Friday, May 28, 2010

Bankruptcy talk spreads among Calif. muni officials

(Reuters) - Two years after Vallejo, California, filed for bankruptcy protection, officials in nearby Antioch are also tossing around the 'B' word.


Antioch's leaders earlier this month said bankruptcy could be an option for the cash-strapped city of roughly 100,000 on the eastern fringe of the San Francisco Bay area.

Antioch's fiscal woes are standard issue for local governments in California: weak revenue from retail sales and property taxes is forcing spending cuts, layoffs and furloughs.

But cost-cutting measures may not be enough to keep Antioch's books balanced, so its city council is openly discussing bankruptcy.

"We just want to alert people to the possibility," Antioch Mayor Pro Tem Mary Helen Rocha said.

Orange County Treasurer Chriss Street would not be surprised if more local governments across the Golden State sound a similar alarm.

Street expects more talk of municipal bankruptcy across California because local government finances are in such dire shape -- a situation underscored on Wednesday when a top finance officer for Sacramento County projected a worse-than-expected shortfall for the county of $181 million, which could force more than 1,000 layoffs from the county's payroll.

"You don't have the easy out of increasing revenue and you have a lot more call on services because of the economy," Street said. "There's no such thing as entertaining bankruptcy; there's ending denial."

Orange County, California's third most populous county, declared bankruptcy in 1994, at the time marking the biggest municipal bankruptcy in U.S. history, after suffering $1.7 billion in losses from bad investments. The county emerged from bankruptcy in 1996 and its credit rating has since recovered from its post-bankruptcy "junk" status. Fitch Ratings earlier this month affirmed its 'AA' rating on the number of the county's long-term obligations.

Marc Levinson, a lawyer with Orrick, Herrington & Sutcliffe LLP who is representing Vallejo in its bankruptcy proceeding, agrees that California's hard times and lean local budgets are forcing local leaders to weigh bankruptcy.

"It's a topic on everyone's lips because cities and counties and local governments are hurting," Levinson said.


Municipal officials, however, are unlikely to pile into bankruptcy court in search of relief from their financial woes, Levinson said.

Chapter 9 bankruptcy filings are rare to begin, in part because many states limit them and, more important, their consequences include harm to credit ratings that determine borrowing costs, said Jim Spiotto, a partner at the Chicago law firm of Chapman & Cutler, who works on municipal finance matters.

A filing for Chapter 9, the part of U.S. bankruptcy code that applies to municipalities could also result in being locked out of the municipal debt market, adding to fiscal trouble.

"We take that very seriously," Amy Doppelt, a managing director at Fitch Ratings, said of how talk of bankruptcy could affect credit ratings.

Bankruptcy could also scare away investment and new jobs at time when California's unemployment rate is in the double-digits -- 12.6 percent in April -- and payroll growth is critical to bolstering the consumer spending and property markets that fill the coffers of local governments.

Ron Loveridge, the mayor of Riverside, California, and president of the National League of Cities, called bankruptcy a last resort.

"It becomes a description of who you are," he said.

Despite its stigma, bankruptcy has paid an important dividend for Vallejo: It has forced public employee unions to the negotiating table, providing city leaders an opportunity to rein in compensation, which city officials said accounts for more than three-quarters of Vallejo's general fund spending. City Councilwoman Stephanie Gomes said the effort has led to concessions from three of four city unions.

Like Vallejo, Los Angeles is suffering from weak revenue at the same time the cost of its pensions and other retirement benefits are rising. Former Mayor Richard Riordan said those factors put the government of the second largest U.S. city on track to declare bankruptcy between now and 2014.

Riordan sees bankruptcy as a necessary tactic for squeezing concessions from the city's public employee unions. It could also pave the way for 401(k) retirement accounts for new city workers instead of defined pension benefit plans with escalating costs, he said.

"The threat of bankruptcy is really the only way you're going to get them to make major changes," Riordan recently told Reuters.

Los Angeles officials dispute Riordan's bankruptcy outlook, published earlier this month in an opinion piece in The Wall Street Journal. City Administrative Officer Miguel Santana said Los Angeles does not want its "brand" tarnished by bankruptcy and that the city can avoid it by continuing to cut spending, by reducing its work force and by handing off some services to the private sector and nonprofits.

"Bankruptcy is what you do when you run out of options. The city has a lot of options and has been exercising those options," Santana said.

Talk of municipal bankruptcy has not escaped California's politically powerful public employee unions. A number of them are pressing the legislature to pass a bill that would require local governments to get the approval of a state board before filing for bankruptcy. Since the board could be stacked with union-friendly appointees, bankruptcy pleas could be rejected or delayed.

"It's a horrible bill," Levinson said. "If you don't have the bankruptcy outlet, what do you do? If you can't pay your bills what do you do?"

(Editing by Kenneth Barry)

UPDATE 1-IMF calls for gradual rise in Japan sales tax

* IMF:Japan should gradually increase consumption tax

* Country should start fiscal reform in 2011

* Japan recovery gaining momentum, deflation to end late 2011

TOKYO, May 19 (Reuters) - Japan should start fiscal consolidation next year, including gradually raising the country's sales tax, taking advantage of solid growth now, the IMF said on Wednesday.

The recommendation by the International Monetary Fund contradicts Prime Minister Yukio Hatoyama's pledge not to raise the sales tax rate at least until the next lower house election, which does not need to be held until 2013.

"With global scrutiny of public finances increasing, the need for early and credible fiscal adjustment has become critical," the IMF said after its annual review of Japan's economy and economic policies.

"In our view, fiscal adjustment should start in 2011/12, beginning with a gradual increase in the consumption tax, to take advantage of cyclical recovery," the IMF said.

Japan's outstanding debt as a ratio of gross domestic product is the highest among industrial nations.

Investors are on edge over countries with large debt burdens after a crisis of confidence in Greece's fiscal policy roiled financial markets and prompted the European Union to roll out a $1 trillion rescue package to defend the falling euro.

Some market players think Japan could become the next target of markets, although many market players think the country can muddle through at least in the near future because of huge domestic savings.

"Our assessment is that there's limited risk of any kind of sovereign debt event (in Japan). But no matter how small the risk is, it must be a bit higher as a result of recent events. That suggests a need for early action. The fact that the economy is showing strength now shows it is a propitious time to begin adjustment," an official at the IMF said.

The IMF said the Japanese recovery is gaining momentum and that prices in the country will start rising in late 2011.

GDP data due on Thursday is expected to show the economy grew an annualised 5.4 percent in the first months of this year. [ID:nTOE64504A]

The IMF also said the BOJ's easing steps have helped stabilise financial markets and support the economy.

But it added the BOJ could consider additional easing measures such as extending the maturity of the central bank's fund-supplying operations. (Reporting by Hideyuki Sano; Editing by Joseph

Is the U.S. Government Planning War to Quell the Tide of Economic Unrest?

In my opinion and in a word: Yes!


  • “READY FOR WAR,” “U.S. Military told to get ready in Korea Standoff, Obama orders commanders to prepare ‘to deter future aggression.’” By Drudge and MSNBC
  • “U.S. Begins Massive Military Build Up Around Iran, Sending Up To 4 New Carrier Groups In Region” by Tyler Durden
  • “Clinton: Korea Must Face ‘Consequences’ For Sunken Warship”
  • Homeland Security, Northeast Intelligence Network: “The Syrian Missile Crisis: Threat of War Very Real”
  • “The Expanding U.S. War in Pakistan” by Jeremy Scahill
  • “Yemen, Latest War Front?” by CBS News

These are but a very few of the recent headlines about more U.S. war, but the Iranian and Korean situations are the most dangerous, and the threats against Iran I think the most real.

United States wars are virtually all wars of aggression, so it is quite evident that U.S. wars are “fought” for reasons other than self-defense. That means there are ulterior motives involved that are not related to moral behavior, but instead to nefarious intent. This is a disturbing revelation, and one little understood by the American masses. It is one however, that if more understood, could literally blow the lid off the notion that the purposeful buildup of the military–industrial complex is for the defense of this nation! This thought scares the life out of those in power who need to keep the populace scared to death at all times in order to propagate their crimes.

Our economy, as is the case for much of the rest of the world’s economies, is currently imploding. Since all major economies in the world are based on valueless, un-backed, and worthless money, this situation should have been evident to the mainstream long ago. Of course the failing economy is just one piece of the puzzle, but it is most definitely the most important piece. With a so-called vibrant economy over the past decade or so, even though it was based on lies and deceit, and was a complete sham, the general population was easy to control during these so-called “prosperous” times. With the real economy now being exposed for the fraud that it is, and the real risks becoming more evident, the once complacent citizen is now becoming angry. Because of this, the evil U.S. federal government must find a new method of fooling the masses into believing in “their” government and country. War is the obvious answer, as war solidifies the putrid and false nationalistic worship of the peasants more than any other ploy.

In my opinion, any bad economic news, any exposure of the current economic fraud, any sovereign government risk of collapse, any higher unemployment or excessive price inflation, will anger the majority and vastly escalate the government’s need to start another war. It cannot afford to let the situation get out of hand, as there are many more of us than there are of them, so whatever becomes necessary in the mind of government in order for it to effect its manipulation and control over the people will be implemented. If that is a purposely orchestrated and unnecessary war, then so be it.

The openness of these plans and the blatant steps being taken by the federal government to protect its power are disturbing to say the least. Even with this openness however, most are still in the dark. Since 2001, our civil rights have been for the most part destroyed. Laws have been enacted that allow the government to capture and hold indefinitely any citizen it deems a risk, and without the possibility of charge or trial. Legislation to open and construct holding camps [see here] has been proposed and plans to implement this process are being prepared for today. Martial Law is now not just a possibility but a probability. This government in my opinion is at the same time preparing for both Martial Law and war to quell the tide of possible civil unrest due to economic instability or collapse. This is astounding, as both ends of the spectrum are being covered by Leviathan’s planned course of action. This should frighten all of us!

This time around the false flag event(s) leading to another war should immediately be scrutinized and brought to light, and those who expose the forthcoming government and neo-con lies should not be considered conspiracy nuts, but rather truth-tellers and heroes. I am warning you in advance, as so many others have done before me, that the next war will be pre-planned and calculated. The federal government’s actions are no longer hidden, and the motive for its criminal and murderous behavior is there for all to see. Obviously, those who now rule over us are confused and dazed, but they are nonetheless prepared to do what is necessary to keep their position of power intact. This government will not consider the means, but only the ends, so that justification will then become more palatable to those so easy to fool.

The dangers of this situation are tremendous. A war with Iran will upset not only the entire Middle East, but the whole world. The terrorism risk due to blowback will increase dramatically; this in and of itself helping the guilty government to perpetuate the crime, all the while gaining even more power and authority over us. Not only will many more innocents abroad be murdered, but many more Americans will also have to die as fodder for the cause of the elite.

These situations are not accidental but designed, and they are designed so that the few can survive in luxury, while the rest of us suffer. When will the common man come to the realization that government in a now totalitarian society like ours is not of the people, by the people, and for the people, but that people are of the government, by the government, and for the government? Only when all individuals are sovereign and free, and in total control of the State will this paradigm shift back to its original design.

Scientists find evidence of large underwater oil plume in gulf

Scientists have found evidence of a large underwater "plume" of oil in the Gulf of Mexico, adding to fears that much of the BP oil spill's impact is hidden beneath the surface.

The scientists, aboard a University of South Florida research vessel, found an area of dissolved oil that is about six miles wide, and extends from the surface down to a depth of about 3,200 feet, said Professor David Hollander.

Hollander said that he believed the plume might have stretched more than 20 miles from the site of a leak on the floor of the Gulf of Mexico, where the Deepwater Horizon drilling rig sank April 22. It has not yet reached Florida.

The plume is clear, with the oil entirely dissolved.

"Here is a situation where, unless you're looking at the chemical fingerprints, [the oil] is absolutely not visible," Hollander said. "It's not some Italian vinaigrette or anything like that. It's absolutely, perfectly clear."

But, Hollander said, even this clear-looking water could contain enough oil to be toxic to small animals at the base of the gulf food chain. He said he was also worried that the oil contains traces of "dispersants," soap-like chemicals sprayed into the oil to break it up.

"You don't want to put soap into a fish tank," Hollander said.

This discovery seems to confirm the fears of some scientists that -- because of the depth of the leak and the heavy use of chemical "dispersants" -- this spill was behaving differently than others. Instead of floating on top of the water, it may be moving beneath it.

That would be troubling because it could mean the oil would slip past coastal defenses such as "containment booms" designed to stop it on the surface. Already, scientists and officials in Louisiana have reported finding thick oil washing ashore despite the presence of floating booms.

It would also be a problem for hidden ecosystems deep under the gulf. There, scientists say, the oil could be absorbed by tiny animals and enter a food chain that builds to large, beloved sport-fish like red snapper. It might also glom on to deep-water coral formations, and cover the small animals that make up each piece of coral.

"It kills them because it prevents them from feeding," said Professor James H. Cowan Jr., of Louisiana State University. "It could essentially starve them to death."

The University of South Florida vessel, the Weatherbird II, used sonar and other devices to sample the water below it. Other scientists have said they have little of the equipment necessary to find oil under the water -- leading to debates about whether the underwater plumes were even there.

This week, Mike Utsler, who helps oversee the spill response off the entire Louisiana coast as BP Houma incident commander, said he's only focused on taking oil off the surface. "We don't know there's oil underwater," he said.

But others had seen worrisome evidence.

Owen Morgan of Amira, a group that specializes in breaking apart spills with oil-eating microbes, found evidence of the oil plume off Venice when his team sampled water 75 feet beneath the service. Morgan -- who said his company is pulling out of Louisiana because of insufficient cooperation from state and federal authorities -- showed a thick, gooey sample consisting of 60 percent crude oil.

"People don't realize how bad it is," Morgan said, dipping a fork in the sample to show the goo that hung in midair without sliding off. "This went on for three miles, of that consistency."

William Hogarth, dean of the USF College of Marine Science, said university researchers have sent samples to federal officials for analysis, but it's clear the oil is new because Stanford scientists had sampled the same area a year ago and found no evidence of oil. The Weatherbird II will conduct another tour next week, he said, with different researchers aboard.

"This is not natural seep," he said, adding that scientists will have to study the region for several years in order to properly gauge its impact. "We're talking about probably a three to five-year monitoring program to see what happens to food chain."

Folly Central: Obama Considers Another Stimulus

Another stimulus. That's right. You read correctly. The U.K.'s Telegraph reports that dour President Obama and his cadre of thick-headed left-wing ideologues are weighing additional borrowing. This time to the tune of $200 billion. Paltry when stacked against the trillions in debt the nation is already massing? Can you say the "tyranny of compounding interest?"

According to the Telegraph, the U.S.'s money supply is shrinking alarmingly. The report quotes Professor Tim Congdon from International Monetary Research, who says:

"It's frightening. The plunge in M3 [money supply] has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly."

But a sober-minded approach to money supply and quality isn't the Obama Way. Seems that Mr. Obama believes that just a wee-bit more stimuli will finally turn things around. The Telegraph reports further:

The US authorities have an entirely different explanation for the failure of stimulus measures to gain full traction. They are opting instead for yet further doses of Keynesian spending, despite warnings from the IMF that the gross public debt of the US will reach 97pc of GDP next year and 110pc by 2015. [Emphasis added]

We all know that Mr. Obama suffers Euro-envy, but Greece-envy? The debt percentages to GDP cited above are simply astounding. And chilling.

More from the lucid and sober Professor Congdon:

[T]he Obama policy risks repeating the strategic errors of Japan, which pushed debt to dangerously high levels with one fiscal boost after another during its Lost Decade, instead of resorting to full-blown "Friedmanite" monetary stimulus.

Yet another pearl from the professor:

"The US has just tried the biggest fiscal experiment in history and it has failed. What matters is the quantity of money and in extremis that can be increased easily by quantitative easing. If the Fed doesn't act, a double-dip recession is a virtual certainty." [Emphasis added]

And to think that establishment economists and the mainstream media dismissed us loony conservatives' warnings that Keynesian economics are a sham and another recession would result if Mr. Obama persisted in Keynes' long discredited policies. Well, the left always knows better, doesn't it?

President Obama and his buffo economic team are leading the U.S. down a path without the joy of even one primrose. As we can see, it's a path strewn with thorns and thistles. And somewhere, not far distant, is a deep, deep hole.

Another Sham Stimulus Bill

Given the choice between retaining power in the short term or doing what's right for America, which would you choose? Most Americans, I believe, would be willing to sacrifice a great deal for their country, and this willingness to sacrifice has always been the great pillar of American democracy. Unfortunately, there is no fondness for sacrifice in Washington these days, especially among the Democratic leadership and its supporters.

The irresponsibility of the left is on display daily as one piece of self-serving legislation follows another. The latest example comes in the form of the American Jobs and Closing Tax Loopholes Act of 2010. Sponsored by Rep. Sander Levin of Michigan -- a state certainly in need of jobs, if not of loophole-closing -- the bill is one more exercise in political cynicism on the part of the most cynical Congress in history. Coming just five months before the all-important November elections, the bill is a blatant exercise in vote-buying paid for with money we don't have. But since the Democrats have added $1.75 trillion to the national debt in 2009 alone, what's another $190 billion tacked onto the national debt? Especially since its intent is to energize the liberal base (and quiet the unease of a 9.9% unemployment rate) by transferring another $2,000 to every adult Obama-supporter -- and this on top of the $787-billion stimulus of 2009 and the $410-billion omnibus spending bill that followed shortly after. Given the choice of ruinous spending versus short-term political gain, the left always chooses political gain.

As unemployment continues to rise toward 10%, it should be obvious that the earlier rounds of stimulus spending have not been effective, and they have not been effective because they were not designed to be. Rather, they were designed in the most cunning fashion for the sole purpose of securing power. How else could one explain unemployment rates that are now on average nearly twice what they were under George W. Bush? Surely the combined brainpower of Larry Summers, Paul Volcker, and Timothy Geithner, if not the singular brainpower of their boss, could have designed a fiscal policy that would have stimulated private-sector job growth -- for example, by lowering corporate taxes and eliminating regulation. Instead, Obama's policies have been consistently anti-business and anti-growth, and Volcker's promotion of a European-style value-added tax is simply another backdoor tax on growth. When you seize business profits in the way Obama has been doing, do you really expect to see businesses investing in new jobs and plants?

Far from stimulating growth, the Levin stimulus bill increases taxes on business (though over three-fourths of the bill is "funded" by further deficits). Long ago, the Democratic Party decided that the way to win elections was through promotion of special interests at the expense of the public at large. The general public will suffer the effects of deficit spending and unprecedented debt. The public will also pay in the form of higher prices for increased unionization and government regulation, much of which is little more than a legalistic shakedown designed to enlarge the lucrative revolving-door trade between government bureaucrats and corporate legal defense teams.

The provisions of the latest stimulus bill demonstrate just how corrupt the Democratic leadership has become. What is $65 billion in Medicare physician payment doing in a so-called stimulus bill? It is there so Democrats can hide the true cost of Obamacare from the public, who will end up paying for it. What are further billions in handouts to minority farmers and welfare payments doing in a bill that is supposed to create jobs? And since when does the government distinguish between minority and non-minority farmers? What's next? Minority and non-minority physicians? Well actually, that's already in the health care bill.

The only provision in the American Jobs bill directly tied to job-creation is one billion for "summer jobs," but these jobs, it turns out, are hardly jobs at all. They are essentially internships for low-income youths in government and the non-profit sector, not in the private sector, where these kids might conceivably learn something about work.

But then, the point of the American Jobs bill is not to promote private-sector employment; the point is to shift more and more Americans from private-sector employment into dependence on government make-work and welfare. Aside from the stealth Medicare reimbursement increase, the American Jobs bill is designed entirely for the purpose of silencing a restive Democratic base until after the fall elections, after which the extended benefits will run out and there will still not be enough jobs in the private sector to bring about normal levels of employment.

The premise of the American Jobs and Closing Tax Loopholes Act is that money buys votes. Depressing as it sounds, Democrats have it about right. A few scraps, such as the $2.8-billion "aid to localities" and the $1.5-billion "disaster relief for farmers" (to say nothing of the $4.6 billion for minority farmers), can buy a sizable number of votes, especially since the tax increases needed to pay for all of this are being kicked down the road.

Whether the American Jobs bill can buy enough votes for Democrats to retain control of Congress remains to be seen, but I would not bet against a party as ruthless and irresponsible as the modern-day Democratic Party.

Only a major shift in political consciousness on the part of Americans at large -- a new awareness of how corrupt the left has become and of how grave the consequences are going to be -- might save America from fiscal ruin. Unfortunately, that sort of shift in consciousness comes about only around once in a lifetime, as it did in 1980. Payoffs to special interests take place ahead of every election.

Dr. Jeffrey Folks taught for thirty years in universities in Europe, America, and Japan. He has published many books and articles on American culture and politics.

Gird Your Loins: IRS 'Wealth Squads' Are on the Way

Forbes, IRS 'Wealth Squads' On The Way, by Donald C. Rocen (Miller & Chevalier, Washington, D.C.):
Newly created exam teams will scrub wealthy taxpayers' hedge funds, trusts and foreign accounts.

Those who by anyone’s measure would be considered wealthy, should be on notice: How you acquired and now maintain the wherewithal to be so labeled may soon be called into question by the IRS. That’s not to say that the questions can’t be answered and the matter closed with no further tax due, but the means to that end could get complicated.

Last Fall, IRS Commissioner Doug Shulman unveiled his vision for a Global High Wealth Exam Group--the latest addition to the agency’s arsenal of compliance strategies. Its goal is to ensure that these high-end Form 1040 filers are not shirking their federal tax responsibilities. While the exact amount of “wealth” that will arouse IRS interest was not disclosed, the Commissioner suggested a threshold in the neighborhood of tens of million of dollars. According to the most recently released IRS estimates, in 2004 there were approximately 47,000 individual taxpayers with a net worth of $20,000,000 or more. ...

This will not be a kick-the-tires type of exam. Instead, think in terms of a major overhaul. Global High Wealth taxpayers and their representatives should expect to confront teams of revenue agents, partnership experts, and international examiners prepared to scrub not only the Forms 1040 and the attached schedules but also any and all related returns. In the background will be specialists in such areas as financial instruments; exempt organizations; retirement plans (whether individually maintained or employer sponsored) and insurance and annuity arrangements. And for those who like to play on the edge, do not overlook the possibility of a criminal investigation agent being asked to join the group. The bottom line is that these teams will have access to whatever resources they need.

Going Concern, Memo to Rich People: Gird Your Loins for the IRS ‘Wealth Squads’:

For those of you keeping score, the ballpark figure of “wealth” is “in the neighborhood of tens of million of dollars,” according to IRS Commish Doug Shulman’s best guess. So if this is you, the time is nigh. You peasants whose net worth falls into the seven figure range probably can rest easy but don’t get too comfortable, you’re still at risk.

And don’t think that this will be a friendly visit between you, your CPA and an IRS representative. No, this will likely be a financial strip search that will be topped off with a latex surgical glove moseying around your nether regions.

BankWatch: TARP Investments Lead to Huge Losses for U.S. Treasury

As struggling banks get acquired or fail, the U.S. Treasury is shouldering a growing burden: Its investments in TARP are turning out to be a bust, leading to huge losses. And there are signs of more trouble ahead.

Example: When Canada's Toronto Dominion Bank (TD) bought a South Carolina bank earlier this month, it came with a hefty price tag for the U.S. Treasury Department -- a 60% loss in its TARP investment. T

Turns out, this is only one among several hits that the Treasury and the U.S. taxpayer have taken recently. In fact the string of losses in TARP, the Troubled Asset Relief Program, isn't only large, it's gathering momentum.

TARP Takes Hits on Its Investments

To wit: The recent acquisition of Pacific Capital Bancorp (PCBC) by Texas billionaire Gerald Ford means a $145 million, or 80%, loss in the U.S. Treasury's $181 million TARP investment in the Santa Barbara, California-based bank. And private equity firm Thomas Lee's investment in Spokane, Washington-based Sterling Financial meant a 75% haircut in the $303 million Treasury investment.

These losses showcase how poorly many of the Treasury Department's TARP investments have fared. Still, on May 21, the Treasury Department grabbed headlines when it notified Congress that the cost of TARP has decreased by $11.4 billion to $105.4 billion. While that is no small achievement -- given that less than a year ago, the estimated cost topped $340 billion -- it hides the stream of investment losses that the Treasury is taking almost weekly from several of its TARP recipients, costing taxpayers dearly.

Just days before, on May 17, the Treasury took a 60% hit to its $347 million TARP investment in a South Carolina bank named The South Financial Group (TSFG), which was awarded the cash in December 2008. At the time, H. Lynn Harton, CEO of South Financial said: "The Treasury Department's investment is a vote of confidence in TSFG and enhances our ability to support economic growth in the communities we serve."

In fact, the "vote of confidence" investment turned out to be a bust. The Treasury Department is getting just $130.6 million in cash in return for its $347 million TARP investment. Canada's Toronto Dominion Bank, part of TD Bank Financial Group (TD), is acquiring South Financial Group's outstanding shares for a mere $61 million.

Losses in Failed Banks Are Mounting

As we are seeing, the story of the TARP losses is being repeated over and over again. Just this month, the Treasury Department lost all of its $84.8 million TARP investment in Midwest Bank & Trust of Illinois. The 23-branch bank was seized by the Federal Deposit Insurance Corporation in mid-May. That was on top of a $2.3 billion loss when CIT Group (CIT) filed for bankruptcy last year, the $298 million loss at failed bank UCBH Holdings and an additional $4.1 million in Pacific Coast National Bancorp.

There are signs of more trouble ahead. More and more banks that took TARP funds are under so much stress that they aren't paying dividends to the U.S. Treasury. The failed Midwest bank was just one of 104 TARP recipients that hadn't paid dividends, according to Neil Barofsky, the special inspector general of TARP. Barofsky says that as of March, unpaid dividends totaled $188.9 million.

Besides, it's anyone's guess how many banks that took TARP funds are part of the recently updated FDIC "Problem List" of 775 banks at the end of the first quarter of 2010, an increase from 702 in the previous quarter.

Don't Hold Your Breath

Barofsky also said that it's quite unlikely that the Treasury will get back all of the $84.8 billion that it handed out to the auto companies and their financial arms or that it will see much of the $50 billion that's earmarked for home loan modifications.

Still, Treasury officials like to point out that the primary objective of the Troubled Asset Relief Program has been achieved.

"TARP has succeeded in achieving its intended goal of stabilizing the economy and putting America back on track for future growth," said Herb Allison, Treasury's Assistant Secretary for Financial Stability. "Not only have we averted an economic catastrophe, we're in a stronger position sooner than anyone predicted."

To be sure, TARP has played a big role in stabilizing the financial system. However, much of the calming seems to have taken place in the larger banks, while the smaller banks are still reeling from the economic recession and bad loans. And it's still up for debate whether the TARP investments in hundreds of banks achieved much. After all, TARP funds were later handed out to spur lending and shore up capital.

Lending Picture Still Dismal

However, as federal regulators' numbers show, lending has hardly picked up and banks continue to weaken as an increased number slide into failure. At last count, the FDIC had seized 238 banks since 2008, and 73 of the failures occurred just since the beginning of the year.

Indeed, in the most recent widely watched survey of bank loan officers, the Federal Reserve found that overall lending standards were unchanged in the first quarter since the same time last year. What's more, terms on loans to households and businesses, especially from small to mid-size banks, continued to tighten.

While it's true that an economic catastrophe has been averted, as the U.S. Treasury's Allison claims, as the Fed data shows, it's certainly up for debate whether TARP has been successful in achieving its many goals as the losses mount.

The Worst Money Supply Plunge Since The Depression Means A Double Dip Is Now A ‘Virtual Certainty’

The stock of U.S. money as measured by ‘M3′ money supply fell to $13.9 trillion from $14.2 trillion during the three months ending in April.

This 9.6% annualized contraction is unprecedented in the post-Depression era, and shows how, in this sense, America isn’t printing more money. There are actually less dollars in the system since U.S. money supply is crashing, even well into the recent economic recovery.

The positive take on this is that we don’t have to worry about either inflation or the Fed tightening significantly any time soon.

The negative take is that this crashing money supply will lead to both deflation and a double dip recession:


“It’s frightening,” said Professor Tim Congdon from International Monetary Research. “The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly,” he said.

Mr Congdon said the Obama policy risks repeating the strategic errors of Japan, which pushed debt to dangerously high levels with one fiscal boost after another during its Lost Decade, instead of resorting to full-blown “Friedmanite” monetary stimulus.

“Fiscal policy does not work. The US has just tried the biggest fiscal experiment in history and it has failed. What matters is the quantity of money and in extremis that can be increased easily by quantitative easing. If the Fed doesn’t act, a double-dip recession is a virtual certainty,” he said.

The danger, critics such as Mr. Congdon say, is that Bernanke as a Keynesian may fail to appreciate the signifance of the recent money supply drop, failing to avoid a new recession.

North Korea reacts angrily as Seoul's navy holds military exercises off coast

Drills involving 10 warships practise detecting North Korean submarines

South korean warships undergo drill

A South Korean warship during a drill in seas off Taean, South Chungcheon province, South Korea. Photograph: Yonhap News Agency/EPA

South Korea fired artillery and dropped bombs in military exercises off the west coast of the divided Korean peninsula today, with tensions running high in the area after an alleged North Korean submarine torpedo attack on a southern warship.

The drills aim to help the military detect incursions by the north's submarines, follow the findings of an international investigation into the sinking of the Cheonan on 26 March in which 46 sailors died.

The navy said 10 vessels including a destroyer fired guns and launched anti-submarine bombs south of the capital, Seoul, in a one-day exercise. The exercises were conducted far from the disputed sea border with North Korea, in the Yellow Sea, the southern news agency Yonhap reported, citing military officials.

The north denies any involvement in the sinking of the Cheonan. In response to the South's military exercises, its military said in a statement carried by the state news agency KCNA today that it would scrap an agreement with Seoul designed to prevent clashes along the disputed maritime border, cut off a military hotline and would stage "prompt physical strikes" if any southern ships entered its waters.

Pyongyang announced last year that it was scrapping all accords with the south and one expert said today's announcement suggested it had not fully implemented that threat.

Relations are at their worst for about 12 years following the Cheonan's sinking and a spate of tit-for-tat measures.

The north has said it will sever all relations until the south's president leaves office and has expelled officials from a joint industrial zone.

Experts believe neither side wants military action but warn that there is always a danger of mistakes or misjudgments escalating the conflict.

Yesterday the media in Seoul reported that the South Korean and US military were attempting to track down four North Korean submarines that had vanished from radar screens. Yonhap reported today that two of the 300-tonne vessels had returned to base after what seemed to be a routine exercise.

Yonhap said the south would take the Cheonan sinking to the UN security council as early as next week, citing an unnamed official.

China, a permanent member of the security council and Pyongyang's main ally, has not so far supported the South Korean investigation, calling instead for both sides to show restraint. But Seoul hopes it will be able to persuade China to go further when its premier, Wen Jiabao, visits on Friday for a summit with President Lee Myung-bak.

Russia's president, Dmitry Medvedev, has sent a team of experts to South Korea to study the findings of the Cheonan investigation, officials in Moscow said today.

The US secretary of state, Hillary Clinton, has called for a "strong but measured" response to the sinking from the international community.

Thousands of protesters, many of them war veterans, gathered in the centre of Seoul today to condemn the north's threats. Several used wooden staves and knives to beat and stab a large rubber model of the north's leader, the Associated Press reported.

"Dialogue won't work with these North Korean devils," said Mo Hyo-sang, 81, who fought in the 1950-53 war. Demonstrations and rallies are common in the south's lively political culture.

National Debt Soars Past $13 Trillion

Senate Minority Leader Mitch McConnell: National Debt Is 'True Emergency'

The U.S. national debt has passed the $13 trillion mark, according to, an independent website that tracks the real-time growth of U.S. revenues and spending.

Global markets decline amid pessimism over bailout package for Greece.

On Tuesday, the national debt stood at $12,995,779,490,444.52, according to the Treasury Department's national debt-tracking website

The Treasury Department did not immediately return a request from ABC News for comment.

Senate Minority Leader Mitch McConnell , R-Ky., wasted no time in sounding an alarm about the new debt milestone. In a statement released today, McConnell cited the debt in his criticism of what's called the tax extenders bill, which would extend unemployment benefits and the amount of time unemployed workers could stay on their group health plan through COBRA, as well as certain tax cuts. McConnell said the bill would cost $130 billion.

"As early as today, we'll reach a dubious milestone in America: a $13 trillion national debt -- the first time in history we've crossed this frightening threshold. This extenders bill would add another $130 billion on top of that. ...This is fiscal recklessness.

"The true emergency here is our national debt," he said.

Addison Wiggin, the executive producer of the 2008 documentary I.O.U.S.A. and the editorial director of the website Daily Reckoning, said everything from the government's regular operations to the wars in Iraq and Afghanistan to the U.S. stimulus package to lackluster tax revenues have contributed to the recent rapid growth of the national debt.

A decade ago, he said, the national debt was $5.7 trillion. By 2005, it rose to $7.7 trillion. As of six months ago, it stood at $12 trillion. The larger the debt grows, the faster the U.S. government's interest payments pile up, which helps explain why's national debt tracker jumps hundreds of thousands of dollars in less than a minute.

"As time goes on, it's such a large figure, you can actually see the interest that we have to pay on it rise if you calculate it down to the second as this site does," Wiggin said.

Wiggin said that U.S. government's borrowing grew especially quickly during the height of the financial crisis, because investors wanted to lend money to the United States -- it was seen as a safer place to stash wealth than the stock market or even banks. The clamor for U.S. Treasury bonds meant that the government could negotiate lower interest rate payments on its debt.

U.S. Economic Rebound Slowed Last Quarter

WASHINGTON -- The economic rebound last quarter turned out to be slower than first thought, one of the reasons unemployment is likely to stay stubbornly high this year.

The economy grew at a 3 percent annual rate from January to March, the Commerce Department said Thursday. That was slightly weaker than an initial estimate of 3.2 percent growth a month ago. The new reading, based on more complete information, also fell short of economists' forecast for stronger growth of 3.4 percent.

The reasons for the small downgrade: consumers spent less than first estimated. Same goes for business spending on equipment and software. And, the nation's trade deficit was a bigger drag on economic activity.

During normal times, growth in the 3 percent range would be considered healthy. But the country is coming out the longest and deepest recession since the Great Depression. So economic growth needs to be a lot stronger -- two or three times the current pace-- to make a big dent in the nation's 9.9 percent unemployment rate.

Economists say it takes about 3 percent growth to create enough jobs just to keep up with the population increase. Growth would have to be about 5 percent for a full year just to drive the unemployment rate down 1 percentage point.

After the last severe recession in the early 1980s, GDP grew at rates of 7 to 9 percent for five straight quarters and the unemployment rate dropped from 10.8 to 7.2 percent in 18 months.

Economists don't see that happening this year. In fact, growth in the first quarter was slower than at the end of last year. The economy grew at a 5.6 percent in the final three months of 2009. But economists had predicted that growth spurt would fade.

GDP measures the values of all goods and services -- from machines to manicures -- produced within the United States. It is the best measure of the country's economic health.

The National Association for Business Economics predicts moderate economic quarterly growth in the 3 percent range through the rest of this year.

The outlook means employers won't feel comfortable about bulking up their work forces.

Consumers increased spending at a 3.5 percent pace in the first three months of this year. Even though that was a notch less than the 3.6 percent growth rate initially estimated, it still marked the strongest spending in three years. Consumer spending was feeble in the final three months of last year, rising at only a 1.6 percent pace.

Although consumers are now helping to support the recovery, they aren't showing signs of spending lavishly as they usually do in the early stages of economic rebounds. High unemployment, stagnant wages and tight credit are just some of the forces restraining spending.

Business spending on equipment and software grew at a 12.7 percent pace in the first quarter, weaker than the 13.4 percent rate first reported. The pace of spending is still strong but the fact that the new estimate was a bit less robust than initially thought was a factor in the quarter's downgrade.

So was the trade deficit. It shaved 0.66 percent point off GDP, versus 0.61 percentage point in the government's first estimate. Exports actually rose even more than initially thought. But so did imports and that widened the trade gap.

Businesses are now faced with new worries about how Europe's debt crisis will affect their sales. Exporters, for example, are expecting to see slower sales from Europe, which could constrain hiring. Wall Street turmoil in response to Europe's woes could make those who have retirement savings invested in the stock market spend less.

Housing and commercial real-estate are major weak spots for the economy. Builders cut spending in each by double digits in the first quarter.

Christina Romer, head of the White House Council of Economic Advisers, said in Paris Thursday that it would be a mistake for the U.S. to rapidly wind down fiscal stimulus measures to bring down the deficit.

Additional measures such as fiscal relief for state and local governments and extension of emergency benefits for the long-term unemployed are still needed, she said. Those are ways to inject more oxygen into the "nascent economic recovery," she said.

New Weekly Jobless Claims Drop 14,000 to 460,000

WASHINGTON -- The number of newly laid off workers filing claims for unemployment benefits in the U.S. dropped last week but the level still remained higher than expected, indicating only modest improvements in the job market.


for unemployment benefits fell 14,000 to 460,000 last week, the Labor Department reported Thursday. Economists had expected the level would fall further to 455,000. The decline came after claims had risen by a revised 28,000 in the previous week, the largest gain in three months.

The latest level of claims is slightly higher than it was at the start of the year, underscoring that the nation's workers are still facing tough times even though the overall economy is growing again after enduring the worst recession since the 1930s.

In a separate report, the Commerce Department said Thursday that the overall economy, as measured by the gross domestic product, grew at an annual rate of 3 percent in the first three months of the year, slightly slower than the 3.2 percent initially estimated.

Even though the economy has been growing since last summer, the pace of growth has not been fast enough to make much of a dent in high unemployment.

The jobless rate hit a high of 10.1 percent last October. While it fell to 9.7 percent for three months, it rose again to 9.9 percent in April as disappointed workers began returning to the labor market to search for jobs.

Jobless numbers at that level pose a risk to the recovery because they depress consumer spending, which accounts for 70 percent of total economic activity.

The four-week average for new jobless claims edged up to 456,500 last week.

The government said the number of people receiving benefits fell by 49,000 to 4.64 million for the week ending May 15.

However, that figure does not include unemployed workers who have exhausted their regular 26 weeks of benefits. An additional 5.3 million workers are receiving extended benefits for the week ending May 8.

After delay, BP restarts 'top kill' effort

There's no end in sight for the situation in the Gulf of Mexico. Anderson Cooper reports live tonight from the region as BP attempts to stop the leak. Watch "AC360°" tonight at 10 ET on CNN for the latest on stopping the leak.

Venice, Louisiana (CNN) -- BP's much-anticipated attempt to cap its undersea gusher in the Gulf of Mexico, a spill now estimated at twice the size of the Exxon Valdez disaster, was suspended for more than 16 hours before it was restarted late Thursday afternoon, a BP executive said Thursday.

"This whole operation is very, very dynamic," Doug Suttles, the company's chief operating officer, told CNN's "John King, USA."

"When we did the initial pumping (Wednesday), we clearly impacted the flow of the well. We then stopped to monitor the well. Based on that, we restarted again. We didn't think we were making enough progress after we restarted, so we stopped again."

The light-brown material that was seen spilling out of the well throughout Thursday was the previously pumped fluid from the "top kill" procedure mixed with oil, he said. Live: Underwater view of top kill procedure

"I probably should apologize to folks that we haven't been giving more data on that," Suttles said when asked why it took so long for BP to announce it had suspended the top kill. "It was nothing more than we are so focused on the operation itself."

Suttles said part of the problem is that too much mud is leaving the breach instead of going down the well. "So what we need to do is adjust how we are doing the job so that we get more of the drilling mud to go down the well," Suttles said.

He said one solution would be to introduce solids -- known as "bridging material," or its variant "junk shot" -- into the mix.

The revelation that the procedure had gone on a 16-hour break angered local officials and observers. Neither President Obama or Coast Guard Adm. Thad Allen, who is leading the government's response to the oil spill, appeared to be aware of the break when they addressed reporters at separate news conferences Thursday.

iReport: Track the oil spill

Plaquemines Parish President Billy Nungesser, who has been extremely critical of the federal response to the spill, said the delay in information from BP was "par for the course."

"We've been dealing with this from day one, and the information has not flowed on anything," he told CNN's Anderson Cooper.

Douglas Brinkley, a presidential historian at Rice University, agreed, saying, "It's unacceptable to trust BP."

"Whatever they say is meant to minimize situations," he told Cooper. "They haven't been transparent -- they're not honest with people."

A White House official told CNN that people inside the White House knew about the temporary halt in the "top kill," but it wasn't clear if Obama was aware of it.

The official said the president wouldn't micromanage every decision made by BP and government officials working the disaster site. The White House didn't announce the break because it didn't seem to be a major issue -- the operation had continued throughout the break and the pumping of the liquid resumed later in the afternoon, the official said.

"It would have been a bigger deal if the entire operation stopped -- and they want to make that distinction," CNN Senior White House Correspondent Ed Henry reported.

BP officials say the procedure could take another 24 to 48 hours to complete, though whether the top kill will successfully stop the flow of oil is uncertain.

Enormous brown plumes of drilling "mud" billowed from the damaged well during the process, which BP Managing Director Bob Dudley called "a "titanic arm-wrestling match" a mile below the surface.

Allen, who is leading the government's response to the oil spill, earlier said the work "is moving along as everyone had hoped."

"They're pumping mud into the well bore, and as long as mud is going down, hydrocarbons are not going up," Allen told reporters Thursday afternoon. The work could take another night, he told reporters in Venice, near the mouth of the Mississippi River.

"I think we just need to let that run its course, and we will see what happens," Allen said. However, asked about reports the procedure had been halted, Allen said he hadn't talked to BP officials yet.

Stopping the leak took on even more urgency after government scientists released spill estimates that far exceed the previous 5,000-barrel-a-day number given by BP.

The burst well is spewing oil at a rate of at least 12,000 to 19,000 barrels a day, U.S. Geological Survey Director Marcia McNutt told reporters Thursday, meaning 260,000 to 540,000 barrels had leaked as of 10 days ago -- larger by far than the 250,000 barrels spilled when the tanker Exxon Valdez ran aground in Alaska's Prince William Sound in 1989.

The 38-day-old spill was beginning to take its toll on Louisiana's sensitive coastal marshes, where heavy oil has been killing plant life and fouling local wildlife and fisheries. On Thursday, the eve of the Memorial Day holiday weekend, the beaches of Grand Isle were empty.

Family fears for Grand Isle

"If only it gets stopped, if what they did yesterday works, that's the beginning of the end," Grand Isle Tourism Commissioner Josie Cheramie said. "We can clean up what's already been put out there, but we just really need to get it stopped. That's the main thing."

The spill claimed a job in Washington, as the head of the scandal-plagued federal agency that oversees offshore drilling resigned.

Elizabeth Birnbaum stepped down as head of the Minerals Management Service "on her own terms and own volition," Interior Secretary Ken Salazar told a House subcommittee. Two Obama administration sources told CNN that she was fired.

Watch Salazar defend the former director Video

Reports from the agency's independent inspector general have painted a picture of an agency that has had close ties to the industry, most recently noted in a report on the Lake Charles, Louisiana, office released Tuesday.

Salazar has ordered the agency split into three parts with separate responsibilities since the April 20 explosion on an offshore drilling rig that caused the spill. In a news conference Thursday afternoon, President Obama said the spill shows "more reforms are needed."

"For years, the oil and gas industry has leveraged such power that they have effectively been allowed to regulate themselves," Obama said. He said U.S. laws were "tailored by the industry to serve their needs instead of the public's," giving short shrift to environmental concerns.

Watch Obama talk about the government's role Video

After a monthlong review of the industry, he announced his administration was suspending dozens of drilling projects, canceling plans to open new parts of the Gulf of Mexico and the Virginia coast to exploration and suspending new deepwater permits for another six months.

Obama also defended his administration's response to the disaster, telling reporters that people who accuse it of being too slow to respond "don't know the facts."

Watch Obama discuss oil drilling reforms Video

"It doesn't mean it's going to happen right away or the way I'd like it to happen. It doesn't mean that we're not going to make mistakes," he said. "But there shouldn't be any confusion here: The federal government is fully engaged, and I'm fully engaged."

The spill erupted April 20, when the drilling platform Deepwater Horizon exploded and burned about 40 miles off Louisiana. The rig sank two days later, taking 11 of its crew of 125 with it.

The Coast Guard and the Minerals Management Service are leading a joint investigation in Louisiana, while several congressional committees are also investigating the disaster.

Oil spill demystified: A glossary

BP, rig owner Transocean and oilfield service contractor Halliburton have all blamed each other for the explosion, which witnesses have said was preceded by a series of unusual pressure tests and a rush of gas out of the well.

One of BP's two representatives on the rig, Robert Kaluza, has refused to testify in the Louisiana hearings, citing his Fifth Amendment right against self-incrimination, the Coast Guard told CNN. The other, Donald Vidrine, bowed out of his scheduled Thursday appearance, citing illness.

The rig's chief mechanic, Doug Brown, testified Wednesday that Transocean and BP managers argued about plans to finish the well on the day of the explosion, with BP's representative winning the argument. He could not identify which of the BP representatives was involved in the dispute, and BP had no comment on his account.

iReport: Share your views on the oil spill response

The rig's offshore installation manager, Jimmy Wayne Harrell, told the Louisiana investigation Thursday that there was no "heated debate." But he said he did reject an initial BP plan to start replacing drill "mud" with seawater without conducting a negative pressure test on the well's initial cementing.

"I told him it was my policy to do a negative test before displacing with seawater," Harrell said. He placed the discussion the day before the blast, and he said Kaluza, the "company man" in the meeting, agreed to add the negative test to the procedure.

Under questioning by an attorney for Halliburton, which did the cementing work to plug the well, Harrell said BP decided not to do a "bottoms-up" test used to measure temperatures and pressures at the deepest part of the well.

Harrell said he wasn't concerned about the lack of a bottoms-up test, but said he wasn't aware that Halliburton had recommended using "substantially more mud" as a counterweight in the drill line than BP had recommended.

Global Warming Update: NASA Accused of 'Climategate' Stalling

The man battling NASA for access to potential "Climategate" e-mails says the agency is still withholding documents and that NASA may be trying to stall long enough to avoid hurting an upcoming Senate debate on global warming.

Nearly three years after his first Freedom of Information Act request, Christopher C. Horner, senior fellow at the Competitive Enterprise Institute, said he will file a lawsuit Thursday to force NASA to turn over documents the agency has promised but has never delivered.

Mr. Horner said he expects the documents, primarily e-mails from scientists involved with NASA's Goddard Institute for Space Studies (GISS), will be yet another blow to the science behind global warming, which has come under fire in recent months after e-mails from a leading British research unit indicated scientists had manipulated some data.

"What we've got is the third leg of the stool here, which is the U.S.-led, NASA-run effort to defend what proved to be indefensible, and that was a manufactured record of aberrant warming," Mr. Horner said. "We assume that we will also see through these e-mails, as we've seen through others, organized efforts to subvert transparency laws like FOIA."

He said with a global warming debate looming in the Senate, NASA may be trying to avoid having embarrassing documents come out at this time, but eventually the e-mails will be released.

"They know time is our friend," said Mr. Horner, author of "Power Grab: How Obama's Green Policies Will Steal Your Freedom and Bankrupt America."

Mark S. Hess, a spokesman for NASA's Goddard Space Flight Center, which overseas the climate program, said the agency is working as fast as it can, and that Mr. Horner should expect some answers any day.

"It looks like the response to his appeal is probably going to happen very soon. I can't tell you it's going to be tomorrow or the next day, but it's just a matter of days," Mr. Hess said.

He said he hasn't seen the response, and doesn't know whether it will authorize any more information to be released.

The science behind global warming has come under question since e-mails leaked from one of the key sources for global temperature data, the Climatic Research Unit in Britain, seemed to show scientists manipulated data. It became known in the press as "Climategate."

An investigation has cleared the scientists of deliberate malpractice and declared the basic science credible.

The British investigation also sympathized with scientists being reluctant to share all of their data, but investigators said the science needed to be above reproach and so the more that is shared, the better.

In the case of NASA's FOIA situation, The Washington Times first reported on the agency's delinquency in December. At that time, the agency was more than two years overdue on one request and nearing the two-year mark on another request - far longer than the 20 business days allowed under FOIA law for a first response.

After that report, the agency released about 2,000 pages, many of them heavily redacted, to CEI. Mr. Horner said among those pages was evidence he said proves NASA data is based on the British records that have come under fire.

But CEI said the agency withheld e-mails NASA scientists sent from nongovernment e-mails, even though they were doing government science work.

Mr. Horner said he has evidence one scientist went back and deleted time stamps on his Internet postings to his private website, which Mr. Horner said shows the scientist was doing that work on government time.

CEI's lawsuit, which is expected to be filed in federal district court in Washington, also says that e-mails leaked from the British research unit include documents that should have been released by NASA, but haven't been.

Mr. Hess said they are fielding more than just CEI's inquiries, and they are taking them all in order.

"We all understand the statute is 20 days, and we work really hard to comply with that as much as humanly possible, but for the most part, especially for a request where you may have to search thousands of documents, sometimes 20 days is just a herculean task," he said.

Some of the NASA scientists Mr. Horner targeted with requests have spoken out against the recent FOIA inquiries, calling them an effort to try to intimidate scientists into not publishing their work.

Gavin Schmidt said information requests have ballooned in recent months and that he thinks those making the inquiries are trying "to put a chilling effect on scientists speaking out in public."

And James E. Hansen, director of GISS, said in a March memo that responding to FOIAs takes away from his time to do research.

He called it "a waste of taxpayer money" and questioned the motives of those filing FOIA requests.

"It seems that a primary objective of the FOIA requesters and the 'harvesters' is discussions that they can snip and quote out of context," he said, warning that could confuse the public and that might delay the pressure Mr. Hansen said will be needed to force policymakers to combat global warming.

The document fight comes as the Senate is preparing for two global warming debates.

One will be on a Republican move to try to overturn Obama administration rules that would let the Environmental Protection Agency regulate carbon emissions, even without specific new authorization from Congress. The second is expected to be a full-blown debate on Democrats' bill to combat global warming.

On Wednesday, President Obama said he wants to see action.

"I'm going to keep fighting to pass comprehensive energy and climate legislation in Washington," he said at an event in California. "We're going to try to get it done this year, because what we want to do is create incentives that will fully unleash the potential for jobs and growth in this sector."

PhillyDeals: If N.J. goes the way of Greece, where's the safety net?

After Gov. Christie told the conservative Manhattan Institute Tuesday that cash-poor New Jersey is moving toward "becoming Greece," the analogy grew legs and ran away.

Comparisons may be odious, as Franklin Roosevelt is supposed to have been fond of saying, but they're apparently irresistible to those who watch the people's money flow in and out of public accounts.

A Philadelphia money manager sent a clip of Christie's statement, with a comparative list of U.S. state and foreign economies by gross national product, to his staffers and asked for their insights.

"New Jersey is more like Russia" than Greece, one replied. "They have about the same GDP, and they're both run by the mob."

"Alabama's about the same size as Iran," said another. "We hope Alabama doesn't get the bomb, either."

Sweating the swings

"Fear and volatility are back. There'll be a lot of triple-digit days," with stock prices falling, recovering, and falling again, predicted Rex Macey, chief investment officer at Wilmington Trust Investment Management, as stock prices plunged, then bounced most of the way back Tuesday.

"It's not just the stock market," he said. "Look at spreads on junk bonds. Look at credit-default swaps. A lot of data points" show investors are worried again.

Macey's been preaching a "slow, fragile" economic recovery since after the 2008 collapse. Investors got more excited when first-quarter corporate earnings came in strong. "But we weren't out of the woods. There's still a lot of foreclosures, there's still severe delinquencies in housing," he told me.

Then came the Greek crisis, and the weaker euro. DuPont Co. and other big multinationals haven't been trimming their foreign-sales projections. Still, last month Wilmington Trust reduced its foreign-stock investments, to clients' relief, Macey said.

"We were in a very stimulative environment. Now, we're seeing the federal government sort of slowing down. We're seeing the state and local governments contract. . . . We're seeing Europe constrict. We're seeing China and Australia putting on the breaks. This is contraction."

And yet: "We still think there's a recovery. A fragile recovery, and a slow-growth environment."

Will Americans have to get used to doing with less? Will New Jersey really go the way of Greece, with public payroll cuts and permanent trims in benefit programs?

"Western Europe's model social safety net appears unsustainable," but U.S. "property taxes should recover," Macey said. "Employment will recover. Tax revenue will go up again."

For now, that leaves Americans struggling over the basic question: "How much social safety net can we afford?"

Backup deal

Insight Venture Partners, a New York investment firm, and Citrix Systems, a publicly traded, Fort Lauderdale-based software service company, say they've made new investment agreements with Philadelphia-based PHD Virtual Technologies, a backup provider for virtual-machine software systems.

Insight and Citrix won't say how much they're investing. "We do several deals a quarter," Citrix spokesman Eduardo Fleites told me. Insight builds backup systems for Citrix servers.

PHD boss Thomas Charlton told me his firm employed 20 when he joined last winter and plans to hire "at least" 20 more, mostly salespeople, this year. PHD competitors include Veeam Software of Columbus, Ohio, and VMWare , Palo Alto. The company's name traces to founder Ron McKelvey and his colleagues: It's an in-joke that there were more self-taught veteran coders than doctorate-level software developers on staff when they started the firm in 2006.

It's the second Insight-backed firm Charlton has moved to Philadelphia, not just, he insists, because he's raising his own family here, but because "it's East Coast, it's attractive for family people, it's affordable."

Among other firms, Charlton once headed network-emulation provider Shunra Software, backed by Insight and Carmel Ventures of Israel.

Budget Clock Ticks Down For South Florida

MIAMI (CBS4) ―The clock is ticking and there is no stopping the approach of more budget pain this year across South Florida. Battered property values and depleted government coffers will do that.

You hear about financial crises so often that they may begin to elicit a yawn. They shouldn't. Miami Commissioner Marc Sarnoff said, "If we don't get city finances under control we have to go bankrupt."

Miami, the Magic City, can't print money like Washington. Neither can Miami-Dade or Broward or… get the point. Local governments and cities, coast to coast, are straining under mounting obligations.

Financial experts recruited to provide a snapshot of Miami's precarious situation illustrated the point Thursday. They told commissioners eight of every ten dollars are spent on city workers—salary, pensions, and other benefits.

One snapshot: Between 2000 and 2009 the study shows general fund revenue in Miami rose by $178 million. However the growth in worker costs shot up by $205 million. It is one small example of the problem bedeviling budget planners everywhere.

The fixes are painful: either employees have to go, services have to give, taxes have to rise, or a combination of all three and no one wants to raise taxes in the current economic environment.

"This year we are hoping to get at least $60 million in concessions from the unions in terms of compensation and pensions," Miami Mayor Tomas Regalado said.

Unions say they are willing to help the city stay afloat but will not watch their pensions and benefits upended. "What they are asking for us to give up," said FOP vice president Javier Ortiz, "and what we are putting on the table are two different things."

No one wants to negotiate particulars in public, but the battles will be intense in the months to come. Of the budget crisis, Commissioner Sarnoff said, "I can see us sailing toward Niagara Falls. We may be 20 feet away."

Ezra Pound on Money

We're never far from money. We spend most of our time and energy in quest of money.

But how did this thing become an intermediary between us and the world around us? Before money, we bartered. Why did money supplant barter and who is custodian of the money system?

These questions are dangerous: they cost Ezra Pound twelve years. Pound was a victim of political persecution at the behest of financiers and their minions like Franklin Delano Roosevelt. These people feared Ezra because he asked "what is money for," and came up with an inconvenient answer.

Pound understood that money is ticket for exchange. People who make things can trade more easily with other people who make things using money. There should only be as much money as there are things to trade. Another way of saying this is: money supply should increase and decrease along with the change in economic output.

Here's the rub. If money supply grows faster than the amount of things made, then theft is taking place. The thief creates extraneous dollars and spends them first: at the time when the rest of us expect a dollar to be worth a certain amount. By the time the thief's dollars have been absorbed into the economy, we notice our dollars are buying less. This is inflation. The thief has dipped into our savings and traded with shoddy bills.

What happens when money supply shrinks compared to things made? Then a new characteristic of money emerges. Things made don't always last - take bread for instance. A baker must sell his bread in a matter of days, otherwise it's lost. Money isn't bound by such considerations. A thief can horde money until the baker's goods rot, then buy his bakery at a huge discount.

The "thief" in both these examples holds a special place in society: he controls the supply of money and "future money" called credit. Controlling money supply is economic power; it is a sovereign privilege. The people who really control a nation control its money supply. [1]

Pound's criticism of the financial class was that they were bad sovereigns. They managed money supply for their own benefit: they were thieves. In contrast, the Founding Fathers were good rulers because they designed a system where Congress managed the money supply; and Congress was answerable to a large swathe of the population.

Pound identified the grasping, vampire-like nature of international finance, and the venal nature of its supporters in national governments.[2] He was interested in finding ways to systematically limit their power: perfecting what the Founding Fathers started in Article 1 Section 8 of the Constitution. This is why Pound studied in the work of Silvio Gesell.

One of Gesell's ideas was to eliminate the disparity between money and perishable goods. A way to do this is to discount large bills over time: holders of large bills would need to get them stamped every month, each stamp representing a decrease in their value. This way, hoarders bear the cost of their behavior and investment is encouraged. Small denominations would not be discounted.

Gesell recognized that the economy is like a body and money is like its blood. If blood builds up systematically in any one place, a disease results. His discounted script discouraged people from taking advantage of others' simple lack of cash. (Note: this is very different than being forced to lend to people who aren't creditworthy.) Saving in the form of investment was systematically encouraged.

Pound notes that Gesell's system worked imperfectly in Alberta, Canada mostly due to planning errors that could easily be fixed. The system worked very well in the Austrian village of Wörgl, and it was promptly closed down by mainstream financial interests.

These financial interests were trying to preserve their privilege: they benefited from the increasing productivity of the societies they milked. Pound didn't see how being born into a banking family; or buying the latest politician; should give them the right to those benefits. Ezra liked the ideas of Major Clifford Douglas: the people who worked should accrue those benefits. This is the essence of Social Credit.

The text of the 1933 version of Major Douglas' book Social Credit, can be found here. Pound appreciated Maj. Douglas' ideas, but thought they needed further exploration. What Pound really felt passionate about was fixing the money problem. Ezra wrote during the Great Depression when, much like now, people were captivated by the supposed security of gold.

Pound was never an advocate of gold-backed money. He understood how easily such systems can be subverted by controlling the supply or the clearing market for the backing commodity. Much of Britain's power during the 19th century came from the fact that London was the clearing market for gold; and other nations used a gold-standard currency. They had to go to England to manage their money!

In Ezra's words:

The trick is simple. Whenever the Rothschild and other gents in the gold business have gold to sell, they raise the price. The public is fooled by propagandizing the devaluation of the dollar, or other monetary unit according to the country chosen to be victimized. The argument is that the high price of the monetary unit is injurious to the nation's commerce.

But when the nation, that is, the people of that nation own the gold and the financiers own the dollars or other monetary units, the gold standard is restored. This raises the value of the dollar and the citizens of "rich" nations, as well as citizens of other nations, are diddled.

Preventing nations from being "diddled" is why Pound supported Fascism in Italy. He saw Fascism as the only system available to the Italians that was likely to deal with the threat from international finance. Mussolini's Fascism let Italy be ruled in an Italian fashion - and until Anglo-American banking interests were threatened, things worked better in Italy than they had in a long time.

Pound never supported Fascism in America. We have our Constitution, which describes a government for Americans run in the American fashion. If it ain't broke, don't fix it. Pound realized that America's challenge was implementing the laws we already have. Read Jefferson and/or Mussolini for his whole argument. [3]

Ezra was a true economic historian. He explained his analysis in the following way:

"The definition of an idea, as observed by someone who understands the events of the day, may shed more light on the historical process than many volumes."

"History, as seen by a Monetary Economist, is a continuous struggle between producers and non-producers, and those who try to make a living by inserting a false system of book-keeping between the producers and their just recompense."

"The usurers act through fraud, falsification, superstitions, habits and, when these methods do not function, they let loose a war. Everything hinges on monopoly, and the particular monopolies hinge around the great illusionistic monetary monopoly."

Pound's analysis identified the canker in American life: the cooperation between government and finance to defraud the public - the "monetary monopoly." Monopolies don't exist without tacit government approval. Beneficiaries of the financial monopoly have collaborated with venal officials against producers for a long time. The history of the largest American fortunes, since the Civil War at least, have followed this trend.

Historically, banking was begun by families as private businesses. As these businesses grew and issued receipts for gold and silver deposits, they gradually developed "fractional reserve" banking by issuing more notes than they had gold on deposit. Although kings would mint coins of gold and silver they owned at their royal mints, fractional reserve banking was a dangerous business, and Kings did not want to gamble with their sovereign power by going into that business. Rather, kings and especially parliaments, became dependent upon these fractional reserve bankers for loans, and would grant monopoly charters to a group of private bankers to create a national or central bank which would then have the power to regulate the size of the money stock through its fractional reserve activities, as it collected taxes, issued the national paper currency and sold sovereign debt on behalf of the government.

These national or central banks conferred significant advantages on the private banks that organized and owned them. Private banks were allowed to borrow at the discount window at special rates provided that they posted reserves with the central bank. Of course, the real advantage of the central bank for its owners and organizers was inside information. During the years of the gold standard, having a seat on the board of a central bank meant that the insider would know when emergency borrowings ticked up, telegraphing the probable start of a bank crisis and stock market crash. In the case of war, it was an easy task for a private bank with seats in several different national banks to calculate the deposits and income of the contesting states and the loans they secured to raise their armies, thus allowing the privileged few to bet on the probable winner.

The gold standard was popular among bankers for the simple reason that the supply of gold increased irregularly but on average more slowly than the increase in population, meaning that the value of loans would gradually increase over time as would the burden of repayment. Debtors resented the power of gold, hence William Jennings Bryan's political appeal and his famous "Cross of Gold" speech. Coincidentally the gold standard was finally abandoned in 1971, six years after the birth control pill descended upon the civilized world.

Pound recognized two very important threats to the international banking community that arose out of the Third Reich. First, Hitler abandoned the gold standard, meaning that Nazi Germany suddenly had the power to prevent defaulting on its future debt simply by printing money - a power that the U.S. copied from Germany just as it copied the autobahns. Second, and much more important, the Reich took back the power of central banks by financing infrastructure projects directly, issuing notes in payment to the laborers, contractors, and suppliers rather than first borrowing the money from a central bank at interest. (See here and here.) If this practice had spread, bankers would be no more powerful than plumbers.

Furthermore, as long as the supply of this newly printed money in the form of notes matched the increase in GNP and future productivity from these new highways, rails, and factories, the printing of money would not necessarily produce inflation. The Reich also issued debt directly to German citizens and businesses to finance Hitler's economic miracle, but the central banks lost control over the money supply and lost the ability to trigger banking panics and depressions inside the Reich. It was a mortal threat, and it had to be stopped. Pound was right.

Hitler's experiment in freedom from banking was broken, and the finance/government partnership was preserved at the cost of millions of lives in World War II.

This finance/government collaboration explains the American elites' love affair with international socialism. They don't know how to make money any other way. Competition is a sin. Government organized monopolies are profitable when you control the government. If there are no national restrictions on moving profits around, they can hide their loot offshore. The perfect crime.

Pound recommended the writings of John Adams, Thomas Jefferson and Martin Van Buren[4] for a practical explanation of how the young Republic wrested itself from London finance. He recommended Classical study (Aristotle's Politics and the works of Demosthenes) for understanding the tricks financiers use. Nationally-controlled money was popular politics until the Civil War; when Pound notes a collective amnesia took the mind of the American public. Tragedy and forgetfulness. This is also the time when Lincoln let the bankers back in with the National Banking Act.

Ezra didn't revel in victimhood. The "monetary monopoly" was made possible by voters' laziness. In his ABC of Economics, Pound castigates the American public for letting its money fall into the hands of enemies and irresponsible men. Americans circa 1930 were ignorant about money and banking; the situation now is even worse. It is a national tragedy that we have been lazy enough to let Congress sell its responsibilities; and let hostile elites control our credit.

The way to fix the situation is to dissolve the Federal Reserve; force Congress to manage money supply as described in the Constitution; and vote the venal or incompetent out of office. The revolutionary patriots gave us the tools; we need to step up to the plate and use them.

Our amnesia and laziness have had a lot of help. Pound pointed out that hostile elites were overrepresented in academia and the media - a situation which has worsened with time. Now we are reaping the harvest: schools devoid of the Classics; universities teaching castrated Economics; and Gloria Vanderbilt's boy on TV. Ezra saw it coming, and he told us how to fix it.

Carolina Hartley ( email herThis e-mail address is being protected from spambots. You need JavaScript enabled to view it ) has a degree in Finance and Economics from MIT. She is also student of aesthetics and social history, though not from the orthodox perspective.

[1] Pound's repeated recommendation of Christopher Hollis' work The Two Nations is based on the book's excellent explanation of British economic power over the centuries.

[2] "Ezra Pound Speaking": Radio Speeches of World War II. Edited by Leonard W. Doob. Greenwood Press, 1978.

[3] Pound recommended the correspondence between John Adams and Thomas Jefferson and the writings of Van Buren for the economic history of the United States.

Pound's Pamphlets on Money are excellent; the first "An Introduction to the Economic Nature of the United States" and "A Visiting Card" are particularly useful. (Published by Peter Russell, London. 1950.)

[4] The Works of John Adams: Second President of the United States: with A Life of the Author, notes and illustrations, by his Grandson, Charles Francis Adams. Little, Brown and Co. Boston 1850-56.

The Writings of Thomas Jefferson, Memorial Edition, XX Volumes, Washington, 1903-04.

The Autobiography of Martin Van Buren, written in 1854 and remaining in manuscript until its publication as Vol. II of the "Annual Report of the American Historical Association for the year 1918," Government Printing Office, Washington 1920.

Pound also recommends Jefferson and Hamilton by Claude G. Bower.