US Economy

[Edward Campbell]

I am not sure that that table is all that it purports to be.

If it is an indication of national holdings then Luxembourg and Switzerland are particularly screwed.

On the other hand if it represents the banking centre in which those bonds are held - often by offshore interests - then the picture becomes, fittingly for our times, considerably more murky.

The real "tells", I believe, are the very high exposures in traditional banking centres - like Luxembourg and Switzerland as well as Britain and the Netherlands - as well as new comers like Singapore, Hong Kong and Ireland.

The clincher didn't make it to this list because it was difficult to divine the GDP of the entity

The Bahamas, Turks & Caicos, Cayman Islands etc (many of them British Dependencies like Jersey, Guernsey and Man) hold an additional 161.2 BUSD in treasuries.

Country USTS GDP USTS/GDP
BUSD BUSD
Luxembourg 62 41 151.2%
Switzerland 148 325 45.5%
Hong Kong 108 326 33.1%
Japan 937 4310 21.7%
Singapore 58 292 19.9%
Ireland 34 172 19.8%
UK 397 2173 18.3%
Taiwan 150 822 18.2%
China 1137 10090 11.3%
Brazil 210 2172 9.7%
Thailand 55 587 9.4%
Norway 22 255 8.6%
Israel 18 219 8.2%
Belgium 32 394 8.1%
Chile 19 258 7.4%
Phillippines 25 351 7.1%
Canada 83 1330 6.2%
Sweden 21 355 5.9%
Colombia 21 435 4.8%
Russia 97 2223 4.4%
Turkey 39 961 4.1%
Poland 29 721 4.0%
Netherlands 23 677 3.4%
Malaysia 13 414 3.1%
Korea, South 32 1459 2.2%
Germany 60 2940 2.0%
Mexico 28 1567 1.8%
Australia 12 882 1.4%
Italy 24 1774 1.4%
France 29 2145 1.4%
India 38 4060 0.9%


GDP data from CIA World Factbook (PPP model)

:goodpost:

Yes, thanks, good catch.

 

[a_majoor]

This op ed is a pretty clear description of Trudeopian Canada as well:

http://www.nytimes.com/2011/10/30/opinion/sunday/douthat-what-tax-dollars-cant-buy.html?_r=3&ref=opinion

What Tax Dollars Can’t Buy
By ROSS DOUTHAT
Published: October 29, 2011

OVER the last 30 years, the U.S. economy has generated more large fortunes and more stress for the middle class. While the rich have grown extraordinarily rich, median wages have barely increased, the costs of health care and higher education have jumped, and socioeconomic mobility has lagged behind that of other developed nations. Americans have never begrudged the wealthy their success, as long as they had a chance to rise higher than their parents, and perhaps get rich themselves. But our era of diminished expectations is putting that in doubt.

From the drum circles of Zuccotti Park to the hustings of Barack Obama’s re-election push, a suddenly invigorated liberalism thinks that it has the answer to this angst: a renewed demand for higher taxes on America’s richest 1 percent. And if all you care about is reducing measured income inequality, then the Occupy Wall Streeters and their Democratic admirers have it right. Tax millionaires sufficiently and you’ll end up with a more equal society. The tallest poppies will be trimmed, and some of their income will find its way to someone’s else pocket.

But true social mobility and broadly shared prosperity are not so easily achieved. Remember that those tax dollars, once collected, would not be disbursed with perfect effectiveness to the most deserving members of the American middle class. Instead, they would be used to buy a little more time for our failing public institutions — postponing a reckoning with unsustainable pension commitments, delaying necessary reforms in our entitlement system and propping up an educational sector whose results don’t match the costs.

More spending in these areas won’t necessarily buy us more mobility. The public-sector workplace has become a kind of artificial Eden, whose fortunate inhabitants enjoy solid pay and 1950s-style job security and retirement benefits, all of it paid for by their less-fortunate private-sector peers. Some on the left have convinced themselves that this “success” can lay the foundation for a broader middle-class revival. But if a bloated public sector were the blueprint for a thriving middle-class society, then the whole world would be beating a path to Greece’s door.

Our entitlement system, meanwhile, is designed to redistribute wealth. But this redistribution doesn’t go from the idle rich to the working poor; it goes from young to old, working-age savings to retiree consumption, middle-class parents to empty-nest seniors. The Congressional Budget Office’s new report on income inequality points out that growing Medicare costs are part of the reason upper-income retirees receive a larger share of federal spending than they did 30 years ago, while working-age households with children receive “a much smaller and declining share of transfers.” Absent reforms, this mismatch will only grow more pronounced: by the 2030s, Medicare recipients will receive $3 in benefits for every dollar they paid in.

Then there’s the public education system, theoretically the nation’s most important socioeconomic equalizer. Yet even though government spending on K-to-12 education has more than doubled since the 1970s, test scores have flatlined and the United States has fallen behind its developed-world rivals. Meanwhile, federal spending on higher education has been undercut by steadily inflating tuitions, in what increasingly looks like an academic answer to the housing bubble. (If the Occupy Wall Street dream of student loan forgiveness were fulfilled, this cycle would probably just continue.)

The story of the last three decades, in other words, is not the story of a benevolent government starved of funds by selfish rich people and fanatical Republicans. It’s a story of a public sector that has consistently done less with more, and a liberalism that has often defended the interests of narrow constituencies — public-employee unions, affluent seniors, the education bureaucracy — rather than the broader middle class.

The alternative to this liberalism should not, however, be the kind of reverse class warfare currently being championed by the not-Romney candidates in the Republican field, whose flat-tax fantasies would ask working Americans to bear more of the burden for public institutions that have been failing them for years.

Rather, it should be a kind of small-government egalitarianism, which would seek to reform the government before we pour more money into it, along lines that encourage upward mobility and benefit the middle class. This would mean seeking a carefully means-tested welfare state, a less special interest-friendly tax code, and a public sector that worked for taxpayers and parents rather than the other way around.

This was the potential message that had some of us excited about the prospects of either a Mitch Daniels or a Chris Christie candidacy. Given his background and his bank account, Mitt Romney is an unlikely champion for a more egalitarian conservatism. But it wouldn’t be the first time that an American patrician has emerged as a champion of the common man.

 

[a_majoor]

If reality has reached San Fransisco's city hall, then perhaps there is hope after all. The combined unfunded liabilities of public sector pensions is over $2 trillion dollars; who knows how much more for health care benefits? The backlash against the public sector unions wil probably be very intense; the people being forced to hand over their tax dollars to pay the extravagent wages, benefits and pensions of public sector union employees generally make far less, and have far lower pension or health care benefits, if any.

http://blogs.the-american-interest.com/wrm/2011/11/05/blue-san-francisco-plans-to-stiff-the-unions/

Blue San Francisco Plans To Stiff The Unions

Scott Walker move over; San Francisco is the latest front line in the battle against abusive public sector unions.
The bluest city in the bluest state in the union has woken up and smelled the latte; generations of extortionate collusion between shamelessly greedy and shortsighted union leaders and unforgivably opportunistic and irresponsible politicians have left the Blue Paradise on the Bay with a pension bill that it simply can’t pay.  As MercuryNews.com tells it,

San Francisco’s public pension system took a beating during the recession, which has left it carrying a hefty unfunded liability for its 26,000 current and 28,000 retired employees. The city’s pension obligation is growing by $100 million a year, leaving less funding for police and fire protection, park maintenance and health services for the needy.Unable to keep up, San Francisco is among several California cities asking voters to help tackle the public pension problem—which is now one of the biggest causes of municipal budget shortfalls.

Several things about this story deserve a closer look; one is that Blueville by the Bay has more retired workers than current employees.  Unless San Francisco has been on a hitherto unnoticed frenzy of cost cutting and layoffs, this means that the city has long had a grotestquely out of line pension system that permits people to retire much earlier than they should.  A more reasonably retiree ratio would be something like one to four; a one to one ratio means that the city is paying as many people to rest as it is to work.  The technical term for this in accounting circles is “blind folly”.  It is often written in Greek: ατη and it is well known as the stage that comes between hubris and nemesis while a tragedy unfolds.

San Francisco may be the Athens of the West, but it is not the only California city that is taking ballot measures to the voters as a way of reducing unsustainable pension obligations.  San Diego and San Jose are also planning ballot measures; the unconscionable collusion between greedy union leaders and ambitious politicians threatens to ruin cities up and down the coast.

California’s shortsighted unions and politicians have left their successors in a horrible position: do you slash pensions that old people rely on, or do you cut government services like police, fire protection and education?  Taxpayers generally favor the first alternative; it is hard to persuade hardworking immigrants struggling to raise kids that they should send their kids to bad schools on dirty, unsafe streets to save the money necessary honor abusive contracts made by past generations of labor and political bosses.

The courts, however, take a different view.  Contracts are contracts and cannot lightly be broken.  Union lawyers are appealing ballot initiatives and pension changes in the courts; often, they win.

Via Meadia thinks that contracts ought normally to be honored, but some agreements are so unrealistic that they are unenforceable.  If the unions fight too aggressively in the courts, the cities can always go bankrupt.

Meanwhile, the public unions in California are isolating themselves politically.  Insisting on “geezers first, kids last” public policy is neither decent nor honorable nor wise.  The political and economic failures of the Baby Boom generation are nowhere more obvious than in California.  The Boomers inherited a golden state of promise and dynamism; as they begin to retire they are leaving it a debt ridden hulk — and the wrecking crew wants fat pensions for a job well done.

Many will have to make do with less than they’d expected; a generation that failed to make California rich enough to afford generous pensions will not be able to collect.

 

[a_majoor]

The collapse of the US government's "green energy" policy will probably lead to a similar collapse here in Ontario. The few companies which are actually competative will benefit from the elimination of their heavily subsidized competition:

http://reason.com/archives/2011/11/04/america-waking-to-light-of-chinese-sun

[quot]
America Waking to Light of Chinese Sun?
Pot calls kettle green in solar dumping petition.

Tim Cavanaugh | November 4, 2011

It’s hard to spot all the absurdities in the death spiral of the U.S. government’s green energy policy. But here’s a big one: A group of solar equipment makers is trying to lock inexpensive products out of the United States, and the argument of these subsidized companies is that subsidies create an unfair market.

Late last month the Coalition for American Solar Manufacturing (CASM), a group of seven domestic solar equipment makers led by SolarWorld Industries America Inc., petitioned the Department of Commerce and the International Trade Commission (ITC) over crystalline silicon photovoltaic cells (whether or not assembled into modules) from the People’s Republic of China.

SolarWorld, the U.S. branch of a German company, alleges that Chinese manufacturers, using subsidies from Chinese taxpayers, are “dumping” their products—selling them at less than cost—in the U.S. market. Along with its six cohorts (whose petition is not being supported by the Solar Energy Industries Association, the main solar trade group), SolarWorld is seeking a finding of “damage” to the American industry and a countervailing tariff on Chinese solar imports.

President Barack Obama has lost no time in showing his support for the protectionist petition.

“We have seen a lot of questionable competitive practices coming out of China when it comes to the clean energy space, and I have been more aggressive than previous administrations in enforcing our trade laws,” the president told a Portland, Oregon TV station during a West Coast fundraising tour. “We have filed actions against them when we see these kinds of dumping activities, and we’re going to look very carefully at this stuff and potentially bring actions if we find that the basic rules of the road have been violated.”

Commerce and the ITC will not comment on the action until they decide whether to launch an investigation, but the evidence so far—even if we accept the anti-competitive, anti-consumer logic of “antidumping” laws—indicates SolarWorld’s cartel has a very weak case, as well as an extremely hypocritical complaint. Trina Solar Ltd., a Chinese manufacturer, tells BusinessWeek that even the well-known largesse of China’s Marxist government is modest compared to the pork dispensed by the American republic:

Jifan Gao, chief executive officer of Changzhou-based Trina, said China Development Bank Corp. charges interest at the “market’s average level” of 6 to 7 percent. That exceeds the average rate of about 5 percent offered to Solyndra on $70 million the U.S. panel maker borrowed in 2011 before filing for bankruptcy protection in September, according to Bloomberg calculations based on filings by a U.S. Treasury bank.

Gao’s comments are the clearest defense yet by a Chinese solar executive against accusations they’ve used more than $30 billion in state subsidized loans to dump panels on overseas markets. U.S. manufacturers led by SolarWorld AG asked the Obama administration to slap duties of as much as 100 percent on more than $1 billion in Chinese imports to counter what they called illegal aid. That added to the debate in the U.S. over publicly funding solar companies that exploded with Solyndra’s collapse.

A look at the documents on ITC’s website (search for investigation number 701-481) supports Trina’s claim. Out of a total of 74 documents so far filed in the solar dumping petition, 46 of them—62 percent—are confidential. And the 28 that can be viewed contain plenty of oddities.

At one point, SolarWorld notes, for example, that the Shandong Province Energy Fund provides RMB 2.133 billion in order to “finance renewable energy developers, supporting activities ranging from manufacturing to technology developers.” That sounds like a lot, and it is a lot. It comes to $337,509,217.11—about 64 percent of what U.S. taxpayers lost on Solyndra alone. The Department of Energy’s Energy Efficiency and Renewable Energy (EERE) program lavished $2.2 billion on domestic manufacturers in 2010, and DOE’s 2012 budget request jacks that up to $3.2 billion.

The Commerce investigation will only cover the effects of Chinese products on U.S. manufacturers. It will not address the effects of subsidies for American manufacturers by American taxpayers, nor will it examine the benefits inexpensive imports provide to buyers of solar material. The International Trade Commission (formerly the U.S. Tariff Commission) will supposedly take a broader look at the domestic market for solar panels. But it’s striking that as of this stage, end users do not appear to have been consulted. Certainly the people who spend their own money on solar products—and who will have to pay any tariff that gets imposed—deserve a say in what constitutes damage to the American solar market.

But one solar industry observer points out the paradox of heavily subsidized American companies seeking to punish Chinese manufacturers (via American consumers) for winning the same game they themselves are trying to play. John L. Whisman, CEO of VeriSol, Inc., a solar marketing, development consultant, points out that the United States is a net exporter of solar technology by a margin of about $1.9 Billion.

“This is simply a self interested play by a group attempting to protect their businesses,” Whisman said in an interview. “I think it's shortsighted because economics is a long run game. [SolarWorld and its co-complainants] know that they may achieve some favorable result based on the idea that politics is a short run game.”

You may have heard that there’s an election next year. Obama’s domestic policies have produced nothing but failure, so it’s not clear what, if anything, he should be saying as he transitions into a full-time campaign schedule. But while his well-established protectionism may still pay dividends, the president’s perverse loyalty to green subsidies can only lead to more shame.

We can put this into dialectical-materialist terms that China’s rulers, Obama’s community-organizer mentors, and even the “Marxist professors and structural feminists and punk-rock performance poets” the future president met in school can all understand:

The great green superstructure is collapsing amid the contradictions of material life, as the conflict between the forces of production and the social relations of surplus value undermines the president’s renewable energy policy. The green boondoggle has failed. Suing people in other countries won’t turn it into a success.

Tim Cavanaugh is managing editor of Reason.com.
[/quote]

 

[Kalatzi]

How Cutting Pentagon Spending Will Fix U.S. Defense Strategy
Austerity is the Best Possible Auditor

link here http://www.foreignaffairs.com/articles/136637/benjamin-friedman/how-cutting-pentagon-spending-will-fix-us-defense-strategy?page=show

"Washington's defense establishment is incapable of making the kind of strategic shift these cuts would suggest, as politicians remains wedded to existing American military commitments. The White House, moreover, considers strategy a question for the military, and the Pentagon is never going to slash its own budget by explaining the uselessness of its own missions.

Those looking to trim the Pentagon budget significantly should follow the Nike approach: Just do it. Telling the services what their new budget is, but not how to reach it, will force a new kind of efficiency on the Pentagon. Military leaders will prioritize when they have to. With less money, they will sacrifice less important tasks and administrative bloat while salvaging their favored missions. Meanwhile, civilian leaders should jettison the so-called golden ratio, by which each service receives a fixed share of the Pentagon budget. If the services are forced to compete for the same funds, as they did in the 1950s, they will expose flaws in others' arguments and improve their own. "

Don't hold you breath.

 

[a_majoor]

This is bizarre, but  the idea of a Quid pro quo arrangement among "like minded" crony capitalists and politicians spanning international boundaries should not be surprising. If fact, given the massive failure to stampede people into various "Global Warming" schemes/scams, quietly fleecing the taxpayer is probably "plan B".

http://pjmedia.com/blog/another-doe-loan-scandal-abengoa/?print=1

Another DOE Loan Scandal: Are We Bailing Out Spain’s Solar Collapse?

Posted By Richard Pollock On November 10, 2011 @ 12:00 am In "Green" tech,economy,Europe,Money,Politics,Science,Science & Technology,Spain,US News,World News | 38 Comments

Yet again, evidence of impropriety surrounds the issuance of federal Department of Energy “green” loan guarantees — in this instance, loans were granted to a foreign company with Democratic Party ties.

Over the last two years, DOE Secretary Steven Chu has awarded Spain-based Abengoa — a sprawling, multi-national industrial firm operating in 70 countries — loan guarantees worth a staggering $2.78 billion for solar [1] and ethanol plants [2].

Abengoa is a Madrid-based conglomerate that operates throughout Europe, the Middle East, Latin America, and Asia. It is not starved for cash: according to its 2009 annual [3] report, the firm was valued at $25.5 billion, enjoying a cash flow of $4 billion and a net profit of $288 million. It is traded on the Madrid and Barcelona stock exchanges and employs more than 25,000 workers.

At first glance, Abengoa does not appear to require U.S. government-backed loan guarantees. In 2010 it qualified for private bank loans in 11 countries worth $161 million [4]. In July 2009 alone,  Abengoa issued convertible bonds in Europe [5] worth $688 million.

Overall, the Energy Department has awarded Abengoa three separate loan guarantees.

One was awarded on September 29, just before the deadline for the end of the fiscal year. This $132 million [6] loan guarantee went to Abengoa Bioenergy Biomass of Kansas for the construction of an ethanol plant to be built in Dodge City. Earlier in September, a $1.2 billion loan guarantee was awarded to Abengoa to construct a solar facility in the Mojave desert [7]. And in July 2010, DOE awarded a $1.45 billion loan guarantee to Abengoa’s Solana solar project [1]. It is a highly leveraged arrangement: the deal was structured [8] in such a way that the company has to put up very little of its own money:

    Abengoa’s Solana 250 MW (net) project in Arizona finalized its Loan Guarantee from the DOE, which will cover up to $1.45B of the total $2.0B in project cost.

    A small percentage of the balance will come from Abengoa. The piece that remains (around 25% of the total cost) will need to come from direct equity investors (such as NRG) and tax equity investors (such as Morgan Stanley and Union Bank).

Congressional leaders say the September issuance of DOE loan guarantees — including the two for Abengoa — may have been part of a group of loans that were rushed by the DOE to meet a September 30 funding deadline [3]. In a September 20 letter to Energy Secretary Steven Chu [9], House Energy and Commerce Chairman Fred Upton (R-MI) wrote:

    We are concerned that another rush to meet stimulus deadlines will result in DOE closing those deals before they are ready.

DOE ignored Upton’s letter: by September 30, DOE had released more than $4.7 billion in federal funds to several “green” energy firms.

According to DOE, the $1.45 billion loan guarantee will employ or “save” 60 permanent jobs [1] at the Solana solar plant, working out to $24.2 million per permanent job “created or saved.” The Mojave solar plant is similar. It will save or create 70 permanent jobs [1], which is $17.1 million per permanent job. The biomass plant will create 65 permanent jobs [6]. That is a real job creator, generating each permanent job for $2 million.

The firm’s global profitability is due to non-renewable industrial activities; yet Abengoa’s U.S. solar and ethanol projects would not exist without the existence of Obama administration money. The $2.78 billion constitutes an American bailout of Spain — and Europe’s — collapsed solar industry.

As the Solyndra bankruptcy illustrates, solar technology is not profitable or sustainable without major government subsidies. Spain briefly enjoyed one of the most advanced solar industries in the world when it was subsidized by $26 billion in grants from the socialist-led Spanish government. However, the short-term injection of government funding was not sustainable. When the money ran out the Spanish solar industry collapsed, [10] and more than 30,000 solar energy workers lost their jobs.

For years, Abengoa has been extolled by former Vice President Al Gore [11], including during a high-profile speech he delivered at the company’s Spanish headquarters in October 2010. Gore himself invested in the company in November 2007. The day he announced his investment, the company’s stock jumped 7 percent [12].

The Spanish firm has connections to Democratic operatives. According to federal lobbying records, Democrat Mark Rokala [13] — a top Washington lobbyist who worked at the now-discredited Democratic lobbyist firm PMA — headed up Abengoa’s effort.

In 2008, PMA was embroiled in a government ethics “pay-to-play” scandal [14] in which the late Democratic Rep. John Murtha directed $137 million in government contracts to PMA clients. PMA and its clients in turn donated $2.37 million to Murtha and other Democratic congressmen who sat on a defense appropriations subcommittee.

In 2007, the non-profit Citizens for Responsibility and Ethics in Washington named Murtha one of the “most corrupt” members of Congress [15]. Rokala’s boss and PMA president Paul Magliocchetti is now serving a 27-month federal sentence for illegal campaign contributions [16]. PMA has shuttered its doors, but since 2006, Rokala has led the lobbying effort on behalf of Abengoa at another D.C. lobbying firm, Cornerstone.  Since 2006, Cornerstone has received $870,000 in lobbying fees [17] from Abengoa.

Abengoa’s reputation on the European Continent does not fare much better. In 2008, the company shared the “Worst EU Lobbying Award” given out by environmental groups including Friends of the Earth Europe. The company was cited [18] for making “false media claims about research that shows the EU can sustainably grow enough agrofuels to meet demand without needing imports.”

President Obama could be the “salvation” for the European solar industry, says Gabriel Calzada, president of Spanish think tank Instituto Juan de Mariana. He tells PJ Media:

    Companies like Abengoa have invested heavily in solar. … The subsistence of those branches of the company depend on the construction of new “profitable” plants since Spain (and Europe for that matter) is not anymore that profitable.

Calzada believes the Obama administration may be bailing out Europe’s ailing solar energy industry:

    The creation of new plants in countries like the U.S. that would now substitute the subsidies they have lost in Europe would represent their salvation.

Regarding Spain’s solar collapse, a solar industry representative tells the [19]New York Times [19]:

    [The crash] was an inevitable consequence of a policy that was not … a long-term sustainable market design,” said Julie Blunden, vice president of public policy at U.S.-based SunPower Corp. “Whenever you’ve got something that’s unsustainable, eventually it gives. And lo and behold, that happened.”

According to Chris Horner, a senior attorney at the Competitive Enterprise Institute, Abengoa is not an exception, but the rule for the Obama administration’s artificially stimulated “green” industry. He tells PJ Media, “This is not unique to Abengoa. It defines the industry, which exists in any meaningful way solely due to political creation, not performance or economics.”

Article printed from PJ Media: http://pjmedia.com

URL to article: http://pjmedia.com/blog/another-doe-loan-scandal-abengoa/

URLs in this post:

[1] solar: https://lpo.energy.gov/?projects=abengoa-solar-inc

[2] ethanol plants: http://biofuelsdigest.com/bdigest/2011/09/30/abengoa-closes-132m-doe-loan-guarantee-path-cleared-for-cellulosic-ethanol-project/

[3] 2009 annual: http://energycommerce.house.gov/News/PRArticle.aspx?NewsID=8931

[4] worth $161 million: http://informeanual.abengoa.com/colab/web/2010/en/legal_financiero/cuentas/Notas/index.html

[5] Abengoa issued convertible bonds in Europe: http://www.linklaters.com/News/LatestDeals/2010/Pages/201004262.aspx

[6] $132 million: https://lpo.energy.gov/?projects=abengoa-bioenergy-biomass-of-kansas-llc

[7] Abengoa to construct a solar facility in the Mojave desert: https://lpo.energy.gov/?projects=abengoa-solar-inc-mojave-solar

[8] structured: http://www.greentechmedia.com/articles/read/abengoa-closes-1.45b-doe-lo/

[9] September 20 letter to Energy Secretary Steven Chu: http://thehill.com/blogs/e2-wire/e2-wire/182703-upton-raises-concerns-doe-will-rush-approval-of-remaining-loan-guarantees

[10] the Spanish solar industry collapsed,: http://online.wsj.com/article/SB125193815050081615.html

[11] extolled by former Vice President Al Gore: http://www.abengoasolar.com/corp/web/en/acerca_de_nosotros/sala_de_prensa/noticias/2008/20081030_noticia.html

[12] jumped 7 percent: http://news.mongabay.com/bioenergy/2007/11/al-gore-invests-in-biofuels.html

[13] Democrat Mark Rokala: http://www.opensecrets.org/lobby/lobbyist.php?id=Rokala%2C%20Mark&id=Y0000024096L&year=2011

[14] PMA was embroiled in a government ethics “pay-to-play” scandal: http://en.wikipedia.org/wiki/PMA_Group

[15] Murtha one of the “most corrupt” members of Congress: http://74.205.126.217/node/30374

[16] now serving a 27-month federal sentence for illegal campaign contributions: http://topics.nytimes.com/top/reference/timestopics/people/m/paul_magliocchetti/index.html

[17] $870,000 in lobbying fees: http://www.opensecrets.org/lobby/firmsum.php?id=D000021939&year=2011

[18] was cited: http://www.climatechangecorp.com/content.asp?ContentID=5720

[19] the : http://www.nytimes.com/gwire/2009/08/18/18greenwire-spains-solar-market-crash-offers-a-cautionary-88308.html?pagewanted=all

 

[a_majoor]

And for those with short memories, the primary cause of the 2008 crash (the ongoing economic turmoil is the deleveraging of unsustainable debt, but the 2008 crash is probably the trigger event for everything that came after. The dominos were going to fall one way or another):

http://washingtonexaminer.com/opinion/columnists/2011/11/conn-carroll-facts-show-fannie-freddie-led-mortgage-market-collapse

Conn Carroll: Facts show Fannie, Freddie led mortgage market to the collapse
By: Conn Carroll | 11/10/11 8:05 PM
Senior Editorial Writer | Follow On Twitter @Conncarroll

"We are delighted to participate in this historic event, and we are particularly proud that a substantial portion of the $8 billion commitment will directly benefit lower income Americans," Countrywide Financial President Angelo Mozilo said at a July 8, 1992, press conference.
"We look forward to the rapid fulfillment of this commitment so that Countrywide can sign another record-breaking agreement with Fannie Mae," Mozilo finished.

Mozilo's almost 20-year-old quote is relevant again thanks to the uproar New York Mayor Michael Bloomberg caused last week when he criticized Occupy Wall Street's view of the financial crisis.

Bloomberg said, "it was not the banks that created the mortgage crisis. It was, plain and simple, Congress, who forced everybody to go and give mortgages to people who were on the cusp. ... They were the ones who pushed Fannie and Freddie to make a bunch of loans that were imprudent, if you will."

The usual suspects on the left went crazy. The New York Times Paul Krugman called Bloomberg an "ignoramous," citing liberal blogger Mike Konczal's Fannie defense:

"The first thing to point out is that the both the subprime mortgage boom and the subsequent crash are very much concentrated in the private market ... [Fannie and Freddie] were not behind them," Konczal said.

Is Konczal right? Are Fannie and Freddie innocent of causing the mortgage crisis?

This we do know: Thanks to the widespread belief that the federal government would bail them out, Fannie and Freddie were able to borrow money at below-market interest rates.

This gave them a significant competitive advantage over private-sector firms which, by 1992, the two government-backed corporate entities had turned into an almost 70 percent share in the mortgage securitization market.

That same year, at the direction of the Congress, the Department of Housing and Urban Development began setting "affordable" mortgage goals for the agencies.

Countrywide was a growing force in the mortgage industry when it partnered with Fannie in 1992. But after Mozilo's firm secured a steady government buyer for their loans, business exploded. Revenues went from $92 million in 1992, to $860 million in 1996, to $2 billion in 2000. By 2004, they were the nation's largest mortgage lender.

The secret to Countrywide's success was no mystery: They shredded standard industry lending practices, giving home loans to virtually anybody who asked. Fannie Mae not only knew this, Fannie rewarded it.

In 2000, the Fannie Mae Foundation honored Countrywide for "Outstanding Achievement" in the industry. The foundation's 2000 annual report noted: "When necessary -- in cases where applicants have no established credit history, for example -- Countrywide uses nontraditional credit, a practice now accepted by [Fannie]."

Countrywide continued to be the biggest supplier of loans to Fannie Mae all the way through the height of the housing boom. In 2004, 26 percent of the loans Fannie bought were from Countrywide. In 2007, that number had risen to 28 percent.

In his 1993 Nobel Prize lecture, economist Douglass North said, "If the institutional framework rewards piracy, then piratical organizations will come into existence; and if the institutional framework rewards productive activities then organizations -- firms -- will come into existence to engage in productive activities."

From 1992 through the height of the housing bubble, Fannie Mae and Freddie Mac used their monopoly position in the mortgage securitization industry to reward firms like Countrywide for making bad bets in the housing market. Countrywide's success was a signal to other market participants to lower their standards as well.

Wall Street banks are not blameless for the financial crisis. But they were only responding to the incentives set up by the federal government. Ignoring this history will help no one.

Conn Carroll is a senior editorial writer for The Washington Examiner. He can be reached at ccarroll@washingtonexaminer.com.

Read more at the Washington Examiner: http://washingtonexaminer.com/opinion/columnists/2011/11/conn-carroll-facts-show-fannie-freddie-led-mortgage-market-collapse#ixzz1dY7haXut

 

[Edward Campbell]

I agree with Conn Carroll and Michael Bloomberg re: the main responsibility lying with a Congress that wanted to practice social engineering with taxpayers' money but we must remember that social engineering, albeit of a slightly different sort, is also the aim of the Tea Party.

The term national interest has been harder and harder to define since Dwight Eisenhower left office. I attribute this to a steady, never ending decline in what George HW Bush (41) called "the vision thing."

 

[Fishbone Jones]

.

 

[a_majoor]

More budget trickery. There needs to be some adult leadership in the Senate and Executive branches:

http://pjmedia.com/blog/budget-chicanery-has-already-doomed-the-super-committee/?print=1

Budget Chicanery Has Already Doomed the Super Committee

Posted By Roger Morse On November 17, 2011 @ 12:28 am In economy,Elections 2012,History,Money,Politics,US News | 1 Comment

Many are wondering if the super committee will fail.  That is not what matters.  The fact that the super committee was created by the Budget Control Act in August is the real failure.

Last spring, many people associated with the financial markets made it clear that politicians in Washington needed to address the massive federal debt problem in a very serious way or the U.S. economy could slip back into recession.  Standard & Poor’s downgraded the outlook on Treasury securities to negative while maintaining the AAA rating at that time.

Our level of debt was exploding and the administration was rapidly approaching the statutory limit of the government’s ability to issue debt.  Financial markets were looking for passage of legislation that would have a significant impact on reducing the growth of federal debt in exchange for allowing the government to increase the debt ceiling.  The figure often cited by financial analysts was $4 trillion in deficit reduction in exchange for an increase in the debt limit of about $2 trillion which would last through the end of 2012.  $4 trillion was the minimum amount of deficit reduction over ten years that would be needed to be considered to be significant.

The House of Representatives passed a budget, known as the Ryan Budget, that would have saved over $6 trillion over the next decade.  While not perfect, it was a serious effort that would have had a significant impact.

The Senate offered nothing.

In fact, the Senate has not proposed nor passed a budget in over 930 days.  This made it impossible to conduct serious negotiations.  The Senate Democratic majority decided to run out the clock on the debt limit rather than offer a serious proposal to let Americans know how they planned to achieve the savings.  They didn’t want anyone to know how little in spending they wanted to cut. Their strategy was to offer nothing and waste time until the limit was reached.  Then they would claim there was no choice but to increase the debt limit by enough to last through the next presidential election with a promise to reduce the deficit at a later date.

The House Republican majority that was elected just a few months earlier pressed for a larger package on the order of the $6 trillion Ryan Budget. However, with no other proposal that the Senate could prove had any votes to pass the Senate, negotiations went nowhere.

Ultimately, the Senate and President Obama got what they wanted in the Budget Control Act (BCA) that passed in early August.  It included just enough cuts promised in the future over the next decade in unspecified programs to receive an increase in the debt limit that should last long enough to get all of the politicians through the next election without having to be forced to give details.

The entire size of the package was just $2.1 trillion over ten years.  Roughly $900 billion would come from discretionary spending limits and the other $1.2 trillion was to be named later by the newly created super committee.

If the super committee is unable to reach agreement by November 23, the BCA imposes a sequestration in narrow areas of defense discretionary spending and some mandatory spending, but none affecting entitlement benefits that are consuming ever greater portions of the budget.  The only mandatory spending affected is for administrative expenses and reimbursements.  The sequestration would cover any amount up to the full $1.2 trillion not achieved by the super committee.

Further, none of these cuts would go into effect until 2013, after the next election.  However, all of the new debt allowed under the increased debt limit increase is likely to be used up by January 2013 requiring Congress to pass more legislation to increase the debt limit yet again.

Interestingly, the $900 billion in savings from discretionary spending caps put in place by the BCA are not hard limits.  They are more like suggestions.  Spending can be increased by simply shifting funding to exempt categories.

Defense spending for the war on terrorism is reclassified as Overseas Contingency Operations (OCO) which is exempt from spending caps.  Disaster relief is exempt.  However, it is limited by a formula using disaster spending from the last 10 years.  While this sounds reasonable, it allows you to move money subject to the discretionary spending caps to money that is exempt.  Rather than fund disaster relief each year and include it in the budget, Congress will eventually pretend that we will have no disasters in the following year to allow them to spend the money elsewhere.  Then when a hurricane hits, they will be able to get more funding that is exempt from the caps to pay for the recovery.

Finally, any spending that the president and Congress agree is an “emergency” is also exempt from the caps.  This is the largest loophole of all.  This gimmick was used repeatedly over the past few decades to evade spending caps imposed by the old Gramm-Rudman-Hollings Act.

These are just a few of the problems in the Budget Control Act.  You also have to look at all of the spending that is not yet included.  The BCA assumes that in January, the Alternative Minimum Tax (AMT) will be allowed to increase.  This is a provision of the Tax Code created in 1969 to ensure that the very rich pay at least some income tax.  It was to affect only about 200 people originally.

Unfortunately, it was not indexed for inflation.  Over time it has grown to impact millions of people who would not be considered to be rich even under President Obama’s standards.  Consequently, Congress has passed a series of short-term corrections over the past four decades to prevent the full impact of the AMT.  The BCA assumes that no more corrections will be made and the full impact of the AMT will be allowed to hit several million unsuspecting taxpayers beginning in 2012.  This allows Congress to assume over $650 billion in deficit reduction under the BCA

That isn’t the only expiring provision of that Tax Code that the BCA has already counted as reducing the deficit.  There is more than $4 trillion in additional deficit reduction from many other expiring tax provisions that the BCA assumes will not continue over the next ten years in order to achieve its $2.1 trillion in deficit reduction.

On the spending side of the ledger, the BCA has also booked savings from payments to physicians from Medicare.  This gimmick has been used by Congress for more than a decade.  Congress always claims to get savings by canceling inflation adjustments for Medicare reimbursements in the future.  But when the future arrives, the inflation adjustments are restored with a promise to cut them even further in the future.

The future has arrived again and in January current law says doctors will have all of these inflation adjustments erased and their payments cut by about 30 percent for treating Medicare patients.  Since many doctors are already treating Medicare patients at a loss to their practice, they won’t absorb this cut and would stop treating Medicare patients.  Every year since 2003, this cut has been put off.

If we assume that there will be no 30 percent cut and no increases in payments due to inflation over the next 10 years, that will cost about $300 billion.  A more realistic assumption would be that payments to doctors will need to keep pace with inflation which would push the cost north of $450 billion.

All of this means that the $2.1 trillion in deficit reduction assumed in the Budget Control Act is about as realistic as the accounting Enron officials used.

These costs need to be addressed in a realistic manner.  The paltry figures being bandied about by the super committee of possible deals they might agree to are just silly.  They are avoiding the major policy decisions that need to be made and are continuing to book phantom savings.

That is why the Budget Control Act and its Frankenstein creation, the super committee, are a failure.  Every penny of increased debt will be spent before the federal government has to make cuts to programs in 2013.

It is precisely this deal that came out of Washington that the financial markets deemed a failure.  It is precisely why Standard & Poor’s downgraded this nation’s credit rating after the passage of the BCA.

Article printed from PJ Media: http://pjmedia.com

URL to article: http://pjmedia.com/blog/budget-chicanery-has-already-doomed-the-super-committee/

 

[a_majoor]

How'd that Hope and Change stuff work out for you?....

http://reason.com/blog/2011/11/17/cbo-on-the-stimulus

CBO on the Stimulus: "A net negative effect on the growth of GDP over 10 years."

Peter Suderman | November 17, 2011

NRO's Andrew Stiles flags this exchange from Congressional Budget Office director Douglas Elmendorf's testimony before the Senate Budget Committee ealier this week:

The quote that matters starts around 1:25, when Elmendorf says that, according to CBO's estimates, with the stimulus legislation in place, "the level of GDP would be a little lower at the end. That is, a net negative effect on the growth of GDP over 10 years." Elmendorf then confirms that CBO estimates that the economic drag will continue in the following decade:

    SESSIONS: And in the next 10 years, since you’re carrying that debt and paying interest on it and the stimulus value is long since gone, it would be a continual negative of some effect?

    ELMENDORF: Yes, it would represent a drag on the level of GDP beyond that, if no other actions were taken.

Caption contest.

As with all CBO's projections, you have to take these with a grain of salt, especially when you start looking out two decades into the future. I've been critical of the way folks have used the CBO's stimulus job-creation numbers in the past, and this sort of long-term economic forecasting is not the most precise tool either, to say the least. Counterfactuals—like asking what economic growth would have looked like the absence of the stimulus—probably tell us more about our current economic assumptions than about alternate economic timelines.

Still, it's worth noting, if only because even the mildly Keynesian congressional scorekeeper agrees that borrowing $800 billion dollars ultimately creates a drag on the economy and a net loss in economic performance relative to what otherwise might have been. And yet the administration went ahead with the legislation anyway, arguing that it would be more or less a free lunch in the long run.

 

[a_majoor]

Counterpoint: the TEA Party movement releases its budget plan:

http://blogs.freedomworks.org/files/TeaPartyBudget.pdf

(36 page report, fairly in depth. Download and read)

 

[a_majoor]

A very stark warning:

http://www.bizzyblog.com/2011/11/17/thank-you-ann-barnhardt-we-need-a-lot-more-people-with-her-courage-like-this/

Thank You, Ann Barnhardt; We Need More People With Your Courage
Filed under: Activism,Economy,Taxes & Government — TBlumer @ 8:35 pm

AnnBlendedAnn Barnhardt, a hedge broker specializing in cattle and grain, is quitting the brokerage portion of her business, and has posted an announcement as to why.

Big deal? Uh, yeah.

I’ve had similar more general conversations with several people along the lines Ann follows in her announcement over the past several months (really, upon reflection, including relatives, over the past year). These discussions obviously pre-dated what Ann saw as the point which dictated her exit. I’ve never articulated my thoughts on the situation here at BizzyBlog because, as a non-trader and non-insider who doesn’t closely follow the day-to-day ebb and flow of the markets, I’m not in a position to prove them or to know that I’m interpreting matters properly. Ms. Barnhardt is.

That’s why what follows is a big, big deal (link is to her blog’s home page, as Ann doesn’t have permalinks; excerpted heavily because of the importance of her assertions; HTs to Zero Hedge and Rush Limbaugh):

    Dear Clients, Industry Colleagues and Friends of Barnhardt Capital Management,

    It is with regret and unflinching moral certainty that I announce that Barnhardt Capital Management has ceased operations. After six years of operating as an independent introducing brokerage, and eight years of employment as a broker before that, I found myself, this morning, for the first time since I was 20 years old, watching the futures and options markets open not as a participant, but as a mere spectator.

    The reason for my decision to pull the plug was excruciatingly simple: I could no longer tell my clients that their monies and positions were safe in the futures and options markets – because they are not. And this goes not just for my clients, but for every futures and options account in the United States. The entire system has been utterly destroyed by the MF Global collapse. Given this sad reality, I could not in good conscience take one more step as a commodity broker, soliciting trades that I knew were unsafe or holding funds that I knew to be in jeopardy.

    The futures markets are very highly-leveraged and thus require an exceptionally firm base upon which to function. That base was the sacrosanct segregation of customer funds from clearing firm capital, with additional emergency financial backing provided by the exchanges themselves. Up until a few weeks ago, that base existed, and had worked flawlessly. Firms came and went, with some imploding in spectacular fashion. Whenever a firm failure happened, the customer funds were intact and the exchanges would step in to backstop everything and keep customers 100% liquid – even as their clearing firm collapsed and was quickly replaced by another firm within the system.

    Everything changed just a few short weeks ago. A firm, led by a crony of the Obama regime, stole all of the non-margined cash held by customers of his firm. Let’s not sugar-coat this or make this crime seem “complex” and “abstract” by drowning ourselves in six-dollar words and uber-technical jargon. Jon Corzine STOLE the customer cash at MF Global. Knowing Jon Corzine, and knowing the abject lawlessness and contempt for humanity of the Marxist Obama regime and its cronies, this is not really a surprise. What was a surprise was the reaction of the exchanges and regulators. Their reaction has been to take a bad situation and make it orders of magnitude worse. Specifically, they froze customers out of their accounts WHILE THE MARKETS CONTINUED TO TRADE, refusing to even allow them to liquidate. This is unfathomable. The risk exposure precedent that has been set is completely intolerable and has destroyed the entire industry paradigm. No informed person can continue to engage these markets, and no moral person can continue to broker or facilitate customer engagement in what is now a massive game of Russian Roulette.

  I have learned over the last week that MF Global is almost certainly the mere tip of the iceberg. There is massive industry-wide exposure to European sovereign junk debt. While other firms may not be as heavily leveraged as Corzine had MFG leveraged, and it is now thought that MFG’s leverage may have been in excess of 100:1, they are still suicidally leveraged and will likely stand massive, unmeetable collateral calls in the coming days and weeks as Europe inevitably collapses. I now suspect that the reason the Chicago Mercantile Exchange did not immediately step in to backstop the MFG implosion was because they knew and know that if they backstopped MFG, they would then be expected to backstop all of the other firms in the system when the failures began to cascade – and there simply isn’t that much money in the entire system. In short, the problem is a SYSTEMIC problem, not merely isolated to one firm.

    … And so, to the very unpleasant crux of the matter. The futures and options markets are no longer viable. It is my recommendation that ALL customers withdraw from all of the markets as soon as possible so that they have the best chance of protecting themselves and their equity. The system is no longer functioning with integrity and is suicidally risk-laden. The rule of law is non-existent, instead replaced with godless, criminal political cronyism.

    … Finally, I will not, under any circumstance, consider reforming and re-opening Barnhardt Capital Management, or any other iteration of a brokerage business, until Barack Obama has been removed from office AND the government of the United States has been sufficiently reformed and repopulated so as to engender my total and complete confidence in the government, its adherence to and enforcement of the rule of law, and in its competent and just regulatory oversight of any commodities markets that may reform. So long as the government remains criminal, it would serve no purpose whatsoever to attempt to rebuild the futures industry or my firm, because in a lawless environment, the same thievery and fraud would simply happen again, and the criminals would go unpunished, sheltered by the criminal oligarchy.

    To my clients, who literally TO THE MAN agreed with my assessment of the situation, and were relieved to be exiting the markets, and many whom I now suspect stayed in the markets as long as they did only out of personal loyalty to me, I can only say thank you for the honor and pleasure of serving you over these last years, with some of my clients having been with me for over twelve years. … my retirement came a few years earlier than I had anticipated, but there was no possible way to continue given the inevitability of the collapse of the global financial markets, the overthrow of our government, and the resulting collapse in the rule of law.

    As for me, I can only echo the words of David:
    “This is the Lord’s doing; and it is wonderful in our eyes.”

My contention is that the extent of the lawlessness goes far beyond the futures markets. Though there were obviously several decades of missteps and craven political calculations which led to it, I insist that the final of three key tipping points of the financial system’s credibility occurred on October 14, 2008, when Hank Paulson put a figurative gun to the heads of the CEOs of the nation’s largest banks, and — utterly without any legal authority, i.e., lawlessly — forced them to “accept” partial ownership and “temporary” de facto control of their firms.

In that same general time frame, the Federal Reserve, in this case secretly and again utterly without any authority, began engaging in massive transfers of funds to troubled domestic and overseas entities, while Fannie Mae and Freddie Mac’s implosions exposed how the two government-sponsored frauds-by-design systematically lied about the quality of the mortgages underlying the securities they issued and the loans they kept on their own books to the combined tune of likely trillions of dollars. No one involved, or at least no one involved at a sufficiently high level, has done hard time.

We began heading down the road Ann cited three-plus years ago when Fan and Fred collapsed without personal consequences for anyone, when Ben Bernanke turned the Fed into the world’s discount window, and finally when Hank Paulson formally announced the beginning of the government’s tyranny over the private portion of the banking system. Note well that all of this took place under cover of the final two months of a presidential election campaign, when apparently no one is allowed to object to anything lest they be accused — perish the thought! — of “politicizing” matters. Now, barring a sea change, it appears that someone who gambled away hundreds of millions of dollars which weren’t his won’t face consequences, while those whose funds were looted are becoming victims of system-enabled theft.

Ms. Barnhardt doesn’t understand how in good conscience one can confidently invest other people’s money, or make recommendations to people as to how they should invest their own money, in what have become lawless financial markets. Neither do I. People who wish to invest on their own are obviously free to try their luck, and of course some will do well. Others won’t. But please, let’s not have anyone kid themselves. In a lawless market, if you do well, it’s because you got lucky, not because you were smart — unless your definition of “smart” includes keeping your head down and not getting noticed, or joining the morally bankrupt cronyism game yourself.

Thank you, Ann Barnhardt. How many other financial advisers, planners, and “market” participants who know the truth are going to have the courage to stop playing along?

Y’know Ann, there’s an Oval Office in Washington which could really, really use a morally grounded occupant — or a reliable, reform-minded Treasury Secretary.

 

[a_majoor]

More on the real corruption:

http://pjmedia.com/spengler/2011/11/18/republicans-democrats-and-wall-street-fraud-or-whos-the-mf-now/?print=1

Republicans, Democrats, and Wall Street Fraud or: Who’s the MF Now?

Posted By David P. Goldman On November 18, 2011 @ 5:59 am In Uncategorized | 84 Comments

Jon Corzine’s MF Global is missing $600 million of customer money, and the bankruptcy trustee has no idea when it might be found or when investors might be paid back, if ever. The New York Times today says that the investigation points to the conclusion that the firm simply misappropriated (that is, stole) customer money to back up failing bets on the distressed bonds of failing European governments.

The former head of Goldman Sachs and Democratic governor of New Jersey presided over a firm that may turn out to have been a criminal enterprise.  Maybe the Occupy Wall Street movement should shift venue to the headquarters of the Democratic Party, which has a long pattern of involvement in outright corruption.

If this is the case — and I will patiently await the results of investigation by the proper authorities before coming to any conclusion — the only proper thing to do would be to throw the book at Corzine and his colleagues and put some people in jail for a very, very long time. In response to corporate malfeasance and Wall Street’s misbehavior in the advent of the 2008 crisis, we have had a raft of new legislation and regulation — Sarbanes-Oxley, Dodd-Frank, the Volcker rules, and more minutiae than the battery of corporate lawyers hired by the banks can follow. My few friends still employed in the investment banking industry are making a fraction of what they once did, but their lawyers are getting fat. The last hiring bubble in Wall Street, I’m told, is in risk management and legal services. Remember what Mother used to say: “You can’t have any new laws until you use the old ones!”

There is overwhelming documentation that key Democratic Party figures used government sponsored enterprises — the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) — to corrupt Congress on a grand scale in order to pay themselves spectacular sums. Last year Gretchen Morgenson and Josh Rosner told the sordid story in their book Reckless Endangerment:

    The authors, Gretchen Morgenson, a Pulitzer Prize-winning business reporter and columnist at The New York Times, and Joshua Rosner, an expert on housing finance, deftly trace the beginnings of the collapse to the mid-1990s, when the Clinton administration called for a partnership between the private sector and Fannie and Freddie to encourage home buying. The mortgage agencies’ government backing was, in effect, a valuable subsidy, which was used by Fannie’s C.E.O., James A. Johnson, to increase home ownership while enriching himself and other executives. A 1996 study by the Congressional Budget Office found that Fannie pocketed about a third of the subsidy rather than passing it on to homeowners. Over his nine years heading Fannie, Johnson personally took home roughly $100 million. His successor, Franklin D. Raines, was treated no less lavishly.

    To entrench Fannie’s privileged position, Morgenson and Rosner write, Johnson and Raines channeled some of the profits to members of Congress — contributing to campaigns and handing out patronage positions to relatives and former staff members. Fannie paid academics to do research showing the benefits of its activities and playing down the risks, and shrewdly organized bankers, real estate brokers and housing advocacy groups to lobby on its behalf. Essentially, taxpayers were unknowingly handing Fannie billions of dollars a year to finance a campaign of self-promotion and self-­protection. Morgenson and Rosner offer telling details, as when they describe how Lawrence Summers, then a deputy Treasury secretary, buried a department report recommending that Fannie and Freddie be privatized. A few years later, according to Morgenson and Rosner, Fannie hired Kenneth Starr, the former solicitor general and Whitewater investigator, who intimidated a member of Congress who had the temerity to ask how much the company was paying its top executives.

The quotes above are from a New York Times book review by the Clinton administration’s most left-wing cabinet member, Robert Reich. Congress subsidized Fannie Mae and Freddie Mac, the two agencies skimmed a third of the subsidy, and used it to pay their executives and lobby Congress. The master manipulator in the Morgenson-Rosner story is James A. Johnson, Mondale’s 1984 campaign manager and a top Democratic Party player for decades, who became FNMA chairman in 1990 and created the lobbying behemoth.

The trouble is that we don’t enforce the laws that we have. The only high-profile federal prosecution to emerge from the 2008 crisis was directed at the managers of the Bear Stearns mortgage hedge fund whose failure in June 2007 heralded the crisis. Bear was a scrappy, entrepreneurial, and Republican shop that forgot the advice of its long-time CEO Ace Greenberg: “Don’t mistake your own body odor for perfume.” I knew the managers of the fund (I worked at Bear 1993-1996), and I also knew that they and a lot of Bear Stearns top managers had their own money in the fund, and lost it. They were guilty of the belief that the housing bubble wouldn’t pop, and nothing more, and a jury rightly acquitted them. By contrast, Corzine’s MF Global appears to have stolen customer money outright.

In my “Spengler” essay at Asia Times Online last week, I recount some personal encounters with dodgy business on Wall Street. Recently a distinguished jurist asked me, “How is it possible that the financial industry — the smartest guys out there — did so many stupid things?” In fact, the financial industry is full of people who know perfectly well that they are mediocre, but who nonetheless want to make a great deal of money. So they cheat. The 2008 crisis spiraled out of control because every level of the investment banks lied to every other level about the extent of the contingent liabilities they had accumulated in order to raise their current fee income. When Lehman hit the rocks in September 2008, its chairman Dick Fuld had no idea of the true extent of the firm’s liabilities. (That, by the way, is why the so-called European financial crisis is not really a crisis, but a negotiation. Everybody knows where the bodies are buried. The only question is who will suffer: German taxpayers, Italian pensioners, bank bondholders, and so forth).

For that matter, I am still amazed that the ratings agencies were never dinged for their role in the crisis. (Actually, I’m not amazed. The powers that be fear that if the ratings agencies are discredited, a shock-wave of risk aversion would roll through the markets.) As I wrote in the cited Asia Times piece:

    The ratings agencies became the arbiters of risk not because they had good models (they did not) or because they employed particularly skilled analysts, but because they were eminently corruptible. In October 2008, congressional investigators found e-mails from Moody’s credit analysts warning management that they had “sold our soul to the devil for revenue”.

    For every Collateralized Debt Obligations, Moody’s and Standard and Poor’s received a fee in the low six figures, and these fees made up the bulk of their revenues. They acted as a adjunct to the investment banks’ structuring teams, advising them on the best way to game their own models.

    Why hasn’t the government prosecuted the rating agencies for fraud? Incredibly, the ratings agencies take the position that their ratings are “opinions” with the same legal status as a newspaper editorial. Newspaper editorialists, though, don’t take money from big advertisers for endorsing their products.

MF Global’s problem — presuming that customer money really was lost in proprietary trading — is much simpler. The technical term is “theft.” Breaking the wall that separates customer money from the firm’s money is like rape: it’s hard to argue that you did it by accident. There is no way that senior management could not have known that customer money was being misappropriated. When the management bet the firm on Italian bonds, it counted every penny of collateral it had to put up for margin. That’s what trading desks do, every day, all day. Hundreds of millions of dollars were stolen, including my residual pittance. What did Corzine know, and when did he know it? Corzine ran a trading desk. He’s a punter; that’s one of the reasons he got the boot from Goldman Sachs. People who run trading desks obsessively watch a spreadsheet that tells them exactly how much cash they have as margin against levered trades, and where the cash comes from.  There is simply no way that someone in senior management could NOT have known that hundreds of millions of dollars materializing ex nihilo in the cash column came from customer accounts. Corzine has lawyered up and isn’t talking.

Regulators reportedly are conducting an audit of every futures trading firm to determine whether they are improperly mingling customer money with their own. The impact of MF Global on entrepreneurs in the financial industry is chilling: if a firm run by the former CEO of Goldman Sachs can make off with customer money, whom can you trust? The new set of protections introduced by Dodd-Frank would NOT have protected MF Global’s customers against theft by the firm, as the Financial Times’ Alphaville blog reports today. Passing new laws doesn’t eliminate criminals. The constable and the jailer eliminate criminals.

I have not a modicum of sympathy for the unwashed waste-heads of the Occupy Wall Street movement. But I’m for enforcement of the law, of which we already have many good ones, for example, against stealing. Let the chips fall where they may. Especially on Democrats.

Article printed from Spengler: http://pjmedia.com/spengler

URL to article: http://pjmedia.com/spengler/2011/11/18/republicans-democrats-and-wall-street-fraud-or-whos-the-mf-now/

 

[a_majoor]

CBO on the "Stimulus":

http://news.investors.com/ArticlePrint.aspx?id=592709&p=1

The CBO Quietly Downgrades Obama's $825 Bil Stimulus

Posted 11/23/2011 07:00 PM ET

Recovery: After nearly all the stimulus money has been spent, the Congressional Budget Office now admits it cost more than advertised, did less to boost growth and will hurt the economy in the long run.

In its latest quarterly report on the economic effects of the Obama stimulus, the CBO sharply lowered its "worst case" scenario while trimming many of its upper-bound estimates for stimulus-fueled growth and employment.

The new report finds, for example, that the stimulus may have added as little as 0.7% to GDP growth in 2010 — when spending was at its peak — and created as few as 700,000 new jobs.

Both are down significantly from the CBO's previous worst-case scenario.

The report also lowered the best-case estimate for added growth in 2010 to 4.1% from 4.2%.

In addition, the CBO says the extra infrastructure money didn't boost growth as much as it previously claimed, because states reacted by spending less out of their own budgets on highways.

So in other words, the CBO now says it's possible that the stimulus had virtually no meaningful effect on growth and employment despite its massive price tag.

All this comes after the CBO increased that price tag to $825 billion from its initial $787 billion — a 5% hike.

Adding insult to injury, the new report also says the stimulus will hurt economic growth in the long run because of "the resulting increase in government debt." Each dollar of additional debt, it reports, "crowds out about a third of a dollar's worth of private domestic capital."

In our view, even the CBO's downgraded estimates are too high, because they're still based entirely on Keynesian economic models that simply assume extra government spending results in added economic growth.

You don't have to look very hard to see this isn't what happened.

While Obama promised the massive stimulus would "ignite spending by businesses and consumers," unleash "a new wave of innovation, activity and construction," and keep unemployment under 8%, what we actually got was the worst recovery since the Great Depression.

 

[a_majoor]

Mark Steyn:

http://www.ocregister.com/opinion/debt-328730-government-spending.html

Mark Steyn: SS Spendaholic sailing into debt abyss

By MARK STEYN

Syndicated columnist
letters@ocregister.com
I see Andrea True died earlier this month. The late disco diva enjoyed a brief moment of global celebrity in 1976 with her ubiquitous glitterball favorite:

"More, More, More

How do you like it?
How do you like it?
More, More, More
How do you like it?
How do you like it?"

In honor of Andrea's passing, I have asked my congressman to propose the adoption of this song as the U.S. national anthem. True, Miss True wrote the number as an autobiographical reflection on her days as a porn movie actress but, consciously or not, it accurately distills the essence of American governmental philosophy in the early 21st century: Excess even unto oblivion.

When it comes to spending and the size of government, only the Democrats are officially panting orgasmically, "More, More, More; How do you like it?" while the Republicans are formally committed to "Less less less." This makes for many dramatic showdowns on the evening news. In the summer, it was the "looming" "deadline" to raise the debt ceiling. In the fall, it was the "looming" "deadline" for the alleged supercommittee to agree $1.2 trillion of cuts. The supercommittee was set up as a last-minute deal for raising the debt ceiling. Now that the supercommittee's flopped out, "automatic" mandatory cuts to defense and discretionary spending are supposed to kick in – by 2013. But no doubt as that looming deadline looms the can of worms will be effortlessly kicked down the room another looming deadline or two.

In return for agreeing to raise the debt ceiling (and, by the way, that's the wrong way of looking at it: more accurately, we're lowering the debt abyss), John Boehner bragged that he'd got a deal for "a real, enforceable cut" of supposedly $7 billion from fiscal year 2012. After running the numbers themselves, the Congressional Budget Office said it only cut $1 billion from FY 2012.

Which of these numbers is accurate?

The correct answer is: Who cares? The government of the United States currently spends $188 million it doesn't have every hour of every day. So, if it's $1 billion in "real, enforceable cuts," in the time it takes to roast a 20-pound stuffed turkey for your Thanksgiving dinner, the government's already borrowed back all those painstakingly negotiated savings. If it's $7 billion in "real, enforceable cuts," in the time it takes you to defrost the bird, the cuts have all been borrowed back.

Bonus question: How "real" and "enforceable" are all those real, enforceable cuts? By the time the relevant bill passed the Senate earlier this month, the 2012 austerity budget with its brutal, savage cuts to government services actually increased spending by $10 billion. More, more, more, how do you like it?

But don't worry. Aside from spending the summer negotiating a deal that increases runaway federal spending, those stingy, cheeseparing Republicans also forced the Democrats to agree to create that big ol' supercommittee that would save $1.2 trillion -- over the course of 10 years.
Anywhere else on the planet that would be a significant chunk of change. But the government of the United States is planning to spend $44 trillion in the next decade. So $1.2 trillion is about 2.7 percent. Any businessman could cut 2.7 percent from his budget in his sleep. But not congressional supercommittees of supermen with superpowers thrashing it out across the table for three months. So there will be no 2.7 percent cut.
That means the "sequestration" from defense and discretionary spending will now be enforced, starting in 2013. That would be so brutal and slashing that by 2021 it would reduce U.S. public debt by $153 billion! Which sounds kinda big if you say it in a Dr. Evil voice and give a menacing mwa-ha-ha laugh, but in fact boils down to about what we borrow currently every month.

But don't worry. Slashing a month's worth of spending over a decade is way too extreme. So that's not going to happen, either. Instead, CNN and "Meet The Press" will just interview big-shot senators and congressmen about it day in, day out, and then normal service will resume: More, more, more, how do you like it?

In the course of a typical day I usually receive at least a couple of emails from readers lamenting that America is now the Titanic. This is grossly unfair to the Titanic, a state-of-the-art ship whose problem was that it only had lifeboat space for about half its passengers. By contrast, the SS Spendaholic is a rusting hulk encrusted with barnacles, there are no lifeboats, and the ship's officers are locked in a debate about whether to use a thimble or an eggcup.

A second downgrade is now inevitable. Aw, so what? We had the first back in the summer, and the ceiling didn't fall in, did it? And everyone knows those ratings agencies are a racket, right? And say what you like about our rotten finances, but Greece's are worse. And Italy's. And, er, Zimbabwe's. Probably.

The advantage the United States enjoys is that, unlike Greece, it can print the currency in which its debt is denominated. But, even so, it still needs someone to buy it. The failure of Germany's bond auction on Wednesday suggests that the world is running out of buyers for western sovereign debt at historically low interest rates. And, were interest rates to return to their 1990-2010 average (5.7 percent), debt service alone would consume about 40 percent of federal revenues by mid-decade. That's not paying down the debt, but just staying current on the interest payments.

And yet, when it comes to spending and stimulus and entitlements and agencies and regulations and bureaucrats, "more, more, more/how do you like it?" remains the way to bet. Will a Republican president make a difference to this grim trajectory? I would doubt it. Unless the public conversation shifts significantly, neither President Romney nor President Insert-Name-Of-This-Week's-UnRomney-Here will have a mandate for the measures necessary to save the republic.

As for Andrea True, back in 1976 she made a commercial in Jamaica. To protest the then Prime Minister's flirtation with Castro, Uncle Sam had imposed economic sanctions against Her Majesty's government in Kingston. Miss True was unable to bring her earnings home. So, for want of anything better to do with them, she went into a Jamaican recording studio and made a demo of a song: "More, More, More." Sure, 35 years later Fidel's still around, but at least the world got a disco hit out of it, which is more than you can say for the Iranian sanctions.

We're approaching a state in which the government spends $4 trillion but only raises $2 trillion. Which is an existential threat to the nation, but at least has the advantage of being one whose arithmetic is simple enough even for politicians: Try to imagine every aspect of government having to make do with half of what it currently has.

That's the scale of reform necessary to save America from a future as a bankrupt, violent, Third World ruin. More, more, more, how do you like it? More poverty, more crime, more corruption, more decay: how do you like that?

Flirting with Castroite policies? Maybe Washington could impose economic sanctions against itself.

 

[a_majoor]

What was done can be undone....

http://www.americanthinker.com/printpage/?url=http://www.americanthinker.com/articles/../2011/11/spending_wars.htm

Spending Wars

By Randall Hoven
The ideas that federal spending exploded under George W. Bush, that "Bush's wars" account for our spending explosion, that Reaganism died with Reagan, and that we are on a spending binge that started decades ago are all nonsense.

Our current spending binge is a very recent phenomenon with a very specific starting point: the year Democrats started writing budgets (or continuing resolutions), compounded by Barack Obama's inauguration.

Look at the chart below.  If you were to cover up the last four years on the right, 2008-11, would you say spending was getting out of hand?  In 2007, total spending was 19.6% of GDP, a level nearly matching that of 1996, and comfortably below the average level of spending from 1960 through 2000: 20.3% of GDP.



Sources: OMB and CBO.

And that relatively low level of spending in 2007 included War-on-Terror spending.  Without the WOT, a reaction to being attacked on our soil, federal spending in 2007 was just 18.4% of GDP -- a level not experienced at any time between 1967 and 1999, and nearly matching the post-1966 low of 18.1% in 2001.

There is something else special about 2007.  That was the last fiscal year in which the federal budget was written by a Republican=controlled Congress.  As you look at the chart above, recall that the U.S. House of Representatives was Republican-controlled corresponding to the budgets of 1996 through 2007 -- the years of the lowest federal spending since Lyndon Baines Johnson was president.

The trend in government spending prior to 1983 was upward.  In fact, it was growing 2% of GDP every decade.  (I wrote of this previously here.)  That upward trend was reversed in 1983, the year Ronald Reagan's tax cuts went into full effect.  Reagan's downward trend in spending did not stop with Reagan; it continued through 2001.  The 17-year result was to cut federal spending from over 23% of GDP to almost 18%.  (Imagine a 230-pound man losing 50 pounds.)

If by "Reaganism" you mean a struggle to keep federal spending below 20% of GDP, it was alive and kicking through 2007.

George Bush's "compassionate conservatism" did not kill Reaganism.  See the chart below.  Take away WOT spending, itself rather modest, and federal spending barely budged from 2000 to 2007.  In 2000 it was 18.2% of GDP; in 2007 it was 18.4%.  There was no spending explosion under Bush.



Sources: OMB and CBO.

The "bad" things started happening almost the minute voters turned over both the House and the Senate to Democrats.  The FY 2008 budget was written by a Democrat Congress and signed by a weakened, lame-duck President Bush.  In 2009, Barack Obama was inaugurated.  Within weeks of his inauguration, he and his fellow Democrats increased the baseline FY 2009 budget and passed the $825-billion Stimulus.  Look at what happened to spending just from 2007 to 2009.

And the spending never stops under Democrats.  The step up in spending was both immediate and permanent.  The CBO estimates that spending under President Obama's proposals will remain above 24% of GDP through 2019 and 2020.  That is above even the post-World-War peak of 1983!  There is nothing "temporary and targeted" about Obama's spending.  Democrats are doing everything in their power to make Obama's "stimulus" level of spending the new normal.

Do not buy the lie that federal spending is some kind of inanimate object that must inevitably grow.  Federal spending is not a result of the laws of physics, but of laws written by men who are voted into office by you and me.  Spending was under control as recently as 2007.  It all went south only when today's Democrats took control of budgeting.

(A note on data sources used in the graphs.  Total spending numbers came from the White House Office of Management and Budget (OMB), specifically Table 1.3.  The most recent OMB data has estimates for FY 2011; all previous years are actual.  War-on-Terror (WOT) spending numbers came from the Congressional Budget Office (CBO).  See Table A-1 from CBO's congressional testimony of October 26, 2011.  Calculations to convert CBO's WOT current-year spending numbers to percentages of GDP were done by the author.  Also, each 1% of GDP is about $150 billion in today's dollars, in round numbers.)


Randall Hoven can be followed on Twitter.  His bio and previous writings can be found at randallhoven.com.


Page Printed from: http://www.americanthinker.com/articles/../2011/11/spending_wars.html at November 26, 2011 - 08:29:18 PM CST

 

[a_majoor]

A long (25 page) paper on the issue of taxation. Many points could apply here as well:

http://www.oaktreecapital.com/MemoTree/It%27s%20All%20Very%20Taxing%2011_16_11.pdf

 

[tomahawk6]

A good snapshot of the Obama economy.Where we were and where we are.Click on the image to enlarge.

 

[Kirkhill]

What was done can be undone....

http://www.americanthinker.com/printpage/?url=http://www.americanthinker.com/articles/../2011/11/spending_wars.htm

Those charts are extremely interesting....

Under Reagan-Bush 1 spending was on the order of 23% of GDP.
Under Clinton spending declined to 18% of GDP.
Under Bush 2 it up-ticked to 19 to 20% of GDP
Under Obama it has "sky-rocketed" to 1 to 2 points higher than the level seen under Reagan.

Now.

Did Reagan start with a lower GDP because of what he had inherited from Nixon and Carter? (Probably)
Was Reagan's spending on "Things" (Apaches, Abrams, Bradleys.......) more efficient than Obama's spending on Programs (EPA, Obamacare.....)? (One is a short term investment with lasting value while the other requires continuous investment).
Do wars "stimulate" the economy? (Arguably yes.  They provide employment for service personnel and ammunition suppliers and the stimulus lasts until the soldiers stop shooting).
Did Clinton decrease spending or increase GDP? (Think DotCom bubble - bust in Spring 2000 - Bush 2 election Nov 2000)?
Bush 2 was confronted with:
DotCom collapse
9/11
Oil being pushed through the $100 mark (Jan 2008) to $140 (ca Nov 2008) with the push starting ca Jan 2007

Link

At least some of that oil movement was driven by individuals consciously acting to impact the market price .....

How Oil First Hit $100 Per Barrel

by Sean Brodrick on August 17, 2010

Via the Financial Times, we read how a rogue trading group was determined to push the price of crude oil to print $100 a barrel…

The US futures regulator on Monday fined a commodity trading group $12m for artificially pushing crude oil prices to $100-a-barrel for the first time in 2008.

The Commodity Futures Trading Commission said a trader at a former unit of ConAgra Foods, bent on driving oil to triple-digit levels, caused a “non-bona fide price” to be reported for the benchmark US crude futures contract West Texas Intermediate. Gavilon, the commodity trading house, later bought the unit’s trading operations.

Later in the story …


“The trader said that CTG had instructed its floor broker that CTG had wanted to get the $100 print for as long as three months prior to January 2, 2008, and that ‘we weren’t gonna let that one get away from us’,” the CFTC said.

The US regulator quoted a CTG trader saying: “Within freakin’ 25 cents [of $100 a barrel], I’m just gonna be a madman”. The floor broker’s clerk, after reporting the deal a $100 a barrel, said there was going to be “fallout of iditos, idiocy somewhere.”

According to the CFTC, a trader at CGT latter bragged on an email: “ome people collect art prints, we collect price prints.” The same trader was quoted by the regulator as saying: “You know hey we not gonna miss this one your know. This is the big one.”

The regulator added on its finding that several traders at CGT “celebrated the trade” at $100 a barrel and one of the traders said: “And now the sell off begins”.

Read the rest at the Financial Times.

  Via http://blog.uncommonwisdomdaily.com/how-oil-first-hit-100-per-barrel-4424

And then he still had to deal with -

Unfunded Medicare and Social Security as well as Fannie and Freddie (which he cited as a risk in April 2001.... before which comes before September).

In my view the short form is: 

Spending to GDP ratio today is not a problem.  The nature of the spending is (long term institutionalized vs short term material) and the trajectory (no defined target - just constantly rising to infinity as the population grows and expectations rise).