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The Betrayal

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March 23, 2009

We the people, who voted for Barack Obama, are about to get ripped off by our favorite Hope dealer.  Throughout the recent controversy arising from the huge bonuses paid to AIG executives, President Obama has done quite a bit of hand wringing over the fact that the government is rewarding “the very same people who got us into this mess”.  Treasury Secretary, “Turbo” Tim Geithner is now rolling out the administration’s so-called Financial Stability Plan, wherein once again, “the very same people who got us into this mess” will be rewarded with our tax dollars.  Over a trillion dollars of taxpayer money will be used to either buy back or insure an arbitrarily-assigned value for the infamous mortgage-backed securities.  The purpose of this exercise will be to prevent the bankers themselves from losing money.  The country’s top economists, including two Nobel Prize winners (Paul Krugman and Joseph Stiglitz) have advocated a different solution:  placing those banks that are about to fail into “temporary receivership”.  However, this process would result in a significant reduction of the stock prices for those banks, in addition to replacement of the management of those institutions.  The big-shot bankers won’t put up with this.

In Sunday’s New York Times, Frank Rich referenced a reader’s observation that this is President Obama’s “Katrina Moment”.  How the new President responds to this crisis will likely shape “the trajectory of his term”.  I prefer to call it Obama’s “Yellow Cake Moment”, since he and his administration are bent on selling a lie (the likelihood that the Financial Stability Plan can succeed) to the public in order to further assist the bad bankers.  It is similar to when George W. Bush convinced many in Congress and the public, that Saddam Hussein was attempting to purchase yellow cake uranium to make atomic bombs (with Bush’s ultimate goal being widespread support for the invasion of Iraq).

It should be no coincidence that the Financial Stability Plan is rewarding the bad bankers, since it was prepared by some of “the very same people who got us into this mess”.  I am specifically referring to Larry Summers and Turbo Tim himself.  Frank Rich covered this point quite well in Sunday’s article.  As a result, Obama’s attempt to chastise “the very same people who got us into this mess” is quite specious, in light of the fact that some of those people have shaped his latest bank bailout.

Back during the campaign, Candidate Obama caught quite a bit of flack for talking about “putting lipstick on a pig”.  Nevertheless, his continued promotion of the various incarnations of what is essentially the same ill-conceived plan floated by former Treasury Secretary Henry Paulson, demonstrates that Obama himself is now putting lipstick on a pig.  As Paul Krugman pointed out:

Why was I so quick to condemn the Geithner plan?  Because it’s not new; it’s just another version of an idea that keeps coming up and keeps being refuted.  It’s basically a thinly disguised version of the same plan Henry Paulson announced way back in September.

*    *    *

But Treasury is still clinging to the idea that this is just a panic attack, and that all it needs to do is calm the markets by buying up a bunch of troubled assets.  Actually, that’s not quite it:  the Obama administration has apparently made the judgment that there would be a public outcry if it announced a straightforward plan along these lines, so it has produced what Yves Smith calls “a lot of bells and whistles to finesse the fact that the government will wind up paying well above market for [I don’t think I can finish this on a Times blog]”

Nevertheless, “public outcry” is exactly what is warranted in response to this soon-to-be fiasco.  Most economists favor the “temporary receivership” approach, rather than the continued bailouts of insolvent banks.  The Administration’s Financial Stability Plan is just another way to reward “the very same people who got us into this mess”.  This plan is expected to cost at least one trillion dollars.  As a result, the government is about to bilk the taxpayers out of an amount in excess of 20 Bernie Madoff Ponzi schemes.

MSNBC’s Rachel Maddow has recently vilified Senator Evan Bayh’s caucus of moderate Democrats, whom she calls “Conservadems” because they have been offering some resistance to a few of Obama’s proposals.   These Senators are actually smart people who can detect the distinctive odor of snake oil.  They know better than to tie their political futures to a bank bailout plan that can destroy their own credibility with the voting public.  They know that public support of Obama’s broader agenda is hinged on how he deals with the banking problem.  As Ben Smith and Manu Raju reported for Politico:

But many lawmakers made clear Tuesday their view that voters’ willingness to trust Obama on some subjects will be determined by their view of how well he handles the economic crisis.

*    *    *

“Unless we can instill some trust back with the American people that these people who brought on this problem, who risked our 401K funds and hard-working people’s money, aren’t going to be able to profit from their folly, I think we are at risk of losing their trust,” said Sen. Amy Klobuchar (D-Minn.).

Meanwhile, there’s an ill wind a-blowin’ and it’s coming from 1600 Pennsylvania Avenue.  The efforts by many pundits to blame the flawed financial policy on Geithner are misplaced.  If President Obama weren’t on board with this plan, it would have never made it outside of the Oval Office.  The problem is with Obama himself, rather than Geithner.  Unfortunately, the decision our President has made will likely turn a two-year recession into a ten-year recession.  To him, the corresponding benefit of helping out the bankers must apparently be worth it.

Hillary Clinton Begins Making History

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March 5, 2009

While most American media outlets focus their attention on Rush Limbaugh’s vainglorious publicity extravaganza, Hillary Clinton is traveling around the world, letting everyone know that the foreign policy of the United States is being drastically changed by the new administration.

The new Secretary of State took quite a bit of heat for her failure to stage a fit of righteous indignation over China’s record of human rights abuses, during her visit there.  Nevertheless, America has been a critic of these transgressions for decades.  Given the current economic situation, our need to maintain a healthy business relationship with China and our country’s embarrassing human rights track record for the past eight years, her decision to leave that issue on the back burner for her initial visit, wasn’t such a bad idea.

Her trip to the Middle East was the first step toward rehabilitating the role of the United States as an effective peace broker for the Israeli – Palestinian conflict.  As Barak Ravid reported for Haaretz, prior to Clinton’s arrival in Israel, a list of demands or “red lines” was created and “approved by Prime Minister Ehud Olmert, Foreign Minister Tzipi Livni and Defense Minister Ehud Barak at a meeting with senior defense officials last week”.  These individuals are apparently so accustomed to browbeating Condoleezza Rice, they feel comfortable about dictating their own “marching orders” to be followed by Clinton as she approaches engaging Iran in formal, diplomatic relations.  The Haaretz article itemized these four mandates as follows:

1. Any dialogue must be both preceded by and accompanied by harsher sanctions against Iran, both within the framework of the UN Security Council and outside it.  Otherwise, the talks are liable to be perceived by both Iran and the international community as acceptance of Iran’s nuclear program.

2. Before the dialogue begins, the U.S. should formulate an action plan with Russia, China, France, Germany and Britain regarding what to do if the talks fail.  Specifically, there must be an agreement that the talks’ failure will prompt extremely harsh international sanctions on Iran.

3. A time limit must be set for the talks, to prevent Iran from merely buying time to complete its nuclear development.  The talks should also be defined as a “one-time opportunity” for Tehran.

4. Timing is critical, and the U.S. should consider whether it makes sense to begin the talks before Iran’s presidential election in June.

Steve Clemons of The Washington Note emphasized that “Israel is crossing the line” by attempting to dictate this agenda to our new Secretary of State and President:

Iran’s pretensions in the region are a problem in my view — but Iran, which fears regime change efforts by the US and other of its neighbors, is responding to an “ecosystem” that many around the world have complicity in building.

Israel should be rebuffed by Hillary Clinton.  She should listen to Israel’s views on the region of course — and consider proposals.  But this kind of instruction manual on what red lines can be tolerated or not is pretty outrageous — and borders on the type of irresponsibility and consequences of what a Taiwanese declaration of independence from China would mean.

In another Haaretz article by Barak Ravid, we see Clinton giving Israel some “pushback” that may or may not have been anticipated:

U.S. Secretary of State Hillary Clinton on Wednesday blasted Israel’s plans to demolish Palestinian homes in East Jerusalem as a violation of its international obligations and “unhelpful” to Middle East peace efforts.

“Clearly this kind of activity is unhelpful and not in keeping with the obligations entered into under the ‘road map’,” Clinton said, referring to the long-stalled peace plan.

On March 4, a day before meeting with Israeli leaders in Jerusalem, Clinton met with Palestinian Authority President Mahmoud Abbas and Palestinian Prime Minister Salam Fayyad in the West Bank city of Ramallah.  According to a CNN report, Clinton advised the Palestinian leaders that the United States is committed to the “two-state solution” (establishing a separate Palestinian state) despite the objections to that plan, voiced by Israel’s Prime Minister-designate, Benjamin Netanyahu.

“The United States through President Obama is committed to a comprehensive peace including a two-state solution,” Clinton said.  “I have said that publicly, I have said that privately.  There is no difference in any message.”

Meanwhile, Secretary Clinton made it a point to single out Iran’s “supreme leader”, Ayatollah Ali Khamenei, for interfering in Palestinian affairs by funding terrorism “whether it’s Hezbollah, Hamas or other proxies”.  As the Voice of America News pointed out:

Khamenei also called the Jewish state a “cancerous tumor” and accused U.S. President Barack Obama of following what he called the same mistaken path as George W. Bush in supporting Israel.  He made the comments during a conference in Tehran earlier Wednesday.

Clinton and Palestinian President Mahmoud Abbas dismissed the ayatollah’s remarks.  Mr. Abbas said Iran should look after its own affairs and stop trying to widen the divide among Palestinians.

Although many critics of the new administration complain that Obama has failed to deliver on his promise of “Change”, one important agent of Change on the Obama team is turning out to be none other than Hillary Clinton.  Who could have foreseen that development at this point, last year?

Another Troubling Appointment By Obama

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February 5, 2009

It all started with Bill Richardson.  On January 4, New Mexico Governor Bill Richardson announced that he was withdrawing as nominee for the position of Commerce Secretary, due to an investigation into allegations of influence peddling.

Then there was a brief moment of concern over the fact that Treasury Secretary nominee, Timothy Geithner, was a little late with some self-employment tax payments.  Since his new position would put him in charge of the Internal Revenue Service, many people found this shocking.  Even more shocking was his admission that he prepared his income taxes using the TurboTax software program.  That entire controversy was overlooked because Geithner has been regarded as the only person in Washington who fully understands the TARP bailout bill (as Newsweek‘s Jonathan Alter once said).

On February 3, two more Obama appointees had to step aside.  The first was Nancy Killefer, who had been selected to become “Chief Performance Officer”, in which role she would have been tasked with cleaning up waste in government programs.  Her situation didn’t sound all that scandalous.  The Wall Street Journal explained that she “… had a $946.69 tax lien imposed on her home by the District of Columbia for unpaid taxes on household help, a debt she had satisfied long ago.”  Later that day, Tom Daschle had to withdraw his nomination to become Secretary of Health and Human Services.  It seemed that his failure to timely pay over $100,000 in taxes was just part of the problem.  As the previously-mentioned Wall Street Journal article pointed out, the Daschle nomination provided additional embarrassment for President Obama:

Beyond the tax issue, Mr. Daschle was increasingly being portrayed as a Washington insider who made a fortune by trading on his Beltway connections — an example of the kind of culture Mr. Obama had pledged to change.

Meanwhile, many Democrats were expressing dismay over the February 2 announcement that Republican Senator Judd Gregg had been tapped to become Commerce Secretary.  Back in 1995, as United States Senator representing New Hampshire, he voted in favor of a budget measure that would have abolished the Commerce Department.  To many, this seemed too much like the George W. Bush tactic of putting a saboteur in charge of an administrative agency.  Nevertheless, Senator Gregg was ready to address those concerns.  As Liz Sidoti reported for the Associated Press:

In a conference call with reporters, Gregg dismissed questions about the vote.

“I say those were my wild and crazy days,” he said.  “My record on supporting Commerce far exceeds any one vote that was cast early on in the context of an overall budget.”

Gregg said he’s strongly supported the agency, particularly its scientific initiatives, including at the agency’s largest department, the National Oceanic and Atmospheric Administration.

Finally, on Wednesday February 5, those who concurred with President Obama’s appointment of Mary Schapiro as Chair of the Securities and Exchange Commission (SEC) had good reason to feel anxious.  That day brought us the long-awaited testimony of independent financial fraud investigator, Harry Markopolos, before the House Financial Services Committee.  Back in May of 2000, Mr. Markopolos tried to alert the SEC to the fact that Bernie Madoff’s hedge fund was a multi-billion-dollar Ponzi scheme.  As Markopolos explained in his testimony, he repeatedly attempted to get the SEC to investigate this scam, only to be rebuffed on every occasion.  Although his testimony included some good advice directed to Ms. Schapiro about “cleaning up” the SEC, this portion of his testimony, as discussed by Marcy Gordon of the Associated Press, deserves some serious attention:

While the SEC is incompetent, the securities industry’s self-policing organization, the Financial Industry Regulatory Authority, is “very corrupt,” Markopolos charged.  That organization was headed until December by Schapiro, who has said Madoff carried out the scheme through his investment business and FINRA was empowered to inspect only the brokerage operation.

So Schapiro’s defense is that FINRA was empowered to inspect only brokerages and Madoff Investments was not a brokerage.  This doesn’t address Markopolos’ testimony that FINRA is “very corrupt”.  Mary Schapiro was the Chair and CEO of that “very corrupt” entity from 2006 until December of 2008.  Let’s not forget that during her tenure in that position she appointed Bernie Madoff’s son, Mark Madoff, to the board of the National Adjudicatory Council.  The Mark Madoff appointment was discussed back on December 18 by Randall Smith and Kara Scannell, in The Wall Street Journal.  At that time, they provided an informative analysis of the SEC nominee’s track record, which should have discouraged the new President from appointing her as he did on his second day in office:

She was credited with beefing up enforcement while at the National Association of Securities Dealers and guiding the creation of the Financial Industry Regulatory Authority, which she now leads.  But some in the industry questioned whether she would be strong enough to get the SEC back on track.

*   *   *

Robert Banks, a director of the Public Investors Arbitration Bar Association, an industry group for plaintiff lawyers  . . .  said that under Ms. Schapiro, “Finra has not put much of a dent in fraud,” and the entire system needs an overhaul.  “The government needs to treat regulation seriously, and for the past eight years we have not had real securities regulation in this country,” Mr. Banks said.

Since Ms. Schapiro took over Finra in 2006, the number of enforcement cases has dropped, in part because actions stemming from the tech-bubble collapse ebbed and the markets rebounded from 2002 to 2007.  The agency has been on the fringe of the major Wall Street blowups, and opted to focus on more bread-and-butter issues such as fraud aimed at senior citizens.

Out of the gate, Ms. Schapiro faces potential controversy.  In 2001 she appointed Mark Madoff, son of disgraced financier Bernard Madoff, to the board of the National Adjudicatory Council, the national committee that reviews initial decisions rendered in Finra disciplinary and membership proceedings.  Both sons of Mr. Madoff have denied any involvement in the massive Ponzi scheme their father has been accused of running.

I would be much more comfortable with a small-time tax cheat in charge of the SEC, than I am with Mary Schapiro in that position.  As his testimony demonstrates, Harry Markopolos is the person who should be running the SEC.

“My Oath Is To The Constitution, Not To The President”

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July 3, 2008

David Iglesias is making the talk show circuit, promoting his recent book: In Justice.  The book provides an insider’s account of the scandal involving the politicization of the Justice Department under the Administration of non-attorneys George W. Bush and Dick Cheney.  As I have said before, these two men have little regard for our Constitution because they know little about it and they have contempt for our courts because they know almost nothing about the law or the concepts of justice and due process.  Bush/Cheney made a point of having culls run Justice:  John Ashcroft, who (surprisingly) to his credit, was not trusted by them to authorize their FISA bypass, so they tried to have him authorize it while he was in the hospital, under sedation.  Once Alberto Gonzalez became Attorney General, we had someone in charge of the Justice Department, who was even more subservient to the whims of non-attorneys Bush and Cheney.  This resulted in what history will view as the most disgraceful abuse of the Justice Department as Soviet-style enforcers of political allegiance to the party-in-charge.  David Iglesias and at least six other important federal prosecutors, who had devoted their careers to fighting organized crime, terrorism and (oops!) corporate fraud, were summarily terminated by Bush-Cheney for failure to align their missions with the political vendettas of this administration.  The title Iglesias chose for his book was an obvious reference to the widespread opinion that the Bush Administration had changed the Justice Department to the Injustice Department.

David Iglesias explained to Tavis Smiley that an underlying theme throughout his book was that as a federal prosecutor, he understood his oath of office as to support the Constitution of the United States, despite the Bush Administration’s mandate that a prosecutor’s highest obligation was to support the President.

This theme is particularly timely in light of the recent dispute arising from the appearance of retired General Wesley Clark on the CBS News program, “Face The Nation” on June 29.  During that conversation, Wesley Clark, in his vanity, forgot that it was actually Barack Obama running as the Democratic Party’s candidate for President, rather than himself.  Clark expressed a rationale that only Commanding Officers, such as himself, had the type of military experience to qualify one for the Presidency.  He tactlessly contrasted this with the experience of John McCain, who was shot down as a fighter pilot and was held for years as a POW in the Hanoi Hilton.  When asked by Dan Abrams on MSNBC’s “The Verdict”, to explain his minimization of McCain’s sacrifice, Clark again reinforced his position that only Commanding Officers, such as himself, had the type of military experience to be qualified for the Presidency.  The McCain camp made the most they could of this denigration of the Republican candidate’s service.  Barack Obama found it necessary to distance himself from Clark’s comments on this subject.

The McCain camp then targeted Virginia Senator Jim Webb, for his remarks to Keith Olbermann on MSNBC’s “Countdown” show of June 30.  During that interview, Webb pointed out that:

We need to make sure that we take politics out of service.  People don’t serve their country for political issues and John McCain is my longtime friend and if there is one area I would ask him to calm down on it is: don’t be standing up and uttering your political views and implying that all the people in the military support them because they don’t, any more than when the Democrats had political issues during the Vietnam war.  Let’s get politics out of the military, take care of our military people and have our political arguments in other areas.

McCain’s claim was that this was another attack on his service in the Vietnam War.  Nevertheless, we can see that Webb was attempting to distinguish a soldier’s obligation to the President (or in this case, a Presidential candidate) from a soldier’s obligation to defend our Constitution.  The oath of enlistment for people serving in the military is as follows:

I, _____, do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; and that I will obey the orders of the President of the United States and the orders of the officers appointed over me, according to regulations and the Uniform Code of Military Justice. (So help me God.)

Although military personnel are bound by their oath to follow the orders of the President, in accordance with regulations and the Uniform Code of Military Justice, their primary duty is to support and defend the Constitution.  When McCain takes for granted that those serving in the military will support his entire political agenda, he is mistaken.  Their oath does not require it, nor could he enforce such compliance if elected President.

What is actually going on with all of this is that the Obama camp is out to “level the playing field” with respect to Obama’s lack of military experience.  McCain’s delusion that he can speak for all the troops and that they are aligned with his entire political agenda is the “Achilles heel” where the Democrats are directing their fire to achieve their goal.  “McCain doesn’t speak for all the troops” is the argument that will pay off when the pollsters focus on the Presidential choices of those in uniform.

As an aside, it’s only fitting that at a time so close to the day we celebrate our Independence, we can celebrate the rescue of former Colombian presidential candidate Ingrid Betancourt from the FARC rebels.  My Colombian friends and I thought she had been killed several years ago.  Let’s all make a toast to Ingrid when we think about freedom this year!