Monthly Archives: August 2007
Many have called the Bush administration the “most secretive administration in American history.” Among those making this charge is Hillary Clinton; likely the next to occupy 1600 Pennsylvania Avenue (unfortunately). On Clinton’s website, she states that “We need a return to transparency and a system of checks and balances, to a president who respects Congress’s role of oversight and accountability.”
This is quite a departure from her days of her illegal holding of closed meetings regarding her socialized healthcare plan early in her husband’s administration. Perhaps she has had a change of heart about transparency in government since then?
Apparently, this policy does not apply to her campaign, however. Last week the AP reported that millions of documents being archived at the Bill Clinton Presidential Library from her husband’s administration will not be available until after the 2008 election (How convenient!). Judicial Watch, a conservative watchdog group and no doubt part of the “vast right-wing conspiracy,” has filed a Freedom of Information Act lawsuit against the Clinton Library to compel the library to release the records. Ironically, Hillary Clinton might benefit from the Bush administration’s secrecy she so decries. In 2001, President Bush signed an executive order which allows former presidents to deem certain documents privileged and apparently exempt from the Freedom of Information Act.
Here’s a wonderful opportunity for Hillary Clinton to demonstrate how open she will be in leading her administration. All she needs to do is sweet talk her husband and have him release the documents which pertain to her. I’m sure she has nothing to hide.
The ball is in your court Hillary. Why should the American people believe you will be transparent in your administration if you will not be transparent in your campaign? The American people have a right to know before they choose the next president.
According to the latest Gallup Poll, Congress’s approval rating is at a low not seen since the days when guys like Tom Foley were in charge:
PRINCETON, NJ — A new Gallup Poll finds Congress’ approval rating the lowest it has been since Gallup first tracked public opinion of Congress with this measure in 1974. Just 18% of Americans approve of the job Congress is doing, while 76% disapprove, according to the August 13-16, 2007, Gallup Poll.
That 18% job approval rating matches the low recorded in March 1992, when a check-bouncing scandal was one of several scandals besetting Congress, leading many states to pass term limits measures for U.S. representatives (which the Supreme Court later declared unconstitutional). Congress had a similarly low 19% approval rating during the energy crisis in the summer of 1979.
And what could the reason be for this historic low ? The Gallup people think there are a few:
Americans elected the Democrats as the majority party in Congress in November 2006’s midterm election in large part due to frustration with the Iraq war and an ineffective and scandal-plagued Republican-led Congress. But any hopes that the elections would lead to change have not been realized as Democrats’ repeated attempts to force a change in Iraq war policy have been largely unsuccessful due to presidential vetoes, disagreements within their own party, and the inability to attract Republican support for their policy proposals. Also, many of the Democratic leadership’s domestic agenda items have not become law even though some have passed one or both houses of Congress.
As the trend in congressional approval makes clear, ratings of Congress usually suffer during times of economic uncertainty, as during the late 1970s and early 1990s. While Americans’ ratings of current economic conditions are not near historical lows, there is a great deal of concern about the direction in which the economy is headed. The latest poll finds a record 72% of Americans saying the economy is “getting worse.”
It’s not at all surprising that the Democrats have disappointed the public. After all, the leadership that came into power in January isn’t all that different from the people that were in charge back when Newt Gingrich’s revolution rolled through the country and brought Republican majorities in both Houses of Congress. In fact, in some case, the same people who were in charge back then are in charge again now.
That’s the problem with the “throw the bums out” idea. More often than not, it really means “throw the bums out and bring back the bums we threw out the last time.” In the end, very little gets accomplished.
That’s why it’s time to start thinking about some radical ideas. Like term limits and returning Congress to the citizen legislature it was meant to be. And, although I know this is never likely to happen, repealing the 17th Amendment for the reasons I named in this post.
It’s time to start thinking some radical thoughts people.
It’s bad enough to end up in an economic conundrum where you lose your house to foreclosure, but, wait, there’s something worse waiting for you from your
friends fiends at the Internal Revenue Service:
Two years ago, William Stout lost his home in Allentown, Pa., to foreclosure when he could no longer make the payments on his $106,000 mortgage. Wells Fargo offered the two-bedroom house for sale on the courthouse steps. No bidders came forward. So Wells Fargo bought it for $1, county records show.
Despite the setback, Mr. Stout was relieved that his debt was wiped clean and he could make a new start. He married and moved in with his wife, Denise.
But on July 9, they received a bill from the Internal Revenue Service for $34,603 in back taxes. The letter explained that the debt canceled by Wells Fargo upon foreclosure was subject to income taxes, as well as penalties and late fees. The couple had a month to challenge the charges.
For those who struggle to pay their bills, who watch their housing payments rise out of reach with their adjustable-rate mortgages, who lose a job or who fall victim to illness, losing one’s home can feel like hitting bottom. But one more financial indignity may await as the fallout from the great housing boom ripples across the United States.
“Getting that tax bill,” Mrs. Stout recalled, “my first thought was that I needed to see my family doctor to help me with my stress, because we had a big mortgage and other debt and then here came the I.R.S. saying we owe this.”
In other words, we’re here from Uncle Sam to tell you that even though you’ve lost your house, and you’re probably unemployed, we’re still gonna suck you dry based upon a definition of “income” that even the drafters of the 16th Amendment would’ve thought ridiculous.
Since Brad brought up the economy in this morning’s open thread, I figured I’d post this article which I originally posted this morning at Below The Beltway. I’m not an economist either, but when credit starts drying up, bad things can happen.
It’s not just the mortgage industry that’s being affected:
U.S. corporations for years operated by the maxim that you have to borrow money to make money. Now, the well of cheap loans is running dry.
The corporate bond market, the MasterCard for U.S. companies, has slowed to levels not seen since the recession of the early 1990s, as rising defaults among mortgage borrowers are causing lenders to question loans going to companies as well.
Without a healthy bond market, a swath of corporate activity is eliminated and the economy slows down. Firms stop borrowing to buy drilling equipment for coal mines, plants for manufacturing cars and land for expanding restaurant chains.
“It affects everything,” Michael Tarsala, an analyst for Thomson Squawk Box, said of the bond market. “It’s access to capital. It’s the lifeblood of a lot of big S&P companies. . . . They’ve been encouraged to borrow money to make money for so long, and now the spigot’s suddenly been shut off.”
Shares of Hertz dropped 6 percent last week after concerns that it will struggle to get low-rate loans, the key source of financing for rental-fleet purchases.
Farm-equipment maker Deere & Co. said last week that it is “putting the brakes” on production of construction vehicles.
Mortgage giant Countrywide Financial on Thursday had to tap its entire $11.3 billion emergency funding line after it could not get short-term loans, known as “commercial paper,” from the bond markets.
Home Depot is rethinking a plan to borrow money to buy back $22 billion worth of its stock. The turmoil in the debt markets might also scuttle the $10.3 billion sale of its wholesale supply business.
These are the things that recessions are made of.
Well, for those of you who follow the financial world, the market was all over the place last week. We saw the fed come in and try to inject $7B in liquidity, only to see the Dow drop 2% afterwards. We then saw a rate cut and a rally to close the week. Today has already been a rollercoaster. And everyone thinks that rate cut will be the saving grace and we’re clear sailing from here. I saw some pundits on the idiot box talking about how suddenly the financial stocks were “cheap”, and even heard someone say the Dow would be back to 14,000 within “weeks”. And all of them were laughing off the guy who said we have a lot farther to go before we hit bottom.
So what’s your prognosis? Both from a market standpoint and a general economy standpoint. Everyone knows I’m bearish over the next 5-10 years, but I’m an engineer, not a finance whiz, so I’d love to hear everyone else’s take.
And as an added question, what do you see our next President doing if the economy falters? You’re free to predict your own next President for that one.
The latest Gallup Poll is out, and it shows a change in the top of the Republican race, but not much else going on:
A new national Gallup Poll shows Mitt Romney moving into double digits and third place for the Republican presidential nomination. The former Massachusetts governor is at 14%, behind Rudy Giuliani (32%) and Fred Thompson (19%).
Romney was at 8% and fourth place in Gallup polls in July and early August. The latest, taken Aug. 13-16, shows Romney’s favorable rating jumping from 22% to 33% over the past two weeks, and his unfavorable rating dropping from 31% to 24%
Romney has clearly benefited from his win at the Ames Straw poll, to the point where he’s turned John McCain into a second-tier candidate. Ron Paul, meanwhile, remains stuck at the 3% ceiling that he hit earlier in the summer, with little sign that the Ames poll coverage had any impact on the campaign at all.
The full results can be found here, and show the following:
Rudy Giuliani — 32%
Fred Thompson — 19%
Mitt Romney — 14 %
John McCain — 11%
Mike Huckabee — 4%
Ron Paul — 3%
Duncan Hunter — 2%
Chuck Hagel — 1%
Sam Brownback — 1%
Tom Tancredo — 1%
Other — 1%
No Opinion — 11%
The race at the top is far from over, but the odds that anyone who isn’t already polling in double digits in a national poll will make it into the top three are pretty slim.
Just before midnight on August 19th, The Liberty Papers had its 500,000th visitor as registered by Sitemeter.
On behalf of my fellow contributors, I’d like to thank everyone who has read what we’ve written, whether you agree with it or not. We’re not here to promote any agenda other than the agenda of freedom, and open debate is always welcome.
Sunday’s Washington Post has an article which highlights the extent to which we’ve been fighting a losing war for 36 years:
Thirty-six years and hundreds of billions of dollars after President Richard M. Nixon launched the war on drugs, consumers worldwide are taking more narcotics and criminals are making fatter profits than ever before. The syndicates that control narcotics production and distribution reap the profits from an annual turnover of $400 billion to $500 billion.
And it’s not just criminal syndicates like the Mafia that are reaping the profits of the War on Drugs, terrorists are getting into the game too:
Poppies were the first thing that British army Capt. Leo Docherty noticed when he arrived in Afghanistan’s turbulent Helmand province in April 2006. “They were growing right outside the gate of our Forward Operating Base,” he told me. Within two weeks of his deployment to the remote town of Sangin, he realized that “poppy is the economic mainstay and everyone is involved right up to the higher echelons of the local government.”
Poppy, of course, is the plant from which opium — and heroin — are derived.
Docherty was quick to realize that the military push into northern Helmand province was going to run into serious trouble. The rumor was “that we were there to eradicate the poppy,” he said. “The Taliban aren’t stupid and so they said, ‘These guys are here to destroy your livelihood, so let’s take up arms against them.’ And it’s been a downward spiral since then.”
Despite the presence of 35,000 NATO troops in Afghanistan, the drug trade there is going gangbusters. According to the U.N. Office on Drugs and Crime (UNODC), Afghan opium production in 2006 rose a staggering 57 percent over the previous year. Next month, the United Nations is expected to release a report showing an additional 15 percent jump in opium production this year while highlighting the sobering fact that Afghanistan now accounts for 95 percent of the world’s poppy crop. But the success of the illegal narcotics industry isn’t confined to Afghanistan. Business is booming in South America, the Middle East, Africa and across the United States.
In other words, the War On (Some) Drugs is putting money into the hands of the people who would use it to buy weapons that would kill Americans, at home and abroad. The War On (Some) Drugs is corrupting the very regime we’d hoped to put in power to replace the Taliban. And, it’s sacrificing the liberties of American citizens.
Think about it this way. If drugs were legal, the Taliban and Al Qaeda wouldn’t be profiting from their illegal production. If they were legal, street gangs in New York, Los Angeles, and Chicago, wouldn’t be profiting from their distribution. And, if they were legal, the Fourth Amendment might just be a little more secure.
My co-bloggers and I have written several posts about the chaos that the dictatorship of Robert Mugabe has brought upon the African nation of Zimbabwe. Today, though, the London Telegraph reports that things have gotten so bad that the nation is four months away from complete chaos:
The economy of Zimbabwe is facing total collapse within four months, leaving the country facing a slide into Congo-style anarchy, The Sunday Telegraph has been told.
Western officials fear the business, farming and financial sectors may be crippled by Christmas, triggering a collapse of government control that could leave the country prey to warlords and ignite long-suppressed tribal tensions.
Speaking anonymously because of the sensitivity of the subject, one Western official said: “It is hard to be definitive, but probably within months, by the end of the year, we will see the formal economy cease to work.”
He added: “One of the great dangers in all this, if Mugabe hangs on for much longer, is that the country will slip from authoritarianism to anarchy, the government will lose control of the provinces, it will lose control of the towns and you will have a situation where the central authority’s writ no longer holds.”
Asked which other African nation Zimbabwe might end up resembling under a worst-case scenario, the official cited as an example the Democratic Republic of Congo (the former Zaire), beset for years by famine, civil war and inter-ethnic conflict.
Now, tell me, is there anyone with even a fundamental understanding of economics who could not have predicted that this is exactly what would have been the effect of Mugabe’s socialist claptrap ?
That is the rather shocking revelation that comes out of a fascinating article in today’s Washington Post:
Many administrations have sought to maximize their control of the machinery of government for political gain, dispatching Cabinet secretaries bearing government largess to battleground states in the days before elections. The Clinton White House routinely rewarded big donors with stays in the Lincoln Bedroom and private coffees with senior federal officials, and held some political briefings for top Cabinet officials during the 1996 election.
But Rove, who announced last week that he is resigning from the White House at the end of August, pursued the goal far more systematically than his predecessors, according to interviews and documents reviewed by The Washington Post, enlisting political appointees at every level of government in a permanent campaign that was an integral part of his strategy to establish Republican electoral dominance.
Under Rove’s direction, this highly coordinated effort to leverage the government for political marketing started as soon as Bush took office in 2001 and continued through last year’s congressional elections, when it played out in its most quintessential form in the coastal Connecticut district of Rep. Christopher Shays, an endangered Republican incumbent. Seven times, senior administration officials visited Shays’s district in the six months before the election — once for an announcement as minor as a single $23 government weather alert radio presented to an elementary school. On Election Day, Shays was the only Republican House member in New England to survive the Democratic victory.
Although Democrats in the House are talking about launching investigations into whether any of these efforts led to violations of the Hatch Act, which prohibits political activity by career government employees acting in their official capacity, on the surface it seems that everything Rove was doing was completely legal:
An invitation to a March 12, 2001, political briefing for federal officials — one of the Rove team’s earliest — framed the mission this way: “How we can work together.”
In practical terms, that meant Cabinet officials concentrated their official government travel on the media markets Rove’s team chose, rolling out grant decisions made by agencies with red-carpet fanfare in GOP congressional districts, and carefully crafted announcements highlighting the release of federal money in battleground states.
“We did that from Day One of the administration, strategically utilizing the president’s appointees to sell his agenda,” Drew DeBerry, the Agriculture Department’s liaison to the White House between 2001 and 2005, recalled in an interview last week.
To lead the charge, Rove had his “asset deployment team.” It comprised the chief White House liaison official at each Cabinet agency. The team members met — sometimes as often as once a month — to coordinate the travel of Cabinet secretaries and senior agency officials, the announcement of grant money, and personnel and policy decisions. Occasionally, the attendees got updates on election strategies.
White House officials say Rove had two basic rules: the first was to avoid meddling with grant and contract decisions made by career government employees; the second was to make sure they complied with the Hatch Act. “What was surprising was how adamant Karl and his whole team was that we involve the lawyers in our discussions to make sure we didn’t come up with things that ran afoul of the law,” DeBerry said. In March 2002, then-White House lawyer Brett Kavanaugh gave such a briefing on the “do’s and don’ts regarding your participation in politically related activities,” according to the invitation.
It may have been legal, but the fact that Rove and the White House were able to do this points out the extent to which spending by the Federal Government has become an exercise in political largess. Grants are made and money is spent not based on where it is needed, but based on where it would be most politically advantageous. In an era when the Federal Government as a budget in excess of $ 2 trillion and has its hands in virtually every corner of the economy, the impact of such spending decisions can be enormous, both politically and economically.
An effort like this shouldn’t be surprising to anyone. If anything, the Democrats are (1) kicking themselves for not thinking of stuff like this during the Clinton Administration and (2) taking notes so that they can do the same thing if, and when, they regain the White House.
As long as we have a Federal Government that is too big and spends too much, we’ll have guys like Karl Rove finding ways to manipulate its resources for political gain. We can either continue with the way things are, or fundamentally change the nature of government in the country and return it to what it was intended to be.
The choice is ours.
So says the New York Times:
Broad new surveillance powers approved by Congress this month could allow the Bush administration to conduct spy operations that go well beyond wiretapping to include — without court approval — certain types of physical searches on American soil and the collection of Americans’ business records, Democratic Congressional officials and other experts said.
Administration officials acknowledged that they had heard such concerns from Democrats in Congress recently, and that there was a continuing debate over the meaning of the legislative language. But they said the Democrats were simply raising theoretical questions based on a harsh interpretation of the legislation.
They also emphasized that there would be strict rules in place to minimize the extent to which Americans would be caught up in the surveillance.
The dispute illustrates how lawmakers, in a frenetic, end-of-session scramble, passed legislation they may not have fully understood and may have given the administration more surveillance powers than it sought.
Is it too much for them to read the laws before they pass them? No wonder why these guys have 29% approval.
Well, not the primaries, he won two straw polls. But there’s less here than meets the eye.
First let’s look at Alabama:
Tom Tancredo – 0 (0%)
Sam Brownback – 2 (.75%)
John McCain – 2 (.75%)
Mike Huckabee – 6 (2%)
Rudy Giuliani – 7 (3%)
Fred Dalton Thompson – 9 (3%)
Duncan Hunter – 10 (4%)
Mitt Romney – 14 (5%)
Ron Paul – 216 (81%)
That’s right 216 votes out of a total of 266 votes cast. At it’s not entirely clear that many of the other candidates were actively seeking support in this straw poll. While it is impressive to see organization at the grass roots level like this, it’s not an indication of anything significant.
Then there’s New Hampshire:
Ron – 208 (73%)
Romney – 26
Huckabee – 20
Tancredo – 8
McCain – 7
Cox – 5
Hunter – 5
Fred Thompson – 3
Giuliani – 3
Brownback – 1
208 votes out of 286 cast. And, other than Tancredo and Huckabee, Paul was the only candidate who showed up for this straw poll. As I said while discussing the results of the Iowa Straw Poll last week, polls like this are usually pretty meaningless and are almost never an accurate predictor of the winner of a particular primary, or the nomination.
So, I guess what I’m saying, is, don’t let stuff like this lead you to think something significant is happening. It might, but the evidence just isn’t there yet.
Let’s face it: Ron Paul doesn’t have a lot of new ideas. His foreign policy harkens back to the very first President, George Washington. George Washington, who gave up a dictatorship, given to him by the continental Congress to prosecute the revolutionary war, was crazy. Washington was the original “decider” and gave up all of that power so that a bunch of politicians could meet and draft the Constitution. That same tired old document to which Ron Paul keeps referring in speech after speech. Now, if Washington would have just kept his dictatorship, he could have written the Constitution himself.
Ron Paul may sound different then the current crop of Republican candidates, and the current President, but really he’s not very original. In fact, he sounds like Bob Taft who most of us wouldn’t know about but for Ron Paul’s incessant referrals to historical figures.
Ron Paul would turn back the clock on many original ideas put forth by past Presidents. Wilson’s income tax? Gone. The Iraq war and pre-emptive war, the two Bush additions to original Presidential thought gone as well. The department of Education? Homeland Security? Welfare? All Gone. No original idea would be spared from the boring veto pen of a Paul presidency.
And, you know, he’s right. What Ron Paul is saying isn’t any different from what Washington, Jefferson, and the rest of the Founders said. Heck, even they stole their ideas from John Locke.
Is this what it’s come to folks ? Are we libertarians really nothing more than a bunch of plagiarizers ?
If The New York Times is right, 2009 could go down in infamy as the year that America’s leaders took a knowing step toward economic suicide. That’s because a recent Times analysis piece declared that among Democratic presidential candidates, free trade had become a “third rail” issue. Support for trade deals is now considered beyond the pale.
So what if protectionism helped keep Europe stagnant for generations; so what if there is massive evidence that protecting jobs quickly becomes a drag on job growth; so what if U.S. trade policy has helped make us a much richer nation than ever. Democrats see votes to be won by lying about trade, and they’re not going to let the facts get in their way.
Their maligning of the North American Free Trade Agreement is a perfect example. Its adoption in 1993 helped kick off one of the great periods of sustained economic health in U.S. history. The resulting explosion in trade with Canada and Mexico was crucial to the creation of more than 17 million new jobs, resulting in a five-year stretch in which the jobless rate was under 5 percent every year for only the second time since World War II.
Yet to hear Democrats tell the story, NAFTA has actually been catastrophic – especially for those with manufacturing jobs. In fact, economist Daniel Ikensen reports that in 2006, “the manufacturing sector achieved record output, record sales, record profits, record profit rates and record return on investment.”
Please, please don’t confuse them with the truth.
Rudy Giuliani says he believes in school choice, but it’s not the kind of school choice you might think:
MERRIMACK, N.H. (AP) — Republican presidential hopeful Rudy Giuliani on Friday argued for taxpayer-funded vouchers for private elementary and secondary schools, saying school choice works for the nation’s colleges and universities.
People come from all over the world to attend college in the United States, Giuliani said at a town hall meeting in Merrimack, N.H.
“How is it that we have the best higher education in the world and a weaker K-through-12 system?” Giuliani said. “What’s the difference? Why does one operate so well and the other not nearly as well? American higher education is based on a quintessential American principle – choice.”
As mayor of New York, Giuliani backed vouchers for private and parochial schools in the face of opposition from his own schools chancellor.
“I’d give parents control over their children’s education,” Giuliani told the audience of about 150 people at a solar power products plant. “We’ve got to have competition operating. If we don’t do that, our education system is going to deteriorate.”
As Andrew Coulson points out at Cato@Liberty, Giuliani’s approach completely misses the point of what a true pro-choice position on education should be:
Real consumer choice and competition among schools aren’t just good ideas — they’re essential if we are ever going to see the kind of progress and innovation in education that we’ve seen in every other field over the past few centuries. But if Rudy is saying he’d back a federal school choice program, he’s got the right idea at the wrong level of government.
As someone who touts the merits of limited government, Giuliani should heed the Tenth Amendment, which reserves to the states and the people powers that they have not delegated to Washington in the Constitution. Last time I checked, neither the word “education” nor the word “school” appears anywhere in that document.
What Giuliani is saying is really no different from what any other Republican has said about education for the past 30 years or more. Heck 27 years ago, Ronald Reagan campaigned on the idea of eliminating the Department of Education.
And what have we gotten ?
Not less Federal involvement in education, but more, as epitomized by the George Bush-Ted Kennedy love child known as the No Child Left Behind Act.
Not a smaller Department of Education, but a larger one.
And, in the end, have we gotten better schools ? Of course not.
For more than 200 years, the government kept its nose out of education, and for good reason; (1) the Constitution gives Congress absolutely no authority over the subject, and (2) it’s impossible for Congressman and bureaucrats sitting in Washington, D.C. to design an education system that is going to work for every school in every town in America.
One can debate whether government should be involved in education at all, and I certainly think that the government monopoly on education should be eliminated, but to the extent it should exist, that involvement belongs at the local level.
Mr. Giuliani, read the Constitution.
LOS ANGELES — Anxious customers jammed the phone lines and Web site of Countrywide Bank and crowded its branch offices to pull out their savings because of concerns about the financial problems of the mortgage lender that owns the bank.
Countrywide Financial Corp., the biggest home-loan company in the United States, sought Thursday to assure depositors and the financial industry that both it and its bank were fiscally stable. And federal regulators said they weren’t alarmed by the volume of withdrawals from the bank.
At Countrywide Bank offices, in a scene rare since the U.S. savings-and-loan crisis ended in the early ’90s, so many people showed up to take out some or all of their money that in some cases they had to leave their names.
In west Los Angeles, a Countrywide supervisor brought in from another office served coffee to more than 25 people waiting calmly for their turn with the one clerk who could help them.
Bill Ashmore drove his Porsche Cayenne to Countrywide’s Laguna Niguel office and waited half an hour to cash out $500,000, which he then wired to an account at Bank of America.
“It’s because of the fear of the bankruptcy,” said Ashmore, president of Irvine’s Impac Mortgage Holdings, which escaped bankruptcy itself recently by shutting down virtually all its lending and laying off hundreds of employees.
“It’s got my wife totally freaked out,” he said. “I just don’t want to deal with it. I don’t care about losing 90 days’ interest, I don’t care if it’s FDIC-insured — I just want it out.”
In a statement, the bank said: “It is very important to remember that Countrywide Bank is well capitalized, with FDIC-insured deposits, and is one of the largest banks in the United States, with assets over $107 billion.” The bank added that it had significant access to outside capital and was still highly rated by debt-rating firms.
In the end, the bank is right. Countrywide Bank and Countrywide Financial are two separate entities and the bank is fundamentally a different entity from the mortgage lender. But banking has always been part-business and part-psychology, if people don’t have confidence in the bank that’s holding their money, no amount of FDIC insurance is going to stop them from taking it out. And, if enough people do that, then Countrywide Bank could find itself in the same position as it’s parent.
The near-collapse of the secondary and sub-prime mortgage markets claimed it’s first victim yesterday:
TUCSON, Ariz. — First Magnus Financial Corp., a national mortgage lender that is suspending operations, says it has laid off 99 percent of its nearly 6,000 employees nationwide and closed all of its more than 300 offices.
According to a notice filed with the state Friday, the Tucson-based company that originated home loans and then sold bundled loans into the secondary loan market expects to retain only about 60 of its employees.
First Magnus officials said a bankruptcy filing was possible.
On Thursday, First Magnus announced that it had stopped originating new loans and was suspending operations.
Company officials said the lender was caught in the credit liquidity crunch now causing a meltdown in the mortgage industry, even though First Mangus was not engaged in selling “sub-prime” mortgages that sparked the crisis in recent months.
This follows Thursday’s announcement by Countrywide Financial that it had tapped into a $ 11.5 billion line of credit to deal with liquidity problems brought on by the problems in the mortgage industry, and is clearly one of the reasons that the Federal Reserve Board decided yesterday to lower the discount rate by .5%.
Yesterday’s action by the Fed did turn the stock markets around, and it’s likely to help most of the mainstream banking industry deal with the short-term liquidity crisis that’s developed in the past several weeks, but the collapse of First Magnus and Countrywide’s liquidity problems should be a signal that we are far from the end of this particular story.
But here’s the thing to remember. What we’re seeing is not a “market failure” and it’s not a sign of some inherent defect in the banking system, it’s the “effect” part of a cause-and-effect scenario that started with the downturn in the housing market. For years, mortgage lenders were foolishly giving money to people who, foolishly, thought that interest rates we hadn’t seen since the 1960’s would be here forever and that they could afford to buy really expensive houses. When that proved not to be the case, people started defaulting on their mortgages and the lenders who gave them money started experiencing liquidity problems.
If anything else, this entire episode should remind everyone that the free market doesn’t prevent people from making foolish decisions, it just ensures that, in the end, there will be consequences paid.
In other words, There Ain’t No Such Thing As A Free Lunch.
WASHINGTON, Aug. 17 — It is not often that a local government tries to turn down $10 million in federal construction money.
But then it is not every day that an Alaska congressman surprises a Florida community with the gift of a highway interchange that just happens to abut the property of a major political fund-raiser.
The money for the interchange was the work of Representative Don Young, the Alaska Republican who was chairman of the transportation committee before the last election.
Officials of Lee County considered the project a low priority, environmental groups opposed it and the Republican congressman from the district never asked for it.
Why, you may ask, is a Congressman in Alaska giving your money, and mine, to a county way down in Florida ? Well, that’s where the story becomes very interesting:
[T]he interchange, on Interstate 75 at a place called Coconut Road, would be a boon to Daniel J. Aronoff, a Michigan real estate developer with adjacent property who helped raise $40,000 in donations to Mr. Young at a fund-raiser in the region shortly before Mr. Young inserted an earmark for the project in a transportation bill.
Adding to the intrigue, a researcher commissioned by Ms. Johnston said Mr. Young had added the earmark for the interchange to a transportation bill after both chambers of Congress had approved it, at a time Congressional aides were cleaning up the bill for President Bush’s signature.
None of this should be surprising, though. This is the same Congressman Don Young who, only a few weeks ago, said the following:
Rep. Don Young attacked his fellow Republicans on the House floor Wednesday, as he defended education funds allocated to his home state of Alaska.
“You want my money, my money,” Young stridently declared before warning conservatives that “those who bite me will be bitten back.”
And he’s also responsible for the Bridge To Nowhere.
Nonetheless, this is a particularly egregious example of Congressional corruption, and the people of Lee County should be applauded for saying no to Congressman Young’s “gift.”
I’ve written before about the increased use of street-level surveillance cameras in cities like New York, now it appears that the Federal Government is increasing the use of spy satellites over American territory:
The Bush administration has approved a plan to expand domestic access to some of the most powerful tools of 21st-century spycraft, giving law enforcement officials and others the ability to view data obtained from satellite and aircraft sensors that can see through cloud cover and even penetrate buildings and underground bunkers.
A program approved by the Office of the Director of National Intelligence and the Department of Homeland Security will allow broader domestic use of secret overhead imagery beginning as early as this fall, with the expectation that state and local law enforcement officials will eventually be able to tap into technology once largely restricted to foreign surveillance.
Administration officials say the program will give domestic security and emergency preparedness agencies new capabilities in dealing with a range of threats, from illegal immigration and terrorism to hurricanes and forest fires. But the program, described yesterday by the Wall Street Journal, quickly provoked opposition from civil liberties advocates, who said the government is crossing a well-established line against the use of military assets in domestic law enforcement.
Although the federal government has long permitted the use of spy-satellite imagery for certain scientific functions — such as creating topographic maps or monitoring volcanic activity — the administration’s decision would provide domestic authorities with unprecedented access to high-resolution, real-time satellite photos.
They could also have access to much more. A statement issued yesterday by the Department of Homeland Security said that officials envision “more robust access” not only to imagery but also to “the collection, analysis and production skills and capabilities of the intelligence community.”
The beneficiaries may include “federal, state, local and tribal elements” involved in emergency preparedness and response or “enforcement of criminal and civil laws.” The “tribal” reference was to Native Americans who conduct semiautonomous law enforcement operations on reservations.
Given the seeming public acceptance of surveillance cameras in public areas, I imagine that many people won’t have a problem with this. The problem, though, is that there is yet another erosion of the line between domestic law enforcement and the military first established in the Posse Comitatus Act.
As KipEsquire notes, the concept is really quite simple:
The sole purpose of a military, and of military hardware, is to protect American citizens from external threats. Combating internal threats is the role of domestic law enforcement. These two purveyors of government force must be kept separate to the greatest extent possible, and the government should be required to demonstrate the most urgent and desperate need before allowing that partition to be breached. Separation of army and police is at least as important a check on oppression as are separation of church and state, co-equal branches and the federal system.
Since September 11th, the line between the army and the police has become increasingly blurred. In some cases, this makes sense. The idea that the FBI and CIA barely shared intelligence about known terrorist threats — which, in and of itself, was the reason that the things we did know about the 9/11 hijackers before the attacks were never acted on — is, it seems absurd. If the CIA finds something out through foreign surveillance regarding a threat against the homeland, they should be allowed to share that information with law enforcement in hopes that the attack can be thwarted.
Turning the very hardware of the military and intelligence communities over to domestic law enforcement and, in effect, spying on the American public goes a step too far, and takes us further down the road that the Posse Comitatus Act was intended to divert us from.