Monthly Archives: May 2009

Nominal SSA/Medicare “Solvency” Dates Worsen Slightly; Journalists Apoplectic

As I’ve thoroughly explained here and here, the whole Social Security “trust fund” issue is a joke. It’s an accounting gimmick designed to push the supposed date of concern out into the future.

When does Social Security become “insolvent”? Well, let’s look at what the word means:

adjective
not solvent; unable to satisfy creditors or discharge liabilities, either because liabilities exceed assets or because of inability to pay debts as they mature.

Assets are a printing press, taxpayers, or the farce of a “trust fund” that contains nothing but promises to raid the printing press or taxpayers in the future. There is absolutely nothing tangible there. Nothing backs up the future liabilities of the system.

But the accounting gimmick is still there, and people still argue as to what year Social Security and Medicare will start running into trouble. They argue about this as a problem to be solved for the future, but those dates for both Social Security and Medicare are coming in a bit as the economy collapses:

The financial health of Social Security and Medicare, the government’s two biggest benefit programs, have worsened because of the severe recession, and Medicare is now paying out more than it receives.

Trustees of the programs said Tuesday that Social Security will start paying out more in benefits than it collects in taxes in 2016, one year sooner than projected last year, and the giant trust fund will be depleted by 2037, four years sooner.

Medicare is in even worse shape. The trustees said the program for hospital expenses will pay out more in benefits than it collects this year and will be insolvent by 2017, two years earlier than the date projected in last year’s report.

The trust funds — which exist in paper form in a filing cabinet in Parkersburg, W.Va. — are bonds that are backed by the government’s “full faith and credit” but not by any actual assets. That money has been spent over the years to fund other parts of government. To redeem the trust fund bonds, the government would have to borrow in public debt markets or raise taxes.

I credit this AP writer for pointing out the italicized text, and for hammering the point home later in the article. Very few journalists have understood or expressed the idea that the “trust fund” is not full of actual assets, only promises. This doesn’t mean the situation will be bad in another decade and only dire in the 2037 time frame; it means this situation is worsening every year.

To illustrate this [yet again], let’s pull out a business example. Let’s create a corporation, and we’ll call it Ubiquitous Spending & Aggravation, Inc. We’ll use USA, Inc. for short.

Let’s say USA, Inc. has three divisions. They have the General Products Division, the Depends Adult Diaper Business Unit, and the Viagra & Ensure Business Unit. As you’d expect, one is a general purpose spending group, another caters to the general needs of the elderly, and the final caters to the medical needs of the elderly.

So assume that the below are true:

Today:
USA, Inc. Today

So it looks to me like USA, Inc. is losing $20 Million per year, but two business units are profitable. Would you call that a healthy company? Would you invest in it?

Now, let’s project earnings into the future.

2017:
USA, Inc. 2017

So what’s happened here? The company is still losing $20M a year, and now the two previously profitable divisions are losing money, while the General Products division is actually earning money due to the CEO instituting his AMP – Advanced Mugging Policy. Does this now look like a healthy company? Does it now look investment-worthy? Unfortunately, you’re already invested, because their stock certificates are printed with the words “Federal Reserve Note”. And they’re going to be issuing new shares soon.

I’ve said it before and I’m sure I’ll say it again. This is all a shell game. As long as the government keeps borrowing money and the debt keeps going up, it doesn’t matter how the individual accounting entities are performing. They can raise payroll taxes, offset by a cut in the income tax, and if it’s overall revenue neutral, it doesn’t matter whether Social Security and Medicare are “saved”. About the only benefit to doing so would be that journalists could quit wasting ink arguing over whether 2016, 2017, 2137 or 2141 are the “important” milestones.

There are no “important milestones”. The feds are going to run a $1.8T deficit this year! The problems we have are far larger than a 4-year swing in projected “insolvency” of an entity that is completely insolvent right now. The only “assets” the Social Security administration has access to are the Federal Reserve printing press or our wallets, and you can be SURE they’re going to be reaching for both.

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Quote Of The Day

From Mark Calabria @ Cato:

Once the government becomes a majority owner of GMAC, its only a matter of time until its focus shifts from re-bulding its financial health to expanding the American Dream of auto-ownership.

Yes, citizen, step right up! You too can achieve your lifelong dream of owning an economical, gas-sipping Chevy Aveo!

No money down! All credit, no credit, OKAY! And for a limited time, bring your old clunker down and get up to $4,500 off!

Lieutenant Dan For President!

Hey, at least the Republicans are looking outside the box. But as Radley Balko notes, a commitment to ideas might be a little bit more important than papering over your problems with a fresh new face:

Nicolle Wallace, a top adviser to George W. Bush and John McCain’s presidential campaign, is adding a few names to the list of Republicans who might lead the GOP out of the wilderness.

Top among them? Actor Gary Sinise.

Wallace, writing on The Daily Beast, said she first heard the idea from a fellow Republican.

“The natural strengths that an actor brings to politics would come in handy to anyone going up against Obama in 2012,” she wrote. “We will need an effective communicator who can stand toe to toe with Obama’s eloquence.”

Was Wallace the same advisor that suggested Sarah “Wink, Wink!” Palin as a VP choice?

In all fairness, though, Sinise did get those Apollo 13 astronauts home safely. Credit where credit is due and all that…

At least it’s not Ricky Schroeder.

Cap And Tax

Coming from Ezra Klein

Via Dave Weigel and Matt Yglesias comes the depressing news that the vast majority of the public doesn’t know what cap and trade” is. And I don’t mean in the sense that they don’t understand the auctions. They have no idea what problem the policy actually refers to.

“Given a choice of three options, just 24 percent of voters can correctly identify the cap-and-trade proposal as something that deals with environmental issues. A slightly higher number (29 percent) believe the proposal has something to do with regulating Wall Street while 17 percent think the term applies to health care reform. A plurality (30 percent) have no idea.”

Sounds like a perfect time to properly articulate it to the American public. And to do this, I’m going to steal borrow an explanation I commonly here on my weekend listening from the Financial Sense News Hour (which I highly recommend you download or subscribe to the podcast — great stuff).

It’s not cap and trade, it’s Cap And Tax. It caps economic growth, and it taxes just about everything.

Park Service Honors Freedom’s Heroes By Stomping On Property Rights

The passengers of United Flight 93 were heroes. Scared, unsure of what the future held, and in the face of everything that passengers previously understood about hijackings, they knew that it was their duty to try to overcome the odds and take down the hijackers on that flight. They didn’t turn to a sky marshal, or rely on nonexistent “authorities”, they courageously got up and fought. While they were ultimately unsuccessful at bringing Flight 93 to a safe conclusion, and paid a heavy price for their efforts, they’ve saved countless lives through their actions. They saved those who were the intended target of Flight 93 that day. But more importantly, more than anything the TSA and airport checkpoints could have done, the simple knowledge that passengers won’t sit idly by and acquiesce to hijacker’s demands are IMHO the reason that we haven’t seen an attempted hijacking since 9/11.

I would love to see the courage and bravery of those passengers memorialized. But not like this. Not at the cost of freedom:

The government will begin taking land from seven property owners so that the Flight 93 memorial can be built in time for the 10th anniversary of the 2001 terrorist attacks, the National Park Service said.

In a statement obtained by The Associated Press, the park service said it had teamed up with a group representing the victims’ families to work with landowners since before 2005 to acquire the land.

“But with few exceptions, these negotiations have been unsuccessful,” said the statement.

Landowners dispute that negotiations have taken place and say they are disappointed at the turn of events.

“We always prefer to get that land from a willing seller. And sometimes you can just not come to an agreement on certain things,” park service spokesman Phil Sheridan said.

And when government cannot come to an agreement, they resort to their final tool: the barrel of a gun. What they want, they’ll simply take, if it comes down to it. Sure, they offer “just compensation”, but if they’re the ones deciding what is “just” without you able to refuse, they can give you whatever pittance they choose. All this to meet an arbitrary 10-year deadline. They claim it’s necessary to move this quickly because they can’t stand the idea of not completing this in time for 9/11/2011. Anyone want to take odds on them actually completing in time, even if they do get the land quickly?

The passengers of Flight 93 stood up to defend themselves and the intended victims of the intended crash site. They also stood up to defend the freedom we cherish in America from those who would attack it. They deserve to be honored, but we need not sacrifice the freedom that they were trying to protect in doing so.

Hat Tip: Positive Liberty (via email from reader Tom R)

Southern Baptists condemn torture, including waterboarding

In a move very surprising to this veteran of far too many southern talk radio programs where I was the one condemning torture to a hostile audience, the Southern Baptist Convention’s Ethics and Religious Liberty Commission has just condemned torture.

“I don’t agree with the belief that we should use any means necessary to extract information,” said SBC Ethics and Religious Liberty Commission president Richard Land. “I believe there are absolutes. There are things we must never do under any circumstances.”

Furthermore, they clearly indicated that waterboarding is indeed an act of torture:

“For me the ultimate test is: Could I, in good conscience, do whatever I am authorizing or condoning others to do? If not, then I must oppose the action. If I could not waterboard someone—and I couldn’t—then I must oppose its practice.”

Land said he considers waterboarding to be torture because the definition of torture includes the determination of whether a procedure causes permanent physical harm, noting he is unable to “separate physical from psychological harm” in this instance. The practice contravenes an individual’s personhood and their humanity, he said.

“It violates everything we believe in as a country,” Land said, reflecting on the words in the Declaration of Independence: that “all men are created equal” and that “they are endowed by their Creator with certain unalienable Rights.”

“There are some things you should never do to another human being, no matter how horrific the things they have done. If you do so, you demean yourself to their level,” he said.

“Civilized countries should err on the side of caution. It does cost us something to play by different rules than our enemies, but it would cost us far more if we played by their rules,” Land concluded.

To begin, I’d like to applaud the Southern Baptist Convention for taking this stand.  Based on my anecdotal observations, this won’t be popular with the let’s-waterboard-them-another-hundred-times crowd.  However, some of their members may now think through the issue or gain the courage to publicly oppose acts of torture.

While this condemnation is clearly many days late, it’s not a dollar short.  Perhaps it’s time to welcome the Southern Baptists into the fold of people who like to have rational and reasonable debate over issues of a political nature.  Or perhaps not.

Kevin Drum Accuses Republicans Of Being Cult

This is funny: Kevin Drum, approvingly quoting Bill Schneider and then going off on his own tangent:

“The Republicans aren’t a party, they’re a cult.”

Well, today’s GOP does seem to check most of the boxes in the International Cultic Studies Association’s “Characteristics Associated with Cultic Groups.” Except for this one: “The group is preoccupied with bringing in new members.” That doesn’t seem to be much of a priority for them these days.

So I clicked his link… First characteristic:

The group displays excessively zealous and unquestioning commitment to its leader and (whether he is alive or dead) regards his belief system, ideology, and practices as the Truth, as law.

Okay, despite the fact that the Republicans are about as internally fractured right now as Arlen Specter’s political power, maybe you can make the claim that the Republicans do this with Reagan.

But you can certainly claim that RIGHT NOW, the Democrats do this with Obama. Notice how any attack on his policies is responded to as if it’s a personal attack on Obama?

Blogging is known as a medium that allows a writer to fire off what’s in his brain right now, without the filter of an editorial board or the delay of the news cycle. Unfortunately for Kevin Drum, it allows us to see straight into the muddled contents of his mushy, mushy brain. Someone’s been watching too much hulu, I think.

Quote Of The Day

From the AP, dated yesterday after the jobs report came out:

Definite signs that business and industry have turned the corner from the temporary period of emergency that followed deflation of the speculative market were seen today by President Obama. The President said the reports to the Cabinet showed the tide of employment had changed in the right direction.

Oh, wait… That’s not right. Let’s correct it:

January 21, 1930
“Definite signs that business and industry have turned the corner from the temporary period of emergency that followed deflation of the speculative market were seen today by President Hoover. The President said the reports to the Cabinet showed the tide of employment had changed in the right direction.” – News dispatch from Washington.

Have an irrationally exuberant weekend, folks!

Truth Hurts… Ignorance Hurts Worse

I disagree with Schiff on hyperinflation; but we’re DEFINITELY going to be seeing significant inflation. I’m thinking 1979 levels or so.

Note: Schiff is also a firm believer in the inherent value fallacy; which is just that, a fallacy. There is no such thing as a stable currency, because nothing has inherent value. All value is circumstantial.

Fiat currency is a horrible thing, but the solution is NOT specie currency, which has its own issues (which can be just as bad as those of fiat currency). The solution is a global free currency market, without government value setting by fiat, OR by an arbitrary commodity standard… or any other arbitrary standard for that matter.

Let the market decide what the currency of a nation is worth, and it will seek its natural level AT ANY GIVEN MOMENT. Let the markets set their own confidence level, based on whatever a currency represents, is backed by, what its purchasing power is… whatever the market values.

We are approaching the technology basis that will allow this, though we aren’t there yet. Universal realtime international communications are a pre-requisite for an efficient currency market. Currently, currency markets present significant arbitrage opportunities based on asymmetric information, communications lag, and government distortion.

Unfortunately, now that governments have the power of fiat currency, they will absolutely refuse to give it up.

We’ve got maybe a 24 month window of slight recovery and plateauing of prices; then we doublehump this, with real economic contraction spurred on by the devaluing dollar, rapid inflation; and concomitant high interest rates, and tighter credit (you think credit is tight now? Not even close).

If you want to buy a house, do it 18-24 months from now on a fixed rate mortgage; and plan on living there the rest of your life. Inflation is going to wipe out a significant amount of your debt anyway.

… Presuming the Chinese don’t bail out on us entirely, and kick this off SIX months from now, instead of 24 months from now.

I am a cynically romantic optimistic pessimist. I am neither liberal, nor conservative. I am a (somewhat disgruntled) muscular minarchist… something like a constructive anarchist.

Basically what that means, is that I believe, all things being equal, responsible adults should be able to do whatever the hell they want to do, so long as nobody’s getting hurt, who isn’t paying extra

Quote of the Day: Empathy vs. The Rule of Law

President Obama says that he wants to nominate a Supreme Court Justice who has “empathy” as opposed to a jurist who makes decisions based on “some abstract legal theory.” Not surprisingly, I’m not the only one troubled by his selection criteria. Thomas Sowell has written an excellent 3 part series “Empathy” Versus Law” (Part 1, Part 2, Part 3).

Of all of the many quotable passages to choose from, I think this one captures the main point of why we should be concerned:

That President Obama has made “empathy” with certain groups one of his criteria for choosing a Supreme Court nominee is a dangerous sign of how much further the Supreme Court may be pushed away from the rule of law and toward even more arbitrary judicial edicts to advance the agenda of the left and set it in legal concrete, immune from the democratic process.

Would you want to go into court to appear before a judge with “empathy” for groups A, B and C, if you were a member of groups X, Y or Z? Nothing could be further from the rule of law. That would be bad news, even in a traffic court, much less in a court that has the last word on your rights under the Constitution of the United States.

Appoint enough Supreme Court justices with “empathy” for particular groups and you would have, for all practical purposes, repealed the 14th Amendment, which guarantees “equal protection of the laws” for all Americans.

Richard Posner — The Bailout Saved The Economy!

Well, in my own mind, only until this bear market rally tanks, but I’ll get to that later. But here he goes:

The bailout worked. At a relatively modest, though by ordinary standards very large ($17 billion), cost to the government, the auto companies were kept out of bankruptcy until the acute psychological phase of the economic crisis had passed. Last December, and indeed until sometime in March, government officials, the media, and the public were understandably fearful that the economy was in free fall and might land somewhere near where the economy had landed in March 1933 (25 percent unemployment, output 34 percent below the GDP trend line, 18 percent deflation). Such a fear can constitute a self-fulfilling prophecy, because by causing consumers and producers to hoard cash rather than to spend, it can push the economy into a very deep downward spiral. That fear has now abated.

He’s following what some might call the “voodoo magick” economics, what Reason is alluding to is the “animal spirits” economics, and the general world knows as Keynesian economics. Centering around the understanding that we live in a credit-based economy entirely resting on fiat currencies and fractional reserve banking, the old question of MV=Py becomes very important. Posner is suggesting that because V was already in trouble, the bankruptcies in October/November of last year would have been devastating, but that today they’re much less significant.

He’s suggesting that the economy is based on confidence (as it’s been said all confidence games are), and that to allow the firms to go bankrupt when confidence is low is far worse than allowing it to happen when confidence is high. And it makes sense, if we’re in a recovery. But if we’re in a bear market rally, as I believe, and if you accept some of the negative impacts of the terms of the bankruptcy packages, I think the harm is yet to be felt.

So where are we? Do we take a DJIA that’s rallied to 8400 points from the March lows, largely on the backs of a financial sector rebound, as a sign of a recovery? I doubt the news from the Stress Test that banks need to recapitalize to the tune of $75B should be seen as good. In fact, Bill King writing for The Big Picture blog suggests that this is playing out according to Wall Street & Geithner’s plan, but that once they get a hold of that capital, the next shoe drops:

It is crystal clear that the scheme over the past two months has been to drive financial stock prices higher so banks could raise capital. Mission accomplished!

The Fed and the solons have accomplished the task of providing an environment, with ample patsies, for banks to raise needed capital. But once banks have procured that capital, watch out.

If Wells Fargo needs to raise $15B, it is far cheaper to raise it at $25 then $7. So once again solons via crony capitalism and smiley-faced fascism utilize massive rigs with taxpayer funds to bailout the elites.

Stocks are at their most overbought level since September 2007 as measured by the Commodity Channel Indicator (moment indicator). And S&P 500 stocks are at their most overbought level since 2006 as measured by percentage of stocks above 50-day moving averages (92%, 460 S&P 500 per Bloomberg).

So where are we headed from here? I can’t say, but look at something that Posner said:

…government officials, the media, and the public were understandably fearful that the economy was in free fall and might land somewhere near where the economy had landed in March 1933 (25 percent unemployment, output 34 percent below the GDP trend line, 18 percent deflation).

Now, count the months from October of 1929 to March of 1933, and then count the number of months from October of 2008 until now. If this thing is going to get worse to 1933 levels, it’s unreasonable to think it would have occurred this quickly. Oh, and while we’re at it, look at what the Dow did over the beginning of that period:

DJIA

Gee, what does that look like, starting in Nov 1929 and ending in April 1930? A bear market rally.

And despite the common narrative, all during Herbert Hoover’s administration he was desperately trying to find ways and interventions into the economy that would stop the slide. He was rewriting the rules of the game surprisingly similar to the way that Obama is today, showing all investors that their gains or losses were due to their ability to play the political markets. He was disincentivizing investment by constantly changing the rules, and thereby the odds of success in any given market play.

So Barack Obama’s policies are antithetical to investment, antithetical to sound business planning, and ensured to kneecap any attempt at recovery that our economy hopes for. If you’re looking for reasons to worry about the future of this economy — looking for justification that this is not a recovery and a bear market rally — you simply have to combine a few facts:

  1. Fundamentally, the bull market of the late 90’s and early 00’s was partly due to an extraordinary increase in financial system leverage.
  2. This bull market was pumped up by fractional reserve banking and a completely unsustainable rise in asset prices that fueled the above leverage.
  3. We are now at a point where leverage is unwinding and asset prices are still declining.
  4. Government props have supported a rise in financial sector stocks, but fundamentally the stress tests prove that banks need to raise capital based on even mild financial shocks.
  5. Any continued weakness in the economy will skewer this current rally.
  6. Asset prices, foreclosures, and jobs data show no signs of getting better, only (at best) signs of slowing their decline.
  7. Obama’s financial system meddling (auto bailout, TARP shenanigans, etc) is sure to provide more weakness than expected.

Richard Posner, and all the other cheerleaders, believe that if only they keep confidence high, all the fundamental problems in the economy will dissipate and we’ll start a recovery. But the fundamentals aren’t going away. The economy is over-leveraged just like it was in the late 1920’s and early 1930’s, and that leverage must unwind before we can reach a recovery, a recovery based on saving and investment rather than spending and debt. Posner thinks the collapse has been avoided by slowing down the decline, but in essence we’ve only delayed and extended the inevitable.

Ashton Lundeby Update: Less Than Meets The Eye

Earlier this week, I wrote about the story of Ashton Lundeby — a 16 year-old kid being held in Indiana in connection with an alleged bomb threat — and his mother’s allegations that he son was being detained pursuant to the PATRIOT Act.

Well, it seems that there is much less to this story than there seemed to be at first blush.

First of all, it’s quite apparent that the PATRIOT Act is not even involved in this case. Lundeby was arrested under a 70 year old law that makes it a Federal crime to use telecommunications equipment to make interstate bomb threats.

Second, it’s quite obvious that Lundeby is not the innocent 16 year-old that his mother made him out to be in initial reports:

A 16-year-old North Carolina boy arrested for allegedly making a bomb threat against Purdue University had a secret identity as a superstar in an unusual online subculture — one dedicated to making prank phone calls for a live internet audience, his mother admitted Thursday.

“I heard the prank phone calls he made,” says Annette Lundeby of Oxford. “They were really funny prank phone calls…. He made phone calls to, like, Walmart.”

Lundeby confirmed that her son was known online as “Tyrone,” a celebrity in a prank-calling community that grew late last year out of the trouble-making “/b/” board on 4chan. Using the VOIP conferencing software Ventrilo, as many as 300 listeners would gather on a server run by Tyrone to listen to him and other amateur voice actors make often-crude and racist phone calls, some of which are archived on YouTube. The broadcasts were organized through websites like PartyVanPranks.com.

A former fan of Tyrone’s work helped lead the police to Lundeby’s son after the boy allegedly moved beyond pranks this year and began accepting donations from students eager to miss a day of school. In exchange for a little money, Tyrone would phone in a bomb threat that would shutter the donor’s school for a day.

“People would pay about five dollars, and they get to submit a number,” says Jason Bennett, a 19-year-old college student in Syndey, Australia. “It was getting way out of hand.”

Lundeby admits that her son received donations for his prank phone calls, but denies that he made bomb threats. She says her son was with her, coming home from church, at the time of the February 15 phone call that summoned a bomb squad and evacuated the mechanical engineering building at Purdue University in Indiana.

Bennett didn’t hear the Purdue call, but he says he heard Tyrone admit to that bomb threat later, and decided enough was enough. He contacted university police and began helping them get the goods on “Tyrone.”

Now this doesn’t mean that Lundeby is guilty of the charges against him, but these reports do cast serious doubts on his mother’s credibility, most especially on her assertion that her son is a victim of overzealous use of the PATRIOT Act. So, you know, sorry for jumping the gun on this story because, as Rick Sincere says, it’s pretty clear we’ve been punked.

Colorado Senate Defeats Death Penalty Repeal by 1 Vote

Like déjà vu but this time in reverse, the Colorado Senate voted down the bill which would repeal the death penalty and use the savings to fund cold case homicide investigations by a single vote*. Though the Senate stripped out the death penalty provision just 15 minutes before the scheduled vote on Monday, the conference committee decided to put the death penalty back on the table to force each Senator to directly say “yea” or “nay” on the controversial issue. All 14 Republicans (mostly “pro-life” Republicans to be sure) plus 4 Democrats decided once again that its perfectly okay for the State of Colorado to kill.

Of the 4 Democrats who joined the majority, Mary Hodge who is opposed to the death penalty was quoted in The Denver Post as saying “It’s the hardest vote I’ve ever taken.” She went on to explain that she voted against the bill because she didn’t like how it conflated the issues of the death penalty and cold case funding.

Well congratulations Mary, Mary, quite contrary! Thanks to your vote the death penalty will remain. I hope you can sleep well at night knowing that you missed an opportunity to repeal this repugnant punishment because you felt the issues of the death penalty and cold case funding “are not connected.”

I beg to differ.

Colorado has limited resources to dedicate to criminal justice; the death penalty consumes nearly $1 million of those resources annually**. The victims of unsolved homicides have just as much right to bring their killers to justice as those whose killers have been convicted.

Most disappointing of all is the idea that far too many people have far too much faith in their government and their criminal justice system despite its many flaws.

» Read more

Snort! Guffaw! Snicker! LOL!

I don’t like getting into the political horse-trading. I frankly care very little about what happens in Congress, because I think they’re all a bunch of crooks and I want them all to go screw themselves.

But funny is funny:

The Democratic leader in the Senate promised Sen. Arlen Specter he would retain his seniority when he jumped from the Republican to the Democratic Party, Specter said on Wednesday, but faced “pushback” from other Democratic senators.

The full Senate voted Tuesday to strip Specter of his seniority, dropping him to the bottom of the pile on every committee he sits on.

“Sen. [Harry] Reid said that I would maintain my committee assignments and that my seniority would be established as if I’d been elected in 1980 as a Democrat,” the long-serving Pennsylvania senator told CNN’s Dana Bash.

Reid’s spokesman, Jim Manley, said, “There was no miscommunication.”

Yep, there was no miscommunication. Reid intended to lie all along.

Is there ANY chance this will end with a duel of pistols at high noon? Pretty please??

Hat Tip: dispatches from TJICistan

Bundling The Banks Into A TARP

Geithner's Treasury Grabs A Bank
Back in October, the banks appeared to be in very deep trouble. Such deep trouble that they were forced to enter a deal with the Devil decided to run to the government for assistance. But they were shocked — SHOCKED! — when the government starting attaching a whole bunch of regulations and conditions to the deal after the fact.

So they want to return the money. And the government won’t take it back without a fight:

The bottom line for the banks is that if they want out of TARP, they have to be able to withdraw from all the other sources of emergency public support that the government has given them. If they want the support, then they have to agree to the conditions and regulations that come with TARP. No subsidies without regulations. To put it into more common terms, banks can decide to break up with the government or they can decide to stay together. But they don’t get to be friends with benefits.

Imagine the outcry from utility regulators if you signed up for the sports package with your cable company because you wanted, say, SpeedTV. After a while, you grow tired of the programming and all the extra cost because you don’t think you need to pay for TVG and all the other channels, so you call the company and try to cancel the sports package. And they tell you that if you want to quit the sports package, you’ll have to cancel cable, internet, and phone service altogether — you can’t have just one!

I think Stuart Varney lays it out quite well (c/o Michael Wade @ QandO):

I must be naive. I really thought the administration would welcome the return of bank bailout money. Some $340 million in TARP cash flowed back this week from four small banks in Louisiana, New York, Indiana and California. This isn’t much when we routinely talk in trillions, but clearly that money has not been wasted or otherwise sunk down Wall Street’s black hole. So why no cheering as the cash comes back?

My answer: The government wants to control the banks, just as it now controls GM and Chrysler, and will surely control the health industry in the not-too-distant future. Keeping them TARP-stuffed is the key to control. And for this intensely political president, mere influence is not enough. The White House wants to tell ‘em what to do. Control. Direct. Command.

I’ll have a more detailed post coming up when I get around to it, but I think I, too, was naive. I expected more from Obama. I honestly believed that he was actually trying to become President because he wanted to improve outcomes, not just drive the train. I was sure, of course, that Obama was going to be pointing us the wrong direction, but I thought he was at least going to try to do so carefully, efficiently, and taking input from all sides before doing so. In short, I knew I wasn’t going to like him, but I thought he was going to be reasonable.

Not so much. He wants to control the financial sector. He doesn’t just want to fix it, he wants to remake it according to his own ideology. He doesn’t want them to succeed without government; he wants them to be dependent on government. I thought Bush was an exceptionally authoritarian President, but it seems that he was just laying the groundwork for Barack Obama.

The Feds have the banks in the grasp of their talons and they’re squeezing. And by god they won’t let up until submission is complete.

Chrysler files for protection against taxpayers

Chrysler will not pay the $7+ billion it owes to taxpayers:

Chrysler LLC will not repay U.S. taxpayers more than $7 billion in bailout money it received earlier this year and as part of its bankruptcy filing.

This revelation was buried within Chrysler’s bankruptcy filings last week and confirmed by the Obama administration Tuesday. The filings included a list of business assumptions from one of the company’s key financial advisors in the bankruptcy case.

Some of the main assumptions listed by Robert Manzo of Capstone Advisory Group were that the Treasury would forgive a $4 billion bridge loan given to Chrysler in the closing days of the Bush administration, a $300 million fee on that loan, and the $3.2 billion in financing approved last week by the Obama administration to fund Chrysler’s operations during bankruptcy.

An Obama administration official confirmed Tuesday that Chrysler won’t be repaying the loans, though a portion of the bridge loan may be recovered by Treasury from the assets of Chrysler Financial, the former credit arm of the automaker which is essentially going out of business as part of the reorganization.

Are you the least bit surprised by this? And as if this weren’t bad enough, Chrysler will get more taxpayer money:

The Obama administration official said that other money being made available to Chrysler, such as the $4.7 billion that will go to the company as it exits bankruptcy, will be a loan that the government expects to be paid back. In addition, that loan will be secured by company assets, unlike the previous loans to Chrysler.

According to the filing, the company’s financial advisor also foresees the need for an additional $1.5 billion loan from the Treasury Department by June 30, 2010.

And I’m sure they’re going to pay it back. How does the saying go? “Fool me once, shame on you; Fool me twice, shame on me.”

Heroes of the Day: The Second Amendment and a Georgia college student

secondamendmentAccording to early reports, an armed student in College Park, GA seems to have saved the lives of  a bunch of his friends.  It’s pretty clear from the reporting so far that he kept a bunch of them from being robbed and raped.  Here’s the scoop:

Bailey said he thought it was the end of his life and the lives of the 10 people inside his apartment for a birthday party after two masked men with guns burst in through a patio door.

“They just came in and separated the men from the women and said, ‘Give me your wallets and cell phones,’” said George Williams of the College Park Police Department.

Bailey said the gunmen started counting bullets. “The other guy asked how many (bullets) he had. He said he had enough,” said Bailey.

That’s when one student grabbed a gun out of a backpack and shot at the invader who was watching the men. The gunman ran out of the apartment.The student then ran to the room where the second gunman, identified by police as 23-year-old Calvin Lavant, was holding the women.

“Apparently the guy was getting ready to rape his girlfriend. So he told the girls to get down and he started shooting. The guy jumped out of the window,” said Bailey.

A neighbor heard the shots and heard someone running nearby. “And I heard someone say, ‘Someone help me. Call the police. Somebody call the police,’” said a neighbor.

The neighbor said she believes it was Lavant, who was found dead near his apartment, only one building away.

Bailey said he is just thankful one student risked his life to keep others alive.“I think all of us are really cognizant of the fact that we could have all been killed,” said Bailey.

One female student was shot several times during the crossfire. She is expected to make a full recovery.

An immediate question is why there are only two news stories (at this moment)  covering the issue so far.  If the thugs had been successful in their plans, the story would be headlined all over the national news.  Why aren’t they covering the hero who stopped a potential travesty?

Also, I still want to know why Sarah Brady and most Democrats keep trying to pass laws which would have made it impossible for these kids in Georgia to defend themselves.

Cost of a bullet: $0.41

Cost of a trial and incarceration: in the millions

Message sent to community when citizens are armed and ready to defend themselves: PRICELESS!

The Latest Victim Of The PATRIOT Act: A 16 Year-Old Kid

Remember when we were told in the wake of the September 11th attacks that the extraordinary surveillance and investigative powers being granted to the Federal Government were intended solely to protect us from terrorist attacks ?

Well, perhaps someone can explain exactly how a 16 year-old in North Carolina constitutes a terrorist threat:

Oxford, N.C. — Sixteen-year-old Ashton Lundeby’s bedroom in his mother’s Granville County home is nothing, if not patriotic. Images of American flags are everywhere – on the bed, on the floor, on the wall.

But according to the United States government, the tenth-grade home-schooler is being held on a criminal complaint that he made a bomb threat from his home on the night of Feb. 15.

The family was at a church function that night, his mother, Annette Lundeby, said.

“Undoubtedly, they were given false information, or they would not have had 12 agents in my house with a widow and two children and three cats,” Lundeby said.

Around 10 p.m. on March 5, Lundeby said, armed FBI agents along with three local law enforcement officers stormed her home looking for her son. They handcuffed him and presented her with a search warrant.

“I was terrified,” Lundeby’s mother said. “There were guns, and I don’t allow guns around my children. I don’t believe in guns.”

Lundeby told the officers that someone had hacked into her son’s IP address and was using it to make crank calls connected through the Internet, making it look like the calls had originated from her home when they did not.

Her argument was ignored, she said. Agents seized a computer, a cell phone, gaming console, routers, bank statements and school records, according to federal search warrants.

“There were no bomb-making materials, not even a blasting cap, not even a wire,” Lundeby said.

And yet her son remains in custody in a juvenile facility in Indiana and the government doesn’t even feel obligated to explain the charges against him:

Passed after the Sept. 11, 2001, terrorist attacks on the U.S., the Patriot Act allows federal agents to investigate suspected cases of terrorism swiftly to better protect the country. In part, it gives the federal government more latitude to search telephone records, e-mails and other records.

“They’re saying that ‘We feel this individual is a terrorist or an enemy combatant against the United States, and we’re going to suspend all of those due process rights because this person is an enemy of the United States,” said Dan Boyce, a defense attorney and former U.S. attorney not connected to the Lundeby case.

(…)

Boyce said the Patriot Act was written with good intentions, but he said he believes it has gone too far in some cases. Lundeby’s might be one of them, he said.

“It very well could be a case of overreaction, where an agent leaped to certain conclusions or has made certain assumptions about this individual and about how serious the threat really is,” Boyce said.

Gee, do you think ?

Here’s a report from a local television station in North Carolina about the incident:

Rick Sincere, whose post early this morning pointed me to this horrendous story, sums up all of this up quite nicely:

In addition to incompetences like this, government law enforcement agencies are extremely shy about apologizing for mistakes. (They almost never do so, unless by court order.) So Ashton Lundeby, no matter how strong the case for his innocence is, will likely be kept in jail for years as the government tries out new and more ridiculous charges against him, until they find one that sticks or they wear Ashton down so thoroughly that he confesses to crimes he did not commit (and probably did not occur).

Welcome to the new America, my friends.

C/P: Below The Beltway

Quote Of The Day

From David Rittgers, Cato@Liberty:

As I have said before, the quickest way to create an insurgent is to burn a man’s livelihood. This may be a competent counternarcotics tactic, but it is an epic failure as a counterinsurgency strategy. We can fight a war against the Taliban or we can fight the war on drugs, but we can’t do both in the same place at the same time.

Internally, libertarians can debate the merits of the Afghanistan conflict and whether the end result will be a safer or less safe America. My view is that if done properly, counterinsurgency operations can be successful over the long term, but it is situationally dependent whether they’re worth the effort.

What I think we can all agree on is that the drug war is unwinnable, and that fighting the drug war in Afghanistan is a mutually exclusive goal with our counterterrorism efforts there. If we have to give up one goal, I suggest the drug war.

UPDATE: Edited post to correctly attribute quote to David Rittgers, not Doug Bandow. My mistake and my apologies to David for the error.

Last Minute Senate Rewrite Jeopardizes Colorado Death Penalty Repeal

Only 2 weeks ago the Colorado House passed H.B. 1274, a bill which would repeal the death penalty and use the savings to solve homicide cold cases, by a single vote. Foes of the bill in the Senate stripped out the death penalty repeal provisions and added an alternative source of funding to satisfy those who support additional cold case spending: a $2.50 surcharge on individuals convicted of a crime. According to The Denver Post, the rewrite happened a full 15 minutes before the Senate was scheduled to vote and with only a few days left in the current legislative session.

The Denver Post article goes on to explain how the rewrite puts the death penalty repeal in doubt:

Sponsor Sen. Morgan Carroll, D-Aurora, blamed the amendment on some colleagues’ anxieties over the controversial topic of repealing the death penalty and said the maneuver leaves little time to work out compromises and no time for public hearings or fiscal analysis of the new draft.

“Some people are looking for ways to avoid voting on the core issue,” Carroll said. “This is a totally different bill that’s not had a public hearing. It’s gamesmanship that makes a mess of public policy.”

Carroll had the backing of a broad coalition of groups — including the families of victims of unsolved murders, whose painful stories helped push the idea that ending the death penalty could be used as a funding source for cold-case investigations.

With their needs potentially met, however, the remaining death-penalty foes in the coalition could lose one of their most poignant and persuasive voices.

I think Sen. Carroll is mostly right. Her colleagues in the Senate are probably thinking more about the 2010 election than any principle regarding the death penalty. With the rewritten provisions to fund the cold case unit and taking the death penalty off the table, her friends in the Senate can avoid making a controversial vote and not have to worry about angering voters.

I’m sure that Gov. Bill Ritter (D) who is also up for re-election in 2010 is most relieved of all about these developments. So far, Gov. Ritter has managed to remain on the fence on the issue with his finger firmly in the air to determine which way the political winds are blowing. Perhaps the only clue as to where he stands – when Ritter was the Denver D.A. he unsuccessfully pursued the death penalty in 7 cases.

Perhaps the “limited resources” and economic arguments was not the best strategy to pursue after all. While these are, in my view, persuasive arguments they should be secondary considerations to the real moral and legal question: should the state have the right to kill? This is the question that far too many politicians do not have the courage to answer.

The article continues:

Carroll said there is too great a risk of wrongful conviction to chance an irreversible penalty such as death.

“How many colleagues do we have in the Senate who believe the state or the government is infallible?” she asked.

As I have written on many occasions, infallible the government is not. This is especially true for our broken criminal justice system.

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