Recession: The NY Times announced that a recession may be unavoidable. Helllll-oooo.
Cause of the Crisis: While politicians keep blaming Fannie Mae and Freddie Mac for the financial crisis, "[f]ederal housing data reveal that the charges aren't true. . . Subprime lending offered high-cost loans to the weakest borrowers during the housing boom that lasted from 2001 to 2007. Subprime lending was at its height from 2004 to 2006." (McClatchy)
Bail-Out: Bush, et al. have decided to sidestep the economic bailout package passed last week and instead are going to emphasize an intervention that would directly invest govern-ment capital in American banks. Many are calling this nationalization of the banks, but I want to point out that the government is waiving dividends and are not taking a voting position. So, it's not really nationalization. It's just a give-away program. We're borrowing money from the Chinese and the Saudis that we have to pay back with interest and giving it to the banks. They don't have to pay it back. The distribution will decide which banks survive and which die. (LA Times) I happen to think that this is part of the plan. All the money will be in the hands of a few banks. Very scary. Treasury officials didn't want the bail-out to seem punitive. However, under the Bush plan, banks can can still pay dividends but can't increase the amount without approval. (Wall Street Journal) Some are also criticizing the U.S. program because it doesn't impose any requirements on the banks to use the government money to increase lending. (Washington Post) The Financial Times calls this "one of the most radical reshapings of the global banking sector."
Who Gets What: The first step is to invest $250 billion in banks. Treasury Secretary Henry Paulson told 9 banks -- Citigroup, Bank of America, Wells Fargo, Goldman Sachs, JPMorgan Chase, Bank of New York, Morgan Stanley & Merrill Lynch -- they'll get half of the $250. The other half will go to smaller banks. The move was set off when Britain, France, Germany, Spain, and other European countries announced plans to guarantee bank debt and "take ownership stakes in banks or prop up ailing companies with billions in taxpayer funds." U.S. banks will be required to set strict restrictions on compensation and there will be a prohibition on golden parachutes and requirements to return any improper bonuses. (NY Times) It should be noted, however, that there is no way to enforce this, so the banks can do whatever they want. Community banks are ticked off because they're not getting help, but they didn't make any of those bad loans. So, the only ones getting our help are the wrongdoers. Yup. The American Way. (Washington Post)
The Real Problem: While everyone keeps talking about the mortgage market, the NY Times reported that the credit crisis really started in mid-2007 (wow, someone is finally admitting it) and most of those bad loans have already been written down. For the 9 banks getting help, the value of the write-down is about $323 billion. So the problem now is really auto, credit card, and commercial real estate loans. "The deepening red ink underscores a crucial question about the government’s plan: Will lenders deploy their new-found capital quickly, as the Treasury hopes, and unlock the flow of credit through the economy? Or will they hoard the money to protect themselves?" What do you think? "All of the combined profits that major banks earned in recent years have vanished. . . For every dollar the banks earned during the industry’s most prosperous years, they have now wiped out $1.06."
Guaranteeing Debt: Paulson is going to guarantee new debt issued by banks for 3 years. The Federal Deposit Insurance Corporation (FDIC) is going to offer an unlimited guarantee on bank deposits in accounts that do not bear interest, mostly business accounts, "bringing the United States in line with several European countries, which have adopted such blanket guarantees." (NY Times)
Europe: EU countries agreed to a coordinated plan to inject public money into banks and temporarily guarantee bank debt. No one said what this would cost. (NY Times) They also agreed to relax so-called mark-to-market accounting rules that require banks to price assets to current market prices. (Wall Street Journal) Brits were the first to reveal what they were doing. They're going to provide up to $63 billion to prop up 3 of the country's largest banks. British taxpayers now own as much as 57% of the Royal Bank of Scotland and 43.5% of Lloyds TSB and the Halifax Bank of Scotland, which are in the process of merging. (AP)
Morgan Stanley: The details of how Paulson is going to spend all the money we gave him began to come out this week. Part of it will be for Morgan Stanley. Bush assured a big Japanese bank that its investment in Morgan Stanley would be protected even ifwe inject capital into the financial institution. Hmmm. Isn't this a bad precedent? We're assuring foreign investors that their money is safe when we haven't yet figured out how to protect the taxpayers who are doing the bail-out? Paulson doesn't think Morgan Stanley will need fresh capital from us, but they're obviously ready to inject some if needed, "suggesting that he does not want to repeat the troubles that resulted from allowing Lehman Brothers to go bankrupt." (NY Times) Yup. Everyone's lining up to get their entitlements. No. I'm not talking about senior citizens.
AIG: New York's Attorney General Andrew Cuomo is demanding that AIG recover the bonuses given to its former executives. He sent a letter to AIG's board, citing “unwarranted and outrageous expenditures" as being contrary to New York law. He also "described a lavish golf outing and an overseas hunting trip that cost nearly $100,000." (NY Times) Go Andy!!!
Lehman Brothers: Federal prosecutors in Brooklyn, Manhattan, and New Jersey are investigating what went on before they collapsed. In New Jersey they're looking at whether executives "made misleading statements about the bank’s condition to investors." Brooklyn and Manhattan are looking at comments the executives made just 5 days before the collapse and whether they "put proper values on its large commercial real estate holdings." (NY Times)
The Markets: The Dow opened on Monday 400 points higher, "led by big gains in financial stocks." At its close, it was up more than 936 points. 11.1%. (NY Times) This was "the largest single-day gain in the American stock market since the 1930s." And it wasn't just the U.S. In Paris and Frankfurt stocks had their biggest one-day gains ever. (NY Times) The Asian markets did well, too. The Nikkei was up more than 13%. (NY Times) But commodities are suffering. Wheat and corn dropped more than 40%; oil dropped 44%; metals, like aluminum, copper and nickel, declined by more than 33%. (NY Times) But on Wednesday the Dow dropped about 733 points, nearly 8%, erasing most of Monday's gain. Standard & Poor's 500-stock index was down 9%. The technology-heavy Nasdaq was down 8.4%. The NY Times said the message is clear: "the economy is in trouble and the recession may be longer and deeper than initially feared." But, on Thursday, stocks gained 400 points (NY Times) and the EU reported an increase of 4.6%. (NY Times) On Friday, the Dow fell 127.04 points, or 1.41%. and the broader S.& P. index declined 0.62%. (NY Times)
The Good News: Many small local banks have increased business since many of the large competitors have collapsed. (Washington Post)
Oil: It's dropped to $70 a barrel and, with a worldwide recession, it'll probably go down even more. Wanna know how much money Americans send to other countries every year for gas? This'll knock your socks off. The NY Times said, "If oil prices stay at current levels, consumers would have $250 billion more, over a year, to save or spend elsewhere." And that's at current prices. How much did we send out of the country when it was at $145 a barrel? The Wall Street Journal quotes an analyst who says that if prices stabilize at around $80 a barrel, it would be the equivalent of "a $275 billion stimulus package to the U.S. economy."
Signing Statements: Bush issued new signing statements this week. One was a military authorization act that required him to enter into "negotiations for an agreement by which Iraq would share some of the costs of the American military operations there" and a prohibition on the use of U.S. funds "being used 'to exercise United States control of the oil resources of Iraq.'" He ain't doin' that! The other was a bill giving inspectors general (IGs) greater independence from White House control by strengthening "legal protections against political interference with the internal watchdog officials at each executive agency." There are 2 sections of this bill that Bush doesn't like. One section gives IGs "a right to counsels who report directly to them." Bush's signing statement said "that such lawyers would be bound to follow the legal interpretations of the politically appointed counsels at each agency." The other section requires the White House to tell Congress what each IG "said about the administration’s budget proposal for their offices." Bush said that this would infringe on "the president’s constitutional authority" to decide what to recommend to Congress. (NY Times)
Authorizing Torture: About a year after the CIA started torturing al-Qaeda suspects (because the Justice Department said they could), they were still concerned and wanted permission from the White House. So, then-CIA Director George Tenet asked Bush for permission. Bush et al. then issued a couple of "secret memos" to the CIA in 2003 and 2004 that gave them the okay to torture. However, it appears that they weren't real happy with permission coming through "secret memos," fearing that they'd be held responsible. (Washington Post) Ya think?
Telecom Immunity: The new FISA bill that gave telecom-munications companies immunity from prosecution for illegally wiretapping citizens is facing its first judicial challenge. (TWW, FISA, 6/28/08) Plaintiffs in the suit against AT&T have filed a 61-page motion "arguing the government could not retroactively invalidate their lawsuit because its immunity authority is uncon-stitutional and destroys the notion of coequal branches of government. . . [and] that immunity violates individuals rights to due process, that the secrecy provisions of immunity violate the First Amendment by creating a 'chilling effect' on free speech, and that the government has not justified dismissing the tele-com lawsuits even if its ability to do so was constitutional." (Raw Story)
Latin America: "U.S. clout in what it once considered its backyard has sunk to perhaps the lowest point in decades. As Washington turned its attention to the Middle East, Latin America swung to the left and other powers moved in." (NY Times) I would add that the things we've done there haven't helped any either. (TWW, Turmoil in South America, 9/13/08) But watch everyone go nuts when Latin America strengthens ties with Russia.
North Korea: Bush is going to remove North Korea as a part of the Axis of Evil. North Korea agreed to close down its plutonium plant and allow inspectors to return to work at its main nuclear facility at Yongbyon. But it reserves the right to veto inspections of other sites across the country. Still, we took them off the shit list. (NY Times)
Russia: They've been testing their long-range InterContinental Ballistic Missiles (ICBM) defense program. Experts said we haven't seen this kind of activity from them since the Cold War. 2 missiles were fired from nuclear submarines "in the Asian and European extremes of the sprawling country." A 3rd was fired on land in northwest Russia. President Dmitry Medvedev said, "This shows that our deterrent is in order." (AFP)
Pakistan: A new National Intelligence Estimate (NIE) says that "growing al-Qaida-backed insurgency, combined with the Pakistani army's reluctance to launch an all-out crackdown, political infighting and energy and food shortages are plunging America's key ally in the war on terror deeper into turmoil and violence." (McClatchy)
Iran: After 2 years of research, Andrew Scott Cooper has released a report based on "previously classified documents" that "suggest" that Nixon and Ford, primarily through Kissinger, "created conditions that helped destabilize Iran in the late 1970s and contributed to the country's Islamic Revolution." While Iran's revolution is usually blamed on Carter, the report "suggests that his Republican predecessors not only contributed to the shah's fall but also were inching toward a realignment with Saudi Arabia as the key U.S. ally in the Persian Gulf." (LA Times) So, tell us something we didn't know.
al-Qaeda: They've caught another #2 guy -- Abu Qaswarah. (AP) I think this is the 4th #2 they've gotten. In September 2005 we caught Abdallah Najim Abdallah Mohammed al-Juwari, known as Abu Azzam. (Fox) Then in June 2006 there was Abu Musab al-Zarqawi. (TWW, Zarqawi and al-Qaeda, 6/10/06) In September 2006 there was Hamed Jumaa Farid al-Saeedi, known as Abu Humam or Abu Rana. (CBS News) You've gotta wonder who's gonna take the job of #2 when they keep getting killed.
Religious Terrorism: It's spreading. In India's eastern state of Orissa, Christians are being forced to convert to Hinduism, or else. This is particularly interesting since India, like the U.S., is a secular nation. There have been attacks in other Indian states, too, but it seems to be worse in Kandhamal, Orissa where "more than 30 people have been killed, 3,000 homes burned and over 130 churches destroyed. . . Christian-owned businesses have been systematically attacked." Christians in India are only about 2% of the population. (NY Times)
SOFA: It looks like the Status of Forces Agreement with Iraq won't get done by the end of the year. (TWW, Iraq, 9/20/08) Since the U.N. mandate expires on December 31st (Iraq & the U.N. Mandates), if there is no SOFA in place, that means that our forces won't have a legitimate right to remain in Iraq. (McClathcy) What then?
Missile Defense Program: The NY Times said that the Pentagon's missile defense program wasted about $350 million on unnecessary and doomed projects promoted by unscrupulous employees. "[D]efense procurement has disintegrated into an incestuous relationship between the military, politicians and contractors." No! How can that be? "Michael Cantrell, an engineer at the Army Space and Missile Defense Command headquarters in Huntsville, Ala., along with his deputy, Doug Ennis, had lined up millions of dollars from Congress for defense companies. Now, Mr. Cantrell decided, it was time to take a cut. . . .The 2 men eventually collected more than $1.6 million in kickbacks, through 2007, prompting them to plead guilty this year to corruption charges." [Emphasis added.]
Bombs Over Nevada: A military jet "accidentally" dropped a dummy bomb, hitting a "pick-up truck that was traveling down Las Vegas Boulevard and Beasley Avenue" in the Las Vegas area. (Raw Story) And they wonder why we were concerned about them flying live nukes over the U.S. (TWW, Nukes Over U.S., 2/16/08)
Budget Deficit: They are now estimating that the deficit for last year, FFY 2008, will be $455 billion. (Reuters) Last week I told you that they were estimating $438 billion. (TWW, The Federal Budget, 10/11/08) As the final numbers come in, I'll bet it'll get worse.
Voting in Michigan: U.S. District Judge Stephen Murphy told state officials to "immediately halt the practice of striking from voter rolls newly registered voters whose registration cards are returned as undeliverable by the post office." He also told state officials to restore 1,438 people who have been removed from the rolls since January 1st. Also, addressing another practice of removing the names of people who apply for driver's licenses in other states, he said that this was illegal "because it doesn't comply with federal law." However, he added, that few people have been shown to be harmed by this practice and so he didn't impose an immediate halt to it. Instead, he urged both sides in the lawsuit to figure out how to resolve the driver's license issue. (Detroit Free Press)
Voting in Ohio: Ohio Republicans had a lawsuit similar to the fight in Wisconsin. (TWW, Purging Voter Rolls, 9/20/08) The full 6th U.S. Circuit Court of Appeals in Cincinnati overturned last week's Appeals panel decision and upheld the lower court's decision ordering Ohio's elections official to set up a system "to verify the eligibility of newly registered voters." (Ohio.com) Ohio took it to the U.S. Supreme Court who overturned the lower court's decision. "The decision was a setback for Ohio Republicans, who had sued to force the Ohio secretary of state, a Democrat, to provide information about database mismatches to county officials." Had the Supreme Court upheld the lower court's decision, the Ohio secretary of state would have had to turn over to Republicans the names of the 660,000 new voters who have been registered since January 1st and more than 200,000 could have been challenged at the polls since there isn't a direct match of their names to the Social Security records. (NY Times) The Supreme Court decision is unsigned so we don't know who wrote it, but it says: "We express no opinion on the question whether HAVA [Help America Vote Act] is being properly implemented. Respondents, however, are not sufficiently likely to prevail on the question whether Congress has authorized the District Court to enforce Section 303 in an action brought by a private litigant to justify the issuance of a TRO [Temporary Restraining Order]."
Voting in Colorado: A new national study says that Colorado "is one of the least-prepared states to handle electronic voting machine failures on Election Day." State regulations "don't outline in detail how poll workers should address problems with voting terminals and don't require counties to keep paper ballots as back-up." (Rocky Mountain News)
YPM: Did you understand the issues about ACORN? Check this out. The GOP hired Young Political Majors (YPM) to register Republicans, but "dozens" who signed the registration, either as new voters or changing from registered Democrats, "say they were duped into joining the party . . . with a trail of fraud complaints stretching across the country." California voters contacted by the LA Times said "they were tricked into switching parties while signing what they believed were petitions for tougher penalties against child molesters. Some said they were told that they had to become Republicans to sign the petition, contrary to California initiative law. Others had no idea their registration was being changed." YPM operates in several states and "has been accused of using the tactic across the country." Investigations are being launched in Florida and Massachusetts. "In Arizona, the firm was recently a defendant in a civil rights lawsuit. Prosecutors in Los Angeles and Ventura counties say they are investigating complaints about the company."
Biosafety Labs: Level 4 Biosafety Labs (BSL-4) handle "the world’s most dangerous agents and diseases." In fact, there are 4 BSL designations, but "only BSL-4 labs can work with agents for which no cure or treatment exists." This is the real scary stuff. The Government Accountability Office (GAO) performed "a systematic security assessment of key perimeter security controls at the nation’s 5 operational BSL-4 labs." They found: "While 3 labs had all or nearly all of the key security controls GAO assessed -- features such as perimeter barriers, roving armed guard patrols, and magnetometers in use at lab entrances -- 2 labs demonstrated a significant lack of these controls." [Emphasis added.] Where are these 2 labs? The report doesn't say. It does say, however, that one lab is in "an urban environment and publicly accessible, with only limited perimeter barriers" Great.
Tort Reform: Bush is quickly moving to rewrite a large number of federal rules to protect companies that comply with government regulations from product-safety lawsuits. Whether he gets away with this or not will depend on what the Supreme Court does with a case it will hear next month. "These new rules can't quickly be undone by order of the next president. Federal rules usually must go through lengthy review processes before they are changed. Rulemaking at the Food and Drug Administration, where most of the new pre-emption rules have appeared, can take a year or more." (Wall Street Journal)
Mental Health: With all the stink about the bail-out bill, a little-noticed piece of legislation also got passed, probably part of the deal cut with Bush. It's called the Paul Wellstone and Pete Domenici Mental Health Parity & Addiction Equity Act of 2008. Don't get too excited. It doesn’t require health insurers to cover mental health care. "But if they do, they’ll have to treat psychological and addictive disorders just as they do other medical conditions." (Chicago Tribune)
Banning Commercials: ABC has refused to air an ad produced by Al Gore's Alliance for Climate Protection. Apparently the ad charges that the U.S. government favors the oil industry and ABC thinks this is too "controversial" for television. (The Guardian)
Mammals: A survey of mammals, called the "Red List," in the annual report by the International Union for Conservation of Nature (IUCN), said that "half the world's mammals are declining in population and more than a third probably face extinction." This is a biodiversity report "which covers more than 44,000 animal and plant species." It said that "a quarter of the planet's 5,487 known mammals are clearly at risk of disappearing forever." (AFP)
Climate Change: A new CBO report says: "Human activities are producing increasingly large quantities of greenhouse gases, particularly carbon dioxide (CO2), and their accumulation in the atmosphere is expected to affect the climate throughout the world." The report looks at the role of passenger vehicles (cars and light trucks) and how a tax on CO2 would affect vehicle emissions.
China Cleans Up: "With just 2 exceptions, China has officially halted all of its coal-to-liquids (CTL) projects due to environmental and economic concerns." (China Daily)
Marijuana: The Beckley Foundation's Global Cannabis Commission issued a report that says that cannabis is less harmful than alcohol or tobacco and that we should rethink our drug policy. The report is a response to the push to re-classify marijuana from the not-so-serious Class C offense to a more serious Class B offense. (AFP)
The Universe: Scientists have created a 3-dimensional model of the universe "that allows an observer to travel, as if by rocket ship," to places that are "billions of light-years away." The model includes 217 million objects, including 800,000 galaxies and 100,000 quasars. Among other things, it confirms the existence of dark energy and shows that the universe is really flat. "You see a fuzzy blob and you know it's another galaxy like ours, and it's never been seen before," one astronomer who worked on the project said. "It just sends a chill down your spine." (LA Times)