Ready to read the most cold-blooded rendition of what went on at the White House this past weekend when Pres. Bush held his "summit" to send the Paulson plan to Congress, and loot the US Treasury for about $1-trillion - the real cost of the bailout?
To grasp how much money that represents, the entire M1 money supply - that is, US dollars in circulation everywhere in the world; every cash drawer, every wallet, every penny jar of change - every single penny of US dollars - is about $1-trillion. So what we are talking about here is somehow manufacturing double the number of dollars that exist everywhere on Earth.
And we are talking about manufacturing them - literally - overnight.
How reliable is this number to do the job? Read this quote, and then decide if you should laugh - or cry:
"They had good reason for skepticism. On Tuesday, a Treasury Department press spokeswoman admitted the $700 billion figure was not based on any particular data point, adding with astonishing candor: 'We just wanted to choose a really large number.'"
OK folks, this is the type of planning going into this crisis from the people who got us into this crisis. Why do I not feel reassured knowing they are in charge?
And frankly, where in the world is my congressman, Jeff Miller? Have you heard from yours either?
Well, read it for yourself in this unedited article. Once again, the London Telegraph does the job; it's a "take no prisoners" fact-telling story that will put the quality of what you've read in the US news to shame.
This is must-reading for anyone who wants to be on the inside of this crisis. But keep the Valium handy when you do.
Kenneth
+++++++++++++++++++
US economy in crisis: How did it come to this?
America’s effort to see off a new depression unravelled last week. Washington correspondent Tim Shipman watched the bail-out talks descend into gridlock .
Unattributed to any one staffer
London Telegraph
Last Updated: 9:48PM BST 27 Sep 2008
When the two men who want to run the world’s most powerful nation took to the stage for the first presidential debate on Friday night, more than 60 million Americans tuned in. But not everyone in Washington was watching Barack Obama and John McCain.
In the White House, the men who currently hold the reins of power in America were on the phone to Capitol Hill, where grey-faced congressional aides were holding late-night meetings trying to thrash out the deal they hope can prevent meltdown in the world economy.
Asked whether he would be watching the debate, in which Mr Bush’s name was used as an insult, or the deadlocked negotiations, in which his standing is little better, one White House official said: “A bit of both – but I’d rather not watch either.”
It was a week that began with a financial crisis, perhaps the gravest in eight decades, and ended with a political crisis over the already infamous bail-out plan to invest $700 billion of public cash buying up the bad debts of failing banks.
Into this maelstrom stepped a president with little economic literacy and still less authority; a presidential candidate whose political judgment seemed as constant as the fluctuating stock market; and, at the heart of it all, a treasury secretary who ended the week literally on his knees, begging for deliverance from the vicissitudes of Washington politics.
At issue was nothing less than the fate of the world economy, the future of free market capitalism and the credibility of the most powerful nation on earth – perhaps even its status as lone global superpower.
This time last week, treasury secretary Henry “Hank” Paulson, a former chief executive of Goldman Sachs, was pretty pleased with himself. His plan, all three pages of it, had been welcomed across the political spectrum.
Roy Smith, a former colleague of Mr Paulson at Goldman Sachs and Professor of Finance and International Business at New York University, told The Sunday Telegraph: “He clearly emerged as the central leader in the administration. Normally, treasury secretaries don’t get that sort of latitude. He’s the principal government decision-maker on economic policy. Period.”
But Mr Paulson’s world quickly fell apart when the American public and Republican congressmen showed themselves unwilling to take dictation from a former Wall Street plutocrat.
Calls and emails to congressional offices on Monday and Tuesday ran 200-to-one against the plan. Polls showed that six out of ten voters could not understand why taxpayers should pay to save reckless Wall Street firms.
They had good reason for scepticism. On Tuesday, a Treasury Department press spokeswoman admitted the $700 billion figure was not based on any particular data point, adding with astonishing candour: “We just wanted to choose a really large number.”
Mr Paulson, unused to the ways of Washington, had failed to explain that his plan was necessary to prevent a credit freeze which would stall the flow of money through the arteries of the world economy, with consequences similar to those of stopping the flow of blood around the human body.
Prof Smith said: “They lost control of the media description of it. That magnified misunderstandings which have been fodder for a political system of demagoguery and posturing.”
He said Mr Paulson has had to undergo a lot of on-the-job learning: “He’s also had to learn that, in the political context in Washington, CEOs are often emasculated quite quickly.”
It was not just the public that did not understand the rescue plan, nor why it was necessary. When Mr Paulson met with congressmen and senators on Tuesday and Wednesday, he found that many lawmakers were similarly clueless.
An aide to a senior Democratic senator said: “It might as well be in Arapahoe for most of them. Paulson had to spell it out like he was talking to a bunch of first-graders.”
In these impromptu lessons, Mr Paulson found Left-wingers scandalised by help for rapacious capitalists sitting side-by-side with Right-wingers who saw in his plan a socialist scheme to tamper with their precious markets.
In closed-door meetings with senior Democrats, Mr Paulson accepted compromises (limits on executive pay at the banks needing help, and more support for struggling mortgage holders) that allowed the House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid to line up their troops in support of the plan. The White House soon won over Senate Republicans, too. But when the 199 House Republicans gathered, just four raised their hands to back Paulson’s proposals.
And more was needed to sell the deal to the nation. Step forward George Bush, whose political capital has long been deep in the red. His televised address on Wednesday night laid out a vision of plummeting house prices and pension funds. “Our entire economy is in danger,” he said.
Steve Clemons, a senior fellow at the New America Foundation think tank, accused Mr Bush of pushing the “fear” button: “He said the clock was ticking. This seems like a bad episode of 24.”
In the panelled splendour of the Capital Grille, a favoured haunt of the political smart set, a former White House speechwriter reflected the view that the presidents doom-mongering could actually make things worse: “If we didn’t need a bail-out before that, we do now.”
But in private talks on Capitol Hill, the Bush administration was pushing an even bleaker picture. A Republican familiar with the warnings issued by the Treasury Department away from the cameras, said the New York stock market should brace for a collapse of up to a third of its value if the deal failed to materialise. “The economy is dropping into the john,” he said. “We could see falls of 3,000 or 4,000 points on the Dow in just a couple of days.
“What’s being put around behind the scenes is that we’re looking at Thirties stuff. We’re looking at catastrophe; huge, amazing catastrophe. It’s one of those things that no one can quite grasp or understand. Everybody is extraordinarily scared.”
This harum-scarum offensive seemed to bear fruit and the tentative basis of a deal was hammered out by Thursday lunchtime. But by then, John McCain had made another of the political gambles for which he is becoming known. The Republican presidential candidate, whose unsure performance on the economy (declaring the fundamentals sound just as the stock market plunged, opposing the bail-out of insurance giant AIG the day before supporting it) had seen his poll numbers decline, declared that he was suspending his campaign to return to Washington and help finalise the deal. From a man known as Senator Hothead for his profanity-laced negotiating style, this was like a bull announcing to the inhabitants of the china shop his intention to do a little browsing.
Mr McCain succeeded in persuading Mr Bush to invite the principal players, and his Democratic rival, Barack Obama, to a Thursday-afternoon summit in the White House. His move also emboldened the House Republicans.
What happened next will go down as the biggest White House drama since The West Wing left our screens two years ago. President Bush lost control as tempers flared in the cabinet room. John Boehner, the Republican House minority leader, torpedoed the Paulson plan, offering up an alternative proposal that would force banks to buy insurance for their failing securities instead of giving them public money.
Mr Paulson explained that the idea was unworkable and declared: “We can’t start over.” But the rebels were not done. Republican Senator Richard Selby then produced a five-page list of 192 economists and business school professors who oppose the plan. That was a red rag to Mr Bush, who snapped back: “I don’t care what somebody on some college campus says,” saying he would trust Mr Paulson instead.
The President then summarised the dangers of inaction to the world economy in characteristically blunt terms: “If money isn’t loosened, this sucker could go down.”
With the deal on life-support, Mr Paulson then chased after furious Democrats, dropping to his knees, only half-jokingly, to beg Nancy Pelosi not to blow up the legislation. Through it all, Mr McCain, who knew Mr Boehner’s plans in advance, far from helping to engineer a compromise, sat mute.
Moderate Republicans were furious at Boehner’s band of brothers. Jim Nuzzo, a White House staffer under the first President Bush, branded the House Republicans “immature brats who have put ideology before country”.
“We’re at a point in our nation’s history when they need to grow up. If McCain can’t get the House Republican leadership to give him 100 votes to do something that the President wants, the treasury secretary wants, the Fed chairman wants, then he doesn’t have a set of nuts that’s worth a damn.”
If he can deliver them over the next 24 hours, it may yet boost Mr McCain’s credibility. Those 100 votes are critical political cover for the Democrats who fear they might lose 20 to 30 congressional seats in November if they alone pushed through an unpopular bill.
The Democratic Senate aide, steeped in seven years of military metaphors from the war on terror, said: “We were prepared to strap on the suicide bomb vests and pull the pins together. But we’re not committing suicide if the Republicans won’t do the same. It’s mutually assured destruction, or nothing.”
In the long run, the true significance of the opposition of the House Republicans may not be the narrow politicking but their stance on the broader historic issue of whether America, a country built on capitalism, will have to accept more government intervention in the market.
The Republican strategist Alex Castellanos, most recently an adviser to Mitt Romney, warned that this would mean accepting aggressively socialistic measures that would leave conservatives unable to explain why the same paternal state we called upon to rescue Wall Street can’t bend down a little lower to provide government-paid health care, energy subsidies and every imaginable social service.
Senior Democratic congressman Barney Frank admitted that things are changing. “This is a very serious policy step that the American government is taking. It’s a fundamental shift in the relationship between the public sector and the private sector.”
The week-long quest for a deal deemed vital and urgent left many cursing Washington’s collective failure of leadership. It was not just smug Europeans, like the German finance minister Peer Steinbrück, who saw last week as the moment America compromised its status as an economic superpower.
Pat Buchanan, the former Republican presidential candidate, claimed that the crash of 2008 will usher in a more sober and much diminished America, branding the credit crisis “a Katrina-like failure of government, of our political class, and of democracy itself. The party’s over. What we are witnessing today is how empires end.”
The days of gridlock raise questions about whether the prize that Mr Obama and Mr McCain are fighting over will be worth the candle come January. In the debate, both candidates acknowledged that the financial belt-tightening will force them to modify their economic plans.
Tom Daschle, a likely chief of staff in an Obama White House, predicted the next president would have, at best, a 50-50 chance of winning a second term because of the looming economic downturn.
The rows on Capitol Hill exposed a continuing cultural divide between New York capitalists and Washington bureaucrats. Slate magazine’s Timothy Noah pointed out that the expansion of government after the Great Depression meant that Washington became Wall Street’s principal rival when it came to running the world. Which wielded more power: the financial markets or the government? If last week is anything to go by, neither of them looks capable of running a corner shop, let alone a world.
As the Senate aide put it after China used a week of American political and economic decline to demonstrate its emergence as a rival power: “They’ve just put men in space. We can’t get 400 congressmen to agree that preventing another depression is a good idea.”
Copyright 2008 the London Telegraph - Used with permission.
-30-
Sunday, September 28, 2008
Daily Telegraph: Financial crisis engulfs banking
As I mentioned earlier, right now the first-tier US news organizations are too often politically tainted by their spin on the presidential election for me to post them as objective sources of information. Therefore, I am turning to the British press, in particular the London Telegraph, for coverage.
Of course, if a US source can report on this crisis without spinning it for their favorite presidential candidate, I'll post it. But at this point, all readers are warned up-front that the quality of information - and its slant - for first-tier US information organizations is all to be taken with a large helping of salt.
The following article will provide more a historic summation of events, because of the pace at which the financial crisis story is moving. Read it to provide yourself with an understanding of the environment surrounding whatever comes out of Washington Sunday and thereafter this coming week.
Kenneth
+++++++++++++++
Deepening financial crisis engulfs the banking industry
As Washington Mutual became America’s biggest bank failure and politicians argue over the terms of a $700bn rescue plan, a solution to the global credit crisis looked more remote than ever.
By Louise Armitstead
Last Updated: 10:23PM BST 27 Sep 2008
It has already become an iconic moment. On Thursday, Henry 'Hank’ Paulson, the US Treasury Secretary and a man with a personal fortune estimated at $700m (£380m), bent down on one knee before the most powerful woman in Congress, Nancy Pelosi, and begged her to save his plan to rescue Wall Street.
It didn’t work. Ten days after America announced a $700bn bailout for its stricken banks, weary financiers on both sides of the Atlantic went home for the weekend convinced their futures were in the hands of a group of American politicians whose priority was an election in a month, not the markets on Monday.
President Bush repeatedly pleaded with Congress to back the deal. “This sucker could go down,” Bush told them, apparently referring to the teetering US economy.
Congressional staff worked until 2am on Saturday morning and resumed again at 7am in an attempt to reach an agreement on the bailout – which could be the most extensive peacetime state intervention in the financial system since the Great Depression – by the time the markets open in Asia tomorrow.
However, Congressmen were under intense pressure to reject the bailout, which would allow the US government to buy toxic housing-related investments from banks.
A source close to the meetings said: “American Congressmen are being lobbied by voters at a scale of nearly 100 to 1 to vote against this bailout. It could be politically lethal to be seen as the ones taking the side of Wall Street against the people.”
Not, screamed Wall Street, as dangerous as the impact on financial markets if it were not granted. Last week Warren Buffett, America’s richest man and most famous investor with a huge retail following, tried to impress the importance: “This is sort of an economic Pearl Harbor we’re going through. I’m sure we didn’t want to go to war in 1941. There are times when events force a timetable on you and force action. If they think about it for three weeks, it will be very different and more difficult.”
Bob Diamond, boss of Barclays Capital and new owner of Lehman Brothers in America, told The Sunday Telegraph: “The reality is that the world needs a functioning financial system and it’s up to everyone involved to make sure this happens.”
Another senior banker said: “I don’t think people realise how serious this is. We are facing a full-scale meltdown of the financial system and liquidity is drying up. Imagine not being able to withdraw cash from the banks to buy food. This, in financial terms, is what’s happening. There is no way this bailout can’t happen. It’s about confidence and the blow would be huge.”
Bankers pointed to the events of last week as proof. While the markets had soared last Friday on news of the bailout, within days the uncertainty surrounding it had again unleashed fresh fear into the markets.
Overnight last Sunday, Morgan Stanley and Goldman Sachs were converted from independent to ordinary regulated banks, adding shocking emphasis to the depth of the crisis: Wall Street as it had long been known ceased to exist.
Then as politicians wrangled, the interbank lending market froze.
On Thursday, regulators seized control of Washington Mutual, making it the biggest banking failure in US history. Then shares in Wachovia, the fourth largest bank in the US, fell 27 per cent on Friday. In the panic, fresh doubts were poured on the future of Morgan Stanley as its credit default swap rate widened dramatically, a sign of extreme distress.
By now all eyes were fixed on the bailout as the market’s only hope.
Yet this weekend, City pessimists argued that Paulson’s plan might not work, even if it does get through Congress. They said confidence in the banks was shattered beyond repair when Paulson let Lehman Brothers fail and that no amount of US taxpayer money set aside to buy toxic assets from banks will get banks to start lending to one another again. Neither will it get investors to start buying bank shares again.
Instead, they argued, investors and banks themselves will keep scouting for – and steering clear of – institutions perceived to be the weakest links in the financial system. This self-fulfilling process could well lead to a 1930s-style domino effect of failing banks.
“I think Paulson has gone for the wrong model,” a senior London banker said on Friday. “The model he chose was the one used to bail out bankrupt US building societies in the 1980s. The model he should have chosen was used to inject government funds directly into banks in the 1930s.”
Others argued, the panic was being overblown by self-important bankers who ought to take responsibility for their own mistakes during what Gordon Brown has condemned as the “age of irresponsibility”. They pointed to the fact that plenty of banks have managed the downturn perfectly well and are now in a position of strength.
Barclays, which made write-downs early in the crisis, has bought Lehman Brothers’ US operations from administration in a move that propelled the British bank up the table of global powerhouses.
This weekend, Diamond said: “All banks have assets they’d prefer not to have on their balance sheets. If you’d asked me a month ago if we were going to buy an investment bank, the answer would be very, very unlikely. This unique opportunity came very quickly. Opportunities only come along in crises.”
Similarly, Deutsche Bank has quietly made four acquisitions over the summer.
But even the strong banks recognised the importance of the US bailout to the wider economy.
Michael Cohrs, head of global banking at Deutsche Bank said: “Our losses, while modest are not acceptable. But we continuing to work hard to ensure we are in the best shape to cope with this crisis. Ensuring stability in the US markets is important for us all. The bailout will not solve the problems but if doesn’t happen it will be yet another negative. There’s a psychology to a crisis and more bad news compounds the problems.”
Last week was meant to be a fresh start. After the collapse of Lehman, the fire sale of Merrill Lynch and HBOS and the nationalisation of AIG, news of the Fed’s planned bailout announced on Thursday was supposed to be the bottom line. On Friday soaring markets reflected a new optimism in the financial system .
Instead, on Monday morning, the two last remaining investment banks, Morgan Stanley and Goldman Sachs, admitted they had been forced to seek humbling rescue measures too.
The most prestigious titans of finance had relinquished their independent status and became standard, regulated banks. Wall Street as it has long been known ceased to exist.
Morgan Stanley then rapidly announced talks to sell a stake to Mitsubishi UFJ Financial while it emerged that Warren Buffett had bought a stake in Goldman on very favourable terms.
One rival said: “The real shock was Goldman. If Goldman were in trouble, we all were.”
It was a reality Goldman’s chief executive Lloyd Blankfein had been fighting for nearly two weeks.
On Friday, September 12 Blankfein joined 30 other bosses for a crisis meeting called by the Fed in New York. They had been told that Lehman was in big trouble and would probably collapse if a buyer could not be found .
Blankfein was considered a leader of the pack, not just because he was the boss of Wall Street’s smartest bank, but he was old chums with the chairmen of the meeting, Paulson, from the US Treasurer’s Goldman days.
He was also on the 'strong side’ of the room – among those considered to have best withstood the financial maelstrom of the past year .
While Bear Stearns went bust and others haemorrhaged unprecedented losses, Goldman adopted the lofty role of adviser and stabiliser.
Yet it was in this meeting that a new reality was realised. The dire problems of Lehman, AIG and Merrill made it clear that this was no longer about weak or strong institutions but about a huge crisis of confidence from which none of them were safe.
One Goldman insider said: “In days after that meeting the atmosphere in the bank changed very quickly from the normal bravado to horror. The worst part was when our share price hit 80p. It was truly frightening.”
More threatening for the bank’s senior management was the distinct possibility that credit rating agencies would downgrade Goldman. The move would mean the cost of borrowing money would soar, putting severe pressure on the lifeblood of the bank.
Arch-rival Morgan Stanley was similarly panicked and abandoned all pretence, loudly searching for a buyer or an investor.
In the middle of the mayhem, Blankfein turned to Buffett, the one man in America who commanded both capital and, more importantly, confidence.
Initially, Buffett said he wasn’t interested. For six months he had rejected similar pleas for help from a raft of other embattled financial institutions, starting with Bear Stearns in March. But on Tuesday last week, his position changed. Just before lunch, Buffett said he was sitting with his feet on his desk in Omaha sipping a Cherry Coke and nibbling at some mixed nuts when he received a desperate call from Byron Trott, head of Goldman in Chicago and charged by Blankfein to secure a deal.
Blankfein knew Buffett – sources say the pair had been introduced by Paulson. But Buffett was close to Trott, whom he had once described in an investment letter as a “rare investment banker who puts himself in his client’s shoes . . . I trust him completely”.
In this phone call Trott simply asked Buffett to name the terms under which he would invest in Goldman and the bank would try to hammer out a deal. Hours later, Buffett’s Berkshire Hathaway had pledged to invest $5bn in Goldman. He also received the right to buy $5bn worth of Goldman shares at $115 per share.
Later Buffett said: “The price was right, the people were right, the terms were right and I decided to write a cheque.” He joked he had lots of cash which had to be spent. “Otherwise, it’s a bit like saving up sex for your old age – at some point you’ve got to use it.”
Within hours, the 'Buffett effect’ had sent Goldman shares soaring and netted him millions of dollars in paper profit.
But it was clear that Buffett recognised the situation was bigger than a single deal or a single bank. The next day he went on CNBC, the American cable channel, to stress the importance of the proposed bailout, and said the financial system was in grave danger and could take “years and years to repair”.
Although America listened to its most admired investor, he still failed to satisfy their increasingly angry question: why?
The financial system was structured after the 1929 Wall Street Crash and in the light of the Great Depression that followed.
Beforehand the banks had been run as an old boys’ club: when problems arose, the weakest institutions were helped along by the strongest, mostly to save their collective good names.
As the Great Depression set in, greedy bankers were blamed for taking too much risk and jeopardising the world economy.
Even so it was accepted that investment banking played a crucial role in the economy .
Peter Hahn of CASS business school said: “Investment banks were, as they are now, crucial for facilitating business and disseminating wealth. As security traders they allow company owners to sell part of their shares, freeing up money to spend and invest while allowing other to share in the growth of their company. To this day, countries with no securities system often have a big concentration of wealth in a few families – in the Middle East, for instance.”
Even so the US government decided the system needed to be properly controlled .
The Securities Act of 1933 brought standardisation to the securities industry, in particular disclosure to the equity and bonds markets, while the SEC was created as the watchdog. In addition, the Glass-Steagall Act divided firms into commercial banks, who took deposits and offered loans to companies, and securities firms that traded on the markets and kept their risks entirely separate from retail savers.
As such, firms such as Goldman Sachs were not really banks but securities dealers.
Hahn said: “In return for the privilege of being able to raise deposits from the public, the banks were heavily regulated and as such grew with a reputation of prudence, safety, watched by the strongest government institutions. The securities banks with their higher risks were kept away from savings.”
But in the following decades and with the onset of globalisation, the burgeoning financial system began to outgrow this structure.
The UK, for instance, had developed in a broadly two-tier sense. The merchant banks, such as Barings, Schroders, Hambros, were small but offered everything from deposits to securities trading to the rich while the clearing banks developed for mass savings.
American securities banks were quick to see the advantage of the more integrated and efficient rules in London.
Hahn said after Big Bang, the integrated system in London allowed for far greater competition and securities trading was “far more efficient and cheaper than New York”.
In 1990 the Rule 144A was passed to introduce competition into securities market and started the erosion of the Glass-Steagall Act by allowing institutional trading of unlisted and unregistered securities. The next big landmark was 1998 – Travellers Group bought Citicorp to add to Salomon Brothers creating an integrated bank which swept away the separation.
By now American regulators were more interested in formulating international banking rules being drawn up in Basel.
But when these rules were introduced, they were aimed at retail banks leaving the burgeoning investment banks to grow relatively unchecked. One expert said: “The only real monitors were credit rating agencies, dominated by Moody’s and Standard & Poor. These were ill-equipped to understand the radically changing products.”
Another oversight was the US insurance market where there has never been a national regulator only state ones.
One insurance expert said: “Essentially insurance went unchecked by professionals. It all worked fine for small players. But huge firms like AIG were becoming international. How was the New York State insurance guy supposed to understand a credit default instrument sold in London?”
Last week experts said that, in hindsight, the lax rules allowed the financial system to completely reinvent itself given a strong enough catalyst. This came in the form of the telecoms and media boom at the turn of the millennium.
A senior London banker said: “During the tech bubble the value of securities was rising so fast that it no longer became good enough for investment banks to just trade on behalf of clients, they wanted to own the securities too. Margins were particularly small in the debt markets – you could do a £10bn eurobond trade for BT and take away a tiny margin. Banks bought debt but also started creating more complicated financial instruments and derivatives that became part of financing. Hybrid capital was born and the 'off-balance sheet vehicles’ were designed to hold the risk.”
The risk systems at the credit rating agencies were not sophisticated enough to keep up and, despite their complexity, many were given AAA ratings. As well as the bank, insurance companies, which were searching for yield enhancing products to match their increasingly liabilities due in part to the ageing population, started lapping them up.
Experts argue that it was at this time that renumeration policies also started encouraging huge risk appetites at the banks.
Peter Hahn : “Bank bosses have been incentivised like tech bosses. If you’re a shareholder in Intel, you want the management to pull all the stops into developing the next chip because if they don’t and Samsung produces a better chip which captures the market, Intel could be bust. If it does go bust, it doesn’t effect anyone else.
“The difference with a bank is a boss can say: 'you want me to make more profits? No problem, I can just go out and buy more risk and deal with the problems later’.” One top UK investor agrees: “At RBS, Fred Goodwin was paid a bonus for doing the ABN deal. Actually, the board should have said, by doing the deal you have radically increased the risk profile of the bank, you’ll get the bonus when the acquisition has proved itself. The pay structure has rewarded risk taking rather than solid, tangible success.”
The hubris reached its zenith with the development of sub-prime mortgages in the US. The ease of originating loans was matched by a hunger to take them on and package them within the banks. Cheap credit flooded the markets and was eagerly taken up by the soaring ambitions of corporates, private equity firms and hedge funds.
One banker said: “The cycle was bound to turn eventually but since it did last summer, it’s the structural problems that have proved to be the real danger.”
Every day for the past two weeks, bosses at the investment banks in London and New York have been meeting to discuss the future of their businesses.
One said: “Large parts of the system are simply gone. Today the wholesale funding market is broken. Securitisation is shut, the bond markets are difficult and costly and other creditors are unreliable.”
Without the funding, the independent investment banks who relied on it must find another source. It is expected that Goldman and Morgan Stanley will buy big retail banks in the US to secure a deposit base.
A far higher level of regulation also seems likely, both from central banks and legislators.
One banker said: “We must accept large-scale intervention. The ban on short-selling is just an example. Perfectly ordinary practices will be banned or regulated into expediency until the system is back to health. This will hit banks, hedge funds, private equity firms and then have a knock-on effect on accountants and lawyers.
“We’re entering a whole new world. The question is, when it is safe to start building it?”
Who said what about the financial meltdown
US Treasury Secretary Hank Paulson on why the $700bn bailout package must be passed: “We must do so in order to avoid a continuing series of financial institution failures and frozen credit markets that threaten American families’ financial wellbeing, the viability of businesses both small and large, and the very health of our economy.”
Federal Reserve chairman Ben Bernanke: “Action by Congress is urgently required to stabilise the situation and avert what otherwise could be very serious consequences for our financial markets and for our economy.”
George W Bush: “Our entire economy is in danger.”
Democratic Congressman Mike McNulty on the rush to approve the bailout fund: “We have been told repeatedly by this administration that the economy is fundamentally sound and then, all of a sudden, they say the economy is going to collapse. That is unacceptable.”
Warren Buffett, after investment in Goldman Sachs: “You can’t keep money around for ever. It’s like saving sex for your old age.”
Dominique Strauss-Kahn, head of the IMF: “The consequences for some financial institutions are still in front of us.”
Copyright 2008 the London Telegraph - Used with permission.
-30-
Of course, if a US source can report on this crisis without spinning it for their favorite presidential candidate, I'll post it. But at this point, all readers are warned up-front that the quality of information - and its slant - for first-tier US information organizations is all to be taken with a large helping of salt.
The following article will provide more a historic summation of events, because of the pace at which the financial crisis story is moving. Read it to provide yourself with an understanding of the environment surrounding whatever comes out of Washington Sunday and thereafter this coming week.
Kenneth
+++++++++++++++
Deepening financial crisis engulfs the banking industry
As Washington Mutual became America’s biggest bank failure and politicians argue over the terms of a $700bn rescue plan, a solution to the global credit crisis looked more remote than ever.
By Louise Armitstead
Last Updated: 10:23PM BST 27 Sep 2008
It has already become an iconic moment. On Thursday, Henry 'Hank’ Paulson, the US Treasury Secretary and a man with a personal fortune estimated at $700m (£380m), bent down on one knee before the most powerful woman in Congress, Nancy Pelosi, and begged her to save his plan to rescue Wall Street.
It didn’t work. Ten days after America announced a $700bn bailout for its stricken banks, weary financiers on both sides of the Atlantic went home for the weekend convinced their futures were in the hands of a group of American politicians whose priority was an election in a month, not the markets on Monday.
President Bush repeatedly pleaded with Congress to back the deal. “This sucker could go down,” Bush told them, apparently referring to the teetering US economy.
Congressional staff worked until 2am on Saturday morning and resumed again at 7am in an attempt to reach an agreement on the bailout – which could be the most extensive peacetime state intervention in the financial system since the Great Depression – by the time the markets open in Asia tomorrow.
However, Congressmen were under intense pressure to reject the bailout, which would allow the US government to buy toxic housing-related investments from banks.
A source close to the meetings said: “American Congressmen are being lobbied by voters at a scale of nearly 100 to 1 to vote against this bailout. It could be politically lethal to be seen as the ones taking the side of Wall Street against the people.”
Not, screamed Wall Street, as dangerous as the impact on financial markets if it were not granted. Last week Warren Buffett, America’s richest man and most famous investor with a huge retail following, tried to impress the importance: “This is sort of an economic Pearl Harbor we’re going through. I’m sure we didn’t want to go to war in 1941. There are times when events force a timetable on you and force action. If they think about it for three weeks, it will be very different and more difficult.”
Bob Diamond, boss of Barclays Capital and new owner of Lehman Brothers in America, told The Sunday Telegraph: “The reality is that the world needs a functioning financial system and it’s up to everyone involved to make sure this happens.”
Another senior banker said: “I don’t think people realise how serious this is. We are facing a full-scale meltdown of the financial system and liquidity is drying up. Imagine not being able to withdraw cash from the banks to buy food. This, in financial terms, is what’s happening. There is no way this bailout can’t happen. It’s about confidence and the blow would be huge.”
Bankers pointed to the events of last week as proof. While the markets had soared last Friday on news of the bailout, within days the uncertainty surrounding it had again unleashed fresh fear into the markets.
Overnight last Sunday, Morgan Stanley and Goldman Sachs were converted from independent to ordinary regulated banks, adding shocking emphasis to the depth of the crisis: Wall Street as it had long been known ceased to exist.
Then as politicians wrangled, the interbank lending market froze.
On Thursday, regulators seized control of Washington Mutual, making it the biggest banking failure in US history. Then shares in Wachovia, the fourth largest bank in the US, fell 27 per cent on Friday. In the panic, fresh doubts were poured on the future of Morgan Stanley as its credit default swap rate widened dramatically, a sign of extreme distress.
By now all eyes were fixed on the bailout as the market’s only hope.
Yet this weekend, City pessimists argued that Paulson’s plan might not work, even if it does get through Congress. They said confidence in the banks was shattered beyond repair when Paulson let Lehman Brothers fail and that no amount of US taxpayer money set aside to buy toxic assets from banks will get banks to start lending to one another again. Neither will it get investors to start buying bank shares again.
Instead, they argued, investors and banks themselves will keep scouting for – and steering clear of – institutions perceived to be the weakest links in the financial system. This self-fulfilling process could well lead to a 1930s-style domino effect of failing banks.
“I think Paulson has gone for the wrong model,” a senior London banker said on Friday. “The model he chose was the one used to bail out bankrupt US building societies in the 1980s. The model he should have chosen was used to inject government funds directly into banks in the 1930s.”
Others argued, the panic was being overblown by self-important bankers who ought to take responsibility for their own mistakes during what Gordon Brown has condemned as the “age of irresponsibility”. They pointed to the fact that plenty of banks have managed the downturn perfectly well and are now in a position of strength.
Barclays, which made write-downs early in the crisis, has bought Lehman Brothers’ US operations from administration in a move that propelled the British bank up the table of global powerhouses.
This weekend, Diamond said: “All banks have assets they’d prefer not to have on their balance sheets. If you’d asked me a month ago if we were going to buy an investment bank, the answer would be very, very unlikely. This unique opportunity came very quickly. Opportunities only come along in crises.”
Similarly, Deutsche Bank has quietly made four acquisitions over the summer.
But even the strong banks recognised the importance of the US bailout to the wider economy.
Michael Cohrs, head of global banking at Deutsche Bank said: “Our losses, while modest are not acceptable. But we continuing to work hard to ensure we are in the best shape to cope with this crisis. Ensuring stability in the US markets is important for us all. The bailout will not solve the problems but if doesn’t happen it will be yet another negative. There’s a psychology to a crisis and more bad news compounds the problems.”
Last week was meant to be a fresh start. After the collapse of Lehman, the fire sale of Merrill Lynch and HBOS and the nationalisation of AIG, news of the Fed’s planned bailout announced on Thursday was supposed to be the bottom line. On Friday soaring markets reflected a new optimism in the financial system .
Instead, on Monday morning, the two last remaining investment banks, Morgan Stanley and Goldman Sachs, admitted they had been forced to seek humbling rescue measures too.
The most prestigious titans of finance had relinquished their independent status and became standard, regulated banks. Wall Street as it has long been known ceased to exist.
Morgan Stanley then rapidly announced talks to sell a stake to Mitsubishi UFJ Financial while it emerged that Warren Buffett had bought a stake in Goldman on very favourable terms.
One rival said: “The real shock was Goldman. If Goldman were in trouble, we all were.”
It was a reality Goldman’s chief executive Lloyd Blankfein had been fighting for nearly two weeks.
On Friday, September 12 Blankfein joined 30 other bosses for a crisis meeting called by the Fed in New York. They had been told that Lehman was in big trouble and would probably collapse if a buyer could not be found .
Blankfein was considered a leader of the pack, not just because he was the boss of Wall Street’s smartest bank, but he was old chums with the chairmen of the meeting, Paulson, from the US Treasurer’s Goldman days.
He was also on the 'strong side’ of the room – among those considered to have best withstood the financial maelstrom of the past year .
While Bear Stearns went bust and others haemorrhaged unprecedented losses, Goldman adopted the lofty role of adviser and stabiliser.
Yet it was in this meeting that a new reality was realised. The dire problems of Lehman, AIG and Merrill made it clear that this was no longer about weak or strong institutions but about a huge crisis of confidence from which none of them were safe.
One Goldman insider said: “In days after that meeting the atmosphere in the bank changed very quickly from the normal bravado to horror. The worst part was when our share price hit 80p. It was truly frightening.”
More threatening for the bank’s senior management was the distinct possibility that credit rating agencies would downgrade Goldman. The move would mean the cost of borrowing money would soar, putting severe pressure on the lifeblood of the bank.
Arch-rival Morgan Stanley was similarly panicked and abandoned all pretence, loudly searching for a buyer or an investor.
In the middle of the mayhem, Blankfein turned to Buffett, the one man in America who commanded both capital and, more importantly, confidence.
Initially, Buffett said he wasn’t interested. For six months he had rejected similar pleas for help from a raft of other embattled financial institutions, starting with Bear Stearns in March. But on Tuesday last week, his position changed. Just before lunch, Buffett said he was sitting with his feet on his desk in Omaha sipping a Cherry Coke and nibbling at some mixed nuts when he received a desperate call from Byron Trott, head of Goldman in Chicago and charged by Blankfein to secure a deal.
Blankfein knew Buffett – sources say the pair had been introduced by Paulson. But Buffett was close to Trott, whom he had once described in an investment letter as a “rare investment banker who puts himself in his client’s shoes . . . I trust him completely”.
In this phone call Trott simply asked Buffett to name the terms under which he would invest in Goldman and the bank would try to hammer out a deal. Hours later, Buffett’s Berkshire Hathaway had pledged to invest $5bn in Goldman. He also received the right to buy $5bn worth of Goldman shares at $115 per share.
Later Buffett said: “The price was right, the people were right, the terms were right and I decided to write a cheque.” He joked he had lots of cash which had to be spent. “Otherwise, it’s a bit like saving up sex for your old age – at some point you’ve got to use it.”
Within hours, the 'Buffett effect’ had sent Goldman shares soaring and netted him millions of dollars in paper profit.
But it was clear that Buffett recognised the situation was bigger than a single deal or a single bank. The next day he went on CNBC, the American cable channel, to stress the importance of the proposed bailout, and said the financial system was in grave danger and could take “years and years to repair”.
Although America listened to its most admired investor, he still failed to satisfy their increasingly angry question: why?
The financial system was structured after the 1929 Wall Street Crash and in the light of the Great Depression that followed.
Beforehand the banks had been run as an old boys’ club: when problems arose, the weakest institutions were helped along by the strongest, mostly to save their collective good names.
As the Great Depression set in, greedy bankers were blamed for taking too much risk and jeopardising the world economy.
Even so it was accepted that investment banking played a crucial role in the economy .
Peter Hahn of CASS business school said: “Investment banks were, as they are now, crucial for facilitating business and disseminating wealth. As security traders they allow company owners to sell part of their shares, freeing up money to spend and invest while allowing other to share in the growth of their company. To this day, countries with no securities system often have a big concentration of wealth in a few families – in the Middle East, for instance.”
Even so the US government decided the system needed to be properly controlled .
The Securities Act of 1933 brought standardisation to the securities industry, in particular disclosure to the equity and bonds markets, while the SEC was created as the watchdog. In addition, the Glass-Steagall Act divided firms into commercial banks, who took deposits and offered loans to companies, and securities firms that traded on the markets and kept their risks entirely separate from retail savers.
As such, firms such as Goldman Sachs were not really banks but securities dealers.
Hahn said: “In return for the privilege of being able to raise deposits from the public, the banks were heavily regulated and as such grew with a reputation of prudence, safety, watched by the strongest government institutions. The securities banks with their higher risks were kept away from savings.”
But in the following decades and with the onset of globalisation, the burgeoning financial system began to outgrow this structure.
The UK, for instance, had developed in a broadly two-tier sense. The merchant banks, such as Barings, Schroders, Hambros, were small but offered everything from deposits to securities trading to the rich while the clearing banks developed for mass savings.
American securities banks were quick to see the advantage of the more integrated and efficient rules in London.
Hahn said after Big Bang, the integrated system in London allowed for far greater competition and securities trading was “far more efficient and cheaper than New York”.
In 1990 the Rule 144A was passed to introduce competition into securities market and started the erosion of the Glass-Steagall Act by allowing institutional trading of unlisted and unregistered securities. The next big landmark was 1998 – Travellers Group bought Citicorp to add to Salomon Brothers creating an integrated bank which swept away the separation.
By now American regulators were more interested in formulating international banking rules being drawn up in Basel.
But when these rules were introduced, they were aimed at retail banks leaving the burgeoning investment banks to grow relatively unchecked. One expert said: “The only real monitors were credit rating agencies, dominated by Moody’s and Standard & Poor. These were ill-equipped to understand the radically changing products.”
Another oversight was the US insurance market where there has never been a national regulator only state ones.
One insurance expert said: “Essentially insurance went unchecked by professionals. It all worked fine for small players. But huge firms like AIG were becoming international. How was the New York State insurance guy supposed to understand a credit default instrument sold in London?”
Last week experts said that, in hindsight, the lax rules allowed the financial system to completely reinvent itself given a strong enough catalyst. This came in the form of the telecoms and media boom at the turn of the millennium.
A senior London banker said: “During the tech bubble the value of securities was rising so fast that it no longer became good enough for investment banks to just trade on behalf of clients, they wanted to own the securities too. Margins were particularly small in the debt markets – you could do a £10bn eurobond trade for BT and take away a tiny margin. Banks bought debt but also started creating more complicated financial instruments and derivatives that became part of financing. Hybrid capital was born and the 'off-balance sheet vehicles’ were designed to hold the risk.”
The risk systems at the credit rating agencies were not sophisticated enough to keep up and, despite their complexity, many were given AAA ratings. As well as the bank, insurance companies, which were searching for yield enhancing products to match their increasingly liabilities due in part to the ageing population, started lapping them up.
Experts argue that it was at this time that renumeration policies also started encouraging huge risk appetites at the banks.
Peter Hahn : “Bank bosses have been incentivised like tech bosses. If you’re a shareholder in Intel, you want the management to pull all the stops into developing the next chip because if they don’t and Samsung produces a better chip which captures the market, Intel could be bust. If it does go bust, it doesn’t effect anyone else.
“The difference with a bank is a boss can say: 'you want me to make more profits? No problem, I can just go out and buy more risk and deal with the problems later’.” One top UK investor agrees: “At RBS, Fred Goodwin was paid a bonus for doing the ABN deal. Actually, the board should have said, by doing the deal you have radically increased the risk profile of the bank, you’ll get the bonus when the acquisition has proved itself. The pay structure has rewarded risk taking rather than solid, tangible success.”
The hubris reached its zenith with the development of sub-prime mortgages in the US. The ease of originating loans was matched by a hunger to take them on and package them within the banks. Cheap credit flooded the markets and was eagerly taken up by the soaring ambitions of corporates, private equity firms and hedge funds.
One banker said: “The cycle was bound to turn eventually but since it did last summer, it’s the structural problems that have proved to be the real danger.”
Every day for the past two weeks, bosses at the investment banks in London and New York have been meeting to discuss the future of their businesses.
One said: “Large parts of the system are simply gone. Today the wholesale funding market is broken. Securitisation is shut, the bond markets are difficult and costly and other creditors are unreliable.”
Without the funding, the independent investment banks who relied on it must find another source. It is expected that Goldman and Morgan Stanley will buy big retail banks in the US to secure a deposit base.
A far higher level of regulation also seems likely, both from central banks and legislators.
One banker said: “We must accept large-scale intervention. The ban on short-selling is just an example. Perfectly ordinary practices will be banned or regulated into expediency until the system is back to health. This will hit banks, hedge funds, private equity firms and then have a knock-on effect on accountants and lawyers.
“We’re entering a whole new world. The question is, when it is safe to start building it?”
Who said what about the financial meltdown
US Treasury Secretary Hank Paulson on why the $700bn bailout package must be passed: “We must do so in order to avoid a continuing series of financial institution failures and frozen credit markets that threaten American families’ financial wellbeing, the viability of businesses both small and large, and the very health of our economy.”
Federal Reserve chairman Ben Bernanke: “Action by Congress is urgently required to stabilise the situation and avert what otherwise could be very serious consequences for our financial markets and for our economy.”
George W Bush: “Our entire economy is in danger.”
Democratic Congressman Mike McNulty on the rush to approve the bailout fund: “We have been told repeatedly by this administration that the economy is fundamentally sound and then, all of a sudden, they say the economy is going to collapse. That is unacceptable.”
Warren Buffett, after investment in Goldman Sachs: “You can’t keep money around for ever. It’s like saving sex for your old age.”
Dominique Strauss-Kahn, head of the IMF: “The consequences for some financial institutions are still in front of us.”
Copyright 2008 the London Telegraph - Used with permission.
-30-
Saturday, September 27, 2008
Daily Telegraph: The Trillion Dollar Dictatorship
Forget $700-billion as the price tag for the bailout; as this article from the London Telegraph shows, the US is up for a $1-trillion bailout. But what's another 45% uptick from what the politicians want us to believe?
This entire farce shows how totally incompetent the US Congress, the administration, and all the regulatory agencies are in doing their oversight responsibilities. The bottom line they are selling us is, "Even through we are responsible for getting the world into this mess, and even though we are failures at every attempt prior to this one to solve it, this time we have the answer and everything will work out right.
"Trust us. Let us do this with a specific provision to eliminate court review of our actions (the most important unreported aspect of the bailout legislation - did you know it will be beyond the reach of any judicial review? How do you feel about dictatorship? That's what it will be as currently written.)"
Well, this is a fast moving story, and I'll do my best to get with it. For regulars looking for new content, I apologize for not posting the past 3 days. I'm back, picking the best unedited articles I can find for your intellectual stimulation.
Kenneth
+++++++++++++
It’s not just Wall Street with its back to the wall
I’m in shock. Can this crisis get any worse? My instinct is it can. My deep concern is it will.
By Liam Halligan
Last Updated: 8:25PM BST 27 Sep 2008
This time last week, the world was breathing a sigh of relief. The “bailout” had just been announced – and share prices shot up in celebration.
Financial markets were jubilant US Treasury Secretary Hank Paulson was coming to the rescue.
Even inter-bank rates – what banks charge to lend to each other – were falling. So last weekend, as Paulson purred, we all saw a light at the end of the tunnel.
Yet, as we now know, that light was an oncoming train. Last weekend I warned, despite the euphoria, the bailout could cause an “almighty, debilitating political dust-up”. Unfortunately, that’s what happened.
Having spent the last few days in the US, I can vouch voters are very, very angry about feather-bedding a bunch of overpaid bankers. Even in New York, a city that lives and breaths high finance, the tabloids screamed “Fraud Street” – aimed directly at the Wall Street crowd.
Just six weeks before the most hotly contested Presidential contest in decades, it’s not surprising the politicians have waded in. In Congress, many Democrats, and even Republicans, have refused to approve the bailout.
Some want extra home-owner protection. Others say that would spook the banks even more. Almost everyone wants limits on bankers’ salaries. And there is sense, too, that huge government bailouts are “socialist” and “un-American”.
All week, the financial markets have gyrated – mostly downward – as the bailout has flirted with extinction. On Monday, as money sought a safe haven, oil spiked 16 per cent, another one-day record, to $120 a barrel.
Huge developments have come and gone – with almost no reflection or comment. Goldman Sachs and Morgan Stanley surrendered their investment bank status. Washington Mutual failed – the biggest bank collapse in US history.
The Bank of England stepped up, pumping £40bn into our credit-starved money markets. And now, Bradford and Bingley could be the next “Northern Rock”. These massive events have just happened. Yet all eyes remain on Congress. Will the bail-out be agreed? What happens if it isn’t?
The sums involved are simply unprecedented. Rather than $700bn, the US government won’t get away with spending less than $1,000bn – a trillion dollars.
The reality of “pork-barrel” politics is that many in Congress won’t vote to bail out Wall Street unless they get money for their vested interests too. In recent days, the ailing US auto industry has moved into poll position – and looks set for $30bn. Michigan and Ohio – the big car-making states – could swing the US election. Neither party will stand in their way.
At a trillion dollars, then, the money at stake isn’t far short of what economists call US M1 – total cash in circulation in the world’s biggest economy. That’s almost 7 per cent of America’s entire GDP.
With Wall Street warning of an almighty crash on Monday unless a bailout is agreed, a deal of sorts will emerge this weekend – if only something preliminary. But I’m not sure it will work.
The idea is that Paulson’s Troubled Asset Relief Programme (TARP) will buy toxic mortgage-backed securities from banks – so de-icing the inter-bank markets. But at what price?
Something between “hold to maturity” and “fire-sale”, says the Federal Reserve – leaving huge scope for uncertainty. But TARP will only inspire confidence if the market feels the total sum pledged will mop up the sub-prime mess. And that can’t be judged if a deal is announced but the price regime isn’t clear.
What’s more, many banks – in an act of on-going self-delusion – have “priced” their sub-prime securities at only a slight discount to face-value.
But when TARP steps in, and establishes genuine prices, many banks will be forced to make even more writedowns. So far, around $510m of sub-prime losses have been “fessed-up”. Ironically, Paulson’s bailout could see that escalate two- or even three-fold – so sparking a new wave of panic.
Consider, also, that the situation will remain very fragile until US house prices stop falling. The more prices drop, the more sub-prime loans will default, causing banks to incur more losses. But as new data showed last week, America’s housing market may yet have further to fall.
US house prices are already down 17 per cent from their 2006 peak. The problem is the huge overhang of unsold homes – which remains at almost 11 months’ supply, worse even that during the recession of the early 1990s.
But my biggest problem isn’t that the Paulson plan is too vague (inevitable, given the political stakes) or that US house prices will keep falling (a fact of life). My problem is that this bail-out is utterly misconceived.
The idea of buy bank’s illiquid assets sounds good in theory. But it won’t solve the main issue – namely, the banks have very little capital to lend anyway, even if their sub-prime losses disappear.
Congress should be approving a direct recapitalisation of US banks – as the Swedish government was forced to back in the mid-1990s – rather than messing about with TARP. I fear that’s eventually what will happen. So this bailout is only round one.
Liam Halligan is chief economist at Prosperity Capital Management
Copyright 2008 London Telegraph - Used with Permission
-30-
This entire farce shows how totally incompetent the US Congress, the administration, and all the regulatory agencies are in doing their oversight responsibilities. The bottom line they are selling us is, "Even through we are responsible for getting the world into this mess, and even though we are failures at every attempt prior to this one to solve it, this time we have the answer and everything will work out right.
"Trust us. Let us do this with a specific provision to eliminate court review of our actions (the most important unreported aspect of the bailout legislation - did you know it will be beyond the reach of any judicial review? How do you feel about dictatorship? That's what it will be as currently written.)"
Well, this is a fast moving story, and I'll do my best to get with it. For regulars looking for new content, I apologize for not posting the past 3 days. I'm back, picking the best unedited articles I can find for your intellectual stimulation.
Kenneth
+++++++++++++
It’s not just Wall Street with its back to the wall
I’m in shock. Can this crisis get any worse? My instinct is it can. My deep concern is it will.
By Liam Halligan
Last Updated: 8:25PM BST 27 Sep 2008
This time last week, the world was breathing a sigh of relief. The “bailout” had just been announced – and share prices shot up in celebration.
Financial markets were jubilant US Treasury Secretary Hank Paulson was coming to the rescue.
Even inter-bank rates – what banks charge to lend to each other – were falling. So last weekend, as Paulson purred, we all saw a light at the end of the tunnel.
Yet, as we now know, that light was an oncoming train. Last weekend I warned, despite the euphoria, the bailout could cause an “almighty, debilitating political dust-up”. Unfortunately, that’s what happened.
Having spent the last few days in the US, I can vouch voters are very, very angry about feather-bedding a bunch of overpaid bankers. Even in New York, a city that lives and breaths high finance, the tabloids screamed “Fraud Street” – aimed directly at the Wall Street crowd.
Just six weeks before the most hotly contested Presidential contest in decades, it’s not surprising the politicians have waded in. In Congress, many Democrats, and even Republicans, have refused to approve the bailout.
Some want extra home-owner protection. Others say that would spook the banks even more. Almost everyone wants limits on bankers’ salaries. And there is sense, too, that huge government bailouts are “socialist” and “un-American”.
All week, the financial markets have gyrated – mostly downward – as the bailout has flirted with extinction. On Monday, as money sought a safe haven, oil spiked 16 per cent, another one-day record, to $120 a barrel.
Huge developments have come and gone – with almost no reflection or comment. Goldman Sachs and Morgan Stanley surrendered their investment bank status. Washington Mutual failed – the biggest bank collapse in US history.
The Bank of England stepped up, pumping £40bn into our credit-starved money markets. And now, Bradford and Bingley could be the next “Northern Rock”. These massive events have just happened. Yet all eyes remain on Congress. Will the bail-out be agreed? What happens if it isn’t?
The sums involved are simply unprecedented. Rather than $700bn, the US government won’t get away with spending less than $1,000bn – a trillion dollars.
The reality of “pork-barrel” politics is that many in Congress won’t vote to bail out Wall Street unless they get money for their vested interests too. In recent days, the ailing US auto industry has moved into poll position – and looks set for $30bn. Michigan and Ohio – the big car-making states – could swing the US election. Neither party will stand in their way.
At a trillion dollars, then, the money at stake isn’t far short of what economists call US M1 – total cash in circulation in the world’s biggest economy. That’s almost 7 per cent of America’s entire GDP.
With Wall Street warning of an almighty crash on Monday unless a bailout is agreed, a deal of sorts will emerge this weekend – if only something preliminary. But I’m not sure it will work.
The idea is that Paulson’s Troubled Asset Relief Programme (TARP) will buy toxic mortgage-backed securities from banks – so de-icing the inter-bank markets. But at what price?
Something between “hold to maturity” and “fire-sale”, says the Federal Reserve – leaving huge scope for uncertainty. But TARP will only inspire confidence if the market feels the total sum pledged will mop up the sub-prime mess. And that can’t be judged if a deal is announced but the price regime isn’t clear.
What’s more, many banks – in an act of on-going self-delusion – have “priced” their sub-prime securities at only a slight discount to face-value.
But when TARP steps in, and establishes genuine prices, many banks will be forced to make even more writedowns. So far, around $510m of sub-prime losses have been “fessed-up”. Ironically, Paulson’s bailout could see that escalate two- or even three-fold – so sparking a new wave of panic.
Consider, also, that the situation will remain very fragile until US house prices stop falling. The more prices drop, the more sub-prime loans will default, causing banks to incur more losses. But as new data showed last week, America’s housing market may yet have further to fall.
US house prices are already down 17 per cent from their 2006 peak. The problem is the huge overhang of unsold homes – which remains at almost 11 months’ supply, worse even that during the recession of the early 1990s.
But my biggest problem isn’t that the Paulson plan is too vague (inevitable, given the political stakes) or that US house prices will keep falling (a fact of life). My problem is that this bail-out is utterly misconceived.
The idea of buy bank’s illiquid assets sounds good in theory. But it won’t solve the main issue – namely, the banks have very little capital to lend anyway, even if their sub-prime losses disappear.
Congress should be approving a direct recapitalisation of US banks – as the Swedish government was forced to back in the mid-1990s – rather than messing about with TARP. I fear that’s eventually what will happen. So this bailout is only round one.
Liam Halligan is chief economist at Prosperity Capital Management
Copyright 2008 London Telegraph - Used with Permission
-30-
Wednesday, September 24, 2008
Lunatic Fringe: PETA wants human breast milk
This is truly an insane group; PETA wrote the founders of Ben and Jerry's ice cream asking they substitute human breast milk for cow's milk.
OK, PETA, tell us how are you going to:
1) Screen the breast milk for disease and impurities?
2) Maintain its sanitation to the factory?
3) Allocate lot numbers to track end-user problems?
4) Build up a cadre of equally insane women to deny milk to their baby in exchange for using it for ice cream?
That's the best I can do to treat this idea with any semblance of respect. PETA is totally insane; that just takes it to a more obvious visibility.
Here's the story:
PETA Urges Ben & Jerry's To Use Human Milk
POSTED: 2:21 pm EDT September 23, 2008
UPDATED: 10:28 pm EDT September 23, 2008
VERMONT -- People for the Ethical Treatment of Animals sent a letter to Ben Cohen and Jerry Greenfield, cofounders of Ben & Jerry's Homemade Inc., urging them to replace cow's milk they use in their ice cream products with human breast milk, according to a statement recently released by a PETA spokeswoman.
"PETA's request comes in the wake of news reports that a Swiss restaurant owner will begin purchasing breast milk from nursing mothers and substituting breast milk for 75 percent of the cow's milk in the food he serves," the statement says.
PETA officials say a move to human breast milk would lessen the suffering of dairy cows and their babies on factory farms and benefit human health.
"The fact that human adults consume huge quantities of dairy products made from milk that was meant for a baby cow just doesn't make sense," says PETA Executive Vice President Tracy Reiman. "Everyone knows that 'the breast is best,' so Ben & Jerry's could do consumers and cows a big favor by making the switch to breast milk."
In a statement Ben and Jerry's said, "We applaud PETA's novel approach to bringing attention to an issue, but we believe a mother's milk is best used for her child."
Read PETA's letter to Ben Cohen and Jerry Greenfield
September 23, 2008
Ben Cohen and Jerry Greenfield, Cofounders
Ben & Jerry's Homemade Inc.
Dear Mr. Cohen and Mr. Greenfield,
On behalf of PETA and our more than 2 million members and supporters, I'd like to bring your attention to an innovative new idea from Switzerland that would bring a unique twist to Ben and Jerry's.
Storchen restaurant is set to unveil a menu that includes soups, stews, and sauces made with at least 75 percent breast milk procured from human donors who are paid in exchange for their milk. If Ben and Jerry's replaced the cow's milk in its ice cream with breast milk, your customers - and cows - would reap the benefits.
Using cow's milk for your ice cream is a hazard to your customer's health.
Dairy products have been linked to juvenile diabetes, allergies, constipation, obesity, and prostate and ovarian cancer. The late Dr. Benjamin Spock, America's leading authority on child care, spoke out against feeding cow's milk to children, saying it may play a role in anemia, allergies, and juvenile diabetes and in the long term, will set kids up for obesity and heart disease-America's number one cause of death.
Animals will also benefit from the switch to breast milk. Like all mammals, cows only produce milk during and after pregnancy, so to be able to constantly milk them, cows are forcefully impregnated every nine months. After several years of living in filthy conditions and being forced to produce 10 times more milk than they would naturally, their exhausted bodies are turned into hamburgers or ground up for soup.
And of course, the veal industry could not survive without the dairy industry. Because male calves can't produce milk, dairy farmers take them from their mothers immediately after birth and sell them to veal farms, where they endure 14 to 17 weeks of torment chained inside a crate so small that they can't even turn around.
The breast is best! Won't you give cows and their babies a break and our health a boost by switching from cow's milk to breast milk in Ben and Jerry's ice cream? Thank you for your consideration.
Sincerely,
Tracy Reiman
Executive Vice President
++++++++++++
Copyright 2008 WNBC - Used with permission
-30-
OK, PETA, tell us how are you going to:
1) Screen the breast milk for disease and impurities?
2) Maintain its sanitation to the factory?
3) Allocate lot numbers to track end-user problems?
4) Build up a cadre of equally insane women to deny milk to their baby in exchange for using it for ice cream?
That's the best I can do to treat this idea with any semblance of respect. PETA is totally insane; that just takes it to a more obvious visibility.
Here's the story:
PETA Urges Ben & Jerry's To Use Human Milk
POSTED: 2:21 pm EDT September 23, 2008
UPDATED: 10:28 pm EDT September 23, 2008
VERMONT -- People for the Ethical Treatment of Animals sent a letter to Ben Cohen and Jerry Greenfield, cofounders of Ben & Jerry's Homemade Inc., urging them to replace cow's milk they use in their ice cream products with human breast milk, according to a statement recently released by a PETA spokeswoman.
"PETA's request comes in the wake of news reports that a Swiss restaurant owner will begin purchasing breast milk from nursing mothers and substituting breast milk for 75 percent of the cow's milk in the food he serves," the statement says.
PETA officials say a move to human breast milk would lessen the suffering of dairy cows and their babies on factory farms and benefit human health.
"The fact that human adults consume huge quantities of dairy products made from milk that was meant for a baby cow just doesn't make sense," says PETA Executive Vice President Tracy Reiman. "Everyone knows that 'the breast is best,' so Ben & Jerry's could do consumers and cows a big favor by making the switch to breast milk."
In a statement Ben and Jerry's said, "We applaud PETA's novel approach to bringing attention to an issue, but we believe a mother's milk is best used for her child."
Read PETA's letter to Ben Cohen and Jerry Greenfield
September 23, 2008
Ben Cohen and Jerry Greenfield, Cofounders
Ben & Jerry's Homemade Inc.
Dear Mr. Cohen and Mr. Greenfield,
On behalf of PETA and our more than 2 million members and supporters, I'd like to bring your attention to an innovative new idea from Switzerland that would bring a unique twist to Ben and Jerry's.
Storchen restaurant is set to unveil a menu that includes soups, stews, and sauces made with at least 75 percent breast milk procured from human donors who are paid in exchange for their milk. If Ben and Jerry's replaced the cow's milk in its ice cream with breast milk, your customers - and cows - would reap the benefits.
Using cow's milk for your ice cream is a hazard to your customer's health.
Dairy products have been linked to juvenile diabetes, allergies, constipation, obesity, and prostate and ovarian cancer. The late Dr. Benjamin Spock, America's leading authority on child care, spoke out against feeding cow's milk to children, saying it may play a role in anemia, allergies, and juvenile diabetes and in the long term, will set kids up for obesity and heart disease-America's number one cause of death.
Animals will also benefit from the switch to breast milk. Like all mammals, cows only produce milk during and after pregnancy, so to be able to constantly milk them, cows are forcefully impregnated every nine months. After several years of living in filthy conditions and being forced to produce 10 times more milk than they would naturally, their exhausted bodies are turned into hamburgers or ground up for soup.
And of course, the veal industry could not survive without the dairy industry. Because male calves can't produce milk, dairy farmers take them from their mothers immediately after birth and sell them to veal farms, where they endure 14 to 17 weeks of torment chained inside a crate so small that they can't even turn around.
The breast is best! Won't you give cows and their babies a break and our health a boost by switching from cow's milk to breast milk in Ben and Jerry's ice cream? Thank you for your consideration.
Sincerely,
Tracy Reiman
Executive Vice President
++++++++++++
Copyright 2008 WNBC - Used with permission
-30-
Tuesday, September 23, 2008
New York Times: Bailout Needs Punitive Action
OK, when the NY Times starts to sound like a conservative financial advocate, you know things on Wall Street are truly a mess.
This quote from the article tells the story in a heartbeat:
“This administration is asking for a $700 billion blank check to be put in the hands of Henry Paulson, a guy who totally missed this, and has been wrong about almost everything,” said Dean Baker, co-director of the liberal Center for Economic and Policy Research in Washington.
“It’s almost amazing they can do this with a straight face. There is clearly skepticism and anger at the idea that we’d give this money to these guys, no questions asked.”
This article tells a story I've long told my radio program listeners: The people at the top of the US government's financial agencies were clueless about the coming crash, and everything they've done up to now is a failure.
Now they want you to cough up another $700-billion. Sure.
Let's see, Lehman Bros. pulled $8-billion out of Europe the week before filing for bankruptcy. Why? So they could fund a $2.5-billion bonus fund for top management.
A bonus for taking a company into bankruptcy? What's wrong with this picture?
Barclay's, which bought Lehman, had to borrow $100-million to make its European payroll.
Here is the article for your edification:
Experts See a Need for Punitive Action in Bailout
By PETER S. GOODMAN
September 23, 2008
As economists puzzle over the proposed details of what may be the biggest financial bailout in American history, the initial skepticism that greeted its unveiling has only deepened.
Some are horrified at the prospect of putting $700 billion in public money on the line.
Others are outraged that Wall Street, home of the eight-figure salary, may get rescued from the consequences of its real estate bender, even as working families give up their houses to foreclosure.
Most economists accept that the nation’s financial crisis — the worst since the Great Depression — has reached such perilous proportions that an expensive intervention is required. But considerable disagreement centers on how to go about it.
The Treasury’s proposal for a bailout, now being negotiated with Congress, is being challenged as fundamentally deficient.
“At first it was, ‘thank goodness the cavalry is coming,’ but what exactly is the cavalry going to do?” asked Douglas W. Elmendorf, a former Treasury and Federal Reserve Board economist, and now a fellow at the Brookings Institution in Washington. “What I worry about is that the Treasury has acted very quickly, without having the time to solicit enough opinions.”
The common denominator to many reactions is a visceral discomfort with giving Treasury Secretary Henry Paulson Jr. — himself a product of Wall Street — carte blanche to relieve major financial institutions of bad loans choking their balance sheets, all on the taxpayer’s bill.
There are substantive reasons for this discomfort, not least concerns that Mr. Paulson will pay too much, thus subsidizing giant financial institutions.
Many economists argue that taxpayers ought to get more than avoidance of the apocalypse for their dollars: they ought to get an ownership stake in the companies on the receiving end.
But an underlying source of doubt about the bailout stems from who is asking for it.
The rescue is being sold as a must-have emergency measure by an administration with a controversial record when it comes to asking Congress for special authority in time of duress.
“This administration is asking for a $700 billion blank check to be put in the hands of Henry Paulson, a guy who totally missed this, and has been wrong about almost everything,” said Dean Baker, co-director of the liberal Center for Economic and Policy Research in Washington.
“It’s almost amazing they can do this with a straight face. There is clearly skepticism and anger at the idea that we’d give this money to these guys, no questions asked.”
Mr. Paulson has argued that the powers he seeks are necessary to chase away the wolf howling at the door: a potentially swift shredding of the American financial system.
That would be catastrophic for everyone, he argues, not only banks, but also ordinary Americans who depend on their finances to buy homes and cars, and to pay for college.
Some are suspicious of Mr. Paulson’s characterizations, finding in his warnings and demands for extraordinary powers a parallel with the way the Bush administration gained authority for the war in Iraq.
Then, the White House suggested that mushroom clouds could accompany Congress’s failure to act. This time, it is financial Armageddon supposedly on the doorstep.
“This is scare tactics to try to do something that’s in the private but not the public interest,” said Allan Meltzer, a former economic adviser to President Reagan, and an expert on monetary policy at the Carnegie Mellon Tepper School of Business. “It’s terrible.”
In part, Mr. Paulson’s credibility has been dented by his pronouncements in previous weeks that the crisis was already contained.
Some suggest this was a well-intentioned effort to stem panic. But the aftermath complicates his quest for the bailout.
“If you view your public statements as an instrument of policy, people don’t believe you anymore,” said Vincent R. Reinhart, a former Federal Reserve economist and now a scholar at the conservative American Enterprise Institute.
The biggest point of contention is over whether and how taxpayers would benefit if the bailout succeeded in righting the financial system, sending banking stocks upward.
In Mr. Paulson’s plan, the Treasury would have the right to buy as much as $700 billion worth of troubled investments, with the taxpayer recouping the proceeds when those investments were sold over coming years.
But many economists — Mr. Elmendorf among them — argue that taxpayers should get more out of the deal, securing stock in the banks that make use of the bailout. The government could then sell off that stock at a profit when conditions improve.
A similar approach was used successfully in Sweden in the early 1990s when its financial system melted down.
Others argue that any bailout must pinch the people who have run the companies now needing rescue, along with their shareholders, addressing the unseemly reality that executives have amassed beach houses and fat bank accounts while taxpayers are now stuck with the bill for their reckless ways.
“It absolutely has to be punitive,” Mr. Baker said. “If they sell us the junk, then we own the company. This isn’t a way to make these companies and their executives rich. This should be about keeping them in business so the financial system doesn’t collapse.”
Other questions center on how to value what the Treasury aims to purchase — an issue that goes to the heart of the crisis itself.
The financial system got to its dangerous perch by betting extravagantly on real estate. When housing prices began plummeting and borrowers stopped making payments, financial institutions found themselves with huge inventories of bad loans.
Not simple loans, but complex investments created by pooling millions of mortgages together and then slicing them into pieces. These were the investments that Wall Street bought, sold and borrowed against in cooking up the money it poured into housing.
The trouble is that these investments are so intertwined and complex that no one seems able to figure out what they are worth. So no one has been willing to buy them.
This is why banks have been in lockdown mode: with mystery enshrouding both the value of their assets and their future losses, banks have held tight to their remaining dollars, depriving the economy of capital.
Now, the Treasury aims to clear the fog by buying up these investments. But their value is as mysterious as ever.
“There’s a tendency for people to think these are stocks and bonds and you know what the price is,” said Bruce Bartlett, a former White House economist under President Reagan. “The problem is people are operating in a world in which nobody knows what the hell is going on. There’s some naïve assumptions about how this would function.”
If Mr. Paulson pays the market rate — whatever that is — that presumably would not be enough to persuade banks to sell. Otherwise, they would have sold already.
For the plan to work, Treasury has to pay a premium.
“It’s a straight subsidy to financial institutions,” said Martin Baily, a former chairman of the Council of Economic Advisers in the Clinton administration, and now a senior fellow at the Brookings Institution. “You’re essentially giving them money.”
Mr. Baily favors the basics of the Paulson plan, albeit with some mechanism that would give the government a slice of any resulting profits.
And yet he remains troubled by the dearth of information combined with the abundance of zeroes in the bailout request.
“I’d like a clearer statement of what we were afraid was going to happen that requires $700 billion,” Mr. Baily said. “Maybe they don’t want to talk about it because it would scare everybody, but it’s a bit much to ask.”
-30-
This quote from the article tells the story in a heartbeat:
“This administration is asking for a $700 billion blank check to be put in the hands of Henry Paulson, a guy who totally missed this, and has been wrong about almost everything,” said Dean Baker, co-director of the liberal Center for Economic and Policy Research in Washington.
“It’s almost amazing they can do this with a straight face. There is clearly skepticism and anger at the idea that we’d give this money to these guys, no questions asked.”
This article tells a story I've long told my radio program listeners: The people at the top of the US government's financial agencies were clueless about the coming crash, and everything they've done up to now is a failure.
Now they want you to cough up another $700-billion. Sure.
Let's see, Lehman Bros. pulled $8-billion out of Europe the week before filing for bankruptcy. Why? So they could fund a $2.5-billion bonus fund for top management.
A bonus for taking a company into bankruptcy? What's wrong with this picture?
Barclay's, which bought Lehman, had to borrow $100-million to make its European payroll.
Here is the article for your edification:
Experts See a Need for Punitive Action in Bailout
By PETER S. GOODMAN
September 23, 2008
As economists puzzle over the proposed details of what may be the biggest financial bailout in American history, the initial skepticism that greeted its unveiling has only deepened.
Some are horrified at the prospect of putting $700 billion in public money on the line.
Others are outraged that Wall Street, home of the eight-figure salary, may get rescued from the consequences of its real estate bender, even as working families give up their houses to foreclosure.
Most economists accept that the nation’s financial crisis — the worst since the Great Depression — has reached such perilous proportions that an expensive intervention is required. But considerable disagreement centers on how to go about it.
The Treasury’s proposal for a bailout, now being negotiated with Congress, is being challenged as fundamentally deficient.
“At first it was, ‘thank goodness the cavalry is coming,’ but what exactly is the cavalry going to do?” asked Douglas W. Elmendorf, a former Treasury and Federal Reserve Board economist, and now a fellow at the Brookings Institution in Washington. “What I worry about is that the Treasury has acted very quickly, without having the time to solicit enough opinions.”
The common denominator to many reactions is a visceral discomfort with giving Treasury Secretary Henry Paulson Jr. — himself a product of Wall Street — carte blanche to relieve major financial institutions of bad loans choking their balance sheets, all on the taxpayer’s bill.
There are substantive reasons for this discomfort, not least concerns that Mr. Paulson will pay too much, thus subsidizing giant financial institutions.
Many economists argue that taxpayers ought to get more than avoidance of the apocalypse for their dollars: they ought to get an ownership stake in the companies on the receiving end.
But an underlying source of doubt about the bailout stems from who is asking for it.
The rescue is being sold as a must-have emergency measure by an administration with a controversial record when it comes to asking Congress for special authority in time of duress.
“This administration is asking for a $700 billion blank check to be put in the hands of Henry Paulson, a guy who totally missed this, and has been wrong about almost everything,” said Dean Baker, co-director of the liberal Center for Economic and Policy Research in Washington.
“It’s almost amazing they can do this with a straight face. There is clearly skepticism and anger at the idea that we’d give this money to these guys, no questions asked.”
Mr. Paulson has argued that the powers he seeks are necessary to chase away the wolf howling at the door: a potentially swift shredding of the American financial system.
That would be catastrophic for everyone, he argues, not only banks, but also ordinary Americans who depend on their finances to buy homes and cars, and to pay for college.
Some are suspicious of Mr. Paulson’s characterizations, finding in his warnings and demands for extraordinary powers a parallel with the way the Bush administration gained authority for the war in Iraq.
Then, the White House suggested that mushroom clouds could accompany Congress’s failure to act. This time, it is financial Armageddon supposedly on the doorstep.
“This is scare tactics to try to do something that’s in the private but not the public interest,” said Allan Meltzer, a former economic adviser to President Reagan, and an expert on monetary policy at the Carnegie Mellon Tepper School of Business. “It’s terrible.”
In part, Mr. Paulson’s credibility has been dented by his pronouncements in previous weeks that the crisis was already contained.
Some suggest this was a well-intentioned effort to stem panic. But the aftermath complicates his quest for the bailout.
“If you view your public statements as an instrument of policy, people don’t believe you anymore,” said Vincent R. Reinhart, a former Federal Reserve economist and now a scholar at the conservative American Enterprise Institute.
The biggest point of contention is over whether and how taxpayers would benefit if the bailout succeeded in righting the financial system, sending banking stocks upward.
In Mr. Paulson’s plan, the Treasury would have the right to buy as much as $700 billion worth of troubled investments, with the taxpayer recouping the proceeds when those investments were sold over coming years.
But many economists — Mr. Elmendorf among them — argue that taxpayers should get more out of the deal, securing stock in the banks that make use of the bailout. The government could then sell off that stock at a profit when conditions improve.
A similar approach was used successfully in Sweden in the early 1990s when its financial system melted down.
Others argue that any bailout must pinch the people who have run the companies now needing rescue, along with their shareholders, addressing the unseemly reality that executives have amassed beach houses and fat bank accounts while taxpayers are now stuck with the bill for their reckless ways.
“It absolutely has to be punitive,” Mr. Baker said. “If they sell us the junk, then we own the company. This isn’t a way to make these companies and their executives rich. This should be about keeping them in business so the financial system doesn’t collapse.”
Other questions center on how to value what the Treasury aims to purchase — an issue that goes to the heart of the crisis itself.
The financial system got to its dangerous perch by betting extravagantly on real estate. When housing prices began plummeting and borrowers stopped making payments, financial institutions found themselves with huge inventories of bad loans.
Not simple loans, but complex investments created by pooling millions of mortgages together and then slicing them into pieces. These were the investments that Wall Street bought, sold and borrowed against in cooking up the money it poured into housing.
The trouble is that these investments are so intertwined and complex that no one seems able to figure out what they are worth. So no one has been willing to buy them.
This is why banks have been in lockdown mode: with mystery enshrouding both the value of their assets and their future losses, banks have held tight to their remaining dollars, depriving the economy of capital.
Now, the Treasury aims to clear the fog by buying up these investments. But their value is as mysterious as ever.
“There’s a tendency for people to think these are stocks and bonds and you know what the price is,” said Bruce Bartlett, a former White House economist under President Reagan. “The problem is people are operating in a world in which nobody knows what the hell is going on. There’s some naïve assumptions about how this would function.”
If Mr. Paulson pays the market rate — whatever that is — that presumably would not be enough to persuade banks to sell. Otherwise, they would have sold already.
For the plan to work, Treasury has to pay a premium.
“It’s a straight subsidy to financial institutions,” said Martin Baily, a former chairman of the Council of Economic Advisers in the Clinton administration, and now a senior fellow at the Brookings Institution. “You’re essentially giving them money.”
Mr. Baily favors the basics of the Paulson plan, albeit with some mechanism that would give the government a slice of any resulting profits.
And yet he remains troubled by the dearth of information combined with the abundance of zeroes in the bailout request.
“I’d like a clearer statement of what we were afraid was going to happen that requires $700 billion,” Mr. Baily said. “Maybe they don’t want to talk about it because it would scare everybody, but it’s a bit much to ask.”
-30-
New York Times: Minimizing Your Own Risks
Minimizing Your Own Exposure to Risks
By RON LIEBER
September 20, 2008
Copyright 2008 The New York Times Co. - Used with permission
Every piece of your financial life involves at least a bit of risk. What made this week extraordinarily rare, and so terribly frightening, was that all of the threats were on display at once.
Sure, investing for retirement involves some ups and downs. But this week, the stock market took the biggest one-day fall in seven years (though it bounced right back as the week ended), and money market funds, long considered rock solid, needed a rescue package.
And yes, plenty of people worry about job security from time to time. But with thousands of financial services jobs gone or in jeopardy and the economy threatening to slow further, you had to wonder whether your job might be next.
Then there was insurance. Maybe once a decade, a big insurance company is on the brink.
This week, the global giant American International Group had a near-bankruptcy experience, leading scores of people to worry themselves sick over their annuities and life insurance policies from that company and others.
And as Treasury Secretary Henry M. Paulson Jr. reminded everyone in his remarks on Friday morning, all of these developments have the mortgage mess at their root, leaving anyone who owns a house (or wants to) wondering whether real estate prices will ever find a bottom.
The stunning confluence of these events was bad enough. But the fact that the federal government may be on the hook for untold billions of dollars just made the pain worse.
I don’t know how or where this will end, and neither do any of the experts.
It’s a humbling time for everyone, and it makes it extremely hard to assess all of these personal risks and come up with a decisive plan of action.
The temptation is to either make drastic changes in your financial life or do nothing and hope that the impact is not too severe.
So here’s another idea, a middle path of sorts. Consider a few modest but concrete things you can do that could reduce your exposure to four of the big areas of risk — investments, job security, your mortgage and insurance — that have been front and center this week.
Some of these suggestions may have more impact for you than others, but they all can help you feel as if you’ve taken back some measure of control.
Investments
Before you do anything with your portfolio, ask yourself this: Do you still believe in capitalism?
Several financial planners I spoke with felt the need to stop and reaffirm the fact that companies will still need to raise money from investors — any quasi-Socialist, short-term federal government intervention aside.
Andrew Orr, a financial planner in Orlando, Fla., says clients with money in index funds are investing in 17,000 companies that seek to generate earnings and pay dividends.
That, he says, is a sustained bet on capitalism itself. “Capitalism is not always pretty. But it’s evolved and gotten better, and there are clearly going to be more protections to come.”
If you’re under 50 or so, you can start by protecting yourself against the biggest investment risk of all, outliving your savings.
Thomas Fisher, a financial planner in Cambridge, Mass., said that this risk was one that people generally underestimate. “Our parents haven’t usually run out of money,” he said. “There has been a whole generation of people with pensions.”
Those days are gone, though. And as he took calls this week from clients considering bailing out of the stock market, he said he realized how few people actually understood the big picture.
The most acute long-term risk is, in fact, too little risk. Unless you’re saving a huge chunk of your income in cash, you’ll need consistent exposure to more risky investments like stocks to produce a suitable retirement balance.
Keep your stock allocation lower if you must for a few months to sleep at night, but don’t get rid of it altogether.
Most people get back into stocks once you explain this. A bigger challenge now is the one facing those who are in or close to retirement and whose portfolios have declined in the last year.
Rebecca Rolfes, a 59-year-old marketing executive in Chicago, has ridden out down markets before, but now her time horizon is shrinking at the same time as her assets. “I keep going on my mutual fund sites but not actually doing anything,” she said.
Even if you can’t bring yourself to make big changes to your portfolio, spending just a bit less money in retirement may make a huge difference.
“Small changes in retirees’ burn rate will affect them far greater than what the market will do today,” said Bill Schultheis, of Sagemark Wealth Management in Kirkland, Wash., and the author of “The Coffeehouse Investor.”
That’s because overspending is a risk you can actually control, even if you can’t predict how the markets perform. “I’ve found that many clients really like that, because they like to be in charge.”
He noted that spending on grandchildren was often a huge item for retirees.
If you can’t bring yourself to cut back there, consider the cost of eating out. He says he is often surprised by the amount people spend on that.
Job Security
Aside from the job losses at financial services companies in the news, there was also concern the economy could slow significantly and ultimately affect employment levels everywhere.
This week, people who work for themselves seemed to feel better about their prospects than those who work for large companies. “It feels safer than having a job with a single employer,” said Mike Sanislo, who helps companies with new product development through his firm High Energy Consulting in Woodbury, Minn.
He says he expects to lose clients every so often, but his business doesn’t fall apart when one goes away.
Though you may not be ready to chuck it all and hang out a shingle, it’s worth considering the approach that Kathy Santos has taken.
Ms. Santos, a webmaster in Pepperell, Mass., has a job by day at the environmental nonprofit group Earthwatch Institute, but is developing a Web design and photography business on the side, Rhino Hill Studios, to spread out her income risk. She also picks up a bit of extra money as an emergency medical technician for the town.
Mortgages
All the problems that funny mortgages have caused have hopefully taught important lessons about interest rate risk. This is something you can control.
If you’re applying for a new mortgage, a fixed-rate mortgage means no risk that the rate will rise. If you have an adjustable-rate mortgage and have enough equity in your house to refinance, get a fixed-rate loan.
Here’s another certainty for those skittish about investing: If you put extra money beyond the minimum toward the monthly payment on a 6 percent mortgage, you’re effectively earning 6 percent by ridding yourself of that extra debt (though the number may be a bit less if you’re taking advantage of the mortgage interest tax deduction).
That’s what Nell Eakle of Sterling, Ill., has been doing, even though she had to ratchet down the overpayment because of a bout with breast cancer.
“We just want to be a little bit ahead,” she said.
An added bonus is that the extra payments mean the mortgage will hit zero about two years ahead of schedule.
A few caveats here. Given the tightened policies among home equity loan providers, you may not be able to easily get this money back out of your house anytime soon.
Also, it makes more sense to first pay down 18 percent credit card debt, or max out any 401(k) match that your employer provides, even if you’re parking the money in cash.
Insurance
A.I.G.’s crisis suggests one simple tactic to reduce your exposure to troubled institutions: Split your life insurance policies and annuities among more than one provider.
Meanwhile, many of the things that insurance protects against are precisely the sorts of risks over which people have the most control.
In uncertain times, there’s some small comfort in taking measures to avoid having to use the insurance at all.
“Stay in during the first snowfall,” said Kevin Albaugh, an engineering consultant in Williamsville, N.Y. “That will shake out all of the people who don’t know how to drive on it. That’s usually when you see a bunch of S.U.V.’s off the side of the road.”
Michael Fripp of Carrollton, Tex., says the only risk he can control is the health risks from the stress.
“The financial risks are beyond my control (and a little beyond my understanding),” he wrote in an e-mail message this week. “I am bicycling to work, walking with the kids and ignoring the 401(k) balance.”
-30-
By RON LIEBER
September 20, 2008
Copyright 2008 The New York Times Co. - Used with permission
Every piece of your financial life involves at least a bit of risk. What made this week extraordinarily rare, and so terribly frightening, was that all of the threats were on display at once.
Sure, investing for retirement involves some ups and downs. But this week, the stock market took the biggest one-day fall in seven years (though it bounced right back as the week ended), and money market funds, long considered rock solid, needed a rescue package.
And yes, plenty of people worry about job security from time to time. But with thousands of financial services jobs gone or in jeopardy and the economy threatening to slow further, you had to wonder whether your job might be next.
Then there was insurance. Maybe once a decade, a big insurance company is on the brink.
This week, the global giant American International Group had a near-bankruptcy experience, leading scores of people to worry themselves sick over their annuities and life insurance policies from that company and others.
And as Treasury Secretary Henry M. Paulson Jr. reminded everyone in his remarks on Friday morning, all of these developments have the mortgage mess at their root, leaving anyone who owns a house (or wants to) wondering whether real estate prices will ever find a bottom.
The stunning confluence of these events was bad enough. But the fact that the federal government may be on the hook for untold billions of dollars just made the pain worse.
I don’t know how or where this will end, and neither do any of the experts.
It’s a humbling time for everyone, and it makes it extremely hard to assess all of these personal risks and come up with a decisive plan of action.
The temptation is to either make drastic changes in your financial life or do nothing and hope that the impact is not too severe.
So here’s another idea, a middle path of sorts. Consider a few modest but concrete things you can do that could reduce your exposure to four of the big areas of risk — investments, job security, your mortgage and insurance — that have been front and center this week.
Some of these suggestions may have more impact for you than others, but they all can help you feel as if you’ve taken back some measure of control.
Investments
Before you do anything with your portfolio, ask yourself this: Do you still believe in capitalism?
Several financial planners I spoke with felt the need to stop and reaffirm the fact that companies will still need to raise money from investors — any quasi-Socialist, short-term federal government intervention aside.
Andrew Orr, a financial planner in Orlando, Fla., says clients with money in index funds are investing in 17,000 companies that seek to generate earnings and pay dividends.
That, he says, is a sustained bet on capitalism itself. “Capitalism is not always pretty. But it’s evolved and gotten better, and there are clearly going to be more protections to come.”
If you’re under 50 or so, you can start by protecting yourself against the biggest investment risk of all, outliving your savings.
Thomas Fisher, a financial planner in Cambridge, Mass., said that this risk was one that people generally underestimate. “Our parents haven’t usually run out of money,” he said. “There has been a whole generation of people with pensions.”
Those days are gone, though. And as he took calls this week from clients considering bailing out of the stock market, he said he realized how few people actually understood the big picture.
The most acute long-term risk is, in fact, too little risk. Unless you’re saving a huge chunk of your income in cash, you’ll need consistent exposure to more risky investments like stocks to produce a suitable retirement balance.
Keep your stock allocation lower if you must for a few months to sleep at night, but don’t get rid of it altogether.
Most people get back into stocks once you explain this. A bigger challenge now is the one facing those who are in or close to retirement and whose portfolios have declined in the last year.
Rebecca Rolfes, a 59-year-old marketing executive in Chicago, has ridden out down markets before, but now her time horizon is shrinking at the same time as her assets. “I keep going on my mutual fund sites but not actually doing anything,” she said.
Even if you can’t bring yourself to make big changes to your portfolio, spending just a bit less money in retirement may make a huge difference.
“Small changes in retirees’ burn rate will affect them far greater than what the market will do today,” said Bill Schultheis, of Sagemark Wealth Management in Kirkland, Wash., and the author of “The Coffeehouse Investor.”
That’s because overspending is a risk you can actually control, even if you can’t predict how the markets perform. “I’ve found that many clients really like that, because they like to be in charge.”
He noted that spending on grandchildren was often a huge item for retirees.
If you can’t bring yourself to cut back there, consider the cost of eating out. He says he is often surprised by the amount people spend on that.
Job Security
Aside from the job losses at financial services companies in the news, there was also concern the economy could slow significantly and ultimately affect employment levels everywhere.
This week, people who work for themselves seemed to feel better about their prospects than those who work for large companies. “It feels safer than having a job with a single employer,” said Mike Sanislo, who helps companies with new product development through his firm High Energy Consulting in Woodbury, Minn.
He says he expects to lose clients every so often, but his business doesn’t fall apart when one goes away.
Though you may not be ready to chuck it all and hang out a shingle, it’s worth considering the approach that Kathy Santos has taken.
Ms. Santos, a webmaster in Pepperell, Mass., has a job by day at the environmental nonprofit group Earthwatch Institute, but is developing a Web design and photography business on the side, Rhino Hill Studios, to spread out her income risk. She also picks up a bit of extra money as an emergency medical technician for the town.
Mortgages
All the problems that funny mortgages have caused have hopefully taught important lessons about interest rate risk. This is something you can control.
If you’re applying for a new mortgage, a fixed-rate mortgage means no risk that the rate will rise. If you have an adjustable-rate mortgage and have enough equity in your house to refinance, get a fixed-rate loan.
Here’s another certainty for those skittish about investing: If you put extra money beyond the minimum toward the monthly payment on a 6 percent mortgage, you’re effectively earning 6 percent by ridding yourself of that extra debt (though the number may be a bit less if you’re taking advantage of the mortgage interest tax deduction).
That’s what Nell Eakle of Sterling, Ill., has been doing, even though she had to ratchet down the overpayment because of a bout with breast cancer.
“We just want to be a little bit ahead,” she said.
An added bonus is that the extra payments mean the mortgage will hit zero about two years ahead of schedule.
A few caveats here. Given the tightened policies among home equity loan providers, you may not be able to easily get this money back out of your house anytime soon.
Also, it makes more sense to first pay down 18 percent credit card debt, or max out any 401(k) match that your employer provides, even if you’re parking the money in cash.
Insurance
A.I.G.’s crisis suggests one simple tactic to reduce your exposure to troubled institutions: Split your life insurance policies and annuities among more than one provider.
Meanwhile, many of the things that insurance protects against are precisely the sorts of risks over which people have the most control.
In uncertain times, there’s some small comfort in taking measures to avoid having to use the insurance at all.
“Stay in during the first snowfall,” said Kevin Albaugh, an engineering consultant in Williamsville, N.Y. “That will shake out all of the people who don’t know how to drive on it. That’s usually when you see a bunch of S.U.V.’s off the side of the road.”
Michael Fripp of Carrollton, Tex., says the only risk he can control is the health risks from the stress.
“The financial risks are beyond my control (and a little beyond my understanding),” he wrote in an e-mail message this week. “I am bicycling to work, walking with the kids and ignoring the 401(k) balance.”
-30-
Monday, September 22, 2008
Israel's Haaretz: Palin and Ahmadinejad's Dreams
Jewish voters who are immune from the anti-Palin hate syndrome are backing Sarah Palin in ever increasing numbers.
(For an example of a Jewish community center's hate for Gov. Palin, click on this hyperlink and read, Sandra Bernhard: Palin Would Be Gang-Raped By Blacks in Manhattan. It is the story of the D. C. Jewish Community Center's support - and pride - for producing a profanity-filled show that is anti-Christian in the extreme. If Gentiles produced something equivalent to it, directing the hate toward Jews that is directed toward Palin, the Anti-Defamation League would go off like a nuclear bomb.)
Educated Jews who put intellect before emotion are pushing hard to make sure the world knows about her support for Israel. She understands, and articulates, uncompromising support for the nation.
Part of getting the word out comes from this article in the Israeli newspaper Haaretz.
Nothing even close to this is coming out of the Obama camp. But that doesn't really surprise anyone who is keeping up with the election; Obama told the world he would meet with the Iranian madman Mahmoud Ahmadinejad, "without preconditions." Barack Obama is such an empty suit.
Gov. Palin would have delivered the speech below had Sen. Clinton not thrown a hissy-fit because Gov. Palin was invited to the same protest outside the UN headquarters Sen. Clinton was invited to attend.
The official line is that Sen. Clinton backed out for political reasons, but the inside scoop is that Hills was afraid Sarah would garner more positive attention than the senator. After all, Hills is so yesterday . . .
Here is the unedited article for your review:
The speech Palin never gave: Ahmadinejad dreams of Final Solution
By Natasha Mozgovaya, Haaretz Correspondent
Coppyright 2008 - Used by permission
In the speech which Republican Vice-Presidential candidate Sarah Palin was to have delivered at a Monday rally protesting the UN appearance of Mahmoud Ahmadinejad, she was to have said that the Iranian president "dreams of being an agent in a 'Final Solution' - the elimination of the Jewish people."
Her appearance in the rally in Dag Hammarskjold Plaza was cancelled in a flap between protest organizers and Hillary Clinton, who had also been scheduled to speak.
Clinton aides were quoted as saying that they had been "blindsided" by the decision to invite Palin, which they called a partisan move. In the ensuing controversy, Clinton withdrew her participation, and Palin's invitation was rescinded.
The text of the speech follows:
I am honored to be with you and with leaders from across this great country - leaders from different faiths and political parties united in a single voice of outrage.
Tomorrow, Mahmoud Ahmadinejad will come to New York - to the heart of what he calls the Great Satan - and speak freely in this, a country whose demise he has called for.
Ahmadinejad may choose his words carefully, but underneath all of the rhetoric is an agenda that threatens all who seek a safer and freer world.
We gather here today to highlight the Iranian dictator's intentions and to call for action to thwart him. He must be stopped. The world must awake to the threat this man poses to all of us. Ahmadinejad denies that the Holocaust ever took place.
He dreams of being an agent in a "Final Solution" - the elimination of the Jewish people. He has called Israel a "stinking corpse" that is "on its way to annihilation." Such talk cannot be dismissed as the ravings of a madman -not when Iran just this summer tested long-range Shahab-3 missiles capable of striking Tel Aviv, not when the Iranian nuclear program is nearing completion, and not when Iran sponsors terrorists that threaten and kill innocent people around the world.
The Iranian government wants nuclear weapons. The International Atomic Energy Agency reports that Iran is running at least 3,800 centrifuges and that its uranium enrichment capacity is rapidly improving. According to news reports, U.S. intelligence agencies believe the Iranians may have enough nuclear material to produce a bomb within a year.
The world has condemned these activities. The United Nations Security Council has demanded that Iran suspend its illegal nuclear enrichment activities. It has levied three rounds of sanctions.
How has Ahmadinejad responded?
With the declaration that the "Iranian nation would not retreat one iota" from its nuclear program.
So, what should we do about this growing threat?
First, we must succeed in Iraq. If we fail there, it will jeopardize the democracy the Iraqis have worked so hard to build, and empower the extremists in neighboring Iran. Iran has armed and trained terrorists who have killed our soldiers in Iraq, and it is Iran that would benefit from an American defeat in Iraq.
If we retreat without leaving a stable Iraq, Iran's nuclear ambitions will be bolstered.
If Iran acquires nuclear weapons, they could share them tomorrow with the terrorists they finance, arm, and train today.
Iranian nuclear weapons would set off a dangerous regional nuclear arms race that would make all of us less safe. But Iran is not only a regional threat; it threatens the entire world.
It is the no. 1 state sponsor of terrorism. It sponsors the world's most vicious terrorist groups, Hamas and Hezbollah. Together, Iran and its terrorists are responsible for the deaths of Americans in Lebanon in the 1980s, in Saudi Arabia in the 1990s, and in Iraq today.
They have murdered Iraqis, Lebanese, Palestinians, and other Muslims who have resisted Iran's desire to dominate the region. They have persecuted countless people simply because they are Jewish.
Iran is responsible for attacks not only on Israelis, but on Jews living as far away as Argentina. Anti-Semitism and Holocaust denial are part of Iran's official ideology and murder is part of its official policy.
Not even Iranian citizens are safe from their government's threat to those who want to live, work, and worship in peace. Politically-motivated abductions, torture, death by stoning, flogging, and amputations are just some of its state-sanctioned punishments.
It is said that the measure of a country is the treatment of its most vulnerable citizens.
By that standard, the Iranian government is both oppressive and barbaric.
Under Ahmadinejad's rule, Iranian women are some of the most vulnerable citizens. If an Iranian woman shows too much hair in public, she risks being beaten or killed. If she walks down a public street in clothing that violates the state dress code, she could be arrested.
But in the face of this harsh regime, the Iranian women have shown courage. Despite threats to their lives and their families, Iranian women have sought better treatment through the "One Million Signatures Campaign Demanding Changes to Discriminatory Laws."
The authorities have reacted with predictable barbarism. Last year, women's rights activist Delaram Ali was sentenced to 20 lashes and 10 months in prison for committing the crime of "propaganda against the system."
After international protests, the judiciary reduced her sentence to "only" 10 lashes and 36 months in prison and then temporarily suspended her sentence. She still faces the threat of imprisonment.
Earlier this year, Senator Clinton said that "Iran is seeking nuclear weapons, and the Iranian Revolutionary Guard Corps is in the forefront of that" effort.
Senator Clinton argued that part of our response must include stronger sanctions, including the designation of the IRGC as a terrorist organization.
John McCain and I could not agree more. Senator Clinton understands the nature of this threat and what we must do to confront it. This is an issue that should unite all Americans. Iran should not be allowed to acquire nuclear weapons.
Period.
And in a single voice, we must be loud enough for the whole world
to hear: Stop Iran!
Only by working together, across national, religious, and political differences, can we alter this regime's dangerous behavior.
Iran has many vulnerabilities, including a regime weakened by sanctions and a population eager to embrace opportunities with the West. We must increase economic pressure to change Iran's behavior.
Tomorrow, Ahmadinejad will come to New York. On our soil, he will exercise the right of freedom of speech - a right he denies his own people.
He will share his hateful agenda with the world. Our task is to focus the world on what can be done to stop him.
We must rally the world to press for truly tough sanctions at the U.N. or with our allies if Iran's allies continue to block action in the U.N.
We must start with restrictions on Iran's refined petroleum imports. We must reduce our dependency on foreign oil to weaken Iran's economic influence.
We must target the regime's assets abroad; bank accounts, investments, and trading partners.
President Ahmadinejad should be held accountable for inciting genocide, a crime under international law.
We must sanction Iran's Central Bank and the Revolutionary Guard Corps -which no one should doubt is a terrorist organization.
Together, we can stop Iran's nuclear program. Senator McCain has made a solemn commitment that I strongly endorse: Never again will we risk another Holocaust.
And this is not a wish, a request, or a plea to Israel's enemies. This is a promise that the United States and Israel will honor, against any enemy who cares to test us.
It is John McCain's promise and it is my promise.
Thank you.
-30-
(For an example of a Jewish community center's hate for Gov. Palin, click on this hyperlink and read, Sandra Bernhard: Palin Would Be Gang-Raped By Blacks in Manhattan. It is the story of the D. C. Jewish Community Center's support - and pride - for producing a profanity-filled show that is anti-Christian in the extreme. If Gentiles produced something equivalent to it, directing the hate toward Jews that is directed toward Palin, the Anti-Defamation League would go off like a nuclear bomb.)
Educated Jews who put intellect before emotion are pushing hard to make sure the world knows about her support for Israel. She understands, and articulates, uncompromising support for the nation.
Part of getting the word out comes from this article in the Israeli newspaper Haaretz.
Nothing even close to this is coming out of the Obama camp. But that doesn't really surprise anyone who is keeping up with the election; Obama told the world he would meet with the Iranian madman Mahmoud Ahmadinejad, "without preconditions." Barack Obama is such an empty suit.
Gov. Palin would have delivered the speech below had Sen. Clinton not thrown a hissy-fit because Gov. Palin was invited to the same protest outside the UN headquarters Sen. Clinton was invited to attend.
The official line is that Sen. Clinton backed out for political reasons, but the inside scoop is that Hills was afraid Sarah would garner more positive attention than the senator. After all, Hills is so yesterday . . .
Here is the unedited article for your review:
The speech Palin never gave: Ahmadinejad dreams of Final Solution
By Natasha Mozgovaya, Haaretz Correspondent
Coppyright 2008 - Used by permission
In the speech which Republican Vice-Presidential candidate Sarah Palin was to have delivered at a Monday rally protesting the UN appearance of Mahmoud Ahmadinejad, she was to have said that the Iranian president "dreams of being an agent in a 'Final Solution' - the elimination of the Jewish people."
Her appearance in the rally in Dag Hammarskjold Plaza was cancelled in a flap between protest organizers and Hillary Clinton, who had also been scheduled to speak.
Clinton aides were quoted as saying that they had been "blindsided" by the decision to invite Palin, which they called a partisan move. In the ensuing controversy, Clinton withdrew her participation, and Palin's invitation was rescinded.
The text of the speech follows:
I am honored to be with you and with leaders from across this great country - leaders from different faiths and political parties united in a single voice of outrage.
Tomorrow, Mahmoud Ahmadinejad will come to New York - to the heart of what he calls the Great Satan - and speak freely in this, a country whose demise he has called for.
Ahmadinejad may choose his words carefully, but underneath all of the rhetoric is an agenda that threatens all who seek a safer and freer world.
We gather here today to highlight the Iranian dictator's intentions and to call for action to thwart him. He must be stopped. The world must awake to the threat this man poses to all of us. Ahmadinejad denies that the Holocaust ever took place.
He dreams of being an agent in a "Final Solution" - the elimination of the Jewish people. He has called Israel a "stinking corpse" that is "on its way to annihilation." Such talk cannot be dismissed as the ravings of a madman -not when Iran just this summer tested long-range Shahab-3 missiles capable of striking Tel Aviv, not when the Iranian nuclear program is nearing completion, and not when Iran sponsors terrorists that threaten and kill innocent people around the world.
The Iranian government wants nuclear weapons. The International Atomic Energy Agency reports that Iran is running at least 3,800 centrifuges and that its uranium enrichment capacity is rapidly improving. According to news reports, U.S. intelligence agencies believe the Iranians may have enough nuclear material to produce a bomb within a year.
The world has condemned these activities. The United Nations Security Council has demanded that Iran suspend its illegal nuclear enrichment activities. It has levied three rounds of sanctions.
How has Ahmadinejad responded?
With the declaration that the "Iranian nation would not retreat one iota" from its nuclear program.
So, what should we do about this growing threat?
First, we must succeed in Iraq. If we fail there, it will jeopardize the democracy the Iraqis have worked so hard to build, and empower the extremists in neighboring Iran. Iran has armed and trained terrorists who have killed our soldiers in Iraq, and it is Iran that would benefit from an American defeat in Iraq.
If we retreat without leaving a stable Iraq, Iran's nuclear ambitions will be bolstered.
If Iran acquires nuclear weapons, they could share them tomorrow with the terrorists they finance, arm, and train today.
Iranian nuclear weapons would set off a dangerous regional nuclear arms race that would make all of us less safe. But Iran is not only a regional threat; it threatens the entire world.
It is the no. 1 state sponsor of terrorism. It sponsors the world's most vicious terrorist groups, Hamas and Hezbollah. Together, Iran and its terrorists are responsible for the deaths of Americans in Lebanon in the 1980s, in Saudi Arabia in the 1990s, and in Iraq today.
They have murdered Iraqis, Lebanese, Palestinians, and other Muslims who have resisted Iran's desire to dominate the region. They have persecuted countless people simply because they are Jewish.
Iran is responsible for attacks not only on Israelis, but on Jews living as far away as Argentina. Anti-Semitism and Holocaust denial are part of Iran's official ideology and murder is part of its official policy.
Not even Iranian citizens are safe from their government's threat to those who want to live, work, and worship in peace. Politically-motivated abductions, torture, death by stoning, flogging, and amputations are just some of its state-sanctioned punishments.
It is said that the measure of a country is the treatment of its most vulnerable citizens.
By that standard, the Iranian government is both oppressive and barbaric.
Under Ahmadinejad's rule, Iranian women are some of the most vulnerable citizens. If an Iranian woman shows too much hair in public, she risks being beaten or killed. If she walks down a public street in clothing that violates the state dress code, she could be arrested.
But in the face of this harsh regime, the Iranian women have shown courage. Despite threats to their lives and their families, Iranian women have sought better treatment through the "One Million Signatures Campaign Demanding Changes to Discriminatory Laws."
The authorities have reacted with predictable barbarism. Last year, women's rights activist Delaram Ali was sentenced to 20 lashes and 10 months in prison for committing the crime of "propaganda against the system."
After international protests, the judiciary reduced her sentence to "only" 10 lashes and 36 months in prison and then temporarily suspended her sentence. She still faces the threat of imprisonment.
Earlier this year, Senator Clinton said that "Iran is seeking nuclear weapons, and the Iranian Revolutionary Guard Corps is in the forefront of that" effort.
Senator Clinton argued that part of our response must include stronger sanctions, including the designation of the IRGC as a terrorist organization.
John McCain and I could not agree more. Senator Clinton understands the nature of this threat and what we must do to confront it. This is an issue that should unite all Americans. Iran should not be allowed to acquire nuclear weapons.
Period.
And in a single voice, we must be loud enough for the whole world
to hear: Stop Iran!
Only by working together, across national, religious, and political differences, can we alter this regime's dangerous behavior.
Iran has many vulnerabilities, including a regime weakened by sanctions and a population eager to embrace opportunities with the West. We must increase economic pressure to change Iran's behavior.
Tomorrow, Ahmadinejad will come to New York. On our soil, he will exercise the right of freedom of speech - a right he denies his own people.
He will share his hateful agenda with the world. Our task is to focus the world on what can be done to stop him.
We must rally the world to press for truly tough sanctions at the U.N. or with our allies if Iran's allies continue to block action in the U.N.
We must start with restrictions on Iran's refined petroleum imports. We must reduce our dependency on foreign oil to weaken Iran's economic influence.
We must target the regime's assets abroad; bank accounts, investments, and trading partners.
President Ahmadinejad should be held accountable for inciting genocide, a crime under international law.
We must sanction Iran's Central Bank and the Revolutionary Guard Corps -which no one should doubt is a terrorist organization.
Together, we can stop Iran's nuclear program. Senator McCain has made a solemn commitment that I strongly endorse: Never again will we risk another Holocaust.
And this is not a wish, a request, or a plea to Israel's enemies. This is a promise that the United States and Israel will honor, against any enemy who cares to test us.
It is John McCain's promise and it is my promise.
Thank you.
-30-
Al Franken / SNL: Example Derangement Syndrome
As everyone reading about the presidential elections knows by now, Al Franken, running to become a US Senator from MN, participated in creating a Saturday Night Live (SNL) sketch about Sarah Palin.
And what was it that Mr. Franken and his buddies at SNL thought would be a real belly-buster?
Mr. Franken and the SNL writers wrote a sketch about Todd Palin committing incest with his daughters.
That's right: incest with his daughters.
How sick do you have to be to even imagine it, let alone broadcast it nationally? Well, that's how sick the anti-Palin crowd is.
We brought to you the article from the San Francisco Chronicle entitled, From the San Francisco Chronicle: "Palin Derangement Syndrome: Obama's Worst Enemy?"
We added the article entitled, Sandra Bernhard: Palin Would Be Gang-Raped By Blacks in Manhattan.
Both are available from our list of links on the left-side of the page.
The depths of their sick minds seems to be without a bottom. Now they give us a broadcast skit about Todd Palin as an incestuous father. That's sick . . . really, really sick.
What would happen if someone put on national TV a skit about Barack Obama lusting for his own daughters, and having sex with them? Can you imagine the outrage that would follow?
But when it is the lunatic left doing the sick thinking, well, have you heard any moral outrage from any Obama supporters, or Barack Obama himself?
The Obama phenomenon is becoming ever more twisted. Read this report for yourself, and decide:
NBC jokes: Todd Palin has sex with daughters'Saturday Night Live' skit suggests Sarah's husband guilty of incest
Posted: September 21, 2008
2:18 am Eastern
By Joe Kovacs
© 2008 WorldNetDaily - Used with permission
A week after a high-profile send-up of Republican vice presidential candidate Sarah Palin on "Saturday Night Live," the NBC comedy show returned to making fun of the Alaskan governor in a skit where New York Times reporters sought to probe the possibility Palin's husband, Todd, was having sex with the couple's own daughters.
"What about the husband?" asked a Times reporter during a mock assignment meeting for the paper.
"You know he's doing those daughters. I mean, come on. It's Alaska."
The assignment editor for the Times, portrayed by actor James Franco, responded: "He very well could be. Admittedly, there is no evidence of that, but on the other hand, there is no convincing evidence to the contrary. And these are just some of the lingering questions about Governor Palin."
The skit featured a photo of one reporter and an on-screen message that stated, "In 2009 [reporter] Howland Gwathmey Moss, V was awarded the Pulitzer Prize for his Times series on unproven, yet un-disproven incest in the Palin family. Sadly, he was to die 3 months later, run over by a snow machine, driven by a polar bear."
The final shot showed an image of a New York Times page, with headlines that included:"While No Direct Evidence of Incest in Palin Family Emerges, Counter Evidence Remains Agonizingly Elusive" and "In a Small Alaska Town, Doubts Still Linger."
The sketch seemed to be designed to mock how out of touch journalists from the Big Apple are when it comes to their knowledge of Alaska, with left-leaning, Manhattan-dwelling reporters mistaking a snowmobile for a "baptizing machine," a crucifix and a NordicTrack exerciser in photographs held up for them.
Some viewers expressed outrage.
"It is time the Palin family brought out the big guns. They need to sue General Electric, NBC, 'Saturday Night Live,'" said Al Barrs of Bascom, Fla.
"This is clearly criminal and defamation of character of an entire family and state. All the above needs to be taken to their knees big time once and for all."
"What if somebody did one with this kind of humor on Obama and his daughters?" asked Jim Cash of Chattanooga, Tenn. "What an uproar there would be. This line of humor is tasteless and moronic and about as low as they could go. There simply must be an uproar over this. We cannot let this just pass."
But others, such as Ana Jimenez, believe the episode was all in good fun, since the program is a comedy show.
"Anyone that watched Saturday's show and believed the skit in which it was suggested that there was incest in the Palin household needs to have [his] head examined," said Jimenez.
"The purpose of the joke (tacky and crude as it was, I did not care for it at all by the way) was to show how out of touch journalists are – not an attack on the Palin household. Sheesh, get a grip!"
NBC's website for "Saturday Night Live" normally contains video clips of the show's comedy routines, but, interestingly, the clip of the incest sketch was never posted online.
The show opened with a brief skit making fun of truth-enhanced TV ads John McCain was approving for his campaign. One ad claimed that since Barack Obama was in favor of universal health care, that meant coverage for everyone in the entire universe, including terrorist mastermind Osama bin Laden.
The Politico reported the opening scene was crafted with the help of former castmember Al Franken, a Democrat currently running for the U.S. Senate from Minnesota.
The season premiere of "Saturday Night Live" last week featured comedic actress Tina Fey returning to the show to portray Gov. Palin in a joint appearance with Hillary Clinton, played by Amy Poehler.
-30-
And what was it that Mr. Franken and his buddies at SNL thought would be a real belly-buster?
Mr. Franken and the SNL writers wrote a sketch about Todd Palin committing incest with his daughters.
That's right: incest with his daughters.
How sick do you have to be to even imagine it, let alone broadcast it nationally? Well, that's how sick the anti-Palin crowd is.
We brought to you the article from the San Francisco Chronicle entitled, From the San Francisco Chronicle: "Palin Derangement Syndrome: Obama's Worst Enemy?"
We added the article entitled, Sandra Bernhard: Palin Would Be Gang-Raped By Blacks in Manhattan.
Both are available from our list of links on the left-side of the page.
The depths of their sick minds seems to be without a bottom. Now they give us a broadcast skit about Todd Palin as an incestuous father. That's sick . . . really, really sick.
What would happen if someone put on national TV a skit about Barack Obama lusting for his own daughters, and having sex with them? Can you imagine the outrage that would follow?
But when it is the lunatic left doing the sick thinking, well, have you heard any moral outrage from any Obama supporters, or Barack Obama himself?
The Obama phenomenon is becoming ever more twisted. Read this report for yourself, and decide:
NBC jokes: Todd Palin has sex with daughters'Saturday Night Live' skit suggests Sarah's husband guilty of incest
Posted: September 21, 2008
2:18 am Eastern
By Joe Kovacs
© 2008 WorldNetDaily - Used with permission
A week after a high-profile send-up of Republican vice presidential candidate Sarah Palin on "Saturday Night Live," the NBC comedy show returned to making fun of the Alaskan governor in a skit where New York Times reporters sought to probe the possibility Palin's husband, Todd, was having sex with the couple's own daughters.
"What about the husband?" asked a Times reporter during a mock assignment meeting for the paper.
"You know he's doing those daughters. I mean, come on. It's Alaska."
The assignment editor for the Times, portrayed by actor James Franco, responded: "He very well could be. Admittedly, there is no evidence of that, but on the other hand, there is no convincing evidence to the contrary. And these are just some of the lingering questions about Governor Palin."
The skit featured a photo of one reporter and an on-screen message that stated, "In 2009 [reporter] Howland Gwathmey Moss, V was awarded the Pulitzer Prize for his Times series on unproven, yet un-disproven incest in the Palin family. Sadly, he was to die 3 months later, run over by a snow machine, driven by a polar bear."
The final shot showed an image of a New York Times page, with headlines that included:"While No Direct Evidence of Incest in Palin Family Emerges, Counter Evidence Remains Agonizingly Elusive" and "In a Small Alaska Town, Doubts Still Linger."
The sketch seemed to be designed to mock how out of touch journalists from the Big Apple are when it comes to their knowledge of Alaska, with left-leaning, Manhattan-dwelling reporters mistaking a snowmobile for a "baptizing machine," a crucifix and a NordicTrack exerciser in photographs held up for them.
Some viewers expressed outrage.
"It is time the Palin family brought out the big guns. They need to sue General Electric, NBC, 'Saturday Night Live,'" said Al Barrs of Bascom, Fla.
"This is clearly criminal and defamation of character of an entire family and state. All the above needs to be taken to their knees big time once and for all."
"What if somebody did one with this kind of humor on Obama and his daughters?" asked Jim Cash of Chattanooga, Tenn. "What an uproar there would be. This line of humor is tasteless and moronic and about as low as they could go. There simply must be an uproar over this. We cannot let this just pass."
But others, such as Ana Jimenez, believe the episode was all in good fun, since the program is a comedy show.
"Anyone that watched Saturday's show and believed the skit in which it was suggested that there was incest in the Palin household needs to have [his] head examined," said Jimenez.
"The purpose of the joke (tacky and crude as it was, I did not care for it at all by the way) was to show how out of touch journalists are – not an attack on the Palin household. Sheesh, get a grip!"
NBC's website for "Saturday Night Live" normally contains video clips of the show's comedy routines, but, interestingly, the clip of the incest sketch was never posted online.
The show opened with a brief skit making fun of truth-enhanced TV ads John McCain was approving for his campaign. One ad claimed that since Barack Obama was in favor of universal health care, that meant coverage for everyone in the entire universe, including terrorist mastermind Osama bin Laden.
The Politico reported the opening scene was crafted with the help of former castmember Al Franken, a Democrat currently running for the U.S. Senate from Minnesota.
The season premiere of "Saturday Night Live" last week featured comedic actress Tina Fey returning to the show to portray Gov. Palin in a joint appearance with Hillary Clinton, played by Amy Poehler.
-30-
Sunday, September 21, 2008
London Times: Leading Scientist Urges Creationism
This will give advocates - and opponents - of Creationism something to talk about: The Royal Society of Britain said Creationism should be taught in schools. Of course, the Denialists went ballistic, and it cost the scientist his job with the academy, as explained in a later article.
But take time to find out about his courage in the face of ranting Denialists.
When the Denialists can explain how you can create a universe from Absolute Nothing- no mass, no energy, no time, no space, no light, no imaginary "black void," and no force acting purely within the natural world, and no force acting outside the natural world, they might actually have something worth listening to.
Until then, they are fools who can't explain how the elements of the Big Bang were created.
But as it stands, all they can do is roll the clock back to the instant of The Big Bang - allowing that only Spontaneous Generation, a concept that does not exist in the natural world, is the only way to explain how the components of the Bang got there. It is "An Inconvenient Truth" they avoid like the plague.
In short, the universe cannot exist through a purely "Natural Laws" explanation. It requires a force outside the Natural Laws - it requires a "Super" natural intervention.
Oh, how the Denialists hate that reality. It takes them down from their self-anointed god status and brings them back to being less than the supreme intellect of the universe. Their inflated egos really can't handle that.
They demean Believers for thinking there exists - in their condescending words, "an imaginary friend" - but they can't tell you how you start with Absolute Nothing, and end up with a universe.
The Denialists are the ones living with an imaginary explanation - at the instant of The Big Bang, they have nothing but their imaginations to believe it all just popped into existence on its own.
Here is the initial report from the London Times:
Leading scientist urges teaching of creationism in schools
By Lewis Smith, Science Reporter and Alexandra Frean, Education Editor
Published Sept. 12, 2008
Creationism should be taught in science classes as a legitimate point of view, according to the Royal Society, putting the august science body on a collision course with the Government.
The Rev. Michael Reiss, a biologist and its director of education, said it was self-defeating to dismiss as wrong or misguided the 10 per cent of pupils who believed in the literal account of God creating the Universe and all living things as related in the Bible or Koran. It would be better, he said, to treat creationism as a world view.
His comments put him at odds with fellow scientists as well as the Government. Former Fellows of the Royal Society include Charles Darwin, who first proposed the theory of evolution.
National curriculum guidelines state that creationism has no place in science lessons. The Government says that if it is raised by students, teachers should discuss how creationism differs from evolution, say that it is not scientific theory and that further discussion should be saved for religious classes.
Professor Reiss, a biologist, was speaking at the British Association’s Festival of Science in Liverpool. Other scientists were vociferous in their response, saying that creationism should remain entirely within the sphere of religious education.
Professor Lewis Wolpert, of University College Medical School, said: “Creationism is based on faith and has nothing to do with science, and it should not be taught in science classes. It is based on religious beliefs and any discussion should be in religious studies.”
Dr John Fry, a physicist at the University of Liverpool, said: “Science lessons are not the appropriate place to discuss creationism, which is a world view in total denial of any form of scientific evidence. Creationism doesn’t challenge science: it denies it!”
However, Professor John Bryant, a biologist at the University of Exeter, agreed that creationism should be discussed as an alternative position of the origins of man and earth.
“If the class is mature enough and time permits, one might have a discussion on the alternative viewpoints,” he said. “However, I think we should not present creationism as having the same status as evolution.”
The Royal Society’s support for the presence of creationism within the classroom points to a remarkable turn-around. Last year the society issued an open letter stating that creationism had no place in schools and that pupils should understand that science supported the theory of evolution.
A spokesman for the organisation, which counts 21 Nobel Prize winners among its Fellows, confirmed yesterday that Professor Reiss’s views did represent that of its president, Lord Rees of Ludlow, and the society.
He said: “Teachers need to be in a position to be able to discuss science theories and explain why evolution is a sound scientific theory and why creationism isn’t.”
The Rev Tim Hastie-Smith, the new chairman of the Headmasters and Headmistresses’ Conference, which represents 250 leading independent schools, said that creationism was taught in science classes at his school, Dean Close in Cheltenham, as a theory that some people believe in, not as a fact.“If we get creationist books sent to us then we give them to the science department to be discussed. We want children to be aware of it.”
Teachers would try to be sensitive if a pupil believed in creationism.
Professor Reiss, a Church of England clergyman, said: “Just because something lacks scientific support doesn’t seem to me a sufficient reason to omit it from a science lesson.”
Many children who go to school believing in creationism come from Muslim or fundamental Christian families, he said. While making clear to them that it is widely rejected by scientists, teachers should ensure they avoid denigrating creationist beliefs.
The theories
Creationism
The Universe and living organisms originated from acts of divine creation. This belief embraces the Biblical account and rejects theories in which natural processes are central, such as evolution. Some creationists have accepted geological findings and other methods of dating the Earth, insisting that such accounts do not necessarily contradict Biblical teachings
Evolution
Different kinds of living organisms have developed and diversified from earlier forms. Darwin’s theory of gradual evolution holds that this development took place by natural selection of varieties of organism better adapted to the environment and more likely to produce descendants
Intelligent Design
Certain features of the Universe and of living things are best explained by an intelligent cause, and not by an undirected process such as natural selection. Proponents insist that it is not based on the Bible, claiming that its roots include the teachings of Plato and Aristotle, who, they say, articulated early versions of the theory
Sources: New Oxford Dictionary of English, Times Database
Copyright, 2008 The London Times; Used with permission
-30-
But take time to find out about his courage in the face of ranting Denialists.
When the Denialists can explain how you can create a universe from Absolute Nothing- no mass, no energy, no time, no space, no light, no imaginary "black void," and no force acting purely within the natural world, and no force acting outside the natural world, they might actually have something worth listening to.
Until then, they are fools who can't explain how the elements of the Big Bang were created.
But as it stands, all they can do is roll the clock back to the instant of The Big Bang - allowing that only Spontaneous Generation, a concept that does not exist in the natural world, is the only way to explain how the components of the Bang got there. It is "An Inconvenient Truth" they avoid like the plague.
In short, the universe cannot exist through a purely "Natural Laws" explanation. It requires a force outside the Natural Laws - it requires a "Super" natural intervention.
Oh, how the Denialists hate that reality. It takes them down from their self-anointed god status and brings them back to being less than the supreme intellect of the universe. Their inflated egos really can't handle that.
They demean Believers for thinking there exists - in their condescending words, "an imaginary friend" - but they can't tell you how you start with Absolute Nothing, and end up with a universe.
The Denialists are the ones living with an imaginary explanation - at the instant of The Big Bang, they have nothing but their imaginations to believe it all just popped into existence on its own.
Here is the initial report from the London Times:
Leading scientist urges teaching of creationism in schools
By Lewis Smith, Science Reporter and Alexandra Frean, Education Editor
Published Sept. 12, 2008
Creationism should be taught in science classes as a legitimate point of view, according to the Royal Society, putting the august science body on a collision course with the Government.
The Rev. Michael Reiss, a biologist and its director of education, said it was self-defeating to dismiss as wrong or misguided the 10 per cent of pupils who believed in the literal account of God creating the Universe and all living things as related in the Bible or Koran. It would be better, he said, to treat creationism as a world view.
His comments put him at odds with fellow scientists as well as the Government. Former Fellows of the Royal Society include Charles Darwin, who first proposed the theory of evolution.
National curriculum guidelines state that creationism has no place in science lessons. The Government says that if it is raised by students, teachers should discuss how creationism differs from evolution, say that it is not scientific theory and that further discussion should be saved for religious classes.
Professor Reiss, a biologist, was speaking at the British Association’s Festival of Science in Liverpool. Other scientists were vociferous in their response, saying that creationism should remain entirely within the sphere of religious education.
Professor Lewis Wolpert, of University College Medical School, said: “Creationism is based on faith and has nothing to do with science, and it should not be taught in science classes. It is based on religious beliefs and any discussion should be in religious studies.”
Dr John Fry, a physicist at the University of Liverpool, said: “Science lessons are not the appropriate place to discuss creationism, which is a world view in total denial of any form of scientific evidence. Creationism doesn’t challenge science: it denies it!”
However, Professor John Bryant, a biologist at the University of Exeter, agreed that creationism should be discussed as an alternative position of the origins of man and earth.
“If the class is mature enough and time permits, one might have a discussion on the alternative viewpoints,” he said. “However, I think we should not present creationism as having the same status as evolution.”
The Royal Society’s support for the presence of creationism within the classroom points to a remarkable turn-around. Last year the society issued an open letter stating that creationism had no place in schools and that pupils should understand that science supported the theory of evolution.
A spokesman for the organisation, which counts 21 Nobel Prize winners among its Fellows, confirmed yesterday that Professor Reiss’s views did represent that of its president, Lord Rees of Ludlow, and the society.
He said: “Teachers need to be in a position to be able to discuss science theories and explain why evolution is a sound scientific theory and why creationism isn’t.”
The Rev Tim Hastie-Smith, the new chairman of the Headmasters and Headmistresses’ Conference, which represents 250 leading independent schools, said that creationism was taught in science classes at his school, Dean Close in Cheltenham, as a theory that some people believe in, not as a fact.“If we get creationist books sent to us then we give them to the science department to be discussed. We want children to be aware of it.”
Teachers would try to be sensitive if a pupil believed in creationism.
Professor Reiss, a Church of England clergyman, said: “Just because something lacks scientific support doesn’t seem to me a sufficient reason to omit it from a science lesson.”
Many children who go to school believing in creationism come from Muslim or fundamental Christian families, he said. While making clear to them that it is widely rejected by scientists, teachers should ensure they avoid denigrating creationist beliefs.
The theories
Creationism
The Universe and living organisms originated from acts of divine creation. This belief embraces the Biblical account and rejects theories in which natural processes are central, such as evolution. Some creationists have accepted geological findings and other methods of dating the Earth, insisting that such accounts do not necessarily contradict Biblical teachings
Evolution
Different kinds of living organisms have developed and diversified from earlier forms. Darwin’s theory of gradual evolution holds that this development took place by natural selection of varieties of organism better adapted to the environment and more likely to produce descendants
Intelligent Design
Certain features of the Universe and of living things are best explained by an intelligent cause, and not by an undirected process such as natural selection. Proponents insist that it is not based on the Bible, claiming that its roots include the teachings of Plato and Aristotle, who, they say, articulated early versions of the theory
Sources: New Oxford Dictionary of English, Times Database
Copyright, 2008 The London Times; Used with permission
-30-
Greenspan’s sins return to haunt us
Everyone loves "Uncle Sugar," a term normally applied to the United States government, but in financial circles it was also applied to Alan Greenspan, the former chair of the Fed.
Following is an analysis of his tenure, and how his actions laid the foundation for last week's financial crisis, from the Financial Times of London:
Greenspan’s sins return to haunt us
By David Blake
Published: September 18 2008 18:39
Back in 2002, when his reputation as “The Man Who Saved the World” was at its peak, Alan Greenspan, former chairman of the Federal Reserve, came to Britain to pick up his knighthood. His biggest fan, Gordon Brown, now the UK prime minister, had ensured that the citation said it was being awarded for promoting “economic stability”.
During his trip, Mr Greenspan visited the Bank of England’s monetary policy committee. He told them the US financial system had been resilient amid the bursting of the internet bubble. Share prices had halved and there had been massive bond defaults, but no big bank collapses.
Mr Greenspan lauded the fact that risk had been spread, using complex derivative instruments. One of the MPC members asked: how could this be? Someone must have lost all that money; who was it? A look of quiet satisfaction came across Mr Greenspan’s face as he answered: “European insurance companies.”
Six years later, AIG, the largest US insurance company, has in effect been nationalised to stop it blowing up the financial world. The US has nationalised the core of its mortgage industry and the government has become the arbiter of which financial companies should survive or die.
Financial markets have an enormous capacity for flexibility, but market participants need to be sure that there are rules, and a referee willing to impose them. Permanent damage has been done to the financial system, despite the extraordinary measures of Messrs Henry Paulson, the US Treasury secretary, and Ben Bernanke, the Fed chairman, to address the problems that stem from the actions of their predecessors. As Mr Paulson has suggested, he is playing a hand dealt by others.
Many blame the Greenspan Fed for this mess. They are right, but not for the reason often cited. It is unfair to say low interest rates are to blame. In the past decade, there is no evidence the US suffered from excessive growth leading to inflation. The economy needed low interest rates and a fiscal stimulus to avoid a severe recession. The Fed was right to do its bit.
Where Mr Greenspan bears responsibility is his role in ensuring that the era of cheap interest rates created a speculative bubble. He cannot claim he was not warned of the risks. Take two incidents from the 1990s.
The first came before he made his 1996 speech referring to “irrational exuberance”. In a Federal Open Market Committee meeting, he conceded there was an equity bubble but declined to do anything about it. He admitted that proposals for tightening the margin requirement, which people need to hold against equity positions, would be effective: “I guarantee that if you want to get rid of the bubble, whatever it is, that will do it.” It seems odd that since then, in defending the Fed’s inaction, he has claimed in three speeches that tightening margins would not have worked.
The second incident stems from spring 1998 when the head of the Commodity Futures Trading Commission expressed concern about the massive increase in over-the-counter derivatives. These have been at the heart of the counter-party risk in the crisis. Mr Greenspan suggested new regulation risked disrupting the capital markets.
At the turn of the millennium, with no move to tighten margin requirements, a feedback loop sent share prices into orbit. As prices rose, more brokers were willing to lend to buy more shares. As share prices went up the buying continued, until the bubble burst. To create one bubble may be seen as a misfortune; to create two looks like carelessness. Yet that is exactly what the Greenspan Fed did.
Bruised by stock market losses, Americans bought houses. The mortgage industry used securitised bonds to ensure that the people who initiated the mortgage did not worry about getting paid back; risk was packaged and sold to others. This time Mr Greenspan did not just stand aside. He said repeatedly that housing was a safe investment because prices do not fall. Home owners could wait out any downturn. Is it any surprise that so many people thought if the world’s financial genius held this view it must be all right?
Even as things went completely wild, Mr Greenspan dismissed those who warned that a new bubble was emerging. It was just a case of a little “froth” in a few areas. Later, after waiting until 2007, two years after he left office, he conceded that “froth” had been his euphemism for “bubble”.
“All the froth bubbles add up to an aggregate bubble,” he told the Financial Times.
This time, as with the equity bubble, the mistake was not to set interest rates too low; it was to stand back as wildly imprudent policies were pursued by mortgage lenders. Indeed, any lender would have been encouraged by his words in April 2005: “Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending.”
Well, he was right about the rapid growth in subprime lending.
Mr Greenspan was in charge of supervising and regulating much of the banking industry for two decades. The Fed says it is responsible for ensuring “safe and sound banking practices”. It is right that other regulators should have stepped in, too – the US regulatory structure has not kept pace with market changes.
But given the Fed’s institutional importance and Mr Greenspan’s personal stature, does anyone doubt that the Fed could have used its limited powers to ensure a closer examination of what was going on?
Mr Greenspan realises that something big has happened and describes it as a “once in a hundred years” event. But then, you do not get Alan Greenspans coming along every day.
The writer is an executive in an asset management company. He writes in a personal capacity
Copyright The Financial Times Limited 2008 - Used with permission
-30-
Following is an analysis of his tenure, and how his actions laid the foundation for last week's financial crisis, from the Financial Times of London:
Greenspan’s sins return to haunt us
By David Blake
Published: September 18 2008 18:39
Back in 2002, when his reputation as “The Man Who Saved the World” was at its peak, Alan Greenspan, former chairman of the Federal Reserve, came to Britain to pick up his knighthood. His biggest fan, Gordon Brown, now the UK prime minister, had ensured that the citation said it was being awarded for promoting “economic stability”.
During his trip, Mr Greenspan visited the Bank of England’s monetary policy committee. He told them the US financial system had been resilient amid the bursting of the internet bubble. Share prices had halved and there had been massive bond defaults, but no big bank collapses.
Mr Greenspan lauded the fact that risk had been spread, using complex derivative instruments. One of the MPC members asked: how could this be? Someone must have lost all that money; who was it? A look of quiet satisfaction came across Mr Greenspan’s face as he answered: “European insurance companies.”
Six years later, AIG, the largest US insurance company, has in effect been nationalised to stop it blowing up the financial world. The US has nationalised the core of its mortgage industry and the government has become the arbiter of which financial companies should survive or die.
Financial markets have an enormous capacity for flexibility, but market participants need to be sure that there are rules, and a referee willing to impose them. Permanent damage has been done to the financial system, despite the extraordinary measures of Messrs Henry Paulson, the US Treasury secretary, and Ben Bernanke, the Fed chairman, to address the problems that stem from the actions of their predecessors. As Mr Paulson has suggested, he is playing a hand dealt by others.
Many blame the Greenspan Fed for this mess. They are right, but not for the reason often cited. It is unfair to say low interest rates are to blame. In the past decade, there is no evidence the US suffered from excessive growth leading to inflation. The economy needed low interest rates and a fiscal stimulus to avoid a severe recession. The Fed was right to do its bit.
Where Mr Greenspan bears responsibility is his role in ensuring that the era of cheap interest rates created a speculative bubble. He cannot claim he was not warned of the risks. Take two incidents from the 1990s.
The first came before he made his 1996 speech referring to “irrational exuberance”. In a Federal Open Market Committee meeting, he conceded there was an equity bubble but declined to do anything about it. He admitted that proposals for tightening the margin requirement, which people need to hold against equity positions, would be effective: “I guarantee that if you want to get rid of the bubble, whatever it is, that will do it.” It seems odd that since then, in defending the Fed’s inaction, he has claimed in three speeches that tightening margins would not have worked.
The second incident stems from spring 1998 when the head of the Commodity Futures Trading Commission expressed concern about the massive increase in over-the-counter derivatives. These have been at the heart of the counter-party risk in the crisis. Mr Greenspan suggested new regulation risked disrupting the capital markets.
At the turn of the millennium, with no move to tighten margin requirements, a feedback loop sent share prices into orbit. As prices rose, more brokers were willing to lend to buy more shares. As share prices went up the buying continued, until the bubble burst. To create one bubble may be seen as a misfortune; to create two looks like carelessness. Yet that is exactly what the Greenspan Fed did.
Bruised by stock market losses, Americans bought houses. The mortgage industry used securitised bonds to ensure that the people who initiated the mortgage did not worry about getting paid back; risk was packaged and sold to others. This time Mr Greenspan did not just stand aside. He said repeatedly that housing was a safe investment because prices do not fall. Home owners could wait out any downturn. Is it any surprise that so many people thought if the world’s financial genius held this view it must be all right?
Even as things went completely wild, Mr Greenspan dismissed those who warned that a new bubble was emerging. It was just a case of a little “froth” in a few areas. Later, after waiting until 2007, two years after he left office, he conceded that “froth” had been his euphemism for “bubble”.
“All the froth bubbles add up to an aggregate bubble,” he told the Financial Times.
This time, as with the equity bubble, the mistake was not to set interest rates too low; it was to stand back as wildly imprudent policies were pursued by mortgage lenders. Indeed, any lender would have been encouraged by his words in April 2005: “Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending.”
Well, he was right about the rapid growth in subprime lending.
Mr Greenspan was in charge of supervising and regulating much of the banking industry for two decades. The Fed says it is responsible for ensuring “safe and sound banking practices”. It is right that other regulators should have stepped in, too – the US regulatory structure has not kept pace with market changes.
But given the Fed’s institutional importance and Mr Greenspan’s personal stature, does anyone doubt that the Fed could have used its limited powers to ensure a closer examination of what was going on?
Mr Greenspan realises that something big has happened and describes it as a “once in a hundred years” event. But then, you do not get Alan Greenspans coming along every day.
The writer is an executive in an asset management company. He writes in a personal capacity
Copyright The Financial Times Limited 2008 - Used with permission
-30-
Friday, September 19, 2008
Joe Scarborough: Dumb is as dumb does
Yesterday, I posted an article from the San Francisco Chronicle about the hate the Democrats, their MainStream Media (MSM) handmaidens, and their cheering section in the left-wing lunatic section of the stadium show towards Sarah Palin. Their hate for her is truly psychotic in its intensity.
While none of the members of the aforementioned groups has the integrity to admit it, they are whack jobs who hate Gov. Palin for not being like them when it comes to their overwhelming propensity to diss God, define feminism by their "self-anointed" agenda, and recoil in horror at her functional family.
Now comes this article by Joe Scarborough, a man with whom I've had many issues that keep me from being part of his fan club. But even a stopped clock is right twice a day, and following is an article that is certainly one of those two possible occasions:
Joe Scarborough: Dumb is as dumb does for Democrats
By Joe Scarborough
Pensacola News Journal
Sept. 17, 2008
Stupid is as stupid does. And this week, the Democrats are showing again just how dumb they can be.
Why is it that Democrats and some of their allies in the press go into every election believing they are going to win in a landslide because of their moral and intellectual superiority?
How many times can the same party have the issues breaking their way but lose a national election because they underestimate their opponents?
When in office, Dwight Eisenhower was dismissed by Democrats as an old bumbling fool who spent most of his presidency on the golf course.
Ike won two landslide victories.
Ronald Reagan was dismissed as an amiable dunce. Smug editorial writers mocked Reagan as a B-list actor with a third-rate mind.
The Gipper left his liberal critics speechless after massive victory margins in 1980 and 1984.
George W. Bush has spent the last eight years being every late-night comedian's punch line. Like Reagan, Bush has been the constant target of smug editorial writers.
But somehow, the president Democrats liked to dismiss as an idiot figured out how to beat them in 2000 and 2004.
Four years after the liberal establishment was left reeling from a second Bush victory, their arrogance just may elect another Republican ticket deemed as dumb by elites in Manhattan and Washington.
The degree of smugness shown by the Democrats and the national media toward the McCain-Palin ticket has been stunning.
On Monday, a Barack Obama supporter introduced the Democrats' vice presidential nominee by attacking Palin personally.
"Barack Obama has made an intelligent choice for the vice-presidency. How so very different this is from that bucket of fluff that the Republican candidates have chosen for the same position."
Do Democrats really want to compare Barack Obama's political resume and life story with Sarah Palin's?
Is it really a wise move for Democratic leaders to treat a governor and former mayor with such disrespect when their own candidate has such a thin resume?
Of course not. But too many Democrats just can't help themselves.
Monday, Joe Biden proved that point in spades when he attacked Republicans as the stupid party.
Biden said the GOP attacked Barack Obama because "they're not just used to somebody really smart. They're just not used to somebody who's really well educated. They just don't know quite how to handle it."
Sen. Biden's attack followed a New York Times column on Sunday accusing the GOP of making the country a dumber place to live.
Another Times columnist concurred, saying that Palin could be responsible for dimwits taking over the United States of America.
"I've gotten the scary feeling, for the first time in my life, that dimwittedness is not just on the march in the U.S., but that it might actually prevail," wrote Bob Herbert on Saturday.
Could it be that the real stars of "Clueless: 2008" are once again the self-appointed philosopher kings who end up electing Republicans by attacking them as uneducated idiots unworthy to hold public office?
But every four years they wake up the day after a presidential election only to find that it was they who were ignorant.
It just may happen again if all these self-anointed intellects don't stop acting so dumb.
-30-
While none of the members of the aforementioned groups has the integrity to admit it, they are whack jobs who hate Gov. Palin for not being like them when it comes to their overwhelming propensity to diss God, define feminism by their "self-anointed" agenda, and recoil in horror at her functional family.
Now comes this article by Joe Scarborough, a man with whom I've had many issues that keep me from being part of his fan club. But even a stopped clock is right twice a day, and following is an article that is certainly one of those two possible occasions:
Joe Scarborough: Dumb is as dumb does for Democrats
By Joe Scarborough
Pensacola News Journal
Sept. 17, 2008
Stupid is as stupid does. And this week, the Democrats are showing again just how dumb they can be.
Why is it that Democrats and some of their allies in the press go into every election believing they are going to win in a landslide because of their moral and intellectual superiority?
How many times can the same party have the issues breaking their way but lose a national election because they underestimate their opponents?
When in office, Dwight Eisenhower was dismissed by Democrats as an old bumbling fool who spent most of his presidency on the golf course.
Ike won two landslide victories.
Ronald Reagan was dismissed as an amiable dunce. Smug editorial writers mocked Reagan as a B-list actor with a third-rate mind.
The Gipper left his liberal critics speechless after massive victory margins in 1980 and 1984.
George W. Bush has spent the last eight years being every late-night comedian's punch line. Like Reagan, Bush has been the constant target of smug editorial writers.
But somehow, the president Democrats liked to dismiss as an idiot figured out how to beat them in 2000 and 2004.
Four years after the liberal establishment was left reeling from a second Bush victory, their arrogance just may elect another Republican ticket deemed as dumb by elites in Manhattan and Washington.
The degree of smugness shown by the Democrats and the national media toward the McCain-Palin ticket has been stunning.
On Monday, a Barack Obama supporter introduced the Democrats' vice presidential nominee by attacking Palin personally.
"Barack Obama has made an intelligent choice for the vice-presidency. How so very different this is from that bucket of fluff that the Republican candidates have chosen for the same position."
Do Democrats really want to compare Barack Obama's political resume and life story with Sarah Palin's?
Is it really a wise move for Democratic leaders to treat a governor and former mayor with such disrespect when their own candidate has such a thin resume?
Of course not. But too many Democrats just can't help themselves.
Monday, Joe Biden proved that point in spades when he attacked Republicans as the stupid party.
Biden said the GOP attacked Barack Obama because "they're not just used to somebody really smart. They're just not used to somebody who's really well educated. They just don't know quite how to handle it."
Sen. Biden's attack followed a New York Times column on Sunday accusing the GOP of making the country a dumber place to live.
Another Times columnist concurred, saying that Palin could be responsible for dimwits taking over the United States of America.
"I've gotten the scary feeling, for the first time in my life, that dimwittedness is not just on the march in the U.S., but that it might actually prevail," wrote Bob Herbert on Saturday.
Could it be that the real stars of "Clueless: 2008" are once again the self-appointed philosopher kings who end up electing Republicans by attacking them as uneducated idiots unworthy to hold public office?
But every four years they wake up the day after a presidential election only to find that it was they who were ignorant.
It just may happen again if all these self-anointed intellects don't stop acting so dumb.
-30-
Sandra Bernhard: Palin Would Be Gang-Raped
I came across this at NewsBusters, and thought you should read it. It is fitting that it again shows the pseudo-intellectual aspect of the anti-Palin ranters. They are gross, course, trash, masquerading as "intelligentsia."
In their way of self-anointed superiority, we who think them lower than slime at the bottom of the ocean are just too IQ-challenged to grasp their intellectual superiority.
The lies these people tell themselves to rescue their egos from the darkness of their souls . . .
Read, and judge for yourself:
Sandra Bernhard: Palin Would Be Gang-Raped By Blacks in Manhattan
By Tim Graham
The Washington Post isn’t the only daily D.C. newspaper to rave about Sandra Bernhard’s anti-Palin ranting. Wednesday’s Washington Examiner joined in, with the headline "Comedienne delivers enraged optimism." Barbara Mackay claimed "in the end, oddly and subtly, Bernhard’s message is positive."
That’s not the impression you’d get from the blog of Theater J, where Bernhard is appearing. It has video of Bernhard calling Palin "Uncle Women," a "turncoat b—h" and a "whore." One complaint on the blog that Bernhard crosses a line of political incorrectness draws a defense from
Ari Roth of Theater J that really drops the curtain on how coarse this show is:
In fact, the play wears its politically VERY correct heart on its sleeve with its indictment of America as "A Man’s World, It’s a White Man’s World, It’s a F–ked Up White Man’s Racist World" and can only be suggested to be racist in its content if one is hell-bent on protecting White Folk for Sandra’s blistering indictment.
When Sandra warns Sarah Palin not to come into Manhattan lest she get gang-raped by some of Sandra’s big black brothers, she’s being provocative, combative, humorous, and yes, let’s allow, disgusting.
The fact that the show has a few riffs like this does not — to my mind — make it a "disgusting show." There’s too much beauty, variety, vitality, and intelligence to label the entire show as "disgusting." I’ll agree with you that we produced this show because we did find it to be edgy — because we wanted to give right wing conservative Jews a good run for their money by being on the receiving end of some blistering indictments from Sandra.
Does it go over the edge sometimes? On the gang-rape joke, yes. Sure. Not much else. It goes over the edge and then comes right back to the cutting edge. [Profanity editing is mine.]
Forgive me if gang-rape jokes don't greet my ears as oddly and subtly positive, as the Examiner suggests, and forgive me if gang-rape jokes aren't "a rotating sprinkler that a spectator washes in most happily," like the Washington Post insists.
Roth insisted to the complainer that the D.C. Jewish Community Center is loving their Bernhard show, and partied with Bernhard on opening night. They’re in tune with her right-bashing rage:
We’re proud of our producing -- proud of Sandra’s sense of timing -- taking the fight out to the house and to the street beyond, channeling so much of our rage and frustration at the bizarre recent twists of fortune since Karl Rove trotted out Sarah Palin for John McCain to briefly meet and then get in bed with.
Sandra’s face is hanging 10 feet tall in a banner over the DCJCC steps and we’re proud that she’s a new emblem and ambassador for our theater and our center. She’s not the only one who represents us. But her large heart, her generous talent, and her big mouth are all a big part of who we are.
"Who we are" at this theater clearly isn't someone who's interesting in presenting anything other than rage. The video itself, presented like a commercial for the show, explains who the show is intended to please. The average person probably wouldn’t find it the least bit funny. But if you really, really hate Sarah Palin or Christian conservatives, this show is for you. Here’s some of what she says in the promo:
Now you got Uncle Women, like Sarah Palin, who jumps on the s--t and points her fingers at other women. Turncoat b---h! Don’t you f--kin’ reference Old Testament, bitch! You stay with your new Goyish crappy shiksa funky bulls--t! Don’t you touch my Old Testament, you b---h!
Because we have left it open for interpre-ta-tion! It is no longer taken literally! You whore in your f--kin' cheap New Vision cheap-ass plastic glasses and your [sneering voice] hair up. A Tina Fey-Megan Mullally brokedown bulls--t moment.
Is it too broad an interpretation to suggest that when Bernhard attacks Palin's "new Goyish crappy shiksa funky bulls--t," she means the New Testament? It sounds like she's telling the Christian to stay away from "her" Old Testament, as if Christians don't have an Old Testament in their Bible. It's quite clear that the D.C. Jewish Community Center is not attempting an interfaith dialogue with this rantfest.
—Tim Graham is Director of Media Analysis at the Media Research Center
-30-
In their way of self-anointed superiority, we who think them lower than slime at the bottom of the ocean are just too IQ-challenged to grasp their intellectual superiority.
The lies these people tell themselves to rescue their egos from the darkness of their souls . . .
Read, and judge for yourself:
Sandra Bernhard: Palin Would Be Gang-Raped By Blacks in Manhattan
By Tim Graham
The Washington Post isn’t the only daily D.C. newspaper to rave about Sandra Bernhard’s anti-Palin ranting. Wednesday’s Washington Examiner joined in, with the headline "Comedienne delivers enraged optimism." Barbara Mackay claimed "in the end, oddly and subtly, Bernhard’s message is positive."
That’s not the impression you’d get from the blog of Theater J, where Bernhard is appearing. It has video of Bernhard calling Palin "Uncle Women," a "turncoat b—h" and a "whore." One complaint on the blog that Bernhard crosses a line of political incorrectness draws a defense from
Ari Roth of Theater J that really drops the curtain on how coarse this show is:
In fact, the play wears its politically VERY correct heart on its sleeve with its indictment of America as "A Man’s World, It’s a White Man’s World, It’s a F–ked Up White Man’s Racist World" and can only be suggested to be racist in its content if one is hell-bent on protecting White Folk for Sandra’s blistering indictment.
When Sandra warns Sarah Palin not to come into Manhattan lest she get gang-raped by some of Sandra’s big black brothers, she’s being provocative, combative, humorous, and yes, let’s allow, disgusting.
The fact that the show has a few riffs like this does not — to my mind — make it a "disgusting show." There’s too much beauty, variety, vitality, and intelligence to label the entire show as "disgusting." I’ll agree with you that we produced this show because we did find it to be edgy — because we wanted to give right wing conservative Jews a good run for their money by being on the receiving end of some blistering indictments from Sandra.
Does it go over the edge sometimes? On the gang-rape joke, yes. Sure. Not much else. It goes over the edge and then comes right back to the cutting edge. [Profanity editing is mine.]
Forgive me if gang-rape jokes don't greet my ears as oddly and subtly positive, as the Examiner suggests, and forgive me if gang-rape jokes aren't "a rotating sprinkler that a spectator washes in most happily," like the Washington Post insists.
Roth insisted to the complainer that the D.C. Jewish Community Center is loving their Bernhard show, and partied with Bernhard on opening night. They’re in tune with her right-bashing rage:
We’re proud of our producing -- proud of Sandra’s sense of timing -- taking the fight out to the house and to the street beyond, channeling so much of our rage and frustration at the bizarre recent twists of fortune since Karl Rove trotted out Sarah Palin for John McCain to briefly meet and then get in bed with.
Sandra’s face is hanging 10 feet tall in a banner over the DCJCC steps and we’re proud that she’s a new emblem and ambassador for our theater and our center. She’s not the only one who represents us. But her large heart, her generous talent, and her big mouth are all a big part of who we are.
"Who we are" at this theater clearly isn't someone who's interesting in presenting anything other than rage. The video itself, presented like a commercial for the show, explains who the show is intended to please. The average person probably wouldn’t find it the least bit funny. But if you really, really hate Sarah Palin or Christian conservatives, this show is for you. Here’s some of what she says in the promo:
Now you got Uncle Women, like Sarah Palin, who jumps on the s--t and points her fingers at other women. Turncoat b---h! Don’t you f--kin’ reference Old Testament, bitch! You stay with your new Goyish crappy shiksa funky bulls--t! Don’t you touch my Old Testament, you b---h!
Because we have left it open for interpre-ta-tion! It is no longer taken literally! You whore in your f--kin' cheap New Vision cheap-ass plastic glasses and your [sneering voice] hair up. A Tina Fey-Megan Mullally brokedown bulls--t moment.
Is it too broad an interpretation to suggest that when Bernhard attacks Palin's "new Goyish crappy shiksa funky bulls--t," she means the New Testament? It sounds like she's telling the Christian to stay away from "her" Old Testament, as if Christians don't have an Old Testament in their Bible. It's quite clear that the D.C. Jewish Community Center is not attempting an interfaith dialogue with this rantfest.
—Tim Graham is Director of Media Analysis at the Media Research Center
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