Monday, March 30, 2009
Obama first International trip [Canada doesn't count] to Europe for the G20 will be a challenge for the administration. Daniel Hannan's comments are a sample of what Obama will face.
Sunday, March 29, 2009
This takes us back to happier times, when we sang in our chains like the sea to the melody of the whip!
Friday, March 27, 2009
By Pete Winn, Senior Writer/Editor
Treasury Secretary Timothy Geithner (left) and Federal Reserve Chairman Ben Bernanke testify before the House Financial Services Committee on Tuesday, March 24, 2009. (AP Photo/Evan Vucci)
(CNSNews.com) – An Arizona congressman wants to know why Treasury Secretary Timothy Geithner isn’t facing tough questions over his apparent about-face on whether the U.S. would consider China’s request to abandon the dollar as the global currency, in favor of a mix of currencies.
Geithner told Congress under oath Tuesday that he wouldn’t consider China’s proposal to shift away from the U.S. dollar toward a world currency -- then the following day (Wednesday) said the U.S. would “be open” to the idea.
Rep. John Shadegg (R.-Ariz.) thinks the Treasury secretary's swift about face demands an explanation.
“Beginning with his tax difficulties, and continuing through the puzzling narrative of when and what he knew about the AIG bonuses, Treasury Secretary Geithner has done little to inspire the confidence of the American people," said Shadegg. "Oddly, Secretary Geithner continued his bizarre and puzzling conduct this week, making flatly contradictory statements about the dollar in a span of only 24 hours. This weakens confidence not only in him, but in the currency he is entrusted to protect.
“On Tuesday," said Shadegg, "Secretary Geithner testified before the House Financial Services Committee that he ‘categorically renounces,’ recent proposals from China and others to shift away from the dollar as the world’s reserve currency. The next morning in New York, speaking to the Council on Foreign Relations, he was asked about the same proposals and said he is ‘quite open,’ to them.”
“Really, Mr. Secretary? Is it too much to ask that your position remain unchanged over a 24 hour period?” Shadegg asked.
The pledge to not move away from the dollar came on Tuesday, March 24.
During his appearance before the House Financial Services Committee, the Treasury Secretary told Rep. Michele Bachmann (R-Minn.) that he would “categorically renounce” recent proposals from China and others to shift away from the dollar as the world’s reserve currency:
Rep. Michele Bachmann (R-Minn.): We’ve seen both China, Russia, and Kazakhstan, make calls for an international monetary conversion to an international monetary standard as soon as the G20, and I’m wondering would you categorically renounce the United States moving away from the dollar and going to a global currency as suggested this morning by China and also by Russia, Mr. Secretary?
Treasury Secretary Timothy Geithner: I would, yes.
However, on March 25, at an appearance in New York at the Council on Foreign Relations, Geithner was asked about the proposal by People’s Bank of China Governor Zhou Xiaochuan in advance of the G20 summit.
He said: “As I understand his proposal, it’s a proposal designed to increase the use of the IMF’s (International Monetary Fund’s) special drawing rights. And we’re actually quite open to that suggestion.”
Those “special drawing rights” would constitute the new global reserve currency, Shadegg said, prompting what he called “the $64,000 question” -- Was Geithner being disingenuous?
“Is he intentionally dissembling here, or is he just lost and is so much in over his head that he’s not up to the job?” Shadegg asked in an interview with CNSNews.com.
“I would suggest that if this were a Republican member of the House, or if this were the minority leader of the House, or if this were a Bush administration official, the media would be all over these inconsistencies and saying, ‘How can anyone believe you Mr. Secretary?”
Geithner did not respond to requests for an interview from CNSNews.com or to further clarify his remarks, though a Treasury Department official did confirm that her boss had issued a clarification Wednesday after the remark prompted the dollar to tumble.
In that clarification, Geithner said there is '(N)o change in (the) dollar as the world's reserve currency” and that it is “likely to remain so for a long time.'"
Top financial media, including Bloomberg.com, reported the dollar declined by 1.3 percent against the euro just 10 minutes after Geithner’s remarks were publicized, but the currency rebounded 15 minutes later, after Geithner clarified his comment.
Shadegg said he was unimpressed at the statement.
“I’m glad he issued a clarification, but this is not a guy from whom we ought to be getting daily clarifications,” Shadegg said.
“I just think that there are so many questions swirling around the guy and he’s in such a key position that it is stunning that nobody is pressing him for straightforward answers,” Shadegg told CNSNews.com.
Shadegg said he also wants questions asked about other apparent inconsistencies in Geithner’s sworn testimony – specifically, when the secretary learned about controversial bonuses at the federally bailed out insurance giant AIG.
Shadegg said the secretary was involved in the seizure and bailout of AIG in his last job -- the head of the New York Fed -- and as incoming Treasury Secretary.
“Somebody ought to ask him point blank – and I’m sorry that it didn’t happen at the hearing this week -- ‘How can it be, Mr. Secretary, that you wrote the Speaker of the House and said that you didn’t know about the AIG bonuses until March 10, but when you answered a question about them (to the financial services committee), you said it was seven days earlier, on March 3.”
CNSNews.com correspondent Matt Cover contributed to this story.
Saturday, March 28, 2009
"Freedom is never more than one generation away from extinction. We do not pass it to our children in the bloodstream. It must be fought for, protected, and handed on to them to do the same, or one day we will spend our sunset years telling our children and our children's children what it was once like in the United States, where men were free".
Ronald Wilson Reagan
Friday, March 27, 2009
AND NOW COMING ATTRACTIONS OF THE NEXT MOVIE ... A COMEDY OR TRAGEDY ... YOU DECIDE!
Unintended consequences as the taxpayers scurry about trying to get out of Jurassic Park and away from Barney and the other dinosaurs [Dodd, Liberman, Snow, and the 531 others, Ron Paul excluded]. The TARP Bill portrayed by the dino-poop ... as the some taxpayers work feverishly away at their expectations ... "theirs gotta be a horse somewhere in here". Watch the trailer, see the full cast.
POSTER CHILD OF A SLUG!
Short Freddie Mac stay made him at least $320,000
By Bob Secter and Andrew Zajac
3:18 PM CDT, March 26, 2009
Before its portfolio of bad loans helped trigger the current housing crisis, mortgage giant Freddie Mac was the focus of a major accounting scandal that led to a management shake-up, huge fines and scalding condemnation of passive directors by a top federal regulator.
One of those allegedly asleep-at-the-switch board members was Chicago's Rahm Emanuel—now chief of staff to President Barack Obama—who made at least $320,000 for a 14-month stint at Freddie Mac that required little effort.
As gatekeeper to Obama, Emanuel now plays a critical role in addressing the nation's mortgage woes and fulfilling the administration's pledge to impose responsibility on the financial world.
Emanuel's Freddie Mac involvement has been a prominent point on his political résumé, and his healthy payday from the firm has been no secret either. What is less known, however, is how little he apparently did for his money and how he benefited from the kind of cozy ties between Washington and Wall Street that have fueled the nation's current economic mess.
Though just 49, Emanuel is a veteran Democratic strategist and fundraiser who served three terms in the U.S. House after helping elect Mayor Richard Daley and former President Bill Clinton. The Freddie Mac money was a small piece of the $16 million he made in a three-year interlude as an investment banker a decade ago.
In business as in politics, Emanuel has cultivated an aggressive, take-charge reputation that made him rich and propelled his rise to the front of the national stage. But buried deep in corporate and government documents on the Freddie Mac scandal is a little-known and very different story involving Emanuel.
He was named to the Freddie Mac board in February 2000 by Clinton, whom Emanuel had served as White House political director and vocal defender during the Whitewater and Monica Lewinsky scandals.
The board met no more than six times a year. Unlike most fellow directors, Emanuel was not assigned to any of the board's working committees, according to company proxy statements. Immediately upon joining the board, Emanuel and other new directors qualified for $380,000 in stock and options plus a $20,000 annual fee, records indicate.
On Emanuel's watch, the board was told by executives of a plan to use accounting tricks to mislead shareholders about outsize profits the government-chartered firm was then reaping from risky investments. The goal was to push earnings onto the books in future years, ensuring that Freddie Mac would appear profitable on paper for years to come and helping maximize annual bonuses for company brass.
The accounting scandal wasn't the only one that brewed during Emanuel's tenure.
During his brief time on the board, the company hatched a plan to enhance its political muscle. That scheme, also reviewed by the board, led to a record $3.8 million fine from the Federal Election Commission for illegally using corporate resources to host fundraisers for politicians. Emanuel was the beneficiary of one of those parties after he left the board and ran in 2002 for a seat in Congress from the North Side of Chicago.
The board was throttled for its acquiescence to the accounting manipulation in a 2003 report by Armando Falcon Jr., head of a federal oversight agency for Freddie Mac. The scandal forced Freddie Mac to restate $5 billion in earnings and pay $585 million in fines and legal settlements. It also foreshadowed even harder times at the firm.
Many of those same risky investment practices tied to the accounting scandal eventually brought the firm to the brink of insolvency and led to its seizure last year by the Bush administration, which pledged to inject up to $100 billion in new capital to keep the firm afloat. The Obama administration has doubled that commitment.
Freddie Mac reported recently that it lost $50 billion in 2008. It so far has tapped $14 billion of the government's guarantee and said it soon will need an additional $30 billion to keep operating.
Like its larger government-chartered cousin Fannie Mae, Freddie Mac was created by Congress to promote home ownership, though both are private corporations with shares traded on the New York Stock Exchange. The two firms hold stakes in half the nation's residential mortgages.
Because of Freddie Mac's federal charter, the board in Emanuel's day was a hybrid of directors elected by shareholders and those appointed by the president.
In his final year in office, Clinton tapped three close pals: Emanuel, Washington lobbyist and golfing partner James Free, and Harold Ickes, a former White House aide instrumental in securing the election of Hillary Clinton to the U.S. Senate. Free's appointment was good for four months, and Ickes' only three months.
Falcon, director of the Office of Federal Housing Enterprise Oversight, found that presidential appointees played no "meaningful role" in overseeing the company and recommended that their positions be eliminated.
John Coffee, a law professor and expert on corporate governance at Columbia University, said the financial crisis at Freddie Mac was years in the making and fueled by chronically weak oversight by the firm's directors. The presence of presidential appointees on the board didn't help, he added.
"You know there was a patronage system and these people were only going to serve a short time," Coffee said. "That's why [they] get the stock upfront."
Financial disclosure statements that are required of U.S. House members show Emanuel made at least $320,000 from his time at Freddie Mac. Two years after leaving the firm, Emanuel reported an additional sale of Freddie Mac stock worth between $100,001 and $250,000. The document did not detail whether he profited from the sale.
Sarah Feinberg, a spokeswoman for Emanuel, said there was no conflict between his stint at Freddie Mac and Obama's vow to restore confidence in financial institutions and the executives who run them. At the same time, Feinberg said Emanuel now agrees that presidential appointees to the Freddie Mac board "are unnecessary and don't have long enough terms to make a difference."
Former President George W. Bush voluntarily stopped making such appointments following Falcon's assessment of their uselessness.
In an interview, Falcon said the Freddie Mac board did most of its work in committees. Yet proxy statements that detailed committee assignments showed none for Emanuel, Free or Ickes during the time they served in 2000 or 2001. Most other directors carried two committee assignments each.
Contrary to the proxy statements, Feinberg said she believed that Emanuel served on board committees that oversaw Freddie Mac's investment strategies and mortgage purchase activities. But Feinberg acknowledged she had no official documents to back up that assertion.
The Obama administration rejected a Tribune request under the Freedom of Information Act to review Freddie Mac board minutes and correspondence during Emanuel's time as a director. The documents, obtained by Falcon for his investigation, were "commercial information" exempt from disclosure, according to a lawyer for the Federal Housing Finance Agency.
Emanuel's board term expired in May 2001, and soon after he launched his Democratic congressional bid.
One of Emanuel's fellow directors at Freddie Mac was Neil Hartigan, the former Illinois attorney general. Hartigan said Emanuel's primary contribution was explaining to others on the board how to play the levers of power.
He was respected on the board for his understanding of "the dynamics of the legislative process and the executive branch at senior levels," Hartigan recalled. "I wouldn't say he was outspoken. What he was, was solid."
By the time Emanuel joined Freddie Mac, the company had begun to loosen lending standards and buy riskier sub-prime loans. It was a practice that later blew up and contributed to the current foreclosure crisis.
In his investigation, Falcon concluded that the board of directors on which Emanuel sat was so pliant that Freddie Mac's managers easily were able to massage company ledgers. They manipulated bookkeeping to smooth out volatility, perpetuating Freddie Mac's industry reputation as "Steady Freddie," a reliable producer of earnings growth. Wall Street liked what it saw, Freddie Mac's stock value soared and top executives collected their bonuses.
Another focus of Freddie during Emanuel's day—and one that played to his skill set—was a stepped-up effort to combat congressional demands for more regulation.
During a September 2000 board meeting—midway through Emanuel's 14-month term—Freddie Mac lobbyist R. Mitchell Delk laid out a strategy titled "Political Risk Management" aimed at influencing lawmakers and blunting pressure in Congress for more regulation. Through Delk's initiative, Freddie Mac sponsored more than 80 fundraisers that raised at least $1.7 million for congressional candidates despite a federal law that bans corporations from direct political activity.
Emanuel spokeswoman Sarah Feinberg said Emanuel "can't remember the meeting or topic" but might have been in attendance when Delk outlined his plans. Feinberg downplayed the significance of the fundraiser thrown for Emanuel, which brought in $7,000, stressing that it was but one of many hosted by Delk. The event stood out in at least one respect, however.
The Freddie Mac-linked events were mostly for Republicans, and only a handful benefited Democrats like Emanuel. "Rahm was a good friend of mine. He was on Freddie Mac's board. He was very much supportive of housing," said Delk, who resigned under pressure in 2004.
Then-Freddie Mac CEO Leland Brendsel also hosted a fundraising lunch for Emanuel's 2002 campaign that netted $9,500 from top company executives. Brendsel was later ousted in the accounting scandal.
Federal campaign records show that Emanuel received $25,000 from donors with ties to Freddie Mac in the 2002 campaign cycle, more than twice the amount collected that election by any other candidate for the U.S. House or Senate.
Emanuel joined the House in January 2003 and was named to the Financial Services Committee, where he also sat on the subcommittee that directly oversaw Freddie Mac. A few months later, Freddie Mac Chief Executive Officer Leland Brendsel was forced out, and the committee and subcommittee launched hearings to sort out the mess, spanning more than a year. Emanuel skipped every hearing, congressional records indicate.
Feinberg said Emanuel recused himself "from deliberations related to Freddie Mac to avoid even the appearance of favoritism, impropriety or a conflict of interest."
Copyright © 2009, Chicago Tribune
Wednesday, March 25, 2009
Dear A.I.G., I Quit!
The following is a letter sent on Tuesday by Jake DeSantis, an executive vice president of the American International Group’s financial products unit, to Edward M. Liddy, the chief executive of A.I.G.
DEAR Mr. Liddy,
It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. I hope you take the time to read this entire letter. Before describing the details of my decision, I want to offer some context:
I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.
After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.
I take this action after 11 years of dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down.
You and I have never met or spoken to each other, so I’d like to tell you about myself. I was raised by schoolteachers working multiple jobs in a world of closing steel mills. My hard work earned me acceptance to M.I.T., and the institute’s generous financial aid enabled me to attend. I had fulfilled my American dream.
I started at this company in 1998 as an equity trader, became the head of equity and commodity trading and, a couple of years before A.I.G.’s meltdown last September, was named the head of business development for commodities. Over this period the equity and commodity units were consistently profitable — in most years generating net profits of well over $100 million. Most recently, during the dismantling of A.I.G.-F.P., I was an integral player in the pending sale of its well-regarded commodity index business to UBS. As you know, business unit sales like this are crucial to A.I.G.’s effort to repay the American taxpayer.
The profitability of the businesses with which I was associated clearly supported my compensation. I never received any pay resulting from the credit default swaps that are now losing so much money. I did, however, like many others here, lose a significant portion of my life savings in the form of deferred compensation invested in the capital of A.I.G.-F.P. because of those losses. In this way I have personally suffered from this controversial activity — directly as well as indirectly with the rest of the taxpayers.
I have the utmost respect for the civic duty that you are now performing at A.I.G. You are as blameless for these credit default swap losses as I am. You answered your country’s call and you are taking a tremendous beating for it.
But you also are aware that most of the employees of your financial products unit had nothing to do with the large losses. And I am disappointed and frustrated over your lack of support for us. I and many others in the unit feel betrayed that you failed to stand up for us in the face of untrue and unfair accusations from certain members of Congress last Wednesday and from the press over our retention payments, and that you didn’t defend us against the baseless and reckless comments made by the attorneys general of New York and Connecticut.
My guess is that in October, when you learned of these retention contracts, you realized that the employees of the financial products unit needed some incentive to stay and that the contracts, being both ethical and useful, should be left to stand. That’s probably why A.I.G. management assured us on three occasions during that month that the company would “live up to its commitment” to honor the contract guarantees.
That may be why you decided to accelerate by three months more than a quarter of the amounts due under the contracts. That action signified to us your support, and was hardly something that one would do if he truly found the contracts “distasteful.”
That may also be why you authorized the balance of the payments on March 13.
At no time during the past six months that you have been leading A.I.G. did you ask us to revise, renegotiate or break these contracts — until several hours before your appearance last week before Congress.
I think your initial decision to honor the contracts was both ethical and financially astute, but it seems to have been politically unwise. It’s now apparent that you either misunderstood the agreements that you had made — tacit or otherwise — with the Federal Reserve, the Treasury, various members of Congress and Attorney General Andrew Cuomo of New York, or were not strong enough to withstand the shifting political winds.
You’ve now asked the current employees of A.I.G.-F.P. to repay these earnings. As you can imagine, there has been a tremendous amount of serious thought and heated discussion about how we should respond to this breach of trust.
As most of us have done nothing wrong, guilt is not a motivation to surrender our earnings. We have worked 12 long months under these contracts and now deserve to be paid as promised. None of us should be cheated of our payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house.
Many of the employees have, in the past six months, turned down job offers from more stable employers, based on A.I.G.’s assurances that the contracts would be honored. They are now angry about having been misled by A.I.G.’s promises and are not inclined to return the money as a favor to you.
The only real motivation that anyone at A.I.G.-F.P. now has is fear. Mr. Cuomo has threatened to “name and shame,” and his counterpart in Connecticut, Richard Blumenthal, has made similar threats — even though attorneys general are supposed to stand for due process, to conduct trials in courts and not the press.
So what am I to do? There’s no easy answer. I know that because of hard work I have benefited more than most during the economic boom and have saved enough that my family is unlikely to suffer devastating losses during the current bust. Some might argue that members of my profession have been overpaid, and I wouldn’t disagree.
That is why I have decided to donate 100 percent of the effective after-tax proceeds of my retention payment directly to organizations that are helping people who are suffering from the global downturn. This is not a tax-deduction gimmick; I simply believe that I at least deserve to dictate how my earnings are spent, and do not want to see them disappear back into the obscurity of A.I.G.’s or the federal government’s budget. Our earnings have caused such a distraction for so many from the more pressing issues our country faces, and I would like to see my share of it benefit those truly in need.
On March 16 I received a payment from A.I.G. amounting to $742,006.40, after taxes. In light of the uncertainty over the ultimate taxation and legal status of this payment, the actual amount I donate may be less — in fact, it may end up being far less if the recent House bill raising the tax on the retention payments to 90 percent stands. Once all the money is donated, you will immediately receive a list of all recipients.
This choice is right for me. I wish others at A.I.G.-F.P. luck finding peace with their difficult decision, and only hope their judgment is not clouded by fear.
Mr. Liddy, I wish you success in your commitment to return the money extended by the American government, and luck with the continued unwinding of the company’s diverse businesses — especially those remaining credit default swaps. I’ll continue over the short term to help make sure no balls are dropped, but after what’s happened this past week I can’t remain much longer — there is too much bad blood. I’m not sure how you will greet my resignation, but at least Attorney General Blumenthal should be relieved that I’ll leave under my own power and will not need to be “shoved out the door.”
Tuesday, March 24, 2009
Geithner Seeks Power to Seize Imperiled Firms
Tuesday, March 24, 2009
Treasury Secretary Timothy Geithner asked Congress Tuesday to give the White House unprecedented powers to seize large insurers, investment firms and hedge funds, leaping beyond its present authority to seize only banks.
Monday, March 23, 2009
Sunday, March 22, 2009
1. The Road Not Taken
TWO roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth;
Then took the other, as just as fair,
And having perhaps the better claim,
Because it was grassy and wanted wear;
Though as for that the passing there
Had worn them really about the same,
And both that morning equally lay
In leaves no step had trodden black.
Oh, I kept the first for another day!
Yet knowing how way leads on to way,
I doubted if I should ever come back.
I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I—
I took the one less traveled by,
And that has made all the difference.
Saturday, March 21, 2009
Friday, March 20, 2009
Contact: Steve Jensen: 860-702-3308/3301
State Comptroller Nancy Wyman today proposed two fiscal initiatives designed to lessen the impact of economic downturns on taxpayers and state services.
Wyman's proposals, aired at a General Assembly hearing before the Appropriations Committee, would:
-Increase the amount of surplus revenue deposited in the Rainy Day Fund as a guard against tax increases and cuts in state services during downturns.
-Deposit surplus funds to the Rainy Day Fund on a monthly basis to ensure windfall revenue is not appropriated elsewhere, and make that revenue immediately available if the budget goes into deficit.
"The unprecedented budget crisis Connecticut is now facing has spotlighted the vital importance of planning for economic downturns that are both cyclical and inevitable," Wyman testified. "These proposals are intended to equip government with conservative, long-term fiscal policies that will lessen the impact of temporary revenue shortfalls on state programs and our taxpayers."
Wyman’s first proposal, Raised Senate Bill 1124: "An Act Increasing The Amount Of Unappropriated Surplus Deposited In The Budget Reserve Fund," would raise the cap on the Rainy Day Fund from 10 percent to 15 percent of the annual state budget, which totals $18.4 billion for fiscal 2009. Over the past five years, Wyman has convinced the legislature to raise the cap from 5 percent to 7.5 percent, and again to the 10 percent level where it stands today.
The $1.4 billion currently in the fund - representing about 8 percent of the budget - will likely be drained within the next two years in order to address projected deficits totaling more than $8 billion, Wyman said. A 15 percent fund under Connecticut's current budget would have created a balance of $2.6 billion.
In her testimony today, Wyman noted that between 1992 and 2008, the state appropriated $5.7 billion in excess revenue that, if not spent on programs, would have been deposited into the Rainy Day Fund as surplus.
"I believe that now is the time to commit to making the fund an even higher priority as we create a roadmap for Connecticut’s economic recovery and long-term fiscal stability," she testified.
Wyman's second proposal would allow the transfer of some projected surplus revenue to the Rainy Day Fund on a monthly basis whenever the projected surplus reaches 1% of appropriations. Any surplus revenue exceeding that 1% threshold would be transferred to the fund and be available to mitigate a shortfall if a projected surplus becomes a projected deficit as the year progresses.
"Ensuring that excess revenue is directed to the Rainy Day Fund, and raising the fund’s cap to 15%, would be firm steps to strengthen fiscal protection for both government and taxpayers during the next economic slowdown," Wyman said.
This message was sent to you by the Office of the State Comptroller Listserv 'WYMANews'. If you would like to make a comment about this or any other issue, please send an email to: email@example.com Please visit the Comptroller's web site at: http://www.osc.state.ct.us/
Thursday, March 19, 2009
AP Thursday, March 19, 2009
At least 13 firms receiving billions of dollars in bailout money owe a total of more than $220 million in unpaid federal taxes, a key lawmaker said Thursday.
Rep. John Lewis, chairman of a House subcommittee overseeing the federal bailout, said two firms owe more than $100 million apiece.
"This is shameful. It is a disgrace," said Lewis, D-Ga. "We are going to get to the bottom of what is going on here."
The House Ways and Means subcommittee on oversight discovered the unpaid taxes in a review of tax records from 23 of the firms receiving the most money, Lewis said as he opened a hearing on the issue.
"If we looked at all 470 recipients, how much would they owe?" Lewis asked.
He did not name the firms owing back taxes.
Banks and other firms receiving federal money were required to sign contracts stating they had no unpaid taxes, Lewis said. But he said the Treasury Department did not ask them to turn over their tax records.
Neil Barofsky, special inspector general for the Troubled Asset Relief Program, told the hearing that if an executive signed a contract knowing that information about unpaid taxes was false, "that would potentially be a crime." He said his office will look to see if crimes were committed.
The revelation is sure to spark outrage on Capitol Hill, where the House is expected to vote Thursday on a bill that would impose steep taxes on employee bonuses at firms that have received bailout money.
To date, the Troubled Asset Relief Program has paid out more than $300 billion to private companies, with billions more on the way.
Wednesday, March 18, 2009
McCain fumes over 9,000 earmarks in omnibus budget: ‘If it seems like I’m angry, it’s because I am.’
During a presidential debate last fall, Barack Obama made an emphatic pledge on earmark reform: “When I’m president, I will go line by line to make sure that we are not spending money unwisely.” Now, the Obama administration is urging Congress to quickly pass a $410 billion budget that contains 9,000 earmarks in order to keep the government running for the rest of fiscal 2009. Yesterday on the Senate floor, John McCain (R-AZ) — who frequently railed against earmarkers on the campaign trail and pledged to “make them famous” — fumed over the Obama administration’s stance:
“If it seems like I’m angry, it’s because I am,” McCain said, taking the White House to task for treating the bill as leftover business — and not subject to the full measure of earmark reform promised by candidate Obama.
“Last year’s business?” McCain asked, incredulous. “The president will sign this appropriations bill into law. It is the president’s business. It is the president of the United States’ business. It is the president of the United States’ business to do what he said — stated — when we were in debate seeking the support of the American people — where he said he would work to eliminate earmarks.”
October 20, 2005
The Bridge to Nowhere: A National Embarrassment
by Ronald D. Utt, Ph.D.
Today, Senator Tom Coburn (R-OK) will offer an amendment to the Senate’s appropriation bill to transfer the $223 million that Congress had previously approved for a bridge in Ketchikan, Alaska, to fund reconstruction of a hurricane-damaged bridge in Louisiana. Dubbed the “Bridge to Nowhere,” the bridge in Alaska would connect the town of Ketchikan (population 8,900) with its airport on the Island of Gravina (population 50) at a cost to federal taxpayers of $320 million, by way of three separate earmarks in the recent highway bill. At present, a ferry service runs to the island, but some in the town complain about its wait (15 to 30 minutes) and fee ($6 per car). The Gravina Island bridge project is an embarrassment to the people of Alaska and the U.S. Congress. Fiscally responsible Members of Congress should be eager to zero out its funding.
The bridge has become an object of national ridicule and a symbol of the fiscal irresponsibility of many in Congress toward the money entrusted to them by the taxpayers. It has also become an embarrassment to the people of Alaska and to responsible members of Congress who now find themselves tarred by the same brush dipped in the muck of the highway bill.
In response to this national humiliation, many in Alaska have vented their anger in the state’s newspapers, and the papers’ editors have also objected to the bridge on their editorial pages.
In the Anchorage Daily News, Diane Mucha of Eagle River wrote, “Of course, Alaska should and, hopefully, will volunteer to reject the money for the bridges to nowhere and Congress will apply the money for the hurricane relief efforts.”
David Raskin of Homer, Alaska, wrote, “Alaskans owe an apology to the people of New Orleans, to Alaska Native people and to the Nation for their selfish shortsightedness in sending these scoundrels to Washington and voting to keep them there.”
In the Ketchikan News, Dave Person wrote, “Thinking about the immense disaster in the Gulf States, it occurred to me that the most effective thing that the residents of Ketchikan could do to help would be to return the money earmarked for our Gravina Bridge.”
Back in Anchorage, Art Weiner wrote, “In a collective act of passion, the people of Alaska should request that the funds appropriated for our bridges be used for infrastructure reconstruction in the hurricane-affected area.”
Despite the willingness of many in Alaska to give back the bridge to pay for disaster relief, Alaska’s congressional delegation has dug in its heels, and many of the delegation’s colleagues, including all of congressional leadership, support its resistance. If Alaska loses some of its pork, they fear, so might they.
In opposing Senator Coburn’s amendment to defund the bridge, one prominent Senator told a closed-door meeting of conservatives that the plan was simply impractical. Many of the earmarks, he claimed, are counted towards a state’s equity bonus and thus are part of the state-by-state allocation formula. Defunding the bridge, he said, would direct at most $75 million to Louisiana, with the remaining $148 million returning to Alaska as money the state could use at its discretion for road projects.
Never mind that the Senator seems to view $75 million in taxpayers’ dollars as a sum of little consequence; what the Senator sees as a problem in fact would be a considerable benefit to Alaska. Assuming the Senator’s numbers are right, Alaska’s Department of Transportation would gain $148 million in money it could spend on the state’s transportation priorities instead of a useless bridge that would serve a tiny fraction of the state’s citizens.
Perhaps recognizing that the citizens of Alaska, including many in Ketchikan, do not value the Gravina Island bridge project, its defenders have been forced to resort to threats. One House “Leadership staffer suggested that retribution could be levied for the removal of the project in a technical corrections bill or other measure,” BNA reported. This is the sort of challenge that fiscally responsible senators should relish and, through their votes, show the House leadership exactly what they think of this childish threat. Most importantly, pushing back would show the nation that their august institution of democracy still maintains the moral authority to be trusted with hard-earned tax dollars.
Ronald D. Utt, Ph.D., is Herbert and Joyce Morgan Senior Research Fellow in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.
by Newt Gingrich 03/18/2009
"Outrage" is the word on everyone’s lips to describe the fat bonuses being paid with taxpayer funds to the failed executives at AIG -- and it is an outrage.
It’s an outrage that the American people are being asked to pay for the bad behavior of people who should have known better, be they reckless traders on Wall Street or reckless borrowers on Main Street.
But the cure for our outrage is not merely, as President Obama is demanding, that AIG be prevented from paying its executives. The $165 million in planned bonuses -- as manifestly undeserved as it is -- is chicken feed compared to the $170 billion in taxpayer funds AIG has received so far.
Nor is it acceptable to ask Americans to keep throwing their tax dollars at failed companies and their leaders.
The answer is an old fashioned one: AIG should choose between receivership or bankruptcy. It should not be allowed to choose more bailouts from the taxpayer.
Restore the Rule of Law: Allow Failing Corporations to go Bankrupt
Under U.S. law, Chapter 11 bankruptcy allows a company to reorganize. Chapter 7 allows a company to dissolve itself.
The choices for AIG, as both an insurance and non-insurance company, are more complicated, but ultimately boil down to the same options. And for other companies either receiving or looking to receive a bailout from the taxpayers, the option should instead be bankruptcy.
Bankruptcy would send a needed message to U.S. investors: Don’t assume the government will bail you out when you do something stupid.
And most importantly, bankruptcy would replace the rule of politicians over U.S. financial institutions with the rule of law.
Geithner Didn’t Inherit the Policy of Throwing Billions at Failing Companies -- He Helped Create It
Because when it comes to Washington’s handling of the financial crisis, so far we’ve had the rule of politicians, not the rule of law.
Most prominent among the politicians in question is Treasury Secretary Timothy Geithner.
As Americans’ level of outraged has risen, so has the level of finger pointing by Geithner and others for the mess we’re in.
But Treasury Secretary Geithner is disingenuous at best and untruthful at worst when he says that he “inherited the worst fiscal situation in American history.”
The truth is that Secretary Geithner didn’t inherit the policy of throwing billions of taxpayer dollars at failing companies -- he helped create it.
Even before he was Treasury Secretary -- when he was still head of the New York Federal Reserve -- Geithner was so deeply involved in the government’s bail out of Bear Stearns, its take over of Fannie Mae and Freddie Mac, and its bailout of AIG that this was the Washington Post’s headline from September 19, 2008:
“In the Crucible of Crisis, Paulson, Bernanke and Geithner Forge a Committee of Three”
The first meeting of the first bailout -- of Bear Sterns -- was held in Geithner’s office. And the first meeting of what has become a $170 billion bailout of AIG was held -- where else? In Geithner’s New York Fed office.
Why Not Bankruptcy for AIG? Because Wall Street Wouldn’t Have Done As Well
From the outset, Geithner was central to the developing policy of having the taxpayers bail out ailing financial institutions like AIG rather then allow them to go bankrupt. And for months now, we’ve been told that these bailouts were necessary to avoid a wider, cataclysmic, financial meltdown.
But now it’s clear that other, less noble, considerations were at play.
As the Wall Street Journal editorialized yesterday, the real outrage over the AIG bailout isn’t executive bonuses, it’s that billions in taxpayer funds intended for AIG have been passed through to benefit foreign banks and Wall Street behemoths like Goldman Sachs.
And as former AIG CEO Hank Greenburg testified last October, these financial institutions wouldn’t have faired as well if AIG had filed for bankruptcy protection rather than do what it did, which was to negotiate a bailout with Timothy Geithner’s New York Federal Reserve.
Here’s how Greenburg put it:
“Although AIG stockholders could have fared better if the company had filed for bankruptcy protection, other stakeholders -- like AIG’s Wall Street counterparties in swaps and other transactions -- would have fared worse.”
For the Cost of Bailing Out AIG, Every American Household Could Have Free Electricity For a Year
So now everyone is outraged, and rightly so. But the lavish executive bonuses being paid with taxpayer funds are just the beginning of the story.
So far, the American taxpayers are on the hook for $170 billion to AIG -- that’s an astounding $1,224 per taxpayer.
What else could we have done with all this money?
$170 billion would pay for more than doubling the Navy’s fleet of aircraft carriers.
$170 billion would pay for a four-year education at a public university for more then two million Americans.
$170 billion would cover the electricity bill of every household in America for an entire year.
When You Reward Failure, All You Get is More Failure
What Washington should learn from all this outrage is to return to the common sense that should have guided it all along: When you reward failure, all you get it more failure.
A company that needs a $170 billion taxpayer bailout is a failed company. The executives that led that company are failed executives. But instead of having to face the consequences of their failure responsibly through bankruptcy or receivership, AIG and its Wall Street “counterparties” are being rewarded for their recklessness -- with our money.
Thanks to the Bush-Obama-Geithner policy of bailing out failing companies, we now have the worst of all possible scenarios: A taxpayer subsidized, government supervised private company; an unsustainable public/private hybrid that is too public to make its own decisions and too private to be responsible to the taxpayers that are keeping it alive.
Outrages like the fat cat bonuses currently dominating the headlines will only continue as long as the rule of politicians supplants the rule of law on Wall Street.
Congress should rethink this entire process. The dangers of a domino-like financial meltdown are real. But so, too, is the danger that the outrage of the American people will reach the point that we no longer trust the dire warnings -- or the righteous indignation -- coming from Washington.