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Former President George W. Bush; Vice-President, Dick Cheney; Secretary of Defense, Donald Rumsfeld; Deputy Secretary of Defense, Paul Wolfowitz; and Deputy Secretary of Defense, Richard Perle may have left us with a world which is more unsafe than it was on September 10th, 2001. The poorly planed war in Afghanistan and its subsequent abandonment may have left the world in a much more precarious position than any other single thing that could have been done. The hell-bent focus on going to Iraq by this group of people may have destabilized the only nuclear-armed Muslim-dominated country in the world. What’s worse, that destabilization may have given 100 nuclear weapons to Osama Bin Laden himself.
If Steve Kroft’s segment on 60 Minutes tonight doesn’t give you chills, I would love to know why. If you still think the war in Iraq was a good idea, I would love to know why. If you believe dropping the ball in Afghanistan to invade a non-threatening Iraq was a good idea, I would love to know why. If mismanaging the war in Afghanistan and allowing the Taliban and Al-Qaeda to get away was in any way something you believe history will judge a success, I would love to know why.
The group I just mentioned will probably make excuses that include hind-site, biased media, bad intelligence or we inherited the problem.
How do you think history will judge them? What do you think?
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As I listened to a replay of the House Financial Services Committee’s hearing this week a few things occurred to me. Conservatives are mad because government meddled in the holy grail of free markets which is Wall Street and banking. Poor liberals are mad because the leadership of the institutions which received TARP money make more in a day than they do in a year. The leadership of these institutions is mad because they have to answer to people like Chairman Barney Frank (D-MD). Frank and other lawmakers are mad because the former Secretary of the Treasury, Hank Paulson, pulled a better bait and switch than a used car salesman with the funds. The Obama Administration is mad because they have to sell the next 350 billion dollar installment of this program and probably a minimum of 500 billion more with the current TARP track record hanging over them. Finally, the American people are mad because no one has taken the time to explain a damn thing to them about anything associated with the TARP program. Paulson and the Congressional leadership pretend we are unaware of the severity of the situation. They feel as though giving us the details would somehow make it true and our financial system would grind to a halt. Well, we are just short of that today, so go ahead and tell us the horror stories. If you want our support, we need to know EXACTLY what could happen if we don’t do a TARP or a TARPalike.
Since TARP has become a four-letter word and the problem of the credit markets is still around, maybe it is time for a new approach. Last week Tim Geithner, the new Treasury Secretary, made a pitch for the something like a new approach for second installment of the 700 billion dollar bailout. It was a tough crowd. Bank stocks plummeted and everybody that is mad over TARP stayed mad. I am not an economist so the following proposal may be as hair-brained as a screen door on a submarine; but, let’s follow the logic and see where it goes.
Instead of government continuing to pick winning and losing financial institutions in this crisis, let’s go to the source. Let’s spend the rest of any bailout monies on the problem. Geithner and others seem to continue to try to do things with the securities generated by home loans both good and bad. Maybe a better approach would be to fix the loans. Now, I can already hear people screaming about moral hazards. It is a moral hazard, they say, to help people who obviously bought houses beyond their budget or on terms they knew they couldn’t pay.
Ironically, some pretend there is no moral hazard on Wall Street so it is ok to have what Barney Frank calls “collateral benefit” for financial institutions. I say the bankers who bought and sold the securities were by and large in a better position to determine the risk of mortgage product like an adjustable rate mortgage than the home buyers were. If anyone gets the benefit of the doubt, it should be the homebuyer.
So, what can we do for the homebuyer? One thing we can do is freeze all foreclosures immediately. Force the mortgage servicers and the homebuyers to renegotiate the loans. Change the bankruptcy laws so that the first to get paid will be the mortgage holders. We should do this because many banks will have to take reduced principle and interest or a “haircut” on most of the loans if forced to negotiate. These actions guarantee mortgage securities will have some value. They probably won’t have the value the investors hoped. Those securities however, will have a definable value.
The value of the home, mortgage and mortgage security will end up being what the homebuyers can afford. Mortgage security holders who expected to make double the return on investment should have also understood those high-paying securities had a higher risk. At least they get some of their investment back. Making the basic unit of a mortgage security, the individual mortgage, solid will also aid in other areas. Some of the other exotic financial instruments like credit default swaps will also be fixed by this approach because institutions may be better able to survive when large parts of their portfolios are re-valued in the program I have outlined.
There will be homeowners who are not able to participate in the renegotiations I describe. They may have lost a job, became sick or some other thing that would prevent it. These mortgages should be assumed by bailout money and resold to the market on an incremental basis after the housing market becomes healthy again.
There are devils in the details but we need a new plan. The current plan seems to make everybody mad.
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The Stimulus, Right Wingers, Left Wingers, Obama And Bipartisanship
Excerpt:
Principle was sited as the left and right wingers did battle on the House and Senate stimulus bills. With the caustic atmosphere in on Capitol Hill being anything but “post partisan”, President Obama suggested bipartisanism takes time….
I may have some insight into what the president was trying to tell those stubborn lawmakers.
To read the whole story go on over to the Moderate Voice
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The American Silent Majority should be proud of our representation in Washington. We have eleven members of the House of Representatives and seventeen Senators who actually subscribe to the campaign pledge of “country first”, even if the author of the pledge, Senator John McCain (R-AZ), no longer believes it himself.
Republican Senators including McCain have taken a “party first” attitude in a sort of weird childish temper tantrum. With many items which Republicans support being in the legislation, Republicans seem to have a theory anything written by a Democrat has to be partisan and wrong. Many, like my Senator, Jeff Sessions (R-AL) have stood on the floor of the Senate and made arguments with half-truths to support this theory. Sessions announced the only way we could pay for the stimulus was to print money. Printing money, he said, “causes inflation.” If Sessions had been in my high school government class, he would have gotten an F on current events this week. He is either being disingenuous or is ignorant in light of recent Federal Reserve statements. One of the primary worries of the Federal Reserve as this economy dangerously spirals into uncharted territory is deflation. The economy is SO bad right now; one could argue we actually need a little inflation.
Scare words like inflation undermine the stimulus’ potential to positively affect consumer and market psychology. Part of the problem is no one is spending money. Part of the partisan Republican indifference may have something to do with today’s ABC program This Week. George Stephanopoulos pointed out today, the Republican leadership believes the economy won’t be any better by the next election cycle. That being the case, a bad American economic attitude is actually a partisan Republican ally. In what may be the most partisan of ironies, they would rather the economy go farther down the tube if the stimulus passes. Cynically, a good start down this path is the infomercial the partisan Republicans are producing. It will help insure Americans believe the stimulus will not work.
Discrediting the stimulus in the minds of Americans seems to also be on the aim of Michael Steele, the new Chairman of the Republican National Committee. He tells Republican Governors like Charlie Crist of Florida they don’t understand the stimulus bill. He says those governors do not understand the distinction between stimulus created road building contracts and some other kind of private road building contract which goes on forever. In my 15 years of being a transportation engineer I haven’t seen many roads built without a government entity contracting with a private construction firm and have seen no contract last forever.
Finally, we get to the issue which gave the Republicans political cover to begin this nonsensical political war.
Apparently, in a sort of “thumb in you eye-we won” gesture, the House stimulus bill included items like money for family planning. I am pretty sure the Democratic House leadership understood how incendiary a provision like this could be. Why not leave it out of this critical legislation? Was it hubris, ineffectiveness or stupidity which drove the leadership to allow this kind of explosive provision? President Obama trusted this leadership with one of the most important bills of his political career and he was let down. With an American now losing a job every four seconds, I can think of at least three people who need to join those Americans. Those people are Speaker of the House, Nancy Pelosi (D-CA), Majority Leader, Steny Hoyer (D-MD) and Democratic Caucus Chair, John Larson (D-CN). At the end of the day these people represent the American Silent Majority about as well as those partisan Republicans.