Wednesday, November 30, 2011
IOWA DEBATE: THE DES MOINES REISTER ADDED AS CO-SPONSOR OF DEC 10TH GOP DEBATE ON ABC
IOWA DEBATE: THE DES MOINES REISTER ADDED AS CO-SPONSOR OF DEC 10TH GOP DEBATE ON ABC
Iowa Debate: The Des Moines Register Added as Co-Sponsor of Dec. 10 GOP Debate on ABC
Iowa Debate: The Des Moines Register Added as Co-Sponsor of Dec. 10 GOP Debate on ABC
VOTE NO TO OBAMA'S SLEDGEHAMMER: SIGN THE RIGHT TO WORK PETITION SPONSORED BY SENATOR RAND PAUL
Dear Concerned American,
You have an historic opportunity to break the cycle of tax-and-spend, political corruption and out of control budgets caused by Big Labor’s compulsory union power.
But you must strike now to make Congressmen and Senators choose between standing with the 80% of Americans who oppose forced unionism and Big Labor's multi-billion dollar political machine.
You see, President Barack Obama and Big Labor allies in the Senate are now feverishly scheming to bury the National Right to Work Act without a vote.
So I have a question for you.
Will you be the sledgehammer?
Your signature on the petition to your Congressman and Senators is what is needed to bust through the opposition and force a vote on the National Right to Work Act.
This is an opportunity you and I cannot afford to miss.
Without your support for the National Right to Work Committee, they have little chance against Big Labor's money and power in Congress.
It will be an epic, historic battle and your support is critical.
Please sign the petition below right away.
Sincerely,
Rand Paul
U.S. Senator, (R-KY)
P.S. After signing the petition below, please consider chipping in with a donation of $10, $25 or more to the National Right to Work Committee. And for first time donors, your donation will be doubled by a generous donor's matching grant.
++++++++
National Right to Work Act Petition to:
My U.S. Senators and Congressman
Whereas: Federal law permits Big Labor to confiscate $8 billion from American workers’ paychecks every year just to get or keep a job;
Whereas: This forced unionism breeds violent strikes and a hate-the-boss mentality which drive good jobs overseas, jack up prices and risk re-igniting inflation:
Whereas: Union bosses use this forced-dues fortune to corrupt our political system with over a billion dollars every election cycle;
Whereas: Union-puppet politicians routinely vote for higher taxes, bailouts, job-killing bureaucracy and even more porkbarrel spending keeping our nation locked in recession;
Therefore: I urge you in the strongest possible terms to strike a blow for freedom and American prosperity by co-sponsoring and casting your every vote in favor the National Right to Work Act.
By submitting the information below, you authorize the National Right to Work Committee to deliver your petition to the Capitol Hill offices of your Senators and Congressman.
GO HERE TO SIGN PETITION:
http://righttoworkcommittee.org/rprtwabb_petition.aspx?pid=ms1
ENDING THE CREEP OF IMF
END THE IMF
September 2011 • Volume: 61 • Issue: 7
The sex scandal involving the recently departed International Monetary Fund chief, Dominique Strauss-Kahn—criminal or not—was never a reason to abolish the agency. But then we didn’t need another reason. The agency, centerpiece of J. M. Keynes’s inflationary Bretton Woods brainchild, should never have been created in the first place, since it was another calculated step toward global government-controlled money. Its re-creation after its original mandate—maintaining the system of dollar-based fixed exchanges rates—became obsolete 40 years ago is a textbook case of bureaucratic mission creep. Its existence is no more justified by the new mission—a 911 for profligate, debt-ridden governments—than it was by the old one.
The IMF has 187 member governments, which together this year have provided $340 billion to the agency. Each country is assigned a contribution quota and a vote count weighted roughly according to its quota. The U.S. government’s financial quota is over 17 percent of the total, almost three times that of the second-largest contributor, Japan. It controls 16.74 percent of the votes. Treasury Secretary Timothy Geithner is the U.S. member of the board of governors, with Federal Reserve Chairman Ben Bernanke as alternate governor. This should be enough to establish that the IMF’s agenda is not free markets.
All IMF money comes from the taxpayers and central bank printing presses. So there’s the first charge against it: It’s financed through compulsion. That should shape our expectations about the agency.
What does the IMF do? Here’s how it describes its mission:
• Surveillance: “oversees the international monetary system and monitors the financial and economic policies of its members”;
• Technical assistance: “assist[s] mainly low- and middle-income countries in effectively managing their economies”; and
• Lending: “provides loans to countries that have trouble meeting their international payments and cannot otherwise find sufficient financing on affordable terms.”
Regarding the first, the IMF has been notoriously bad at foreseeing crises. But that should not be surprising. Why would bureaucrats living rather well off the taxpayers, with no personal capital at risk, be expected to be competent at spotting economic trouble?
The promise of “technical assistance” is dubious and even risible because the dominant governments of the world can hardly be said to have “effectively” managed their own economies. The IMF often advises distressed countries to raise taxes and to cut government spending to reduce budget deficits, upsetting both Keynesians and supply-siders. This is regarded as market-oriented, or “neoliberal,” advice, but to the extent that externally imposed measures engender public resentment, they give real market reform a bad name and set back the cause of genuine liberalism.
For example, the IMF may advise a government to remove price controls on food, which in itself would be a pro-market measure if accompanied by other reforms. However, if corresponding government-created scarcities—through licensing, franchises, patents, and so on—remain in place, average people will suffer and blame “the free market.” Food riots occurred some years ago in Egypt under just such circumstances, and as a result market reforms are widely distrusted there.
IMF loans constitute a double bailout. First, they save kleptocratic politicians from the consequences of their exploitative schemes, sparing them the necessity of radical reform—including land reform and free banking.
Second, IMF loans rescue the failing country’s creditors—Wall Street banks, typically—from a government default. In addition U.S. agricultural interests have come out in favor of increased support for the IMF to stimulate American farm exports. In 2009 the debate over increased U.S. funding was framed in the context of pushing an export-led American economic recovery.
This is surely doing well by doing good—with the taxpayers’ money.
Who pays? Aside from the taxpayers who supply the IMF with money, the tab is eventually paid by the working people of the subject countries through the higher taxes prescribed by the IMF.
The likelihood of the IMF’s compounding problems is immense. In The White Man’s Burden, former World Bank economist William Easterly writes: The IMF’s “core function of enforcing financial discipline is flawed by an intrusive Planner’s mentality that sets arbitrary numerical targets for key indicators of government behavior. Like all Planners, the IMF fits the complex reality of economic systems into a Procrustean bed of numerical targets that have little to do with that complexity.”
The IMF emphasizes that loans always come with “conditionality,” but for reasons already alluded to, that should offer little reassurance to advocates of free markets. The agency notes that it uses the principle of “parsimony” when writing conditions: “program-related conditions should be limited to the minimum necessary to achieve the goals of the Fund-supported program . . . .” Thus the deepest violations of individual liberty and market principles—feudal land distribution, for example—will be left untouched. Real markets don’t exist when large tracts of land are controlled by a privileged elite, leaving most people little choice but to take whatever is given. Their acceptance may represent the “best available option,” but if their choice set has been artificially constricted, that’s not saying much.
(Fortunately the informal economy offers some hope.)
IMF loans of course channel resources to central governments, reinforcing their power and further politicizing the “aided” countries. As P. T. Bauer wrote,
Foreign aid has thus done much to politicize life in the Third World. And when social and economic life is extensively politicized, who has the power becomes supremely important, sometimes a matter of life and death. . . . People divert their resources and attention from productive activity into other areas, such as trying to forecast political developments, placating or bribing politicians and civil servants, operating or evading controls.
In the end the IMF has fostered long-term dependency, perpetual indebtedness, moral hazard, and politicization, while discrediting market reform and forestalling revolutionary liberal change. The solution is not for the IMF to impose free markets, even if it could. That would smack of imperialism and, writes Easterly, would have “patronizing echoes of the White Man’s Burden.”
The IMF should be scrapped and the people suffering under kleptocracy left to discover the requirements for improving their own conditions. How much more “help” can they stand?
About the Authors:
Sheldon Richman is the editor of The Freeman and TheFreemanOnline.org, and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families. ... See All Posts by This Author
OBAMA'S PRESENCE ALONE DECLINES THE AMERICAN STANDARD OF LIVING...S&P CUTS BOFA, GOLDMAN SACHS, CITIGROUP, JP MORGAN CHASE CREDIT RATINGS
S&P CUTS BOFA, GOLDMAN SACHS, CITIGROUP, JP MORGAN CHASE CREDIT RATINGS
By Dakin Campbell - Nov 29, 2011
Bank of America Corp. (BAC), Goldman Sachs Group Inc. (GS) and Citigroup Inc. had long-term credit grades reduced to A- from A by Standard & Poor’s after the ratings firm revised criteria for dozens of the world’s biggest lenders.
S&P made the same cut to Morgan Stanley and Bank of America’s Merrill Lynch unit today. JPMorgan Chase & Co. (JPM) was reduced one level to A from A+. S&P upgraded Bank of China Ltd. (3988) and China Construction Bank Corp. to A from A- and maintained the A rating on Industrial & Commercial Bank of China Ltd. (1398), giving all three lenders higher grades than most big U.S. banks.
The moves may increase pressure on firms already dealing with weak economies and Europe’s mounting sovereign debt crisis. Lenders including Bank of America, Citigroup and Morgan Stanley have said they may have to post billions of dollars of additional collateral and termination payments on trades because of a one-level downgrade in their credit ratings.
“It’s evident that stress from the European banking system is taking its worldwide toll,” Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, said in an e-mail.
The ratings firm also downgraded UBS AG (UBSN) and Barclays Plc (BARC) to A from A+, and HSBC Holdings Plc (HSBA) to A+ from AA-, according to the report.
Change in Technique
S&P, a unit of New York-based McGraw-Hill Cos. (MHP), has been changing the way it looks at debt after its faulty grades contributed to the credit-market seizure that brought down Lehman Brothers Holdings Inc. and Bear Stearns Cos. It started to review the methodology in December 2008, months after the collapse of those two firms.
Most bank stocks were little changed in after-hours trading. Bank of America fell 4 cents to $5.04, while Citigroup dropped 19 cents to $25.05 and Goldman Sachs declined 21 cents to $88.60 as of 6:30 p.m. in New York trading. Citigroup (C) issued a statement disputing S&P’s downgrade.
“I don’t think moving from single A to single A- has much of an economic impact on anyone,” said David Hilder, a New York-based analyst at Susquehanna Financial Group. “Those ratings are at a high level compared to the whole spectrum of ratings and are still well into the territory of investment grade.”
For Bank of America, the bigger impact might have been with when Moody’s Investors Service reduced its grade in September to Baa1, two notches below the prior A2 rating, Hilder said. By contrast “these are relatively minor changes,” he said.
Collateral Triggers
Downgrades “could likely have a material adverse effect on our liquidity, potential loss of access to credit markets, the related cost of funds, our businesses and on certain trading revenues, particularly in those businesses where counterparty creditworthiness is critical,” Charlotte, North Carolina-based Bank of America said in its quarterly filing.
The company, which noted the risk of downgrades from S&P and Fitch Ratings in the filing, previously said it has prepared by lining up funding for a year.
Citibank NA, the deposit-taking arm of New York-based Citigroup, was downgraded to A from A+. The bank estimated in a quarterly filing that a one-level reduction to the unit’s rating could trigger $4 billion of collateral payments and other cash obligations.
Citigroup Dissents
“We completely disagree with S&P’s change to Citigroup Inc.’s holding company long-term and short-term ratings,” said Jon Diat, a spokesman for the lender, in an e-mailed statement. “Less than 1 percent of Citi’s funding will be affected by the S&P revision.”
Morgan Stanley estimated over-the-counter derivatives counterparties could demand $1.29 billion of collateral or termination payments from the New York-based firm after a one- notch downgrade. In addition, the firm may have to post an additional $323 million to exchanges and clearinghouses. All the estimates were as of Sept. 30.
JPMorgan, the largest and most profitable U.S. lender (BKX), has said the New York-based company may have to post an extra $1.5 billion in collateral against its derivatives and pay additional sums for contract terminations after a one-notch cut.
Mark Lake, a Morgan Stanley spokesman, David Wells, a spokesman for New York-based Goldman Sachs, and JPMorgan’s Joe Evangelisti declined to comment.
Power Shift
S&P analysts wrote earlier this month that the new ratings would reflect “a potential shift in the power balance of global banking.” In August, S&P downgraded the U.S. sovereign credit rating from AAA, citing political failure to reduce record deficits. The ratings company downgraded the six largest U.S. banks while upgrading two Chinese lenders.
S&P analysts wrote in a Nov. 1 research note describing its criteria that developed banking markets in the U.S. and Europe were under pressure, while emerging markets in Latin America and Asia were expanding.
“Leading banks in these regions have benefited from strong economic growth which has supported household and corporate credit quality,” S&P wrote.
S&P, the world’s largest provider of bond ratings, has roiled markets this month with a pair of errors related to sovereign credit ratings. On Nov. 10, the company sent, and then corrected, an erroneous message to subscribers suggesting France’s top credit rating had been downgraded. French 10-year bond yields rose as much as 28 basis points after the mistaken announcement. A week later, it released a statement with an incorrect rating for Brazil in the headline. It later sent a corrected headline.
The following table shows firms that were downgraded by S&P, followed by a list of banks that were upgraded.
Downgraded:
Banco Bilbao Vizcaya Argentaria S.A.
Bank of America Corp.
Bank of New York Mellon Corp.
Barclays Plc
Citigroup Inc.
Rabobank Nederland
Goldman Sachs Group Inc.
HSBC Holdings Plc
JPMorgan Chase & Co.
Lloyds Banking Group Plc
Morgan Stanley
Royal Bank of Scotland Plc
UBS AG
Wells Fargo & Co.
Upgraded:
Bank of China Ltd.
China Construction Bank Corp.
To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net
To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net
By Dakin Campbell - Nov 29, 2011
Bank of America Corp. (BAC), Goldman Sachs Group Inc. (GS) and Citigroup Inc. had long-term credit grades reduced to A- from A by Standard & Poor’s after the ratings firm revised criteria for dozens of the world’s biggest lenders.
S&P made the same cut to Morgan Stanley and Bank of America’s Merrill Lynch unit today. JPMorgan Chase & Co. (JPM) was reduced one level to A from A+. S&P upgraded Bank of China Ltd. (3988) and China Construction Bank Corp. to A from A- and maintained the A rating on Industrial & Commercial Bank of China Ltd. (1398), giving all three lenders higher grades than most big U.S. banks.
The moves may increase pressure on firms already dealing with weak economies and Europe’s mounting sovereign debt crisis. Lenders including Bank of America, Citigroup and Morgan Stanley have said they may have to post billions of dollars of additional collateral and termination payments on trades because of a one-level downgrade in their credit ratings.
“It’s evident that stress from the European banking system is taking its worldwide toll,” Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, said in an e-mail.
The ratings firm also downgraded UBS AG (UBSN) and Barclays Plc (BARC) to A from A+, and HSBC Holdings Plc (HSBA) to A+ from AA-, according to the report.
Change in Technique
S&P, a unit of New York-based McGraw-Hill Cos. (MHP), has been changing the way it looks at debt after its faulty grades contributed to the credit-market seizure that brought down Lehman Brothers Holdings Inc. and Bear Stearns Cos. It started to review the methodology in December 2008, months after the collapse of those two firms.
Most bank stocks were little changed in after-hours trading. Bank of America fell 4 cents to $5.04, while Citigroup dropped 19 cents to $25.05 and Goldman Sachs declined 21 cents to $88.60 as of 6:30 p.m. in New York trading. Citigroup (C) issued a statement disputing S&P’s downgrade.
“I don’t think moving from single A to single A- has much of an economic impact on anyone,” said David Hilder, a New York-based analyst at Susquehanna Financial Group. “Those ratings are at a high level compared to the whole spectrum of ratings and are still well into the territory of investment grade.”
For Bank of America, the bigger impact might have been with when Moody’s Investors Service reduced its grade in September to Baa1, two notches below the prior A2 rating, Hilder said. By contrast “these are relatively minor changes,” he said.
Collateral Triggers
Downgrades “could likely have a material adverse effect on our liquidity, potential loss of access to credit markets, the related cost of funds, our businesses and on certain trading revenues, particularly in those businesses where counterparty creditworthiness is critical,” Charlotte, North Carolina-based Bank of America said in its quarterly filing.
The company, which noted the risk of downgrades from S&P and Fitch Ratings in the filing, previously said it has prepared by lining up funding for a year.
Citibank NA, the deposit-taking arm of New York-based Citigroup, was downgraded to A from A+. The bank estimated in a quarterly filing that a one-level reduction to the unit’s rating could trigger $4 billion of collateral payments and other cash obligations.
Citigroup Dissents
“We completely disagree with S&P’s change to Citigroup Inc.’s holding company long-term and short-term ratings,” said Jon Diat, a spokesman for the lender, in an e-mailed statement. “Less than 1 percent of Citi’s funding will be affected by the S&P revision.”
Morgan Stanley estimated over-the-counter derivatives counterparties could demand $1.29 billion of collateral or termination payments from the New York-based firm after a one- notch downgrade. In addition, the firm may have to post an additional $323 million to exchanges and clearinghouses. All the estimates were as of Sept. 30.
JPMorgan, the largest and most profitable U.S. lender (BKX), has said the New York-based company may have to post an extra $1.5 billion in collateral against its derivatives and pay additional sums for contract terminations after a one-notch cut.
Mark Lake, a Morgan Stanley spokesman, David Wells, a spokesman for New York-based Goldman Sachs, and JPMorgan’s Joe Evangelisti declined to comment.
Power Shift
S&P analysts wrote earlier this month that the new ratings would reflect “a potential shift in the power balance of global banking.” In August, S&P downgraded the U.S. sovereign credit rating from AAA, citing political failure to reduce record deficits. The ratings company downgraded the six largest U.S. banks while upgrading two Chinese lenders.
S&P analysts wrote in a Nov. 1 research note describing its criteria that developed banking markets in the U.S. and Europe were under pressure, while emerging markets in Latin America and Asia were expanding.
“Leading banks in these regions have benefited from strong economic growth which has supported household and corporate credit quality,” S&P wrote.
S&P, the world’s largest provider of bond ratings, has roiled markets this month with a pair of errors related to sovereign credit ratings. On Nov. 10, the company sent, and then corrected, an erroneous message to subscribers suggesting France’s top credit rating had been downgraded. French 10-year bond yields rose as much as 28 basis points after the mistaken announcement. A week later, it released a statement with an incorrect rating for Brazil in the headline. It later sent a corrected headline.
The following table shows firms that were downgraded by S&P, followed by a list of banks that were upgraded.
Downgraded:
Banco Bilbao Vizcaya Argentaria S.A.
Bank of America Corp.
Bank of New York Mellon Corp.
Barclays Plc
Citigroup Inc.
Rabobank Nederland
Goldman Sachs Group Inc.
HSBC Holdings Plc
JPMorgan Chase & Co.
Lloyds Banking Group Plc
Morgan Stanley
Royal Bank of Scotland Plc
UBS AG
Wells Fargo & Co.
Upgraded:
Bank of China Ltd.
China Construction Bank Corp.
To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net
To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net
ON "DAY 1041", OBAMA'S APPROVAL RATING HITS RECORD LOW - LOWER THAN ANY OTHER PRESIDENT IN MODERN HISTORY
ON "DAY 1041", OBAMA'S APPROVAL RATING HITS RECORD LOW - LOWER THAN ANY OTHER PRESIDENT IN MODERN HISTORY
President Barack Obama, flanked by European Council President Herman Van Rompuy, left, and European Commission President Jose Manuel Barroso speaks to the media, Monday, Nov. 28, 2011, in the Roosevelt Room of the White House Washington. (AP Photo/Haraz N. Ghanbari) 12:35 PM 11/30/2011
By Alexis Levinson
One thousand forty-one days into his presidency, Barack Obama’s approval rating is lower than any other U.S. president in modern history at this point into a first White House term.
At 43 percent, according to Gallup’s daily presidential approval rating tracking poll, Obama’s approval has sunk even below Jimmy Carter’s approval at this point in his presidency. Carter had a 51 percent approval rating during this period.
Carter’s approval rating was on a steep upswing toward the end of his third year in office, rising from 29 percent in the beginning of October 1979 to a peak of 58 percent in January 1980.
This is not the first time Obama’s approval rating has slipped below Carter’s. In the beginning of March, Obama’s approval rating was tied with Carter’s at 47 percent; and from September 2010 through the beginning of January 2011, Obama’s approval rating remained consistently lower than Carter’s at the same point in his presidency.
Obama’s approval rating has yet to sink to the depths that Carter saw during his presidency’s rockiest times, when he hit an all-time low of 28 percent. Obama’s lowest approval rating yet is 38 percent.
Alexis Levinson is a reporter for The Daily Caller.
Read more: http://dailycaller.com/2011/11/30/on-day-1041-obama-approval-rating-hits-record-low/#ixzz1fDCd4sCo
AFTER HOLDER'S CARIBBEAN JUNKET, ISAKSON BECOMES FIRST US SENATOR TO DEMAND HOLDER'S RESIGNATIONS
ISAKSON BECOMES FIRST US SENATOR TO DEMAND HOLDER'S RESIGNATION
Published: 11:39 PM 11/29/2011
By Matthew Boyle - The Daily Caller
Sen. Johnny Isakson, R-Ga., second form right, gestures during a news conference on Capitol Hill in Washington, Tuesday, Feb. 1, 2011, to discuss the introduction of the "CAP Act" a bipartisan bill that would put binding cap on all federal spending. From left are, Sen. Bob Corker, R-Tenn., Sen. Claire McCaskill, D-Mo., Isakson and Sen. Mark Kirk, R-Ill. (AP Photo/Manuel Balce Ceneta)
Georgia Republican Sen. Johnny Isakson told The Daily Caller on Tuesday that he thinks Attorney General Eric Holder should resign over Operation Fast and Furious, making him the first U.S. senator to demand that Holder step down now.
Isakson’s call comes after Holder lost control and accused TheDC of being “behind” calls for his resignation — rather than address them — during an interview at the White House. Holder scolded a Daily Caller reporter when he asked the attorney general to address the surge in calls for his resignation.
“You guys need to — you need to stop this,” Holder said. “It’s not an organic thing that’s just happening. You guys are behind it.”
Isakson joins 52 congressmen, three presidential candidates and two sitting governors in demanding that Holder resign immediately. (RELATED: Members of Congress calling for Holder’s immediate resignation)
Several other senators have made conditional or veiled calls for Holder’s resignation. Wyoming Republican Sen. Mike Enzi’s spokesman told TheDC he wants to continue learning more about what happened first.
“Senator Enzi was opposed to Attorney General Holder’s nomination in large part due to Holder’s positions on the 2nd Amendment,” Enzi’s spokesman said. “He voted against Holder’s nomination. Senator Enzi is also concerned about Operation Fast and Furious. He is following the investigation and wants to find those responsible, remove them from duty, and prevent such a bad program from happening again.”
A spokeswoman for Arkansas Republican Sen. John Boozman told TheDC that he supports an independent investigation to determine if Holder lied to Congress during his testimony about Fast and Furious — if he’s found to have lied, Boozman thinks Holder should resign.
“Senator Boozman supports an appointment of a special counsel to investigate Holder’s statements before the Judiciary Committee regarding his knowledge of Operation Fast & Furious and that pending the outcome of that investigation, if he is found to be in the wrong, Senator Boozman believes he should resign,” Boozman’s spokeswoman said.
When TheDC asked Mississippi Republican Sen. Thad Cochran if he thinks Holder should resign, he replied that he thinks it’s a decision the president and his advisers should make. “I think this is a problem for the administration to resolve,” he said.
MAtthew Boyle is a reporter at The Daily Caller. He studied journalism at Flagler College in St. Augustine, Florida, where he worked as an editor at the school's newspaper, The Gargoyle.
Read more: http://dailycaller.com/2011/11/29/isakson-becomes-first-us-senator-to-demand-holders-resignation/#ixzz1fDBE3Dco
AMERICAN AIRLINES PLUNGES INTO BANKRUPTCY
Tony Gutierrez/AP PhotoAMERICAN AIRLINES PLUNGES INTO BANKRUPTCY
ABC NEWS
Faced with high labor costs and rising prices for jet fuel, American Airlines parent company AMR filed today for Chapter 11 bankruptcy.
Once the world’s largest airline, American is deeply in the red, and in recent months its cash reserves have been falling. The company says labor contract rules force it to spend many millions of dollars more on operations than other airlines.
In a statement the carrier’s parent company announced plans to continue normal business operations as it seeks court protection to reduce costs and debt. American says flight schedules will be unchanged and its frequent flier program is not affected.
“The consumers, themselves, are probably not going to be affected that much; it’s going to be the employees that are really affected,” says airline analyst Denny Kelly in Fort Worth, Texas. He expects American to emerge from bankruptcy financially stronger than it is today.
What the American Airline bankruptcy could mean for you?
The nation’s third largest airline also says CEO Gerard Arpey will step down. He’s being replaced by Thomas Horton, currently the company’s president. AMR shares plunged 85 percent to just 25 cents each in trading this morning.
Flight operations may be reduced in the future. “Some of the destinations that are not very popular will be probably cut back or maybe eliminated,” says Kelly. Employee pay may be cut. “When they go in and file bankruptcy, then American can set the employee contracts anyway they want.”
American was the only major U.S. airline that didn’t seek bankruptcy protection after the 2001 terrorist attacks. Unlike most other carriers, American did not merge with a competitor, and it was the only major airline to lose money last year.
“American’s customers are always our top priority and they can continue to depend on us for the safe, reliable travel and high quality service they know and expect from us,” said Horton in a statement. “American serves 260 airports in more than 50 countries and territories, and we are committed to maintaining a strong presence in worldwide markets.”
The Fort Worth,Texas-based company listed $24.7 billion in assets and $29.6 billion in debt in court papers filed today in New York.
AMR had losses of $162 million in the third quarter and $2.7 billion in the past year while the other major airlines posted profits. United Continental, the parent of United Airlines, the world’s largest carrier, had third-quarter profits of $653 million and US Airways made $76 million.
The airline had been in contract talks with unions representing its pilots, flight attendants and ground crews for more than four years.
Tuesday, November 29, 2011
NEWT DECLARES A BAN ON ALL FEDERAL TAX DOLLARS TO SANCTUARY CITIES, INCLUDING THE CITY OF CHICAGO AND THE COUNTY OF COOK IN THE STATE OF ILLINOIS!
NEWT DECLARES A BAN ON ALL FEDERAL TAX DOLLARS TO SANCTUARY CITIES, INCLUDING THE CITY OF CHICAGO AND THE COUNTY OF COOK IN THE STATE OF ILLINOIS!
CHARLESTON, South Carolina (Reuters) - Republican presidential hopeful Newt Gingrich told a South Carolina town hall on Monday that as president he would block federal funds to any city that "declared itself a sanctuary" for illegal immigrants.
Gingrich, fresh from a key endorsement from an influential New Hampshire newspaper, is on a three-day swing through South Carolina, an early primary state that his campaign has dubbed his "southern firewall."
"No American president has the right to side with foreigners," Gingrich told a crowd of hundreds at the College of Charleston, after reciting a list of 16 countries that he said had filed friend of the court briefs in a Justice Department lawsuit against South Carolina's new immigration law.
The law, which goes into effect on January 1 barring an injunction from a federal court, requires police officers to check the immigration status of anyone they stop or detain for another reason and makes it a felony to knowingly transport or harbor undocumented immigrants.
"In three years and eight months, we defeated fascist Italy, Nazi Germany and imperial Japan. Today, we can't build a (border) fence," Gingrich said. "I would propose cutting off all federal funds to any city that declares itself a sanctuary city." He said that if UPS and FedEx could keep track of millions of packages a day, the federal government should be able to track illegal immigrants in the country.
But Gingrich added: "I don't believe we'll ever pass a bill which requires us to hunt down every single person" who has been in this country for some time illegally. Gingrich also said he would favor a "very sophisticated, very clean" guest worker program.
"I think we should go back to the World War Two selective service model where local citizens are certified at a local level, where they actually know the person," he said.
"If the person is a good citizen, has genuine ties to the United States, has genuine roots, they still don't get amnesty, they still don't get citizenship, they still don't get the right to vote. They do get the legal right to be a resident." Immigrant workers are important in agricultural production in the South as in other U.S. regions, from field labor such as picking and tending fruits and vegetables to working in poultry plants and plant nurseries. They also are a heavy contributor to the manpower for construction crews.
CHARLESTON, South Carolina (Reuters) - Republican presidential hopeful Newt Gingrich told a South Carolina town hall on Monday that as president he would block federal funds to any city that "declared itself a sanctuary" for illegal immigrants.
Gingrich, fresh from a key endorsement from an influential New Hampshire newspaper, is on a three-day swing through South Carolina, an early primary state that his campaign has dubbed his "southern firewall."
"No American president has the right to side with foreigners," Gingrich told a crowd of hundreds at the College of Charleston, after reciting a list of 16 countries that he said had filed friend of the court briefs in a Justice Department lawsuit against South Carolina's new immigration law.
The law, which goes into effect on January 1 barring an injunction from a federal court, requires police officers to check the immigration status of anyone they stop or detain for another reason and makes it a felony to knowingly transport or harbor undocumented immigrants.
"In three years and eight months, we defeated fascist Italy, Nazi Germany and imperial Japan. Today, we can't build a (border) fence," Gingrich said. "I would propose cutting off all federal funds to any city that declares itself a sanctuary city." He said that if UPS and FedEx could keep track of millions of packages a day, the federal government should be able to track illegal immigrants in the country.
But Gingrich added: "I don't believe we'll ever pass a bill which requires us to hunt down every single person" who has been in this country for some time illegally. Gingrich also said he would favor a "very sophisticated, very clean" guest worker program.
"I think we should go back to the World War Two selective service model where local citizens are certified at a local level, where they actually know the person," he said.
"If the person is a good citizen, has genuine ties to the United States, has genuine roots, they still don't get amnesty, they still don't get citizenship, they still don't get the right to vote. They do get the legal right to be a resident." Immigrant workers are important in agricultural production in the South as in other U.S. regions, from field labor such as picking and tending fruits and vegetables to working in poultry plants and plant nurseries. They also are a heavy contributor to the manpower for construction crews.
NEWT GINGRICH RECIEVES MAJOR ENDORSEMENT FROM SOUTH CAROLINA'S LIEUTENANT GOVERNOR WHO COMPARED THE STATE'S POOR TO STRAY ANIMALS!
GINGRICH RECEIVES MAJOR ENDORSEMENTS
TWO MAJOR ICONS ENDORSED NEW GINGRICH FOR THE REPUBLICAN PRESIDENTIAL NOMINATION
By Jerome Campbell
Monday, November 28, 2011
A former South Carolina lieutenant governor who compared the state’s poor to stray animals endorsed Newt Gingrich’s bid for the Republican Presidential Nomination Monday.
Andre Bauer’s endorsement comes as Gingrich begins three days of campaigning in South Carolina, hoping to position himself as the most credible conservative alternative to former Massachusetts Gov. Mitt Romney. The Palmetto state will hold the first southern primary on Jan. 21.
"Speaker Newt Gingrich offers the best and most comprehensive plan to get America moving forward and that is why today I am announcing my full support for Speaker Gingrich," Bauer said in a statement. "[He is] a true conservative, a true patriot, and true leader."
The endorsement strikes speculation from voters for the prominence of the South Carolina Republican as well as his controversial history. Bauer drew criticism for blaming South Carolina’s high unemployment on people too lazy to do field work.
“My grandmother was not a highly educated woman, but she told me as a small child to quit feeding stray animals. You know why? Because they breed," Gingrich told Politico. "You’re facilitating the problem if you give an animal or a person ample food supply."
This endorsement is one of many for the new Republican front-runner. Gingrich received an endorsement from New Hampshire's largest newspaper, the Union Leader, on Sunday.
"We are in critical need of the innovative, forward-looking strategy and positive leadership that Gingrich has shown he is capable of providing," The New Hampshire Union Leader said in its front-page editorial. "We don't back candidates based on popularity polls or big-shot backers. We look for conservatives of courage and conviction who are independent-minded, grounded in their core beliefs about this nation and its people, and best equipped for the job."
While the support of the Union Leader higlights major support for Gingrich in the upcoming New Hampshire primary, the newspaper has a history of picking candidates who never win. The paper has more recently contented itself with picking losing candidates: Pierre Du Pont in 1988, Pat Buchanan in 1992 and 1996 and Steve Forbes in 2000.
“We are not trying to attach our name to a winner,” said Editorial Page Editor Drew Cline on Sunday to CNN’s Candy Crowley. “That is not really leading. That would do our readers a very big disservice. We are looking at who we would like to see as President.”
Despite the history of his endorsors, Gingrich holds a nine-point lead over fellow Republican nominee Mitt Romney Monday, according to a National Poll Position survey.
SECRET FED LOANS GAVE BANKS OVER $7.77 TRILLION OF YOUR TAXPAYER DOLLARS!
SECRET FED LOANS GAVE BANKS OVER $7.77 TRILLION OF YOUR TAXPAYER DOLLARS!
By Bob Ivry, Bradley Keoun and Phil Kuntz - Nov 27, 2011
Bloomberg Markets Magazine
Nov. 28 (Bloomberg) -- Bloomberg Markets magazine's January issue examines how the Federal Reserve and big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. And how bankers failed to mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. (Source: Bloomberg).
Nov. 28 (Bloomberg) -- The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. No one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue. Betty Liu reports on Bloomberg Television's "In the Loop." (Source: Bloomberg).
On Nov. 26, 2008, then-Bank of America Corp. Chief Executive Officer Kenneth D. Lewis wrote to shareholders that he headed “one of the strongest and most stable major banks in the world.” He didn’t say that his firm owed the central bank $86 billion that day.
The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.
The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.
Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse.
A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.
‘Change Their Votes’
“When you see the dollars the banks got, it’s hard to make the case these were successful institutions,” says Sherrod Brown, a Democratic Senator from Ohio who in 2010 introduced an unsuccessful bill to limit bank size. “This is an issue that can unite the Tea Party and Occupy Wall Street. There are lawmakers in both parties who would change their votes now.”
The size of the bailout came to light after Bloomberg LP, the parent of Bloomberg News, won a court case against the Fed and a group of the biggest U.S. banks called Clearing House Association LLC to force lending details into the open.
The Fed, headed by Chairman Ben S. Bernanke, argued that revealing borrower details would create a stigma -- investors and counterparties would shun firms that used the central bank as lender of last resort -- and that needy institutions would be reluctant to borrow in the next crisis. Clearing House Association fought Bloomberg’s lawsuit up to the U.S. Supreme Court, which declined to hear the banks’ appeal in March 2011.
$7.77 Trillion
The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.
“TARP at least had some strings attached,” says Brad Miller, a North Carolina Democrat on the House Financial Services Committee, referring to the program’s executive-pay ceiling. “With the Fed programs, there was nothing.”
Bankers didn’t disclose the extent of their borrowing. On Nov. 26, 2008, then-Bank of America (BAC) Corp. Chief Executive Officer Kenneth D. Lewis wrote to shareholders that he headed “one of the strongest and most stable major banks in the world.” He didn’t say that his Charlotte, North Carolina-based firm owed the central bank $86 billion that day.
‘Motivate Others’
JPMorgan Chase & Co. CEO Jamie Dimon told shareholders in a March 26, 2010, letter that his bank used the Fed’s Term Auction Facility “at the request of the Federal Reserve to help motivate others to use the system.” He didn’t say that the New York-based bank’s total TAF borrowings were almost twice its cash holdings or that its peak borrowing of $48 billion on Feb. 26, 2009, came more than a year after the program’s creation.
Howard Opinsky, a spokesman for JPMorgan (JPM), declined to comment about Dimon’s statement or the company’s Fed borrowings. Jerry Dubrowski, a spokesman for Bank of America, also declined to comment.
The Fed has been lending money to banks through its so- called discount window since just after its founding in 1913. Starting in August 2007, when confidence in banks began to wane, it created a variety of ways to bolster the financial system with cash or easily traded securities. By the end of 2008, the central bank had established or expanded 11 lending facilities catering to banks, securities firms and corporations that couldn’t get short-term loans from their usual sources.
‘Core Function’
“Supporting financial-market stability in times of extreme market stress is a core function of central banks,” says William B. English, director of the Fed’s Division of Monetary Affairs. “Our lending programs served to prevent a collapse of the financial system and to keep credit flowing to American families and businesses.”
The Fed has said that all loans were backed by appropriate collateral. That the central bank didn’t lose money should “lead to praise of the Fed, that they took this extraordinary step and they got it right,” says Phillip Swagel, a former assistant Treasury secretary under Henry M. Paulson and now a professor of international economic policy at the University of Maryland.
The Fed initially released lending data in aggregate form only. Information on which banks borrowed, when, how much and at what interest rate was kept from public view.
The secrecy extended even to members of President George W. Bush’s administration who managed TARP. Top aides to Paulson weren’t privy to Fed lending details during the creation of the program that provided crisis funding to more than 700 banks, say two former senior Treasury officials who requested anonymity because they weren’t authorized to speak.
Big Six
The Treasury Department relied on the recommendations of the Fed to decide which banks were healthy enough to get TARP money and how much, the former officials say. The six biggest U.S. banks, which received $160 billion of TARP funds, borrowed as much as $460 billion from the Fed, measured by peak daily debt calculated by Bloomberg using data obtained from the central bank. Paulson didn’t respond to a request for comment.
The six -- JPMorgan, Bank of America, Citigroup Inc. (C), Wells Fargo & Co. (WFC), Goldman Sachs Group Inc. (GS) and Morgan Stanley -- accounted for 63 percent of the average daily debt to the Fed by all publicly traded U.S. banks, money managers and investment- services firms, the data show. By comparison, they had about half of the industry’s assets before the bailout, which lasted from August 2007 through April 2010. The daily debt figure excludes cash that banks passed along to money-market funds.
Bank Supervision
While the emergency response prevented financial collapse, the Fed shouldn’t have allowed conditions to get to that point, says Joshua Rosner, a banking analyst with Graham Fisher & Co. in New York who predicted problems from lax mortgage underwriting as far back as 2001. The Fed, the primary supervisor for large financial companies, should have been more vigilant as the housing bubble formed, and the scale of its lending shows the “supervision of the banks prior to the crisis was far worse than we had imagined,” Rosner says.
Bernanke in an April 2009 speech said that the Fed provided emergency loans only to “sound institutions,” even though its internal assessments described at least one of the biggest borrowers, Citigroup, as “marginal.”
On Jan. 14, 2009, six days before the company’s central bank loans peaked, the New York Fed gave CEO Vikram Pandit a report declaring Citigroup’s financial strength to be “superficial,” bolstered largely by its $45 billion of Treasury funds. The document was released in early 2011 by the Financial Crisis Inquiry Commission, a panel empowered by Congress to probe the causes of the crisis.
‘Need Transparency’
Andrea Priest, a spokeswoman for the New York Fed, declined to comment, as did Jon Diat, a spokesman for Citigroup.
“I believe that the Fed should have independence in conducting highly technical monetary policy, but when they are putting taxpayer resources at risk, we need transparency and accountability,” says Alabama Senator Richard Shelby, the top Republican on the Senate Banking Committee.
Judd Gregg, a former New Hampshire senator who was a lead Republican negotiator on TARP, and Barney Frank, a Massachusetts Democrat who chaired the House Financial Services Committee, both say they were kept in the dark.
“We didn’t know the specifics,” says Gregg, who’s now an adviser to Goldman Sachs.
“We were aware emergency efforts were going on,” Frank says. “We didn’t know the specifics.”
Disclose Lending
Frank co-sponsored the Dodd-Frank Wall Street Reform and Consumer Protection Act, billed as a fix for financial-industry excesses. Congress debated that legislation in 2010 without a full understanding of how deeply the banks had depended on the Fed for survival.
It would have been “totally appropriate” to disclose the lending data by mid-2009, says David Jones, a former economist at the Federal Reserve Bank of New York who has written four books about the central bank.
“The Fed is the second-most-important appointed body in the U.S., next to the Supreme Court, and we’re dealing with a democracy,” Jones says. “Our representatives in Congress deserve to have this kind of information so they can oversee the Fed.”
The Dodd-Frank law required the Fed to release details of some emergency-lending programs in December 2010. It also mandated disclosure of discount-window borrowers after a two- year lag.
Protecting TARP
TARP and the Fed lending programs went “hand in hand,” says Sherrill Shaffer, a banking professor at the University of Wyoming in Laramie and a former chief economist at the New York Fed. While the TARP money helped insulate the central bank from losses, the Fed’s willingness to supply seemingly unlimited financing to the banks assured they wouldn’t collapse, protecting the Treasury’s TARP investments, he says.
“Even though the Treasury was in the headlines, the Fed was really behind the scenes engineering it,” Shaffer says.
Congress, at the urging of Bernanke and Paulson, created TARP in October 2008 after the bankruptcy of Lehman Brothers Holdings Inc. made it difficult for financial institutions to get loans. Bank of America and New York-based Citigroup each received $45 billion from TARP. At the time, both were tapping the Fed. Citigroup hit its peak borrowing of $99.5 billion in January 2009, while Bank of America topped out in February 2009 at $91.4 billion.
No Clue
Lawmakers knew none of this.
They had no clue that one bank, New York-based Morgan Stanley (MS), took $107 billion in Fed loans in September 2008, enough to pay off one-tenth of the country’s delinquent mortgages. The firm’s peak borrowing occurred the same day Congress rejected the proposed TARP bill, triggering the biggest point drop ever in the Dow Jones Industrial Average. (INDU) The bill later passed, and Morgan Stanley got $10 billion of TARP funds, though Paulson said only “healthy institutions” were eligible.
Mark Lake, a spokesman for Morgan Stanley, declined to comment, as did spokesmen for Citigroup and Goldman Sachs.
Had lawmakers known, it “could have changed the whole approach to reform legislation,” says Ted Kaufman, a former Democratic Senator from Delaware who, with Brown, introduced the bill to limit bank size.
Moral Hazard
Kaufman says some banks are so big that their failure could trigger a chain reaction in the financial system. The cost of borrowing for so-called too-big-to-fail banks is lower than that of smaller firms because lenders believe the government won’t let them go under. The perceived safety net creates what economists call moral hazard -- the belief that bankers will take greater risks because they’ll enjoy any profits while shifting losses to taxpayers.
If Congress had been aware of the extent of the Fed rescue, Kaufman says, he would have been able to line up more support for breaking up the biggest banks.
Byron L. Dorgan, a former Democratic senator from North Dakota, says the knowledge might have helped pass legislation to reinstate the Glass-Steagall Act, which for most of the last century separated customer deposits from the riskier practices of investment banking.
“Had people known about the hundreds of billions in loans to the biggest financial institutions, they would have demanded Congress take much more courageous actions to stop the practices that caused this near financial collapse,” says Dorgan, who retired in January.
Getting Bigger
Instead, the Fed and its secret financing helped America’s biggest financial firms get bigger and go on to pay employees as much as they did at the height of the housing bubble.
Total assets held by the six biggest U.S. banks increased 39 percent to $9.5 trillion on Sept. 30, 2011, from $6.8 trillion on the same day in 2006, according to Fed data.
For so few banks to hold so many assets is “un-American,” says Richard W. Fisher, president of the Federal Reserve Bank of Dallas. “All of these gargantuan institutions are too big to regulate. I’m in favor of breaking them up and slimming them down.”
Employees at the six biggest banks made twice the average for all U.S. workers in 2010, based on Bureau of Labor Statistics hourly compensation cost data. The banks spent $146.3 billion on compensation in 2010, or an average of $126,342 per worker, according to data compiled by Bloomberg. That’s up almost 20 percent from five years earlier compared with less than 15 percent for the average worker. Average pay at the banks in 2010 was about the same as in 2007, before the bailouts.
‘Wanted to Pretend’
“The pay levels came back so fast at some of these firms that it appeared they really wanted to pretend they hadn’t been bailed out,” says Anil Kashyap, a former Fed economist who’s now a professor of economics at the University of Chicago Booth School of Business. “They shouldn’t be surprised that a lot of people find some of the stuff that happened totally outrageous.”
Bank of America took over Merrill Lynch & Co. at the urging of then-Treasury Secretary Paulson after buying the biggest U.S. home lender, Countrywide Financial Corp. When the Merrill Lynch purchase was announced on Sept. 15, 2008, Bank of America had $14.4 billion in emergency Fed loans and Merrill Lynch had $8.1 billion. By the end of the month, Bank of America’s loans had reached $25 billion and Merrill Lynch’s had exceeded $60 billion, helping both firms keep the deal on track.
Prevent Collapse
Wells Fargo bought Wachovia Corp., the fourth-largest U.S. bank by deposits before the 2008 acquisition. Because depositors were pulling their money from Wachovia, the Fed channeled $50 billion in secret loans to the Charlotte, North Carolina-based bank through two emergency-financing programs to prevent collapse before Wells Fargo could complete the purchase.
“These programs proved to be very successful at providing financial markets the additional liquidity and confidence they needed at a time of unprecedented uncertainty,” says Ancel Martinez, a spokesman for Wells Fargo.
JPMorgan absorbed the country’s largest savings and loan, Seattle-based Washington Mutual Inc., and investment bank Bear Stearns Cos. The New York Fed, then headed by Timothy F. Geithner, who’s now Treasury secretary, helped JPMorgan complete the Bear Stearns deal by providing $29 billion of financing, which was disclosed at the time. The Fed also supplied Bear Stearns with $30 billion of secret loans to keep the company from failing before the acquisition closed, central bank data show. The loans were made through a program set up to provide emergency funding to brokerage firms.
‘Regulatory Discretion’
“Some might claim that the Fed was picking winners and losers, but what the Fed was doing was exercising its professional regulatory discretion,” says John Dearie, a former speechwriter at the New York Fed who’s now executive vice president for policy at the Financial Services Forum, a Washington-based group consisting of the CEOs of 20 of the world’s biggest financial firms. “The Fed clearly felt it had what it needed within the requirements of the law to continue to lend to Bear and Wachovia.”
The bill introduced by Brown and Kaufman in April 2010 would have mandated shrinking the six largest firms.
“When a few banks have advantages, the little guys get squeezed,” Brown says. “That, to me, is not what capitalism should be.”
Kaufman says he’s passionate about curbing too-big-to-fail banks because he fears another crisis.
‘Can We Survive?’
“The amount of pain that people, through no fault of their own, had to endure -- and the prospect of putting them through it again -- is appalling,” Kaufman says. “The public has no more appetite for bailouts. What would happen tomorrow if one of these big banks got in trouble? Can we survive that?”
Lobbying expenditures by the six banks that would have been affected by the legislation rose to $29.4 million in 2010 compared with $22.1 million in 2006, the last full year before credit markets seized up -- a gain of 33 percent, according to OpenSecrets.org, a research group that tracks money in U.S. politics. Lobbying by the American Bankers Association, a trade organization, increased at about the same rate, OpenSecrets.org reported.
Lobbyists argued the virtues of bigger banks. They’re more stable, better able to serve large companies and more competitive internationally, and breaking them up would cost jobs and cause “long-term damage to the U.S. economy,” according to a Nov. 13, 2009, letter to members of Congress from the FSF.
The group’s website cites Nobel Prize-winning economist Oliver E. Williamson, a professor emeritus at the University of California, Berkeley, for demonstrating the greater efficiency of large companies.
‘Serious Burden’
In an interview, Williamson says that the organization took his research out of context and that efficiency is only one factor in deciding whether to preserve too-big-to-fail banks.
“The banks that were too big got even bigger, and the problems that we had to begin with are magnified in the process,” Williamson says. “The big banks have incentives to take risks they wouldn’t take if they didn’t have government support. It’s a serious burden on the rest of the economy.”
Dearie says his group didn’t mean to imply that Williamson endorsed big banks.
Top officials in President Barack Obama’s administration sided with the FSF in arguing against legislative curbs on the size of banks.
Geithner, Kaufman
On May 4, 2010, Geithner visited Kaufman in his Capitol Hill office. As president of the New York Fed in 2007 and 2008, Geithner helped design and run the central bank’s lending programs. The New York Fed supervised four of the six biggest U.S. banks and, during the credit crunch, put together a daily confidential report on Wall Street’s financial condition. Geithner was copied on these reports, based on a sampling of e- mails released by the Financial Crisis Inquiry Commission.
At the meeting with Kaufman, Geithner argued that the issue of limiting bank size was too complex for Congress and that people who know the markets should handle these decisions, Kaufman says. According to Kaufman, Geithner said he preferred that bank supervisors from around the world, meeting in Basel, Switzerland, make rules increasing the amount of money banks need to hold in reserve. Passing laws in the U.S. would undercut his efforts in Basel, Geithner said, according to Kaufman.
Anthony Coley, a spokesman for Geithner, declined to comment.
‘Punishing Success’
Lobbyists for the big banks made the winning case that forcing them to break up was “punishing success,” Brown says. Now that they can see how much the banks were borrowing from the Fed, senators might think differently, he says.
The Fed supported curbing too-big-to-fail banks, including giving regulators the power to close large financial firms and implementing tougher supervision for big banks, says Fed General Counsel Scott G. Alvarez. The Fed didn’t take a position on whether large banks should be dismantled before they get into trouble.
Dodd-Frank does provide a mechanism for regulators to break up the biggest banks. It established the Financial Stability Oversight Council that could order teetering banks to shut down in an orderly way. The council is headed by Geithner.
“Dodd-Frank does not solve the problem of too big to fail,” says Shelby, the Alabama Republican. “Moral hazard and taxpayer exposure still very much exist.”
Below Market
Dean Baker, co-director of the Center for Economic and Policy Research in Washington, says banks “were either in bad shape or taking advantage of the Fed giving them a good deal. The former contradicts their public statements. The latter -- getting loans at below-market rates during a financial crisis -- is quite a gift.”
The Fed says it typically makes emergency loans more expensive than those available in the marketplace to discourage banks from abusing the privilege. During the crisis, Fed loans were among the cheapest around, with funding available for as low as 0.01 percent in December 2008, according to data from the central bank and money-market rates tracked by Bloomberg.
The Fed funds also benefited firms by allowing them to avoid selling assets to pay investors and depositors who pulled their money. So the assets stayed on the banks’ books, earning interest.
Banks report the difference between what they earn on loans and investments and their borrowing expenses. The figure, known as net interest margin, provides a clue to how much profit the firms turned on their Fed loans, the costs of which were included in those expenses. To calculate how much banks stood to make, Bloomberg multiplied their tax-adjusted net interest margins by their average Fed debt during reporting periods in which they took emergency loans.
Added Income
The 190 firms for which data were available would have produced income of $13 billion, assuming all of the bailout funds were invested at the margins reported, the data show.
The six biggest U.S. banks’ share of the estimated subsidy was $4.8 billion, or 23 percent of their combined net income during the time they were borrowing from the Fed. Citigroup would have taken in the most, with $1.8 billion.
“The net interest margin is an effective way of getting at the benefits that these large banks received from the Fed,” says Gerald A. Hanweck, a former Fed economist who’s now a finance professor at George Mason University in Fairfax, Virginia.
While the method isn’t perfect, it’s impossible to state the banks’ exact profits or savings from their Fed loans because the numbers aren’t disclosed and there isn’t enough publicly available data to figure it out.
Opinsky, the JPMorgan spokesman, says he doesn’t think the calculation is fair because “in all likelihood, such funds were likely invested in very short-term investments,” which typically bring lower returns.
Standing Access
Even without tapping the Fed, the banks get a subsidy by having standing access to the central bank’s money, says Viral Acharya, a New York University economics professor who has worked as an academic adviser to the New York Fed.
“Banks don’t give lines of credit to corporations for free,” he says. “Why should all these government guarantees and liquidity facilities be for free?”
In the September 2008 meeting at which Paulson and Bernanke briefed lawmakers on the need for TARP, Bernanke said that if nothing was done, “unemployment would rise -- to 8 or 9 percent from the prevailing 6.1 percent,” Paulson wrote in “On the Brink” (Business Plus, 2010).
Occupy Wall Street
The U.S. jobless rate hasn’t dipped below 8.8 percent since March 2009, 3.6 million homes have been foreclosed since August 2007, according to data provider RealtyTrac Inc., and police have clashed with Occupy Wall Street protesters, who say government policies favor the wealthiest citizens, in New York, Boston, Seattle and Oakland, California.
The Tea Party, which supports a more limited role for government, has its roots in anger over the Wall Street bailouts, says Neil M. Barofsky, former TARP special inspector general and a Bloomberg Television contributing editor.
“The lack of transparency is not just frustrating; it really blocked accountability,” Barofsky says. “When people don’t know the details, they fill in the blanks. They believe in conspiracies.”
In the end, Geithner had his way. The Brown-Kaufman proposal to limit the size of banks was defeated, 60 to 31. Bank supervisors meeting in Switzerland did mandate minimum reserves that institutions will have to hold, with higher levels for the world’s largest banks, including the six biggest in the U.S. Those rules can be changed by individual countries.
They take full effect in 2019.
Meanwhile, Kaufman says, “we’re absolutely, totally, 100 percent not prepared for another financial crisis.”
To contact the reporters on this story: Bob Ivry in New York at bivry@bloomberg.net; Bradley Keoun in New York at bkeoun@bloomberg.net; Phil Kuntz in New York at pkuntz1@bloomberg.net.
To contact the editors responsible for this story: Gary Putka at gputka@bloomberg.net; David Scheer at dscheer@bloomberg.net.
By Bob Ivry, Bradley Keoun and Phil Kuntz - Nov 27, 2011
Bloomberg Markets Magazine
Nov. 28 (Bloomberg) -- Bloomberg Markets magazine's January issue examines how the Federal Reserve and big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. And how bankers failed to mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. (Source: Bloomberg).
Nov. 28 (Bloomberg) -- The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. No one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue. Betty Liu reports on Bloomberg Television's "In the Loop." (Source: Bloomberg).
On Nov. 26, 2008, then-Bank of America Corp. Chief Executive Officer Kenneth D. Lewis wrote to shareholders that he headed “one of the strongest and most stable major banks in the world.” He didn’t say that his firm owed the central bank $86 billion that day.
The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.
The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.
Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse.
A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.
‘Change Their Votes’
“When you see the dollars the banks got, it’s hard to make the case these were successful institutions,” says Sherrod Brown, a Democratic Senator from Ohio who in 2010 introduced an unsuccessful bill to limit bank size. “This is an issue that can unite the Tea Party and Occupy Wall Street. There are lawmakers in both parties who would change their votes now.”
The size of the bailout came to light after Bloomberg LP, the parent of Bloomberg News, won a court case against the Fed and a group of the biggest U.S. banks called Clearing House Association LLC to force lending details into the open.
The Fed, headed by Chairman Ben S. Bernanke, argued that revealing borrower details would create a stigma -- investors and counterparties would shun firms that used the central bank as lender of last resort -- and that needy institutions would be reluctant to borrow in the next crisis. Clearing House Association fought Bloomberg’s lawsuit up to the U.S. Supreme Court, which declined to hear the banks’ appeal in March 2011.
$7.77 Trillion
The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.
“TARP at least had some strings attached,” says Brad Miller, a North Carolina Democrat on the House Financial Services Committee, referring to the program’s executive-pay ceiling. “With the Fed programs, there was nothing.”
Bankers didn’t disclose the extent of their borrowing. On Nov. 26, 2008, then-Bank of America (BAC) Corp. Chief Executive Officer Kenneth D. Lewis wrote to shareholders that he headed “one of the strongest and most stable major banks in the world.” He didn’t say that his Charlotte, North Carolina-based firm owed the central bank $86 billion that day.
‘Motivate Others’
JPMorgan Chase & Co. CEO Jamie Dimon told shareholders in a March 26, 2010, letter that his bank used the Fed’s Term Auction Facility “at the request of the Federal Reserve to help motivate others to use the system.” He didn’t say that the New York-based bank’s total TAF borrowings were almost twice its cash holdings or that its peak borrowing of $48 billion on Feb. 26, 2009, came more than a year after the program’s creation.
Howard Opinsky, a spokesman for JPMorgan (JPM), declined to comment about Dimon’s statement or the company’s Fed borrowings. Jerry Dubrowski, a spokesman for Bank of America, also declined to comment.
The Fed has been lending money to banks through its so- called discount window since just after its founding in 1913. Starting in August 2007, when confidence in banks began to wane, it created a variety of ways to bolster the financial system with cash or easily traded securities. By the end of 2008, the central bank had established or expanded 11 lending facilities catering to banks, securities firms and corporations that couldn’t get short-term loans from their usual sources.
‘Core Function’
“Supporting financial-market stability in times of extreme market stress is a core function of central banks,” says William B. English, director of the Fed’s Division of Monetary Affairs. “Our lending programs served to prevent a collapse of the financial system and to keep credit flowing to American families and businesses.”
The Fed has said that all loans were backed by appropriate collateral. That the central bank didn’t lose money should “lead to praise of the Fed, that they took this extraordinary step and they got it right,” says Phillip Swagel, a former assistant Treasury secretary under Henry M. Paulson and now a professor of international economic policy at the University of Maryland.
The Fed initially released lending data in aggregate form only. Information on which banks borrowed, when, how much and at what interest rate was kept from public view.
The secrecy extended even to members of President George W. Bush’s administration who managed TARP. Top aides to Paulson weren’t privy to Fed lending details during the creation of the program that provided crisis funding to more than 700 banks, say two former senior Treasury officials who requested anonymity because they weren’t authorized to speak.
Big Six
The Treasury Department relied on the recommendations of the Fed to decide which banks were healthy enough to get TARP money and how much, the former officials say. The six biggest U.S. banks, which received $160 billion of TARP funds, borrowed as much as $460 billion from the Fed, measured by peak daily debt calculated by Bloomberg using data obtained from the central bank. Paulson didn’t respond to a request for comment.
The six -- JPMorgan, Bank of America, Citigroup Inc. (C), Wells Fargo & Co. (WFC), Goldman Sachs Group Inc. (GS) and Morgan Stanley -- accounted for 63 percent of the average daily debt to the Fed by all publicly traded U.S. banks, money managers and investment- services firms, the data show. By comparison, they had about half of the industry’s assets before the bailout, which lasted from August 2007 through April 2010. The daily debt figure excludes cash that banks passed along to money-market funds.
Bank Supervision
While the emergency response prevented financial collapse, the Fed shouldn’t have allowed conditions to get to that point, says Joshua Rosner, a banking analyst with Graham Fisher & Co. in New York who predicted problems from lax mortgage underwriting as far back as 2001. The Fed, the primary supervisor for large financial companies, should have been more vigilant as the housing bubble formed, and the scale of its lending shows the “supervision of the banks prior to the crisis was far worse than we had imagined,” Rosner says.
Bernanke in an April 2009 speech said that the Fed provided emergency loans only to “sound institutions,” even though its internal assessments described at least one of the biggest borrowers, Citigroup, as “marginal.”
On Jan. 14, 2009, six days before the company’s central bank loans peaked, the New York Fed gave CEO Vikram Pandit a report declaring Citigroup’s financial strength to be “superficial,” bolstered largely by its $45 billion of Treasury funds. The document was released in early 2011 by the Financial Crisis Inquiry Commission, a panel empowered by Congress to probe the causes of the crisis.
‘Need Transparency’
Andrea Priest, a spokeswoman for the New York Fed, declined to comment, as did Jon Diat, a spokesman for Citigroup.
“I believe that the Fed should have independence in conducting highly technical monetary policy, but when they are putting taxpayer resources at risk, we need transparency and accountability,” says Alabama Senator Richard Shelby, the top Republican on the Senate Banking Committee.
Judd Gregg, a former New Hampshire senator who was a lead Republican negotiator on TARP, and Barney Frank, a Massachusetts Democrat who chaired the House Financial Services Committee, both say they were kept in the dark.
“We didn’t know the specifics,” says Gregg, who’s now an adviser to Goldman Sachs.
“We were aware emergency efforts were going on,” Frank says. “We didn’t know the specifics.”
Disclose Lending
Frank co-sponsored the Dodd-Frank Wall Street Reform and Consumer Protection Act, billed as a fix for financial-industry excesses. Congress debated that legislation in 2010 without a full understanding of how deeply the banks had depended on the Fed for survival.
It would have been “totally appropriate” to disclose the lending data by mid-2009, says David Jones, a former economist at the Federal Reserve Bank of New York who has written four books about the central bank.
“The Fed is the second-most-important appointed body in the U.S., next to the Supreme Court, and we’re dealing with a democracy,” Jones says. “Our representatives in Congress deserve to have this kind of information so they can oversee the Fed.”
The Dodd-Frank law required the Fed to release details of some emergency-lending programs in December 2010. It also mandated disclosure of discount-window borrowers after a two- year lag.
Protecting TARP
TARP and the Fed lending programs went “hand in hand,” says Sherrill Shaffer, a banking professor at the University of Wyoming in Laramie and a former chief economist at the New York Fed. While the TARP money helped insulate the central bank from losses, the Fed’s willingness to supply seemingly unlimited financing to the banks assured they wouldn’t collapse, protecting the Treasury’s TARP investments, he says.
“Even though the Treasury was in the headlines, the Fed was really behind the scenes engineering it,” Shaffer says.
Congress, at the urging of Bernanke and Paulson, created TARP in October 2008 after the bankruptcy of Lehman Brothers Holdings Inc. made it difficult for financial institutions to get loans. Bank of America and New York-based Citigroup each received $45 billion from TARP. At the time, both were tapping the Fed. Citigroup hit its peak borrowing of $99.5 billion in January 2009, while Bank of America topped out in February 2009 at $91.4 billion.
No Clue
Lawmakers knew none of this.
They had no clue that one bank, New York-based Morgan Stanley (MS), took $107 billion in Fed loans in September 2008, enough to pay off one-tenth of the country’s delinquent mortgages. The firm’s peak borrowing occurred the same day Congress rejected the proposed TARP bill, triggering the biggest point drop ever in the Dow Jones Industrial Average. (INDU) The bill later passed, and Morgan Stanley got $10 billion of TARP funds, though Paulson said only “healthy institutions” were eligible.
Mark Lake, a spokesman for Morgan Stanley, declined to comment, as did spokesmen for Citigroup and Goldman Sachs.
Had lawmakers known, it “could have changed the whole approach to reform legislation,” says Ted Kaufman, a former Democratic Senator from Delaware who, with Brown, introduced the bill to limit bank size.
Moral Hazard
Kaufman says some banks are so big that their failure could trigger a chain reaction in the financial system. The cost of borrowing for so-called too-big-to-fail banks is lower than that of smaller firms because lenders believe the government won’t let them go under. The perceived safety net creates what economists call moral hazard -- the belief that bankers will take greater risks because they’ll enjoy any profits while shifting losses to taxpayers.
If Congress had been aware of the extent of the Fed rescue, Kaufman says, he would have been able to line up more support for breaking up the biggest banks.
Byron L. Dorgan, a former Democratic senator from North Dakota, says the knowledge might have helped pass legislation to reinstate the Glass-Steagall Act, which for most of the last century separated customer deposits from the riskier practices of investment banking.
“Had people known about the hundreds of billions in loans to the biggest financial institutions, they would have demanded Congress take much more courageous actions to stop the practices that caused this near financial collapse,” says Dorgan, who retired in January.
Getting Bigger
Instead, the Fed and its secret financing helped America’s biggest financial firms get bigger and go on to pay employees as much as they did at the height of the housing bubble.
Total assets held by the six biggest U.S. banks increased 39 percent to $9.5 trillion on Sept. 30, 2011, from $6.8 trillion on the same day in 2006, according to Fed data.
For so few banks to hold so many assets is “un-American,” says Richard W. Fisher, president of the Federal Reserve Bank of Dallas. “All of these gargantuan institutions are too big to regulate. I’m in favor of breaking them up and slimming them down.”
Employees at the six biggest banks made twice the average for all U.S. workers in 2010, based on Bureau of Labor Statistics hourly compensation cost data. The banks spent $146.3 billion on compensation in 2010, or an average of $126,342 per worker, according to data compiled by Bloomberg. That’s up almost 20 percent from five years earlier compared with less than 15 percent for the average worker. Average pay at the banks in 2010 was about the same as in 2007, before the bailouts.
‘Wanted to Pretend’
“The pay levels came back so fast at some of these firms that it appeared they really wanted to pretend they hadn’t been bailed out,” says Anil Kashyap, a former Fed economist who’s now a professor of economics at the University of Chicago Booth School of Business. “They shouldn’t be surprised that a lot of people find some of the stuff that happened totally outrageous.”
Bank of America took over Merrill Lynch & Co. at the urging of then-Treasury Secretary Paulson after buying the biggest U.S. home lender, Countrywide Financial Corp. When the Merrill Lynch purchase was announced on Sept. 15, 2008, Bank of America had $14.4 billion in emergency Fed loans and Merrill Lynch had $8.1 billion. By the end of the month, Bank of America’s loans had reached $25 billion and Merrill Lynch’s had exceeded $60 billion, helping both firms keep the deal on track.
Prevent Collapse
Wells Fargo bought Wachovia Corp., the fourth-largest U.S. bank by deposits before the 2008 acquisition. Because depositors were pulling their money from Wachovia, the Fed channeled $50 billion in secret loans to the Charlotte, North Carolina-based bank through two emergency-financing programs to prevent collapse before Wells Fargo could complete the purchase.
“These programs proved to be very successful at providing financial markets the additional liquidity and confidence they needed at a time of unprecedented uncertainty,” says Ancel Martinez, a spokesman for Wells Fargo.
JPMorgan absorbed the country’s largest savings and loan, Seattle-based Washington Mutual Inc., and investment bank Bear Stearns Cos. The New York Fed, then headed by Timothy F. Geithner, who’s now Treasury secretary, helped JPMorgan complete the Bear Stearns deal by providing $29 billion of financing, which was disclosed at the time. The Fed also supplied Bear Stearns with $30 billion of secret loans to keep the company from failing before the acquisition closed, central bank data show. The loans were made through a program set up to provide emergency funding to brokerage firms.
‘Regulatory Discretion’
“Some might claim that the Fed was picking winners and losers, but what the Fed was doing was exercising its professional regulatory discretion,” says John Dearie, a former speechwriter at the New York Fed who’s now executive vice president for policy at the Financial Services Forum, a Washington-based group consisting of the CEOs of 20 of the world’s biggest financial firms. “The Fed clearly felt it had what it needed within the requirements of the law to continue to lend to Bear and Wachovia.”
The bill introduced by Brown and Kaufman in April 2010 would have mandated shrinking the six largest firms.
“When a few banks have advantages, the little guys get squeezed,” Brown says. “That, to me, is not what capitalism should be.”
Kaufman says he’s passionate about curbing too-big-to-fail banks because he fears another crisis.
‘Can We Survive?’
“The amount of pain that people, through no fault of their own, had to endure -- and the prospect of putting them through it again -- is appalling,” Kaufman says. “The public has no more appetite for bailouts. What would happen tomorrow if one of these big banks got in trouble? Can we survive that?”
Lobbying expenditures by the six banks that would have been affected by the legislation rose to $29.4 million in 2010 compared with $22.1 million in 2006, the last full year before credit markets seized up -- a gain of 33 percent, according to OpenSecrets.org, a research group that tracks money in U.S. politics. Lobbying by the American Bankers Association, a trade organization, increased at about the same rate, OpenSecrets.org reported.
Lobbyists argued the virtues of bigger banks. They’re more stable, better able to serve large companies and more competitive internationally, and breaking them up would cost jobs and cause “long-term damage to the U.S. economy,” according to a Nov. 13, 2009, letter to members of Congress from the FSF.
The group’s website cites Nobel Prize-winning economist Oliver E. Williamson, a professor emeritus at the University of California, Berkeley, for demonstrating the greater efficiency of large companies.
‘Serious Burden’
In an interview, Williamson says that the organization took his research out of context and that efficiency is only one factor in deciding whether to preserve too-big-to-fail banks.
“The banks that were too big got even bigger, and the problems that we had to begin with are magnified in the process,” Williamson says. “The big banks have incentives to take risks they wouldn’t take if they didn’t have government support. It’s a serious burden on the rest of the economy.”
Dearie says his group didn’t mean to imply that Williamson endorsed big banks.
Top officials in President Barack Obama’s administration sided with the FSF in arguing against legislative curbs on the size of banks.
Geithner, Kaufman
On May 4, 2010, Geithner visited Kaufman in his Capitol Hill office. As president of the New York Fed in 2007 and 2008, Geithner helped design and run the central bank’s lending programs. The New York Fed supervised four of the six biggest U.S. banks and, during the credit crunch, put together a daily confidential report on Wall Street’s financial condition. Geithner was copied on these reports, based on a sampling of e- mails released by the Financial Crisis Inquiry Commission.
At the meeting with Kaufman, Geithner argued that the issue of limiting bank size was too complex for Congress and that people who know the markets should handle these decisions, Kaufman says. According to Kaufman, Geithner said he preferred that bank supervisors from around the world, meeting in Basel, Switzerland, make rules increasing the amount of money banks need to hold in reserve. Passing laws in the U.S. would undercut his efforts in Basel, Geithner said, according to Kaufman.
Anthony Coley, a spokesman for Geithner, declined to comment.
‘Punishing Success’
Lobbyists for the big banks made the winning case that forcing them to break up was “punishing success,” Brown says. Now that they can see how much the banks were borrowing from the Fed, senators might think differently, he says.
The Fed supported curbing too-big-to-fail banks, including giving regulators the power to close large financial firms and implementing tougher supervision for big banks, says Fed General Counsel Scott G. Alvarez. The Fed didn’t take a position on whether large banks should be dismantled before they get into trouble.
Dodd-Frank does provide a mechanism for regulators to break up the biggest banks. It established the Financial Stability Oversight Council that could order teetering banks to shut down in an orderly way. The council is headed by Geithner.
“Dodd-Frank does not solve the problem of too big to fail,” says Shelby, the Alabama Republican. “Moral hazard and taxpayer exposure still very much exist.”
Below Market
Dean Baker, co-director of the Center for Economic and Policy Research in Washington, says banks “were either in bad shape or taking advantage of the Fed giving them a good deal. The former contradicts their public statements. The latter -- getting loans at below-market rates during a financial crisis -- is quite a gift.”
The Fed says it typically makes emergency loans more expensive than those available in the marketplace to discourage banks from abusing the privilege. During the crisis, Fed loans were among the cheapest around, with funding available for as low as 0.01 percent in December 2008, according to data from the central bank and money-market rates tracked by Bloomberg.
The Fed funds also benefited firms by allowing them to avoid selling assets to pay investors and depositors who pulled their money. So the assets stayed on the banks’ books, earning interest.
Banks report the difference between what they earn on loans and investments and their borrowing expenses. The figure, known as net interest margin, provides a clue to how much profit the firms turned on their Fed loans, the costs of which were included in those expenses. To calculate how much banks stood to make, Bloomberg multiplied their tax-adjusted net interest margins by their average Fed debt during reporting periods in which they took emergency loans.
Added Income
The 190 firms for which data were available would have produced income of $13 billion, assuming all of the bailout funds were invested at the margins reported, the data show.
The six biggest U.S. banks’ share of the estimated subsidy was $4.8 billion, or 23 percent of their combined net income during the time they were borrowing from the Fed. Citigroup would have taken in the most, with $1.8 billion.
“The net interest margin is an effective way of getting at the benefits that these large banks received from the Fed,” says Gerald A. Hanweck, a former Fed economist who’s now a finance professor at George Mason University in Fairfax, Virginia.
While the method isn’t perfect, it’s impossible to state the banks’ exact profits or savings from their Fed loans because the numbers aren’t disclosed and there isn’t enough publicly available data to figure it out.
Opinsky, the JPMorgan spokesman, says he doesn’t think the calculation is fair because “in all likelihood, such funds were likely invested in very short-term investments,” which typically bring lower returns.
Standing Access
Even without tapping the Fed, the banks get a subsidy by having standing access to the central bank’s money, says Viral Acharya, a New York University economics professor who has worked as an academic adviser to the New York Fed.
“Banks don’t give lines of credit to corporations for free,” he says. “Why should all these government guarantees and liquidity facilities be for free?”
In the September 2008 meeting at which Paulson and Bernanke briefed lawmakers on the need for TARP, Bernanke said that if nothing was done, “unemployment would rise -- to 8 or 9 percent from the prevailing 6.1 percent,” Paulson wrote in “On the Brink” (Business Plus, 2010).
Occupy Wall Street
The U.S. jobless rate hasn’t dipped below 8.8 percent since March 2009, 3.6 million homes have been foreclosed since August 2007, according to data provider RealtyTrac Inc., and police have clashed with Occupy Wall Street protesters, who say government policies favor the wealthiest citizens, in New York, Boston, Seattle and Oakland, California.
The Tea Party, which supports a more limited role for government, has its roots in anger over the Wall Street bailouts, says Neil M. Barofsky, former TARP special inspector general and a Bloomberg Television contributing editor.
“The lack of transparency is not just frustrating; it really blocked accountability,” Barofsky says. “When people don’t know the details, they fill in the blanks. They believe in conspiracies.”
In the end, Geithner had his way. The Brown-Kaufman proposal to limit the size of banks was defeated, 60 to 31. Bank supervisors meeting in Switzerland did mandate minimum reserves that institutions will have to hold, with higher levels for the world’s largest banks, including the six biggest in the U.S. Those rules can be changed by individual countries.
They take full effect in 2019.
Meanwhile, Kaufman says, “we’re absolutely, totally, 100 percent not prepared for another financial crisis.”
To contact the reporters on this story: Bob Ivry in New York at bivry@bloomberg.net; Bradley Keoun in New York at bkeoun@bloomberg.net; Phil Kuntz in New York at pkuntz1@bloomberg.net.
To contact the editors responsible for this story: Gary Putka at gputka@bloomberg.net; David Scheer at dscheer@bloomberg.net.
THIS PIECE OF SHIT ASSHOLE HAS BEEN TOLD TO GET OUR OF OUR HOMES, OFF OF OUR PHONES, AND AWAY FROM OUR CHILDREN --- CHILD MOLESTER! LACKING?
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ILLINOIS LICENSE PLATE & CHILD MOLESTING PREDATOR # 962 0110
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Michael F. Smith Guest
Posted Mon, November 28th, 2011 2:19 pm
Argument preview: How lacking is “so lacking”?
I. Introduction
When a Los Angeles County SWAT team shattered a picture window and poured into seventy-three-year-old Augusta Millender’s living room in a fruitless predawn search in 2003, glass may have been only the first casualty. On December 5, the Supreme Court will hear arguments in Messerschmidt v. Millender, Ms. Millender’s civil case against two of the deputies. Its ruling could significantly alter the court’s jurisprudence regarding qualified immunity for police officers who execute a warrant that later turns out to lack probable cause – case law that has developed into what some have called “the Barney Fife exception” to the Fourth Amendment.
II. Background
For nearly thirty years, federal courts have looked to a pair of Supreme Court decisions to determine when a police officer will be denied immunity in a civil action, and evidence excluded from a criminal proceeding, because the officer acted upon a warrant that later turned out to lack probable cause.
In United States v. Leon (1984), the Court held that evidence would be excluded only when the Fourth Amendment violation is “substantial and deliberate,” such that the officer could not have procured the warrant in objective good faith. That would occur only in various limited instances, the Court explained, such as when the affidavit used to obtain the warrant was “so lacking in indicia of probable cause as to render belief in its existence entirely unreasonable.” Two years later, the court applied Leon in the context of immunity from suit under 42 U.S.C. § 1983 in Malley v. Briggs (1986), extending the “so lacking in indicia of probable cause” standard to qualified immunity.
Under the Malley/Leon test, the relevant question is whether a reasonably well-trained officer in the officer’s position would have known that his affidavit failed to establish probable cause. Short of that, “all but the plainly incompetent or those who knowingly violate the law” will be granted qualified immunity – the theory being that, because it is the magistrate’s job to ensure that there is probable cause, an officer typically can’t be expected to question that determination.
That was the underlying law in late 2003, when Jerry Ray Bowen tried to throw his girlfriend off a second-story balcony after she broke up with him, then fired several shots at her from his sawed-off shotgun as she sped away with her belongings. The ex-girlfriend told detective Curt Messerschmidt that Bowen might be hiding out at the Los Angeles home of his foster mother, Ms. Millender. After searching various public records, Messerschmidt prepared an affidavit and warrants to arrest Bowen for assault with a deadly weapon and search the home. His affidavit listed two broad categories of items to be seized, including (1) all working firearms, ammunition of any caliber, and receipts or paperwork showing ownership of them; and (2) evidence showing gang membership or affiliation, or tending to establish control of the premises. It also requested night service of the warrant, due to the nature of the assault and Bowen’s suspected affiliation with a local street gang.
The warrants and affidavit were reviewed by Messerschmidt’s superiors, including Sgt. Robert Lawrence, as well as a deputy district attorney, and approved by a magistrate. A team of sheriff’s deputies executed the warrants in a five a.m. raid, but found neither Bowen nor his gun. They did, however, seize Ms. Millender’s 12-gauge shotgun and a box of .45-caliber ammunition, both of which she lawfully possessed.
Police later re-interviewed the ex-girlfriend, who told them Bowen might be at an area motel. Messerschmidt obtained a second warrant and, without SWAT-team assistance, found Bowen hiding under a bed and arrested him.
III. The lawsuit
Ms. Millender, her daughter, and her grandson sued Detective Messerchmidt and Sgt. Lawrence under Section 1983 for violating their Fourth Amendment rights in the search of their home. On cross-motions for summary judgment, the district court upheld part of the search warrant, but ruled that its authorization to search for all firearms, firearm-related materials, and gang-related items was unconstitutionally overbroad, and denied the officers immunity. After a divided panel of the Ninth Circuit reversed and found the officers entitled to immunity, the court granted rehearing en banc, and in August 2010, issued an opinion that reversed the three-judge panel and affirmed the district court.
Applying Malley and Groh v. Ramirez (2004) – in which a five-Justice majority held that a warrant that totally failed to describe the things to be seized was so plainly invalid that law enforcement officials were not entitled to immunity – the en banc court held that Messerschmidt’s search warrant contained a similar glaring deficiency: neither it nor the affidavit established probable cause that the broad categories of firearm- and gang-related materials sought at the Millender home were contraband or evidence of a crime. In the primary dissent, two judges argued that Malley and Groh should be interpreted to give workable guidelines for line officers, and that Messerschmidt’s mistakes neither put him into Malley‘s area of the plainly incompetent or knowing law-violator nor rendered his actions objectively unreasonable.
The Supreme Court granted certiorari on two issues: whether the warrant was “so lacking in indicia of probable cause” that the officers should be denied qualified immunity, and whether the Malley/Leon standards should be reconsidered or clarified, based on lower courts’ inability to apply them in a way that would deter police misconduct. (Shortly after certiorari was granted, Ms. Millender passed away.)
IV. Arguments
The officers point to the Ninth Circuit’s en banc decision itself as proving the need to revisit the “so lacking in indicia of probable cause” inquiry, arguing that the standard is so vague as to be meaningless – the immunity equivalent of “I know it when I see it.” They argue that the judicial burdens it imposes in re-litigating probable-cause determinations dwarf any minimal deterrent effect on officers, and that the standard should be restricted, if not discarded.
For their part, the Millenders argue that any reasonable officer would have known that the search warrant was so overbroad as to meet Malley‘s standard, because probable cause to search for one specific item (Bowen’s black, sawed-off shotgun with a pistol grip) could not establish probable cause to search for and seize all firearms and firearm-related materials in the house. They also argue that the officers shouldn’t be allowed to bolster their actions by pointing to information they could have provided the magistrate in obtaining the warrant, but didn’t.
Each side is supported by two amici. Like the officers, the United States points to the disagreement among various Ninth Circuit judges as to whether the officers acted reasonably in relying on the warrants as proof that they did not violate clearly established law. Petitioners’ other amici, a group of twenty-six states led by Texas, go even further, arguing that Malley and Leon should be reconsidered or clarified to extend recent caselaw on the exclusionary rule’s good-faith exception – Herring v. United States (2009) and Davis v. United States (2011) – to qualified immunity for defective search warrants. The states thus argue that officers who violate Fourth Amendment rights while acting on a warrant should receive qualified immunity absent “deliberate, reckless, or grossly negligent” conduct.
Weighing in as an amicus in support of the Millenders, the ACLU argues that Malley effectively balances society’s interest in being free from searches and seizures conducted without probable cause with that of allowing police to reasonably rely on judicial warrants without fearing personal liability. It likened the broad warrant here to the general warrants and writs of assistance against which the Warrant Clause’s particularity requirement is aimed.
The Millenders’ other amici, the National Rifle Association and California Rifle and Pistol Association Foundation, Inc., pick up on that theme, reviewing the historical record leading to the Fourth Amendment’s adoption and arguing that its particularity requirement was prompted especially by the Crown’s use of general warrants to seize firearms. The NRA also charges the officers with using Bowen’s gang membership to improperly expand the warrant not only to other persons at the house but to all weapons, in reckless disregard of those individual’s Second Amendment rights.
V. Analysis
Since Leon, the Court’s cost-benefit analysis in exclusion cases has focused on the flagrancy of the police misconduct – which could be decisive in this immunity case as well. In two of its more recent applications of Leon, the Court refused to invoke the exclusionary rule absent evidence that officers exhibited deliberate, reckless, or grossly negligent disregard for Fourth Amendment rights.
Thus, in Herring, Chief Justice Roberts, joined by Justices Scalia, Kennedy, Thomas, and Alito, held that Leon‘s cost-benefit analysis did not merit exclusion of evidence obtained in violation of the Fourth Amendment as a result of one-time police negligence – execution of an arrest warrant that police in a neighboring county already had rescinded, unbeknownst to them – on the ground that the deterrent effect would be minimal. And in Davis, the same five Justices, joined by Justice Kagan and, in a separate concurrence, Justice Sotomayor, extended the good-faith exception to a police search based on objectively reasonable reliance on judicial precedent that later was overturned. The officers and their amici here seek a similarly expanded zone of protection in the immunity context.
If the Court continues to focus on the flagrancy of the police misconduct, the future of the Malley/Leon “so lacking in indicia of probable cause” standard could rest on who it is a majority of Justices see standing with the SWAT team outside the house on E. 120th Street that morning: one of George III’s customs agents, wielding a general warrant – or the befuddled Deputy Fife.
Posted in Messerschmidt v. Millender, Featured, Merits Cases
Recommended Citation: Michael Smith, Argument preview: How lacking is “so lacking”?, SCOTUSblog (Nov. 28, 2011, 2:19 PM), http://www.scotusblog.com/2011/11/argument-preview-how-lacking-is-so-lacking/
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ILLINOIS LICENSE PLATE & CHILD MOLESTING PREDATOR # 962 0110
++++++++++++++++++
ILLINOIS LICENSE PLATE & CHILD MOLESTING PREDATOR # 962 0110
++++++++++++
Michael F. Smith Guest
Posted Mon, November 28th, 2011 2:19 pm
Argument preview: How lacking is “so lacking”?
I. Introduction
When a Los Angeles County SWAT team shattered a picture window and poured into seventy-three-year-old Augusta Millender’s living room in a fruitless predawn search in 2003, glass may have been only the first casualty. On December 5, the Supreme Court will hear arguments in Messerschmidt v. Millender, Ms. Millender’s civil case against two of the deputies. Its ruling could significantly alter the court’s jurisprudence regarding qualified immunity for police officers who execute a warrant that later turns out to lack probable cause – case law that has developed into what some have called “the Barney Fife exception” to the Fourth Amendment.
II. Background
For nearly thirty years, federal courts have looked to a pair of Supreme Court decisions to determine when a police officer will be denied immunity in a civil action, and evidence excluded from a criminal proceeding, because the officer acted upon a warrant that later turned out to lack probable cause.
In United States v. Leon (1984), the Court held that evidence would be excluded only when the Fourth Amendment violation is “substantial and deliberate,” such that the officer could not have procured the warrant in objective good faith. That would occur only in various limited instances, the Court explained, such as when the affidavit used to obtain the warrant was “so lacking in indicia of probable cause as to render belief in its existence entirely unreasonable.” Two years later, the court applied Leon in the context of immunity from suit under 42 U.S.C. § 1983 in Malley v. Briggs (1986), extending the “so lacking in indicia of probable cause” standard to qualified immunity.
Under the Malley/Leon test, the relevant question is whether a reasonably well-trained officer in the officer’s position would have known that his affidavit failed to establish probable cause. Short of that, “all but the plainly incompetent or those who knowingly violate the law” will be granted qualified immunity – the theory being that, because it is the magistrate’s job to ensure that there is probable cause, an officer typically can’t be expected to question that determination.
That was the underlying law in late 2003, when Jerry Ray Bowen tried to throw his girlfriend off a second-story balcony after she broke up with him, then fired several shots at her from his sawed-off shotgun as she sped away with her belongings. The ex-girlfriend told detective Curt Messerschmidt that Bowen might be hiding out at the Los Angeles home of his foster mother, Ms. Millender. After searching various public records, Messerschmidt prepared an affidavit and warrants to arrest Bowen for assault with a deadly weapon and search the home. His affidavit listed two broad categories of items to be seized, including (1) all working firearms, ammunition of any caliber, and receipts or paperwork showing ownership of them; and (2) evidence showing gang membership or affiliation, or tending to establish control of the premises. It also requested night service of the warrant, due to the nature of the assault and Bowen’s suspected affiliation with a local street gang.
The warrants and affidavit were reviewed by Messerschmidt’s superiors, including Sgt. Robert Lawrence, as well as a deputy district attorney, and approved by a magistrate. A team of sheriff’s deputies executed the warrants in a five a.m. raid, but found neither Bowen nor his gun. They did, however, seize Ms. Millender’s 12-gauge shotgun and a box of .45-caliber ammunition, both of which she lawfully possessed.
Police later re-interviewed the ex-girlfriend, who told them Bowen might be at an area motel. Messerschmidt obtained a second warrant and, without SWAT-team assistance, found Bowen hiding under a bed and arrested him.
III. The lawsuit
Ms. Millender, her daughter, and her grandson sued Detective Messerchmidt and Sgt. Lawrence under Section 1983 for violating their Fourth Amendment rights in the search of their home. On cross-motions for summary judgment, the district court upheld part of the search warrant, but ruled that its authorization to search for all firearms, firearm-related materials, and gang-related items was unconstitutionally overbroad, and denied the officers immunity. After a divided panel of the Ninth Circuit reversed and found the officers entitled to immunity, the court granted rehearing en banc, and in August 2010, issued an opinion that reversed the three-judge panel and affirmed the district court.
Applying Malley and Groh v. Ramirez (2004) – in which a five-Justice majority held that a warrant that totally failed to describe the things to be seized was so plainly invalid that law enforcement officials were not entitled to immunity – the en banc court held that Messerschmidt’s search warrant contained a similar glaring deficiency: neither it nor the affidavit established probable cause that the broad categories of firearm- and gang-related materials sought at the Millender home were contraband or evidence of a crime. In the primary dissent, two judges argued that Malley and Groh should be interpreted to give workable guidelines for line officers, and that Messerschmidt’s mistakes neither put him into Malley‘s area of the plainly incompetent or knowing law-violator nor rendered his actions objectively unreasonable.
The Supreme Court granted certiorari on two issues: whether the warrant was “so lacking in indicia of probable cause” that the officers should be denied qualified immunity, and whether the Malley/Leon standards should be reconsidered or clarified, based on lower courts’ inability to apply them in a way that would deter police misconduct. (Shortly after certiorari was granted, Ms. Millender passed away.)
IV. Arguments
The officers point to the Ninth Circuit’s en banc decision itself as proving the need to revisit the “so lacking in indicia of probable cause” inquiry, arguing that the standard is so vague as to be meaningless – the immunity equivalent of “I know it when I see it.” They argue that the judicial burdens it imposes in re-litigating probable-cause determinations dwarf any minimal deterrent effect on officers, and that the standard should be restricted, if not discarded.
For their part, the Millenders argue that any reasonable officer would have known that the search warrant was so overbroad as to meet Malley‘s standard, because probable cause to search for one specific item (Bowen’s black, sawed-off shotgun with a pistol grip) could not establish probable cause to search for and seize all firearms and firearm-related materials in the house. They also argue that the officers shouldn’t be allowed to bolster their actions by pointing to information they could have provided the magistrate in obtaining the warrant, but didn’t.
Each side is supported by two amici. Like the officers, the United States points to the disagreement among various Ninth Circuit judges as to whether the officers acted reasonably in relying on the warrants as proof that they did not violate clearly established law. Petitioners’ other amici, a group of twenty-six states led by Texas, go even further, arguing that Malley and Leon should be reconsidered or clarified to extend recent caselaw on the exclusionary rule’s good-faith exception – Herring v. United States (2009) and Davis v. United States (2011) – to qualified immunity for defective search warrants. The states thus argue that officers who violate Fourth Amendment rights while acting on a warrant should receive qualified immunity absent “deliberate, reckless, or grossly negligent” conduct.
Weighing in as an amicus in support of the Millenders, the ACLU argues that Malley effectively balances society’s interest in being free from searches and seizures conducted without probable cause with that of allowing police to reasonably rely on judicial warrants without fearing personal liability. It likened the broad warrant here to the general warrants and writs of assistance against which the Warrant Clause’s particularity requirement is aimed.
The Millenders’ other amici, the National Rifle Association and California Rifle and Pistol Association Foundation, Inc., pick up on that theme, reviewing the historical record leading to the Fourth Amendment’s adoption and arguing that its particularity requirement was prompted especially by the Crown’s use of general warrants to seize firearms. The NRA also charges the officers with using Bowen’s gang membership to improperly expand the warrant not only to other persons at the house but to all weapons, in reckless disregard of those individual’s Second Amendment rights.
V. Analysis
Since Leon, the Court’s cost-benefit analysis in exclusion cases has focused on the flagrancy of the police misconduct – which could be decisive in this immunity case as well. In two of its more recent applications of Leon, the Court refused to invoke the exclusionary rule absent evidence that officers exhibited deliberate, reckless, or grossly negligent disregard for Fourth Amendment rights.
Thus, in Herring, Chief Justice Roberts, joined by Justices Scalia, Kennedy, Thomas, and Alito, held that Leon‘s cost-benefit analysis did not merit exclusion of evidence obtained in violation of the Fourth Amendment as a result of one-time police negligence – execution of an arrest warrant that police in a neighboring county already had rescinded, unbeknownst to them – on the ground that the deterrent effect would be minimal. And in Davis, the same five Justices, joined by Justice Kagan and, in a separate concurrence, Justice Sotomayor, extended the good-faith exception to a police search based on objectively reasonable reliance on judicial precedent that later was overturned. The officers and their amici here seek a similarly expanded zone of protection in the immunity context.
If the Court continues to focus on the flagrancy of the police misconduct, the future of the Malley/Leon “so lacking in indicia of probable cause” standard could rest on who it is a majority of Justices see standing with the SWAT team outside the house on E. 120th Street that morning: one of George III’s customs agents, wielding a general warrant – or the befuddled Deputy Fife.
Posted in Messerschmidt v. Millender, Featured, Merits Cases
Recommended Citation: Michael Smith, Argument preview: How lacking is “so lacking”?, SCOTUSblog (Nov. 28, 2011, 2:19 PM), http://www.scotusblog.com/2011/11/argument-preview-how-lacking-is-so-lacking/
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Monday, November 28, 2011
SHADOW GOVERNMENT: WHAT OBAMA DOESN'T WANT YOU TO KNOW ABOUT HIS CZARS
The book that rocked the Obama Administration, instantly made national news and led to Congressional inquiries, resignations and forced Obama into cover up mode...IS BACK with more potent hard-hitting facts that Obama hopes you won't see.
by Scott Wheeler and Peter Leitner
by Scott Wheeler and Peter Leitner
RES JUDICATA: THE CASE FOR KAGAN'S RECUSAL
RES JUDICATA: THE CASE FOR KAGAN'S RECUSAL
November 28th, 2011 - Howard Foster
The Solicitor General of the U.S. (a position Elana Kagan held in 2010) is the government’s advocate in every case heard in any federal court. Typically the Solicitor will personally argue some cases in the Supreme Court. He or she will certainly be involved with any case that challenges the constitutionality of a federal law.
This is not to minimize the role of the Attorney General, who is also involved in many cases of constitutional import, but the Attorney General does not personally stand up in the Supreme Court and make the argument for the United States. The Solicitor General does so, and must be able to respond to questions from the justices about how the argument he or she is making might differ from prior arguments the government has made in previous cases. “Well, Madam Solicitor,” a justice is likely to ask, “today you’re here asking us to take a narrow interpretation of sec. 44 of the law, but last month you signed a brief in the Fourth Circuit asking that Court to take a different view of the same section, right?” And the Solicitor General has to explain why in a persuasive manner that shows enough intellectual consistency so as to enunciate a workable rule of decision that can apply to the current and future disputes.
It was widely reported at the time of her appointment as Solicitor General that Elana Kagan had never argued a case in any court. She had spent her entire legal career as an academic. So the legal world paid more than the usual amount of attention to the few cases that she personally argued in the Supreme court. By all accounts, she performed solidly. This reassured skeptics that she could make the transition from teacher to advocate.
Upon her confirmation, Justice Kagan recused herself from dozens of cases that came up to the Supreme Court because she had participated in them in some way while Solicitor General. The participation requiring recusal from a case by a former government employee can be as minimal as “expressing an opinion concerning the merits of the particular case or controversy.” 28 U.S.C. sec. 455(b)(3). It seemed at the time of her recusals that she was erring on the side of recusal when the question was close.
We rarely get a glimpse of the inner workings of the Solicitor General’s office. So we cannot know for sure what she personally said or did in any particular case to warrant recusal–until now, with the Patient Protection and Affordable Care Act.
Based upon Freedom of Information Act requests by Judicial Watch and other groups, emails have been made public in which Justice Kagan expressed glee in 2010 at the passage of the law, asked to be kept in the loop in all Department of Justice strategy sessions concerning the law and two months before being appointed to the Court actually read a Complaint filed in a federal court challenging the constitutionality of the law and weighed in with her response. We don’t know precisely what her response was, but we don’t need to know.
Can anyone seriously doubt that she has “expressed an opinion concerning the merits of the particular case?” She needs to recuse herself from the health care case if she is maintain her integrity. There has not been such a clear case for recusal in years. In fact I can’t think of one.
In 2004 the Sierra Club and the entire liberal legal establishment demanded, unsuccessfully, that Justice Scalia recuse himself from a case because he had gone duck hunting with Vice President Cheney. The implication was that they had discussed a particular case on his trip. Justice Scalia took the matter quite seriously and wrote a strongly worded defense of his decision not to recuse pointing out that he had not actually discussed the matter with the Vice President, and the two had not shared a single duck blind on the trip. This might sound ridiculous today, but it was important to air this publicly so that the people have confidence in the independence of the justices.
Justice Kagan will have to formally account for her actions as Solicitor General in a similar manner. The case for recusal is so strong and so obvious that her failure to do so will not be accepted by the public. Needless to say, her recusal, or non-recusal, could be the decisive factor in the biggest case of the century (thus far). But she promised in her confirmation decision not to shirk from her obligation to recuse herself when necessary.
UNITED STATES SUPREME COURT PETITION OF THE DAY
Joshua Matz Petition of the Day
Posted Mon, November 28th, 2011 9:42 am
Today, the Court begins the December sitting with oral arguments in two cases. In Mims v. Arrow Financial Services, LLC, which Ronald Mann previewed for this blog, the Court will consider federal court jurisdiction under the Telephone Consumer Protection Act. And in First American Financial Corp. v. Edwards, which Christopher Wright previewed for this blog and James Vicini previewed for Reuters, the Court will consider the “injury in fact” prong of Article III standing under the Real Estate Settlement Services Act.
Discussion of the Affordable Care Act turned primarily to debates over judicial recusal, with a focus on Justices Thomas and Kagan. Lyle summarizes the arguments here, while Mark Sherman of the Associated Press and Robert Barnes of the Washington Post also provide coverage of the debate; Roger Pilon weighs in on the merits of the debate at CATO@Liberty, as does Carrie Severino of the Judicial Crisis Network in an op-ed in the Washington Examiner. At New York Magazine, Dahlia Lithwick examines Justice Kagan’s first year on the Court, emphasizing that “[p]eople who think Justice Elena Kagan should recuse herself from the looming ‘Obamacare’ case might want to take a closer look at her first term … while Kagan is assuredly a liberal, and likely also a fan of the health-reform law, a close read of her tenure at the Supreme Court suggests that she is in fact the opposite of a progressive zealot.”
Commentators also offered broader thoughts on various aspects of the ACA litigation. In his column for law students for this blog, Stephen Wermiel provides “[a]n introduction to jurisdiction and remedies, through the lens of the health care cases.” At the New York Times Economix Blog, Uwe E. Reinhardt emphasizes that, through their constitutional reasoning, “the justices will be making major health policy.” Blake Aued summarizes the issues in the case for the Athens Banner-Herald, as does Neil Reynolds in his column for the Toronto Globe and Mail. The editorial board of the Washington Post urges the Court to allow cameras in the courtroom, arguing that the ACA cases “would be a fitting vehicle for the court’s first televised argument.” In a New York Review of Books essay entitled “How the Justices Get What They Want,” Robert Gordon reviews two recent books on the Court to provide historical context for the ACA challenges. And Julian Pecquet of The Hill reports on an expected flood of amicus briefs in the ACA litigation.
As Lyle reports for this blog, Texas announced over the weekend that it will request an emergency order from the Court today to “delay the implementation of a new redistricting plan for the two chambers of the state’s legislature — a plan drawn up by a three-judge federal District Court for use temporarily as election season begin.” Bloomberg, The Houston Chronicle, the Election Law Blog, and Constitutional Law Prof Blog all provide coverage.
Briefly:
•For this blog, Alex Wohl previews Federal Aviation Administration v. Cooper (whether the Federal Privacy Act includes damages for mental and emotional distress), while Michael Dimino previews Setser v. United States (whether a district court may direct that a criminal defendant’s sentence run consecutively with a yet-to-be-imposed sentence that the defendant is expected to receive for a state crime).
•In the Washington Post, Robert Barnes previews Wednesday’s argument in PPL Montana v. Montana, in which the Court will consider a dispute over how to determine whether a river is navigable.
•In the Los Angeles Times, David G. Savage reports on Justice Scalia’s role as leader of an “unusual pro-defendant faction at the high court in reversing convictions for murder, drug dealing, wife beating and drunken driving.”
•At Verdict, Vikram David Amar and Alan Brownstein argue that, even if the Proposition 8 case does reach the Court, “it is still quite unclear … whether the Court will rule on the merits—or instead dismiss the appeal on procedural grounds.”
•Also at Verdict, Julie Hilden explains why, in her view, the Court is likely to grant cert. to reverse a recent decision by the Third Circuit in an indecency case arising out of Janet Jackson’s “wardrobe malfunction” during the 2004 Super Bowl halftime show.
•Denise Jewell Gee of the Buffalo News reports on a cert. petition filed by Erie County asking the Court to review a Second Circuit ruling “that the county failed to put policies in place at the jail to prevent the rape.” (Hat tip to Howard Bashman @ How Appealing.)
•John Lynch of the Arkansas Democrat-Gazette previews Blueford v. Arkansas, in which the Court will consider whether, if a jury deadlocks on a lesser-included offense, the Double Jeopardy Clause bars the reprosecution of a greater offense after a jury announces that it has voted against guilt on the greater offense.
•In the Silicon Valley Mercury News, Howard Mintz profiles Karen Golinski and Amy Cunninghis –plaintiffs in a constitutional challenge to the Defense of Marriage Act (DOMA) – and reports on the string of challenges to DOMA that could reach the Court within a few years.
ELENA KAGAN MUST RECUSE HERSELF FROM OBAMACARE CASE!
ELENA KAGAN MUST RECUSE HERSELF FROM OBAMACARE CASE
By Julie Borowski
After several federal judges have declared ObamaCare unconstitutional, the Supreme Court has finally decided that it will hear challenges to the health care overhaul law. This could be one of the most closely watched and politically-charged Supreme Court cases in the past few decades. While I hope that the nation’s highest court makes the correct decision regarding ObamaCare, we shouldn’t automatically trust the justices to uphold the Constitution.We all know that the Constitution grants very few powers to the federal government. Only about thirty enumerated powers are listed throughout the entire document. Our founding document clearly prohibits the federal government from forcing citizens to purchase a product simply because they exist. Almost everything that Congress does is not within bounds of the Constitution yet the Supreme Court rarely ever strikes down a law as unconstitutional. Between the years 1937 to 1995, the Supreme Court did not declare one single law unconstitutional according to the Tenth Amendment Center. This is exactly what Thomas Jefferson feared.Jefferson warned that if the federal government has a monopoly on determining the extent of its own powers, these powers would continue to grow regardless of separation of powers. This is why James Madison declared that states were “duty bound to resist” any federal law that violated the Constitution. A majority of the states have pushed back against the health care overhaul law.
The recent passage of Issue 3 also known as the Ohio Healthcare Freedom Amendment is a win for the states against federal abuse.The main point is just because ObamaCare is unconstitutional doesn’t mean the Supreme Court will rule it so. Some justices more than others have shown that they are not interested in upholding our founding document. They wrongly see it as a “living document” that can be interpreted as they please based on the political whims of the day. Their dangerous philosophy has essentially rendered the Constitution pointless. As historian Kevin Gutzman says, “those who give us a living Constitution are actually giving us a dead Constitution, since such a thing is completely unable to protect us from the encroachments of government power.”
Supreme Court Justice Elena Kagan made it clear that she sees almost no limits to federal power in her confirmation hearing last summer. She was even unable to answer a question on whether it is constitutional for the federal government to force citizens to eat three vegetables and three fruits every day. Knowing what we are up against, is there anything we can do to help ensure that the Supreme Court makes the right decision? I would say that the best thing we can do is to call on Justice Elena Kagan to recuse herself—abstain from participating from the case—due to a conflict of interest.
Elena Kagan as Solicitor General for the Obama administration claims she was present at “at least one” meeting regarding strategy for the defense of ObamaCare. The Judicial Crisis Network has made the case that her involvement is much more substantial than she is admitting. Emails obtained by Judicial Watch through the Freedom of Information Act reveal that she cheered on the passage of ObamaCare in a number of emails. On March 21, 2010, an email was exchanged between Kagan and then-Senior Counselor for Access Justice Laurence Tribe. Kagan writes “I hear they have the votes!! Simply amazing…” and Tribe responds “So healthcare is basically done! Remarkable.”
Elena Kagan should recuse herself from the case as matter of integrity. She has recused herself from 29 of 82 Supreme Court cases because of her previous work as Solicitor General. The ObamaCare case should be no exception. Section 455 of Title 28 of the United States Code (the Judicial Code) states that “any justice, judge, or magistrate judge of the United States shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned.” Now, I’m not a lawyer, but I believe that calling the passage of ObamaCare “simply amazing” and using double exclamation points implies a bit (okay, a lot) of impartiality.
Let’s hope that the Supreme Court actually stands up for the original intent of the Constitution. Justice Elena Kagan is not a defender of our constitutional rights; she is a partisan cheerleader for ObamaCare. Regardless of what the Supreme Court happens to rule next June, ObamaCare will remain a clear violation of the Constitution and should be immediately repealed for the sake of our health care freedom.
Source: FreedomWorks
REP. FRANK WON'T RUN FOR RE-ELECTION!
REP. FRANK WON'T RUN FOR RE-ELECTION!
By Russell Berman and Josh Lederman - 11/28/11 01:07 PM ET
Rep. Barney Frank (D-Mass.) announced Monday that he is not seeking reelection, ending a 32-year career in the House.
Frank, 71, is the top Democrat on the Financial Services Committee and the architect, with former Sen. Chris Dodd (D-Conn.), of the sweeping Wall Street regulatory reform law enacted in 2010.
He announced his decision at a 1 p.m. press conference in his district, and said redistricting played a role in his retirement.
"I was planning to run again, and then congressional redistricting came," said Frank.
Frank's retirement will deprive the House of one of its most colorful characters, a man known for his quick and often caustic wit.
Elected in 1980, Frank survived scandal early in his career and rose to become the nation’s most powerful openly-gay elected official. After coming out publicly, he became a champion for gay rights and helped campaign for an end to the military’s ban on gays serving openly, which ended this year.
His legislative legacy is likely to be the Dodd-Frank financial reform bill that passed in 2010 in the wake of the Wall Street meltdown that sent the economy into a tailspin in 2008. Hailed by the Obama administration, the law has drawn sharp criticism in the Republican presidential nomination fight, and one leading contender, former Speaker Newt Gingrich (R-Ga.), even suggested that Frank be jailed, along with Dodd, for their support of the mortgage giants Fannie Mae and Freddie Mac in the lead up to the financial crisis.
President Obama praised Frank's work on the financial reform legislation.
"This country has never had a Congressman like Barney Frank, and the House of Representatives will not be the same without him," Obama said in a statement. "It is only thanks to his leadership that we were able to pass the most sweeping financial reform in history designed to protect consumers and prevent the kind of excessive risk-taking that led to the financial crisis from ever happening again."
Although Frank's district was made slightly more competitive for Republicans during redistricting, Democrats were adamant that Frank’s retirement would not change the game and that the seat would remain safely in Democratic hands. In 2008, 63 percent of voters in the district chose President Obama over Sen. John McCain (R-Ariz.); under the redrawn boundaries, 61 percent would have gone for Obama.
Frank said his decision was "precipitated by congressional redistricting, not entirely caused by it."
"There are other things I'd like to do in my life before my career is over," he said, referencing an uncompleted doctoral dissertation at Harvard University.
Frank's decision will be seen by some as a sign the veteran Democrat lacked confidence his party will retake the House next year.
Democrats have been publicly sanguine about their chances to flip the 26 seats they need to retake the majority, but political handicappers are leery of those claims in light of President Obama’s sinking poll numbers.
Frank had no trouble winning reelection for more than two decades, capturing 68 percent of the vote in 2008. But the changing political climate and the special election of Republican Sen. Scott Brown (Mass.) in early 2010 gave the GOP reason to be bullish in Massachusetts, and Frank faced a tougher-than-expected reelection later that year, coming in just 11 points ahead of Republican Sean Bielat.
Democrats said Monday that Frank’s decision was a long time coming and did not catch them off guard, but they had no potential candidates to float to replace him.
Nonetheless, attention turned Monday to the handful of former Senate candidates who dropped out of the Democratic primary after Elizabeth Warren entered the race in October. Those include entrepreneur Alan Khazei, the Senate race’s initial front-runner, and Setti Warren, the mayor of Newton, Mass., where Frank resides.
On the Republican side, Elizabeth Childs, a physician and school board member, had already announced plans to challenge Frank.
Frank’s announcement came one month after another Massachusetts Democrat, Rep. John Olver, made public his plans to leave the House at the end of the term. That retirement spared Democrats — who control every seat in the state’s congressional delegation — from an unpleasant intraparty battle. Massachusetts lost one House seat in the redistricting process, and Olver’s retirement allowed Democrats to draw a map with one less district without an incumbent-on-incumbent primary contest in 2012.
Democratic National Committee Chairwoman Debbie Wasserman Schultz (D-Fla.) called the 71-year-old congressman a "historic pioneer in American politics."
"This is a man of incredible intellect. A powerhouse who has championed the rights of consumers in the financial services community," Wasserman Schultz said on a conference call with reporters Monday. "I really have a heavy heart today. I'm going to miss him terribly."
Massachusetts Democratic Party Chairman John Walsh also praised Frank's service.
"Barney has been a tireless advocate for justice and equality who has stood up for Massachusetts’ fisherman, fought for economic development on the South Coast and provided the driving force behind landmark Wall Street reform legislation," he said.
— Erik Wasson contributed.
This story was posted at 9:54 a.m. and last updated at 1:41 p.m.
By Russell Berman and Josh Lederman - 11/28/11 01:07 PM ET
Rep. Barney Frank (D-Mass.) announced Monday that he is not seeking reelection, ending a 32-year career in the House.
Frank, 71, is the top Democrat on the Financial Services Committee and the architect, with former Sen. Chris Dodd (D-Conn.), of the sweeping Wall Street regulatory reform law enacted in 2010.
He announced his decision at a 1 p.m. press conference in his district, and said redistricting played a role in his retirement.
"I was planning to run again, and then congressional redistricting came," said Frank.
Frank's retirement will deprive the House of one of its most colorful characters, a man known for his quick and often caustic wit.
Elected in 1980, Frank survived scandal early in his career and rose to become the nation’s most powerful openly-gay elected official. After coming out publicly, he became a champion for gay rights and helped campaign for an end to the military’s ban on gays serving openly, which ended this year.
His legislative legacy is likely to be the Dodd-Frank financial reform bill that passed in 2010 in the wake of the Wall Street meltdown that sent the economy into a tailspin in 2008. Hailed by the Obama administration, the law has drawn sharp criticism in the Republican presidential nomination fight, and one leading contender, former Speaker Newt Gingrich (R-Ga.), even suggested that Frank be jailed, along with Dodd, for their support of the mortgage giants Fannie Mae and Freddie Mac in the lead up to the financial crisis.
President Obama praised Frank's work on the financial reform legislation.
"This country has never had a Congressman like Barney Frank, and the House of Representatives will not be the same without him," Obama said in a statement. "It is only thanks to his leadership that we were able to pass the most sweeping financial reform in history designed to protect consumers and prevent the kind of excessive risk-taking that led to the financial crisis from ever happening again."
Although Frank's district was made slightly more competitive for Republicans during redistricting, Democrats were adamant that Frank’s retirement would not change the game and that the seat would remain safely in Democratic hands. In 2008, 63 percent of voters in the district chose President Obama over Sen. John McCain (R-Ariz.); under the redrawn boundaries, 61 percent would have gone for Obama.
Frank said his decision was "precipitated by congressional redistricting, not entirely caused by it."
"There are other things I'd like to do in my life before my career is over," he said, referencing an uncompleted doctoral dissertation at Harvard University.
Frank's decision will be seen by some as a sign the veteran Democrat lacked confidence his party will retake the House next year.
Democrats have been publicly sanguine about their chances to flip the 26 seats they need to retake the majority, but political handicappers are leery of those claims in light of President Obama’s sinking poll numbers.
Frank had no trouble winning reelection for more than two decades, capturing 68 percent of the vote in 2008. But the changing political climate and the special election of Republican Sen. Scott Brown (Mass.) in early 2010 gave the GOP reason to be bullish in Massachusetts, and Frank faced a tougher-than-expected reelection later that year, coming in just 11 points ahead of Republican Sean Bielat.
Democrats said Monday that Frank’s decision was a long time coming and did not catch them off guard, but they had no potential candidates to float to replace him.
Nonetheless, attention turned Monday to the handful of former Senate candidates who dropped out of the Democratic primary after Elizabeth Warren entered the race in October. Those include entrepreneur Alan Khazei, the Senate race’s initial front-runner, and Setti Warren, the mayor of Newton, Mass., where Frank resides.
On the Republican side, Elizabeth Childs, a physician and school board member, had already announced plans to challenge Frank.
Frank’s announcement came one month after another Massachusetts Democrat, Rep. John Olver, made public his plans to leave the House at the end of the term. That retirement spared Democrats — who control every seat in the state’s congressional delegation — from an unpleasant intraparty battle. Massachusetts lost one House seat in the redistricting process, and Olver’s retirement allowed Democrats to draw a map with one less district without an incumbent-on-incumbent primary contest in 2012.
Democratic National Committee Chairwoman Debbie Wasserman Schultz (D-Fla.) called the 71-year-old congressman a "historic pioneer in American politics."
"This is a man of incredible intellect. A powerhouse who has championed the rights of consumers in the financial services community," Wasserman Schultz said on a conference call with reporters Monday. "I really have a heavy heart today. I'm going to miss him terribly."
Massachusetts Democratic Party Chairman John Walsh also praised Frank's service.
"Barney has been a tireless advocate for justice and equality who has stood up for Massachusetts’ fisherman, fought for economic development on the South Coast and provided the driving force behind landmark Wall Street reform legislation," he said.
— Erik Wasson contributed.
This story was posted at 9:54 a.m. and last updated at 1:41 p.m.
SCOTUS --- DOES IMPOSING MUNICIPAL POLICE LIABILITY ON A SINGLE WOMAN AFTER A JAIL GUARD RAPED HER AND KIDNAPPED HER CHILDREN CONSTITUTE INDIFFERENCE!
Does imposing municipal liability for a single incident of sexual assault on an inmate by a jail guard contravene the rigorous deliberate indifference?
SCOTUSblog
SCOTUSblog
Sunday, November 27, 2011
PLAY OBAMA'S "GOOD BET" SLOT MACHINE!
http://gop.com/GoodBet/
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THE NEW HAMPSHIRE UNION LEADER ENDORSES NEWT GINGRICH FOR PRESIDENT!
Newt Gingrich talks about issues during a stop at the New Hampshire Union Leader on Monday.(DAVID LANE/UNION LEADER)
AN EDITORIAL: FOR PRESIDENT, NEWT GINGRICH
By JOSEPH W. McQUAID
Published Nov 27, 2011
This newspaper endorses Newt Gingrich in the New Hampshire Presidential Primary.
America is at a crucial crossroads. It is not going to be enough to merely replace Barack Obama next year. We are in critical need of the innovative, forward-looking strategy and positive leadership that Gingrich has shown he is capable of providing.
He did so with the Contract with America. He did it in bringing in the first Republican House in 40 years and by forging balanced budgets and even a surplus despite the political challenge of dealing with a Democratic President. A lot of candidates say they're going to improve Washington. Newt Gingrich has actually done that, and in this race he offers the best shot of doing it again.
We sympathize with the many people we have heard from, both here and across the country, who remain unsure of their choice this close to the primary. It is understandable. Our nation is in peril, yet much of the attention has been focused on fluff, silliness and each candidate's minor miscues.
Truth be known, many in the liberal media are belittling the Republican candidates because they don't want any of them to be taken as a serious challenger to their man, Obama.
Readers of the Union Leader and Sunday News know that we don't back candidates based on popularity polls or big-shot backers. We look for conservatives of courage and conviction who are independent-minded, grounded in their core beliefs about this nation and its people, and best equipped for the job.
We don't have to agree with them on every issue. We would rather back someone with whom we may sometimes disagree than one who tells us what he thinks we want to hear.
Newt Gingrich is by no means the perfect candidate. But Republican primary voters too often make the mistake of preferring an unattainable ideal to the best candidate who is actually running. In this incredibly important election, that candidate is Newt Gingrich. He has the experience, the leadership qualities and the vision to lead this country in these trying times. He is worthy of your support on January 10.
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