Saturday, February 20, 2010

Gun Owners Against Illegal Mayors

Stop the Bloomberg Gang! Click the mayors' names above to view their rap sheets


Gun Owners Against Illegal Mayors represents Americans united to fight the Bloomberg Gang, a band of organized criminal politicians. Originating in New York City, the Gang has recruited criminal mayors across the United States.

Some of the Gang's members have been convicted of assaulting officers and constituents, corruption, extortion, theft, obstruction of justice, bribery, perjury, tax evasion, child porn, battery, and child molestation. They have attacked constituents and police officers, destroyed houses with sledge hammers, and even stolen gift cards donated for the poor. No crime is beneath them and no enormity beyond them.

The gang hides its intentions behind the deceptive title of "Mayors Against Illegal Guns." This criminal band was organized by N.Y. City mayor Michael "Bloomie" Bloomberg, who is reported to have made illegal gun purchases in several states, which interfered with 18 federal investigations. No wonder that he and his illicit mayors would like to see us made helpless to resist their sociopathic drives.

We call upon Americans to unite against these thugs, and to demand that the Department of Justice use its Racketeer Influenced and Corrupt Organization (RICO) powers to shut down "Mayors Against Illegal Guns."
Stop the Illegal Mayors! Stop them for our children, and for ourselves!

Debra Medina, Glenn Beck, 911 Truth and the Importance of Private Property

Click this link ......

Isles' real estate is still in distress

Defaults and foreclosures continue to loom over Hawaii's real estate investment markets, which entered the recession last year.

During the most recent Hawaii investment cycle, tenant demand has slowed, rents have dropped and many proposed developments have been shelved, according to a report released today by commercial real estate brokerage Colliers Monroe Friedlander.

"2010 will likely be the transition year," said Mike Hamasu, Colliers' consulting and research director.

"Many property owners that capitalized on cheap available funding during the peak found themselves overleveraged a few years later."

While the multifamily and retail sectors likely will recover this year, and industrial is expected to improve by the end of the year or the beginning of the next, it could be 2011 before the office sector improves and as late as 2012 before problems in the hotel sector abate, he said.

Last year, total investment transaction volume fell to $627.5 million, a 20.4 percent drop from the prior year and an 85 percent drop from the $4.3 billion record in 2005, Colliers reported. Transaction activity dropped last year to levels not seen since the aftermath of the Japanese bubble period in the 1990s; however, Colliers said financial stresses have created heartaches and opportunities.

Hawaii's hotel and resort sector was battered last year by decreased occupancy and room rates. As a result, a number of high-profile hotels went into distress, including the Ilikai, the former W Honolulu Diamond Head, Maui Prince, Fairmont Orchid, ResortQuest Kauai and the Hilton Kauai, said Mark Bratton, Colliers vice president.

Currently, there are four Hawaii hotels for sale and 11 more that are distressed or in foreclosure, Bratton said.

"It is highly likely that 2010 will yield more financially distressed properties for Hawaii and the U.S.," said Nanette Macapanpan, Colliers' research consultant/project manager. "With an estimated $1.4 trillion in commercial debt due to mature by 2013, there is sure to be more financial heartache for property owners and more opportunistic plays for savvy investors."

The Makena Resort, which sold for $575 million in 2007, is an example of a property in foreclosure after the owners failed to make payments on a $192 million mortgage, Macapanpan said.

While several distressed properties have been taken back or purchased at a discount, investors also are buying notes with the hopes of selling it for a favorable return once the market strengthens, she said.

For example, A&B Properties purchased the distressed note from I-Star Financial last summer when the former Hawaii Raceway Park in West Oahu fell into default, Macapanpan said.


Hawaii distressed properties in 2009:

Property Type Status
ResortQuest Kauai HTL Foreclosure complete, lender owned
Fairmont Orchid HTL Foreclosure complete, lender owned
Makena Resort HTL In foreclosure
W Honolulu Diamond Head HTL Sold to Unity House
The Ilikai HTL Foreclosure complete, lender owned
Kapolei Trade Center INDL Foreclosure complete, lender owned
Former Raceway Park site INDL LND Foreclosure complete, lender owned
Moana Vista RES Sold to OliverMcMillan
Coconut Grove RTL Foreclosure complete, lender owned
King Kalakaua Plaza RTL Foreclosure complete, lender owned
Ala Moana R/O Owner bankrupt, loans restructured
Victoria Ward Properties R/O/I Owner bankrupt, loans restructured

HTL: Hotel. INDL: Industrial. INDL LND: Industrial land. RES: Residential. RTL: Retail. R/O: Retail/office. R/O/I: Retail/office/industrial.

Source: Colliers Monroe Friedlander

Counties warn of mutiny over state budget crisis

Fed up with what they see as a state raid on cash that belongs to them, top officials from a dozen counties converged on Sacramento on Thursday and warned that mutiny is near.

In a contentious meeting attended by a half-dozen legislators, the officials threatened lawsuits, vowed to withhold local taxes owed to Sacramento and said they would shut down unfunded state programs -- including those aiding children and the poor -- if the "deadbeat state," as one official put it, does not change its ways.

Their anger stems from money the state owes the counties but has delayed paying amid the ongoing fiscal crisis. Some of that cash -- but not all of it -- could start flowing again if lawmakers pass a state spending plan in coming days. State officials may continue to hold back some cash indefinitely.

"It's incomprehensible," said Orange County Supervisor John Moorlach, a certified public accountant, on the subject of the state's action on county funding. Turning to the legislators at the meeting, he added: "We are not the bank, and you need to find different lenders."

Like students being scolded, some lawmakers sat slouched in their seats in the packed conference room at the counties' Sacramento headquarters.

Riverside County Supervisor Jeff Stone said his county would consider issuing the state IOUs instead of the property tax revenue it is required to send to Sacramento, as well as shutting down some state programs.

"There will be no state programs provided by our county," he said.

The officials lambasted legislators for dragging their feet on solving the state's $42-billion budget shortfall, which is forcing public works projects to shut down and social service agencies to borrow and use up reserves.

"We are fed up," said Riverside County Supervisor John F. Tavaglione. "You have truly lost touch with those you represent."

--Patrick McGreevy

Slump in Tax Revenue Creates State of Siege

U.S. states face a "lost decade," says Raymond Scheppach, head of the National Governors Association. The problem is a broken fiscal model exposed by the recession, and likely to extend the pain beyond the downturn's official conclusion.

GM's eventual bankruptcy was rooted largely in the award of ever-more-generous employee benefits, all paid for by cyclical car sales. States have similarly expanded the scope of services beyond their revenue-raising abilities. Some 55% of state revenue, before federal transfers, comes from personal- and corporate-income tax and sales tax, according to Donald Boyd at the Nelson A. Rockefeller Institute of Government. All three get killed in a downturn, and the first three quarters of 2009 were the worst for state tax receipts since at least 1963.

Expenditures are harder to rein in. States projected a collective $145.9 billion budget gap for fiscal year 2010, which began in July, equivalent to 9.2% of the previous year's total state expenditures. Apart from voter backlash against cuts, the economic cycle raises spending as the newly unemployed turn to government programs like Medicaid for help. The result is a lagged effect on state finances, with tax revenues usually taking as long as five years to reattain prior peaks, according to Mr. Boyd.

Since states can't run general funding deficits, closing gaps mean raising taxes, cutting services and resorting to one-time measures. No prizes for guessing which option politicians prefer. A big one is $246 billion of stimulus transfers from Washington. More than half of this pot will have been spent by the end of this year. And while states had estimated rainy-day funds of $36.5 billion in fiscal year 2009, it is likely they have since drawn them down significantly.

Besides the near-term crisis, the other similarity states have with the old GM is an overhang of debt. Between 2000 and 2008, state debts—distinct from other municipal debts—almost doubled to about $1 trillion, according to the Census Bureau. However, that is only 7% of gross domestic product, and low rates mean interest charges have been manageable, reaching $47 billion, or 3.7% of total expenditures, in 2008.

The bigger issue is retirement obligations. Like GM, many localities have struck generous deals with public-sector workers. In part, this reflected a desire to appease unions with promises for tomorrow that didn't have to be paid for until well after the next election. In a new study, the Pew Center on the States estimates there was a $1 trillion funding gap on $3.35 trillion of state health-care and retirement obligations as of fiscal year 2008.

Overhaul of these, as well as the out-of-date, volatile revenue-raising mechanisms that fund them, is long overdue. Just don't expect it to happen quickly: 37 governors' seats are up for election this year.

In the meantime, states will scrimp as much as they can, and raise fees and taxes to balance budgets. State defaults remain unlikely, but as their ability to help localities is constrained, holders of bonds issued by cities, public projects and other smaller entities should beware.

The wider issue is the drag on economic growth. Median household income was stagnant in the last economic up-cycle, a big reason why so many borrowed against their homes to maintain living standards.

That option is now severely constrained, and higher taxes and reduced government services will serve to erode disposable income and living standards further. Consumers, and the cyclical stocks that take their cue from them, face an extended period of Capitol punishment.

—Liam Denning

Report: Real estate could bury banks

While small banks far outside Columbus are getting clobbered by commercial real estate losses, Central Ohio’s community lenders appear to be weathering the storm.

A Feb. 11 report from the Congressional Oversight Panel studying the banking bailout and financial services regulation predicted that a gathering wave of commercial real estate loan defaults could jeopardize the stability of many banks over the next few years while battering a hobbled economy. It said the downturn could be acute among community banks because they are “proportionately even more exposed than their larger counterparts” to commercial real estate loans.

But an analysis by Columbus Business First using the government’s calculations found Central Ohio’s community banks have generally steered clear of the gorging on commercial real estate seen in other states, while a conservative approach has helped them avoid deep losses.

“In some really hot markets there were commercial real estate banks created, or they expanded greatly with (commercial real estate),” said Jeff Benton, CEO of the Delaware County Bank & Trust Co., a commercial real estate lender that has encountered relatively few problem loans. “Our banks here tend to be more balanced.”

Announcing the Major Economic Crimes Bureau

Manhattan's District Attorney Cyrus Vance Jr. has just announced the formation of a new office within the DA's for fighting "complex economic crime" on Wall Street.

Translation, they will harass the politically unconnected and weak who dare to try and pull off the scams that are business as usual for Goldman Sachs and JPMorgan.

The Major Economic Crimes Bureau will be headed by former DOJ man Richard Weber.

Vance took office in January, replacing Robert Morgenthau. His father served as the United States Secretary of State under President Jimmy Carter from 1977 to 1980. Vance Sr. actually believed in negotiation over war. In April 1980, he resigned in protest of Operation Eagle Claw, the failed secret mission to rescue American hostages in Iran.

Jobless Claimant Count Jumps to Highest Since 1997

LONDON (Reuters) - The number of Britons claiming jobless benefit jumped unexpectedly in January and at its fastest rate in 6 months, raising fears that an improvement at the end of last year may have been little more than a blip.

Figures from the Office for National Statistics on Wednesday showed claimant count unemployment rose by 23,500 last month, the biggest rise since last July.

The rise wiped out the declines seen in the previous two months and took the total number of claimants to its highest since 1997, when the ruling Labour party came to power.

Economists had been expecting claimant count unemployment to fall for a third consecutive month, by around 10,000.

"The standout figure is the increase in the claimant count, which calls into question the hypothesis that unemployment is falling," said Philip Shaw, chief economist at Investec.

There was better news on the internationally comparable ILO jobless measure, which includes people out of work and not claiming benefit. Unemployment on this broader measure fell by 3,000 in the three months to December to 2.457 million, its lowest since April-June 2009.

The ILO jobless rate was steady at 7.8 percent of the workforce, well below the rate of 9.7 percent in the United States and 10 percent in the euro zone.


With a national election due by June, the Labour party is counting on an economic recovery to overturn a large opinion poll lead for the opposition Conservatives.

But analysts said any recovery was likely to be sluggish and Wednesday's labour market report fitted in with that, particularly since whichever party is in government after the election will have to tighten fiscal policy sharply to rein in a bulging budget deficit.

Britain's economy expanded by just 0.1 percent in the final quarter of last year after an 18-month long recession that wiped out six percent of economic output.

"The fact that the claimant count was falling in recent months was the huge surprise," said Ross Walker, an economist at RBS. "The fact that we have got a rise is not particularly surprising. It seems to fit more with the underlying reality."

Average earnings growth for the workforce as a whole remained subdued, at 0.8 percent in the three months to December. Earnings growth excluding bonuses held at 1.2 percent, matching the lowest since this series began in 2001.

With inflation running well ahead of pay growth, Graeme Leach, chief economist at the Institute of Directors, said there was a real risk the economy could tip back into recession.

"This really is the feel-bad recovery," he said. "Today's numbers support our view that the economy may experience a double-dip to the recession in the first half of 2010. Throw in a public sector recession in 2011 and we may even end up with a triple-tumble recession."

(Editing by Mike Peacock)

Frustrated Owner Bulldozes Home Ahead Of Foreclosure

Man Says Actions Intended To Send Message To Banks

Like many people, Terry Hoskins has had troubles with his bank. But his solution to foreclosure might be unique.Hoskins said he's been in a struggle with RiverHills Bank over his Clermont County home for nearly a decade, a struggle that was coming to an end as the bank began foreclosure proceedings on his $350,000 home."When I see I owe $160,000 on a home valued at $350,000, and someone decides they want to take it – no, I wasn't going to stand for that, so I took it down," Hoskins said. View SlideshowHoskins said the Internal Revenue Service placed liens on his carpet store and commercial property on state Route 125 after his brother, a one-time business partner, sued him.

The bank claimed his home as collateral, Hoskins said, and went after both his residential and commercial properties."The average homeowner that can't afford an attorney or can fight as long as we have, they don't stand a chance," he said.Hoskins said he'd gotten a $170,000 offer from someone to pay off the house, but the bank refused, saying they could get more from selling it in foreclosure.Hoskins told News 5's Courtis Fuller that he issued the bank an ultimatum."I'll tear it down before I let you take it," Hoskins told them.And that's exactly what Hoskins did.Man Says Actions Intended To Send Message To BanksThe Moscow man used a bulldozer two weeks ago to level the home he'd built, and the sprawling country home is now rubble, buried under a coating of snow."As far as what the bank is going to get, I plan on giving them back what was on this hill exactly (as) it was," Hoskins said. "I brought it out of the ground and I plan on putting it back in the ground."Hoskins' business in Amelia is scheduled to go up for auction on March 2, and he told Fuller he's considering leveling that building, too.RiverHills Bank declined to comment on the situation, but Hoskins said his actions were intended to send a message."Well, to probably make banks think twice before they try to take someone's home, and if they are going to take it wrongly, the end result will be them tearing their house down like I did mine," Hoskins said.Man Has No Regrets Over Bulldozing HouseHoskins said he's heard from people all over the country since his story first aired Thursday, and he said most have been supportive.He said he sought legal counsel before tearing down his home and understands the possible consequences, but he has never doubted his decision once he made it."When I knew I was going to lose it, I decided to take it down," Hoskins said.

State releases parks hit list, 9 sites in CNY targeted

Winter_022308-49 copy_2.JPGReader Joseph Cross captured this image at Selkirk Shores State Park during the winter of 2008. The public beach would close under the state budget proposed by Gov. David Paterson.

State officials have recommended shuttering six state parks, one public swimming beach and two historic sites in Central New York in an effort to close the state's expected $8.2 billion budget deficit.

The proposed local closures include:

See a complete list of proposed park closures

Carol Ash, commissioner of the Office of Park, Recreation and Historic Preservation said the closures are necessary to stay within next year's expected budget. OPRHP recommended closing 41 parks and 14 historic sites statewide, and reducing services at 23 parks and one historic site.

"These actions were not recommended lightly, but they are necessary to address our state's extraordinary fiscal difficulties," Ash said.

"In an environment when we have to cut funding to schools, hospitals, nursing homes and social services, no area of state spending -- including parks and historic sites -- could be exempt from reductions," Gov. David Paterson said.

For now, the closures are only recommendations. The Legislature will decide the ultimate fate of the parks when lawmakers vote on a state budget. The deadline for that vote is April 1.

Wall Street's Bailout Hustle

Goldman Sachs and other big banks aren't just pocketing the trillions we gave them to rescue the economy - they're re-creating the conditions for another crash

On January 21st, Lloyd Blankfein left a peculiar voicemail message on the work phones of his employees at Goldman Sachs. Fast becoming America's pre-eminent Marvel Comics supervillain, the CEO used the call to deploy his secret weapon: a pair of giant, nuclear-powered testicles. In his message, Blankfein addressed his plan to pay out gigantic year-end bonuses amid widespread controversy over Goldman's role in precipitating the global financial crisis.

The bank had already set aside a tidy $16.2 billion for salaries and bonuses — meaning that Goldman employees were each set to take home an average of $498,246, a number roughly commensurate with what they received during the bubble years. Still, the troops were worried: There were rumors that Dr. Ballsachs, bowing to political pressure, might be forced to scale the number back. After all, the country was broke, 14.8 million Americans were stranded on the unemployment line, and Barack Obama and the Democrats were trying to recover the populist high ground after their bitch-whipping in Massachusetts by calling for a "bailout tax" on banks. Maybe this wasn't the right time for Goldman to be throwing its annual Roman bonus orgy.

Not to worry, Blankfein reassured employees. "In a year that proved to have no shortage of story lines," he said, "I believe very strongly that performance is the ultimate narrative."

Translation: We made a shitload of money last year because we're so amazing at our jobs, so fuck all those people who want us to reduce our bonuses.

Goldman wasn't alone. The nation's six largest banks — all committed to this balls-out, I drink your milkshake! strategy of flagrantly gorging themselves as America goes hungry — set aside a whopping $140 billion for executive compensation last year, a sum only slightly less than the $164 billion they paid themselves in the pre-crash year of 2007. In a gesture of self-sacrifice, Blankfein himself took a humiliatingly low bonus of $9 million, less than the 2009 pay of elephantine New York Knicks washout Eddy Curry. But in reality, not much had changed. "What is the state of our moral being when Lloyd Blankfein taking a $9 million bonus is viewed as this great act of contrition, when every penny of it was a direct transfer from the taxpayer?" asks Eliot Spitzer, who tried to hold Wall Street accountable during his own ill-fated stint as governor of New York.

Beyond a few such bleats of outrage, however, the huge payout was met, by and large, with a collective sigh of resignation. Because beneath America's populist veneer, on a more subtle strata of the national psyche, there remains a strong temptation to not really give a shit. The rich, after all, have always made way too much money; what's the difference if some fat cat in New York pockets $20 million instead of $10 million?

The only reason such apathy exists, however, is because there's still a widespread misunderstanding of how exactly Wall Street "earns" its money, with emphasis on the quotation marks around "earns." The question everyone should be asking, as one bailout recipient after another posts massive profits — Goldman reported $13.4 billion in profits last year, after paying out that $16.2 billion in bonuses and compensation — is this: In an economy as horrible as ours, with every factory town between New York and Los Angeles looking like those hollowed-out ghost ships we see on History Channel documentaries like Shipwrecks of the Great Lakes, where in the hell did Wall Street's eye-popping profits come from, exactly? Did Goldman go from bailout city to $13.4 billion in the black because, as Blankfein suggests, its "performance" was just that awesome? A year and a half after they were minutes away from bankruptcy, how are these assholes not only back on their feet again, but hauling in bonuses at the same rate they were during the bubble?

The answer to that question is basically twofold: They raped the taxpayer, and they raped their clients.

The bottom line is that banks like Goldman have learned absolutely nothing from the global economic meltdown. In fact, they're back conniving and playing speculative long shots in force — only this time with the full financial support of the U.S. government. In the process, they're rapidly re-creating the conditions for another crash, with the same actors once again playing the same crazy games of financial chicken with the same toxic assets as before.

That's why this bonus business isn't merely a matter of getting upset about whether or not Lloyd Blankfein buys himself one tropical island or two on his next birthday. The reality is that the post-bailout era in which Goldman thrived has turned out to be a chaotic frenzy of high-stakes con-artistry, with taxpayers and clients bilked out of billions using a dizzying array of old-school hustles that, but for their ponderous complexity, would have fit well in slick grifter movies like The Sting and Matchstick Men. There's even a term in con-man lingo for what some of the banks are doing right now, with all their cosmetic gestures of scaling back bonuses and giving to charities. In the grifter world, calming down a mark so he doesn't call the cops is known as the "Cool Off."

To appreciate how all of these (sometimes brilliant) schemes work is to understand the difference between earning money and taking scores, and to realize that the profits these banks are posting don't so much represent national growth and recovery, but something closer to the losses one would report after a theft or a car crash. Many Americans instinctively understand this to be true — but, much like when your wife does it with your 300-pound plumber in the kids' playroom, knowing it and actually watching the whole scene from start to finish are two very different things. In that spirit, a brief history of the best 18 months of grifting this country has ever seen:


By now, most people who have followed the financial crisis know that the bailout of AIG was actually a bailout of AIG's "counterparties" — the big banks like Goldman to whom the insurance giant owed billions when it went belly up.

What is less understood is that the bailout of AIG counter-parties like Goldman and Société Générale, a French bank, actually began before the collapse of AIG, before the Federal Reserve paid them so much as a dollar. Nor is it understood that these counterparties actually accelerated the wreck of AIG in what was, ironically, something very like the old insurance scam known as "Swoop and Squat," in which a target car is trapped between two perpetrator vehicles and wrecked, with the mark in the game being the target's insurance company — in this case, the government.

This may sound far-fetched, but the financial crisis of 2008 was very much caused by a perverse series of legal incentives that often made failed investments worth more than thriving ones. Our economy was like a town where everyone has juicy insurance policies on their neighbors' cars and houses. In such a town, the driving will be suspiciously bad, and there will be a lot of fires.

AIG was the ultimate example of this dynamic. At the height of the housing boom, Goldman was selling billions in bundled mortgage-backed securities — often toxic crap of the no-money-down, no-identification-needed variety of home loan — to various institutional suckers like pensions and insurance companies, who frequently thought they were buying investment-grade instruments. At the same time, in a glaring example of the perverse incentives that existed and still exist, Goldman was also betting against those same sorts of securities — a practice that one government investigator compared to "selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars."

Goldman often "insured" some of this garbage with AIG, using a virtually unregulated form of pseudo-insurance called credit-default swaps. Thanks in large part to deregulation pushed by Bob Rubin, former chairman of Goldman, and Treasury secretary under Bill Clinton, AIG wasn't required to actually have the capital to pay off the deals. As a result, banks like Goldman bought more than $440 billion worth of this bogus insurance from AIG, a huge blind bet that the taxpayer ended up having to eat.

Thus, when the housing bubble went crazy, Goldman made money coming and going. They made money selling the crap mortgages, and they made money by collecting on the bogus insurance from AIG when the crap mortgages flopped.

Still, the trick for Goldman was: how to collect the insurance money. As AIG headed into a tailspin that fateful summer of 2008, it looked like the beleaguered firm wasn't going to have the money to pay off the bogus insurance. So Goldman and other banks began demanding that AIG provide them with cash collateral. In the 15 months leading up to the collapse of AIG, Goldman received $5.9 billion in collateral. Société Générale, a bank holding lots of mortgage-backed crap originally underwritten by Goldman, received $5.5 billion. These collateral demands squeezing AIG from two sides were the "Swoop and Squat" that ultimately crashed the firm. "It put the company into a liquidity crisis," says Eric Dinallo, who was intimately involved in the AIG bailout as head of the New York State Insurance Department.

It was a brilliant move. When a company like AIG is about to die, it isn't supposed to hand over big hunks of assets to a single creditor like Goldman; it's supposed to equitably distribute whatever assets it has left among all its creditors. Had AIG gone bankrupt, Goldman would have likely lost much of the $5.9 billion that it pocketed as collateral. "Any bankruptcy court that saw those collateral payments would have declined that transaction as a fraudulent conveyance," says Barry Ritholtz, the author of Bailout Nation. Instead, Goldman and the other counterparties got their money out in advance — putting a torch to what was left of AIG. Fans of the movie Goodfellas will recall Henry Hill and Tommy DeVito taking the same approach to the Bamboo Lounge nightclub they'd been gouging. Roll the Ray Liotta narration: "Finally, when there's nothing left, when you can't borrow another buck . . . you bust the joint out. You light a match."

And why not? After all, according to the terms of the bailout deal struck when AIG was taken over by the state in September 2008, Goldman was paid 100 cents on the dollar on an additional $12.9 billion it was owed by AIG — again, money it almost certainly would not have seen a fraction of had AIG proceeded to a normal bankruptcy. Along with the collateral it pocketed, that's $19 billion in pure cash that Goldman would not have "earned" without massive state intervention. How's that $13.4 billion in 2009 profits looking now? And that doesn't even include the direct bailouts of Goldman Sachs and other big banks, which began in earnest after the collapse of AIG.


In the usual "DollarStore" or "Big Store" scam — popularized in movies like The Sting — a huge cast of con artists is hired to create a whole fake environment into which the unsuspecting mark walks and gets robbed over and over again. A warehouse is converted into a makeshift casino or off-track betting parlor, the fool walks in with money, leaves without it.

The two key elements to the Dollar Store scam are the whiz-bang theatrical redecorating job and the fact that everyone is in on it except the mark. In this case, a pair of investment banks were dressed up to look like commercial banks overnight, and it was the taxpayer who walked in and lost his shirt, confused by the appearance of what looked like real Federal Reserve officials minding the store.

Less than a week after the AIG bailout, Goldman and another investment bank, Morgan Stanley, applied for, and received, federal permission to become bank holding companies — a move that would make them eligible for much greater federal support. The stock prices of both firms were cratering, and there was talk that either or both might go the way of Lehman Brothers, another once-mighty investment bank that just a week earlier had disappeared from the face of the earth under the weight of its toxic assets. By law, a five-day waiting period was required for such a conversion — but the two banks got them overnight, with final approval actually coming only five days after the AIG bailout.

Why did they need those federal bank charters? This question is the key to understanding the entire bailout era — because this Dollar Store scam was the big one. Institutions that were, in reality, high-risk gambling houses were allowed to masquerade as conservative commercial banks. As a result of this new designation, they were given access to a virtually endless tap of "free money" by unsuspecting taxpayers. The $10 billion that Goldman received under the better-known TARP bailout was chump change in comparison to the smorgasbord of direct and indirect aid it qualified for as a commercial bank.

When Goldman Sachs and Morgan Stanley got their federal bank charters, they joined Bank of America, Citigroup, J.P. Morgan Chase and the other banking titans who could go to the Fed and borrow massive amounts of money at interest rates that, thanks to the aggressive rate-cutting policies of Fed chief Ben Bernanke during the crisis, soon sank to zero percent. The ability to go to the Fed and borrow big at next to no interest was what saved Goldman, Morgan Stanley and other banks from death in the fall of 2008. "They had no other way to raise capital at that moment, meaning they were on the brink of insolvency," says Nomi Prins, a former managing director at Goldman Sachs. "The Fed was the only shot."

In fact, the Fed became not just a source of emergency borrowing that enabled Goldman and Morgan Stanley to stave off disaster — it became a source of long-term guaranteed income. Borrowing at zero percent interest, banks like Goldman now had virtually infinite ways to make money. In one of the most common maneuvers, they simply took the money they borrowed from the government at zero percent and lent it back to the government by buying Treasury bills that paid interest of three or four percent. It was basically a license to print money — no different than attaching an ATM to the side of the Federal Reserve.

"You're borrowing at zero, putting it out there at two or three percent, with hundreds of billions of dollars — man, you can make a lot of money that way," says the manager of one prominent hedge fund. "It's free money." Which goes a long way to explaining Goldman's enormous profits last year. But all that free money was amplified by another scam:


At one point or another, pretty much everyone who takes drugs has been burned by this one, also known as the "Rocks in the Box" scam or, in its more elaborate variations, the "Jamaican Switch." Someone sells you what looks like an eightball of coke in a baggie, you get home and, you dumbass, it's baby powder.

The scam's name comes from the Middle Ages, when some fool would be sold a bound and gagged pig that he would see being put into a bag; he'd miss the switch, then get home and find a tied-up cat in there instead. Hence the expression "Don't let the cat out of the bag."

The "Pig in the Poke" scam is another key to the entire bailout era. After the crash of the housing bubble — the largest asset bubble in history — the economy was suddenly flooded with securities backed by failing or near-failing home loans. In the cleanup phase after that bubble burst, the whole game was to get taxpayers, clients and shareholders to buy these worthless cats, but at pig prices.

One of the first times we saw the scam appear was in September 2008, right around the time that AIG was imploding. That was when the Fed changed some of its collateral rules, meaning banks that could once borrow only against sound collateral, like Treasury bills or AAA-rated corporate bonds, could now borrow against pretty much anything — including some of the mortgage-backed sewage that got us into this mess in the first place. In other words, banks that once had to show a real pig to borrow from the Fed could now show up with a cat and get pig money. "All of a sudden, banks were allowed to post absolute shit to the Fed's balance sheet," says the manager of the prominent hedge fund.

The Fed spelled it out on September 14th, 2008, when it changed the collateral rules for one of its first bailout facilities — the Primary Dealer Credit Facility, or PDCF. The Fed's own write-up described the changes: "With the Fed's action, all the kinds of collateral then in use . . . including non-investment-grade securities and equities . . . became eligible for pledge in the PDCF."

Translation: We now accept cats.

The Pig in the Poke also came into play in April of last year, when Congress pushed a little-known agency called the Financial Accounting Standards Board, or FASB, to change the so-called "mark-to-market" accounting rules. Until this rule change, banks had to assign a real-market price to all of their assets. If they had a balance sheet full of securities they had bought at $3 that were now only worth $1, they had to figure their year-end accounting using that $1 value. In other words, if you were the dope who bought a cat instead of a pig, you couldn't invite your shareholders to a slate of pork dinners come year-end accounting time.

But last April, FASB changed all that. From now on, it announced, banks could avoid reporting losses on some of their crappy cat investments simply by declaring that they would "more likely than not" hold on to them until they recovered their pig value. In short, the banks didn't even have to actually hold on to the toxic shit they owned — they just had to sort of promise to hold on to it.

That's why the "profit" numbers of a lot of these banks are really a joke. In many cases, we have absolutely no idea how many cats are in their proverbial bag. What they call "profits" might really be profits, only minus undeclared millions or billions in losses.

"They're hiding all this stuff from their shareholders," says Ritholtz, who was disgusted that the banks lobbied for the rule changes. "Now, suddenly banks that were happy to mark to market on the way up don't have to mark to market on the way down."


One of the great innovations of Victor Lustig, the legendary Depression-era con man who wrote the famous "Ten Commandments for Con Men," was a thing called the "Rumanian Box." This was a little machine that a mark would put a blank piece of paper into, only to see real currency come out the other side. The brilliant Lustig sold this Rumanian Box over and over again for vast sums — but he's been outdone by the modern barons of Wall Street, who managed to get themselves a real Rumanian Box.

How they accomplished this is a story that by itself highlights the challenge of placing this era in any kind of historical context of known financial crime. What the banks did was something that was never — and never could have been — thought of before. They took so much money from the government, and then did so little with it, that the state was forced to start printing new cash to throw at them. Even the great Lustig in his wildest, horniest dreams could never have dreamed up this one.

The setup: By early 2009, the banks had already replenished themselves with billions if not trillions in bailout money. It wasn't just the $700 billion in TARP cash, the free money provided by the Fed, and the untold losses obscured by accounting tricks. Another new rule allowed banks to collect interest on the cash they were required by law to keep in reserve accounts at the Fed — meaning the state was now compensating the banks simply for guaranteeing their own solvency. And a new federal operation called the Temporary Liquidity Guarantee Program let insolvent and near-insolvent banks dispense with their deservedly ruined credit profiles and borrow on a clean slate, with FDIC backing. Goldman borrowed $29 billion on the government's good name, J.P. Morgan Chase $38 billion, and Bank of America $44 billion. "TLGP," says Prins, the former Goldman manager, "was a big one."

Collectively, all this largesse was worth trillions. The idea behind the flood of money, from the government's standpoint, was to spark a national recovery: We refill the banks' balance sheets, and they, in turn, start to lend money again, recharging the economy and producing jobs. "The banks were fast approaching insolvency," says Rep. Paul Kanjorski, a vocal critic of Wall Street who nevertheless defends the initial decision to bail out the banks. "It was vitally important that we recapitalize these institutions."

But here's the thing. Despite all these trillions in government rescues, despite the Fed slashing interest rates down to nothing and showering the banks with mountains of guarantees, Goldman and its friends had still not jump-started lending again by the first quarter of 2009. That's where those nuclear-powered balls of Lloyd Blankfein came into play, as Goldman and other banks basically threatened to pick up their bailout billions and go home if the government didn't fork over more cash — a lot more. "Even if the Fed could make interest rates negative, that wouldn't necessarily help," warned Goldman's chief domestic economist, Jan Hatzius. "We're in a deep recession mainly because the private sector, for a variety of reasons, has decided to save a lot more."

Translation: You can lower interest rates all you want, but we're still not fucking lending the bailout money to anyone in this economy. Until the government agreed to hand over even more goodies, the banks opted to join the rest of the "private sector" and "save" the taxpayer aid they had received — in the form of bonuses and compensation.

The ploy worked. In March of last year, the Fed sharply expanded a radical new program called quantitative easing, which effectively operated as a real-live Rumanian Box. The government put stacks of paper in one side, and out came $1.2 trillion "real" dollars.

The government used some of that freshly printed money to prop itself up by purchasing Treasury bonds — a desperation move, since Washington's demand for cash was so great post-Clusterfuck '08 that even the Chinese couldn't buy U.S. debt fast enough to keep America afloat. But the Fed used most of the new cash to buy mortgage-backed securities in an effort to spur home lending — instantly creating a massive market for major banks.

And what did the banks do with the proceeds? Among other things, they bought Treasury bonds, essentially lending the money back to the government, at interest. The money that came out of the magic Rumanian Box went from the government back to the government, with Wall Street stepping into the circle just long enough to get paid. And once quantitative easing ends, as it is scheduled to do in March, the flow of money for home loans will once again grind to a halt. The Mortgage Bankers Association expects the number of new residential mortgages to plunge by 40 percent this year.


All of that Rumanian box paper was made even more valuable by running it through the next stage of the grift. Michael Masters, one of the country's leading experts on commodities trading, compares this part of the scam to the poker game in the Bill Murray comedy Stripes. "It's like that scene where John Candy leans over to the guy who's new at poker and says, 'Let me see your cards,' then starts giving him advice," Masters says. "He looks at the hand, and the guy has bad cards, and he's like, 'Bluff me, come on! If it were me, I'd bet everything!' That's what it's like. It's like they're looking at your cards as they give you advice."

In more ways than one can count, the economy in the bailout era turned into a "Big Mitt," the con man's name for a rigged poker game. Everybody was indeed looking at everyone else's cards, in many cases with state sanction. Only taxpayers and clients were left out of the loop.

At the same time the Fed and the Treasury were making massive, earthshaking moves like quantitative easing and TARP, they were also consulting regularly with private advisory boards that include every major player on Wall Street. The Treasury Borrowing Advisory Committee has a J.P. Morgan executive as its chairman and a Goldman executive as its vice chairman, while the board advising the Fed includes bankers from Capital One and Bank of New York Mellon. That means that, in addition to getting great gobs of free money, the banks were also getting clear signals about when they were getting that money, making it possible to position themselves to make the appropriate investments.

One of the best examples of the banks blatantly gambling, and winning, on government moves was the Public-Private Investment Program, or PPIP. In this bizarre scheme cooked up by goofball-geek Treasury Secretary Tim Geithner, the government loaned money to hedge funds and other private investors to buy up the absolutely most toxic horseshit on the market — the same kind of high-risk, high-yield mortgages that were most responsible for triggering the financial chain reaction in the fall of 2008. These satanic deals were the basic currency of the bubble: Jobless dope fiends bought houses with no money down, and the big banks wrapped those mortgages into securities and then sold them off to pensions and other suckers as investment-grade deals. The whole point of the PPIP was to get private investors to relieve the banks of these dangerous assets before they hurt any more innocent bystanders.

But what did the banks do instead, once they got wind of the PPIP? They started buying that worthless crap again, presumably to sell back to the government at inflated prices! In the third quarter of last year, Goldman, Morgan Stanley, Citigroup and Bank of America combined to add $3.36 billion of exactly this horseshit to their balance sheets.

This brazen decision to gouge the taxpayer startled even hardened market observers. According to Michael Schlachter of the investment firm Wilshire Associates, it was "absolutely ridiculous" that the banks that were supposed to be reducing their exposure to these volatile instruments were instead loading up on them in order to make a quick buck. "Some of them created this mess," he said, "and they are making a killing undoing it."


Here's the thing about our current economy. When Goldman and Morgan Stanley transformed overnight from investment banks into commercial banks, we were told this would mean a new era of "significantly tighter regulations and much closer supervision by bank examiners," as The New York Times put it the very next day. In reality, however, the conversion of Goldman and Morgan Stanley simply completed the dangerous concentration of power and wealth that began in 1999, when Congress repealed the Glass-Steagall Act — the Depression-era law that had prevented the merger of insurance firms, commercial banks and investment houses. Wall Street and the government became one giant dope house, where a few major players share valuable information between conflicted departments the way junkies share needles.

One of the most common practices is a thing called front-running, which is really no different from the old "Wire" con, another scam popularized in The Sting. But instead of intercepting a telegraph wire in order to bet on racetrack results ahead of the crowd, what Wall Street does is make bets ahead of valuable information they obtain in the course of everyday business.

Say you're working for the commodities desk of a big investment bank, and a major client — a pension fund, perhaps — calls you up and asks you to buy a billion dollars of oil futures for them. Once you place that huge order, the price of those futures is almost guaranteed to go up. If the guy in charge of asset management a few desks down from you somehow finds out about that, he can make a fortune for the bank by betting ahead of that client of yours. The deal would be instantaneous and undetectable, and it would offer huge profits. Your own client would lose money, of course — he'd end up paying a higher price for the oil futures he ordered, because you would have driven up the price. But that doesn't keep banks from screwing their own customers in this very way.

The scam is so blatant that Goldman Sachs actually warns its clients that something along these lines might happen to them. In the disclosure section at the back of a research paper the bank issued on January 15th, Goldman advises clients to buy some dubious high-yield bonds while admitting that the bank itself may bet against those same shitty bonds. "Our salespeople, traders and other professionals may provide oral or written market commentary or trading strategies to our clients and our proprietary trading desks that reflect opinions that are contrary to the opinions expressed in this research," the disclosure reads. "Our asset-management area, our proprietary-trading desks and investing businesses may make investment decisions that are inconsistent with the recommendations or views expressed in this research."

Banks like Goldman admit this stuff openly, despite the fact that there are securities laws that require banks to engage in "fair dealing with customers" and prohibit analysts from issuing opinions that are at odds with what they really think. And yet here they are, saying flat-out that they may be issuing an opinion at odds with what they really think.

To help them screw their own clients, the major investment banks employ high-speed computer programs that can glimpse orders from investors before the deals are processed and then make trades on behalf of the banks at speeds of fractions of a second. None of them will admit it, but everybody knows what this computerized trading — known as "flash trading" — really is. "Flash trading is nothing more than computerized front-running," says the prominent hedge-fund manager. The SEC voted to ban flash trading in September, but five months later it has yet to issue a regulation to put a stop to the practice.

Over the summer, Goldman suffered an embarrassment on that score when one of its employees, a Russian named Sergey Aleynikov, allegedly stole the bank's computerized trading code. In a court proceeding after Aleynikov's arrest, Assistant U.S. Attorney Joseph Facciponti reported that "the bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways."

Six months after a federal prosecutor admitted in open court that the Goldman trading program could be used to unfairly manipulate markets, the bank released its annual numbers. Among the notable details was the fact that a staggering 76 percent of its revenue came from trading, both for its clients and for its own account. "That is much, much higher than any other bank," says Prins, the former Goldman managing director. "If I were a client and I saw that they were making this much money from trading, I would question how badly I was getting screwed."

Why big institutional investors like pension funds continually come to Wall Street to get raped is the million-dollar question that many experienced observers puzzle over. Goldman's own explanation for this phenomenon is comedy of the highest order. In testimony before a government panel in January, Blankfein was confronted about his firm's practice of betting against the same sorts of investments it sells to clients. His response: "These are the professional investors who want this exposure."

In other words, our clients are big boys, so screw 'em if they're dumb enough to take the sucker bets I'm offering.


Not many con men are good enough or brazen enough to con the same victim twice in a row, but the few who try have a name for this excellent sport: reloading. The usual way to reload on a repeat victim (called an "addict" in grifter parlance) is to rope him into trying to get back the money he just lost. This is exactly what started to happen late last year.

It's important to remember that the housing bubble itself was a classic confidence game — the Ponzi scheme. The Ponzi scheme is any scam in which old investors must be continually paid off with money from new investors to keep up what appear to be high rates of investment return. Residential housing was never as valuable as it seemed during the bubble; the soaring home values were instead a reflection of a continual upward rush of new investors in mortgage-backed securities, a rush that finally collapsed in 2008.

But by the end of 2009, the unimaginable was happening: The bubble was re-inflating. A bailout policy that was designed to help us get out from under the bursting of the largest asset bubble in history inadvertently produced exactly the opposite result, as all that government-fueled capital suddenly began flowing into the most dangerous and destructive investments all over again. Wall Street was going for the reload.

A lot of this was the government's own fault, of course. By slashing interest rates to zero and flooding the market with money, the Fed was replicating the historic mistake that Alan Greenspan had made not once, but twice, before the tech bubble in the early 1990s and before the housing bubble in the early 2000s. By making sure that traditionally safe investments like CDs and savings accounts earned basically nothing, thanks to rock-bottom interest rates, investors were forced to go elsewhere to search for moneymaking opportunities.

Now we're in the same situation all over again, only far worse. Wall Street is flooded with government money, and interest rates that are not just low but flat are pushing investors to seek out more "creative" opportunities. (It's "Greenspan times 10," jokes one hedge-fund trader.) Some of that money could be put to use on Main Street, of course, backing the efforts of investment-worthy entrepreneurs. But that's not what our modern Wall Street is built to do. "They don't seem to want to lend to small and medium-sized business," says Rep. Brad Sherman, who serves on the House Financial Services Committee. "What they want to invest in is marketable securities. And the definition of small and medium-sized businesses, for the most part, is that they don't have marketable securities. They have bank loans."

In other words, unless you're dealing with the stock of a major, publicly traded company, or a giant pile of home mortgages, or the bonds of a large corporation, or a foreign currency, or oil futures, or some country's debt, or anything else that can be rapidly traded back and forth in huge numbers, factory-style, by big banks, you're not really on Wall Street's radar.

So with small business out of the picture, and the safe stuff not worth looking at thanks to the Fed's low interest rates, where did Wall Street go? Right back into the shit that got us here.

One trader, who asked not to be identified, recounts a story of what happened with his hedge fund this past fall. His firm wanted to short — that is, bet against — all the crap toxic bonds that were suddenly in vogue again. The fund's analysts had examined the fundamentals of these instruments and concluded that they were absolutely not good investments.

So they took a short position. One month passed, and they lost money. Another month passed — same thing. Finally, the trader just shrugged and decided to change course and buy.

"I said, 'Fuck it, let's make some money,'" he recalls. "I absolutely did not believe in the fundamentals of any of this stuff. However, I can get on the bandwagon, just so long as I know when to jump out of the car before it goes off the damn cliff!"

This is the very definition of bubble economics — betting on crowd behavior instead of on fundamentals. It's old investors betting on the arrival of new ones, with the value of the underlying thing itself being irrelevant. And this behavior is being driven, no surprise, by the biggest firms on Wall Street.

The research report published by Goldman Sachs on January 15th underlines this sort of thinking. Goldman issued a strong recommendation to buy exactly the sort of high-yield toxic crap our hedge-fund guy was, by then, driving rapidly toward the cliff. "Summarizing our views," the bank wrote, "we expect robust flows . . . to dominate fundamentals." In other words: This stuff is crap, but everyone's buying it in an awfully robust way, so you should too. Just like tech stocks in 1999, and mortgage-backed securities in 2006.

To sum up, this is what Lloyd Blankfein meant by "performance": Take massive sums of money from the government, sit on it until the government starts printing trillions of dollars in a desperate attempt to restart the economy, buy even more toxic assets to sell back to the government at inflated prices — and then, when all else fails, start driving us all toward the cliff again with a frank and open endorsement of bubble economics. I mean, shit — who wouldn't deserve billions in bonuses for doing all that?

Con artists have a word for the inability of their victims to accept that they've been scammed. They call it the "True Believer Syndrome." That's sort of where we are, in a state of nagging disbelief about the real problem on Wall Street. It isn't so much that we have inadequate rules or incompetent regulators, although both of these things are certainly true. The real problem is that it doesn't matter what regulations are in place if the people running the economy are rip-off artists. The system assumes a certain minimum level of ethical behavior and civic instinct over and above what is spelled out by the regulations. If those ethics are absent — well, this thing isn't going to work, no matter what we do. Sure, mugging old ladies is against the law, but it's also easy. To prevent it, we depend, for the most part, not on cops but on people making the conscious decision not to do it.

That's why the biggest gift the bankers got in the bailout was not fiscal but psychological. "The most valuable part of the bailout," says Rep. Sherman, "was the implicit guarantee that they're Too Big to Fail." Instead of liquidating and prosecuting the insolvent institutions that took us all down with them in a giant Ponzi scheme, we have showered them with money and guarantees and all sorts of other enabling gestures. And what should really freak everyone out is the fact that Wall Street immediately started skimming off its own rescue money. If the bailouts validated anew the crooked psychology of the bubble, the recent profit and bonus numbers show that the same psychology is back, thriving, and looking for new disasters to create. "It's evidence," says Rep. Kanjorski, "that they still don't get it."

More to the point, the fact that we haven't done much of anything to change the rules and behavior of Wall Street shows that we still don't get it. Instituting a bailout policy that stressed recapitalizing bad banks was like the addict coming back to the con man to get his lost money back. Ask yourself how well that ever works out. And then get ready for the reload.

The Next Ron Paul?

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Fed Raises Discount Rate - Peter Schiff - 02-18-2010

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Marc Faber - Gold Seek Radio Nugget - 02-17-10 - Part 1

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Sadly, Obama didn’t save us from Depression, only made it worse when it comes.

Delaying a depression is not the same as saving us from one. Our own government accountants have warned for years that the policies he is using are not sustainable and that we will lose BOTH our standard of living and domestic tranquility (their words, in the report, not mine or somebody on TV).

The fact he didn’t save us from a depression isn’t because he hasn’t tried. No president or Congress can. We are on a path laid out decades ago and even turning around (reforms) now, would cause a depression.

We are in the eye of a storm that could last months or a couple years or so but, we have been saved from nothing because we have gone so far that now we can’t tax or grow out of this and cutting spending would cause the depression to begin now.

Take advantage of whatever time we have left until that day arrives and save and invest in ways to protect against a collapsing dollar. Since home prices will fall a lot more either due to the two years of resets we face or the rising layoffs by cities and states that will hit the private sector too, or because of rising interest rates, I wouldn’t buy a home now even at a foreclosure price unless it is in a very stable neighborhood. A bargain isn’t really a bargain if you find yourself surrounded by empty homes being looted for the raw materials in them. Also, renting makes it easier should you have to move to another city for a job should you lose the one you have.

This is not the President’s fault nor the previous President nor the one before him. These policies began over 70 years ago and have slowly eroded our ability to survive as an economic power in the world. You can blame some for speeding the process up, like Bush but, had he not created or helped create the housing bubble and debt bubble, we would have been in depression during his Presidency. Clinton would have been presiding over a depression had it not been for the tech bubble that created a big rise in tax revenues at the same time people were going deeper into debt to spend more and help create an illusion of growth.

The is bigger now, than any President or Congress or FED can control. They can only delay or speed up the time to some type of collapse.

- JanPaul

Will They Raise the Retirement Age to 91?

That seems to be the implication of a comment made by Alan Simpson, who along with Erskine Bowles, are the tag team that President Obama has appointed to deal with the growing deficit.

These two characters seem to think the only way the deficit problem can be solved is by increasing taxes or cutting back on Social Security payouts. There is very little coming out of their mouths about cutting the number of Federal government employees or cutting back on the wars being fought. Nope. They are just thinking about taking it out of the hides of the people.

From the tax angle, these guys are really hyping a value added tax.

In an interview with Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend, they said:
..they would consider a consumption or value-added tax as a way of stemming federal debt.

“I’m just game for anything” and “we going to have to slay sacred cows,” said Simpson.

“A value-added tax -- I’ve looked at lots of them -- ought to be something that’s on the table,” Bowles said.
Simpson comes off as a total elitist S.O.B. during the interview, damn the voters. At one point, according to Bloomberg, he says:
...while voters would have some sense of the panel’s proposals before the November midterm elections, “we don’t dare put out a report before Election Day or it’ll be total cremation and we’ll have to move to the top of Mount Somewhere -- Erskine and I -- somewhere living up there like hermits.”
That's right, the S.O. B's are going to wait until after the mid-term elections to drop the real bombshells. Keep that in mind this November, if you haven't kicked the voting habit.

So how bad could the bombshells get? Real bad. Not only is a VAT in the air, but Simpson and Bowles seem to think that Social Security really is government money that should be paid out sparingly to the people. Get a load of this:
They said the panel would consider changes to the Social Security retirement system, including possibly raising the age when beneficiaries can begin receiving benefits.

“The thing was set up when the life expectancy was 57 -- that’s why they set the retirement at 65,” said Simpson. “Now the average life span is 80, 83 -- it can’t work.”

“If we’re going to get to the Promised Land, everything had got to be on the table or there won’t be money for Social Security,” Bowles said. “This debt is like a cancer.”
Taking Simpson's point to its logical current day extrapolation, Simpson is saying that Social Security wasn't meant to be paid out to all the people, only to the select long term survivors. It appears fine to him that the retirement age was originally set 8 years ABOVE life expectancy. He states that life expectancy is now 80, 83. If he wants to set the Social Security age as he said it was originally set, 8 years above life expectancy, he's thinking of setting the retirement age for Social Security to between 88 and 91 years of age.

Will the retirement age get that high? I doubt it, but it shows you the direction in which these two mental midgets are thinking. It's time to change the debate about lowering the deficit from one about taking money out of the hides of the people, and changing it to a debate of cutting and cutting and cutting government, itself, way down to size. First to be laid off should be Simpson and Bowles for lack of creative thinking and attempted theft from "the people."

One million could lose jobless benefits in March

NEW YORK ( -- More than 1 million people could lose their jobless benefits and health insurance subsidy in March if Congress doesn't act fast.

When it returns from the President's Day recess on Monday, the Senate will have one week to extend the deadlines to apply for federal unemployment benefits and the COBRA health insurance subsidy. Currently, the jobless have until Feb. 28 to sign up.

Without an extension, people receiving state jobless benefits won't be able to apply for additional federally paid unemployment insurance, and anyone already receiving those checks could be cut off.

Justin Julian is one the 1 million people who are desperate for Congress to take action next week. If they don't, he and his wife won't have a place to live.

The Lewisville, Texas, resident lost his software position in August and will miss the deadline to apply for additional federal benefits by only a few days. He currently receives $1,600 a month in unemployment benefits, which he uses to cover rent, car payments and the electricity bill. He must borrow money from friends and family to pay for food.

"Without the unemployment insurance, we can't pay any of our bills," said Julian, 39, whose wife is disabled. "It's kind of doomsday for us. We'll wind up sleeping on friends' couches."

Stalled in the Senate

Lawmakers were on track last week to introduce legislation that would have extended the deadlines to May 31 at a cost of $25 billion over 10 years. But Senate Majority Leader Harry Reid, D-Nev., decided Thursday to offer a slimmed-down job creation package that did not include the provision.

But Reid plans to address the jobless benefits deadlines when Congress returns next week, a Senate Democratic aide said.

"We also hope to pass an extension of expiring provisions, including unemployment insurance and COBRA, next week," the aide said. "With Republican cooperation, we should be able to do so."

In December, the House passed a $154 billion job creation package that extended the deadlines to June 30. Speaker Nancy Pelosi, D-Calif., last week urged her Senate colleagues to pass a more comprehensive jobs measure.

While extending the deadline generally enjoys bipartisan support, passing a bill to do so is an entirely different matter. Last year, it took seven weeks for legislation extending unemployment benefits to get through the Senate. But when lawmakers finally took up the measure, it passed by a 98-0 vote.

Potentially out of luck

About 11.5 million people currently depend on jobless benefits. Nearly one in 10 Americans are out of work and a record 41.2% have been unemployed for at least six months. The average unemployment period lasts a record 30.2 weeks.

"These are essential benefits that people spend on food, utilities and housing," said Judy Conti, federal advocacy coordinator at the National Employment Law Project.

While unemployment benefits now run as long as 99 weeks, depending on the state, not everyone will receive checks for that long a stretch. Those who run out of their 26 weeks of state-paid coverage after Feb. 28 would not be able to apply for federal benefits. The jobless currently receiving extended federal benefits, which are divided into tiers, would stop getting checks once they complete their tier.

The law project would like to see the deadline extended to the end of the year so "workers don't fall hostage" to the machinations within Congress, Conti said. Julian agrees, saying waiting for lawmakers to act has been "a living hell."

State agencies are expected to start mailing notices to the jobless to alert them to the impending end of their benefits.

While the economy is slowly recovering, hiring is expected to remain slow in coming years. The unemployment rate is expected to remain at about 10% this year, according to the White House Council of Economic Advisers, and won't fall back to its 2008 level of 5.8% for another seven years.

The 'Stimulus' Actually Raised Unemployment

President Obama seized on the one-year anniversary of the American Recovery and Reinvestment Act (ARRA) as an opportunity to take credit for the belated and tenuous economic recovery.

But the economy always recovered from recessions, long before anyone imagined that government borrowing could "create jobs." And we didn't used to have to wait nearly two years for signs of recovery, as we did this time.

A famous 1999 study by Christina Romer, who now heads the Council of Economic Advisers, found the average length of recessions from 1887 to 1929 was only 10.3 months, with the longest lasting 16 months.

Recessions lasted longer during the supposedly enlightened postwar era, with three of them lasting 16 to 21 months.

Keynesian countercyclical schemes have never worked in this country, just as they never worked in Japan.

The issue of "fiscal stimulus" must not be confused with TARP or with the Federal Reserve slashing interest rates and pumping up bank reserves.

One might argue that those Treasury and Fed programs helped prevent a hypothetical depression, but it's impossible to make that argument about ARRA.

The "fiscal stimulus" refers only to a deliberate $862 billion increase in budget deficits. Importantly, only 23% ($200 billion) was spent in 2009, with 47% in 2010 and 30% in later years (according to the Congressional Budget Office this January).

How could the initial $200 billion have possibly had anything to do with the 5.7% rise in fourth-quarter GDP?

The Keynesian fable presumes that faster federal spending and consumers spending their federal benefit checks were the driving forces in the rebound.

Yet the GDP report clearly said the gain "reflected an increase in private inventory investment, a deceleration of imports and an upturn in nonresidential, fixed investment that was partly offset by decelerations in federal government (defense) spending and in personal consumption expenditures."

Since federal spending accounted for exactly zero of the only significant increase GDP, how could such spending possibly have "created or saved" 2 million jobs?

The bill was launched last year amid grandiose promises of "shovel ready" make-work projects.

In reality, as the CBO explains, "five programs accounted for more than 80% of the outlays from ARRA in 2009: Medicaid, unemployment compensation, Social Security ... grants to state and local governments ... and student aid."

In other words, what was labeled a "stimulus" bill was actually a stimulus to government transfer payments — cash and benefits that are primarily rewards for not working, or at least not working too hard.

Vice President Joe Biden suggested that much of the real stimulus will occur this year. Yet the new budget has a chapter called "Reviving Job Creation" that does not even mention the 2009 giveaway legislation.

In 2010, as in 2009, the ARRA is mainly a stimulus to government. Shovel-ready or not, highway programs will get only $10 billion of the borrowed booty, about 2%. "Nearly half of the outlays resulting from ARRA in 2010," says the CBO, "will be for programs administered by Health and Human Services or the Department of Education."

From the CBO figures, it appears that 39% to 44% of the $862 billion will be for increased transfer payments, including refundable tax credits (checks to people who don't pay taxes).

The American Recovery and Reinvestment Act of 2009 had extended federally funded unemployment benefits by 53 weeks, and another bill in November added 20 more — bringing the total up to 99 weeks in states with high unemployment.

As the Federal Reserve's Open Market Committee minutes for January noted: "The several extensions of emergency unemployment insurance benefits appeared to have raised the measured unemployment rate, relative to levels recorded in past downturns, by encouraging some who have lost their jobs to remain in the labor force. ... Some estimates suggested it could account for 1 percentage point or more of the increase in the unemployment rate during this recession."

My own estimate, in past articles available at, is that the stimulus act added about 2 percentage points to the unemployment rate.

The evidence that extended benefits have that effect is overwhelming, fully documented by the Organization for Economic Cooperation and Development and by at least two economists in the Obama administration.

It turns out that raising the unemployment rate by a percentage point or two is the only clearly identifiable effect the stimulus act had on the jobs market. It stimulated unemployment.

• Reynolds is a senior fellow at the Cato Institute and the author of "Income and Wealth" (Greenwood Press, 2006).

Toyota's president to testify before Congress

TOKYO -- Toyota's president Akio Toyoda, under fire for his handling of sweeping recalls, will testify before a congressional hearing next week, appealing to U.S. lawmakers and aggrieved customers for understanding while the company fixes its safety problems.

Japanese officials praised the decision by Toyoda, grandson of the company's founder, to accept a formal invitation to explain the recalls and outline plans by the world's largest automaker to ensure safety and satisfy worried car buyers.

"I will be happy to attend. I will speak with full sincerity," Toyoda told reporters Friday in Nagoya, near where the company is headquartered.

"I am hoping our commitment to the United States and our customers will be understood," said Toyoda.

Toyoda said he will cooperate with U.S. regulators looking into recalls of over 8 million vehicles worldwide, including top-selling models like the Corolla, the Camry and the Prius hybrid.

Earlier this week, he said he did not plan to attend the hearings unless invited. That decision drew heated criticism in the United States. On Thursday, he agreed to a request to attend from the chairman of the U.S. House of Representatives Committee on Oversight and Government Reform, Rep. Edolphus Towns, a Democrat from New York.

"It was not just up to me to decide," Toyoda told reporters in televised remarks.

The decision won accolades from Japanese officials.

Japan's transport minister, Seiji Maehara, said he welcomed Toyoda's decision. Maehara has urged Toyota to heed the concerns of its customers, and he said it was important for the company to explain the safety lapses.

It's crucial to prevent the recalls from fueling political friction, said Japan's foreign minister, Katsuya Okada.

"I hope Toyota will soon regain the trust of their customers around the world," Okada told reporters Friday.

"Although this is a matter of one individual company, we wish to back them up as much as we can as it could become a national issue," he said.

The U.S. side is launching a fresh investigation into Corolla compacts over potential steering problems, widening the crisis over recalls for sticking gas pedals, accelerators getting jammed in floor mats and momentarily unresponsive brakes.

At stake is the Toyota brand name and the loyalty of legions of customers whose trust in the company's once impeccable quality has been deeply shaken.

"He's got to demonstrate to regulators, congressmen, customers, dealers, employees that Toyota recognizes there's a problem, they are contrite about it and they're going to fix it," said Jeff Kingston, director of Asian Studies at Temple University in Tokyo.

Toyota has been chastised for a tepid response to the recalls, and Toyoda initially was accused of being largely invisible as the recalls escalated. But he has held three news conferences in recent weeks, apologizing repeatedly for the safety problems and promising changes.

Toyoda already had planned a U.S. visit to meet with American workers and dealers, though the company had planned to send North America chief executive Yoshi Inaba to the congressional hearings.

The desire to avoid the spotlight was understandable, say some analysts. Others contend that only someone from Toyota headquarters could fully answer questions over the design and engineering of the equipment requiring fixes.

"Obviously, the hearing will be nasty. It's a political showplace for those congressmen so I'm sure you are going to see all sorts of unfriendly questions," said Koji Endo, managing director at Advanced Research Japan.

Toyoda's schedule for traveling to the United States was not immediately available.

Towns, the committee chairman, told Toyoda in his invitation that motorists were "unsure as to what exactly the problem is, whether it is safe to drive their cars, or what they should do about it."

Towns said late Thursday that Toyoda would be joined by Inaba and Jim Lentz, president of Toyota Motor Sales USA.

The Transportation Department's preliminary investigation into steering problems at highway speeds will encompass 487,000 Toyota Corolla and Corolla Matrix compacts from the 2009-2010 model years. The government has received 168 complaints and reports of 11 injuries and eight crashes on the Corolla and Matrix compacts with electric power steering.

Toyota has said it is looking into complaints of power steering difficulties with the vehicle and considering a recall as one option.

Reports of deaths in the U.S. connected to sudden acceleration in Toyota vehicles have surged recently, with the toll of fatalities allegedly attributed to the problem reaching 34 since 2000, according to new consumer data gathered by the government.

Toyoda's appearance will come more than a year after the leaders of General Motors, Chrysler and Ford sought support for the U.S. auto industry and were scolded for traveling to the hearings in private jets. The invitation to Toyoda essentially forced him to testify or face a subpoena.

Toyota faces questions from three committees in Congress. The House Energy and Commerce Committee moved its scheduled hearing up to Feb. 23, one day ahead of the Oversight Committee meeting. The energy panel has invited Lentz and David Strickland, head of the National Highway Traffic Safety Administration, to testify. A Senate hearing, chaired by West Virginia Sen. Jay Rockefeller, is planned for March 2.

Congressional investigators and the Transportation Department have demanded documents related to the Toyota recalls, seeking information on how long the automaker knew of safety defects before taking action.

Toyota has promised an outside review of company operations, better handling of customer complaints and improved communication with federal officials. The company has provided about 50,000 pages of documents to congressional investigators and is answering questions from staff members, said Josephine Cooper, Toyota's group vice president for public policy and government and industry affairs.

Toyoda's testimony will give the company a chance to clarify, and apologize.

"He has to be extremely well-prepared to take responsibility. He should take the full force of the most hostile criticisms he gets and welcome them," said Jeffrey Sonnenfeld, senior associate dean at the Yale School of Management.

Time To Leave Citibank Folks - Citi Warns of Withdrawal Gate

Seen on a recent Citibank (C) statement: "Effective April 1, 2010, we reserve the right to require (7) days advance notice before permitting a withdrawal from all checking accounts. While we do not currently exercise this right and have not exercised it in the past, we are required by law to notify you of this change."

Whoa. Is this an April Fool's joke? A contingency plan to defend against the idea of what "would happen if thousands of [bank] customers pledge to withdraw their money from the bank on a certain day, unless the bonuses are capped?" A strategem cooked up by Citi's new shareholders from the hedge fund industry, an industry in which such withdrawal gates are common? An idea backed by Citi's big shareholder, Uncle Sam, or one of its regulators, Sheila Bair?

I called Citi about it and they said the warning applies only to customers in Texas and that the notification had been mistakenly included on statements nationwide. Whatever the explanation, it doesn't exactly inspire confidence in Citi. I've got nothing against Citi as a general matter -- I have friends who work there, and know some account holders who are generally satisfied customers. But it's hard to believe a bank would be sending out a notice like that on its statements.

British Gas profits surge 50% as cash-strapped elderly freeze

British Gas faces a backlash as it prepares to announce a 50 per cent surge in profits on the back of a winter of crippling energy bills.

The UK's largest supplier, with 15.7million customers, has made profits of more than £550million in the past year.

Thousands of elderly, meanwhile, have been unable to afford to keep warm during the coldest winter in 30 years.

But critics say British Gas - together with the other members of the 'Big Six' club of energy firms - should have done more to cut bills before the winter.

Wholesale energy prices have fallen by 60 per cent from their peak in the middle of 2008.

However, customer bills have come down by less than 10 per cent.

There were 36,700 more deaths among the elderly last winter than in warmer months, according to the Office of National Statistics.

This was up 12,000 on the previous year.

At the same time, there are millions of pensioners among the 5.4million who are in fuel poverty.

This is the group who spend more than 10 per cent of their disposable income on heat and light.

The Age Concern and Help the Aged charity condemned the rise in winter deaths, which it links to 'cash-strapped older people turning down the heating'.


Higher bills: The cold weather is forcing households to turn up their heating


Cold snap: The UK is bracing itself for more snow over the weekend

While the profits of British Gas - which declares its profits on Thursday - and UK-based provider Scottish & Southern Energy are transparent, the same is not true of the other major firms.

Companies such as nPower and Eon hide rising profits within the accounts of their German parent companies. The same is true of EDF, which is French, and Scottish Power, which is Spanish-owned.

Official customer body Consumer Focus and the Conservatives have called for an inquiry into the industry and the failure to pass on wholesale price reductions.

Price comparison website spokesman Ann Robinson said: 'Consumers can still expect their household energy bills to be around £270 higher than just a couple of years ago.'

The household average bill is usually around £1,200 a year, but could be around £100 higher this year because of the weather.

Christine McGourty, director of Energy UK, which represents the major suppliers, rejected claims of profiteering. She said much of the gas being used this winter was bought two years ago, when wholesale prices were higher.

It comes as Britain was warned to brace itself for a big chill over the weekend – forcing homeowners to turn up their heating.

Freezing conditions are set to continue over the weekend with some areas dropping to overnight lows of -6c (21f).

Forecasters are also predicting further snow on Saturday and Sunday as the UK faces its coldest February for 24 years.