is becoming increasingly clear that the preferred stock is in jeopardy as well, jeopardizing the banks that hold it. 

There are other aspects of Paulson´s bailout plan that could be giving policymakers Maalox moments.  As noted in a July 17 Economist article:

ì[N]ationalisation . . . would bring the whole of Fannie´s and Freddie´s debt onto the federal government´s balance sheet. In terms of book-keeping this would almost double the public debt, but that is rather misleading. It would hardly be like issuing $5.2 trillion of new Treasury bonds, because Fannie´s and Freddie´s debt is backed by real assets. Nevertheless, the fear [is] that the taxpayer may have to absorb the GSEs´ debt . . . . That suggests yet another irony; the debt of the GSEs has been trading as if it were guaranteed by the American government, but the debt of the government was not trading as if Uncle Sam had guaranteed that of the GSEs.”2

The U.S. federal debt is already up to nearly $10 trillion, putting its own triple-A credit rating in jeopardy. If the U.S. assumes the GSEs´ weighty liability as well, the country could lose its own triple-A rating, causing foreign lenders to withdraw their massive infusion of funds.3 But if the U.S. does not back the GSEs´ debt, the result could be the same. China´s $376 billion of long-term U.S. agency debt is mostly in Fannie and Freddie assets. Yu Yonding, a former adviser to China´s central bank, warned on August 21:

ìIf the U.S. government allows Fannie and Freddie to fail and international investors are not compensated adequately, the consequences will be catastrophic.  If it is not the end of the world, it is the end of the current international financial system.”4

The Endgame Nears

It sounds pretty grim, but let´s think about that.  Would the end of the current financial system really be so bad?  The international financial system is now controlled by a network of private central banks that print national currencies and trade them with sovereign governments for government bonds (or debt).  The bonds then become the basis for creating many times their value in loans by commercial banks.  At a 10% reserve requirement, banks are allowed to fan $1 worth of reserves into $10 in loans, effectively delivering the power to create money into private hands.  The price exacted by this private money-creating machine is compound interest perpetually drawn off the top, in a Ponzi scheme that has now reached its mathematical limits.  The chief role of Fannie and Freddie has been to keep the Ponzi scheme alive by adding ìliquidity” to markets, something they do by buying mortgages and bundling them together as securities that are then sold to investors.  Old loans are moved off the banks´ books, making room for new loans, further expanding the money supply and driving up home prices.  As economist Michael Hudson noted in Counterpunch in July:

ìAltruistic political talk aside, the reason why the finance, insurance and real estate (FIRE) sectors have lobbied so hard for Fannie and Freddie is that their financial function has been to make housing increasingly unaffordable. They have inflated asset prices with credit that has indebted homeowners to a degree unprecedented in history. This is why the real estate bubble has burst, after all. Yet Congress now acts as if the only way to resolve the debt problem is to create yet more debt, to inflate real estate prices all the more by arranging yet more credit to bid up the prices that homebuyers must pay.

ì. . . The economy has reached its debt limit and is entering its insolvency phase.  We are not in a cycle but the end of an era. The old world of debt pyramiding to a fraudulent degree cannot be restored . . . . The class war is back in business, with a vengeance. Instead of it being the familiar old class war between industrial employers and their work force, this one reverts to the old pre-industrial class war of creditors versus debtors. Its guiding principle is ‘Big Fish Eat Little Fish,´ mainly by the debt dynamic that crowds out the promised economy of free choice.

ì. . . No economy in history ever has been able to pay off its debts. That is the essence of the ‘magic of compound interest.´  Debts grow inexorably, making creditors rich but impoverishing the economy in the process, thereby destroying its ability to pay. Recognizing this financial dynamic most societies have chosen the logical response. From Sumer in the third millennium BC and Babylonia in the second millennium through Greece and Rome in the first millennium BC, and then from feudal Europe to the Inter-Ally war debts and reparations tangle that wrecked international finance after World War I, the response has been to bring debts back within the ability to pay.

ìThis can be done only by wiping out debts that cannot be paid. The alternative is debt peonage. Throughout most of history, countries have found again and again that bankruptcy – wiping out the debts – is the way to free economies. The idea is to free them from a situation where the economic surplus is diverted away from new tangible investment to pay bankers. The classical idea of free markets is to avoid privatizing monopolies, such as the unique privilege of commercial bankers to create bank-credit and charge interest on it.”5

Bailout or Conservatorship?

Under current law, if the GSEs´ capital falls too far below required levels, the Office of Federal Housing Enterprise Oversight (their regulator) is authorized to take control of the firms and impose a conservatorship, a form of bankruptcy.  As former Federal Reserve consultant Walker F. Todd explained in a July 23 article:

ìTraditionally, conservatorship freezes existing bank accounts and then allows limited withdrawals until authorities determine how much of those frozen accounts may be distributed pro rata to the claimants. After the appointment of a conservator, new deposits and other funds received as well as new investments would be fully protected.”6

 Prior claimants satisfy their claims against available assets according to seniority, with lenders being senior to shareholders. The proceeds from any new business are kept separate. Fannie and Freddie investors would take some losses, but the available pot for settling claims is quite large. As Hudson observes:

ì[N]ot all the mortgages that these two agencies have bought or guaranteed are junk.  Most are genuine and are being paid. . . . Let these mortgages continue to back the existing FNMA and Freddie Mac bonds to the degree that they actually receive mortgage debt service.  If there is a shortfall, let the bondholders take the usual haircut that is supposed to go hand in hand with risk. . . . That is the law for all other bondholders when their investments go south.  Why make an exception for participants in the real estate bubble? . . . To keep their activities current, let Fannie and Freddie issue a new series of bonds – the ‘we won´t fake it anymore´ series.”

Nouriel Roubini is Professor of Economics at New York University and has a popular website called Global EconoMonitor.  He estimates that the haircut for securities holders would be a modest 5% ($250 billion on $5 trillion).  Securities holders are getting a subsidy of $50 billion a year over what they would earn if they had invested in U.S. Treasuries, specifically because Fannie and Freddie carry more risk; and risk means the occasional haircut.  Roubini concludes:

ìIt is . . . time to put a stop to the coming ‘mother of all bailouts´ starting with a firm stop to the fiscal rescue of Fannie and Freddie, institutions that have behaved for the last few years like the ‘mother of all leveraged hedge funds´ with their reckless leverage and reckless financial activities.

ì. . . [L]et´s call a spade a bloody shovel: nationalise Freddie Mac and Fannie May. They should never have been privatised in the first place. . . . Increase taxes or cut other public spending to finance the exercise. But stop pretending. Stop lying about the financial viability of institutions designed to hand out subsidies to favoured constituencies.”7

Nationalization Without Taxation: Successful Historical Models

Roubini suggests that nationalizing Fannie and Freddie would require an increase in taxes or cuts in other public spending, but there are other possible funding solutions, ones with quite successful historical precedents.  If the multiple layers of profiteers, speculators, derivatives, commissions, bonuses, fees and general fraud were eliminated from the mix, a nationalized Fannie/Freddie could finance itself.  This was proven in the 1930s with the Home Owners´ Loan Corporation (HOLC), a government-owned agency set up to reverse a disastrous wave of home foreclosures.  The HOLC was funded by the Reconstruction Finance Corporation (RFC), another wholly government-owned agency that performed the functions of a public bank.  The RFC successfully funded not only the New Deal but America´s participation in World War II.  In a February 2008 article in The New York Times, Alan Binder recommended a return to the HOLC model as a way out of the current mortgage crisis.  He wrote:

ìThe HOLC was established in June 1933 to help distressed families avert foreclosures by replacing mortgages that were in or near default with new ones that homeowners could afford. It did so by buying old mortgages from banks . . . and then issuing new loans to homeowners. The HOLC financed itself by borrowing from capital markets and the Treasury. 

ìThe scale of the operation was impressive.  Within two years, the HOLC granted over a million new mortgages. (Adjusting only for population growth, the corresponding mortgage figure today would be almost 2.5 million.) Nearly one of every five mortgages in America became owned by the HOLC. Its total lending amounted to $3.5 billion. . . . (The corresponding figure today would be about $750 billion.)

ìAs a public corporation chartered for a public purpose, the HOLC was a patient and even lenient lender. . . . But times were tough in the 1930s, and nearly 20 percent of the HOLC´s borrowers defaulted anyway.  So the corporation eventually acquired ownership of about 200,000 houses, nearly all of which were sold by 1944. The HOLC closed its books in 1951, or 15 years after its last 1936 mortgage was paid off, with a small profit. It was a heavy lift, but the incredible HOLC lifted it.

ìToday´s lift would be far lighter. . . . Given current low interest rates, a new HOLC could borrow cheaply and should find it easy to earn a two-percentage-point spread between borrowing and lending rates, for a gross profit of maybe $4 billion to $8 billion a year.”8

The RFC initially capitalized the HOLC by buying all of its stock for $200 million.  The HOLC was then authorized by statute to issue ten times that sum (or $2 billion) in tax exempt bonds.  In the same way, in 1937-38 the RFC created and funded Fannie Mae as a wholly government-owned agency, for the purpose of injecting money into the banking system so that banks could increase the volume of home mortgages.  The RFC and its agencies funded their operations by selling bonds at a modest interest to the Treasury and the public, then relending the acquired funds at a slightly higher interest.  The ìspread” was sufficient to cover operating costs and losses from default and still turn a modest profit.

How did the HOLC manage to reverse a far worse foreclosure crisis than we have today and still turn a profit, when Fannie and Freddie – which also raise their loan money by selling securities to investors – have become hopelessly bankrupt in that pursuit?  The difference seems to be that the HOLC was a public institution operated as a public service.  Fannie and Freddie are private, profit-making ventures designed to make money for their investors and political exploiters.  As Professor Roubini observes, ìThese GSEs were designed to make losses. They are expected to make losses. If they don´t make losses they are not serving their political purpose.”  When the profiteering is taken out and the business is run as a public service, the math works.

There is another American model that is even older than the HOLC, which presents even more exciting possibilities.  In the first half of the 18th century, the province of Pennsylvania completely funded its government without taxes or debt, through a publicly-owned bank that issued paper currency and lent it to farmers.  The bank did not have to borrow capital before it made loans; it just created the currency on a printing press.  The money was lent rather than spent into the economy, so it came back to the government in a circular flow, avoiding inflation; and interest on the loans was sufficient to fund the government´s operations without taxation.  Such a public bank today could solve not only the housing crisis but a number of other pressing problems, including the infrastructure crisis and the energy crisis.  (See E. Brown, ìSustainable Energy Development: How Costs Can Be Cut in Half,” webofdebt.com/articles, November 5, 2007).

Once bankrupt businesses have been restored to solvency, the usual practice is to return them to private hands; but a better plan for Fannie and Freddie might be to simply keep them as public institutions.  In the August 8 London Tribune, British MP Michael Meacher proposed this alternative for Northern Rock, a major British bank that was recently nationalized after becoming insolvent.  He wrote:

ì[W]hen the banks have failed the public interest so badly and still even now continue to pursue so single-mindedly their commitment to privatise their gains whilst socialising their losses, would not a publicly owned bank be the most effective way of changing the current corrosive financial culture of short-termism, lower investment, house price inflation, and insider enrichment at the expense of systemic fragility for everyone else? Perhaps we should not return Northern Rock to the private sector after all.”9

Perhaps we should not return Fannie and Freddie either.

Copyright 2008 Ellen Brown


1 Martin Weiss, ìThe Greatest Bailout of All Time,” Money and Markets (August 25, 2008).
2 of Illusions,” Economist (July 17, 2008).
3 Nouriel Roubini, ìHow to Avoid the ‘Mother of All Bailouts´”, Global EconoMonitor (July 11, 2008).
4 Kevin Hamlin, ìFreddie, Fannie Failure Could Be World ‘Catastrophe,´ Yu Says,” Bloomberg (August 22, 2008).
5 Michael Hudson, ìWhy the Bail Out of Freddie Mac and Fanny Mae is Bad Economic Policy,” Counterpunch (July 15, 2008).
6 Walker Todd, ìReceivership or Conservatorship for Fannie Mae, Freddie Mac, and Failing Banks,” American Institute for Economic Research (July 23, 2008).
7 N. Roubini, op.cit.
8 Alan Blinder, ìFrom the New Deal, a Way Out of a Mess,” New York Times (February 24, 2008).
9 Meacher, ìA Bank Too Far?”, The Tribune (August 8, 2008) (emphasis added).
   
Ellen Brown, J.D., developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and ìthe money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her eleven books include the bestselling Nature´s Pharmacy, co-authored with Dr. Lynne Walker, and Forbidden Medicine.

See: Web of DebtGlobal Research Articles by Ellen Brown