The Obama administration and Democrats have consistently blamed the financial problems that the country has faced on Wall Street, banks and their greed. But it has just as consistently ignored the role and cost of two quasi-governmental agencies which were also in the center of the financial storm – Freddie Mac and Fanny Mae. The Wall Street Journal points out that the cost to the government (and therefore the taxpayer) of these two institutions has been kept “off books” by the fiction that they’re “private institutions”. But, in fact, they’re really not:
As the CBO notes in a recent background paper, the standards for when to include government-sponsored entities in the budget go back to the 1960s, when a Presidential commission laid out a set of questions.
To wit: “Who owns the agency?” (In the case of Fan and Fred, taxpayers.) “Who supplies its capital?” (Taxpayers.) “Who selects its managers?” (The federal government.) And finally, “Do the Congress and the President have control over the agency’s program and budget, or are the agency’s policies the responsibility of the Congress or the President only in some broad ultimate sense?” (The feds have control in every sense.)
The point, of course, is the claim they’re “quasi-governmental” or “private” entities is fiction. They are, in every way, controlled by the federal government and were as involved in the financial melt down as any other institution. In fact, there’s an argument that they were the instututions which made the housing bubble possible and, through their policies, encouraged it.
By John W. Whitehead
President, The Rutherford Institute
“As I look at America today, I am not afraid to say that I am afraid.” – Bertram Gross, Friendly Fascism: The New Face of Power in America
Ominous developments in America have been a long time coming, in part precipitated by “we the people” – a citizenry that has been asleep at the wheel for too long. And while there have been wake-up calls, we have failed to heed the warnings.
Just consider the state of our nation:
We’re encased in what some are calling an electronic concentration camp. The government continues to amass data files on more and more Americans. Everywhere we go, we are watched: at the banks, at the grocery store, at the mall, crossing the street. This loss of privacy is symptomatic of the growing surveillance being carried out on average Americans. Such surveillance gradually poisons the soul of a nation, transforming us from one in which we’re presumed innocent until proven guilty to one in which everyone is a suspect and presumed guilty. Thus, the question that must be asked is: can freedom in the United States flourish in an age when the physical movements, individual purchases, conversations and meetings of every citizen are under constant surveillance by private companies and government agencies?
We are metamorphosing into a police state. Governmental tentacles now invade virtually every facet of our lives, with agents of the government listening in on our telephone calls and reading our emails. Technology, which has developed at a rapid pace, offers those in power more invasive, awesome tools than ever before. Fusion centers – data collecting agencies spread throughout the country, aided by the National Security Agency – constantly monitor our communications, everything from our internet activity and web searches to text messages, phone calls and emails. This data is then fed to government agencies, which are now interconnected – the CIA to the FBI, the FBI to local police – a relationship which will make a transition to martial law that much easier. We may very well be one terrorist attack away from seeing armed forces on our streets – and the American people may not put up much resistance. According to a recent study, a greater percentage of Americans are now willing to sacrifice their civil liberties in order to feel safer in the wake of the failed crotch bomber’s attack on Christmas Day.
President Obama’s first State of the Union address. (PHOTO CREDIT: Getty Images)
After the jump, read the full text of President Obama’s first State of the Union address as prepared for delivery:
Madame Speaker, Vice President Biden, Members ofCongress, distinguished guests, and fellow Americans:
Our Constitution declares that from time to time, the President shall give to Congress information about the state of our union. For two hundred and twenty years, our leaders have fulfilled this duty. They have done so during periods of prosperity and tranquility. And they have done so in the midst of war and depression; at moments of great strife and great struggle.
It’s tempting to look back on these moments and assume that our progress was inevitable – that America was always destined to succeed. But when the Union was turned back at Bull Run and the Allies first landed at Omaha Beach, victory was very much in doubt. When the market crashed on Black Tuesday and civil rights marchers were beaten on Bloody Sunday, the future was anything but certain. These were times that tested the courage of our convictions, and the strength of our union. And despite all our divisions and disagreements; our hesitations and our fears; America prevailed because we chose to move forward as one nation, and one people.
Again, we are tested. And again, we must answer history’s call.
One year ago, I took office amid two wars, an economy rocked by severe recession, a financial system on the verge of collapse, and a government deeply in debt. Experts from across the political spectrum warned that if we did not act, we might face a second depression. So we acted – immediately and aggressively. And one year later, the worst of the storm has passed.
But the devastation remains. One in ten Americans still cannot find work. Many businesses have shuttered. Home values have declined. Small towns and rural communities have been hit especially hard. For those who had already known poverty, life has become that much harder.
This recession has also compounded the burdens that America’s families have been dealing with for decades – the burden of working harder and longer for less; of being unable to save enough to retire or help kids with college.
So I know the anxieties that are out there right now. They’re not new. These struggles are the reason I ran for President. These struggles are what I’ve witnessed for years in places like Elkhart, Indiana and Galesburg, Illinois. I hear about them in the letters that I read each night. The toughest to read are those written by children – asking why they have to move from their home, or when their mom or dad will be able to go back to work.
Since everyone else is throwing in their two cents about 1) whether Ben Bernanke should be reappointed to a second term as Federal Reserve chairman; 2) what moves the FOMC will (or should) make next; and, 3) the policymaking and regulatory role the Fed will (or should) play in future, I figured I might as well do the same.
Although I didn’t quite plan it this way, below are three posts — my six cents, you might say — published today byGoing Concern, Sense on Cents, and Wall St. Cheat Sheet, respectively [all of which have long been on my blogroll, as it happens], which should give you some sense of where I stand when it comes to Mr. Bernanke and our nation’s central bank:
By the summer of 2009, shortly after the H1N1 flu pandemic had first emerged, there was a waiting list for the first several million doses of the forthcoming new flu vaccine. At the head of the line, naturally, were the world’s richest nations. “Again we see the advantage of affluence,” said Margaret Chan, the head of the World Health Organization (WHO), at a news conference on July 14. “Again we see access denied by an inability to pay.” Describing H1N1 as “entirely new and highly contagious,” Chan scolded rich countries at the time for hoarding the “lion’s share” of the global H1N1-vaccine supply.(Comment on this story below.)
Six months later, Chan’s admonitions seem prescient. Rich countries’ hoards have become massive surpluses, and many nations are now trying frantically to cancel pending orders of vaccines or transfer them to poorer nations. France, which had ordered enough of the vaccine to inoculate its entire population of 60 million, has so far used only 5 million doses and now wants to cancel 50 million doses and sell millions more. Similarly, the Netherlands has a 19 million–dose order for sale to other countries, while Germany is in talks with drug manufacturers to halve its order of 50 million doses and sell off millions of others. Switzerland, Spain and Britain are also considering giving away or selling the millions of doses of the vaccine they have received or have on order. The U.S., which has so far distributed 160 million of the 251 million doses it purchased to doctors, hospitals and other health care providers across the country, has yet to make a decision on whether it will have an overflow and what it will do with any surplus.(Watch TIME’s video “Chicken Eggs and Antigens: How the H1N1 Vaccine Is Made.”)
As everybody knows, AIG got a hugegovernment bailout in September 2008 to help make payments on derivatives contracts with banks, including Goldman. Yet in the previous month, Goldman approached AIG about “tearing up” its contracts, according to a November 2008 analysis by BlackRock, then an adviser to the New York Fed.
We should get back with Goldman. I will talk with Bill.
Date: 10/31/2008 6:57 PM.
Also, I spoke to Manzari this morning. He asked me to stand down on tearing up / unwinding CDS trades on the CDO portfolio.
That appears to be a smoking gun in that it documents that there was an active negotiation on “tearing up” – that is, unwinding CDS trades at less than 100 cents on the dollar and that negotiation was intentionally terminated.
Will we next be entertained by a discussion of what the word “is” means, or can we take the above at its obvious face value – that GOLDMAN ITSELF APPEARS TO HAVE OFFERED TO TEAR UP THE CDS ON AIG’S PORTFOLIO!
If there indeed was such an offer – as is all but stated here – and if indeed there was an order given to “stand down” on such negotiations then those persons responsible must be summoned to the dock and compelled to provide testimony, as it appears that one or more individuals who have already stated that no such negotiation was possible may have committed perjury, never mind dispensing more than $10 billion of taxpayer money to Goldman Sachs unnecessarily – at best.
The U.S. lost ground on many fronts. Scores declined in seven of the 10 categories of economic freedom. Losses were particularly significant in the areas of financial and monetary freedom and property rights. Driving it all were the federal government‘s interventionist responses to the financial and economic crises of the last two years, which have included politically influenced regulatory changes, protectionist trade restrictions, massive stimulus spending and bailouts of financial and automotive firms deemed “too big to fail.” These policies have resulted in job losses, discouraged entrepreneurship, and saddled America with unprecedented government deficits.
In the world-wide rankings of economic freedom, the U.S. fell to eighth from sixth place. Canada now ranks higher and boasts North America’s freest economy. More worrisome, for the first time in the Index’s 16-year history, the U.S. has fallen out of the elite group of countries identified as “economically free” by the objective measures of the Index. Four Asia-Pacific economies now sit atop the global rankings. Hong Kong stands in first place for the 16th consecutive year, followed by Singapore, Australia and New Zealand. Every region of the world maintains at least one country among those deemed “free” or “mostly free” by the Index.
I have a friend that tends to express his ideas about everything in the jargon of a securities trader. Of course, this is probably because he has been a very successful trader, both in bull and bear markets, for many years. “Every trend in history, even liberty, can be charted like a stock,” he has often observed. I tend to agree.
Wall Street bankers are set to receive a windfall of $108 billion in pay and bonuses – more than four times Australia’s annual military spending.
Goldman Sachs hot shots are expected to land an 81 percent rise in pay and bonuses for 2009, leading Wall Street’s biggest banks in rewarding staff with a total of $108 billion (US$100 billion).
Analysts predict that Goldman will hand out up to $22 billion to its 30,000 staff members – a windfall of around $715,780 a head – sparking further public backlash over fat cat pay.
Australia’s defence budget for 2009-10 was set at $25 billion in May last year – increased by $1.7 billion to help fund the cost of operations in Afghanistan ($1.4 billion), Iraq ($62.2 million) and East Timor ($213.8 millon).
Goldman, which will round up the US banks reporting season on Thursday, is bracing itself for outrage despite many staff taking bonuses in shares rather than cash, as well as higher-paid executives being forced to donate money to charity.
Rival bank JP Morgan was slammed by politicians across the globe on Friday when it revealed plans to pay up 24,654 traders a vast $10.1 billion in bonuses.
JP Morgan’s bankers in London are thought to be in line for an average $409,500, according to UK reports.
The bank was awarded $16.6 billion of US taxpayers’ cash amid the global financial crisislast year. It has since repaid the loan, and last week posted a huge jump in profits to almost $13 billion.
Meanwhile, rival Morgan Stanley is rumoured to be planning payouts worth $16 billion, despite being slated to have lost around $922 million this year.
Citigroup is expected to pay out $5.5 billion in bonuses to its investment banking arm, despite preparing to report losses of $9.2 billion this week, according to The Sunday Times.
The bank, which was the last of its peers to repay the US government, is expected to admit to paying staff more than $32.5 billion in bonuses, salaries and benefits overall.
The windfalls come days after the US PresidentBarack Obama unveiled a “Spank the Banks” tax which will net $125 billion over a decade, in a bid to curb the “obscene” bonus culture.
In the UK, the new 50 percent “super-tax” on bonuses above $44,000 should pull around $530 million into the government’s coffers.