Friday, March 12, 2010

Budget cuts may be amplifying recession in Hawaii

State spending cuts significantly have worsened the effects of the global economic downturn in the Islands, according to several Hawai'i economists who spoke to more than 150 advocates, lawmakers and others at the state Capitol yesterday.

The economists warned attendees that the spending cutbacks — from reductions in mental health services to public school furlough days — also have a slew of long-term impacts and urged lawmakers to consider temporary tax increases and tapping into special funds as alternatives to deeper program cuts this legislative session.

"The way the budget crisis has been handled feeds back into the economy and amplifies the recession," said University of Hawai'i-West O'ahu economist Lawrence Boyd.

He said that spending cuts also produce something of a vicious cycle, and "will actually lead to other cuts because those (first) cuts affect the economy and then affect tax revenues."

The critique follows hundreds of millions of dollars in state spending cuts and comes as legislators and the governor — facing a $1.2 billion budget shortfall through June 2011 — are looking to reduce spending even more.

This week, the state House approved a $10 billion state budget for the fiscal year starting July 1 that proposed about $60 million in new spending reductions to a variety of programs.

The budget is now before the Senate for consideration.

State Rep. Marcus Oshiro, D-39th (Wahiawā), chairman of the House Finance Committee, said he understands the concerns raised at the forum and agrees that state spending cuts have big negative effects on the state's economy. But he added that lawmakers have tried to limit cuts by increasing taxes and by tapping into special funds.

Tax increases are again being eyed this legislative session.

The governor and state officials also have said state spending cuts are painful but necessary to balance the budget. They also argue that the cuts are being carefully targeted.

$1 Billion impact

The forum with economists yesterday at the state Capitol auditorium was put together by PHOCUSED (Protecting Hawaii's Ohana, Children, Under Served, Elderly and Disabled), a consortium of social service providers that has long raised concerns about how state spending reductions are affecting the state's most vulnerable.

Alex Santiago, the group's executive director, said the "combined message" of the event was "it's going to take increased revenue, through some form of tax increase ... to maintain essential services. Otherwise, we risk destroying" the state's social safety net.

Meanwhile, Boyd estimated the state has cut spending by about $644 million this fiscal year. Because the ripple effect of any state spending cut affects the overall economy by a factor of two, the total economic impact of those spending reductions is about $1 billion, he said.

Boyd added that the state took a further hit in declines in tax revenues.

He said that Hawai'i's economy is somewhat unique, compared with other states, because it didn't see a significant economic downturn when the global recession started.

But the state did see declines in tax revenues, which spurred the spending cuts.

positive advice

Economists Paul Brewbaker and Byron Gangnes also spoke at yesterday's forum. Gangnes, an economics professor at UH-Mānoa, said cuts to state programs have "significant negative effects" on the economy, and said "appropriate tax increases are likely to have smaller adverse effects on the economy" in Hawai'i.

He said to balance out concerns that tax increases will decrease spending, the Legislature should only implement temporary hikes — of one to two years.

"People don't respond as negatively to tax increases if they know they're only going to bear it for a short time," he said, adding that the state should also be using its special funds.

"It's foolish to be holding onto special funds," he said.

Brewbaker, director of TZ Economics, agreed with advocates that the long-term impacts of the state spending cuts remain to be seen.

"In terms of social services, there's a lot of things if you cut now you end up paying later," Brewbaker told forum attendees.

Gerard Russo, a UH-Mānoa health economist and professor, told those attending the forum that recent cuts will increase the number of uninsured adults in the Islands.

In addition to the economists, several social service providers, advocates and state employees spoke at the forum, raising concerns about state spending cuts on everything from child protective service and food safety inspections at eateries to public education.

Petrice Bell, a child protective services specialist on the Big Island, said cuts have "crippled" her office and doubled caseloads. "It should be illegal what has happened to our program," she said during an emotional address at the forum. "We actually had a supervisor resign because he did not want to be responsible for a child getting hurt."

Bell said that his position hasn't been filled.

Local sales tax revenue plummets

Pratt’s sales tax revenues for January fell a whopping 29.9 percent over the same period in 2009 from $209,260 to $146,645, according to the Kansas Department of Revenue.
The decrease for February was much less but still significant. Sales tax revenue was $19,989 less in February 2010 than in February 2009.
“Things that normally contribute to sales tax revenues are not happening,” said Vincent Amanor-Boadu, associate professor of agribusiness at Kansas State.
A large part of sales tax revenues and likewise a large part of the economy are big ticket items such as appliances, vehicles and luxury items. They are not selling well.
“Consumers are saving right now,” said Amanor-Boadu, who was the keynote speaker at 2009’s Annual Chamber of Commerce Meeting in Pratt. “As a consumer, increasing my savings is good for me, and it’s usually good for the economy, but not if everyone does it.”
And while unemployment is a low 4.7 percent in Pratt County, sales tax numbers demonstrate just how cautious local consumers are.
“This whole thing is about trust and confidence,” he said. “There is reason for hope. It is driven on the fact that demand is eventually going to go up, because we have significant capital in low-yield bonds and other ‘safe’ investments.”

Hardball In New Jersey, No Balls In Virginia; Brass Balls In Las Vegas

New Jersey Governor Chris Christie is doing what he was elected to do, govern. And that means playing hardball with union termites who refuse to give an inch to help the state out of budget problems primarily caused by untenable union promises, union wages, and union pensions.

When unions refused to cooperate, Christie decided to take the next logical step, to privatize jobs. Please consider New Jersey plans to privatize state jobs

Gov. Chris Christie today will create a commission to privatize as many as 2,000 state jobs beginning next January, officials said Wednesday night.

As he grapples with an $11 billion deficit in the budget he will present on Tuesday, Christie is also considering invoking the Disaster Control Act to suspend Civil Service rules to make it easier for him to lay off higher-paid workers, according to two administration officials.

The Republican governor today plans to sign an executive order creating the task force to cut the size and cost of the state payroll. Three officials familiar with his plans last night said the commission will identify which jobs or agencies would be operated by the private sector and how that would be accomplished. The officials declined to be named ahead of the announcement.

Privatizing jobs would require layoffs. By beginning them in January, Christie would not be subject to a deal between former Gov. Jon Corzine and state worker unions that would require the state to pay millions in raises to remaining workers if he orders layoffs before then.

Suspending civil service would allow Christie to order layoffs of higher-paid unionized state employees with many years of service, rather than the usual practice of layoffs that affect lower-paid new employees first, the officials said. Currently, workers with more seniority can "bump" less-experienced workers from their jobs.

The privatization effort deals a blow to state worker unions just 48 hours after Christie publicly acknowledged he is bound by the agreement struck by Corzine where state workers would get two 3.5 percent raises in the coming fiscal year Ð one in July and one in January. They deferred one raise and took 10 unpaid furlough days last year in exchange for the no-layoff pledge.
Two days ago when I read that the Union refused to give an inch on a ridiculous contract negotiated by former governor Corzine, I was delighted. The reason is I was pretty sure how Christie would respond. Today he hit a home run.

Moreover, his goal should be to privatize every government job he can. Why stop at 2,000?

Where's The Leadership?

It's too bad other governors refuse to follow Christie's lead by cutting expenses. I talked about that previously in Missouri Budget Overstates Revenues By Up To $1 billion; Indiana Revenue Falls Short; Budget Battles In Washington; Budget Gaps In Kansas

Sadly, the governors in Missouri, Kansas, Washington, and Indiana fail to see the problem or are still looking for "tricks" to postpone dealing with those problems. There are no tricks left in the bag, yet states keep looking for tricks.

Add Virginia to the list of states playing trick-or-treat.

Federally Funded Ticketing Blitz In Virginia

Inquiring minds are reading Virginia State Police Help With Budget Crunch.
A federally funded ticketing blitz in the state of Virginia landed a total of 6996 traffic tickets this weekend. The blitz, dubbed “Operation Air, Land & Speed” coincided with frantic efforts by state officials to close a$2.2 billion budget deficit. Supervisors ordered state troopers to saturate Interstates 81 and 95 to issue as many tickets as humanly possible over the space of two days.

Activists with the National Motorists Association pointed out that enforcement efforts may have concentrated on areas where speed limits are expected to rise to 70 MPH following Governor Bob McDonnell’s signature on legislation raising the state’s maximum speed limit (view law). This would mean a significant number of tickets were issued for conduct that will be perfectly legal in a matter of months. The group also indicated that state police tactics may run afoul of state law.

Under the federal grant application process, state officials explained that they would pay officers overtime — at least one-and-a-half times their normal salary — to participate. This special reward for ticketing operation participants appears to violate the spirit of state law.
Message To Virginia Governor

Hello, Bob McDonnell, you are not even in the ballpark with what needs to be done. How about showing some leadership rather that resorting to traffic blitzes to shore up the budget? All you are doing is postponing tackling the real problem, a bloated state budget.

If the state police have nothing better to do than harass drivers in areas where the speeding limit is set to go up anyway, then Virginia should get rid of some of that police force, reducing the budget at the same time.

Brass Balls In Las Vegas

Finally! The mayor of a major city is looking into doing what needs to be done. Please consider Las Vegas Mayor Says City Should Fire All Workers
If Las Vegas can't get the desired wage concessions out of its employee unions, the city should simply fire everyone and offer to rehire them to work a shorter work week, Mayor Oscar Goodman said Wednesday.

"I'm trying to save jobs. I really am," Goodman said. "If it's a strong-arm tactic, so be it. "If it's legal, I'm going to propose it to the council. I think it's the only way we're going to save jobs."

Goodman ordered the city attorney to study the possibility.

The idea didn't go well with the unions. Several union presidents went so far as to call the mayor a bully. And Councilman Ricki Barlow also said he disagreed with the mayor.

The city faces a $70 million budget hole to fill and most likely a $40 million deficit in the next fiscal year, and the proposed solution to that hasn't changed -- all employees, Goodman said, should forgo their scheduled raises and accept 8 percent pay cuts in each of the next two years.

Or, under his fire-and-rehire plan, a new 37.5-hour workweek would trim costs 6.25 percent, and a 36-hour week would cut costs 10 percent, he said.

"I've never been as severely disappointed as this situation has caused me to be," Goodman said about the unions being unwilling to open their contracts and accept needed changes.

Goodman also called for a study of whether the city should privatize its ambulance services, noting that his fire-them-all approach isn't applicable to public safety employees.
Hello Mayor Goodman, you have the right idea, so just do it. And when you hire those workers back, privatize every one of the jobs, including police and fire. Don't wimp out by privatizing just ambulance services. It's time to show some brass balls.

Cities Find New Ways To Reach Into Your Wallet

You may love your hometown, but get ready to be nickel and dimed by it. Cities all over the country, strapped for cash, are coming up with some novel ideas for raising money, bit by bit.

These range from new charges for responding to 911 calls to taxes and fees on sodas, bottled water, groceries and grocery bags. One budget officer compares the annoyance factor of these niche taxes to having to pay baggage fees and other airline charges.

"Cities and states are going mostly after these kinds of sin taxes," says Justin H. Higginbottom, an analyst with the Tax Foundation, a conservative research group in Washington. "They'll target a politically unpopular industry and go after them to raise revenue. It's much easier to do that than to raise rates on sales taxes."

Selling Virtue

One reason sin taxes are easier to sell is that they aren't presented purely as ways to raise money. Mayors like to stress the idea that they're helping to curb bad behaviors.

Officials in Washington, D.C., tout the city's new fee of 5 cents on plastic grocery bags, which took effect Jan. 1, as a way of cleaning up the polluted Anacostia River, which has become the final resting place for thousands of plastic bags.

"It doesn't actually raise all that much money," says Charles Allen, chief of staff to District Councilman Tommy Wells, who sponsored the new fee. "The goal is cleaning up the Anacostia."

Similarly, Philadelphia Mayor Michael Nutter last week proposed a 2 cents per ounce tax on sodas — which would add up to $2.88 for a 12-pack of 12-ounce cans — because, he says, it's a tool for discouraging childhood obesity.

Dr. Donald Schwartz, who serves as both Philadelphia's deputy mayor and its health commissioner, says he's optimistic that the proposed soda tax will help cut down on consumption. But, he concedes, "Our No. 1 priority at the moment is revenue for the city."

Sin Some More

There's no question that cities are in bad shape financially right now, with property, sales and income tax collections all on the decline. States are cutting way back on aid to cities, too. The National League of Cities estimates that municipalities will face collective shortfalls as high as $83 billion over the next three years.

But economists frown on what they call "Pigovian taxes," which are designed not only to raise revenue but put to governments in the position of trying to influence how people shop or behave.

"Social engineering through the tax code isn't the most efficient way to do it," Higginbottom says.

And city officials are aware of the contradictions involved in imposing sin taxes. You may have the health commissioner hoping people will cut back on sodas, but the budget director will quietly root for them to keep sipping.

"You're taxing behaviors we want to see reduced," says Chris Hoene, research director for the National League of Cities. "But if so, are you planning for revenues to go down as people change behavior, or are you planning on collecting that money?"

Few Good Options

Even some city officials get frustrated when they encounter new fees. Michelle McGurk, a senior policy adviser to San Jose, Calif., Mayor Chuck Reed, describes herself as a heavy library user and certainly noticed when the late fee spiked to 50 cents per book per day.

"I'm one of those people who never turn books in on time," she says. "If you have five books checked out, it adds up pretty quickly. "

But McGurk recognizes that her boss has few good options. San Jose has had to cut its budget nine years running and faces a $116 million shortfall heading into its next budget year this summer.

And city officials in Phoenix, which started the year facing a $275 million shortfall, felt they had no choice but to impose a 2 percent tax on groceries. Phoenix, like most cities, faces limits imposed by state law on its ability to raise most kinds of taxes.

Sal DiCiccio, a member of the Phoenix City Council, said the food tax, which kicks in next month, "is absolutely the worst tax that could have been imposed. It's regressive and it's imposed on the poor."

But a broader sales tax increase was not feasible, says Cathy Gleason, the city's budget director, because of competition with neighbors. "You have to be concerned about raising your overall tax rate, because people can go and buy their cars in Scottsdale to avoid the sales tax," Gleason says. However, all of Phoenix's neighbors already charge a grocery tax.

Count Your Change

Local officials are facing at least two more years of bad budgets and hard choices. Cutting salaries and benefits for unionized workers is politically difficult, and the public protests cuts to the highly visible services provided by cities, such as trash pickup, police and parks.

As a result, look for more cities to turn to niche taxes. They may not bring in enough money to fill large budget shortfalls, but for cities these days, every nickel counts.

ABC interviews FBI 911 Whistleblower Coleen Rowley

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Big ax looming at the FDNY: Threat of 1,000 layoffs, closing of 62 fire

The FDNY is bracing for doomsday.

The department will be forced to close a staggering 62 fire companies and lay off more than 1,000 firefighters if the bad-news state budget becomes reality, Commissioner Salvatore Cassano told the City Council Wednesday.

"We would be very, very taxed," warned a grim-faced Cassano. "Our operations would be impacted and every neighborhood in this city would feel the effect."

Even if lawmakers in Albany - already facing an April 1 deadline and a $9 billion budget gap - find a way to pump in more cash, the city's fiscal woes may still force the FDNY to shutter 20 companies, Cassano warned.

"We're going to try not to close a single company or a single firehouse," Cassano told the Fire and Criminal Justice Services Committee, "but if we have to, we will."

Sixteen fire companies were set to close last year until the Council restored funding for an extra 12 months.

But those companies - which were never identified - are still slated to close this July, and an additional four are scheduled to be shut down later in the year, creating a savings of $37.4 million, Cassano said.

The department currently has 198 engine companies and 143 ladder companies.

FDNY officials are still calculating which companies - or potentially entire firehouses - will be scrapped, although the prospect of any closures infuriated Council members and the fire unions.

"We cannot shortchange the safety of New Yorkers by forcing these cuts on our taxpayers," saidCity Councilwoman Elizabeth Crowley (D-Queens). "Response times will go up throughout the city."

"The very young and the very old are the most vulnerable in fires and most at risk if there are cuts," said Al Hagan, head of the Uniformed Fire Officers Association.

"Is it morally right to balance the budget on the weary shoulders of our elders or the tender backs of the young?" Hagan asked.

The FDNY will try to close the budget gap by issuing violations to building owners whose fire detection systems set off false alarms, Cassano said.

The department is also fighting in court for the authority to scrap curbside alarm boxes, a potential $6 million savings on maintenance.

FDNY officials are prepared to battle the fire unions to reduce the staffing at 60 companies from five firefighters to four.

"If it's a choice between going to four-man engines - which most companies have anyway - or closing companies," said Cassano, "I know what I would do."

The unions have long opposed the change, saying it would affect public safety.

Northrop Grumman say layoffs of entire Hagerstown workforce possible

Northrop Grumman on Thursday warned its entire work force of 180 employees at its facility north of Hagerstown that they could be laid off within 60 days, a company spokeswoman said.

“No new work is coming in right now. We’re hoping work will come in, in the fall,” said Leah Smith, the company’s media relations manager.

Northrop Grumman’s local operation is on Showalter Road near Hagerstown Regional Airport.

Company officials were trying to determine if employees can be placed at other Northrop Grumman sites, but did not know Thursday how many could be transferred and how many could be laid off, Smith said.

Asked if any laid-off workers would be put on a recall list for any new work in the fall, Smith said company officials were in the planning phase of such a decision.

“This was not an easy decision,” David Tracy, director of Northrop Grumman Technical Services’ Hagerstown site, said in a news release. “However, we find ourselves closing out existing task orders while waiting on new business opportunities. We are taking prudent business measures today to ensure viability of the operation for the future.”

Company officials expect to complete projects with the U.S. Navy and U.S. Customs and Border Protection in mid-June, according to a company news release.

For both federal agencies, Hagerstown-area workers perform maintenance and modifications to P3 surveillance aircraft, Smith said.

Timothy R. Troxell, executive director of the Hagerstown-Washington County Economic Development Commission, said he was surprised by the news.

“(We) talked to them numerous times over the past year and the facility was doing well,” Troxell said. “I think they added close to 50 people last year.”

“It sounds like they just need to, hopefully, win some more contract work for the type of stuff they do out there,” Troxell said.

Smith would not say what the average salary was at the local operation. Troxell didn’t have any salary figures, but he said they are “well-paid positions.”

The operation started as California Microwave and was purchased by Northrop Grumman Corp. in 1999.

Northrop Grumman announced Jan. 4 its decision to move its corporate office from Los Angeles to the Washington, D.C., area by 2011, according to the company’s Web site. The search was expected to be completed this spring, and the new corporate office would employ about 300 people.

Troxell said Maryland, Virginia and Washington, D.C., were battling over which will be the new home.

“We threw our name out there. We tried to get involved, but it’s going to be a city project,” Troxell said.

The two Maryland counties in the hunt are Montgomery and Prince George’s counties, he said.

Philly Audit Finds $3.4M In Taxes Never Deposited

HILADELPHIA (AP) ― Call it the case of the misplaced millions.

Philadelphia officials have recovered more than $3 million in wage taxes that should have been deposited in the city treasury in 2005 — but never were.

City Inspector General Amy Kurland said Thursday the wage tax payments were made five years ago by the Pentagon for Department of Defense employees who work in Philadelphia.

But the money never made it to the bank. Kurland says her office contacted Defense officials, who reissued the checks.

Kurland says the discrepancy was discovered as part of an ongoing corruption investigation into a former municipal employee.

Her office is still looking into how the funds were misplaced, and whether any crime was committed.

(© 2010 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

972 Foreclosure Filings in Hawaii in February

HONOLULU (AP) -- A real estate research firm is reporting there were 972 foreclosure filings in Hawaii in February.

The figure reported Thursday by foreclosure listing firm RealtyTrac represents an 81 percent increase over 537 filings in February 2009.

However, the number of filings was down from 1,534 in December and 1,302 in January. Even so, February's count was the fourth-highest on record in Hawaii.

RealtyTrac's marketing communications manager, Daren Blomquist, says its too early to call two months of decline a downward trend.

The 972 foreclosure filings works out to one filing for every 528 island households, making Hawaii's rate 14th worst nationally. The national average in February was one filing for every 418 households.

Social Security Is Going Cash Flow Negative Six Years Earlier Than Expected

Pay attention, this is BIG.

The Trustees of Social Security Fund, in their annual report, have implied that the trust fund will turn cash flow negative around the year 2017. This doesn't mean they will be bankrupt and out of assets in 2017, just that they will start to pay out more in benefits than money they take in.

Well, scratch that 2017 date. The fund is now cash flow negative.

Here's how Bruce Krasting puts it:
The Social Security Trust Fund is able to make accurate estimates on the major components of its monthly cash flows. Therefore the first quarter operating results for the Fund are in. Only the payroll taxes and benefits paid numbers are currently available for January, February and March of 2010. The raw numbers show clear acceleration of the deterioration in the Funds dynamics...The conclusions are not good...

The 1st Q 2010 YoY top line for the Fund is down by 6%. A very significant drop...

There is no good news for the Fund on the expense side either. While there has been variations on a month to month basis, the trend line for benefits is northward at a 5% compounded growth rate. And that percent number has nowhere to go but up as the boomers get checks...

The actual results for the Fund are not available. The reporting for interest income, income tax receipts (outside of FICA and SECA), the operating expenses and the costs of the Railroad Retirement are not available. In 2009 these numbers were +$118b, +$20b, -$6b and -$4b respectively. It is unlikely that these numbers will vary too much in 2010.

Based on the assumption that these other numbers will remain static and that payroll receipts will stabilize to the 2009 numbers for the remainder of the year the following forecasts of the full calendar year can be made:

Benefits paid will exceed Payroll tax receipts by $40b (+660b, -700b).In my opinion this is the primary measure of financial soundness. This number was -$5 billion in 2009.

The Fund uses the ratio of total tax receipts to benefits paid as its soundness measurement. Based on the 1st Q results it would appear likely that the full year results of this ratio will be negative $20b ($700b-680b). Should that happen, it would be the first time in the Fund’s history.
I agree with Krasting when he also writes:
When I look at the Fund I look at cash flow. All of the experts on this topic say that is a dumb way to look at it. Annual cash flow is meaningless when you are looking at something that has $2.5T in assets and will, under the very worst of conditions, be able to pay the bills for 15 years or so. I disagree. It’s all well and good to ignore cash flow when cash flow is positive. But when it goes negative it is the first gentle step that leads to a very slippery and steep slope.

Interest income for the Fund is a non-cash item. They get credit for more paper. There is something about this process of automatic money creation that bothers me. I believe the Fund must ponder this question as well. In their reports they publish on a monthly basis their net cash position...the net cash flow is a positive $3b.
But the cash flow problem is also going to be a whammy from another direction, the Treasury debt direction. As I wrote early last year:
It should be noted that the projected point, by the Social Security Board of Trustees, at which tax revenues will fall below program costs comes in 2016 -- one year sooner than the estimate in last year’s report. This means that although the fund does not become exhausted, by Trustee projections, until 2036. In 2016, Social Security stops being a net buyer of Treasury securities and becomes a net liquidator, with smaller and smaller net new quantities purchased leading up to 2016 . Currently, Social Security buys approximately 25% all Treasury securities issued. Who is going to make up for that shortfall, especially since Social Security will not only stop buying, but will be a net liquidator? It's not going to be the other major Treasury security player, the Chinese. They are trying to slow their purchases now. So in addition to the Social Security and Medicare crisis for the elderly, this funding crisis will have a major impact on Treasury funding...
Now that it is clear that the Great Recession has knocked the Social Security numbers way off from their original projections, the trouble should be clear to see.

The Social Security Fund will not be buying, net, any new Treasury securities. In fact, as the years pass, they will be net-sellers, competing with the Treasury for Treasury security money. Given the huge amounts of new debt the Treasury will have to issue, and the fact that the Chinese will be forced to cut back on their buying because of growing domestic Chinese inflation, this is not a pretty picture at all. You have huge increases of U.S. debt just ahead and the two major players, China and the Social Security fund, being taken out as major buyers.

I repeat, if you are in debt, do what you have can to lock that debt in at the current fixed rates. They are not going to stay at these levels for much longer.

Bruce Ivins' attorney calls for case to be re-opened

An attorney for the alleged anthrax killer Bruce Ivins has said that he does not believe that the case against Ivins should not be closed.

"There's not one shred of evidence to show he did it," Paul F. Kemp, Ivins' attorney, told

Kemp said he doesn't not believe the 92-page summary released on Feb. 19 by the Justice Department that officially closed the case against Ivins. The report states the Ivins, acting alone, had the wherewithal to create anthrax spores of the concentration and purity of the mailed anthrax.

According to Kemp, repeated denials of sending the letters were made by Ivins. Additionally, Ivins' fellow scientists insisted that Ivins would not be capable of making the type of mailed anthrax with the equipment that was available to his at the Army Medical Research Institute for Infectious Diseases.

Joining Kemp in questioning Ivins' guilt is Rep. Rush Holt, D-N.J., who called last week for a congressional investigation into the anthrax probe.

"We don't know whether the FBI's assertions about Dr. Ivins' activities and behavior are accurate," Holt wrote in a letter to the chairmen of the House Committees on Homeland Security, Judiciary, Intelligence, and Oversight and Government Reform.

Ivins is alleged to have mailed the anthrax containing letters in 2001 to five media outlets and two senators. The letters resulted in five deaths and the sickening of 17 other people.

GLOBAL PULSE: Chimerica: U.S., China and the Global Economy (3/11/2010)

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Jesse Ventura on The View 03 10 2010 - Gulf of Tonkin, Pat Tillman , JFK, and WTC-7 9/11

Jesse Ventura Video Playlist

Dr. David Ray Griffin on 911: "We're Really in the Level of Proof Now - not conjecture"

Corporate media mouthpieces would do well to heed Abraham Lincoln's words of wisdom should they expect to survive our crisis in America:
" You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time."

Media character assassinations of the messengers bringing 911 truth contradicting the fairytale that was force-fed to the public by their feckless "representatives" follow a usual pattern. But times are a'changin'.

The geometric growth in public awareness regarding the facts of 911 truth has brought with it newly invigorated and stronger demands for answers from government and misleading media who continue propagandistic pollution of our public airwaves. Who would expect that the profit mode would help enlighten our typically purblind corporate fountains of koolaid propaganda as they face a stark reality: that if they continue to pretend that overwhelming evidence of fraud and crime doesn't exist- they will continue to lose viewers - and lost viewers means lost advertising dollars. That's how America really works - and there is no escaping that fact!

RT Interviews Dr. David Ray Griffin-see first video below

The snickering interviewer begins with the usual professionalism of corporate-owned media puppets :

" I'm guessing, that you think ... and this is just an assumption on my part ..."

Dr. David Ray Griffin discusses that there is no other possibility that WTC7 collapsed due to any other means than explosives.* This has no effect on the interviewer - such as provoking follow-up questions - or, as far I can tell - thought.

The interviewer asks Dr. Griffin how much of the argument he is "buying" from Mr. Fujita. As is the norm - the interviewer seems numb to the fact that Usama bin Laden is NOT wanted by the FBI for 911 - yes you heard Dr. Griffin - because the FBI "has no hard evidence." Facts as this are brushed over as if never mentioned - again the norm for TV "news."

Interviews such as this are standard - where the public does all the investigating - then is confronted with a deaf and blind news media. A "news medium" that doesn't walk like a news medium, doesn't talk like a news medium, probably isn't a real news medium. This interview shows signs of slight progress by not following the usual pattern where, after the show is put on for the unsuspecting victim/viewers, and the guest is no longer around to keep them honest - the half-truths, omissions and smears can begin anew. This RT interview simply ended leaving the viewer with only the information Dr. Griffin was able to fit into the meager time slot with only some amateurish barbs thrown in. Yes - things are turning around.

Although this RT bit wasn't as bad as the usual hit-piece, they could have done a little more preparation - like maybe finding someone with the courage or maybe a college degree to debate Dr. Griffin.

Dr. Griffin's research on this topic is peerless - the anti-911-truth advocates will exercise the usual name-calling tactics - always avoiding the ocean of detailed information available that has been uncovered by his and others' research.

Perhaps the RT interviewer could have come to work more prepared by watching this excellent speech. If all you listen to is the first part of this speech where he carves Cass Sunstein up like the turkey he is.

Comment on Circumstances of Washington Post Editorial Dated Mar 8, 2010

Yukihisa Fujita
Member of the House of Councillors
Office Tel: 3508-8205

" ... However, once the one hour interview had ended and Hockstader had closed his laptop, he mentioned as an aside that he had noticed from my resume that I had raised the issue of the 9/11 terror attacks in a Diet committee, and asked whether I had some doubts about this issue. In response, I explained the circumstances that led me to become involved in the 9/11 issue and pointed out a number of points that still remained unexplained about the events of that day.

2. In other words, after answering questions on the agreed upon theme for around one hour, I naturally responded to this question as being separate from the interview itself."


* Here is WTC7 collapse - controlled demo hypothesis best fits the evidence:

2008 Financial Collapse

The Greatest Calamity The World Has Ever Known

The year is 2010 and to anyone not in denial, the industrialized nations have entered the greatest calamity the world has ever known:

  • 35 Million Americans on Food Stamps: 12 Percent of U.S. Population on Food Stamps Highest Since Records Kept in 1969, and that’s before the Obama administration announced a planned three-year budget freeze on government discretionary spending. (My Budget 360)
  • 18 Million empty houses in the United States and 39 million Americans who are no longer working or looking for work, and that’s before Federal Reserve finishes rewriting the rules of American “capitalism” as US Housing, the Automobile Industry and the American Dream are dismantled. (The 31-Year-Old in Charge of Dismantling G.M., David E. Sanger)

“There are now well over 150 million Americans who feel stress over these things on a consistent basis. Over 60 percent of Americans now live paycheck to paycheck.” (The Economic Elite vs. People of the USA, David DeGraw)

In an effort to explain our escalating financial crisis, the American Nightmare (an Environmental Dream), the “experts” are under the erroneous impression that the Fed "missed" the warning signs leading up to the October 2008 meltdown.

The pundits are focusing their angst on the 44th POTUS, who might very well go down as the single most inept president in all of American history. (How to Squander the Presidency in One Year, David Michael Green)

Barack Obama is not inept, greedy or stupid and he isn’t one of “us”.

He rose from obscurity to power with his top economics adviser, Zbigniew Brzezinski, the co-founder of David Rockefeller's Trilateral Commission and he travels in the same circles as other members of the super-secret Skull & Bones Society at Yale University, who pretend to be running for president every four years.

The decision to have Obama preside over the greatest financial calamity since the Great Depression was made five years ago; the November election was a formality. (Why Joseph Biden will be the Next Vice President of the United States)

To believe otherwise, is to ignore the Bradley/Palin effect and the decision by John McCain to wait until his concession speech to shed the image of a nasty "grumpy old man."

In September 2008, when the Obama campaign seemed to be slumping and their candidate's long-standing lead in the polls had evaporated, the senator's supporters openly worried that a potential victory might be slipping away. Then, providence joined the campaign: The failure of the giant investment bank Lehman Brothers followed by a global financial meltdown in the month of October.

“Things do not happen. Things are made to happen.” John F. Kennedy

And, “speaking of change”, the escalation of the war in Afghanistan and Iraq and his policies on Guantanamo, state secrets, renditions, executive power, bailouts and the stimulus packages are for the most part identical to those of George W. Bush.

However, the policies at the Federal Reserve have changed inexplicably, monumentally and historically:

As of October 2008, the men behind the Federal Reserve, all connected to the House of Rothschild, are no longer giving up what’s left of their real wealth so the middle class can live the American Dream, a nightmare for the planet.

Brian Deese, special assistant to president Obama for economic policy, in his first government position, shuffles back and forth from the West Wing to the Treasury Department (Federal Reserve) rewriting the rules of American “capitalism” as he dismantles the US Housing, Automobile Industry and the American Dream. (The 31-Year-Old in Charge of Dismantling G.M., David E. Sanger)

Deese’s First Rule: Withdraw Credit and Liquidity:

Causing spending to fall even further, forcing companies to cut back on inventory and staff - Creating even more unemployment…263,000 jobs eliminated bringing the total to 39 million Americans who are no longer working or looking for work. (The September Employment Rate is 90%)

And that’s before the recently announced “planned three-year budget freeze on government discretionary spending.”

Capitalism never made sense

    “The Fed didn’t miss anything; the October meltdown was an inside job”

Professor Ebeling, the Ludwig von Mises professor of Economics at Hillsdale College, understood something was wrong when he wrote, "The perverse development and evolution of historical capitalism, the institutions necessary for a truly free-market economy have been either undermined or prevented from emerging."

But when he claimed, "It is the principles and the meaning of a free-market economy that must be rediscovered" in order to overcome the burden of historical capitalism and save liberty, he should have written that principles must be rediscovered in order to prevent the planet from attempted murder (ecocide).

American "capitalism" and our consumer economy never made economic, environmental or common sense—unless the goal was ecocide.

Capitalism and a not-so-free market economy based on consumer products, that is, products we are manipulated to want, not need, was never sustainable. Consumers consume…the resources of the planet.

Who is Responsible?

The “experts” are under the impression this is the natural order of things.

Allegedly, this is another “example” of the private credit monopoly of rich and predatory moneylenders that “prey upon the people of the United States” for the benefit of themselves. [1]

    “For the benefit of the middle class is a more accurate statement.”

The people responsible for the October collapse, our Federal Reserve, also get credit for the windfalls of “Monopoly Money”, created out of thin air, which financed our consumer society.

Those predatory moneylenders gave the middle class the highest standard of living in the world.

Recall when the American economy appeared headed into a recession at the end of the dot-com bubble, the Federal Reserve began slashing short- term interest rates until they reached a historically low one percent. The move re-inflated the economy by allowing homeowners to extract $750 billion in equity from their homes—up from $106 billion in 1996—and apply the dollars toward a multitude of consumer items and other credit card debt.

As interest rates plummeted and alleged home equity artificially soared, buyers were able to afford first and second homes, and they did it by taking out risky mortgages with "teaser rates" similar to those offered by the credit card industry. Even as interest rates adjusted upward, the sponsoring banks used complicated financial derivatives to resell the risky mortgages as "asset-backed paper."

As housing prices edged downward and mortgage rates inched upward, the recession was put on hold with the help of an astonishing 10 to 12 credit card offers per month being delivered to some consumer mailboxes. The credit card companies issued 1.5 billion cards to 158 million cardholders and promised an improbable zero percent interest—some deals for up to 18 months. (Similar to mortgage debt, the credit card debt is put into pools also known as derivatives that are then resold to investment houses, other banks and institutional investors.)

Thank those rich and predatory moneylenders for the short-term interest rates and the liquidity that allowed the debt to be pooled, sold and resold.

But blame them because our hyper-shopping has wreaked havoc on the planet.

Who is Behind the Federal Reserve?

Rockefeller, Kuhn, Loeb and Morgan—all connected to The Global Financial Elite (TGFE), direct the Federal Reserve to create money out of thin air.

The process that the Federal Reserve, or any bank, uses to create money “consists of making an entry in a book, that is all,” said Graham Towers, governor of the Bank of Canada. “Each and every time a bank makes a loan (a debt) . . . new bank credit is created—brand new money.”

Money used to pay for the Industrial Revolution, orchestrate the Great Depression, the stagflation of the 1970’s, the dot-com and the housing market bubbles, resulted in 60 years of unprecedented prosperity for the middle class.

These scoundrels at the beginning of the 20th century, owned or controlled one-sixth of the world’s real wealth: raw materials, commodities, copper, iron ore, petroleum, lead, silver and gold.

So how do they get rich exchanging real wealth for about $500 trillion of the Monopoly money they printed?

They don’t, they are the losers, not the middle class!

Remember those trees we chopped down so just about anyone in America could afford their dream house, or those mountains we blew up so we could have that fat station wagon in our driveway? All of those resources “now used up”, were once owned or controlled by the robber barons of our history books.

Their real wealth, not yours or mine has been "cut, mined and hauled away so Americans could trash the planet with houses, second houses, cars, RVs, TVs and DVDs— the cheap stuff we associate with the good life that put the planet on the downward spiral to ecocide. (Dem Bones is Connected To De Debt Bone)

The middle class should be thanking those scoundrels for all that "stuff"—but blame them for conning us into trashing the planet.

The Story of Stuff

The Story of Stuff, an animated video about the underside of our consumer society, believes the scoundrels are a bloated corporation sporting a top hat with a dollar sign etched on its front.

Film narrator, Annie Leonard argues our environmental damage is the result of the greedy corporations externalizing costs (shift them onto the public and the environment) so they can make more money.

But that premise is contradicted on film when Annie stands in line to buy a radio for $4.99 and correctly realizes the price couldn’t possibly capture the cost of the radio but incorrectly concludes that the greedy corporations pollute the environment so they can make more profit. [2]

If profits were the motive, then why wasn’t the radio $5.99? A price anyone would consider a "throw away" or loss leader.

We have come to believe that everything wrong in America is about someone getting rich while we are getting swindled.

That our economy runs on profits is a true statement, but imagine how much those moneygrubbers would have made if the radio was $5.99.

That $1.00 would be 100% pure profit.

The swindlers and scoundrels downward-manipulate the costs of what was in 1910 their real wealth:

    Raw materials, commodities, copper, iron ore, petroleum, lead, silver and gold, to industry at prices lower,

not higher as you would expect, so the corporations can still make a profit selling you a radio for $4.99.

Downward manipulation is an uneconomic aberration discovered in the precious metals market by the noted silver analyst Ted Butler.

We are conditioned to believe that prices are always inflated so the greedy corporations can make more money but Ted Butler’s research confirmed the price of silver has been manipulated to stay at the $4-5 price range for years. The beneficiaries of this type of manipulation are the consumers since industrial users can sell their products cheaply and still make a profit. (The Myth of the "Free" Enterprise Economic System)

    Behind every consumer society is the reality of a credit-based monetary system and a fiat currency. Behind every fiat currency is a Federal Reserve or a Central Bank controlled by The Global Financial Elite including, Rockefeller, Kuhn, Loeb and J.P. Morgan, Ted Butler’s prime suspect in the “ongoing intentional not accidental” great crime of keeping the price of silver low so consumers can buy a lot more ‘radio’ (silver) for their dollar.” (The Real Story, Theodore Butler, Silver But No Silver Lining)

Annie should be asking herself why those scoundrels intentionally sold their raw materials cheaply so just about everyone could afford the American Dream, a nightmare for the Planet.

Ecocide Results in Cognitive Dissonance

The premise that anyone would intentionally damage the planet, which future generations will inherit, results in Cognitive Dissonance (CD). CD is the discomfort felt at the discrepancy between what you already know or believe, and new information or interpretation that contradicts a strongly held belief system.

But what if the attempted murder of the environment was the goal from the beginning and not the unintended consequence?

Then we were "conned" into shopping for stuff to intentionally because The Global Financial Elite are in a metaphysical war with mother-earth (Gaea) and hope to attain immortality in the New World Order. [3]

Now the world around you will finally make sense.

Hot, flat, and crowded Thomas L. Friedman will finally know what planet George W. Bush is on.

Bush lost the war on terrorism and the war in Iraq, but is winning the war waged on the environment.

Dubya was deadly serious about Ecocide when, after rejecting the global climate change targets of the July 2008 G8 summit, he said, "Goodbye, from the (then) world's biggest polluter." China is now the world’s biggest polluter, Meat, Milk and Motors: The New China Syndrome

Ecocide Eliminates the Stupid Explanations

We see the collapse of GM and Chrysler as the result of failed public policy, government action, inaction and conclude the leadership is inept, arrogant or just "stupid" because only Ecocide could explain an industry that failed to keep up with the competition and adjust to new market demands.

Did Detroit forget the Volkswagen Beetle was the most successful car in history?

An incredible 21,529,464 Beetles were produced with the same body style and the same taillight (World's 5 Most Successful Cars).

The policies and decisions for the last 31 years aren’t inept or stupid if the goal was pollution.

The Beetle as a mobile pollution device was a failure. Its effects on the environment were minimal compared to the Detroit lineup of egocentric gas-guzzlers, all designed with a different taillight and eco-unfriendly accessories.

The “Evil” Federal Reserve made sure that shiny new automobile with the V8 engine, chrome wheels and bumpers was so cheap just about everyone in America could afford the mobile pollution device of their dreams.

Ecocide Explains Why Alaska is in the Picture

Most analysts point to the oil shock of the mid-1970s, set off by the Arab oil embargo of 1973 as the turning point for the US economy and automobile industry.

Why didn’t our then-President Richard Nixon and the rest of the U.S. government promote mass transit, renewable energy, and high-mileage vehicles?

Because the objective that makes the most sense was to disturb 800 miles of the most pristine country in Alaska with the Trans-Alaska Pipeline.

In 2008 we had a similar shock when $4.50 a gallon gasoline convinced Americans they should give up their last Arctic wilderness (U.S. Economy in Free Fall, Why is the Arctic National Wildlife Reserve in this picture?).

Ecocide Explains why Electricity is so Cheap

Electricity radically transformed and expanded our energy use. To a large extent, electricity defines modern technological civilization and made the Industrial Revolution and therefore our consumer society possible.

Electric power arrived barely a hundred years ago, but high costs and the Great Depression dried up most investment capital and delayed electric service to rural Americans until President Franklin Roosevelt signed into law the Rural Electrification Administration (REA) in 1935.

The REA loaned money created by the Federal Reserve at low interest rates and helped to set up electricity cooperatives.

Historically, energy is priced below its actual environmental and social cost in order to create excessive demand and discourage conservation. In other words such pricing diminishes the value of energy to users and causes them to use it irresponsibly and increase the amount of pollution coal-fired plants generate.

Why is electricity priced so cheap that "only the rich can afford to burn candles"?

Because cleaner alternatives like wind, solar or even natural gas don’t require mining companies to use dynamite to blast away 800 to 1,000 feet of 500 mountaintops and bury over 1200 miles of rivers and streams. [4]

Ecocide explains why 54% of electricity comes from the most abundant raw energy, coal and is the dirtiest source of power for much of the world. Coal-fired plants harm wildlife, generate smog, soot, acid rain, global warming, toxic air emissions and require billions of gallons of our most precious resource—water.

He Ruined the Country

The private credit monopoly of rich and predatory moneylenders do not “prey upon the middle class” to get rich.

You don’t become wealthier by exchanging gold, silver and raw materials for about $500 trillion of the Monopoly money you print.

Moneylenders created the middle class and then conned us into trashing the planet because Ecocide was the goal not the unintended consequence.

American "capitalism" and our consumer economy make perfect sense if the goal was the attempted murder of the planet.

Maybe ecocide is what Woodrow Wilson meant when he confessed that he "ruined the country."


[1] Congressman Louis T. McFadden, Chairman of the House Banking & Currency Committee, speech on the floor of the House of Representatives, June 10, 1932.

[2] “Corporations Rule the World”, David Korten (1995): “If some portion of the cost of producing a product are borne by third parties who in no way participate in or benefit from the transaction, then economists say the costs have been externalized and the price of the product is distorted accordingly.

[3] Ecuador Approves New Constitution: Voters Approve Rights of Nature, Mari Margil, Associate Director The Community Environmental Legal Defense Fund. An Ominous Drilling Sign for the Truth

[4] On March 25, Democrats introduced legislation that would prohibit the dumping of mining waste into streams. More than one million acres of Appalachia have already been affected by this practice, Senator Alexander says, "An estimated 1,200 miles of headwater streams have been buried under tons of mining wastes. More than 500 mountains have been impacted, and homes have been ruined and drinking water supplies contaminated" (Enviros Win Injunction Against Mountaintop Removal Mining).

Defaulted Loans May Haunt Seniors

A little–noticed law could soon result in smaller Social Security checks for hundreds of thousands of the elderly and disabled who owe the U.S. money from defaulted loans and other debts more than a decade old.

Social Security benefits are off–limits to creditors, such as credit–card companies and banks. But the U.S. can collect debts to federal agencies by "offsetting," or withholding Social Security and disability payments.

The Treasury currently withholds benefits of 3.1 million Social Security recipients to recover defaulted student–, farm– and small–business loans, unpaid income taxes, amounts veterans owe for health care, and other debts to the government.

Previously, the U.S. hasn't been able to withhold Social Security payments to recover most debts delinquent for more than ten years.

But a provision in the 2008 Farm Bill lifted the ten–year statute of limitations on the government's ability to withhold Social Security benefits in collecting debts other than student loans—for which the statute of limitations was lifted in 1997—and income taxes, where the limit remains 10 years.


This means that a person who defaulted on a small–business loan in 1995, for example, and who is receiving Social Security could be notified that his benefits may be reduced each month until the debt, with interest, fees, and penalties, is paid. The Treasury can withhold 15% of the benefit, though it can't be reduced to below $750. Tax debts have no floor.

The change will add more than $6 billion to the $75 billion in delinquent debt individuals owe the government, according to the Financial Management Service, the Treasury's debt collection unit.

A Treasury spokesman says the new legislation "allows Treasury's Financial Management Service to collect older debts and levels the playing field so that all eligible debts, regardless of age, are subject to debt collection. Treasury expects this legislation will result in increased collections of $10 million per year in delinquent federal non–tax debt."

Though no one argues that people shouldn't repay their debts, the change is coming at a challenging time for older Americans already pinched by mortgage woes, pension cuts and spiraling medical costs.

The shift applies to debtors of all ages, but Social Security recipients will bear much of the brunt. A Wall Street Journal analysis of Treasury Department data shows that Social Security recipients comprise a large and growing percentage of people from whom the Treasury recovers debts.

For years, most debt the Treasury collected through its "Offset Program," came from withholding income–tax refunds. But with an aging population and growing unemployment, roughly 10% of the $4.3 billion in debts collected by the Treasury came from Social Security benefits in 2008, the latest figures available. That's up from 1.6% in 2001, according to Journal computations that the Treasury confirms.

Though the law has expanded the age of debts that can be recovered, it hasn't addressed the sometimes–Kafkaesque process debtors can face when challenging the validity of a claim.

Consider the predicament of Dr. Robert Steinberg, the founder of Scharffen Berger chocolates, who spent more than six years and thousands of dollars in legal fees appealing the Social Security Administration's claim that he owed it more than $28,000.

Dr. Steinberg received disability benefits in the early 1990s while undergoing chemotherapy for lymphoma, a condition that ultimately claimed his life. Dr. Steinberg returned to work sporadically at a free clinic before co–founding the chocolate company.

Year later, the Social Security Administration notified Dr. Steinberg he was overpaid in the 1990s. In May 2002, with the matter still unresolved, the agency turned the debt over to the Treasury for collection.

In Oct. 2002, administrative law judge Gary Lee found that the Social Security Administration had never established the amount of the overpayment; had dismissed an earlier appeal "for spurious reasons"; had misinformed Dr. Steinberg and mishandled his later appeals; and had lost his file. He noted that Dr. Steinberg was "without fault," and told the agency to stop its collections efforts.

Dr. Steinberg died in 2008, at 61. His lawyer, Peter Young, a former staff attorney for the Social Security Administration, has handled more than 100 overpayment cases, "very few of which were accurate," he says. "Most people can't find or afford help, and give up very quickly and end up with painful offsets on a fixed budget."

An agency spokeswoman says mistakes can happen, but "over all, the process works."

A Treasury spokesman says the new regulations require agencies seeking to recover debts more than a decade old to give debtors the right to review and copy their files, make payment arrangements, and apply for disability and hardship waivers.

But a recent dispute about a student loan shows that even with these rights, a person challenging an old debt can face hurdles similar to homeowners in foreclosure trying to modify a loan that has been resold.

In 2003, the U.S. began withholding $173 a month in Social Security benefits from Annie Brown, a paralyzed 75–year–old widow living in a nursing home to repay a defaulted $8,823 student loan the Education Department says she took out in 1989. The offset reduced Mrs. Brown's benefit to about $980 a month.

Mrs. Brown said a granddaughter had forged her signature on a loan application. Her daughter and a lawyer spent more than four years disputing the debt with the owner of the loan, United Student Aid Funds, a student–loan guarantor that also was acting as one of the Education Department's 21 debt collectors. USA Funds itself farms out various debt–collection activities to others, which it did in Mrs. Brown's case.

Between 2003 and 2008, Mrs. Brown's daughter and Lynn Drysdale, a legal–aid lawyer in Jacksonville, Fla., corresponded numerous times with USA Funds and two other debt–collection companies it hired. One letter from USA Funds warned that unless documents were received "within 30 days from the date this letter was generated...your case will be closed." The letter was undated. Another letter required Mrs. Brown to refer to an attached document. There was no attachment. "I don't know how a lay person could maneuver through this process," says Ms. Drysdale. "Nobody seemed to know what was needed."

In 2007, USA Funds denied Mrs. Brown's claim, citing a recently passed federal rule requiring people claiming identity theft on student loans to obtain a criminal court verdict of the crime. That was impossible for Mrs. Brown; a statute of limitations for bringing a case had passed years earlier. In any case, she wasn't alleging identity theft, but forgery.

Robert Murray, a spokesman for USA Funds, agrees that Mrs. Brown's signature was forged. "It's absolutely a forgery," he says, "It \[the loan\] should never have been made."

But he says that USA Funds couldn't discharge the loan as a forgery because Mrs. Brown didn't return a required form in 2005, and that USA Funds must rigorously defend claims. "There are borrowers who want to get out of a legitimate debt," he says. "By the same token, we want to work with individuals who have a legitimate issue."

Ms. Drysdale, the legal–aid lawyer, finally sought to obtain a disability waiver for her client. That process took more than a year, and was achieved only after Ms. Drysdale asked for help from the Social Security Administration's ombudsman, who declined to comment.

In August 2009, the Education Department agreed that Mrs. Brown is permanently disabled, and discharged her obligation to repay the loan she never took out. The Treasury returned her withheld benefits in December.

Fannie, Freddie’s $125 billion tab still growing

Sixteen months after being seized, the firms remain wards of the state

The federal government has spent the past half year seeking to roll back its emergency efforts at propping up the financial markets — with the notable exception of its involvement in mortgage giants Fannie Mae and Freddie Mac.

As the government has pledged more and more money to cover the companies' losses, it has assured the public that planning was underway for overhauling the firms so the bailouts would end. As recently as December, the Obama administration said it expected to release a preliminary report on how to remake Fannie Mae and Freddie Mac around Feb. 1.

But no plan was produced, and in response to questions from lawmakers, Treasury Secretary Timothy F. Geithner clarified last month that it would be another year before the government proposes how to restructure the firms.

Sixteen months after they were seized to prevent their collapse, the companies remain wards of the state, running a tab that has now exceeded $125 billion in what has become the single costliest component of the federal bailout for the financial system.

Some members of Congress have complained that the huge public commitment is unsustainable. But the administration has been reluctant to start reforming Fannie Mae and Freddie Mac, officials and analysts say, because the firms in their current form play an essential role in supporting the housing market at a time when it is still under severe stress.

As other financial firms have exited the market and credit has seized up, Fannie and Freddie have been behind the vast majority of mortgages made since the start of the financial crisis. The companies now own or back more than half of all U.S. home loans.

Struggling borrowers
Moreover, the companies are helping the administration pursue policies designed to make new homes more affordable, ease the burden on struggling borrowers and direct funding to parts of the country especially hard hit by the downturn. Any initiative to remake the firms could distract energy from these programs or, in some cases, put an end to them.

Nor is the administration eager to foster a debate over Fannie Mae and Freddie Mac in an election year, according to analysts and lawmakers. The pair have long been lightning rods for criticism by many Republicans, who call them an intrusion into the free market and a Democratic patronage haven. Many Democrats, even as they faulted companies' excesses, have defended the firms' role in fostering home ownership.

And with Obama's campaign to overhaul financial regulation facing resistance on Capitol Hill, administration officials don't want to add another divisive issue to the mix.

"We've obviously had our hands full, as has the Congress," said Michael Barr, assistant Treasury secretary for financial institutions. "We're just beginning to see some positive signs in the housing market, but we're not out of the woods yet and so we want to be careful to be sure that we had an appropriate, paced process."

Barr said Treasury officials have been meeting informally with their counterparts at the White House and the Department of Housing and Urban Development and exchanging policy papers to develop principles for overhauling Fannie Mae and Freddie Mac. These principles include, for instance, that the government ensure borrowers could still get mortgages even when the private market is no longer offering loans. But whatever replaces Fannie and Freddie, it should not be allowed to grow so large that its failure could threaten the financial system.

So far, Barr said, the administration has been too busy to build out the principles.

The government's extended involvement in the companies has opened the administration to criticism from both parties that it has failed to begin winding down Fannie Mae and Freddie Mac fast enough.

"They weren't planning to do much about it," said Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, in an interview. "They're busy, and it's hard and it's complicated and they're trying to put it off." Frank said he is "forcing" the issue by scheduling a committee hearing later this month, summoning Geithner and other officials to discuss options for reforming the firms.

Once among their strongest supporters, Frank has more recently called for their abolishment. But he said he still expects the government to play a role providing funding for low-income housing and subsidies for home ownership.

Future scenarios for reforming Fannie Mae and Freddie Mac range widely — from total privatization to total nationalization. But no consensus has emerged over the best fix.

Spokesmen for Fannie Mae and Freddie Mac said their current focus is on keeping funds flowing into the mortgage market and helping distressed borrowers remain in their homes. The companies did not address the question of how they should be restructured.

Adrian Douglas: If your gold is at an LBMA bank, you may be just an unsecured creditor

Recently I have written several articles that have discussed how much "paper gold" has been sold, principally through the unallocated accounts of the London Bullion Market Association, though there are other vehicles that achieve the same end, such as pool accounts, unbacked exchange-traded funds, futures, and derivatives, etc., but the LBMA dwarfs them all.



I estimate that as much as 50,000 tonnes of gold have been sold that do not exist. That is equivalent of all the gold reserves in the world that are yet to be mined -- or, put another way, 25 years of gold production.

That is the granddaddy of all short positions.

The fractional reserve operation of the LBMA is likely to be the next Madoff scandal, except multiplied by 100 -- a $5 trillion fraud as opposed to a $50 billion fraud.

Like all financial scandals before it, this one will be exposed just as surely as night follows day. Gold is unique among all commodities. It is the only commodity that is not bought to be consumed. Rather, it is purchased as a store of wealth. Because it is not consumed, the buyer does not need to take possession of his gold but can be persuaded to trust the seller to store his gold on his behalf.

This unique wrinkle allows bullion bankers to sell gold that does not exist. This allows them to make huge profits, since they have very little cost, as they don't have the inconvenience of actually having to purchase the gold before they sell it.

The consequence of this illegal activity is that it suppresses the price of gold because the "paper gold" supply has the same effect on prices that would happen if real gold had actually been supplied to the market.

Such racketeering is extremely beneficial to the central banks, which are hostile to gold because a free-market gold price would blow the whistle on their perpetual inflationary actions. A suppressed gold price makes fiat currencies appear to have higher purchasing power.

The central banks do not just turn a blind eye to the bullion banks' fraud but actively assist it; the central banks lease gold at a pittance of a lease rate to make sure there is always enough liquidity so the scam is not exposed from the bullion banks' inability to deliver real metal when asked.

There is nothing new about gold bankers selling gold they don't have. The goldsmiths invented the scheme in the 16th century. As recently as 2005 Morgan Stanley was sued for selling imaginary precious metals. Morgan Stanley even had the audacity to charge storage fees on metal that didn't exist. The firm settled the lawsuit out of court but no criminal charges were ever filed. Morgan Stanley maintained that it did nothing wrong because none of its clients had lost any money in the scam. That was innovative. I will try stealing a billion dollars from a bank and then I will pay it back the following day and see what the FBI thinks of that legal defense.

The LBMA operates a fractional reserve system. It sells much more gold than it has. The LBMA keeps on hand the amount of gold that it estimates, in the worst-case scenario, it will be called upon to deliver.

In a recent article I analyzed data from the LBMA's own Internet site that shows that a net of approximately 20 million ounces of gold are traded every day:

This means that we are meant to believe that the equivalent of 25 percent of global annual gold production changes hands each day on the LBMA. On a gross trading basis this probably represents the whole of annual worldwide gold production traded every day. In dollar terms it represents $5.7 trillion of net trade annually. That is almost 60 percent of the entire U.S. economy or 10 percent of the entire global economy being traded through a handful of gold bullion banks.

It is simply mind boggling. You don't have to be a rocket scientist or a market regulator to smell something fishy. To back that level of trading on a 100 percent reserve ratio, the bullion banks would have to own almost 40 percent of all the gold ever mined. There are simply not enough London Good Delivery bars for that to be the case.

You don't have to rely on me to tell you that the LBMA is running a fractional reserve gold racket. This is from the LBMA's own Internet site:

"Unallocated Accounts

This is an account where specific bars are not set aside and the customer has a general entitlement to the metal. It is the most convenient, cheapest, and most commonly used method of holding metal.

"The units of these accounts are 1 fine ounce of gold and 1 ounce of silver based upon a .995 LGD (London Good Delivery) gold bar and a .999-fine LGD silver bar respectively. Transactions may be settled by credits or debits to the account while the balance represents the indebtedness between the two parties.

"Credit balances on the account do not entitle the creditor to specific bars of gold or silver, but are backed by the general stock of the bullion dealer with whom the account is held. The client is an unsecured creditor.

"Should the client wish to receive actual metal, this is done by 'allocating' specific bars or equivalent bullion product, the fine gold content of which is then debited from the allocated account."

There are some real peaches in this description. For example: "Credit balances on the account do not entitle the creditor to specific bars of gold or silver, but are backed by the general stock of the bullion dealer with whom the account is held."

They don't say that the bullion dealer has to hold the amount of gold he has sold, just that these unallocated accounts are backed by the bullion dealer's stock. His stock could be a thousand ounces or none at all.

Note the statement: "The client is an unsecured creditor." So this really spells out what "unallocated" means. It means that there is no gold allocated to the customer. The customer owns only an IOU for gold.

If the LBMA were running a system that had on hand 100 percent of all the gold being sold but just didn't want to assign specific bars and serial numbers, then all creditors would be secured. But the LBMA spells out that all clients are unsecured creditors. The buyers have no gold guaranteed against the IOU from the bullion dealers.

Who exactly are the members of the LBMA? The clearing members are as follows:

-- HSBC Bank USA National Association

-- JP Morgan Chase Bank

-- The Bank of Nova Scotia

-- Barclays Bank

-- Deutsche Bank


HSBC and JPMorgan Chase are the biggest short sellers on the New York Commodity Exchange. Together they own 95 percent of the over-the-counter precious metals derivatives. They are also custodians of the bullion supposedly held by the GLD and SLV exchange-traded funds, respectively, and they are clearing agents for the LBMA.

That is one fine set of credentials. These banks are so arrogant and confident that their racketeering will not be exposed that the quarterly publication of the LBMA is titled "The Alchemist."

Unlike the alchemists of the middle ages who tried to turn lead into gold, the alchemists at the LBMA turn paper into gold. (Well, gold IOUs, to be exact.)

In 2003 Graham Tuckwell, chairman of Gold Bullion Securities, made a presentation to the annual LBMA precious metals conference about his firm's new gold-backed ETF that today trades on the American Stock Exchange under the ticker symbol "GOLD." The transcript of his speech can be found here:

In that speech Tuckwell said:

"There are three essential components of [a] listed security, in our opinion. Firstly, ownership of the gold; investors want allocated gold, not a third-party credit risk, which is what unallocated gold is. In fact, you could argue unallocated gold isn't gold; it's just a piece of paper issued by a bank, and in most cases, unsecured risk."

You have to remember that this is a speech being made in front of all the members of the LBMA. You simply can't make such a statement in front of such a crowd if it isn't true. And we know it is true because the LBMA says the same thing on its Internet site. They say their clients are "unsecured creditors."

The LBMA peddles gold promises to those gullible enough to trade off convenience against title.

Many people do not understand what fractional reserve accounting means. I will give you an example of a less important real-life case.

Commercial airlines routinely sell more seats on a flight than the airplane has. If the plane holds 200 passengers but from statistics the airline knows that on average only half the passengers with ticket show up for check-in, the airline can sell 400 seats and be confident that the plane will fly full, which increases the airline's profitability. If the airline sold only 200 tickets, the plane would fly half empty. Occasionally the airline gets caught when, say, 210 passengers check in. In such circumstances the airline offers a free night in a hotel, a first-class upgrade, and some cash for any 10 passengers volunteering to fly later or the next day. But all the people who purchased tickets believed that they were buying actual available seats, not unallocated virtual seats.

This is exactly the same situation with the LBMA; the LBMA sells more gold than it has. It knows from statistics on average how many clients will ask for delivery and that determines the LBMA's minimum stock level.

But just like the case of the airlines, this scheme is destined to be discovered. When more gold is demanded than the bullion banks can deliver, they try to lease or buy gold from central banks. If this can be done in a timely fashion, the bullion banks' clients are none the wiser. If the central banks cannot provide supply, then the bullion banks are obliged to offer premiums over the spot gold price to encourage clients to accept cash in lieu of metal.

We are hearing anecdotal stories that recently there have been cases of premiums of up to 25 percent being offered for gold buyers to settle in cash instead of metal. It would seem that the bullion banks have pushed the game too far and are on a collision course with default. In addition the central banks have dishoarded a large proportion of their gold and are not in a position to come to the rescue of the bullion banks as much as in the past.

I recently made an analysis of the Comex warehouse inventory of gold and silver in an article entitled "Alarming Trend in Comex Gold and Silver Inventory Data":

One of my conclusions is that in the last six months there has been a dramatic decline in the inventory held by the dealers on the Comex (the registered category), while over the same period the open interest has increased. This essentially means that each open contract has less warehouse gold or silver backing today than it did six months ago.

This is a classic reduction in reserve ratio. It is a sign that the gold cartel is running out of physical gold and silver.

This observation is supported by other data. During the last two years the U.S. mint has periodically suspended production of gold and silver coins due to shortages of bullion, and the Comex futures have displayed contracting contango and/or mild backwardation, which is indicative of physical market stress.

There is anecdotal evidence that the LBMA OTC market in London has been having difficulties in making deliveries and requiring central bank gold to do so.

There are also rumors of large premiums being offered for cash settlement in lieu of the bullion.

Sources active in the London market tell us it is difficult to find large amounts of bullion.

The central banks have stopped selling and have become net buyers of gold. Further, at the end of last year the politically connected miner Barrick Gold announced a panicked buying back of its hedges.

The clients of the LBMA are not speculators or gamblers. They have bought gold that they believe is being held in a vault for them by the LBMA members. As the suspicions about the LBMA rise, more clients will ask for delivery, which will expose this fraudulent operation.

As I wrote here earlier, I estimate that as much as 50,000 tonnes of gold have been sold that do not exist. That is equivalent to all the gold in the world that is yet to be mined, or, put another way, 25 years of gold production, the granddaddy of all short positions.

The fractional reserve operation of the LBMA is likely to be the next Madoff scandal, except multiplied by 100 -- a $5 trillion dollar fraud as opposed to a $50 billion fraud. Those holding real bullion will see the price multiply many times as the price adjusts to the supply and demand fundamentals of real metal.

There is only one way to protect yourself and to profit. You should own physical bullion. Simply don't trust intermediaries like the LBMA that purportedly sell you gold but label you an "unsecured creditor." Anyone who thinks he holds gold at the LBMA should demand delivery.

The major desirable and unique characteristic of gold is that it is no one else's liability, unlike almost every other financial asset. If you own a credit risk, like IOU gold, you have not achieved the principle objective of owning gold.

Are you a gold owner or an "unsecured creditor"?

You cannot be both.

Peter Schiff Vlog 03/09/10 - Fast Money, unemployment, big government

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