A lighthearted look at the American tragedy
The next step of this panic could become the mother of all bank runs, i.e. a run on the trillion dollar plus of the cross border short-term interbank liabilities of the US banking and financial system as foreign banks as starting to worry about the safety of their liquid exposures to US financial institutions; such a silent cross border bank run has already started as foreign banks are worried about the solvency of US banks and are starting to reduce their exposure. And if this run accelerates - as it may now - a total meltdown of the US financial system could occur. We are thus now in a generalized panic mode and back to the risk of a systemic meltdown of the entire financial system. And US and foreign policy authorities seem to be clueless about what needs to be done next. Maybe they should today start with a coordinated 100 bps reduction in policy rates in all the major economies in the world to show that they are starting to seriously recognize and address this rapidly worsening financial crisis.If I were Paulson or Bernanke, I'd be listening. But I doubt that they are.
Glenn Greenwald has a good post up that points out that the tactics used to sell Congress on the Fat Cat Bail Out Plan (FCBOP) are the same as those used to sell the Iraq war, WE'RE ALL GOING TO DIE! The only way to save ourselves is to
invade Iraq give $700bn to Fat Cats. Greenwald summarizes the proposed 'plan':
Here is the current draft for the latest plan. It's elegantly simple. The three key provisions: (1) The Treasury Secretary is authorized to buy up to $700 billion of any mortgage-related assets (so he can just transfer that amount to any corporations in exchange for their worthless or severely crippled "assets") [Sec. 6]; (2) The ceiling on the national debt is raised to $11.3 trillion to accommodate this scheme [Sec. 10]; and (3) best of all: "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency" [Sec. 8].
Put another way, this authorizes Hank Paulson to transfer $700 billion of taxpayer money to private industry in his sole discretion, and nobody has the right or ability to review or challenge any decision he makes.
If it works, it works. Why mess with success?
The only question left is, will this be the final reaming that the US will undergo at the hands of the Bushies? I think this is the topper, but you never know!
Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation.(h/t Krugman)
As pointed out in our last post, one of the Bush administration's favorite tactics is to say one thing, and then either do another, or both say and do another.After assurances that the US will 'respect Pakistani sovereignty' from CJCS Adm. Mullen, Gates comes out saying:
In an interview with the BBC, Secretary Gates insisted that the United States has the right to launch attacks across the border into Pakistan, and take whatever other actions its deems necessary to “protect our troops”. He refused to answer a question as to whether Pakistan’s government had authorized the strikes, but said he would prefer Pakistan tackle the militants itself. Prime Minister Raza Gilani said his government has warned the US about the attacks, and insists there can be no compromise on Pakistan’s sovereignty.And here is a novel reason for the cross -border attacks, and some of the backlash they might provoke:
CIA Director Michael Hayden said yesterday that the attacks into Pakistan are designed to “tickle” the militants and examine their responses, but the number of civilians killed in these strikes has alienated the US from what it has long considered among its most important partners in the region. In addition, a large tribe in South Waziristan announced that a jirga yesterday had decided they would take up arms against the Americans if the attacks continue, including attacking across the border into Afghanistan.The Asia Times also has an interesting article about the new 'facts on the ground' in Pakistan/Afghanistan. As above, these actions seem to work to unite Pakistan, at least in the border regions, against US attacks:
Either way, the US incursions have unprecedented unity between local tribesmen, the Taliban and the rank-and-file Pakistani security forces deployed on the border regions. Tribal sources tell Asia Times Online that the next time American ground forces venture into Pakistan they will meet stiff opposition from these now-combined forces.Pulling new forces into the war on the other side seems a strange way to proceed, but not so strange for Feckless Leader. Expanding a war without expanding the available forces sets the stage for another, larger disaster than the current Afghan situation. But with winter coming on, probably another administration will have to deal with it.
With all the hoopla over the financial meltdown, it's gone almost unnoticed that North Korea has now affirmed that they are working to restart their nuclear reactor.
AFP says that reactivation could take less than one year, which would put the whole process back at square one for the next US administration.
North Korea is peeved that the US put new conditions on its pledge to take NK off of the 'state sponsors of terrorism list' by requiring intrusive inspections that were not specified when the six-party deal was made. This has become the typical modus operandi of US diplomacy, used also by lackey Sarkozy while negotiating with the Russians. Make a deal, then change the terms accompanied by a press campaign to distort the issues. It didn't work with the Russians, and evidently it's not working with the North Koreans. They've also announced that they don't care if they're taken off of the 'list', so now further negotiations will be hampered by having one less carrot to offer them.
The Bush administration has been struggling mightily to delay all the looming disasters that almost eight years of arrogant stupidity have assembled. Success at any of their endeavors would have been a small miracle, chalk up another one in the failure column.
We've going to get a sweeping plan, no less, to 'fight [the] crisis'.
The government, no matter how steeply discounted the purchases of 'illiquid' assests are, will always be left with a sack of shit. That's why they're illiquid. Initial estimates put the steeply discounted price tag at half a trillion, so count on more.
The Democrats, of course, will line up obediently to vote on the 'sweeping plan' without even debating the giveaway. Why bother? It ain't their money, and they have to go out and run for office on the big issues of the day.
It is said that history repeats itself, first as tragedy:
The program may look more like the Reconstruction Finance Corporation, a Depression-era relief program formed in 1932 by President Hoover that tried to inject liquidity into the market by giving loans to banks and other businesses.
And now we get the farce, once again it will be the same thieves that started the mess given the keys to the government's money.
But after the farcical aspects play out, it will be the same old tragedy.
Many of Blog Simple's posts link to articles in TomDispatch. Tom Engelhardt gets some (most?) of the best and most realistic thinkers on world affairs, articles that are so far above the claptrap we're normally fed by the 'distinguished' New York Times and Washington Post that the difference is almost absurd.
Once again, Tom has a must read article, this time by Tariq Ali, that looks at the apparent escalation of the excellent Afghan war into Pakistan. By all means, read the whole thing, but here is the conclusion:
The key in Pakistan, as always, is the army. If the already heightened U.S. raids inside the country continue to escalate, the much-vaunted unity of the military High Command might come under real strain. At a meeting of corps commanders in Rawalpindi on September 12th, Pakistani Chief of Staff General Ashfaq Kayani received unanimous support for his relatively mild public denunciation of the recent U.S. strikes inside Pakistan in which he said the country's borders and sovereignty would be defended "at all cost."
Saying, however, that the Army will safeguard the country's sovereignty is different from doing so in practice. This is the heart of the contradiction. Perhaps the attacks will cease on November 4th. Perhaps pigs (with or without lipstick) will fly. What is really required in the region is an American/NATO exit strategy from Afghanistan, which should entail a regional solution involving Pakistan, Iran, India, and Russia. These four states could guarantee a national government and massive social reconstruction in that country. No matter what, NATO and the Americans have failed abysmally.
Really required, unfortunately, is another way of saying, won't be done. Instead, we have the Chairman of the Joint Chiefs of Staff, Adm. Mullen, jetting off to Islamabad for talks with the Prime Minister of Pakistan, Gilani, as well as the head of the Pakistan military, Kayani. Our 'do everything' military has pretty well cornered the market on diplomacy in Pakistan. Sending a military man to placate or armtwist our supposed allies makes one believe that armtwisting is the order of the day. Washington has been coy lately about the delivery of F16 fighters to Pakistan, might that be the carrot being offered? Certainly, to get Gilani and Kayani to sign off on the new cross-border US policy is a tall order. To get them to sign off publicly seems far fetched. If they do not sign off, Pakistan has a trump card to play, as explained in the conclusion to the NTY article linked to above:
On a visit to Britain on Tuesday, Pakistan’s newly elected president, Asif Ali Zardari, was quoted as saying after meeting with British Prime Minister Gordon Brown: “This situation doesn’t help democracy. “
When asked about future cross border attacks, Mr. Zardari said: “I don’t think there will be any more.”
In a meeting in Islamabad on Tuesday with Jack Straw, the British justice secretary, Mr. Gilani said that Pakistan’s sovereignty had to be respected.
According to a press statement by the Pakistani prime minister’s office, Mr. Straw said that he “hoped that Pakistan would continue providing passage to NATO convoys through its territory on their way to Afghanistan.”
You had better hope so, Mr. Straw, and you too, Adm. Mullen.
Yesterday in a local report on KTRK-TV in Houston, TX, reporter Wayne Dolcefino revealed that media have been blocked from covering Hurricane Ike’s devastation. In a press conference, Dolcefino pressed Gov. Rick Perry on why media aren’t even allowed to fly over parts of Galveston Island, noting that media access was far better in Mississippi and Louisiana after Hurricane Katrina. Perry tried to brush off Dolcefino’s concerns, but eventually passed blame to federal officials:
DOLCEFINO: That is unprecedented and quite honestly not appropriate because it’s our job to inform people. Why can’t we go to Bolivar and West End?
PERRY: I think when the local officials decide it was appropriate, whether it’s the media or first responders or what have you. The fact of the matter, that is actually a local decision, Wayne, that is made by the local county judge and by the mayor of those —
DOLCEFINO: They don’t control that area.
PERRY: Last time, the state of Texas doesn’t even.
DOLCEFINO: So it’s the federal government?
PERRY: I don’t know.
Governor Perry seems fortuitously uninformed.
As a follow-up to Blog Simple's last post about the shenanigans that went down in Kuwait and Iraq, I should point out that TomDispatch has a report by Frida Berrigan that looks at the big picture of corruption. At that lofty level, no indictments are handed out, no one pleads guilty, and few traces are left of the billions that disappear into company coffers.Not until they arise again, those billions, as campaign contributions, 527s, and ownership and manipulation of the press. Even when wrongdoing is discovered and documented, the consequences are more than benign:
Ironically, the Pentagon isn't even getting what it paid for… not by a long shot. KBR's fraudulent activities have, according to the Government Accountability Office, included the failure to adequately account for more than a billion dollars in contracted funds; the leasing of vehicles to be used by company personnel for up to $125,000 a year (despite the fact that these vehicles could have been purchased outright for $40,000 or less); the purchase of unnecessary luxuries such as monogrammed towels for use in company-run recreation facilities for military personnel; the overcharging for fuel brought into Iraq from Kuwait for military use; the charging to the Pentagon's tab three to four times as many meals as were actually consumed by U.S. military personnel; and the provision of unclean water for U.S. troops.
All of these abuses came to light thanks to investigations by Representative Henry Waxman (D-CA), the Pentagon's own Office of the Inspector General, and others, but Halliburton and its former subsidiary got off with little more than such wrist slaps as the revocation of the fuel supply contract and of KBR'S exclusive LOGCAP contract for Iraq. That was recently divided into three parts and put out to bid. KBR was, however, allowed to join the bidding, and is now sharing the contract with DynCorp and Fluor Corporation. Each company has received a $5 billion contract that includes nine one-year options for renewal that could be worth, in total, up to $150 billion, according to Dana Hedgpeth of the Washington Post.
The underlying philosophy behind such massive and continuous corruption goes under the heading 'privatization'. In a sense, privatization can be thought of as the last stage of the capitalist state. The relentless quest for markets and resources has gone around the globe, only nooks and crannies remain. So the search turns inwards, and the big pieces of the state are now in play as both resources and markets. The whole process is greased by financial feedback into the political system. Neither party is immune, and if the Republicans have raised the bar higher than we would have thought possible, the Democrat's silence on these facts show that the bar will not be coming down, no matter who is elected.
In his introduction to the report, Tom Engelhardt concludes with this comment:
In the meantime, let Frida Berrigan take you past the obvious Blackwater issues and into the deeper quagmire of the massive privatization of the American military. It's an issue whose time should long ago have arrived, but don't hold your breath till the media discussion and debate begins.
Media discussion and debate might begin if one of the presidential candidates would bring it up. But both are beholden to the same private powers that are running amok. Private debts are passed over to the state, while public resources are divvied up amongst the jackals at the door. How long can it possibly continue?
Meanwhile, ...the Caesarism that is to succeed arrives with quiet firm step....
And this is from just one investigation:
Almost three years after Cockerham returned to San Antonio, federal investigators have identified at least $125.5 million in tainted contracts for bottled water that Cockerham, based at Fort Sam Houston, steered to companies in Kuwait as part of a scheme to collect $15 million in kickbacks, documents show.
Cockerham and three other contracting officers who worked with him, succeeded him or preceded him also are accused of directing millions in contracts for potable water, latrine maintenance, gray water removal and warehouse work to the firms.
So far then, the story is that mid-level officers, enabled because of lack of supervision, ran a scheme that netted them tens of millions of dollars. The army says:
They might amount to just a sliver of the problem. Ongoing investigations — 124 of them — are focusing on several current or former officers who served in Kuwait or Iraq, civilian employees, contractors and many of their friends and relatives.
“The investigations involve 286 people, both U.S. and foreign personnel,” Gordon Heddell, the Defense Department's acting inspector general, testified before Congress on July 23. “Much more is anticipated as investigations ready for prosecution mount.”
“When workload surges and/or staffing shortfalls occur, (our) system of checks and balances is put under stress and opportunities for mistakes and abuse of the system increase,” Donald Bibby, a spokesman for the Army Contracting Agency, the wing Cockerham worked under, said by e-mail.That may have been true during the heady days following the invasion, but:
Hall is accused of obtaining $17.25 million in contracts for bottled water and security fencing between January 2004 and November 2007Nov. 2007 is 4 1/2 years after the invasion. It's almost 3 years after the replacement of Rumsfeld by Gates. That system of checks and balances sure did take a long time to get going. And with 124 investigations still ongoing, we're just at the tip of the iceberg.
Do not worry about the rich, the purges will come and the workers will reap the benefits.
Today instead the US has performed the greatest nationalization in the history of humanity. By nationalizing Fannie and Freddie the US has increased its public assets by almost $6 trillion and has increased its public debt/liabilities by another $6 trillion. The US has also turned itself into the largest government-owned hedge fund in the world: by injecting a likely $200 billion of capital into Fannie and Freddie and taking on almost $6 trillion of liabilities of such GSEs the US has also undertaken the biggest and most levered LBO (“leveraged buy-out”) in human history that has a debt to equity ratio of 30 ($6,000 billion of debt against $200 billion of equity).
So now Comrades Bush, Paulson and Bernanke (as originally nicknamed by Willem Buiter) have now turned the USA into the USSRA (the United Socialist State Republic of America). Socialism is indeed alive and well in America; but this is socialism for the rich, the well connected and Wall Street. A socialism where profits are privatized and losses are socialized with the US tax-payer being charged the bill of $300 billion.
I was initially in favor of funding the Large Hadron Collider—the biggest, most technologically advanced machine ever built. It is a superconductive, superfluid ring in which bundles of heavy atoms are to be accelerated to almost the speed of light and smashed together to replicate the awesome energies of the Big Bang and to create showers of heavy-mass particles found only in those first seconds when the universe was destroyed and re-created. Unfortunately, theoretical calculations show that the LHC could produce two kinds of dark matter—black holes and strange, ultradense quark matter—that are extremely dangerous, as both have been theoretically proven to swallow in a chain reaction the entirety of Earth. Thus, a cosmological bomb billions of times more powerful than the atomic bomb might be created at the European Organization for Nuclear Research.Well, at least we won't have to listen to election crap. Look on the bright side!
The events of the past seven years have yielded a definitive judgment on the strategy that the Bush administration conceived in the wake of 9/11 to wage its so-called Global War on Terror. That strategy has failed, massively and irrevocably. To acknowledge that failure is to confront an urgent national priority: to scrap the Bush approach in favor of a new national security strategy that is realistic and sustainable -- a task that, alas, neither of the presidential candidates seems able to recognize or willing to take up.That McCain is unable to confront the urgent national priority is no surprise, if and when he is elected he can turn it all over to Palin and get back to playing solitaire, or whatever he does in his spare time. He'll have nothing but spare time! If we're lucky, he'll even turn presidential speechifying over to the VP, his head and the teleprompter just don't work well together.
Palin Billed State for Nights Spent at Home
Alaska Gov. Sarah Palin has billed taxpayers for 312 nights spent in her own home during her first 19 months in office, charging a "per diem" allowance intended to cover meals and incidental expenses while traveling on state business.
The governor also has charged the state for travel expenses to take her children on official out-of-town missions. And her husband, Todd, has billed the state for expenses and a daily allowance for trips he makes on official business for his wife.
If she can squirm her way out of this one, she is formidable!
The Bush administration seized control of the nation’s two largest mortgage finance companies on Sunday, seeking to shrink drastically their outsize influence on Wall Street and on Capitol Hill while at the same time counting on them to pull the nation out of its worst housing crisis in decades.It's the Bush adminstration that has seized control, not the government of the US, says the article, and the takeover counters F&Fs 'outsized influence' on Wall Street and Capitol Hill. Does it counter the influence, whatever it may be, or just put it under the direct control of the Bush administration. What does that mean, anyway?
The Treasury Department is close to finalizing a plan to help shore up mortgage giants Fannie Mae and Freddie Mac, according to people familiar with the matter. Precise details of Treasury's plan couldn't be learned. The plan is expected to involve a creative use of Treasury's authority to intervene in the two companies, which it won earlier this year, and could involve a capital injection into the beleaguered giants.Shorter US version, "America, you pay."
Although he is presently holed up in the premier's residence for fear of his safety from militant attacks, he has the security apparatus largely in check to force it to abandon its reservations about the "war on terror".This would mean both renewed attacks on the tribal regions by Pakistani troops, as well as cross border incursions by NATO and Afghan troops.
Barely a week after a meeting on the US aircraft carrier USS Abraham Lincoln in the Indian Ocean between the chairman of the US Joint Chiefs of Staff, Admiral Michael Mullen, and the chief of the Pakistani Army Staff, General Ashfaq Pervez Kiani, to discuss infiltration points for militants going from Pakistan to Afghanistan and to pin-point al-Qaeda training camps, American special forces carried out two attacks inside Pakistan.It seems like déjà vu all over again, the president strong man does and says one thing, while the rest of Pakistan's politicians remain strongly against escalating the war into their country. Mr. Shahzad believes that Zardari will prevail:
With his fingers firmly on the levers of power, and with strong American backing, Zardari will lead Pakistan into a new and potentially extremely bloody chapter of which the US special forces' raids into the country are just the beginning.Musharraf, while toeing the US line on the surface, had the wit to prevent cross border raids, and to keep military pressure on the tribal lands balanced with negotiating and compromise. If Zardari remains a tool of the Americans, there is an extreme risk of widespread revolt in Pakistan. The consequences could both destroy the Pakistan state, such as it is, as well as doom the Afghan war for the US in the short term (it's doomed in the long term, anyway).
The disorder from which we suffer—known among its close observers as Self-Satirizing Syndrome, or SSS—is a cruel one. Not only have we been made to witness the betrayal of almost every promise made by our Founding Fathers, and seen their direst prophesies confirmed, we must also suffer the indignity of seeing our constitutional ideal turned into a shabby mockery of itself. Somehow, by a trick of dialectical cunning, the United States of America has vaulted over the tragic phase of history in favor of a relentless pursuit of historical farce.I suggest reading the whole thing.
The real question is not the fantasy of Sarkozy, but is that put by Putin: How far are you willing to go? Our national survival is being threatened, we have drawn a line in the sand. Are you stepping over? Our nuclear arsenal is aimed at all European cities, any attack on Russia will risk a counterattack that will utterly destroy you. You're first.
Nicolas Sarkozy, the French and current EU president who convened the summit, said Moscow's relations with the west were at stake in the Caucasus and that he would go to Moscow next week, along with the European commission president, José Manuel Barroso, and the EU foreign policy head, Javier Solana, to mediate over Georgia but also to gauge Russia's commitment to a values-based relationship with Europe.
"The question is what does Russia want," Sarkozy said of the Kremlin's decision to invade and partition Georgia. "It takes two to tango. The meeting [in Moscow] on September 8 will be crucial for relations between Russia and the EU."