Unemployment rates were higher in February than a year earlier in all 372 metropolitan areas, the Bureau of Labor Statistics of the U.S.Department of Labor reported today. Fourteen areas recorded joblessrates of at least 15.0 percent, while 20 areas registered rates below 5.0 percent. The national unemployment rate in February was 8.9 per-cent, not seasonally adjusted, up from 5.2 percent a year earlier. Among the 310 metropolitan areas for which nonfarm payroll data wereavailable, 270 areas recorded over-the-year employment decreases, 37reported gains, and 3 had no change.
...with particularly bad news for California:
El Centro, Calif., recorded the highest unemployment rate, 24.5 per- cent. The areas with the next highest rates were Merced, Calif., 19.9 percent; Yuba City, Calif., 18.9 percent; and Elkhart-Goshen, Ind., 18.0 percent. Among the 14 areas with jobless rates of at least 15.0 percent, 10 were located in California.
Meanwhile, the U.S. economy shed another 742,000 jobs last month. Still, if you can believe it, things are not all bad:
April 1 (Bloomberg) -- U.S. stocks advanced for a second day as sales of existing homes unexpectedly increased and a manufacturing gauge topped economists’ estimates, bolstering optimism that the worst of the recession is over. The dollar strengthened against the euro and oil fell.
D.R. Horton Inc. led gains in 12 of 13 shares in an index of homebuilders as the National Association of Realtors reported a 2.1 percent increase in pending home resales in February. Citigroup Inc. and JPMorgan Chase & Co. added at least 5.8 percent after Treasury Secretary Timothy Geithner said there are signs that financial markets are recovering.
Of course, we now know for sure that what's good for Wall Street isn't necessarily, or even all that often, good for Main Street, but signs that we may have hit the bottom are out there. Let's hope so, anyway.
If a presidency's success or failure is judged on how the country as a whole changed during its time, how its people are doing by the end of his term or terms, or how America's standing in the world changed, relative to where it was when the president's reign began, then George W. Bush's presidency can rightly be judged an abject failure. The vast majority of Americans are worse off economically than when Bush came into office in the closing months of the heady days of boom and surplus during the Clinton years. The United States remains mired in an unnecessary war in Iraq, for which an astounding 650,000 Americans have already paid the price in physical and mental injuries serious enough to require medical treatment or disability. The war in Afghanistan rages on, and the world economy has been dragged into the tar pit of mortgage backed securities and derivatives invented on Wall Street.
But if a presidency is to be judged on whether it achieved its prime directive -- whether it lived up to the implicit promise made by its leadership on their way in, campaign rhetoric aside -- then George W. Bush's presidency has to be judged a resounding success. George W. Bush came into office calling the very wealthy his "base." He rode in on a promise to restore the full promise of trickle down "Reaganomics" in Washington, complete with neutering the federal government through deregulation, fattening the wealthy's pockets through corporate tax cuts and the virtual elimination of the concept of taxing wealth, and making war a permanent fixture of the American GDP. And Bush did just that, and more.
Bloomberg reports that, according to recently released IRS data, “the average tax rate paid by the richest 400 Americans fell by a third to 17.2 percent through the first six years of the Bush administration and their average income doubled to $263.3 million.” Much of their income came from capital gains resulting from the Bush tax cuts.
The 17.2 percent tax rate in 2006 was the lowest since the IRS began tracking the 400 largest taxpayers in 1992, although the richest 400 Americans paid more tax on an inflation-adjusted basis than any year since 2000.
The drop from 2001’s tax rate of 22.9 percent was due largely to ex-President George W. Bush’s push to cut tax rates on most capital gains to 15 percent in 2003.
Capital gains made up 63 percent of the richest 400 Americans’ adjusted gross income in 2006, or a combined $66.1 billion, according to the data. In all, the 400 wealthiest Americans reported a combined $105.3 billion of adjusted gross income in 2006, the most recent year for which the IRS has data.
“The big explosion in income for this group is clearly on the capital gains side, although there are also sharp increases in dividend and interest income,” said Dean Baker, co-director of the Center for Economic Policy and Research in Washington.
In other words, Bush did precisely what he came to Washington to do: namely, to pull of the largest bank robbery in history -- a "reverse Robin Hood" scheme that consists of stealing from the United States treasury to give to the rich, and not just to individuals, but also to the energy industry, particularly oil and gas, which reaped huge profits from his presidency, and from the defense contractors from whence his chief henchmen, Dick Cheney and Don Rumsfeld, slunk.
The only trouble is, Bush also succeeded in thoroughly discrediting the idea of "trickle down" a/k/a "supply side" economics or "Reaganomics," revealing, ironically, that his father was right when he called it "voodoo." Because, though dummies and ideologues like Rudy Giuliani (who is both) still believe that you have to feed the rich so they'll keep holding up the economy on their strong, broad shoulders, the rest of us are on to the fact that it is the middle class, not the wealthy, who carry the economy with our spending. That's why the suddenly robust personal savings rate of 2.9% last quarter helped tank economic expansion by 3.5 percent. No middle class buying TVs and computers and clothes, on credit, usually ... no economic growth, which leads to layoffs that even further restrict spending. The middle class -- wage earners -- not Wall Street fat cats and richie rich's who plough their extra duckets into really bad investments (and bubbles) drive the economy. If you want to help the economy, help THEM.
It's a painful lesson that an entire nation, and indeed the world, has now learned, the hard way.
The economy shrank at a 3.8 percent pace at the end of 2008, the worst showing in a quarter-century, as the deepening recession forced consumers and businesses to throttle back spending.
Although the initial result was better than economists expected, the figure is likely to be revised even lower in the months ahead and some believe the economy is contracting in the current quarter at an even faster pace.
The new figure, released Friday by the Commerce Department, showed the economy sinking at a much faster clip in the October-December period than the 0.5 percent decline logged in prior quarter.
Although economists expected an even worse fourth-quarter performance — a staggering 5.4 percent rate of decline — the results were still grim.
Meanwhile, things weren't as bad for some people as for others. Those who did better than the rest of us include...
Bank executives, who handed out about $18 billion in bonuses to themselves, as a reward for screwing up the mortgage market... (President Obama scolded them roundly for it today.)
Exxon Mobile, which posted earth shattering, record profits of $45.2 billion, due to Bushian sky-high oil prices through most of last year. And get this: those profits were DOWN 33%...
And last, and actually, least ... Rudy Giuliani, who's still getting people to listen to him warble, on cable TV, talk radio and on and on, despite having gotten exactly ONE electoral vote during his presidential campaign, and becoming the laughing stock, not just of New York, but of the world, with his scandal-tainted, one state strategy bid for greatness.
The economic stimulus plan passes with not a single Republican vote
Surprise! Bipartisanship doesn't exactly rule the day... but the package passes anyway:
With no Republican support, the House approved an $819 billion stimulus plan that will serve as the cornerstone of President Obama's efforts to resuscitate the economy, an early victory for the new president but still a disappointment because of the lack of Republican votes.
The measure passed 244 to 188, with 11 Democrats and 177 Republicans voting against it.
The two-year economic package includes $275 billion in tax cuts and more than $550 billion in domestic spending on roads and bridges, alternative-energy development, health-care technology, unemployment assistance, and aid to states and local governments. It would also provide up to $500 per year in tax relief for most workers and more than $300 billion in aid to states for funding to help rebuild schools, provide health-care to the poor and reconstruct highways and bridges.
Despite a last-minute lobbying campaign by Obama -- including coming to the Capitol yesterday for separate closed-door meetings with House and Senate Republicans -- Republicans opposed the measure and argued that it spent hundreds of billions of dollars on Democratic initiatives that would do little to stimulate the economy or create jobs.
House Speaker Nancy Pelosi (D-Calif.) heralded the legislation as the first down payment on Obama's pledge, in his inaugural address, to provide "bold and swift" action to revive an economy that is losing more than 500,000 jobs a month, including 65,000 layoffs announced just this week.
"He said he wanted action, bold and swift, and that is exactly what we are doing," Pelosi told reporters before the vote.
A $475 billion Republican alternative, which focused heavily on reducing individual and business taxes, was rejected largely on party lines. Rep. Cathy McMorris Rodgers (R-Wash.), a member of the GOP leadership team, ridiculed the Democratic plan as a "typical bill that is full of wasteful spending." ...
The GOP now has to hope that it doesn't work. Next up: the Senate debates their version (tomorrow) and then it's on to conference committee. What fun!
The GOP is scrambling to find a clean way of opposing the coming economic stimulus plan, because they know that once implemented, it has the potential to cement Democrats in power for a very long time. To understand why, you have to look at what its priorities are. Per the White House:
Doubling the production of alternative energy in the next three years.
Modernizing more than 75% of federal buildings and improve the energy efficiency of two million American homes, saving consumers and taxpayers billions on our energy bills.
Making the immediate investments necessary to ensure that within five years, all of America’s medical records are computerized.
Equipping tens of thousands of schools, community colleges, and public universities with 21st century classrooms, labs, and libraries.
Expanding broadband across America, so that a small business in a rural town can connect and compete with their counterparts anywhere in the world.
Investing in the science, research, and technology that will lead to new medical breakthroughs, new discoveries, and entire new industries.
On education alone, we're talking about doubling the budget of the Bush-neglected Department of Education, and pumping $150 billion into the nation's schools and universities. That affects tens of millions of parents and potentially, nearly 100 million children and college students. That's not good news for the GOP. Nor is the significant shoring up in the stimulus plan for the jobless, and for troubled homeowners. Every dollar of individual aid to an American citizen is a potential vote lost for the GOP. That's what Rush and his fellow travelers fear most.
At the end of the day, most economists understand that with most people feeling too job insecure to spend money on non-necessities, and states in financial drought, the federal government is the only entity that can spend at the level needed to put a jolt into the economy. Spending is what we need now, and Republicans know it. But they also know that government spending is good politics, for Democrats.
Related: read the Congressional Budget Office's take on the stimulus package here. On interesting caveat is that the bill forbids spending stimulus dollars on such Miami-beloved things as horse and dog tracks. A good look, I'd say...
Obama delivered his first major economic speech since becoming president this morning. First, he makes a couple of basic points:
This crisis did not happen solely by some accident of history or normal turn of the business cycle, and we won’t get out of it by simply waiting for a better day to come, or relying on the worn-out dogmas of the past. ...
... ow, the very fact that this crisis is largely of our own making means that it is not beyond our ability to solve. Our problems are rooted in past mistakes, not our capacity for future greatness.
And sets down a core Democratic principle worthy of FDR:
It is true that we cannot depend on government alone to create jobs or long-term growth, but at this particular moment, only government can provide the short-term boost necessary to lift us from a recession this deep and severe. Only government can break the vicious cycles that are crippling our economy – where a lack of spending leads to lost jobs which leads to even less spending; where an inability to lend and borrow stops growth and leads to even less credit.
Here's video of the opening remarks:
Okay, now for the plan, which starts with the much mentioned "green jobs":
To finally spark the creation of a clean energy economy, we will double the production of alternative energy in the next three years. We will modernize more than 75% of federal buildings and improve the energy efficiency of two million American homes, saving consumers and taxpayers billions on our energy bills. In the process, we will put Americans to work in new jobs that pay well and can’t be outsourced – jobs building solar panels and wind turbines; constructing fuel-efficient cars and buildings; and developing the new energy technologies that will lead to even more jobs, more savings, and a cleaner, safer planet in the bargain.
On health care, a plan that so far, is not exactly bold:
To improve the quality of our health care while lowering its cost, we will make the immediate investments necessary to ensure that within five years, all of America’s medical records are computerized. This will cut waste, eliminate red tape, and reduce the need to repeat expensive medical tests. But it just won’t save billions of dollars and thousands of jobs – it will save lives by reducing the deadly but preventable medical errors that pervade our health care system.
I didn't read the word "universal" in there, or see dramatic change that doesn't sound strangely like something Jeb Bush would come up with ... okay, giving him and Tom Daschle the benefit of the doubt on that one, we move on to education:
To give our children the chance to live out their dreams in a world that’s never been more competitive, we will equip tens of thousands of schools, community colleges, and public universities with 21st century classrooms, labs, and libraries. We’ll provide new computers, new technology, and new training for teachers so that students in Chicago and Boston can compete with kids in Beijing for the high-tech, high-wage jobs of the future.
To build an economy that can lead this future, we will begin to rebuild America. Yes, we’ll put people to work repairing crumbling roads, bridges, and schools by eliminating the backlog of well-planned, worthy and needed infrastructure projects. But we’ll also do more to retrofit America for a global economy. That means updating the way we get our electricity by starting to build a new smart grid that will save us money, protect our power sources from blackout or attack, and deliver clean, alternative forms of energy to every corner of our nation. It means expanding broadband lines across America, so that a small business in a rural town can connect and compete with their counterparts anywhere in the world. And it means investing in the science, research, and technology that will lead to new medical breakthroughs, new discoveries, and entire new industries.
And last but not least, cash to the starving states, and to taxpayers:
Finally, this recovery and reinvestment plan will provide immediate relief to states, workers, and families who are bearing the brunt of this recession. To get people spending again, 95% of working families will receive a $1,000 tax cut – the first stage of a middle-class tax cut that I promised during the campaign and will include in our next budget. To help Americans who have lost their jobs and can’t find new ones, we’ll continue the bipartisan extensions of unemployment insurance and health care coverage to help them through this crisis. Government at every level will have to tighten its belt, but we’ll help struggling states avoid harmful budget cuts, as long as they take responsibility and use the money to maintain essential services like police, fire, education, and health care.
It somehow doesn't sound as bold when you've been hearing essentially the same thing for a year, but hey, it's a step forward. Read the whole speech here.
Okay, I'm getting sick of "Morning Joe." Between Joe's water carrying for the RNC, Mika's unintelligible babble and kissing up to the right, and that annoying Coutney Hazlett (why anyone would take her opinion that Clint Eastwood isn't a good actor more seriously than, say, Clint Eastwood... is beyond me.) But perhaps the most annoying aspect of "Joe" is Erin Burnett, the serially upbeat Wall Street analyst. Today, she even managed to do the unemployment numbers headline WITHOUT TELLING US WHAT THE UNEMPLOYMENT NUMBERS ARE. Which of course, forced me to turn to the serially upbeat Reuters, who proferred the following headline:
Jobless claims fell by 21,000 last week
Now, before you run out and buy stock in Bernie Madoff's company to celebrate. Here's the actual story:
Initial claims for state unemployment insurance benefits fell 21,000, to a seasonally adjusted 554,000 in the week ended December 13 from an upwardly revised 575,000 the previous week. State offices were closed for at least one day near the end of November because of the Thanksgiving holiday, distorting the holiday week and the following week's numbers.
A Labor Department official said there were no special factors influencing the report. Analysts polled by Reuters had forecast 558,000 new claims versus a previously reported figure of 573,000 the week before.
In other words, unemployment claims "fell" this week because a) last week's number was TOO LOW when first reported, and b) this week's number wasn't quite as bad as expected. Your headline should have read:
"Holy, shit! Another 554,000 people filed for unemployment last week!!!"
And by the way, Reuters had more sunny "good news":
Continuing claims fell to 4.38 million in the week ended December 6 after scaling a 26-year of 4.43 million the previous week.
God, is everyone writing for "Morning Joe"??? The Labor Department lays reality out with a lot more seriousness, and you'll never guess where the biggest job losses Toyota Central:
States reported 933,652 persons claiming EUC (Emergency Unemployment Compensation) benefits for the week ending Nov. 29, an increase of 258,601 from the prior week.
... The largest increases in initial claims for the week ending Dec. 6 were in North Carolina (+26,596), California (+22,963), Georgia (+20,237), Pennsylvania (+20,090), and Tennessee (+12,170), while the largest decreases were in Wisconsin (-8,593), Iowa (-3,424), North Dakota (-895), Arkansas (-514), and Idaho (-320).
WASHINGTON – An alarming half-million American jobs vanished virtually in a flash last month, the worst mass layoffs in over a third of a century, as economic carnage spread ever faster and the nation hurtled toward what could be the hardest hard times since the Great Depression.
Underscoring Friday's dismaying signs of a rapidly deteriorating economy, General Motors announced yet more job cuts, and a record number of homeowners were reported behind on mortgage payments or in foreclosure.
Somehow Wall Street found a silver lining, betting that so much bad news would force fresh government action to revive the foundering economy. The Dow Jones industrial rose 259 points.
Yeah. Leave it to Wall Street to find job losses attractive. It means productivity, or something like that... The bad news keeps on coming:
Staring at 533,000 lost jobs, economists were anything but hopeful. Since the start of the recession last December, the economy has shed 1.9 million jobs, and the number of unemployed people has increased by 2.7 million — to 10.3 million now out of work.
Some analysts predict 3 million more jobs will be lost between now and the spring of 2010 — and that the once-humming U.S. economy could stagger backward at a shocking 6 percent rate for the current three-month quarter.
"The economy is in a free fall," said Richard Yamarone of Argus Research. "It is as if someone flicked off the switch on hiring."
"It's a mess," said Mark Zandi, chief economist at Moody's Economy.com. "Businesses, battening down the hatches, are concerned about their survival and are cutting workers."
The Labor Department report showed monthly jobs losses of 533,000 spread across the economy, hitting construction firms, computer makers, auto dealers, clothing stores and banks and insurance companies alike.
The new data translate the steady stream of pink slip notices coming from companies as diverse as financial titans like the Carlyle Group to discount retailers like Linen 'n Things into evidence of broad economic weakness. The headline number alone -- the worst monthly job loss since Dec., 1974, amid a steep downturn and in the wake of an oil embargo by Arab states -- is likely to raise fresh concerns about the depth and length of an ongoing recession.
The number literally took my breath away this morning. And add to it the 422,000 Americans who stopped bothering to job hunt and the 600,000 manufacturing jobs we've lost this year, and you start to get a sense of the depth of the problem. Oh, and guess who noticed that we're in a recession? The bystander:
WASHINGTON – President George W. Bush publicly acknowledged for the first time Friday that the U.S. economy is in a recession and worried aloud that Detroit's Big Three automakers may not all survive their mounting troubles.
Four days after the long-suspected existence of a recession was made official, Bush used the word himself.
"Our economy is in a recession," Bush said flatly, speaking to reporters on the South Lawn only hours after the release of a government report showing the biggest month of job losses in 34 years. "This is in large part because of severe problems in our housing, credit and financial markets, which have resulted in significant job losses."
While repeatedly listing the serious problems in the economy, the White House has refused to embrace the actual term until Monday, when a panel for the National Bureau of Economic Research said the recession began last December and is ongoing.
Thanks, Dubya. Real helpful.
This will put a new complexion on the proposed auto bailout. It now, clearly, has to happen. The economy, and the states, simply cannot handle another 3 million unemployed, heaped on top of the millions already out here on a limb. And TPM points out, via the New York Times, that the news is even worse than it looks.
If the Henry Paulson press conference yesterday bugged you, you're not alone. I'm still not clear on what, exactly, this guy has done with $300 billion of the $700 billion, or was it $1.2 trillion, he was shoveled by Congress to "save the banks." Now, we're not buying their worthless assets? Oh, and there has been no oversight? Brilliant! Now, there's a big push on, including from the in-coming administration, to bail out the Big Three U.S. auto-makers, whose bad decisions and bad products (try selling a Hummer in Europe. I dare you) over three decades or so got them into the mess they're in. All are headed to Capitol Hill with tin cups in hand, but many in the real world are asking why they should get another $25 billion in government loans (they got that amount before. Did you know that?) from the same taxpayers they've been screwing with their crappy cars?
And as they will, Wall Street Journal types want the bailout, but they want the pensioners, who slaved away in the plants for a quarter century and were promised a decent retirement, to take one for the team. Figures. And Michigan's attractive governor, who can't run for president because she's Canadian, might be in line to be the nation's "car czar," something she earned by being a loyal Obamacrat during the campaign. Great for her. She deserves it. Now, back to the bailout. Why should we do it? (And why not just let the automakers declare bankruptcy, like millions of Americans have had to do? A pro-bankruptcy argument here, and GM's rebuttal to that here.) Five arguments you'll hear today:
1. Detroit is "too big to fail." The industry employs, directly or indirectly, more than 3 million Americans. If GM, Ford and Chrysler (who the hell buys a Chrysler anymore...?) go down, they take their workers, and the restaurants, supermarkets, stores and schools their families patronize, with them. As Dem strategist Peter Fenn puts it:
Let's put aside the 3 million jobs that would be lost in the first year, that 1 in 10 American jobs depend on the industry, that there would be lost wages of $150.7 billion or we would lose $156 billion in taxes paid over three years. Let's look down the road. Do we really want to deep six the cornerstone of American manufacturing when only 13% of the world's population drives cars and this is one of the greatest growth industries of the 21st century?
2. It's not a bailout, it's an opportunity. Any bailout pushed through Congress would likely force Detroit to do what it has resisted for generations: retool and modernize, produce "green" cars that get 40 mpg, and yes, even the electric car they bought up and killed during the 1980s.
3. We must save the workers to save the Obama agenda. Ford has announced it's "temporarily" closing 11 more plants. And GM parts suppliers, even NASCAR, hang in the balance if the Big Three fail. If a failed U.S. auto industry ripples through the economy, it could multiply the potential job losses from 3 million to three times that number. Try doing anything on Obama's list with a cratering tax base.
4. We're not doing much else with the money. The bank bailout is already a hot mess. Henry Paulson can't seem to figure out what else to do, so we might as well do this.
5. 2012. Michigan is a reliable blue state. Democrats owe them, and will need them to re-elect President Obama in four years, especially with a Mitt Romney re-run looming. Okay, a crass argument, but politics is crass.
A little truthiness: who caused the subprime crisis?
McClatchy does us all a service, by setting the record straight:
As the economy worsens and Election Day approaches, a conservative campaign that blames the global financial crisis on a government push to make housing more affordable to lower-class Americans has taken off on talk radio and e-mail.
Commentators say that's what triggered the stock market meltdown and the freeze on credit. They've specifically targeted the mortgage finance giants Fannie Mae and Freddie Mac, which the federal government seized on Sept. 6, contending that lending to poor and minority Americans caused Fannie's and Freddie's financial problems.
Federal housing data reveal that the charges aren't true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.
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.
Federal Reserve Board data show that:
More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics.
The "turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007," the President's Working Group on Financial Markets reported Friday.
Furthermore, though they have become the whipping banks of the right:
Fannie, the Federal National Mortgage Association, and Freddie, the Federal Home Loan Mortgage Corp., don't lend money, to minorities or anyone else, however. They purchase loans from the private lenders who actually underwrite the loans.
This much is true. In an effort to promote affordable home ownership for minorities and rural whites, the Department of Housing and Urban Development set targets for Fannie and Freddie in 1992 to purchase low-income loans for sale into the secondary market that eventually reached this number: 52 percent of loans given to low-to moderate-income families.
To be sure, encouraging lower-income Americans to become homeowners gave unsophisticated borrowers and unscrupulous lenders and mortgage brokers more chances to turn dreams of homeownership in nightmares.
But these loans, and those to low- and moderate-income families represent a small portion of overall lending. And at the height of the housing boom in 2005 and 2006, Republicans and their party's standard bearer, President Bush, didn't criticize any sort of lending, frequently boasting that they were presiding over the highest-ever rates of U.S. homeownership.
Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble.
During those same explosive three years, private investment banks — not Fannie and Freddie — dominated the mortgage loans that were packaged and sold into the secondary mortgage market. In 2005 and 2006, the private sector securitized almost two thirds of all U.S. mortgages, supplanting Fannie and Freddie, according to a number of specialty publications that track this data.
In 1999, the year many critics charge that the Clinton administration pressured Fannie and Freddie, the private sector sold into the secondary market just 18 percent of all mortgages.
Fueled by low interest rates and cheap credit, home prices between 2001 and 2007 galloped beyond anything ever seen, and that fueled demand for mortgage-backed securities, the technical term for mortgages that are sold to a company, usually an investment bank, which then pools and sells them into the secondary mortgage market.
About 70 percent of all U.S. mortgages are in this secondary mortgage market, according to the Federal Reserve.
But what about the infamous Community Reinvestment Act (the CRA)? Isn't THAT Carter-era abomination to blame for the subprime crisis? Why, no...
Congress created the CRA in 1977 to reverse years of redlining and other restrictive banking practices that locked the poor, and especially minorities, out of homeownership and the tax breaks and wealth creation it affords. The CRA requires federally regulated and insured financial institutions to show that they're lending and investing in their communities.
Conservative columnist Charles Krauthammer wrote recently that while the goal of the CRA was admirable, "it led to tremendous pressure on Fannie Mae and Freddie Mac — who in turn pressured banks and other lenders — to extend mortgages to people who were borrowing over their heads. That's called subprime lending. It lies at the root of our current calamity."
Fannie and Freddie, however, didn't pressure lenders to sell them more loans; they struggled to keep pace with their private sector competitors. In fact, their regulator, the Office of Federal Housing Enterprise Oversight, imposed new restrictions in 2006 that led to Fannie and Freddie losing even more market share in the booming subprime market.
What's more, only commercial banks and thrifts must follow CRA rules. The investment banks don't, nor did the now-bankrupt non-bank lenders such as New Century Financial Corp. and Ameriquest that underwrote most of the subprime loans.
These private non-bank lenders enjoyed a regulatory gap, allowing them to be regulated by 50 different state banking supervisors instead of the federal government. And mortgage brokers, who also weren't subject to federal regulation or the CRA, originated most of the subprime loans.
As much as I love the folks at McClatchy, I said the exact same thing a month ago, in this fantabulous video:
Will Neil Cavuto be forced to walk back from his "lending to minorities caused the housing crisis" gaffe? Recall that on Sept. 18, Neil interviewed California Congressman Xavier Becerra (D-CA) and gave the now standard Republican talking point that the problem isn't Wall Street speculators and investment banks, it's Fannie Mae and Freddie Mac and their insidious practice of lending money to minorities to make them feel like homeowners... Neil? You're up:
CAVUTO: I just wonder, you know, with Congress holding all these hearings -- and you're right, there are a lot of them planned -- does anyone hold hearings on what you guys knew or didn't know or whether -- or whether you were ignorant or not? I mean, does anyone look at -- I know the buck stops with the president -- but at least it stops by you guys. What were you doing?
BECERRA: Well, we were trying to get answers from the administration. Unfortunately, it didn't seem like they were giving us a complete picture of what was going on. We can only know what the administration tells us about their administration of the government. But you're right.
CAVUTO: All right, but let me ask you -- but, Congressman, when -- when you and many of your colleagues were pushing for more minority lending and more expanded lending to folks who heretofore couldn't get mortgages, when you were pushing homeownership --
BECERRA: Neil, who did that?
CAVUTO: -- I'm just saying, I don't remember a clarion call that said, "Fannie and Freddie are a disaster. Loaning to minorities and risky folks is a disaster."
It would be nice if Cavuto was some sort of lone wolf, but it's actually a rather standard talking point on the right, that the real problem goes back to the days when do-gooders like Andrew Cuomo were running HUD, creating things like the "Community Reinvestment Act" and forcing poor, helpless banks to stop red lining black neighborhoods and denying home loans to qualified black applicants. Poor fools. Little did they realize they'd be left holding the bag for Phil Gramm and John McCain's deregulation of the securities markets.
The truth of the matter is, Fannie and Freddie are a drop in the bucket compared to the Wall Street "banks" that bundled bad mortgages and sold them as derivatives -- bad mortgages that went, not to "poor people" as Larry Kudlow and others charge, or to "minorities" alone, but to millions of perfectly white middle class Americans, and not a few people trying their hand at "house flipping." And the bad mortgages wouldn't have infected the entire system had they not been immediately sold off, chopped up, and turned into lucrative, air-thin derivative securities that were sold at inflated values to make people like Kudlow richer.
But that's too complicated for people like Neil, who like their politics simple, neat, and racist. Oh, and it's also a clever way to argue that the problem wasn't deregulation, it was overregulation...
So will Neil be disciplined by his bosses at Fox? When Sarah Palin gives a press conference...
Oh, okay, so now, Republicans believe in socialism...
On "This Week" on Sunday, Bush Treasury Secretary Henry Paulson confirmed that the administration is prepared to up the ante on American socialism by not only taking over the vast majority of Wall Street's bad assets (meaning, as George Will pointed out, that after the bailout, the government would control most U.S. investment banks) but that the White House would push for the $700 billion bailout to include buying up the bad assets of foreign financial firms, too:
"We are talking very aggressively with other countries around the world," Paulson said in an interview on ABC News' "This Week." "If a financial institution has business operations in the United States, hires people in the United States...they have the same impact on the American people as any other institution."
Paulson, the architect of the bailout, also said that he will fight requests by Democrats to include a broader stimulus package in the bailout legislation.
"We need this to be clean and quick, and we need to get it in place," said Paulson.
By "clean and quick," he means rush through a bailout for the big boys, with nothing for you, except the bill.
So much for Republicans' belief in the free market. In their former Darwinian belief system, failed companies are supposed to be allowed to fail. Not anymore. Now, Republicans believe in aggressive government intervention to help the richest of firms and investors stay rich. Bailouts for ordinary people who are in danger of losing their homes: not so much. You see, those people are actually to blame...
Meanwhile, the world begins to notice our sudden love of socialism. From the Herald, UK:
Today we will learn further details of what could turn out to be the greatest act of grand larceny in history: the US treasury secretary, Henry Paulson's, trillion-dollar bailout of the US banks. Following last week's crash, the US government has decided to use taxpayer money to buy up all the bad mortgage debts of the banks and investment houses and insurance companies and let them start again with a clean sheet. In other words, save them from the consequences of their own folly. Nothing similar is yet proposed here, but it will.
The Bad Bank bailout is a bad idea. If the bankers get away with this we really will be one step from serfdom. I'm someone who has always tended to the left of the political spectrum, but on this issue I side with the American conservatives, such as Republican Congressman John Culberson, who are saying that this is socialism for the rich. Congress has no right bailing out private investors with money pledged in advance from the children and grandchildren of American citizens.
Advocates of the Bad Bank fund cite the success of the Resolution Trust Corporation (RTC) which sorted out the wreckage from the US savings and loans bust in 1989. But the RTC was very different from this Bad Bank. It collected and eventually sold off loans made by banks that had already gone bust; what is being proposed now is to buy loans before the lenders go under. In other words, it will create an artificial market with artificial prices to perpetuate the bankers' delusion that they are not actually bankrupt.
Still less is Paulson's bailout any kind of legitimate descendant of the Reconstruction Finance Corporation set up by Roosevelt in 1933 to cope with the last comparable banking crisis during the Great Depression. The first thing FDR did was shut the banks down, throw out their managements and halt all dividend payments. He then reopened the banks under new management and under US Treasury supervision, giving federal loans to banks prepared to behave.
E pluribus hokum or When the gamblers bail out the casino By Spengler
Why should American taxpayers give US Treasury Secretary "Hank" Paulson a blank check to bail out the shareholders of busted banks? Why should the Treasury turn itself into a toxic waste dump for their bad loans? Why not let other banks join the unlamented Brothers Lehman in bankruptcy court, and start a new bank with taxpayers' money? Or have the Treasury pay interest on delinquent mortgages, and make them whole? Even better, why not let the Chinese, or the Saudis or other foreign investors take control of failed American banks? They've got the money, and they gladly would pay a premium for an inside seat at the American table.
None of the above will occur. America will give between US$700-$800 billion to the Treasury to buy any bank assets it wants, onany terms, with no possible legal recourse. It is an invitation to abuse of power unparalleled in American history, in which ill-paid civil servants will set prices on the portfolios of the banking system with no oversight and no threat of legal penalty.
Why are the voices raised in protest so shrill and few? Why will Americans fall on their fountain-pens for their bankers? If America is to adopt socialism, why not have socialism for the poor, rather than for the rich? Why should American households that earn $50,000 a year subsidize Goldman Sachs partners who earn $5 million a year?
Believe it or not, there is a rational explanation, and quite in keeping with America's national motto, E pluribus hokum. Part of the problem is that Wall Street, like the ethnic godfather in the old joke, has made America an offer it can't understand. The collapsing the mortgage-backed securities market embodies a degree of complexity that mystifies the average policy wonk. But that is a lesser, superficial side of the story.
Paulson's dreadful scheme will become law, because Americans love their bankers. The bankers enable their collective gambling habit. Think of America as a town with one casino, in which the only economic activity is gambling. Most people lose, but the casino keeps lending them more money to play. Eventually, of course, the casino must go bankrupt. At this point, the townspeople people vote to tax themselves in order to bail out the casino. Collectively, the gamblers cannot help but lose; individually they nonetheless hope to win their way out of the hole. Americans are so deep in the hole that they might as well keep putting borrowed quarters into the one-armed bandit. They have hardly saved anything for the past 10 years. Instead, they counted on capital gains to replace the retirement savings they never put aside, first in tech stocks, then in houses. That hasn't worked out. The S&P 500 Index of American equities today is worth what it was in 1997, after adjusting for inflation (and a pensioner who sells stock purchased in 1997 will pay a 20% capital gains tax on an illusory inflationary gain of 40%). Home prices doubled between 1997 and 2007 before falling by more than 20%, with no floor in sight.
As it is, many of the baby boomers now on the verge of retirement will spend their declining years working at Wal-Mart or McDonalds rather than cruising the Caribbean. Some of them still have time to tighten their belts and save 10% of their income (by consuming 10% less), plus a good deal more to compensate for the missing savings of the 1990s.
Altogether, they'd rather gamble, and if that requires a bailout of the house, they gladly will chip in to pay for it. After all, today's baby boomers won't pay for the bailout. The next generation of taxpayers will pay for Paulson's $700-$800 billion. If that enables the present generation to keep borrowing rather than saving, it is no skin off their back. If home prices continue to collapse, the baby boomers will die in debt anyway, working at low-paying jobs until the day before their funerals.
And Spengler has this additional, interesting note:
Investment banks typically hold about $30 of securities for every $1 of capital, so a 3% write-down would leave them insolvent. If Lehman Brothers classified 14% of its assets as Level III at the end of the first quarter; Goldman Sachs was at 13%. Why is Lehman bankrupt, and Goldman Sachs still in business? If Secretary Paulson, the former head of Goldman Sachs, had not proposed a general bailout last week, we might already have had the answer to that question.
... Some Democrats in Congress are asking for some form of oversight, but it is hard to imagine how they might use it, for a Treasury with $800 billion to spend would constitute the whole market bid for low-quality mortgage assets, and would set whatever prices it wished. Professionals with years of experience set prices on these securities with great uncertainty. How would an overseer determine if it had set the correct price? And if the Treasury decided to bail out one bank (say, Goldman Sachs) rather than another, how would the overseer judge whether that decision was judicious, politically motivated, venal, or arbitrary?
If a liberal Democratic administration had put hundreds of billions of dollars of taxpayer money at risk by bailing out Bear Stearns and nationalizing American International Group (AIG), Fannie Mae and Freddie Mac, wouldn't conservatives accuse Democrats of "socialism"? Can Mr. McCain now square a circle by calling himself a conservative while favoring increased regulation?
In fact, Mr. McCain championed financial deregulation for years. In 1999, he supported legislation crafted by Phil Gramm, then a senator from Texas, that removed Depression-era walls between banking, investment and insurance companies -- allegedly to make the country's financial institutions more competitive and free to take entrepreneurial risks in the marketplace. (Many Democrats, including Sen. Joe Biden, the party's vice presidential nominee, supported this ill-considered legislation as well.)
The result was the creation of a free-market free-for-all of banks approving home mortgages to people who clearly couldn't afford to repay them if real-estate values stopped rising. It also spurred investment banks to buy and sell packages of mortgages after they had convinced themselves that by "spreading the risk," bad loans could become less-bad loans. Then they bought insurance contracts from gargantuan insurance companies like AIG to spread the risk even further. Investors banked on the fact that if real-estate values stopped rising (impossible!), and more and more people defaulted on their mortgages, Fannie and Freddie would pick up the tab. And, if Fannie and Freddie went down, there would be -- The-Ultimate-Bearer-Of-All-Risks -- the lowly taxpayers.
Now I know what former Sen. Gary Hart meant when he told an audience of wealthy Republican businessmen during his 1984 presidential campaign, "I know why you are conservatives -- you favor private enterprise for the poor and socialism for the rich."
And the boos keep coming, from Krugman, from Roger Cohen, and from Bill Kristol, who advises John McCain to flip-flop again and oppose the bailout. Personally, I'd give the same advice to Barack Obama...
Every so often, a member of the "conservative movement" offers us a clarifying moment, that illustrates the fundamental differences between the values and ideas of the two major political parties. (Phil Gramm declaring Americans "whiners" for not appreciating how well the economy is doing ... for rich people like him; John "seven homes" McCain declaring that "the fundamentals of the economy are strong," while Rome is literally burning all around him, being just two examples.) This morning on "Morning Joe," CNBC host, GOP booster, laissez-faire economics guru and John McCain sympatico Larry Kudlow, offered up such a moment.
Asked to explain the current crisis on Wall Street and Main Street, Kudlow declared that it's not the fault of the investment banks and hedge fund guys who packaged, bought and sold subprime mortgages for sport and profit, driving up demand for bad loans and incentivizing shady lending, or even the banks themselves, and their coterie of crooked appraisers and greedy mortgage brokers. It wasn't the Republican Congresses who systematically stripped the system of regualtions, thanks in large part to John McCain's buddy Phil Gramm. It wasn't the speculators or the flippers buying second, third, and even fourth homes and condos, or the price-gouging builders raising prices $30,000 a month here in Florida, or the greedy developers and brokers pushing home ownership with "no money down" as the latest fashion trend, or the combined speculative market that juiced up of home values beyond all reason. Nope. Those people are well off, and therefore they're better than you.
No, my friends, it turns out our current economic crisis, led by the massive mortgage meltdown, is the fault of liberals, who literally forced banks to lend mortgage money to poor people so they could assuage their "liberal guilt," and of course, it's also the fault of those icky, horrible poor people themselves. How dare they want to live like the rest of us! Why, they're POOR! ... and that's supposed to mean something in America!
Never mind that percentage-wise, home ownership among the poor is literally negligible, and that a huge part of the housing crisis is the LACK of affordable homes for people with little income, or that the majority of these 3-bedroom, $500,000 homes that are really worth $250,000 are being sold not to the poor, but to the middle class, often at teaser rates that mean their mortages literally can double after six or seven years.
Forget all that, and listen to Larry. He knows that it really was those bloody awful poor people, and the whimpering liberals who pamper them, at the expense of the downtrodden, helpless banks.
After a few minutes of this, Joe Scarborough was literally dumbstruck.
"Okay, so you're saying it's the poor people's fault," he deadpanned. Kudlow sputtered, but he had already said too much.
Going into the break, Scarborough sneered that coming up in the next segment, they'd explain how poor people were behind the JFK assassination, too.
Update: An astute commenter at TPM finds this link that delves into the role the SEC's lax oversight played in bringing us to the brink. An excerpt:
As we learn this morning via Julie Satow of the NY Sun, special exemptions from the SEC are in large part responsible for the huge build up in financial sector leverage over the past 4 years -- as well as the massive current unwind
Satow interviews the above quoted former SEC director, and he spits out the blunt truth: The current excess leverage now unwinding was the result of a purposeful SEC exemption given to five firms.
You read that right -- the events of the past year are not a mere accident, but are the results of a conscious and willful SEC decision to allow these firms to legally violate existing net capital rules that, in the past 30 years, had limited broker dealers debt-to-net capital ratio to 12-to-1.
Instead, the 2004 exemption -- given only to 5 firms -- allowed them to lever up 30 and even 40 to 1.
Who were the five that received this special exemption? You won't be surprised to learn that they were Goldman, Merrill, Lehman, Bear Stearns, and Morgan Stanley.
As Mr. Pickard points out that "The proof is in the pudding — three of the five broker-dealers have blown up."
So while the SEC runs around reinstating short selling rules, and clueless pension fund managers mindlessly point to the wrong issue, we learn that it was the SEC who was in large part responsible for the reckless leverage that led to the current crisis.
The financial crisis continues to ripple across the globe this morning, from Moscow to London to New York City. Stocks took a dive this morning on Wall Street, even after the Fed agreed to bail out AIG, the nation's largest insurance company. The FDIC -- you know, the one that insures the money you have in the bank, up to $100,000? It's running short of cash, meaning that, in the AP's words, "the taxpayer may be the lender of last resort."
Meanwhile, maybe Sarah Palin can get on this right away: Russia is threatening to seize part of the oil-rich Arctic. Yep. Seize it.
And last but not least, no, Gerald Warner, it's not just you...
...no, seriously, McCain's plan to fix the global economic meltdown is a commission ... just like the one that looked into 9/11 years later. So that's it then. John McCain is going to fight corporate greed with old-man style needling of those jerks on Wall Street, a few pokes in the gut to his "friends" on Capitol Hill who are REALLY gonna listen to him once he's in the White House ... plus the unseen power of bloated bureaucracy! ABC News, broadcast friend of Republicans everwhere? Your turn:
An angry Sen. John McCain indicated today that as president he would launch a 9/11-commission style investigation into what he called "the old-boy network and Washington corruption" that created the current Wall Street crisis and has endangered peoples' savings and retirement funds.
... uh oh... it's never good when the "drive by media" uses the words "angry" and "McCain" in the first sentence...
McCain's stance on the economy has been under attack from Democrats since he released an ad Monday that said the economy was in crisis, but later gave a speech saying the "fundamentals of our economy are strong." He defended himself Tuesday and laced into a denunciation of corporate greed.
"I said the fundamental of our economy is the American worker. I know that the American worker is the strongest, the best, and most productive and most innovative," McCain, R-Ariz., told ABC's Chris Cuomo on "Good Morning America" Tuesday.
"They've been betrayed by a casino on Wall Street of greedy, corrupt excess -- corruption and excess that has damaged them and their futures," he added.
McCain said he wants an inquiry into what led to the current mess, though he did not offer details.
"We're going to need a '9/11 Commission' to find out what happened and what needs to be fixed," he said. "I warned two years ago that this situation was deteriorating and unacceptable. And the old-boy network and the corruption in Washington is directly involved, and one of the causes of this financial crisis that we're in today. And I know how to fix it, and I know how to get things done."
"Americans are hurting right now, and there's going to be a ripple effect of this financial crisis because of the greed and corruption and excess, and Wall Street treated the American economy like a casino," he continued. "And we can fix it, and we've got to keep people in their homes."
So ... you're going to have the federal government root around into the finances and payrolls of private companies, Mr. Conservative? Hm?
This crisis seems to be bringing out the worst in John McCain. He is at his histrionic, tisk-tisking apex, railing against Wall Street, railing against Congress (which he'd like you to forget he's a part of, and has been for a quarter century,) and just generally sticking it to all the jerks he's better than. That's not change we can believe in... that's an angry Grandpa!
Today, the commission released its final report calling for the federal government to immediately withdraw from Wall Street, the home mortgage market and “other sectors where government intervention has undercut the principles of free-market capitalism.”
The commission, which convened at the Cracker Barrel Restaurant in Fogelsville, Pennsylvania, issued its recommendations before the waitress brought out the dessert menu, and it called on presidential candidates from both major parties get behind its agenda of common-sense reforms.
According to Scrappleface's crack...erbarrel reporting, the commission members include:
... a truck driver, a Wal-Mart People Greeter, a self-described public school “cafeteria lady” and “that old guy who’s always sitting by himself at Cracker Barrel”...
... especially since a sizable share of the American public seems prepared to return the same people to power who got us into this mess, just so they can see their "values" reflected in the white woman ... I mean, "house..."
Two more bank failures on Wall Street, as Lehman Bros. files for Chapter 11, and Merryl Lynch is sold under duress, to Bank of America. The feds will let Lehman fail, opting not to go for yet another bailout.
What will Wall Street and the City of London look like, when the smoke clears?
The collapse of Lehman Brothers and the rescue of Merrill Lynch at the weekend do not mark the end of the financial crisis. There may still be more failures to come - former US Federal Reserve chairman Alan Greenspan, hardly known for his pessimism, suspects there will be.
For one thing, power will no longer rest with the great Wall Street investment banks, which once pulled the levers of corporate America, even though their financial firepower was dwarfed by the commercial banks'.
Only Goldman Sachs and Morgan Stanley remain forces to be reckoned with, now that Lehman is gone and Merrill and Bear Stearns subsumed into much larger entities,
Does that matter? In practical terms, not really: their functions - trading and underwriting debt and equity, advising companies on mergers - are already provided by big global banks such as Citigroup, Credit Suisse and Barclays.
The US low-tax zealot, Grover Norquist, is famous for wanting to "shrink government down to the size where we can drown it in the bathtub". Still alive, he is not turning in his grave, but his idea has been well and truly buried - and not by the Democrats he hates; they have been tongue-tied on the credit crisis.
It is Wall Street, the paradigm of "red in tooth and claw" capitalism, that has turned to government subsidy on an unprecedented scale.
Low, ideally non-existent, taxes may be very desirable, but when free-market principles came into conflict with the survival of business as we know it, priorities were clear. The US Federal government's full faith and credit - in other words, the resources of American taxpayers - should be urgently deployed to preserve as much as possible of the financial industry.
Luckily for Wall Street, government was still too big to fit in that bathtub - and proved only too willing to take up the challenge.
Sen. Barack Obama (D-Ill.) was first with a statement, at 6:17 a.m. Eastern: “The situation with Lehman Brothers and other financial institutions is the latest in a wave of crises that are generating enormous uncertainty about the future of our financial markets. This turmoil is a major threat to our economy and its ability to create good-paying jobs and help working Americans pay their bills, save for their future, and make their mortgage payments.”
Sen. John McCain (R-Ariz.) followed at 8:01 a.m.: “The McCain-Palin Administration will replace the outdated and ineffective patchwork quilt of regulatory oversight in Washington and bring transparency and accountability to Wall Street. We will rebuild confidence in our markets and restore our leadership in the financial world."
McCain was first with a TV ad, called "Crisis", vowing: "Our economy in crisis. Only proven reformers John McCain and Sarah Palin can fix it. Tougher rules on Wall Street to protect your life savings. No special interest giveaways. Lower taxes to create new jobs. Offshore drilling to reduce gas prices."
If it sounds familiar, it’s because it is: The candidates are repackaging their normal stump rhetoric to deal with an economic earthquake that could constrict voters’ ability to get loans, and is already reshuffling the biggest names in American finance.
Anything new to offer, Grandpa?
I await the Obama ad, which I assume is forthcoming ... (eyes rolling...) eventually...
A leaked memo from the McCain campaign suggests the campaign intends to paint Barack Obama as a "job killing machine." Well pot ... let me introduce you to kettle...
By Michael D. Shear - LIMA, Ohio -- Five years ago, John McCain's campaign manager, Rick Davis, lobbied on behalf of German shipping giant DHL Express, whose purchase of Airborne Express meant a new corporate boss for thousands of residents in Wilmington, Ohio.
Now, DHL wants to stop using the Wilmington airport as a hub, something that could cost thousands of jobs. And today, McCain will meet with some of the people who could be laid off.
He is scheduled to gather with about two dozen local officials and company employees, a meeting that was supposed to highlight McCain's concern about the faltering economy in an important election-year swing state.
But thanks to the Cleveland Plain Dealer, which this week wrote about Davis' 2003 lobbying efforts on behalf of DHL, the meeting has invited some unwelcome attention for the campaign.
The Plain Dealer reported that McCain himself argued on behalf of the merger in 2003 after concerns were raised by fellow senators about foreign ownership of the shipping company.
... In a new conference yesterday, Ohio Sen. Sherrod Brown called on McCain and Davis to use the same connections they had in 2003 to try and stop DH: from abandoning the airport.
"I'm personally calling on John McCain to send Rick Davis to Germany to use his considerable clout with DHL,... to help save these 8,200 jobs in southwest Ohio," Brown said.
Davis was a lobbyist who helped [Deutsche Post World Net] overcome objections in Congress in 2003, when the company was acquiring Airborne Express and its Wilmington airport, as The Plain Dealer reported.
And McCain, then the chairman of the Senate Commerce Committee, fought back proposed legislative language in a defense spending bill that would have made the deal less attractive -- language favored by lawmakers and DHL competitors that wanted to keep the foreign firm out of the air express business in this country.
Davis and McCain were successful in 2003 -- and so was Wilmington for several years, with a humming freight airport and a net gain of an estimated 1,000 jobs. But now DHL wants to use rival United Parcel Service for its air freight, saying the move would help stem more than $1 billion in projected losses this year. DHL would stay in the delivery business, even though it would contract with UPS for airlift.
Wilmington officials are worried about the potential loss of up to 8,000 jobs if DHL moves work away from the Wilmington Air Park by hiring United Parcel Service to replace ABX Air and ASTAR Air Cargo in transporting DHL packages.
... The McCain campaign told The Plain Dealer that no one in 2003 could anticipate today's threatened job cuts. The campaign noted that Davis has not lobbied for Deutsche Post since 2005.
Before the merger, some members of Congress, as well as UPS and Federal Express, cited concerns about a subsidiary of a foreign company controlling a segment of air commerce in the United States. Sen. Ted Stevens, Republican of Alaska, tried to insert language in a military spending bill to ban a foreign-owned carrier from flying military equipment or troops. That would have made the Airborne Express purchase less attractive to DHL.
McCain, of Arizona, and fellow Republican Sen. Trent Lott of Mississippi objected, saying it would be unfair to keep the Pentagon from using an air carrier it might someday need. McCain, then the chairman of the Commerce Committee, also objected to using a spending bill to set military policy.
"Moreover, Sen. McCain has a long-held belief that defense contracts should reflect providing our service members the best equipment and support while providing the best return to American taxpayers, irrespective of narrow and protectionist concerns," his campaign said . He prevailed. After the merger, Ohio and local governments provided more than $400 million in incentives for road and facility upgrades, and DHL in 2005 moved its smaller air freight operation from northern Kentucky to Wilmington.
The Ohio Democratic Party took a swipe in a new web ad released today:
The ad features video of McCain's exchange in early July with a woman at a town hall in Portsmouth, Ohio and reporting from The Plain Dealer and cleveland.com.
The Democratic Party noted that on the eve of McCain's visit today to DHL-Airborne Express in Wilmington, Stephen Koff, The Plain Dealer's Washington Bureau chief, reported that McCain's campaign manager and longtime friend Rick Davis lobbied on behalf of DHL to overcome Congressional opposition to allowing a foreign company to take over Airborne, and that McCain himself intervened to ensure that the deal went through.
The story on Tuesday said that filings in the Senate show Davis' lobbying firm, Davis Manafort, was hired to help both companies deal with Congress, where objections over DHL's foreign ownership arose. Davis and a partner earned their firm $185,000 for the DHL-Airborne Express work that year, records show.
They earned $405,000 more from Deutsche Post for work on other issues in 2004 and 2005, after the deal passed Congress.
A Justice Department report confirms that two former underlings of America's worst Attorney General EVER, Alberto Gonzales, broke the law by taking political persuasion into account in JD hiring. The perps: Regent University "Law School" grad Monica Goodling, and fellow traveler D. Kyle Sampson. Alberto wasn't faulted in the report... why? The only remaining question: how quickly does Michael Mukasey announce that he will do nothing?
Meanwhile, how big of a budget deficit will George W. Bush leave to the next president? Try $490 billion:
The next president will inherit a record budget deficit approaching $490 billion, a Bush administration official said Monday.
The official said the deficit was being driven to an all-time high by the sagging economy and the stimulus payments being made to 130 million households in an effort to keep the country from falling into a deep recession. A deficit approaching $490 billion would easily surpass the record deficit of $413 billion set in 2004.
The administration official spoke on condition of anonymity because the new estimate had not been formally released. Administration officials were scheduled to do that at a news conference later Monday.
The new figure actually underestimates the deficit, since it leaves out about $80 billion in war costs. In a break from tradition — and in violation of new mandates from Congress — the White House did not include its full estimate of war costs.
White House press secretary Dana Perino had no comment on the $490 billion figure. But she told reporters that the White House and lawmakers acknowledged months ago that they were going to increase the deficit by approving a short-term boost for the slumping economy.
"Both parties recognized that the deficit would increase, and that that was going to be the price that we pay," Perino said.
The White House had earlier predicted next year's deficit at $407 billion. Figures for the 2008 budget year ending Sept. 30 may also set a record.
When Dubya took office in 2001, the CBO estimated the U.S. had a ten-year budget surplus of $5.6 trillion. Bush even trumpeted the surplus in a campaign ad back in 2000:
Bush for President, Inc. "Surplus" 30 sec. TV spot run in NH latter part of Jan. 2000. Maverick Media
Male Announcer [music]: George W. Bush's tax plan is called an economic agenda worthy of a new president.
The Bush plan reserves $2 trillion of the surplus to protect and strengthen Social Security and pay down the national debt. The rest is dedicated to priorities--education, rebuilding our military, and providing a real tax cut for every taxpayer.
Some Washington politicians say it's better to keep the money in Washington. Governor Bush believes we can meet priorities and still give families back more of what they earn.
Over to Iraq (a/k/a "Surgistan,") where two apparent female suicide bombers killed more than 50 people and injured some 240 others in Baghdad and Kirkuk. The Guardian puts the death and injured toll even higher, at 55 and 300.
When George W. Bush was an oil man (and not a very good one,) he named one of his companies Arbusto, meaning "little Bush" in Spanish. Others in the industry derisively called the company "El Busto," because it had a little meeting its prime directive: finding oil in Texas.
When El Busto's little brother was running Florida, he spent eight years exsanguinating state revenues by slashing taxes on wealthy Floridians and corporations (while cutting Medicaid and other healthcare benefits for the poor, disabled and elderly, and raising tuition at the state's colleges), and privatizing everything he could get his hands on, from state payroll services to prisons. Now that the state has a shiny new, totally not gay, Republican governor, we're supposed to be reaping the windfall of the twin Bush booms -- the national one that was supposed to be brought on by Dubya's aggressive tax cutting, and the local one that was supposed to be the "smart Bush brother's" legacy to Charlie Crist. Well ... a funny thing happened on the way to the boom: Florida, it seems, went bust. From today's Miami Herald:
TALLAHASSEE -- The top job-loss state in the nation. Shrinking wages. Collapsing population growth. Record home foreclosures.
Florida's economy is not just firmly and bleakly in the red ---- it will likely stay that way until next June, according to the state government's top economists who issued their most pessimistic financial forecast in years.
With few exceptions, the economists' Wednesday forecast shows that most economic indicators will do worse in this budget year when compared to a forecast they issued in February.
At the heart of the problem is the falling housing market, upon which Florida's economy has a Monopoly game-like reliance. The economists projected new housing construction will fall to about 60,000 units this year -- a decrease of 78 percent from a high of nearly 283,000 in 2005.
Total statewide construction expenditures, including public buildings, are expected to decrease by $10.6 billion, or 21.5 percent.
The most dire fact of all: Florida lost more jobs in the past 12 months -- 74,700 -- than any other state in the nation. And the economists predict that more people in construction, government, manufacturing, financial services, transportation and warehousing will be out of work soon.
''We were No. 1 in jobs created in the entire country,'' said Clyde Diao, one of Gov. Charlie Crist's economists, referring to the booming economy in 2005. ``Now, if you count the District of Columbia, we're 51.''
Frank Williams, the Department of Revenue's chief economist, agreed: ``We're No. 1 in job losses. Absolutely.''
Were it not for employment gains in the health, education and the low-paying services fields, they said, the job-loss numbers would be far higher. Construction lost 77,000 jobs and manufacturing lost 23,000 in the last year. By month's end, the experts project, Florida's job-loss rate will be higher the nation's for the first time since 2002.
Which leads us to another little problem for the Sunshine State. Smarter Bush's tax cut mania really caught on, especially with Florida homeowners, who have never missed an opportunity to lower their property taxes, at all costs. In January, Florida homeowners pushed through a constitutional amendment that slashed property taxes statewide, mostly for wealthy homeowners, by increasing the homestead exemption, while netting about $200 bucks for the average homesteader. But the pain from those cuts is now being felt statewide, as counties struggle to find places to cut. Take the Miami-Dade school system (the nation's fourth largest), which is struggling to slice $284 million from its budget to close a yawning deficit, without sending teachers to the picket lines. The county school board is considering everything from slashing its workforce to deleting school bus routes to close the gap. The county narrowly escaped cutting school police this week, when Superintendent Rudy Crew, who was apparently hoping to become Secretary of Education in a Hillary Clinton administration, according to a state official who asked not to be named, tabled a proposal to cut the force. Statewide, Floridians are seeing the real world cost of tax cuts in the parks that are having to close early, cuts to desperately needed affordable housing and economic development progams, and inevitably, future cuts to police and fire services and pension benefits.
Florida's legislature has already slashed $6 billion from the budget, which according to the state constitution, must be balanced. Most of that money has come out of the hides of schools, services for the elderly and the poor, and Florida's infrastructure. The state is busy privatizing roads everywhere it can, to pass more costs onto already burdened drivers, who are paying some of the highest gas prices in the country. Home prices in the state are cratering, and yet Miami-Dade County (the largest county in Florida) still has a glut of unbought homes and condos. Downtown Miami is dotted with silent cranes and half built high rises that are a soaring symbol of Florida's economic meltdown, which TIME Magazine recently chronicled in an article asking whether Florida has become the "Sunset State." And even with the glut of housing, Miami-Dade and other counties are in the middle of an affordable housing crisis and a foreclosure crisis (Florida is second only to California in home defaults.) Indeed, a new NPR/Kaiser Family Foundation poll shows half of Floridians struggling on multiple fronts: falling home prices, a credit crunch, and soaring fuel and food prices. (Low icome housing and worker's rights advocate Gihan Pereira, co-founder of the Miami Workers Center, this week called Florida "the canary in the coal mine," and indeed the state's troubles have been an ominous economic harbinger for the nation.)
And what can our fair governor, who has gone so far as to promise to hand over Florida's beaches to Chevron AND marry a woman in order to become John McCain's running mate, do to turn things (including his veep prospects) around?
"This time next year, we wouldn't expect to be a whole lot better than we are right now," said Amy Baker, coordinator of the Office of Economic & Demographic Research, who headed the economic estimating conference. "The question is, does it continue on beyond that, or does it start improving?"
And Florida's prospects are further clouded by past failures, particularly during the Bush years, to invest in education, in order to create more potential high wage job earners, rather than relying on low wage service and tourism industry jobs to fill the bill. Florida continues to languish near the bottom in high school graduation rates (we have the sixth lowest rate in the U.S.), and according to the Alliance for Excellent Education, "if the dropouts from Florida's Class of 2008 had stayed in school and earned diplomas, the economy of the Sunshine State could have enjoyed an additional $25.3 billion in wages, taxes and productivity over those former students' lifetimes." The sad news for Florida is that the state for years was one of those "high growth, high poverty" states at the greatest risk of economic decline, and now that the decline has come, the state's tax cutting leaders have few cards to play.
Governor Crist promised last year that the latest tax cuts would, produce a real estate-driven "sonic boom" that would send Florida's economy into growth overdrive. It's turned out to be more of a sonic bubble. And it has officially burst. |
Does it sometimes seem like we're living though a looking glass version of the 1970s? Trouble with Iran (whom the Bush administration is now not quite but sort of talking to) an economy in turmoil, and skyrocketing inflation (which in May and June saw the largest jump since 1982, two years after Ronald Reagan took over management of the country from Jimmy Carter) coupled with stagnant growth, producing the very 1970s-like phenomenon called "stagflation."
Just like the 1970s, oil and gas are at the root of the problem. High gas and diesel prices are being passed on to consumers by every company whose goods are delivered by truck, including food, furniture, hell, everything. And wages have fallen behind inflation, and Americans are being forced to drain their savings and 401K plans just to keep up. Even with rising prices, companies are struggling to stay in the black, and often failing (take the airline industry for instance. It's headed down the drain.) Consumer confidence is way down, even as the right continues to shill for the oil companies and pooh-pooh the problems of ordinary Americans.
And there's a new communal spirit growing in America. It's called borders!
Meanwhile, Congressman Dennis Kucinich uncovers thousands of military veterans who have been denied disability and pension benefits by the Bush administration.
President Bush sought to reassure shaky markets and frightened consumers about worsening economic conditions today, asserting that the U.S. economy is fundamentally sound and urging Congress to quickly pass legislation to shore up mortgage giants Fannie Mae and Freddie Mac....
...The president also played down predictions that large numbers of banks may be on the verge of failure and spoke at length about the federal insurance system that guarantees deposits up to $100,000. Federal regulators last week took over IndyMac Bancorp of California amid a run on the bank's reserves.
"My hope is that people take a deep breath and realize their deposits are safe. I think the system is basically sound," Bush said.
"I'm not an economist, but I do believe we're growing," he said later, adding that the economy is "not growing the way it should."
Maybe Dubya should have bypassed the presser and given his speech directly to his Fed chairman...
The twin problems of slow growth and rising prices are making it difficult for federal policymakers to chart a course for the economy, Federal Reserve Chairman Ben S. Bernanke said today, as he outlined a raft of problems facing the country -- including "ongoing strains" at banks and finance companies and a string of recent job losses and declining home prices.
... or to Wall Street...
Wall Street was lower again today, with major U.S. indexes initially off as much as 1.5 percent. Shares, however, rebounded to near even by midday as news came oil prices fell by more than $8 a barrel, to around $136, as investors weighed the degree to which a global slowdown will undercut demand. Asian and European markets fell overnight.
Or struggling businesses ...
Bernanke described worry about the run-up in the price of oil and other commodities, and said that it may lead businesses to raise prices for goods other than food and energy in the future.
"With businesses facing persistently higher input prices, they may attempt to pass through such costs into prices . . . more aggressively than they have so far," Bernanke said.
DETROIT (AP) — General Motors Corp. said Tuesday it will lay off salaried workers, cut truck production, suspend its dividend and borrow $2 billion to $3 billion to weather a severe downturn in the U.S. market. GM said the moves will raise $15 billion to help cover losses and turn around its North American operations, including $10 billion from internal cost-cutting and $5 billion from selling some assets and borrowing against others. "In short, our plan is not a plan to survive. It is a plan to win," GM Chairman and CEO Rick Wagoner said in a broadcast to employees.
GM's shares fell as much as 6 percent to a new 54-year low of $8.81, then rebounded to $9.94 in midday trading, up 56 cents from Monday's close.
Chief Operating Officer Fritz Henderson said GM wants to reduce its total salaried costs in the U.S. and Canada by more than 20 percent. A large chunk of the reduction, he said, would come from cutting health care benefits for salaried retirees. Those people would get a pension increase from the company's overfunded pension fund to help compensate for Medicare and supplemental insurance, the company said.
Several thousand jobs will be cut through normal attrition and retirements, and through early retirement and buyout offers, Henderson said. The company could resort to involuntary layoffs but does not want to, he said.
(Bloomberg) -- The dollar declined to a record low against the euro on speculation Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson will say credit- market losses are hurting U.S. economic growth.
The currency dropped the most versus the yen since the March collapse of Bear Stearns Cos. and fell to a 25-year low versus the Australian dollar on concern confidence in the debt of Fannie Mae and Freddie Mac will diminish even after the U.S. government pledged support for the firms. The pound surpassed $2 for the first time since July 1 as inflation accelerated.
The economy showed the depth of its twin problems on Tuesday, slow growth and rising inflation, as the nation wrestled with a teetering financial system, a slumping dollar and rising prices for food and fuel.
The Labor Department reported that soaring costs for gasoline and food pushed inflation at the wholesale level up by a bigger-than-expected 1.8 percent in June, leaving inflation rising over the past year at the fastest pace in more than a quarter-century.
Over the past 12 months, wholesale prices are up 9.2 percent, the largest year-over-year surge since June 1981, another period when soaring energy costs were giving the country inflation pains.
Core inflation, which excludes energy and food, was better behaved in June, rising by just 0.2 percent, slightly lower than expectations.
A separate report from the Commerce Department showed that all the economy's problems were weighing on the consumer. Retail sales edged up by a tiny 0.1 percent in June, weaker than had been expected, as consumer spending was held back by a sharp plunge in sales at auto dealerships.
While the Federal Deposit Insurance Corporation (FDIC) is keeping secret its official list of 90 troubled banks, ABC News has obtained other lists prepared by several research groups and financial analysts.
The lists use versions of the so-called "Texas ratio" which compare a bank's assets and reserves to its non-performing loans, based on financial data made public by the FDIC in March.
Analysts say banks with a ratio over 100 per cent would be the most likely to fail, based on what happened to Texas savings and loans during the 1980's.
When Indymac collapsed, 1929 style, last week, it wasn't a sign of things to come, it was a loud, clanging alarm bell that should even alert the Marie Antoinette's on the right (like Phil Gramm,) that the U.S., and indeed the world, economy is in trouble. The bank is being taken over by the feds after pannicky account holders withdrew $1 billion in a run on the bank on Friday.
Depending on which international headline you believe, Indymac FSB is either the second, or the third largest bank collapse in U.S. history. Britain's Sky News had one other interesting tidbit:
IndyMac was founded in 1985 by David Loeb and Angelo Mozilo, who also founded Countrywide, another big mortgage lender whose loans helped fuel the housing boom.
Countrywide was taken over last week by Bank of America Corp.
That says volumes, doesn't it? The bank reopens this morning as Indymac Federal Bank, under control of the FDIC. So what was the largest U.S. bank collapse? For that we go to the Times of London:
NetBank is the largest US bank to fail since the savings-and-loans crisis in the early 1990s. The bank, based in Geor-gia and launched in the late 1990s, had $2.5 billion in assets and was seen as a leading inter-net-only savings bank. The Office of Thrift Supervision, which regulates American lenders, blamed the bank’s demise on thumping loan losses and poor underwriting standards.
NetBank’s problems were made worse by its decision to expand into sub-prime mortgages, leaving it exposed to the meltdown in the US housing market.
ING, the Dutch bank, is taking over NetBank’s customers and $1.5 billion in insured savings deposits. It paid just $15m for the savings book.
And just for Phil Gramm, the Carpe Diem blog helpfully chronicles the history of big, bad, bank failures in the U.S. of A, and concludes that unlike the high water mark for bank failures in the 1980s, today's market really isn't all that bad.
Venezuelan President Hugo Chavez warns of $300 a barrel oil if three U.S. oil giant Exxon Mobile succeeds in pushing through a freeze on that country's assets in a dispute over a nationalized oil project.
Meanwhile, this bud's pour vous: Annheuser-Busch has been sold to Belgium's InBev. The company's St. Louis, MO hometown will become the headquarters for the company's North American division. A-B has about a 50 percent share of the U.S. beer market. The company has said it will retain "key management" and distribution personnel, but has made no representation about other U.S. jobs.
John McCain's chief economic adviser is not only the author of the Enron loophole, he's also an idiot. Let's go to the Moonies for more on that:
In an interview with the Washington Times, Phil Gramm, a former Texas senator who is now vice chairman of UBS, the giant Swiss bank, said he expects Mr. McCain to inherit a sluggish economy if he wins the presidency, weighed down above all by the conviction of many Americans that economic conditions are the worst in two or three decades and that America is in decline.
"You've heard of mental depression; this is a mental recession," he said, noting that growth has held up at about 1 percent despite all the publicity over losing jobs to India, China, illegal immigration, housing and credit problems and record oil prices. "We may have a recession; we haven't had one yet."
"We have sort of become a nation of whiners," he said. "You just hear this constant whining, complaining about a loss of competitiveness, America in decline" despite a major export boom that is the primary reason that growth continues in the economy, he said.
"We've never been more dominant; we've never had more natural advantages than we have today," he said. "We have benefited greatly" from the globalization of the economy in the last 30 years.
Mr. Gramm said the constant drubbing of the media on the economy's problems is one reason people have lost confidence. Various surveys show that consumer confidence has fallen precipitously this year to the lowest levels in two to three decades, with most analysts attributing that to record high gasoline prices over $4 a gallon and big drops in the value of homes, which are consumers' biggest assets.
"Misery sells newspapers," Mr. Gramm said. "Thank God the economy is not as bad as you read in the newspaper every day."
Yeah, those 1 million homes in foreclosure? The millions of Americans who are out of work, out of gas money, and behind on their bills? An optical illusion!
Questioned whether Gramm, who has been rumored as a potential Treasury secretary for McCain, would still have a position in his administration, the GOP candidate underscored his unhappiness with his former colleague's comments without directly answering the question.
"I think Sen. Gramm would be in serious consideration for ambassador to Belarus," McCain said with a broad smile. "Though I'm not sure the citizens of Minsk would welcome that."
But in comments clearly prepared for the anticipated Gramm question that would open the press conference, McCain underlined his disagreement.
"I believe that the person here in Michigan who just lost his job isn't suffering from a 'mental recession,'" McCain said, citing Gramm's remarks published in the Washington Times. "I believe that the mother here in Michigan, around the country trying to get enough money to educate her children isn’t 'whining.'"
America, McCain made sure to note, "is in great difficulty."
Former senator Phil Gramm -- under fire for saying the United States has "become a nation of whiners" -- said in an interview today that he meant the nation's leaders were whiners, not its citizens.
But the top adviser to Sen. John McCain repeated his assertion that the economy is not in recession, and he declined to retract the comments quoted yesterday in the Washington Times.
"I'm not going to retract any of it. Every word I said was true," Gramm said.
Yeah, boy! Way to not help out your candidate by backing down!
The real trouble for Mr. Straight Talk is that Gramm's remarks aren't just reflective of his own evil inner core, they're also revelatory of his candidate. Marc Ambinder explains:
McCain has baggage. Begin with his own statements about not undering economics; add to that a few reversals on policy, a very odd phrase about Social Security, a party linkage to President Bush, and pressure from professional conservatives to adopt an approach to economic problems that is more tough-love than lovey-dovey. Phil Gramm is not just an adviser; he's been a close adviser for years, and has influenced McCain's economic policies. Go back to the fundamental paradox of conservatives and economic crises: in many instances, the proscribed solution is to do nothing; the political imperative is exactly the opposite. Usually, a compromise takes the form of half-measures that will pacify the public and not weaken the fundamental architecture of the economy.
Today, Gramm has given voice to an idea that is not uncommon among ideologically conservative economists: the recession is as much a creation of our anxiety about the future as it is a reflection of economic fundamentals.
"Look, the economy is bad. It is far below what we Americans have a right to expect, but we are not in a recession," he said. "We may or may not have one in the future, but based on the data we are not in a recession. But that does not mean all this talk does not have a psychological impact."
Gramm represents one distinct force that is pulling at McCain: orthodox, academics who experience the world through graphs, charts and data. The other is represented on the campaign by policy chief Doug Holtz-Eakin, who experiences the economic world through the language of politics. Holtz-Eakin is more of an Eisenhower Republican than a Kemp Republican, although Gramm has always been a big proponent of a balanced budget. Gramm generally wants government to get out of the way and lets crises work their way out through the market, believing that interventions distort the market. Holtz-Eakin's economic bent is more applied; politics demands that leaders offer solutions, even if solutions are more about quelling anxiety than they are about fixing a problem.
These two approaches have ranked McCain before; Gramm's fingerprints were all over McCain's first attempt to explain the housing crisis: measured, incremental and market-oriented. Didn't work. McCain looked like an ogre, although professional conservatives cheered. Two weeks later, Gramm had little to do with McCain's second swing of the bat, a specific set of proposals designed to help families hit hardest by the crisis. There were echoes of the Grammar, if you will, in the second speech, but the tone was softer and less academic, the proposals were more generous, and the message was unambiguous: McCain understands the pain.
Rush Limbaugh signs an eight year, $400 million deal to continue his top-rated radio show. Premiere Radio Networks: Palm Beach County's property tax rolls (and the underground pill trade), thank you.
Meanwhile, on the other end of the pay scale: U.S. employers cut another 62,000 jobs in June, making it six months in a row of job cuts for the Bush economy. And, says the New York Times:
... as job losses mount, even those still on payrolls have felt the pain: employers are cutting hours for their full-time employees and shrinking salaries, just as workers face record-high prices for gasoline and food.
The unemployment rate stayed steady in June at 5.5 percent, the highest level in four years. The elevated figure dispelled speculation among some economists that last month’s half-percentage point jump, the biggest monthly spike in 22 years, was a statistical anomaly.
...In the last 12 months, the economy had seen a net gain of only 15,000 jobs, the lowest net increase since November 2003.
The Hill reports that both the Obama and McCain campaigns are touting plans to turn the bleak employment picture around.
The Democratic presidential candidate promised that he would “restore broad-based, bottom-up growth that benefits all Americans.”
“I will provide working families with a middle-class tax cut; fight for affordable health care and college tuition; work to help raise workers' wages, and invest in infrastructure, education and a clean energy future to create millions of new jobs,” he said.
Sen. John McCain also noted that Americans are feeling the pain of a struggling economy and said that “Washington can no longer abdicate its responsibility to act.”
“To get our economy back on track, we must enact a jobs-first economic plan that supports job creation, provide immediate tax relief for families, enact a plan to help those facing foreclosure, lower healthcare costs, invest in innovation, move toward strategic energy independence and open more foreign markets to our goods,” the Arizona Republican said.
Both sought to paint the other party as responsible for the woes.
“Last night, President Uribe and the defense minister did brief us that the operation was going to take place today,” said McCain, the presumptive GOP presidential nominee, who was visiting Colombia Wednesday to promote a free trade agreement and to discuss drug trafficking.
“Today, I spoke by phone to President Uribe. He told me some of the details of the dramatic rescue of the people who were held hostage. Three Americans are now free and Ingrid Betancourt is now in good condition,” said McCain. “I’m pleased with the success of this very high-risk operation.”
No word on whether he got wind of the raid from the Bush administration before he planned his trip...
The WaPo, meanwhile, has a story on the Bush administration's shocking and entirely unexpected foreknowledge of a U.S. oil company's plans to do an end-run around the new Iraqi government, by cutting an oil deal with the Kurds:
Bush administration officials told Hunt Oil last summer that they did not object to its efforts to reach an oil deal with the Kurdish regional government in northern Iraq, even while the State Department was publicly expressing concern that such contracts could undermine a national Iraqi petroleum law, according to documents obtained by a House committee.
Last fall, after the deal was announced, the State Department said that it had tried to dissuade Hunt Oil from signing the contract with Kurdish regional authorities but that the company had proceeded "regardless of our advice." Although Hunt Oil's chief executive has been a major fundraiser for President Bush, the president said he knew nothing about the deal.
Yesterday, however, Henry A. Waxman (D-Calif.), chairman of the House Committee on Oversight and Government Reform, released documents and e-mails showing that for nearly four months, State and Commerce department officials knew about Hunt Oil's negotiations and had told company officials that there were no objections. In one note, a Commerce Department official even wished them "a fruitful visit to Kurdistan" and invited them to contact him "in case you need any support."
That guidance contradicted the administration's public posture. The Bush administration made an Iraqi national petroleum law, which has still not been adopted, a top priority last year in the hope it would more tightly bind the country's regions together and open the way for international oil companies to invest in much larger oil fields south of Iraq's Kurdish region. The State Department said, and continues to assert, that it opposes any contract with a regional Iraqi authority in the absence of a national petroleum law.
The Bush administration dabbling in secret oil deals? Say it isn't so!
Robert Mugabe retains power, dodges the Hague ... plus other morning news
Swiftboat veterans seek to reclaim the dignity of the name from the sleazeballs who attacked John Kerry's service in Vietnam in 2004. Meanwhile, T. Boone Pickens is a phony and a liar, just like the attack group he funded...
A group of American advisers led by a small State Department team played an integral part in drawing up contracts between the Iraqi government and five major Western oil companies to develop some of the largest fields in Iraq, American officials say.
The disclosure, coming on the eve of the contracts’ announcement, is the first confirmation of direct involvement by the Bush administration in deals to open Iraq’s oil to commercial development and is likely to stoke criticism.
In their role as advisers to the Iraqi Oil Ministry, American government lawyers and private-sector consultants provided template contracts and detailed suggestions on drafting the contracts, advisers and a senior State Department official said.
And why would they do such a thing?
Though enriched by high prices, the companies are starved for new oil fields. The United States government, too, has eagerly encouraged investment anywhere in the world that could provide new oil to alleviate the exceptionally tight global supply, which is a cause of high prices.
Iraq is particularly attractive in that light, because in addition to its vast reserves, it has the potential to bring new sources of oil onto the market relatively cheaply.
As sabotage on oil export pipelines has declined with improved security, this potential is closer to being realized. American military officials say the pipelines now have excess capacity, waiting for output to increase at the fields.
Ah yes, the oil. The oil!
“We pretend it is not a centerpiece of our motivation, yet we keep confirming that it is,” Frederick D. Barton, senior adviser at the Center for Strategic and International Studies in Washington, said in a telephone interview. “And we undermine our own veracity by citing issues like sovereignty, when we have our hands right in the middle of it.”
And the story wouldn't be complete without a completely contradictory comment from Condi Rice:
Criticism like that has prompted objections by the Bush administration and the secretary of state, Condoleezza Rice, who say the deals are purely commercial matters. Ms. Rice, speaking on Fox News this month, said: “The United States government has stayed out of the matter of awarding the Iraq oil contracts. It’s a private sector matter.”
Meanwhile, the Washington Post has a wrenching, first-person account of treating PTSD among our troops returning from the dual war zones.
The soldier from Ohio studied the wall carefully. It was amazing, he said, how much the layout of those picture frames resembled the layout of the street in Tikrit that was seared in his memory; the similarity had leapt out at him the first time he came in for a session. He traced the linear space between the frames, showing me where his Humvee had turned and traveled down the block, and where the two Iraqi men had been standing, close -- too close -- to the road.
"I knew immediately something was wrong," he said. The explosion threw him out of the vehicle, with his comrades trapped inside, screaming. Lying on the ground, he returned fire until he drove off the insurgents. His fellow soldiers survived, but nearly four years later, their screams still haunted him. "I couldn't go to them," he told me, overwhelmed with guilt and imagined failure. "I couldn't help them."
That soldier from Ohio is one of the nearly 40,000 U.S. troops diagnosed by the military with post-traumatic stress disorder after serving in Iraq and Afghanistan from 2003 to 2007; the number of diagnoses increased nearly 50 percent in 2007 over the previous year, the military said this spring. I saw a number of soldiers with war trauma while working as a psychologist for the U.S. Army. In 2006, I went to Fort Dix as a civilian contractor to treat soldiers on their way to and return from those wars. I was drawn by the immediacy of the work and the opportunity to make a difference. What the raw numbers on war trauma can't show is what I saw every day in my office: the individual stories of men and women who have sustained emotional trauma as well as physical injury, people who are still fighting an arduous postwar battle to heal, to understand a mysterious psychological condition and re-enter civilian life. As I think about the soldiers who will be rotating back home from Iraq this summer as part of the "pause" in the "surge," as well as those who will stay behind, I remember some of the people I met on their long journey back from the war. ...
So now we know: Michelle Obama shops at Target, hates pantyhose ("painful") and made the "fist pump" cool.
And Cindy McCain does lots of under-the-radar charity work, favors Oscar de la Renta and has a credit card bill that's been somewhere between $100,000 and $250,000 this year.
But rest assured, America: With a major female presidential candidate no longer in the running, there's plenty more we'll learn about the stylistic, literary, grooming and culinary penchants of the two women who aspire to be first lady of the United States.
Three hours after John McCain’s campaign bus left General Motors’ plant in Lordstown, Ohio, workers started streaming in and out of the factory’s gates for the mid-afternoon shift change.
Only a fraction had caught a glimpse of the Republican presidential candidate when he toured the production line and still fewer attended the meeting he held in an adjacent conference room. “Management invited him,” said 38-year-old Tim Niles. “It had nothing to do with us. We’re with Obama.”
Mr Niles, a white, working-class Democrat who wears a “Bubba’s Army” T-shirt, is exactly the kind of voter Mr McCain was courting on his trip to northern Ohio on Friday. On the day Barack Obama and Hillary Clinton staged their first joint rally, Mr McCain was trying to undermine their reconciliation by wooing Mrs Clinton’s blue-collar base.
His efforts appeared wasted on many. “We’re a working-class factory,” said 49-year-old Greg George. “McCain calls himself moderate, but his party has been a disaster for working people over the past eight years.”
And the U.S. warns that Mexico's battle against powerful drug cartels is threatening to escalate into a crippling, all-out war.
U.S. unemployment keeps tacking upward, suggesting that we are in, or very near, a very real recession. From CBS Marketwatch:
The U.S. unemployment rate jumped by a half percentage point to 5.5% in May on the biggest increase in seasonally adjusted unemployment in 33 years, the Labor Department reported Friday. Nonfarm payrolls fell by 49,000 in May, the fifth consecutive decrease and in line with expectations of economists. The economy has lost 324,000 jobs so far this year. Unemployment rose by 861,000 to 8.5 million, the government said. The 0.5 percentage point increase in the unemployment rate was a shock, as economists expected a much smaller 0.1 percentage point gain to 5.1%. The jobless rate is the highest since October 2004. It was the biggest percentage point gain in unemployment since 1986.
The folks on CNBC's "Squawkbox" yesterday were hoping for a slight job GAIN. I guess you could say they were a bit off base.
The hardest hit sectors aren't surprising: retail (nobody's buying jack, not even with the stimulus checks -- those are going in the gas tank and to the grocery store, if not to bill collectors...) along with manufacturers, homebuilders and airlines.
LONDON (AP) -- BP PLC and Royal Dutch Shell PLC, Europe's two biggest oil producers, posted forecast-busting first-quarter earnings on Tuesday thanks to record crude oil prices that are expected to bolster profits across the industry. The combined profits of $17 billion reignited calls for a windfall tax on oil profits as consumers struggle to pay for food and fuel.
... BP posted a 63 percent surge in first-quarter net profit to $7.6 billion (4.9 billion euros), while Shell reported a 25 percent rise, to a record $9.08 billion (5.81 billion euros).
Revenue at BP jumped 44 percent to $89.2 billion (57.1 billion euros), while sales at Shell soared 55 percent to $114 billion (72.95 billion euros).
Last week ConocoPhillips reported a 16 percent rise in net income to $4.14 billion. Like BP and Shell, the third biggest U.S. producer far outpaced industry expectations. More big profits are expected from the biggest two U.S. companies, Exxon Mobil Corp. and Chevron Corp., when they report first-quarter earnings later this week.
Crude oil hit $111.80 per barrel during the quarter, while gas jumped an average of 22 percent. Crude has pushed even higher since, reaching a record $119.93 per-barrel this week.
BP shares jumped 5.7 percent to 611.5 pence ($12.06, while Shell rose 5.2 percent to 26.03 euros ($40.51).
81 - the percentage of Americans in a new poll that say the country is on the wrong track. That's the worst showing for right track/wrong track EVER in this poll, stretching back to 1986. (Another 14 percent say the country is headed in the right direction, leading to serious questions about what the hell is wrong with the other 5 percent...) In the NYT/CBS poll, most respondents blamed regulators, rather than banks or homeowners, for the current housing crisis, reflecting a tendency for people to "blame up" -- meaning that those with a closest proximity; your neighbor (or yourself) and your neighborhood bank, get less blame. And most Americans oppose bailing out banks, preferring that the government offer individual help to homeowners. Overall, the poll finds Americans pessimistic about jobs, unhappy with both the president and Congress, and slightly preferring either Democratic presidential candidate to John McCain. On the "Ronald Reagan test" question, 78 percent say the country is worse off than it was five years ago (another high for the poll) with just 4 percent saying we're better off. The complete poll is available here.
$40 million - The amount of money Barack Obama raised for his presidential campaign last month. Hillary Clinton's campaign raised half that amount, and her campaign is being completely outspent where it counts: in upcoming primary states like Pennsylvania and North Carolina (In PA, for instance, Hillary has a $500,000 television buy in the field, versus $3 million in television and radio ads for Obama.) To her credit, Clinton has raised $175 million so far in the campaign. Trouble is, Obama has raised $240 million, and her donor base, which has by and large given in larger individual amounts, is getting tapped out, while her fundraisers are expressing exhaustion, rather than enthusiasm.
1,276,000 - The number of individual donors who have contributed to the Obama campaign. According to the Times: "More than 442,000 people contributed to the campaign in March, with more than 218,000 of them giving for the first time. The average contribution in March was $96; the total number of contributors to date comes to 1,276,000."
2 - the point spread between Hillary Clinton and Barack Obama in a new Insider Advantage poll of Pennsylvania voters. I don't know how reliable this poll is, and I'd probably go with the latest Qpac poll myself,) but it's not good news for Camp Clinton, who surely see that the race in this must-win-big state for her, is tightening.