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Keeping The Megabank Controversy On Republican Radar

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It was almost a year ago when Lou Dolinar of the National Review encouraged Republicans to focus on the controversy surrounding the megabanks:

“Too Big to Fail” is an issue that Republicans shouldn’t duck in 2012.  President Obama is in bed with these guys.  I don’t know if breaking up the TBTFs is the solution, but Republicans need to shame the president and put daylight between themselves and the crony capitalists responsible for the financial meltdown.  They could start by promising not to stock Treasury and other major economic posts with these, if you pardon the phase, malefactors of great wealth.

One would expect that those too-big-to-fail banks would be low-hanging fruit for the acolytes in the Church of Ayn Rand.  After all, Simon Johnson, former Chief Economist for the International Monetary Fund (IMF), has not been the only authority to characterize the megabanks as intolerable parasites, infesting and infecting our free-market economy:

Too Big To Fail banks benefit from an unfair, nontransparent, and dangerous subsidy scheme.  This isn’t a market.  It’s a government-backed distortion of historic proportions.  And it should be eliminated.

Last summer, former Kansas City Fed-head, Thomas Hoenig discussed the problems created by what he called, “systemically important financial institutions” – or “SIFIs”:

… I suggest that the problem with SIFIs is they are fundamentally inconsistent with capitalism.  They are inherently destabilizing to global markets and detrimental to world growth.  So long as the concept of a SIFI exists, and there are institutions so powerful and considered so important that they require special support and different rules, the future of capitalism is at risk and our market economy is in peril.

So why aren’t the Republican Presidential candidates squawking up a storm about this subject during their debates?  Mike Konczal lamented the GOP’s failure to embrace a party-wide assault on the notion that banks could continue to fatten themselves to the extent that they pose a systemic risk:

When it comes to “ending Too Big To Fail” it actually punts on the conservative policy debates, which is a shame.  There’s a reference to “Explore reforms now being considered by the U.K. to make the unwinding of its biggest banks less risky for the broader economy” but it is sort of late in the game for this level of vagueness on what we mean by “unwinding.”  That unwinding part is a major part of the debate.  Especially if you say that you want to repeal Dodd-Frank and put into place a system for taking down large financial firms – well, “unwinding” the biggest financial firms is what a big chunk of Dodd-Frank does.

Nevertheless, there have been occasions when we would hear a solitary Republican voice in the wilderness.  Back in November,  Jonathan Easley of The Hill discussed the views of Richard Shelby (Ala.), the ranking Republican on the Senate Banking Committee:

“Dr. Volcker asked the other question – if they’re too big to fail, are they too big to exist?” Shelby said Wednesday on MSNBC’s “Morning Joe.”  “And that’s a good question.  And some of them obviously are, and some of them – if they don’t get their house in order – they might not exist.  They’re going to have to sell off parts to survive.”

*   *   *

“But the question I think we’ve got to ask – are we better off with the bigger banks than we were?  The [answer] is no.”

This past weekend, Timothy Haight wrote an inspiring piece for the pro-Republican Orange County Register, criticizing the failure of our government to address the systemic risk resulting from the “too big to fail” status of the megabanks:

The concentration of assets in a few institutions is greater today than at the height of the 2008 meltdown.  Taxpayers continue to be at risk as large financial institutions have forgotten the results of their earlier bets.  Legislation may have aided members of Congress during this election cycle, but it has done little to ward off the next crisis.

While I am a champion for free-market capitalism, I believe that, in some instances, proactive regulation is a necessity.  Financial institutions should be heavily regulated due to the basic fact that rewards are afforded to the financial institutions, while the taxpayers are saddled with the risk.  The moral hazard is alive and well.

So far, there has been only one Republican Presidential candidate to speak out against the ongoing TBTF status of a privileged few banks – Jon Huntsman.  It was nice to see that the Fox News website had published an opinion piece by the candidate – entitled, “Wall Street’s Big Banks Are the Real Threat to Our Economy”.  Huntsman described what has happened to those institutions since the days of the TARP bailouts:

Taxpayers were promised those bailouts would be a one-time, emergency measure.  Yet today, we can already see the outlines of the next financial crisis and bailouts.

The six largest financial institutions are significantly bigger than they were in 2008, having been encouraged to snap up Bear Stearns and other competitors at bargain prices.

These banks now have assets worth over 66% of gross domestic product – at least $9.4 trillion – up from 20% of GDP in the 1990s.

*   *   *

The Obama and Romney plan simply appears to be to cross our fingers and hope no Too-Big-To-Fail banks fail on their watch – a stunning lack of leadership on such a critical economic issue.

As president, I will break up the big banks, end future taxpayer bailouts, and restore capitalist principles – competition and creative destruction – to our financial sector.

As of this writing, Jon Huntsman has been the only Presidential candidate – including Obama – to discuss a proposal for ending the TBTF situation.  Huntsman has tactfully cast Mitt Romney in the role of the “Wall Street status quo” candidate with himself appearing as the populist.  Not even Ron Paul – with all of his “anti-bank” bluster, has dared approach the TBTF issue (probably because the solution would involve touching his own “third rail”:  regulation).  Simon Johnson had some fun discussing how Ron Paul was bold enough to write an anti-Federal Reserve book – End the Fed – yet too timid to tackle the megabanks:

There is much that is thoughtful in Mr. Paul’s book, including statements like this (p. 18):

“Just so that we are clear: the modern system of money and banking is not a free-market system.  It is a system that is half socialized – propped up by the government – and one that could never be sustained as it is in a clean market environment.”

*   *   *

There is nothing on Mr. Paul’s campaign website about breaking the size and power of the big banks that now predominate (http://www.ronpaul2012.com/the-issues/end-the-fed/).  End the Fed is also frustratingly evasive on this issue.

Mr. Paul should address this issue head-on, for example by confronting the very specific and credible proposals made by Jon Huntsman – who would force the biggest banks to break themselves up.  The only way to restore the market is to compel the most powerful players to become smaller.

Ending the Fed – even if that were possible or desirable – would not end the problem of Too Big To Fail banks.  There are still many ways in which they could be saved.

The only way to credibly threaten not to bail them out is to insist that even the largest bank is not big enough to bring down the financial system.

It’s time for those “fair weather free-marketers” in the Republican Party to show the courage and the conviction demonstrated by Jon Huntsman.  Although Rick Santorum claims to be the only candidate with true leadership qualities, his avoidance of this issue will ultimately place him in the rear – where he belongs.


 

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A Loner Named Loughner

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In the aftermath of the attempted assassination of Representative Gabrielle Giffords and the fatal shootings of six other bystanders (including Federal Judge John Roll), a huge debate has erupted over the motives of the gunman (who left notes admitting his intent to kill Congresswoman Giffords).  The accused killer, Jared Loughner, is now being subjected to a great deal of scrutiny to ascertain whether he may have been motivated (to any extent) by Sarah Palin’s now-infamous midterm election campaign advertisement featuring a map with crosshairs over those Congressional Districts whose Representatives who were being “targeted” by SaraPAC (one of whom was Rep. Giffords).  Palin’s defenders and apologists have contended that there was nothing unusual about the rhetoric used by Palin throughout the 2010 campaign, during which time Palin attempted to establish herself as an influential “power broker” within the Republican Party.

Among the most specious defenses of Palin was the assertion made by SarahPAC staffer Rebecca Mansour, who claimed that the crosshairs on the map identifying the Congressional Districts of targeted Democrats were actually “surveyor’s symbols”.  Amanda Terkel of The Huffington Post had no trouble exposing the dishonesty of that claim.

In order to determine whether Jared Loughner’s videotaped shooting spree was politically motivated – or whether he was politically aligned with any group, a close analysis of his YouTube page can be helpful.  (Loughner also had a page on MySpace, which has been removed by that organization.)  Take a look at what can be gleaned from a review of Loughner’s YouTube page and ask yourself whether some of this stuff reminds you of anyone famous:

  1. He apparently did not expect to survive this event because his upload entitled, “Hello” began with the statement that what followed were his “final thoughts”.
  2. He constantly addressed his intended audience as “listener”, suggesting that he may have been emulating someone with a radio program.
  3. He opposes the use of fiat money, preferring instead, the use of currency based on gold or silver.
  4. He is an abstruse advocate of citing the United States Constitution in discussions of subjects that involve no Constitutional issue (e.g. the tuition at Pima Community College).
  5. On his YouTube page, Loughner uses his “electronic blackboard” to explain his theories about how the American public is being subjected to mind control.
  6. He is critical of what he describes as the poor grammatical skills of the people in District 8, while at the same time personally exemplifying the potential validity of that claim.
  7. He is apparently obsessed with transitive relations.  Nearly every assertion posted on his YouTube page is couched in terms describing some sort of transitivity.  Most noticeable among these was what I refer to as his “Transitive Law of Moneyprinting” — which must have scared the hell out of Ben Bernanke:

If you create one new currency then you’re able to create a second new currency.

If you’re able to create a second new currency then you’re able to create a third new currency.

You create one new currency.

Thus, you’re able to create a third new currency.

Any guesses as to who Jared Loughner’s hero might be?

It obviously does not take a licensed clinical psychotherapist to realize that Loughner is suffering from some sort of Axis II personality disorder.  Nevertheless, that does not excuse whomever may have been responsible from giving this guy that extra nudge from the realm of the delusional to the ranks of the homicidal.

Despite the claims of Sarah Palin’s apologists that the controversial “crosshairs” campaign advertisement was part of a “normal political discourse”, consider the following:

—  Representative Giffords complained about the ad during an interview conducted by Chuck Todd on MSNBC.  Here is what she said about the ad:

We’re on Sarah Palin’s targeted list.  But the thing is the way that she has it depicted has the crosshairs of a gun site over our district.  When people do that they’ve got to realize there’s consequences to that action.

In spite of the eerily prescient objection raised by Representative Giffords, Palin and her minions refused to remove the ad.

—  Two versions of the “crosshairs” ad remained posted on the Internet for 65 days after the mid-term elections were concluded.  This raises the question of whether Palin was attempting to provoke what Sharron Angle might describe as “a Second Amendment solution” to the continuing political viability of Representative Giffords.  The “political discourse” was over on November 4, 2010.  Why did SaraPAC wait until Gabrielle Giffords was actually shot in the head before a decision was made to take down the ads?

—  Regardless of whether Jared Loughner was motivated by the “crosshairs” ad campaign, the BBC News reported this interesting bit of information provided by the Pima County Sheriff:

Sheriff Dupnik said the congresswoman had been threatened by someone with a gun during her re-election campaign in November, adding that there had been other threats.

It should come as no surprise that Palin’s apologists are now criticizing Sheriff Dupnik for laying blame where it properly belongs.  Because Loughner had a history of smoking marijuana, Team Palin is now attempting to characterize Loughner as a “Leftist”.  Nevertheless, in the event that any of Loughner’s writings might reference an entity known as Aqua Buddha .  .  .  you know what will happen.

Prior to this tragic event, many astute conservatives, such as George Will, had pointed out that Sarah Palin was in over her head with her attempts to become a Presidential candidate.  Although elections often become “beauty contests”, the Republican Party’s cynical decision to actually put a former beauty contestant on their national ticket in 2008 didn’t work out too well.  Experience as a beauty contestant does not necessarily qualify one for a position of political leadership.  I have always considered Sarah Palin to be a gumball.  At this point in her political career, Palin has gone from being toast to toxic.  I cannot imagine why any political candidate with an I.Q. above 80 would want to have anything to do with her.  In the aftermath of the Tucson killings, Palin’s cherished “brand” may have no greater value than that of Lehman Brothers.

Let’s all hope that Gabrielle Giffords has a successful recovery and that the grieving relatives and friends of those slain in this tragedy can regain the strength to continue enjoying their lives to the fullest extent possible.


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Balance Provokes Outrage

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December 13 marked the launch date for an organization named No Labels.  The group describes itself this way:

No Labels is a 501(c)(4) social welfare advocacy organization created to provide a voice for America’s vital center, where ideas are judged on their merits, a position which is underrepresented in our current politics.  No Labels provides a forum and community for Americans of all political backgrounds interested in seeing the nation move not left, not right, but forward.  No Labels encourages all public officials to prioritize the national interest over party interest, and to cease acting on behalf of narrow, if vocal, special interests on the far right or left.

Although No Labels has both a Declaration and a Statement of Purpose, you will find the most useful information about the group on its Frequently Asked Questions page.

As a political centrist, I found most of what I read at the No Labels website appealing enough, although I disagreed with a bit of it.  First of all, the group would have been more aptly-named, “No Polarization” since they aren’t really opposed to labels, as they explained:

We are never asking people to give up their labels, only put them aside to do what’s best for America.

Besides – I enjoy using labels to describe people.  Some of my favorite labels include:  corporatist, plutocrat, oligarch and tool.  Another statement on the No Labels website with which I disagreed was the following remark, from their Statement of Purpose:

We can’t seem to break our addiction to foreign oil.

I would suggest:  “We can’t seem to break our addiction to carbon-based energy sources.”  There is no such thing as “foreign oil”.  The so-called, “American” oil companies are all incorporated in the Cayman Islands and none of them pay income taxes to our government.  All of our oil comes from multinational corporations and it is commingled with “Muslim oil” and “Venezuelan Communist oil” at storage depots.  If the people from No Labels insist on treating us as idiots in the same manner as the two major political parties, they will deservedly fail in their mission.

I was particularly amused by the fact that so many people expressed outrage about the founding of No Labels.  The new organization managed to draw plenty of ire from an assortment of commentators during the past week and it made for some fun reading.  One of the “Founding Leaders” of No Labels is John Avlon of the Huffington Post.  He recently wrote this essay in response to spleen-venting by Rush Limbaugh on the right and Keith Olbermann on the left – both of whom expressed displeasure with the inception of the new association:

“If we do this right, we can discredit this whole mind-set of the ‘moderate center’ being the defining group in American politics,” said Rush.  “Because this No Labels group is going to end up illustrating what a fraudulent idea that whole concept of, ‘There are people who decide issue by issue.  On the left they like certain things, on the right they like certain things.’ ”

So Rush believes that there are no principled Americans who decide what they believe on different policies issue-by-issue.  For someone who talks about freedom a lot, he doesn’t have much faith in free will or free-thinking.  He doesn’t believe that Americans — especially independent voters — can consider themselves fiscally conservative but socially liberal.  You either walk in lockstep as a social conservative and fiscal conservative or you are a ‘hard-core liberal’ — libertarians, apparently, need not apply.

*   *   *

Keith Olbermann named No Labels one of the “worst persons in the world” last night (a badge of honor he gave to me earlier this year).  He called us “wolves in sheep’s clothing,” and “a bunch of fraudulent conservative Democrats pretending to be moderates and a bunch of fraudulent Republicans pretending to be independents.”  Again, there’s the impulse to divide and deny the legitimacy of anyone who doesn’t conform to a hyper-partisan view of politics.

Conservative columnist George Will provided this amusing bit of speculation that the entire effort might simply be a pretext for Michael Bloomberg’s Presidential ambitions:

Often in the year before the year before the year divisible by four, a few political people theatrically recoil from partisanship.  Recently, this ritual has involved speculation about whether New York Mayor Michael Bloomberg might squander a few of his billions to improve America by failing to be elected president.

Oh, snap!  Good one, George!

The strangest reaction to the kick-off of No Labels came from Frank Rich of The New York Times.  The relevant portions of Mr. Rich’s rant seemed to be based on the theme that the Republican-dominated 112th Congress will be intransigent and therefore, President Obama along with his fellow Democrats, must fight intransigence with intransigence.  This formula for gridlock would ultimately prove more harmful to Democrats than Republicans.

The Frank Rich diatribe was particularly bizarre because it rambled all over the place, with rants about people and subjects having nothing to do with No Labels.  Peter Orszag has no connection to No Labels.  So, why did Frank Rich go off on the wild tangent about Orszag, Citigroup and Scott Brown’s contributions from the financial sector as though any of them might have had something to do with No Labels?  Forget about what John Avlon told you concerning Keith Olberman’s putting No Labels on his “worst persons in the world” list.  According to Frank Rich, the entire No Labels effort is actually a “a promotional hobby horse for MSNBC”.  It gets weirder:  Rich believes that because a political consultant (Mark McKinnon) and a fund-raiser (Nancy Jacobson) are “prime movers” for No Labels . . .  therefore “No Labels itself is another manifestation” of the syndrome wherein “both parties are bought off by special interests who game the system and stack it against the rest of us.”  At this point, the only factoid I can find to support that allegation is the inclusion of the term “foreign oil” in the group’s Statement of Purpose.  So, I’ll keep an open mind.  Besides, I enjoy a good conspiracy theory as well as Jesse Ventura’s television program with the same name.  Nevertheless, it becomes difficult to stick with Frank Rich’s theory that by failing to seek re-election as Senator of Indiana, Evan Bayh deliberately “facilitated the election of a high-powered corporate lobbyist, Dan Coats, as his Republican successor”.  The fact that Bayh’s father, former Senator Birch Bayh, is a lobbyist is interposed to emphasize the likelihood that Evan will also become a lobbyist.  Is this discussion being offered to explain that Evan Bayh “stepped aside” to allow Dan Coats to become Senator because Bayh has a genetic pre-disposition to the “Lobbyist Code of Dishonor”?  If so, in what manner does this impact No Labels?  Guilt by association?

The animosity generated by this group’s stand against what it calls “hyper-partisanship” demonstrates that the opponents of No Labels are advocates of hyper-partisanship.  In the days ahead, it will be interesting to see who else speaks out to “give acrimony a chance”.


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Moment Of Truth

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May 24, 2010

Now that the Senate has passed its own version of a financial reform bill (S. 3217), the legislation must be reconciled with the House version before the bill can be signed into law by the President.  At this point, there is one big problem:  the President doesn’t like the bill because it actually has more teeth than an inbred, moonshine-drinking, meth head.  One especially objectionable provision in the eyes of the Administration and its kindred of the kleptocracy, Ben Bernanke, concerns the restrictions on derivatives trading introduced by Senator Blanche Lincoln.

Eric Lichtblau and Edward Wyatt of The New York Times wrote an article describing the current game plan of financial industry lobbyists to remove those few teeth from the financial reform bill to make sure that what the President signs is all gums:

The biggest flash point for many Wall Street firms is the tough restrictions on the trading of derivatives imposed in the Senate bill approved Thursday night.  Derivatives are securities whose value is based on the price of other assets like corn, soybeans or company stock.

The financial industry was confident that a provision that would force banks to spin off their derivatives businesses would be stripped out, but in the final rush to pass the bill, that did not happen.

The opposition comes not just from the financial industry.  The chairman of the Federal Reserve and other senior banking regulators opposed the provision, and top Obama administration officials have said they would continue to push for it to be removed.

And Wall Street lobbyists are mounting an 11th-hour effort to remove it when House and Senate conferees begin meeting, perhaps this week, to reconcile their two bills.  Lobbyists say they are already considering the possible makeup of the conference panel to focus on office visits and potential fund-raising.

The article discussed an analysis provided to The New York Times by Citizens for Responsibility and Ethics in Washington, a nonpartisan group:

The group’s analysis found that the 14 freshmen who serve on the House Financial Services Committee raised 56 percent more in campaign contributions than other freshmen.  And most freshmen on the panel, the analysis found, are now in competitive re-election fights.

“It’s definitely not accidental,” said Melanie Sloan, the director of the ethics group. “It appears that Congressional leaders are deliberately placing vulnerable freshmen on the Financial Services Committee to increase their ability to raise money.”

Take Representative John Adler, Democrat of New Jersey.  Mr. Adler is a freshman in Congress with no real national profile, yet he has managed to raise more than $2 million for his re-election, more than any other freshman, the analysis found.

That is due in large part, political analysts say, to his spot on the Financial Services Committee.

An opinion piece from the May 24 Wall Street Journal provided an equally-sobering outlook on this legislation:

The unifying theme of the Senate bill that passed last week and the House bill of last year is to hand even more discretion and authority to the same regulators who failed to foresee and in many cases created the last crisis.  The Democrats who wrote the bill are selling it as new discipline for Wall Street, but Wall Street knows better.  The biggest banks support the bill, and the parts they don’t like they will lobby furiously to change or water down.

Big Finance will more than hold its own with Big Government, as it always does, while politicians will have more power to exact even more campaign tribute.  The losers are the overall economy, as financial costs rise, and taxpayers when the next bailout arrives.

At The Huffington Post, Mary Bottari discussed the backstory on Blanche Lincoln’s derivatives reform proposal and the opposition it faces from both lobbyists and the administration:

The Obama Administration Wants to Kill the Best Provisions

Lincoln’s proposal has come under fire from all fronts.  Big bank lobbyists went ballistic of course and they will admit that getting her language pulled from the bill is still their top priority.  Behind the scenes, it is also the top priority of the administration and the Federal Reserve.  Believe it or not the administration is fighting to preserve its ability to bailout any financial institutions that gets in trouble, not just commercial banks.  Yep that is right.  Instead of clamping down Wall Street gambling, the administration wants to keep reckless institutions on the teat of the Federal Reserve.

The battle lines are drawn.  The biggest threat to the Lincoln language now is the Obama administration and the Federal Reserve.  There will no doubt be a move to strip out the strong Lincoln language in conference committee where the House and Senate versions of the bank reform bill now go to be aligned.

Meanwhile, President Obama continues to pose as the champion of the taxpayers, asserting his bragging rights for the Senate’s passage of the bill.  Jim Kuhnhenn of MSNBC made note of Obama’s remark, which exhibited the Executive Spin:

The financial industry, Obama said, had tried to stop the new regulations “with hordes of lobbyists and millions of dollars in ads.”

In fact, the lobbyists have just begun to fight and Obama is right in their corner, along with Ben Bernanke.



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Preparing For The Worst

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November 19, 2009

In the November 18 edition of The Telegraph, Ambrose Evans-Pritchard revealed that the French investment bank, Societe Generale “has advised its clients to be ready for a possible ‘global economic collapse’ over the next two years, mapping a strategy of defensive investments to avoid wealth destruction”.   That gloomy outlook was the theme of a report entitled:  “Worst-case Debt Scenario” in which the bank warned that a new set of problems had been created by government rescue programs, which simply transferred private debt liabilities onto already “sagging sovereign shoulders”:

“As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse,” said the 68-page report, headed by asset chief Daniel Fermon.  It is an exploration of the dangers, not a forecast.

Under the French bank’s “Bear Case” scenario, the dollar would slide further and global equities would retest the March lows.  Property prices would tumble again.  Oil would fall back to $50 in 2010.

*   *   *

The underlying debt burden is greater than it was after the Second World War, when nominal levels looked similar.  Ageing populations will make it harder to erode debt through growth.  “High public debt looks entirely unsustainable in the long run.  We have almost reached a point of no return for government debt,” it said.

Inflating debt away might be seen by some governments as a lesser of evils.

If so, gold would go “up, and up, and up” as the only safe haven from fiat paper money.  Private debt is also crippling.  Even if the US savings rate stabilises at 7pc, and all of it is used to pay down debt, it will still take nine years for households to reduce debt/income ratios to the safe levels of the 1980s.

To make matters worse, America still has an unemployment problem that just won’t abate.  A recent essay by Charles Hugh Smith for The Business Insider took a view beyond the “happy talk” propaganda to the actual unpleasant statistics.  Mr. Smith also called our attention to what can be seen by anyone willing to face reality, while walking around in any urban area or airport:

The divergence between the reality easily observed in the real world and the heavily touted hype that “the recession is over because GDP rose 3.5%” is growing.  It’s obvious that another 7 million jobs which are currently hanging by threads will be slashed in the next year or two.

By this point, most Americans are painfully aware of the massive bailouts afforded to those financial institutions considered “too big to fail”.  The thought of transferring private debt liabilities onto already “sagging sovereign shoulders” immediately reminds people of TARP and the as-yet-undisclosed assistance provided by the Federal Reserve to some of those same, TARP-enabled institutions.

As Kevin Drawbaugh reported for Reuters, the European Union has already taken action to break up those institutions whose failure could create a risk to the entire financial system:

EU regulators are set to turn the spotlight on 28 European banks bailed out by governments for possible mandated divestitures, officials said on Wednesday.

The EU executive has already approved restructuring plans for British lender Lloyds Banking (LLOY.L), Dutch financial group ING Groep NV (ING.AS) and Belgian group KBC (KBC.BR).

Giving break-up power to regulators would be “a good thing,” said Paul Miller, a policy analyst at investment firm FBR Capital Markets, on Wednesday.

Big banks in general are bad for the economy because they do not allocate credit well, especially to small businesses, he said. “Eventually the big banks get broken up in one way or another,” Miller said at the Reuters Global Finance Summit.

Meanwhile in the United States, the House Financial Services Committee approved a measure that would grant federal regulators the authority to break up financial institutions that would threaten the entire system if they were to fail.  Needless to say, this proposal does have its opponents, as the Reuters article pointed out:

In both the House and the Senate, “financial lobbyists will continue to try to water down this new and intrusive federal regulatory power,” said Joseph Engelhard, policy analyst at investment firm Capital Alpha Partners.

If a new break-up power does survive the legislative process, Engelhard said, it is unlikely a “council of numerous financial regulators would be able to agree on such a radical step as breaking up a large bank, except in the most unusual circumstances, and that the Treasury Secretary … would have the ability to veto any imprudent use of such power.”

When I first read this, I immediately realized that Treasury Secretary “Turbo” Tim Geithner would consider any use of such power as imprudent and he would likely veto any attempt to break up a large bank.  Nevertheless, my concerns about the “Geithner factor” began to fade after I read some other encouraging news stories.  In The Huffington Post, Sam Stein disclosed that Oregon Congressman Peter DeFazio (a Democrat) had called for the firing of White House economic advisor Larry Summers and Treasury Secretary “Timmy Geithner” during an interview with MSNBC’s Ed Schultz.  Mr. Stein provided the following recap of that discussion:

“We think it is time, maybe, that we turn our focus to Main Street — we reclaim some of the unspent [TARP] funds, we reclaim some of the funds that are being paid back, which will not be paid back in full, and we use it to put people back to work.  Rebuilding America’s infrastructure is a tried and true way to put people back to work,” said DeFazio.

“Unfortunately, the President has an adviser from Wall Street, Larry Summers, and a Treasury Secretary from Wall Street, Timmy Geithner, who don’t like that idea,” he added.  “They want to keep the TARP money either to continue to bail out Wall Street  … or to pay down the deficit.  That’s absurd.”

Asked specifically whether Geithner should stay in his job, DeFazio replied:  “No.”

“Especially if you look back at the AIG scandal,” he added, “and Goldman and others who got their bets paid off in full … with taxpayer money through AIG.  We channeled the money through them.  Geithner would not answer my question when I said, ‘Were those naked credit default swaps by Goldman or were they a counter-party?’  He would not answer that question.”

DeFazio said that among he and others in the Congressional Progressive Caucus, there was a growing consensus that Geithner needed to be removed.  He added that some lawmakers were “considering questions regarding him and other economic advisers” — though a petition calling for the Treasury Secretary’s removal had not been drafted, he said.

Another glimmer of hope for the possible removal of Turbo Tim came from Jeff Madrick at The Daily Beast.  Madrick’s piece provided us with a brief history of Geithner’s unusually fast rise to power (he was 42 when he was appointed president of the New York Federal Reserve) along with a reference to the fantastic discourse about Geithner by Jo Becker and Gretchen Morgenson, which appeared in The New York Times last April.  Mr. Madrick demonstrated that what we have learned about Geithner since April, has affirmed those early doubts:

Recall that few thought Geithner was seasoned enough to be Treasury secretary when Obama picked him.  Rubin wasn’t ready to be Treasury secretary when Clinton was elected and he had run Goldman Sachs.  Was Geithner’s main attraction that he could easily be controlled by Summers and the White House political advisers?  It’s a good bet.  A better strategy, some argued, would have been to name Paul Volcker, the former Fed chairman, for a year’s worth of service and give Geithner as his deputy time to grow.  But Volcker would have been far harder to control by the White House.

But now the president needs a Treasury Secretary who is respected enough to stand up to Wall Street, restabilize the world’s trade flows and currencies, and persuade Congress to join a battle to get the economic recovery on a strong path.  He also needs someone with enough economic understanding to be a counterweight to the White House advisers, led by Summers, who have consistently been behind the curve, except for the $800 billion stimulus.  And now that is looking like it was too little.  The best guess is that Geithner is not telling the president anything that the president does not know or doesn’t hear from someone down the hall.

The problem for Geithner and his boss, is that the stakes if anything are higher than ever.

As the rest of the world prepares for worsening economic conditions, the United States should do the same.  Keeping Tim Geithner in charge of the Treasury makes less sense than it did last April.



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Maria Cantwell In The Spotlight

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November 9, 2009

Meghan McCain’s recent lament in The Daily Beast struck me as rather strange.  She really should know better.  Ms. McCain expressed her frustration over mainstream media treatment of “two of the most prominent women in politics — Hillary Clinton and Sarah Palin”.  Ms. McCain felt the coverage received by those two politicians has been so misogynistic that she has nearly given up on the possibility that she may ever see a woman get elected to the Presidency:

It seems to me the male-dominated media suffers from a Goldilocks Syndrome that keeps women from shattering the glass ceiling.  Worse, I fear it will prevent tomorrow’s female leaders from even seeking office.

Of course, if one can see no further than Hillary Clinton or Sarah Palin when seeking female Presidential candidates, then despair is inevitable.  In the summer of 2008, after Ms.Clinton faced up to the reality that Barack Obama had won the Democratic nomination, we heard similar doubts expressed by many despondent female supporters of Hillary Clinton — that they would never see a female elected President within their own lifetimes.  At that point, I wrote apiece entitled “Women To Watch”, reminding readers that “there are a number of women presently in the Senate, who got there without having been married to a former President (whose surname could be relied upon for recognition purposes).”  One of those women, whom I discussed at that time, was Senator Maria Cantwell of Washington.  Maria Cantwell has been in the news quite a bit recently and the coverage has been favorable.  As I said in June of 2008, those holding out hope for a female Presidential candidate should keep an eye on her.

In our highly-partisan political climate, one rarely hears a national politician break from “party line” rhetoric and talking points while being interviewed by the news media or when writing commentary pieces for news publications and blogs.  Nevertheless, Senator Cantwell has taken the bold step of criticizing, not only the administration’s handling of the economic crisis, but the K Street payoff culture enlisting her fellow Democrats as enablers of the status quo.

On October 30, Senator Cantwell wrote a piece for The Huffington Post, decrying the fact that those financial institutions benefiting from the massive bailouts from TARP and the Federal Reserve “have resumed their old habit of using other people’s money to gamble with the same risky unregulated derivatives that led us into this crisis.”  The reason for the failure at every level of the federal government to even consider appropriate legislation or regulations to rein-in continuing irresponsible behavior by those institutions was candidly discussed by the Senator:

Look no further than the powerful lobbying arm of the financial services sector, which has spent at least $220 million this year lobbying Congress to stave off new rules to prevent another collapse.  That is over $500,000 in lobbying for every member of Congress, which might help explain why, to date, nothing has been fixed in our porous financial regulatory system.  Americans want to know when Congress will put an end to the Wall Street’s secret off-book gambling schemes and restore our capitalist system by requiring real transparency and true competition.

Senator Cantwell’s essay is essential reading, coming on the heels of a rebuke, by her fellow Democrats, against efforts at requiring transparency in the trading of credit default swaps:

Imposing full transparency and true competition will require moving derivative trades onto regulated exchanges.  That would mean full transparency of trading prices and volumes, reporting requirements for large trader positions, and adequate capital reserves to protect against a default.  The government needs full anti-fraud and anti-manipulation authority.  Giving regulators this power will ensure a transparent and competitive marketplace and will ensure that violators will go to jail.

On November 2, Senator Cantwell appeared on MSNBC’s Morning Meeting with Dylan Ratigan.  At that time, Mr. Ratigan had just written a piece for The Business Insider, expressing his outrage about recent statements by Treasury Secretary “Turbo” Tim Geithner, supporting House bank reform legislation allowing credit default swaps to continue being traded in secret.  Since Senator Cantwell had previously discussed that subject with him on October 16, Mr. Ratigan focused on Geithner.  Ratigan noted Geithner’s endorsement of the proposed House “banking  reform” legislation on the previous day’s broadcast of Meet The Press — despite the bill’s “massive exemptions” allowing opacity in the trading of credit default swaps.  Ratigan then asked Senator Cantwell why Tim Geithner still has a job, to which she replied:

I’m not sure because David Gregory had him almost — trying to get a straight answer out of him.  What the Treasury Secretary basically said was:  yes, banks should take more risks and we should continue the loopholes — and that is really appalling because, right now, we know that lack of transparency has caused this problem with the U.S. economy and Wall Street is continuing, one year later, continuing the same kind of loopholes.  And so if the Treasury Secretary doesn’t come down hard against these loopholes and advocate foreclosing them, then we’re going to have a tough time closing them in Congress.  So the Treasury Secretary is dodging the issue.

Senator Cantwell sure isn’t dodging any issues.  Beyond that, she is demonstrating that she has more cajones than any of her male counterparts in the Senate.  So far, all of the publicity concerning her position on financial reform has been favorable.  After all, she is boldly standing up to the lobbyists, the Congress they own and a White House that received nearly a million dollars in campaign contributions from Goldman Sachs.

Back in Senator Cantwell’s home state of Washington, The Seattle Times praised her co-sponsorship of Senate Bill 823, the Net Operating Loss Carryback Act, which has already been passed by both houses of Congress.  This bill increases the corporate income tax refunds for businesses that were making money during the pre-2008 era but now operate at a loss.  As the Seattle Times editorial explained:

The national unemployment rate is still rising.  It has just gone double-digit for the first time in 26 years, and is at 10.2 percent.

This is not recovery.

The new law does not have taxpayers underwrite credit default swaps or any of the other alchemic creations of Wall Street investment banks.  It is not more aid and comfort for the nationalized and quasi-nationalized corporate giants; it specifically exempts Fannie Mae, Freddie Mac and any company in which the Treasury has recently become an owner.

This law is for the businesses that suffer in the recession, not the ones that caused it.  It is one of the few things Congress has done that reaches directly to Main Street America. It is a big deal to many local businesses, including businesses here.

Congratulations, Senator Cantwell!

To Meghan McCain and other women remaining in doubt as to whether they will ever see a female sworn in as President:  Just keep watching Maria Cantwell as she continues to earn well-deserved respect.



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Offering Solutions

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October 22, 2009

Many of us are familiar with the old maxim asserting that “if you’re not part of the solution, you’re part of the problem.”  During the past year we’ve been exposed to plenty of hand-wringing by info-tainers from various mainstream media outlets decrying the financial crisis and our current economic predicament.  Very few of these people ever seem to offer any significant insight on such interesting topics as:  what really caused the meltdown, how to prevent it from happening again, whether any laws were broken that caused this catastrophe, whether any prosecutions might be warranted or how to solve our nation’s continuing economic ills, which seem to be immune to all the attempted cures.  The painful thorn in the side of Goldman Sachs, Matt Taibbi, recently raised an important question, reminding people to again scrutinize the vapid media coverage of this pressing crisis:

It’s literally amazing to me that our press corps hasn’t yet managed to draw a distinction between good news on Wall Street for companies like Goldman, and good news in reality.

*   *   *

In fact the dichotomy between the economic health of ordinary people and the traditional “market indicators” is not merely a non-story, it is a sort of taboo — unmentionable in major news coverage.

That quote inspired Yves Smith of Naked Capitalism to write a superb essay about how “access journalism” has created a controlled press.  What follows is just a small nugget of the great analysis in that piece:

So what do we have?  A media that predominantly bases its stories on what it is fed because it has to.  Ever-leaner staffing, compressed news cycles, and access journalism all conspire to drive reporters to focus on the “must cover” news, which is to a large degree influenced by the parties that initiate the story.  And that means they are increasingly in an echo chamber, spending so much time with the influential sources they feel they must cover that they start to be swayed by them.

*   *   *

The message, quite overly, is: if you are pissed, you are in a minority.  The country has moved on.  Things are getting better, get with the program. Now I saw the polar opposite today.  There is a group of varying sizes, depending on the topic, that e-mails among itself, mainly professional investors, analysts, economists (I’m usually on the periphery but sometimes chime in).  I never saw such an angry, active, and large thread about the Goldman BS fest today.  Now if people who have not suffered much, and are presumably benefitting from the market recovery are furious, it isn’t hard to imagine that what looks like complacency in the heartlands may simply be contained rage looking for an outlet.

Fortunately, one television news reporter has broken the silence concerning the impact on America’s middle class, caused by Wall Street’s massive Ponzi scam and our government’s response – which he calls “corporate communism”.  I’m talking about MSNBC’s Dylan Ratigan.  On Wednesday’s edition of his program, Morning Meeting, he decried the fact that the taxpayers have been forced to subsidize the “parlor game” played by Goldman Sachs and other firms involved in proprietary trading on our coin.  Mr. Ratigan then proceeded to offer a number of solutions available to ordinary people, who would like to fight back against those pampered institutions considered “too big to fail”.  Some of these measures involve:  moving accounts from one of those enshrined banks to a local bank or credit union; paying with cash whenever possible and contacting your lawmakers to insist upon financial reform.

My favorite lawmaker in the battle for financial reform is Congressman Alan Grayson, whose district happens to include Disney World.  His fantastic interrogation of Federal Reserve general counsel, Scott Alvarez, about whether the Fed tries to manipulate the stock markets, was a great event.  Grayson has now co-sponsored a “Financial Autopsy” amendment to the proposed Consumer Financial Protection Agency bill.  This amendment is intended to accomplish the following:

– Requires the CFPA conduct a “Financial Autopsy” of each state’s bankruptcies and foreclosures (a scientific sampling), and identify financial products that systematically led to a large number of bankruptcies and foreclosures.
– Requires the CFPA report to Congress annually on the top financial products (the companies and individuals that originated the products) that caused consumer bankruptcies and foreclosures.
– Requires the CFPA take corrective action to eliminate or restrict those deceptive products to prevent future bankruptcies and corrections

– The bottom line is to highlight destructive products based on if they are making people “broke”.

From his website, The Market Ticker, Karl Denninger offered his own contributions to this amendment:

This sort of “feel good” legislative amendment will of course be resisted, but it simply isn’t enough.  The basic principle of equity (better said as “fairness under the law”) puts forward the premise that one cannot cheat and be allowed to keep the fruits of one’s outrageous behavior.

So while I like the direction of this amendment, I would put forward the premise that the entirety of the gains “earned” from such toxic products, when found, are clawed back and distributed to the consumers so harmed, and that to the extent this does not fully compensate for that harm such a finding should give rise to a private, civil cause of action for the consumers who are bankrupted or foreclosed.

It’s nice to know that bloggers are no longer the only voices insisting on financial reform.  Ed Wallace of Business Week recently warned against the consequences of unchecked speculation on oil futures:

Is today’s stock market divorced from economic reality?  Probably.  It is a certainty that oil is.  We know that because those in the market are still putting out the same tired and incorrect logic that they used successfully last year to push oil to $147 a barrel while demand was plummeting.

Because oil is not carrying a market price that fairly reflects economic conditions and demand inventories, overpriced energy is siphoning off funds that could be used for corporate expansion, increased consumerism and, in time, the recreation of jobs in America.

Did you think that the “Enron Loophole” was closed by the enactment of the 2008 Farm Bill?  It wasn’t.  The Farm Bill simply gave more authority to the Commodity Futures Trading Commission to regulate futures contracts that had been exempted by the loophole.  In case you’re wondering about the person placed in charge of the Commodity Futures Trading Commission by President Obama  —  his name is Gary Gensler and he used to work for  …  You guessed it:  Goldman Sachs.



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An Ominous Drumbeat Gets Louder

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August 13, 2009

Regular readers of this blog (all four of them) know that I have been very skeptical about the current “bear market rally” in the stock markets.  Nevertheless, the rally has continued.  However, we are now beginning to hear opinions from experts claiming that not only is this rally about to end — we could be headed for some real trouble.

Some commentators are currently discussing “The September Effect” and looking at how the stock market indices usually drop during the month of September.  Brett Arends gave us a detailed history of the September Effect in Tuesday’s edition of The Wall Street Journal.

Throughout the summer rally, a number of analysts focused on the question of how this rally could be taken seriously with such thin trading volume.  When the indices dropped on Monday, many blamed the decline on the fact that it was the lowest volume day for 2009.  However, take a look at Kate Gibson’s discussion of this situation for MarketWatch:

One market technician believes trading volume in recent days on the S&P 500 is a sign that the broad market gauge will test last month’s lows, then likely fall under its March low either next month or in October.

The decline in volume started on Friday and suggests the S&P 500 will make a new low beneath its July 8 bottom of 869.32, probably next week, on the way to a test in September or October of its March 6 intraday low of 666.79, said Tony Cherniawski, chief investment officer at Practical Investor, a financial advisory firm.

“In a normal breakout, you get rising volume. In this case, we had rising volume for a while; then it really dropped off last week,” said Cherniawski, who ascribes the recent rise in equities to “a huge short-covering rally.”

The S&P has rallied more than 50 percent from its March lows, briefly slipping in late June and early July.

Friday’s rise on the S&P 500 to a new yearly high was not echoed on the Nasdaq Composite Index, bringing more fodder to the bearish side, Cherniawski said.

“Whenever you have tops not confirmed by another major index, that’s another sign something fishy is going on,” he said.

What impressed me about Mr. Cherniawski’s statement is that, unlike most prognosticators, he gave us a specific time frame of “next week” to observe a 137-point drop in the S&P 500 index, leading to a further decline “in September or October” to the Hadean low of 666.

At CNNMoney.com, the question was raised as to whether the stock market had become the latest bubble created by the Federal Reserve:

The Federal Reserve has spent the past year cleaning up after a housing bubble it helped create.  But along the way it may have pumped up another bubble, this time in stocks.

*   *   *

But while most people take the rise in stocks as a hopeful sign for the economy, some see evidence that the Fed has been financing a speculative mania that could end in another damaging rout.

One important event that gave everyone a really good scare took place on Tuesday’s Morning Joe program on MSNBC.  Elizabeth Warren, Chair of the Congressional Oversight Panel (responsible for scrutiny of the TARP bailout program) discussed the fact that the “toxic assets” which had been the focus of last fall’s financial crisis, were still on the books of the banks.  Worse yet, “Turbo” Tim Geithner’s PPIP (Public-Private Investment Program) designed to relieve the banks of those toxins, has now morphed into something that will help only the “big” banks (Goldman Sachs, J.P. Morgan, et al.) holding “securitized” mortgages.  The banks not considered “too big to fail”, holding non-securitized “whole” loans, will now be left to twist in the wind on Geithner’s watch.  The complete interview can be seen here.  This disclosure resulted in some criticism of the Obama administration, coming from sources usually supportive of the current administration. Here’s what The Huffington Post had to say:

Warren, who’s been leading the call of late to reconcile the shoddy assets weighing down the bank sector, warned of a looming commercial mortgage crisis.  And even though Wall Street has steadied itself in recent weeks, smaller banks will likely need more aid, Warren said.

Roughly half of the $700 billion bailout, Warren added, was “don’t ask, don’t tell money. We didn’t ask how they were going to spend it, and they didn’t tell how they were going to spend it.”

She also took a passing shot at Tim Geithner – at one point, comparing Geithner’s handling of the bailout money to a certain style of casino gambling.  Geithner, she said, was throwing smaller portions of bailout money at several economic pressure points.

“He’s doing the sort of $2 bets all over the table in Vegas,” Warren joked.

David Corn, a usually supportive member of the White House press corps, reacted with indignation over Warren’s disclosures in an article entitled:  “An Economic Time Bomb Being Mishandled by the Obama Administration?”  He pulled no punches:

What’s happened is that accounting changes have made it easier for banks to contend with these assets. But this bad stuff hasn’t gone anywhere.  It’s literally been papered over. And it still has the potential to wreak havoc.  As the report puts it:

If the economy worsens, especially if unemployment remains elevated or if the commercial real estate market collapses, then defaults will rise and the troubled assets will continue to deteriorate in value.  Banks will incur further losses on their troubled assets.  The financial system will remain vulnerable to the crisis conditions that TARP was meant to fix.

*   *   *

In a conference call with a few reporters (myself included), Elizabeth Warren, the Harvard professor heading the Congressional Oversight Panel, noted that the biggest toxic assets threat to the economy could come not from the behemoth banks but from the “just below big” banks.  These institutions have not been the focus of Treasury efforts because their troubled assets are generally “whole loans” (that is, regular loans), not mortgage securities, and these less-than-big banks have been stuck with a lot of the commercial real estate loans likely to default in the next year or two.  Given that the smaller institutions are disproportionately responsible for providing credit to small businesses, Warren said, “if they are at risk, that has implications for the stability of the entire banking system and for economic recovery.”  Recalling that toxic assets were once the raison d’etre of TARP, she added, “Toxic assets posed a very real threat to our economy and have not yet been resolved.”

Yes, you’ve heard about various government efforts to deal with this mess.  With much hype, Secretary Timothy Geithner in March unveiled a private-public plan to buy up this financial waste.  But the program has hardly taken off, and it has ignored a big chunk of the problem (those”whole loans”).

*   *   *

The Congressional Oversight Panel warned that “troubled assets remain a substantial danger” and that this junk–which cannot be adequately valued–“can again become the trigger for instability.”  Warren’s panel does propose several steps the Treasury Department can take to reduce the risks.  But it’s frightening that Treasury needs to be prodded by Warren and her colleagues, who characterized troubled assets as “the most serious risk to the American financial system.”

On Wednesday morning’s CNBC program, Squawk Box, Nassim Taleb (author of the book, Black Swan — thus earning that moniker as his nickname) had plenty of harsh criticism for the way the financial and economic situations have been mishandled.  You can see the interview with him and Nouriel Roubini here, along with CNBC’s discussion of his criticisms:

“It is a matter of risk and responsibility, and I think the risks that were there before, these problems are still there,” he said. “We still have a very high level of debt, we still have leadership that’s literally incompetent …”

“They did not see the problem, they don’t look at the core of problem.  There’s an elephant in the room and they did not identify it.”

Pointing his finger directly at Fed Reserve Chairman Ben Bernanke and President Obama, Taleb said policymakers need to begin converting debt into equity but instead are continuing the programs that created the financial crisis.

“I don’t think that structural changes have been addressed,” he said.  “It doesn’t look like they’re fully aware of the problem, or they’re overlooking it because they don’t want to take hard medicine.”

With Bernanke’s term running out, Taleb said Obama would be making a mistake by reappointing the Fed chairman.

Just in case you aren’t scared yet, I’d like to direct your attention to Aaron Task’s interview with stock market prognosticator, Robert Prechter, on Aaron’s Tech Ticker internet TV show, which can be seen at the Yahoo Finance site.  Here’s how some of Prechter’s discussion was summarized:

“The big question is whether the rally is over,” Prechter says, suggesting “countertrend moves can be tricky” to predict.  But the veteran market watcher is “quite sure the next wave down is going to be larger than what we’ve already experienced,” and take major averages well below their March 2009 lows.

“Well below” the Hadean low of 666?  Now that’s really scary!

CNNFail

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June 15, 2009

Back on January 16, 1991, it seemed as though anyone with cable TV was glued to their set, watching the beginning of Operation Desert Storm.  As the coalition forces began their aerial assault on Baghdad, most American reporters were pinned down at the Al-Rashid Hotel.  As it turned out, CNN was the only news service able to communicate with the rest of the world during that time.  Bernard Shaw, John Holliman and Peter Arnett gained instant fame as CNN’s “Boys of Baghdad”, providing non-stop coverage of the invasion from Room 906 of the Al-Rashid.  The event helped establish CNN as a “top tier” news organization.  CNN’s coverage of this event became the subject of a documentary film by HBO, entitled Live From Baghdad.

On Friday June 12, many of the world’s news services focused their attention on Iran’s presidential election.  Incumbent President Mahmoud Ahmadinejad was being faced with a serious challenge by Mir Hussein Mousavi, one of three other contenders for the post.  Mousavi’s supporters were highly organized and energetic.  They adopted the color green as their symbol and they began calling for a “green revolution”.  Al Jazeera reported that Yadollah Javani, political chief of Iran’s Revolutionary Guard, had issued a warning from his website that any such revolution would be “nipped in the bud”.  This should have been a tip that the Revolutionary Guard had every intention of subverting the public will.

On Saturday, June 13, Iran’s state-owned news service, Fars, declared incumbent President Mahmoud Ahmadinejad the winner, with nearly two-thirds of the vote.  A landslide of such proportions was completely unexpected, given the large turnout at rallies in support of the leading challenger, Mir Hussein Mousavi, as well as the recent poll, indicating that Ahmadinejad was leading his three challengers with only 34 percent of the vote.  As a result, many expected that a runoff election between Ahmadinejad and Mousavi would have been necessary.  Because of this claimed “landslide” victory, it immediately became obvious that the election had been stolen.  Juan Cole, President of the Global Americana Institute, wrote the following on his blog, Informed Comment:

As the real numbers started coming into the Interior Ministry late on Friday, it became clear that Mousavi was winning.  Mousavi’s spokesman abroad, filmmaker Mohsen Makhbalbaf, alleges that the ministry even contacted Mousavi’s camp and said it would begin preparing the population for this victory.

The ministry must have informed Supreme Leader Ali Khamenei, who has had a feud with Mousavi for over 30 years, who found this outcome unsupportable.  And, apparently, he and other top leaders had been so confident of an Ahmadinejad win that they had made no contingency plans for what to do if he looked as though he would lose.

They therefore sent blanket instructions to the Electoral Commission to falsify the vote counts.

This clumsy cover-up then produced the incredible result of an Ahmadinejad landlside in Tabriz and Isfahan and Tehran.

The public reaction on the streets of Tehran was documented for Slate by Jason Rezaian:

A feeling of dejection hung in the air for most of Saturday. Spontaneous street demonstrations early in the day were small and were quickly broken up by riot police on motorcycles.

As reality set in, people began taking to the streets en masse. Around 5 p.m. on the approach to Fatemi Square, where the Interior Ministry is located, I could see that the entire traffic circle had been closed to car traffic. About 200 riot police waited in the middle of the square. I headed down an alley, just steps away, where protesters had created a blockade of flaming garbage cans.

The demonstrators pushed aside a garbage can, opening a path, and rushed forward. Simultaneously, baton-wielding police charged. The protesters hurled rocks, and the police responded by beating everyone who couldn’t escape into one of the connecting alleys.

Citizens, nearly all on the side of the protesters, left their front gates open just a little to offer those of us fleeing the police an escape route.

The ensuing riots resulted in phone cam videos posted to YouTube.  Messages were sent out over Twitter under the hashtags: #IranElection and #Iran Election.

Many mainstream media news outlets had reporters “on the ground” in Tehran.  ABC News had Jim Sciutto there.  Mr. Sciutto sent a message out over Twitter at 9:20 on Saturday morning:

police confiscated our camera and videotapes.  We are shooting protests and police violence on our cell phones

Sciutto and other reporters whose equipment had been confiscated, began shooting riot videos on their phone cams.  Many networks, including ABC, MSNBC and Fox News began to broadcast these  …  but not CNN.  Many Twitter users, following the Iranian violence became outraged over CNN’s failure to cover the rioting.  As a result, they started a new discussion thread, using the hashtag:  #CNNFail.  Many of these postings criticized the quality of CNN’s limited reporting on these events.

Here were some of the messages I found on CNNFail:

Shazzy919 — ChristianeAmanpour:  “No indication of curfew or further forceful action” really????

ahockley — There’s currently a story on CNN titled “Do journalists Twitter too much?”

charlieprofit —  CNN just ran the same report aired earlier where they call some Iranian protesters Vigilantes

Robot117 —  My animosity toward CNN for their utter incompetence in reporting this news is growing

georgedick — CNN still referring to “The landslide win of Iranian President Mahmoud Ahmadinejad”.   WTF.

In fact, ABC’s Jim Sciutto made the following comment on Twitter concerning CNN’s fiasco:

Did CNN Intl really just air pix of a water-skiing squirrel?  Anyone remember ‘Ron Burgundy’? 12:14 AM Jun 14th from web

A review of CNN’s website reveals that some of their coverage seemed like an attempt to legitimize Ahmadinejad’s “victory”:

The landslide defeat of Ahmadinejad’s leading opponent, Mir Hossein Moussavi, who some analysts predicted would win the election, triggered angry protests in Iran and other cities around the world.

*    *    *

Moussavi’s supporters say the election was rigged. But the huge turnout for Ahmadinejad’s victory speech Sunday leaves no doubt that the president carries plenty of support.

For all the ridicule directed against Twitter and its users, the CNNFail event will become an historical milestone for the moment when this communication medium finally earned some respect.

GPCs And GMCs

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May 18, 2009

The latest disappointment from the Obama – Goldman Sachs administration concerns the case of Daniel Choi.  Here was a West Point graduate, serving in the Army as an Arabic translator, who appeared on MSNBC’s Rachel Maddow Show.  With Barack Obama in the White House, Choi must have felt that the time was right to take a stand against the “don’t ask – don’t tell” policy concerning gays in the military by announcing to the world that he is gay.  Wrong!  Within a few weeks, Choi received a letter informing him that he had earned a dishonorable discharge for publicly disclosing his homosexuality, in violation of the “don’t ask – don’t tell” policy.  Not long afterward, the Obama administration announced that it would not intervene in such cases.

On Friday evening, this subject became a topic for discussion on the HBO program, Real Time with Bill Maher.  Maher reminded us of Obama’s campaign promise to do away with the “don’t ask – don’t tell” policy — particularly since so many of its targets happened to have served as Arabic translators.  We just don’t have enough personnel with that skill.  I agree with Maher’s belief that the rationale for adhering to the “don’t ask – don’t tell” policy arises from the fact that sexual harassment is a huge problem in the military.  Things haven’t changed all that much since the days of the “Tailhook” scandal.  In fact, they may now be much worse.  The military brass probably fears that if the “don’t ask – don’t tell” policy were rescinded, they could find themselves with an enormous increase in sexual harassment claims.  For example, an “out” Sgt. Butch Topington might feel emboldened about harassing the new recruits.

This subject was fresh in my mind as I watched Sean Penn’s fantastic, Oscar-winning performance in the film, Milk.  I was particularly impressed by Penn’s delivery of those important comments, spoken by gay activist Harvey Milk, into his tape recorder, after realizing that his eventual assassination would be more than likely:

I ask for the movement to continue because it’s not about personal gain.  It’s not about ego and it’s not about power.  It’s about the “Us”es out there — Not just the gays, but the blacks and the Asians and the seniors and the disabled — the “Us”es.

Without hope, the “Us”es give up.  And I know you can’t live on hope alone, but without hope life is not worth living.  So you … and you … and you — You gotta’ give ’em hope!  You gotta’ give ’em hope!

Candidate Obama spoke eloquently about “the audacity of hope”.  Nevertheless, President Obama seems to increasingly demonstrate “the audacity of nope”.

I believe there is still hope for those individuals in the same situation as Daniel Choi.  Now that they are out of the service, they should start working for “the big bucks” as contractors.  They could call themselves Gay Private Contractors (GPCs) or Gay Military Contractors (GMCs).  They should start their own business to compete with Blackwater (now known as Xe).  They might want to call it:  Gaywater.  Gaywater could promote its translation and interrogation service with a slogan such as:  “When we ask — they tell.”  Although the President has stated that he wants to “reconsider” the role of military contractors, where else is he going to find Arabic translators?  These individuals had security clearances up to the point of their discharge, so it should be a relatively quick, easy process to obtain civilian security clearances for them.  (However, the GMCs should be advised not to take personally, the fact that a civilian security clearance is called a “Q” clearance.)  Although there would likely be some sort of hurdle involved in getting such security clearances for “dishonorably discharged” personnel, the simple fact is that the only “dishonorable” acts committed by these individuals were instances of telling the truth about themselves.