Friday, December 12, 2008

US Congress Holds A 'Monopoly' On Debt

Click on the above title to see the post by Andy Aplikowski of the Residual Forces blog.

You may click here to see the article by Rep. Michele Bachmann (R-MN06)

Newest National Debt Statistics posted November 2008

Here are the newest National Debt statistics available for the month of November 2008 from

Debt held by the public (Dec. 11, 2008):

Intragovernmental holdings (Dec. 11, 2008):

Total Debt (Dec. 11, 2008):

Since Oct. 1, 2008 - the National Debt has increased:

In the month of November 2008, taxpayers shelled out:
$18,558,733,892.95 in interest payments.

Total amount paid in interest on the National Debt since the Oct. 1, 2008 beginning of the 2009 fiscal year: $37,543,039,529.24

Total amount paid in interest on the National Debt in fiscal year 2008: $451,154,049,950.63

Gifts to reduce the public debt, October 2008: $32,849.95
Gifts to reduce the public debt, Fiscal Year 2008: $2,189,358.89

If you don't like these numbers, we can change them. Call your Congressman at the Capitol Switchboard number (202)224-3121 and urge them to balance the federal budget. Bailouts won't fix the economy, balancing the federal budget will.

Monday, December 1, 2008

MinnPost: Will Obama Plug Minnesota's Budget Deficit?

(The last thing we need is yet another government bailout - this time to bailout government! - ed)

Will Obama plug Minnesota's budget deficit?

By David Brauer Published Mon, Nov 24 2008 3:33 pm

Although Recountpalooza has at least another month to run, Minnesota's looming budget deficit has begun to move up the charts. Opinion seems to be calcifying around a $4 billion gap, or as MPR's Bob Collins notes, about 11 percent of the state's general fund budget.

Even if Democrats somehow get around Gov. Pawlenty's rock-ribbed opposition to tax hikes, they could probably only raise a billion — roughly a quarter of the shortfall. Most of the rest would come from cuts.

At the federal level, we're all Keynesians now. There's widespread agreement that another massive fiscal stimulus is needed, with resulting debt repaid when times are good. (I know; click your heels and you'll be in Kansas on the latter point.)

But local officials and some analysts note a paradox: as the feds pump money into the system, state, county and city governments will pull it out via spending cuts and tax hikes. As New York county exec Tom Suozzi notes in Politico this morning:

"States and localities must, by law, balance our budgets every year, leaving us
no choice but to make difficult decisions. These efforts are necessary in the
short term, but we are undoing any national efforts to stimulate the economy."

Minnesota's constitution requires budget balancing. The only escape hatch has been a bonding bill, which historically is limited to 3 percent of general fund spending, far short of the cutting to come.

Re-enter the feds. We know they can borrow, so they could take states off the constitutional hook. Local-government support might not create new jobs, but teachers, cops and medical staff at least wouldn't lose theirs.

I asked U.S. Sens. Amy Klobuchar and Norm Coleman how they stood on fiscal stimulus for local governments, and sought comment from Al Franken as well. I also left a message with St. Paul DFL Congresswoman Betty McCollum, who sits on the House Appropriations Committee, a key stop for such legislation.

So far, only Klobuchar has gotten back to me. Here's her statement:

President-elect Obama has assembled not just an A economic team, but an A+
economic teams. His economic job-creation plan is good for Minnesota, with its
focus on energy and infrastructure jobs.

It’s also important for this plan to include options for assistance to
state or local governments. I believe Barack Obama shares this view.

For example, he has proposed that the Federal Reserve and the Treasury
should work together to provide a funding backstop to the state and municipal
government debt market similar to the program already implemented for the
commercial paper market. This would be designed to protect taxpayer resources
while ensuring that state and local governments can continue to provide vital
services to their residents.

Lowering borrowing costs is nice, but pretty thin soup compared to the direct $50 billion subsidy Suozzi proposes.

On a per-capita basis, Minnesota could get about a billion in such a plan (which would trickle down to localities if state local-government aid isn't whacked, which it almost certainly will be otherwise).

Again, a billion wouldn't close the state deficit, but it would be a big leap forward. The last time the state faced a billion-dollar shortfall, no one expected a Washington assist given George W. Bush's ideology. Will Barack Obama provide change, or more of the same?

Sunday, November 23, 2008

Budget-busting expenditures saddling economic growth

Budget-busting expenditures for roads means more federal waste saddling economic growth
Kristina Rasmussen

(Originally appeared on Nov. 13, 2008 on

ALEXANDRIA, Va. _ When you're in a hole, quit digging. Tell that to Barack Obama, Nancy Pelosi, Harry Reid & Co., who want to add an additional $300 billion to America's $10 trillion national debt for a new "stimulus" package to repair, among other things, roads and bridges.
Considering that each American's share of the debt is now more than $34,850, any new spending liabilities should be considered with great care.

Thus far, most of the federal "rescue" _ ahem, bailout _ money has been targeted toward financial entities. Yet more special interests _ from automakers to road builders _ are sinking into "me too" mode.

Take the case of state governments, some of whom are experiencing deficits of their own making. On the whole, state outlays have grown 124 percent over where they were 10 years ago, and debt has increased by 95 percent. Clearly, some states and localities allowed themselves to be caught up in the borrow-and-spend mania. Now that the economy has soured, they want Uncle Sugar to finance their habits.

"Over the past few years, many states have spent money like drunken sailors. It's not right to expect the American taxpayer to pick up the tab," notes Jonathan Williams of the American Legislative Exchange Council, a nonpartisan membership organization of state legislators. "If families and businesses are required to live within their means, state governments should be required to as well."


If the first bailout proved anything, it's that rushing to "do something" is irresponsible. The House's attempt to pass a stimulus bill in September gave priority to projects that "can award contracts based on bids within 120 days of enactment." In other cases, it favored "those activities that are labor intensive." Speed and make-work shouldn't be the primary drivers of how taxpayer dollars are spent.

Haste makes waste, and there's enough of that in government as it is.

Stimulus-boosters counter that they're directing long-overdue money into supposedly "neglected" areas, but this premise is false. According to the National Taxpayers Union Foundation's VoteTally system, Congress adopted legislation to increase spending above the baseline in the areas of infrastructure, housing, disaster recovery, and energy assistance by $99 billion between 2001 and 2006. Washington has been indulgent, not neglectful, in doling out cash.

Besides, bloated government budgets don't make economies soar. They didn't work here in the 1970s, the last time Washington tried spending its way out of a slump.

For more than a decade Japan has poured huge sums into public works projects, helping to boost its national debt level to 150 percent of Gross Domestic Product _ the highest in the industrialized world. Japanese citizens are still waiting for the boom.

The reason for these failures is simple _ pumping money into the inefficient public sector means taking it out of the private sector through taxes or borrowing, which can reduce or stall growth overall.

The better way to jump-start the economy and keep it going is through tax relief. How about locking into place the 2001 and 2003 tax cuts that are set to expire after 2010? If families can count on current tax rates, many will be more comfortable investing today instead of fearing the tax man's bigger bite in 2011. Or what about allowing full and immediate expensing for small businesses? This would encourage firms to invest in the assets such as equipment and real estate that could help expand and invigorate operations.

Pro-growth tax policy can best lay the groundwork for a sustainable economic expansion _ one that will provide the solid base for tomorrow's tax revenues. More government spending is likely to result in a temporary market blip, one that isn't worth its price tag.

Congressional Democrats, and yes, some Republicans, are polishing their spades as they get ready to heap more tax dollars on government projects. It's up to ordinary Americans to stay "quit digging."

Wednesday, November 19, 2008

Romney: 'Let Detroit Go Bankrupt'

November 19, 2008
Op-Ed Contributor
New York Times

Let Detroit Go Bankrupt

IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.

Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.

I love cars, American cars. I was born in Detroit, the son of an auto chief executive. In 1954, my dad, George Romney, was tapped to run American Motors when its president suddenly died. The company itself was on life support — banks were threatening to deal it a death blow. The stock collapsed. I watched Dad work to turn the company around — and years later at business school, they were still talking about it. From the lessons of that turnaround, and from my own experiences, I have several prescriptions for Detroit’s automakers.

First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.

That extra burden is estimated to be more than $2,000 per car. Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota’s Avalon. Of course the Avalon feels like a better product — it has $2,000 more put into it. Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable.

Second, management as is must go. New faces should be recruited from unrelated industries — from companies widely respected for excellence in marketing, innovation, creativity and labor relations.

The new management must work with labor leaders to see that the enmity between labor and management comes to an end. This division is a holdover from the early years of the last century, when unions brought workers job security and better wages and benefits. But as Walter Reuther, the former head of the United Automobile Workers, said to my father, “Getting more and more pay for less and less work is a dead-end street.”

You don’t have to look far for industries with unions that went down that road. Companies in the 21st century cannot perpetuate the destructive labor relations of the 20th. This will mean a new direction for the U.A.W., profit sharing or stock grants to all employees and a change in Big Three management culture.

The need for collaboration will mean accepting sanity in salaries and perks. At American Motors, my dad cut his pay and that of his executive team, he bought stock in the company, and he went out to factories to talk to workers directly. Get rid of the planes, the executive dining rooms — all the symbols that breed resentment among the hundreds of thousands who will also be sacrificing to keep the companies afloat.

Investments must be made for the future. No more focus on quarterly earnings or the kind of short-term stock appreciation that means quick riches for executives with options. Manage with an eye on cash flow, balance sheets and long-term appreciation. Invest in truly competitive products and innovative technologies — especially fuel-saving designs — that may not arrive for years. Starving research and development is like eating the seed corn.

Just as important to the future of American carmakers is the sales force. When sales are down, you don’t want to lose the only people who can get them to grow. So don’t fire the best dealers, and don’t crush them with new financial or performance demands they can’t meet.

It is not wrong to ask for government help, but the automakers should come up with a win-win proposition. I believe the federal government should invest substantially more in basic research — on new energy sources, fuel-economy technology, materials science and the like — that will ultimately benefit the automotive industry, along with many others. I believe Washington should raise energy research spending to $20 billion a year, from the $4 billion that is spent today. The research could be done at universities, at research labs and even through public-private collaboration. The federal government should also rectify the imbedded tax penalties that favor foreign carmakers.

But don’t ask Washington to give shareholders and bondholders a free pass — they bet on management and they lost.

The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.

In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check.

Mitt Romney, the former governor of Massachusetts, was a candidate for this year’s Republican presidential nomination.

Sunday, November 16, 2008

2nd death tied to failed Colombian pyramid scheme

November 14, 2008

BOGOTA, COLOMBIA (AP) - A collapsed pyramid scheme that cost millions and sent swindled investors rioting in the streets continued to plague southwestern Colombia on Friday, with two people dead and 13 towns under police curfew.

A total of 600 million pesos ($270 million) is believed to have been lost by the investment company "Dinero Rapido Facil Efectivo," or "Easy Money Fast Cash" in English, police said.
The collapse so far has affected hundreds of investors in small towns and rural areas.

The company offered profits of 70 percent to 150 percent a month, Narino state Gov. Antonio Navarro said in an interview with Caracol radio.

The yearlong scheme was allowed to flourish because of "naivete, greed and banking regulators' failure to act," said Navarro, whose state was home to the company headquarters.

Authorities had a hard time explaining on Friday why they hadn't intervened earlier with at least 240 offices offering absurdly favorable returns.

The financial company collapsed on Wednesday as rumors spread that its owner, Carlos Alfredo Suarez, fled the country and investors took to the streets. Police confiscated some 57 billion pesos ($26 million) _ but said most of the money was gone and that Suarez's whereabouts are unknown.

At least 13 towns were put under curfew because of rioting, said Gen. Orlando Paez, national police operations chief.

Two men shot and killed company security guard Heriberto Taticuan after breaking to his home near the town of Rosas about 400 kilometers (250 miles) southwest of Bogota, said Mayor Jose Roberto Diaz.

He said Taticuan died early Thursday from wounds to the chest.

Another man who was trying to calm upset investors was shot and killed on Wednesday by an unknown assailant in Buesaco, where the town mayor said nearly every family had invested their money in the scheme.

The general said police hadn't taken action before because they weren't ordered to by the Finance Minister or the Attorney General.

Attorney General Mario Iguaran and Finance Minister Oscar Ivan Zuluaga gave a brief statement Friday, saying they are speeding up their investigations, but declined to answer questions.

Wednesday, November 12, 2008

It's the Debt ... Stupid!

It's the Debt, Stupid

By Victor Davis Hanson
Real Clear
Published October 16, 2008

Who caused the American financial panic and the wild swings in our financial system -- and what are we going to do about it in the long term after the markets settle down?

Republicans point to Fannie Mae and Freddie Mac. Politically wired executives at Fannie and Freddie cooked the books. They received mega-bonuses and took cover through campaign gifts to their Democratic supporters in Congress. Then almost everyone involved justified their scams by claiming that, as good liberals, they only wanted to help the poor buy homes.

Democrats counter that Republicans always pushed for more deregulation and, as good conservatives, kept quiet about multimillion-dollar CEO bonuses paid out from shaky Wall Street firms and passed off as good for business -- rather than symptoms of suicidal greed.
Those in the present Bush administration blame the Clintonites for seeding the disaster; those in the last administration blame the present one for harvesting it.

Long ago, John McCain warned about the antics of Freddie and Fannie, and later charged that Barack Obama and some of his advisers received too much money from these agencies for looking the other way. Obama has countered that McCain was a reckless deregulator and that some on his staff were lobbyists for Wall Street firms.

The blame game goes on and on. But so far no one seems willing to tell the American people the truth: It is not just "they," but we, the people, who have recklessly borrowed to spend what we haven't yet earned.

Take energy. In recent years, we've borrowed trillions of dollars overseas to buy oil from foreign producers. Wind and solar may sound like neat and easy solutions. But for decades to come, Americans must drill more oil and natural gas of our own for transportation and heating; we must build more coal and nuclear power plants to power the electric grid; and we must conserve. Otherwise, we'll go broke before clean alternate fuels become accessible and affordable.

Our energy challenges do not just concern independence, natural security and global warming. They involve basic financial solvency as well. Yet so far, none of our public officials have warned us that the energy crisis is largely a money matter: We're borrowing too much to buy what we won't or can't produce at home.

Second, as a nation of debtors, we are renting money from Asia to buy its exports with our credit cards. Given our talents and natural wealth, we could easily consume more than others in the world and still balance the books. But Americans cannot charge all that we desire on unlimited credit. Surely one of our presidential candidates can warn the American people to save a little more, use our credit cards a little less and pay off what we already owe.

Third, the government can only hand out more entitlements by borrowing even more to pay for them. Raising taxes on anyone in a recession is insane. But even crazier is cutting them further at a time of skyrocketing national debt without commensurate reductions in spending.
So who will tell the people that we can't raise -- or reduce -- taxes and that we can't borrow for any more new programs until we first cut expenses and begin paying off the trillions we've already borrowed?

In a hugely productive economy that creates each year some $13 trillion of goods and services, the government has the resources to make real headway in paying down our $10 trillion national debt in relatively short order -- if we have leaders brave enough to quit promising to spend a few more hundred billion here and there that we simply don't have.

Fourth, will some candidate explain to the wheeler-dealer public that most real estate is not going to double or triple in value every few years? Instead, houses should once again be seen as homes to live in, rather than investments to get rich from.

If 70 percent of the American people scrimp to buy a home, we can't endanger their financial solvency by waiving the rules for others, who can't or won't pay the mortgage debts they freely incurred. It's time to tell the public that you must budget to buy a house, see it as a place to raise a family and pay the mortgage you took on. And if that's not possible, then keep renting.

The problems on Wall Street, our energy woes, the election-year fight over taxes versus more programs, and the housing crash have one common denominator: massive debt. They are simply the collective reflections of our own spendthrift habits of buying things with borrowed money that we now either can't or don't want to pay back.

In this year's presidential race, the honest candidate who stops promising endless bailouts and has the guts to lead us out of debt could well end up winning.

Victor Davis Hanson is a classicist and historian at the Hoover Institution, Stanford University, and author, most recently, of "A War Like No Other: How the Athenians and Spartans Fought the Peloponnesian War." You can reach him by e-mailing

White House to Detroit: Let Me Repeat, No TARP Funds

November 12, 2008, 1:30 pm

White House to Detroit: Let Me Repeat, No TARP Funds

Henry J. Pulizzi reports on the White House.
Wall Street Journal

The White House said it will work with Congress to help the U.S. auto sector, but continued to reject the possible use of Treasury Department rescue funds for Detroit.

“We don’t think that that was Congress’s intent,” White House spokeswoman Dana Perino said of the $700 billion Troubled Asset Relief Program, which top Democrats would like to open for the auto makers.

Perino also said the auto makers’ plight won’t be a blight on President George W. Bush’s legacy. “People can blame the president of the U.S. for a lot of things and a lot of things land on his desk, but the state of the auto makers right now is not the president of the U.S.’s fault,” she said.

Government help for the car makers will be in focus during next week’s lame-duck session of Congress, with lawmakers looking to expand the TARP or extend some other form of federal aid. President-elect Barack Obama also is pushing for more help for Detroit, including an acceleration of the $25 billion in loans already authorized for factory retooling.

Perino said the White House would listen to ideas to amend the legislation granting those loans, or speed the funds’ release. She reiterated the administration’s view that the money should go only to “viable” firms.

“I think everyone can agree that you wouldn’t want taxpayer dollars going to something that would not be a long-time concern or something that could actually succeed in the future,” she said.

With concerns that General Motors Corp. will need to file for bankruptcy without government help, Perino shed no light on the question of whether any of Detroit’s Big Three automakers is too big to fail. “The president of the U.S. believes that companies are responsible for finding solutions. However, this is an industry, as I’ve said before, that’s very important to the American people,” she said. “Congress and the administration and the companies have an obligation to put their best minds toward trying to figure out what we can do to the greatest extent possible to try to keep these companies viable. And if we can do that, we certainly will.”

Monday, November 10, 2008

Fed Defies Transparency Aim in Refusal to Disclose

By Mark Pittman, Bob Ivry and Alison Fitzgerald

Nov. 10 (Bloomberg) -- The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.

Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn't require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.

``The collateral is not being adequately disclosed, and that's a big problem,'' said Dan Fuss, vice chairman of Boston- based Loomis Sayles & Co., where he co-manages $17 billion in bonds. ``In a liquid market, this wouldn't matter, but we're not. The market is very nervous and very thin.''
Bloomberg News has requested details of the Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit Nov. 7 seeking to force disclosure.

The Fed made the loans under terms of 11 programs, eight of them created in the past 15 months, in the midst of the biggest financial crisis since the Great Depression.

``It's your money; it's not the Fed's money,'' said billionaire Ted Forstmann, senior partner of Forstmann Little & Co. in New York. ``Of course there should be transparency.''

Treasury, Fed, Obama

Federal Reserve spokeswoman Michelle Smith declined to comment on the loans or the Bloomberg lawsuit. Treasury spokeswoman Michele Davis didn't respond to a phone call and an e-mail seeking comment.

President-elect Barack Obama's economic adviser, Jason Furman, also didn't respond to an e-mail and a phone call seeking comment from Obama. In a Sept. 22 campaign speech, Obama promised to ``make our government open and transparent so that anyone can ensure that our business is the people's business.''

The Fed's lending is significant because the central bank has stepped into a rescue role that was also the purpose of the $700 billion Troubled Asset Relief Program, or TARP, bailout plan -- without safeguards put into the TARP legislation by Congress.

Total Fed lending topped $2 trillion for the first time last week and has risen by 140 percent, or $1.172 trillion, in the seven weeks since Fed governors relaxed the collateral standards on Sept. 14. The difference includes a $788 billion increase in loans to banks through the Fed and $474 billion in other lending, mostly through the central bank's purchase of Fannie Mae and Freddie Mac bonds.

Sept. 14 Decision

Before Sept. 14, the Fed accepted mostly top-rated government and asset-backed securities as collateral. After that date, the central bank widened standards to accept other kinds of securities, some with lower ratings. The Fed collects interest on all its loans.

The plan to purchase distressed securities through TARP called for buying at the ``lowest price that the secretary (of the Treasury) determines to be consistent with the purposes of this Act,'' according to the Emergency Economic Stabilization Act of 2008, the law that covers TARP.

The legislation didn't require any specific method for the purchases beyond saying mechanisms such as auctions or reverse auctions should be used ``when appropriate.'' In a reverse auction, bidders offer to sell securities at successively lower prices, helping to ensure that the Fed would pay less. The measure also included a five-member oversight board that includes Paulson and Bernanke.

At a Sept. 23 Senate Banking Committee hearing in Washington, Paulson called for transparency in the purchase of distressed assets under the TARP program.

`We Need Transparency'

``We need oversight,'' Paulson told lawmakers. ``We need protection. We need transparency. I want it. We all want it.''

At a joint House-Senate hearing the next day, Bernanke also stressed the importance of openness in the program. ``Transparency is a big issue,'' he said.

The Fed lent cash and government bonds to banks, which gave the Fed collateral in the form of equities and debt, including subprime and structured securities such as collateralized debt obligations, according to the Fed Web site. The borrowers have included the now-bankrupt Lehman Brothers Holdings Inc., Citigroup Inc. and JPMorgan Chase & Co.

Banks oppose any release of information because it might signal weakness and spur short-selling or a run by depositors, said Scott Talbott, senior vice president of government affairs for the Financial Services Roundtable, a Washington trade group.

Frank Backs Fed

``You have to balance the need for transparency with protecting the public interest,'' Talbott said. ``Taxpayers have a right to know where their tax dollars are going, but one piece of information standing alone could undermine public confidence in the system.''

The nation's biggest banks, Citigroup, Bank of America Corp., JPMorgan Chase, Wells Fargo & Co., Goldman Sachs Group Inc. and Morgan Stanley, declined to comment on whether they have borrowed money from the Fed. They received $120 billion in capital from the TARP, which was signed into law Oct. 3.

In an interview Nov. 6, House Financial Services Committee Chairman Barney Frank said the Fed's disclosure is sufficient and that the risk the central bank is taking on is appropriate in the current economic climate. Frank said he has discussed the program with Timothy F. Geithner, president and chief executive officer of the Federal Reserve Bank of New York and a possible candidate to succeed Paulson as Treasury secretary.

``I talk to Geithner and he was pretty sure that they're OK,'' said Frank, a Massachusetts Democrat. ``If the risk is that the Fed takes a little bit of a haircut, well that's regrettable.'' Such losses would be acceptable, he said, if the program helps revive the economy.

`Unclog the Market'

Frank said the Fed shouldn't reveal the assets it holds or how it values them because of ``delicacy with respect to pricing.'' He said such disclosure would ``give people clues to what your pricing is and what they might be able to sell us and what your estimates are.'' He wouldn't say why he thought that information would be problematic.

Revealing how the Fed values collateral could help thaw frozen credit markets, said Ron D'Vari, chief executive officer of NewOak Capital LLC in New York and the former head of structured finance at BlackRock Inc.

``I'd love to hear the methodology, how the Fed priced the assets,'' D'Vari said. ``That would unclog the market very quickly.''

TARP's $700 billion so far is being used to buy preferred shares in banks to shore up their capital. The program was originally intended to hold banks' troubled assets while markets were frozen.

AIG Lending

The Bloomberg lawsuit argues that the collateral lists ``are central to understanding and assessing the government's response to the most cataclysmic financial crisis in America since the Great Depression.''

The Fed has lent at least $81 billion to American International Group Inc., the world's largest insurer, so that it can pay obligations to banks. AIG today said it received an expanded government rescue package valued at more than $150 billion.

The central bank is also responsible for losses on a $26.8 billion portfolio guaranteed after Bear Stearns Cos. was bought by JPMorgan.

``As a taxpayer, it is absolutely important that we know how they're lending money and who they're lending it to,'' said Lucy Dalglish, executive director of the Arlington, Virginia- based Reporters Committee for Freedom of the Press.

Ratings Cuts

Ultimately, the Fed will have to remove some securities held as collateral from some programs because the central bank's rules call for instruments rated below investment grade to be taken back by the borrower and marked down in value. Losses on those assets could then be written off, partly through the capital recently injected into those banks by the Treasury.

Moody's Investors Service alone has cut its ratings on 926 mortgage-backed securities worth $42 billion to junk from investment grade since Sept. 14, making them ineligible for collateral on some Fed loans.

The Fed's collateral ``absolutely should be made public,'' said Mark Cuban, an activist investor, the owner of the Dallas Mavericks professional basketball team and the creator of the Web site, which focuses on the secrecy shrouding the Fed's moves.

The Bloomberg lawsuit is Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, U.S. District Court, Southern District of New York (Manhattan).

Sunday, November 9, 2008

Newest National Debt Statistics posted October 2008

Per, the newest National Debt statistics are in.

As of November 6, 2008:

Publicly held:
Intragovernmental holdings:

Interest Payment October 2008:

Interest Payments Fiscal Year to Date:

Gifts to reduce the public debt September 2008:

Gifts to reduce the public debt FY 2008:

Gifts to reduce the public debt FY 2007:

Viewpoint from Concord: Are you ready pay more in taxes?

By Chris Nevins
November 07, 2008 6:00 AM - Portsmouth, New Hampshire

And so it is over. The historic election of 2008 has made its mark and change is in the air. While welcomed by many, this change is also feared by others.

My guess is that the emotion of the day may be overdone on both sides of the political spectrum and that our futures may not be as exciting or problematic as some suspect. Our nation has weathered many storms during our brief history and shared in many victories as well. The earth continues to rotate and we will all continue to rotate with it. The American journey continues on its way and I am pleased to be a participant in that journey.

But of course, this does not mean we have time only to smell the flowers. There is a lot of serious work ahead of us. And just what is that work? Our primary focus should be to get our fiscal house in order. In a recent letter to the editor, my Democratic counterpart talked about our national debt as if it were just eight years in the making. It was not. This nation has been in and out of debt for much of its existence. During most of that time wars were the culprit causing that debt but now it is a much different issue.

The major cause of our total debt and yearly deficits are our entitlement programs; Social Security, Medicare and Medicaid. These entitlements total more than 53 percent of our federal budget. This mandatory part of our budget cannot be reduced or increased by Congress without a major change to our laws. Other mandatory items include federal and military retirements, veteran benefits and certain welfare related programs. After interest on our debt is paid (about 9 percent of the budget) we have everything else which is 38 percent of the budget. This 38 percent is what can be adjusted by 13 appropriation bills every budget year. It includes military spending of just over 4 percent.

He stated that our national debt is more than $10.5 trillion and that is correct. However, $10.5 trillion represents $6 trillion we owe the public (including foreign countries) for buying our treasury bonds and nearly $5 trillion in Intra Governmental holdings, (money that the federal government has taken from the so called Social Security "trust" fund to spend on other things besides Social Security). IOUs are then left behind for future generations to pay. What a great deal! But let's be brutally honest. This figure only represents what we owe bondholders.

If we consider what we have promised present and future mandatory entitlement beneficiaries our real debt is more than $50 trillion. Were these promises made in just the last eight years? Which promises shall we break to get out of this debt?

Why should a state representative be talking about federal problems? Because I have observed that contrary to the statement that past Republican governors have created a problem that needs to be solved, it is in this administration where the problems are just beginning. Concord is starting to catch the "federal disease" and spending beyond its means. While warnings of growing debt were ignored by the majority, it wasn't until the end of the session that an attempt to rectify it came into play. Now that the reality of a recession is upon us the specter of not only major cuts but more borrowing seems to loom ahead of us. Will this mean more shifting of our spending today to tomorrow's generation? Would that be the moral thing for us to do?

"We must set priorities" is only an empty cliché unless we specifically identify what we need to pay for in our New Hampshire budget, not just what we would like to. Identifying a priority would mean not ordering "surf and turf" at our local restaurant but rather "surf or turf." More realistically we are probably looking at ordering meatloaf. So yes, indeed the election is over and change is in the air. But what will that change look like in Concord the next two years? Will we make the hard decisions to cut spending? Will we raise more fees and taxes on you or can you smell a broad-based tax in your future? Are you ready pay more in taxes but have less control on how it is spent?

Stay tuned as the next legislative session starts in January. We shall soon know.

Chris Nevins is chairman of the Hampton Republican Party chairman and a state representative from Hampton recently re-elected.

Romney: Obama must be 'educator-in-chief'

Former presidential candidate Mitt Romney offers his advice to Barack Obama, and his views on labor unions, federal bailouts, Detroit, protectionism, and America's debts.

November 7, 2008: 9:47 AM ET
Fortune Magazine

NEW YORK (Fortune) -- Mitt Romney, former Massachusetts governor and co-founder of private equity firm Bain Capital, is often mentioned as a GOP contender for 2012. He spoke with Fortune's Jia Lynn Yang.

Any management advice for the next president? How does he rally a depressed nation to meet the challenges we face?

He should forget entirely about reelection and focus solely on helping the nation at a critical time. He should dismiss the people who helped him win the election and bring in people who are above politics and above party. He should surround himself with statesmen and economists, businesspeople and leaders. In some ways it would be beneficial if our presidency consisted of only one term. That way the President would think about his legacy and the future of the country rather than reelection and partisanship.

How likely do you think that's going to happen?

In his second term, President Clinton made an effort to govern more from the center than from the extreme wing of his party, and by doing so, found greater support and greater political success. Perhaps it's a paradox, the less political the agenda, the more political success one enjoys. But now is not the time for partisanship opportunism.

The unions have helped Barack Obama. They will hope to be paid back. I'm particularly concerned that organized labor would call on Barack Obama to pass the card check program. This removes from American workers the right to the secret ballot in deciding whether or not to accept a union. This legislation would do more to harm America's long-term competitiveness than almost anything I can imagine. It would be a partisan payback for organized labor but it would come with devastating consequences for the nation.

Do you have any concerns that the massive government intervention on Wall Street will have unintended consequences?

"The bailout of Wall Street" was a terrible choice of words. No one wants to bail out anything, especially Wall Street. The objective of the legislation, however, had a much broader purpose: to stabilize our financial system, to keep it from complete collapse. Sometimes that broad purpose may require saving individual companies, as with AIG (AIG, Fortune 500). But we just can't have government running around the nation looking to bail out companies in trouble.

Given your Michigan roots and what your father accomplished turning around the American Motors Corporation in the 1950s, what do you think is the future of the auto industry?

Right now, the auto industry is on life support, and its prospects look extremely dim. But they don't need to be. The industry could be turned around. There is no inherent reason why America can't build and sell cars to Americans at least as well as the transplants are doing. Any effort to help the auto industry has to be made as part of a comprehensive strategy. Before the government issues loans to the auto industry, as has been authorized by Congress, it should insist on seeing credible and independent strategies that will return the companies to long-term sustainability. Government should not finance ongoing losses and declining market shares.

What concerns you the most about the economy right now? Any dangers lurking in the global economy that we didn't hear much about during the campaigns?

Far too little attention was paid to America's long-term competitive position during the campaign. I see four major economic strategies at play in the world today: the first is ours. It combines freedom and free enterprise.

The second is China's. It combines free enterprise with authoritarianism.

The third is Russia's. No longer is Russia's plan for dominance based upon industrial capacity but rather upon controlling energy throughout the world. Hence Russia's cozy relationship with Iran and Venezuela as well as its belligerent entry into Georgia. Russia's strategy is based on energy and authoritarianism.

The fourth strategy is represented by radical violent jihad. The intent of the jihadists is to cause the collapse of the other three, such that the "hidden Imam" or the Caliphate remains the last man standing.

The real challenge for America is how to strengthen our competitive position so that our economy outperforms those of the other three. If we're successful, freedom will be preserved for the world. If we're unsuccessful, the results are unthinkable.

When you talk about making America more competitive, what do you have in mind?

First, America must substantially improve our education system. We've fallen behind, particularly in areas of math and science.

Second, we're going to have to remedy our disproportionate health care cost disadvantage. America spends far more than any other nation as a percent of GDP on health care. This effectively is an enormous tax on the economy and on our businesses.

Third, our national debt is excessive and our entitlement obligations pass a massive burden onto the next generation.

Fourth, tax and regulatory policies weigh down our ability to compete. Specifically, our products carry an embedded tax which makes American goods less competitive abroad and at home.

Fifth, America's apparent retrenchment from the concept of open, free and fair trade could put us further behind other nations that are aggressively seeking trade relations around the world.
Sixth, our lack of an effective energy policy drains our economy by approximately half a trillion dollars a year.

And, finally, the blow that Wall Street has taken may make us less competitive in financing entrepreneurship.

There's strong populist sentiment against free trade deals. Given that, how does an American president move forward on this?

I can only hope the President abandons the populist current, which seems to be growing in our country. An effort to block foreign trade will only hurt America. Ultimately products in this country would become uncompetitive. Look what happened to the Soviet Union. Its cars, its watches, its goods became a joke.

The only way to remain the leading economy in the world is to be successful on a level playing field around the world. Some individuals, at the behest of special interests, seek to prevent trade with other nations by imposing America's labor requirements and other peculiarities. That is a disguised form of protectionism.

Do Americans need to save more and adjust to a lower standard of living? In other words, should be buying houses we can actually afford?

I think a President has to be an educator- in-chief as well as a commander-in-chief. The American people need to understand the challenges we face. And the American people need to understand that they, like the nation, need to live within their means. Both have been spending more than they have been taking in. It puts the nation at risk. And it puts families at risk.

There's a period of adjustment that's occurring right now as American families deleverage and employers deleverage. It's time for the government to finally address our severe debt burden, before it leads to even more severe consequences. I'm referring not only to our annual deficit and national debt but also to our obligations under entitlement programs like Social Security.

What Obama's Spending Plans Mean for Your Portfolio

By Alyce Lomax and Dayana Yochim
The Motley Fool
November 7, 2008

You know things are dire when the National Debt Clock can't keep up with government spending. But that's what happened in October, when the counter on the corner of 44th Street and Sixth Avenue near Times Square maxed out at $10 trillion.

Welcome to office, President-elect Obama! Hope you don't mind picking up the tab!
Maxed-out America is due for a debt diet At least part of the problem will be remedied in 2009: A new debt clock will be installed -- one with a counter that can tally dollar amounts up to one quadrillion -- that's a one with 15 zeros.

As for dealing with the hangover from the spending that got us here, well, that's now in the hands of newly elected Barack Obama. And man oh man, does he have his work cut out for him.
Here's a look at some of the ideas Sen. Obama discussed during his campaign in the area of government spending, fiscal policies, and the national debt -- and what we see as potential implications for investors.

The plan for growth and restraint Paying down the monstrous national debt while funding new and existing projects will require a deft balancing act. Obama has said he will handle the give-and-take by adhering to budget rules that demand new spending be paid for in one of two ways: through cuts to other programs, or with new revenue -- "new revenue" being a less hot-button way of saying "taxes."

One major spending initiative under an Obama administration focuses on getting businesses back into hiring mode. According to his campaign platform, we could see:
A $3,000 tax credit for each employee hired in 2009 and 2010.

Sweeteners for small businesses, such as allowing small businesses to expense as much as $250,000 until the end of 2009.

Capital gains tax cuts on small-business investments.

Obama has also said he favors infrastructure projects -- roads, bridges, schools, and such -- to create work in an economy that is rapidly bleeding jobs. For investors, that bodes well for companies that have some relationship to infrastructure, such as construction and project-management companies like Fluor (NYSE: FLR) and KBR (NYSE: KBR).

Another major spending plan is a $25 billion "Jobs and Growth Fund." In addition, Obama has proposed a 90-day moratorium on foreclosures for "homeowners acting in good faith," as well as a $25 billion stimulus package for state governments -- to give them less reason to raise property taxes. States are also suffering from the housing crisis, since plunging home values translate into falling tax revenues; California recently admitted it was facing a big cash crunch and asked for federal assistance.

To free up cash for spending proposals, Obama has suggested reducing the number of troops in Iraq, raising taxes on high-income filers, doing away with corporate loopholes, and carefully vetting earmarks -- as well as demanding more transparency for them to begin with.

How Obama's policies might play out in your portfolio So far, there are indications that some stock sectors may do well under Obama's spending proposals. In addition to infrastructure, alternative energy is certainly another area that may benefit from Obama's being in office. Companies like solar concerns First Solar (Nasdaq: FSLR) and SunPower (Nasdaq: SPWRA) could benefit from government funding of alternative-energy research.

A Democratic presidency is typically good for unions, and that means automakers such as General Motors (NYSE: GM), Chrysler, and Ford may luck out despite their recent dire straits. The Big Three are instrumental to Detroit, are heavily unionized, and represent a huge chunk of jobs -- in other words, voters -- with health-care benefits. The chances of getting some financial love from the government look good -- although expecting that to translate to long-term stock performance certainly isn't a given.

The flip side, of course, is that businesses heavily targeted by unions may not fare as well in the next four years. Sorry, Wal-Mart, Whole Foods Market (Nasdaq: WFMI), and Starbucks (Nasdaq: SBUX) -- your attempts to avoid unionization may become increasingly difficult.
Of course, as history tells us, it will be interesting to see how campaign promises translate into policy reality, and how that will affect investors' strategies. However, the Fool will be here tracking the environment and gauging the best ways investors can make money in their portfolios.

Friday, October 24, 2008

Dave Ramsey's Thoughts on the Elections

Dave, which bozo should I vote for in this election? Who’s going to fix the economy? Who’s going to give me the most money?

Well, I’m here to remind you that you’re going to fix the economy because your personal economy is up to you. It's not Washington's job to fix what's going on with you. If you are waiting on Washington to change something, you've got a long wait!

You’re going to give yourself money as a result of your hard work and persistence. Waiting for money to be taken from others and given to you is a spirit of envy, and it's wrong.

I’m not here to tell you who to vote for. But I am here to tell you that the government doesn’t have the capacity to fix your problems. Washington is full of bozos, and I am doing my part to send a lot of them home!

This economic mess is a reality, but we can each only control one thing—our reactions. Does this stuff define you? Only if you let it. The weird thing about the economy is that YOU are the economy! I learned this the hard way. I got my real estate license when I was 18 years old. By the time I was 21, interest rates had risen to 17% fixed-rate … and I still sold houses. How? Because I worked hard.

As bad as USA Today meant a recent article to be about what we think of the suffering economy and upcoming election, I think it’s rather encouraging that no one thinks that President Bush or Barack Obama or John McCain can fix the economy!

This may be the beginning of the biggest level of prosperity this nation has ever known if we don’t look to a candidate to fix our lives. How about we say, "I’m going to vote for the candidate who’s going to fix the nation. I’m going to fix my life, so leave me alone and let me do my own thing."

Don't react based on fear or panic. Don’t look to Washington to fix your problems. Why would you do that? At what point did Bill Clinton fix any of your problems? At what point did he cause you to prosper? At what point did George Bush end your career or cause you to prosper? When did Ronald Reagan fix your problems? Guess what? I liked Reagan the most, and while he was in office, I hit rock bottom and filed bankruptcy—but it wasn’t Reagan’s fault. It was mine.
So when you go to the polls in a few days to cast your vote, don’t get caught up in following a political party or candidate without knowing the issues they support. Do your research so you can make educated decisions.

Wednesday, October 15, 2008

I'm Not Running Against John Kline

In response to those who have contacted me regarding my alleged write-in campaign against John Kline, I am not waging a write-in campaign against the Congressman. I do not live in his district so I cannot even vote for him. My previous post in response to "Why Kline Voted Yes" on the bailout bill has caused an inadvertant error in the blogosphere. There is another guy running a write in campaign against Kline, and it was mistakenly attributed to me because of my post.

While I seriously disagree with the Congressman on this particular issue - he has been a stellar conservative on other issues like opposing earmarks and opening up domestic drilling. If I lived in his district, he would still have my vote.

For those who came here to see the "goods" on the Congressman and why I would wage a write-in campaign against him, I'm sorry to disappoint.

As for a future Congressional bid in Minnesota's 4th Congressional District, I won't rule that out in the future. No write-in this year - Ed Matthews has my vote!

Jeffrey S. Williams
National Debtbusters

Monday, October 13, 2008

Debtor Nation

Look at the graph to the right. I find it quite peculiar that the Personal debt (in trillions) equals the size of the National Debt. Food for thought.

Debtor Nation
Posted by TOM BEVAN

The graphic to the right, from a column on the debt that is crushing the middle class in today's Detroit Free-Press, pretty much says it all.

Over the past few weeks as the economic crisis has come into hideous focus, we've spent a lot of time blaming Wall Street executives and a lot of time blaming Congress, both deservedly so.
One area we haven't spent enough time focusing on is the millions of Americans who helped get us into this mess by taking on more debt than they could afford. There are many sad and tragic stories among this group, of course, and while we don't want to dismiss or denigrate them, it's fair to point out they represent only a small portion of those who've gotten into trouble by overextending themselves financially.

More important still is to recognize the millions upon millions of Americans who've managed their finances prudently, lived within their means, and continued to make payments on time even as they are saddled with the burden of bailing out those who did not.
Credit card companies and other businesses will always be there to ply us with sweet nothings about low interest loans and the like. Too often over the last twenty years, however, it seems more and more Americans have fallen victim to that siren song and rejected the truism which our fathers, grandfathers, and even Founding Fathers lived by: there's no such thing as a free lunch.

At its core, then, this is a story about individual freedom and individual choices. Nobody put a gun to the head of the 28 year-old University of Michigan graduate in the Detroit Free-Press story and forced him to buy a house with a $150,000 mortgage - any more than someone forced his fiancee to ring up $15,000 in credit card debt.

The most nauseating part of this debacle is that the United States government - which long ago perfected the habit of living beyond its means - was an active participant in helping some Americans shed the inhibition of fiscal prudence and embrace the notion we can afford it all - even when we know we can't.

The true irony, of course, is that because some Americans exercised their individual freedoms irresponsibly in the last decade we've now all become less free, assuming you measure such things by the number of additional taxpayer dollars committed to Washington's coffers ($700+ billion) and by unprecedented expansion of the U.S. government into what was previously considered the "private sector."

A Historical Perspective

click on the graph for larger view
If you look at the debt level through Eisenhower and after Eisenhower, you will see the influence of John Maynard Keynes "General Theory" on the policies of U.S. Presidents, Senators and Congressmen. It comes as no surprise that the debt started rising during the Kennedy Administration, as he was the first President known to have embraced the "General Theory." It was Richard Nixon who once declared "We're all Keynesian's now." As Congress approves more and more spending, and Presidents sign the spending bills, it is no wonder we are in the mess we're in.

Sunday, October 12, 2008

How fast is it growing?

How fast is it growing?

In 9 days, the debt increased by $241,657,749,631.13

This shows an average daily rate of $26,850,861,070.13.

At the current rate, the debt would balloon to an increase of $9,800,564,290,597.45 - essentially doubling the current debt.

And the politicians in Washington want to spend more of your hard earned dollars.

Newest National Debt Statistics Posted - Sept 08 - end of Fiscal Year 2008


Debt Held By Public (Oct. 9, 2008) - $5,994,929,606,697.25
Intragovernmental Holdings - $4,271,453,039,846.37
Total Debt (Oct. 9, 2008) $10,266,382,646,543.62

Interest payment (September 2008): $19,883,186,641.26
Interest payment (Fiscal Year 2008): $451,154,049,950.63

Gifts to reduce the public debt (August 2008): $83,570.84
Gift to reduce the public debt (FY 08 To Date): $2,146,846.54

The State of Trick or Treating This Year

I don't think this needs too much of an explanation.

Friday, October 10, 2008


Iceland is all but officially bankrupt
By Eric Pfanner
International Herald Tribune

Thursday, October 9, 2008
REYKJAVIK: People go bankrupt all the time. Companies do, too. But countries?

Iceland was on the verge of doing exactly that on Thursday as the government shut down the stock market and seized control of its last major independent bank. That brought trading in the country's currency to a halt, with foreign banks no longer willing to take Icelandic krona, even at fire-sale rates.

As the meltdown in the Icelandic financial system quickened, with the government seemingly powerless to do anything about it, analysts said there was probably only one realistic option left: for Iceland to be bailed out by the International Monetary Fund.

"Iceland is bankrupt," said Arsaell Valfells, a professor at the University of Iceland. "The Icelandic krona is history. The IMF has to come and rescue us."

Prime Minister Geir Haarde, who had warned this week of the threat of "national bankruptcy," said Thursday that Iceland's finance minister, Arni Mathiesen, would be in Washington this weekend for the autumn IMF/World Bank meetings. He declined to say whether Iceland was seeking a rescue package from the international lender.

"We will certainly keep this option open, but we have not yet made a decision," Haarde said Thursday at a news conference.

The IMF managing director, Dominique Strauss-Kahn, said in Washington that he had activated an emergency funding system, last used during the Asian financial crisis of the late 1990's, to help countries in crisis. Though not mentioning Iceland by name, he said: "We are ready to answer any demand by countries facing problems."

Iceland has approached Russia about a loan of €4 billion, or $5.5 billion, to help see it through the crisis, but Haarde said no agreement had been reached.

An IMF intervention in Iceland, which would necessarily involve accepting a series of harsh measures to restore fiscal and monetary stability, would underline the extraordinary reversal in the country's fortunes after a decade-long, debt-fueled binge by the country's banks, businesses and some private citizens. The banks, while avoiding the toxic mortgage securities that have humbled Wall Street, expanded aggressively at home and abroad. When credit tightened and the krona fell this year, they were unable to finance their debts.

In these circumstances, going to the IMF "is probably the only thing Iceland can do," said Richard Portes, an economist at the London Business School.

Events have moved so fast that the full import of national bankruptcy has yet to sink in here. It's happened before, of course, but in places like Argentina and Thailand, not a country that likes to think of itself as close to Europe.

And on an island raked by icy North Atlantic winds and dotted with volcanoes and geysers, where people live with the threat of earthquakes and maritime disasters, few residents seem to be losing their cool over the financial crisis - yet. But some have suffered deep losses, and others are simply bewildered at how things could have gone so wrong so quickly.

"There is a lot of fear in society and there are people who are losing everything," Bubbi Morthens, an Icelandic rock favorite, said Wednesday after singing at an impromptu midday concert in central Reykjavik intended to lift people's spirits.

Like many of his compatriots, Morthens did well when Iceland was riding high, accumulating considerable wealth. But when the government seized control of Iceland's third-largest bank, Glitnir, last month, Morthens said he lost his life savings, which he had invested in the bank's stock.

On Thursday, the government seized Kaupthing Bank, the country's largest lender, effectively completing the nationalization of the banking system after the previous takeover of Glitnir and the No.2 lender, Landsbanki.

Meanwhile trading in the currency froze up Thursday, according to Bloomberg News, citing dealers at Nordea, a big Scandinavian bank. The last trade was made at 340 krona to the euro, Nordea said - less than half what the Icelandic currency was worth at the start of the week.

Haarde said the Central Bank of Iceland had set up a special system to handle currency transactions, so that Icelandic companies could conduct international business.

"We are gradually moving through this crisis," he said, sounding surprisingly unworried for the leader of a country facing economic and financial disaster. "There are still a few issues to resolve but that is the nature of these kinds of things."

Problems with the krona have been at the core of the government's inability to control the crisis. Without a viable currency, there is no way to support the banks, which have done the bulk of their business in foreign markets. There is also no way to bring down inflation or interest rates, both already in double digits before the crisis intensified in recent days.

Valfells and Portes said that once the situation is stabilized, the best way forward would be for Iceland is to give up on the krona and adopt the euro instead.

How could Iceland, which is not even a member of the European Union, adopt the currency?

One option would be to simply "peg" its currency to the euro. In that case, Iceland would also hand over control of monetary policy, including the setting of interest rates, to the European Central Bank in Frankfurt.

But fixing the currency to the euro could be difficult for Iceland, given that its central bank probably lacks the necessary reserve to defend such a level if the currency were to come under renewed attack, Portes said.

That leaves another option: applying to join the European Union and adding Iceland to the euro zone. Because Iceland is already part of the European Economic Area, a looser trading bloc, it already abides by many EU rules.

Still, such a move would be politically challenging. The conservative Independence Party, headed by the prime minister, has been dead set against it. Another member of that party, which is governing in a coalition with the pro-EU Social Democrats, is the central bank chairman, David Oddsson, a former prime minister.

They are supported by the powerful fishing industry, which mostly wants to stay out of the euro and to keep Europe at a comfortable distance. Fishing has been the focus of many clashes between Iceland and its European neighbors - most heatedly with Britain, in what became known as the Cod Wars of the 1950s to the 70s. The two countries clashed repeatedly over Iceland's move to extend exclusive fishing rights into waters that had long been trawled by British vessels, too.

Tension with Britain has flared anew during the current crisis. It centers on accounts, worth an estimated 8 billion pounds, that Britons hold in the Icelandic banks; while the British government has guaranteed private savers' accounts, charities and local government organizations fear that they will lose their money. The government of Prime Minister Gordon Brown of Britain has used powers granted under anti-terrorism laws to freeze British assets of Landsbanki until the standoff is resolved.

"We do not consider this to be a particularly friendly act," Haarde said, adding that he had tried to defuse the situation in a telephone call with Brown on Thursday.

For all the worries, this capital city of 120,000 people still displays the fruits of the decade-long economic boom that followed the deregulation of Iceland's financial sector in the 1990s - hip cafés, lobster restaurants and stylish shops selling outdoor gear.

But the days when the economy seemed capable of gravity-defying feats are gone. So are the days when investors went on an international buying spree, adding some of the biggest names of the British and American retailing industries to their portfolios. Gone too, are the days when ordinary citizens effortlessly joined in the fun, taking out second mortgages to finance their own trips abroad or at least to the Laugavegur, the main shopping strip in Reykjavik.

"It's difficult; the landscape is very difficult," said Franch Michelsen, a watch dealer in central Reykjavik, as he took a break Wednesday from cleaning his shop window.

Some ordinary Icelanders face a similar problem to the one that brought down the banks. In recent months, many mortgages were taken out in foreign currencies - marketed by the banks as a way to benefit from lower interest rates abroad, as rates in Iceland rose into the double digits.

Now, with the Icelandic krona plunging, homeowners suddenly have to pay back far more expensive euro or dollar values of their mortgages. At the same time, house prices are falling.

The Reverend Karl Sigurbjornsson, the bishop of Iceland, who leads the state-sponsored Lutheran church, says he worries about how the prospect of financial suffering will affect a society that "was led to believe that it was unlimited growth forever."

"What will happen when the dust settles?" he asked. "A lot of people will be very angry. It will be a challenge for our society."

Monday, October 6, 2008

Sadly, History made Sept 30 as National Debt hits $10 Trillion

History was made on Tuesday Sept. 30, 2008, the last day of Fiscal Year 2008 for U.S. Government accounting purposes, as the National Debt crept up over $10 Trillion for the first time ever. There was no fanfare, no balloons, no real mention of it in the newspapers. This was an important milestone in American history and it went by as an average day.

On Sept. 30th, the total debt amounted to $10,024,724,896,912.49

Thursday, October 2, 2008

A Letter to My Congresswoman

Written on Oct. 2, 2008 at 10:14 p.m.

Dear Congresswoman McCollum:

I find it amazing that you have already voted to increase our National Debt by $700 Billion, and the fact that you are even considering supporting an even bigger bill of $810 Billion is completely unthinkable.

It's bad enough that we pay nearly $500 Billion each year on the interest on our National Debt but you want to raise that to $600 Billion. How much Federal Spending is enough? I highly encourage you to vote NO on the Wall Street bailout package. It's time we have some financial responsibility back in Washington and New York. Main Street American's right here in St. Paul, your home district, cannot afford this.

In addition, I would like to know your reasoning behind the vote, and what you plan on doing to eliminate our national debt. Please put it in writing to me at:



Jeffrey S. Williams

Wednesday, October 1, 2008

Gingrich: We Need Action Now

From Former Speaker of the House Newt Gingrich in his email commentary today.

Replace Secretary Paulson and Suspend Mark to Market
by Newt Gingrich (more by this author)
Posted 10/01/2008 ET

Following Monday's failure of the Paulson plan in the House, it is imperative that our leaders not hesitate to bring stability to our financial markets.

We need action now.

The Paulson Plan - is dead. The time has come for Congress to turn its attention to a plan that does the right things the right way instead of trying to fix the wrong way of this monstrosity of a Wall Street bailout bill.

As I said to Fox News' Greta Van Susteren Monday night, and spoke about at the National Press Club on Tuesday, there are two steps that could be taken that would send a needed signal to the world financial markets that America has leaders who recognize the gravity of the crisis and are capable of putting aside narrow partisan self-interest for the good of the country.

Step One: Replace Secretary Paulson
A plan that relies on the former chairman of Goldman Sachs presiding over disbursing hundreds of billions of dollars to Wall Street is a terrible concept and inevitably will lead to crony capitalism and the appearance of - if not the actual existence of - corruption.

The American people understand this and they don't trust the Paulson plan. Congress should never have been faced with this as its only option to solve the financial crisis. Congress never should have been confronted with this bill. And one man, above all others, is responsible.

That man is Henry Paulson, who may have been a great deal maker for Goldman Sachs, but has been an utter failure during this economic crisis.

It's time - passed time, in fact - for President Bush to fire Secretary Paulson.

President Bush should replace Paulson immediately with someone more capable of forging a deal that the American people can trust. Secretary Paulson's Deputy at Treasury is Robert Kimmitt. He does not have the Wall Street background that made Secretary Paulson so difficult to trust as a negotiating partner and should be much more open to alternatives because he has less invested in the "Paulson" plan.

Kimmitt need not go through the actual confirmation process to immediately take over negotiating with Congress. The sooner Paulson is replaced as the chief negotiator for the administration, the sooner we will have a deal the American people can support.

Step Two: Suspend the Mark-to-Market Accounting Rule
The second thing our leaders should do immediately is simple and uncontroversial: Suspend the "mark-to-market" accounting rule that is exacerbating this crisis.

Under this artificial rule, the value of assets of banks moves up and down with economic conditions, regardless of their underlying worth. So in a time of economic crisis - such as the current subprime mortgage crisis - the value of bank assets gets caught in a downward spiral, causing investor panic and a drying up of credit.

In 2004, the European Central Bank issued this now eerily prescient opinion of the mark-to-market rule:

"With a real estate crisis or a stock market crash... [a bank] under [mark-to-market] accounting might aggravate the effects of the shock. Banks may be encouraged to react by panic selling and tightening lending standards, thus contributing to a further deepening of the crisis."

A Smart First Step
I've spent the past few days talking with businesspeople across the country - from Oklahoma, Georgia, Nevada and California - and they agree: this artificial accounting rule is needlessly making the financial crisis worse.

On Monday I appeared on Fox News' On the Record with Greta van Susteren and called for mark-to-market to be suspended.

I also wrote this op-ed yesterday for urging the same course of action.

I gave a speech at the National Press Club in which I discussed in depth the need to end this problem now. You can read the text and view it here.

Then, later that afternoon, the Securities and Exchange Commission took a smart first step by issuing a "clarification" giving companies more leeway in estimating the value of mortgage related investments. You can read more here. Securities and Exchange Commission Chairman Chris Cox deserves credit for recognizing how this accounting requirement is needlessly exacerbating our current financial difficulties.

The Bush Administration's Expensive Legacy
Taking these two steps - replacing Secretary Paulson and suspending the mark-to-market rule - are absolutely necessary right now to give Congress the breathing room to develop a plan to replace the Paulson Plan and to re-establish trust with the American people.

The Bush Administration has now provided three case studies that have badly damaged the cause of conservatism.

First there was former FEMA head Michael Brown during Hurricane Katrina, whose incompetence convinced Americans that Republicans can't be trusted with governing.

Then there was Ambassador Jerry Bremer in Baghdad, whose decisions as the head of the American occupation of Iraq convinced Americans that Republicans can't be trusted to manage foreign policy.

And now we have Secretary Paulson at the Treasury, whose intransigence during the worst financial crisis since the Great Depression has convinced Americans that Republicans can't be trusted with their money.

It's a tragic and very expensive legacy. No conservative and no Republican should doubt how much it has hurt our cause and our party.

Rebuilding Public Trust with a Work Out, Not a Bailout
As I told Greta Van Susteren Monday night on Fox News, the fundamental flaw in the Paulson Plan was that it was seen by the American people as a deal designed by and for Wall Street.

Congress needs to go back to the drawing board and develop, not just a financial markets rescue bill (which should be a work out, not a bailout) but also an economic growth bill.

This economic growth package should do two fundamental things:

First of all, it needs to provide relief for our financial markets that is based on lending troubled institutions the capital to restore our credit markets, rather than buying their bad assets. The taxpayers should be asked to extend these institutions a line of credit until they can get back on their feet, rather than blindly acquire these institutions' toxic paper. This is the essential difference between a workout and a bailout.

Second, the plan should stop the flow of $700 billion each year out of our economy and into the coffers of foreign dictators by achieving energy independence. Not only would our national security be improved, but this much new energy income would cause our economy to boom and government revenues to grow.

A Final Warning: Don't Allow the House Democrats to Move the Plan Left
A lot of people are scratching their heads over what would cause House Speaker Nancy Pelosi to deliver such a bitterly partisan speech minutes before the House voted down the Paulson Plan - a plan she purported to support.

I think it's likely that Speaker Pelosi deliberately delivered her highly partisan speech at the last minute to get precisely the result that she got - the defeat of the Paulson Plan. The danger now is that she and the liberal Democrats in the House will spend the next couple days re-loading the bill with all the leftwing pork projects that Senator McCain and the House Republicans were able to remove from it.

This danger makes it imperative that Republicans unify behind Minority Leader John Boehner in resisting moving any rescue plan to the left. The stakes are too high for the American people to allow liberal Democrats to use the current crisis to line the coffers of their special interest allies.

My Response to "Why Kline Voted Yes"

Here is my response to Janet Beihoffer, who is a great American and great conservative that I just happen to disagree with at this time. The person who forwarded this to me I wish to keep anonymous.


_______ forwarded me your email, and, as a fiscal conservative, I have to honestly disagree with your assessment.
Part of the problem our party is facing is the fact that we talk about offering free-market solutions to government problems. We, as fiscal conservatives, are against government intervention in the private sector. The market will correct itself if we just let it.
Does that mean that some businesses will go belly up? Yes. But new businesses will be created to fill the void. Does that mean that some people will lose their homes? Probably. But these are the people who shouldn't be renting their homes from a bank or mortgage company to begin with.
Look at the housing market, to begin with. I, personally, have a credit score of approximately 600 because of bad debts that I incurred (student loans). For any type of conventional mortgage, I do not qualify because my debt service subtracted from my income, does not leave me with enough to make mortgage payments at the high interest rates I "might" qualify for. Does that mean I should go and take a mortgage from Fannie Mae or Freddie Mac and expect to stay in my home when I could not afford the mortgage to begin with?
We fiscal conservatives stress the principle of "let the market decide." If the market decides that I am a poor risk to lend money to (like a mortgage), then they have every right to deny me financing.
The problem occurred when government mandated that certain income groups or people groups (minorities and first time buyers to name two of the groups) must comprise a certain percentage of mortgages underwritten.
Since these people should not have qualified for financing to begin with, and Wall Street firms (starting with the mortgage originators and moving up) bought the "safe" mortgage-backed securities, I do not think that the U.S. taxpayers, like me, need to be on the hook for someone elses problem. The Federal government is not bailing me out from my student loan debt, despite the fact I've had occasional bouts of underemployment or unemployment that have prohibited me from paying them back right away. Still, it is not the government's fault that I took the money for school. I incurred the obligation and therefore I am left with the debt. (By the way, for the record - I never asked the Federal government for a bailout and don't expect one either. Besides, should I have made the cop out of going through bankruptcy instead of doing the right thing and just paying down my debt, student loan debt is not dischargable through bankruptcy anyway).
Essentially what I am saying is this bill, regardless of the money for ACORN or other liberal special interest groups being stripped, was a bad deal because nobody wanted to assume responsibility for anything and put we taxpayers on the hook for the whole amount. It does not matter if smaller businesses are involved or not. Further governmental intervention will not solve the problem but only make matters worse. Government (Federal, State and Local) has to just step out of the way and let the markets work.
That is a core principle of being a Republican and that is the type of fiscal responsibility we fight for in our party's platform. Why change now? Just because President Bush and Treasury Secretary Paulson have gotten away from fiscal conservatism? Believe me, that's what's gotten our party in the sad state that it's at. That's why we lost the 2006 elections so bad and that's why it has taken so long to get the momentum rolling in our direction in 2008.
As our beloved 40th President, Ronald Wilson Reagan once remarked (and I paraphrase), "Government is not the solution to our problems. Government is the problem."

Best wishes!

Jeffrey S. Williams
House District 55A Co-chair
4th Congressional District Vice Chair

(I am sending this on my own accord and not "officially" on behalf of the BPOU or 4th Congressional District)

P.S. I have CC'd (names are being withheld) and am posting a copy of it on my blog, I hope you don't mind.

P.P.S. Just so you don't think I'm too critical, I do want you to know that I appreciate all that you have done and continue to do for our great party. This is just an area where we might have some vehement disagreement.

Why Kline voted Yes

Written by Janet Beihoffer, 2nd Congressional District (MN) Republican Party Chair.

My Congressman, John Kline, voted to support the solution to address our financial problems. I have read a ton on both sides and will be writing a blog post "An Everyman's Explanation of the MESS" ( and in an attempt to put in English what is really going on with this fiasco. There are three components: the mortgage industry; banks; and other. It's the "other" category that is driving the need for a solution. While the mortgage and banking topics have been in the press, what has not been explained in all the headlines, rhetoric, hype, etc. is this: there are 100's if not 1000s of companies who got into the financing business starting in the 1980's. These companies include manufacturers, insurance, brokerage, etc. - all outside of the banking industry. They are all loaning each other money for a plethora of reasons. All wanted to make their profit on loaning money. The "bailout" was not so much for the barons/bankers of Wall Street as it was for those other companies who provide jobs, pension plans, etc.

Whether or not you agree with this, it simply is.

Now for John Kline: he understood this. He also knows that the Democrats control Congress. He knows that Democrat Pelosi and company had no intention of including House Republicans in any solution - that is until Treasury Secretary Paulson called McCain back to help. McCain got the House involved; the original plan (Paulson, Dems, Paulson) included money that was going to be funneled to ACORN and other Democrat (non-profit???) support groups which in turn would be funneled back to Democrats. Once McCain and the Republican House got involved, all the perks/earmarks/subsidies were removed; golden parachutes were removed; some real oversite procedures were put in place. So Kline voted for the offered solution.

If you go here, you can read all of Kline's short post but this info is key:

“Today, members of Congress were asked to make a difficult decision. As it became increasingly clear that the financial crisis facing America was extending beyond Wall Street and threatening the jobs, homes, and retirement security of the men and women reporting for work on Main Streets throughout Minnesota and across America, we were asked to cast our vote for an imperfect, but important, solution. Unfortunately, this bill did not pass, and the crisis continues.

The result was imperfect, but it was a bipartisan solution that I believed was in the best interest of provided increased protection for the American taxpayer by instituting greater oversight and transparency. My Republican colleagues and I stood firm against the original, seriously flawed plan, as well as irresponsible provisions supported by my Democratic colleagues – including slush funds for left-leaning political organizations. We demanded that Wall Street finance its recovery through a federal insurance program. We also fought to ensure no golden parachutes would be available to corporate executives who made reckless decisions. But the bill failed, and we must, once again, return to negotiations." John Kline

Perfect, no; plausible,yes. Now the issue is whether or not there can be another plan that can keep the good stuff from this one as well as address outstanding issues that other Republicans want addressed. Unfortunately, our party is in the minority. The Democrats can pass any bill they want. You can bet the last dollar you have that they will include their friends in other bills. While Obama is fiddling, our economy is burning (up) and we need something. What? Phew, don't know but a stop gap measure needs to be put in place so we can regroup; then, have the government get out of the way. At least McCain is trying to do something - I know, we have our differences but...

Remember, most of the millionaires and billionaires are Democrats (Gates, Buffett, Oprah Winfrey, H'wood moguls, media barons, the Google and Yahoo mega millionaires as well as most of the mega millionaires, etc.). They won't miss the money but the rest of us will. Republicans are the party of the people. Too bad we do a lousy job of marketing that fact.

We are Americans; we solve problems when we have most of the facts.

Tuesday, September 30, 2008

AZ Rep. Shadegg Takes on Treasury Sec. Paulson

Ariz. Rep. John Shadegg Takes on Henry Paulson
Tuesday, September 30, 2008 11:37 AM

By: Jim Meyers

“The sky is not falling,” declares Rep. John Shadegg, and Congress will act to deal with the economic crisis without giving Treasury Secretary Henry Paulson a “blank check.”

The Arizona Republican writes in Monday’s USA Today: “Every Republican who voted against the Emergency Economic Stabilization Act on Monday believes that Congress must address this crisis. They take it seriously and stand ready to vote for reasonable legislation…

“Paulson’s $700 billion plan was fundamentally flawed. The bill asked for a blank check. It did not specify which assets could be purchased or the procedure by which they would be purchased…

“Secretary Paulson is getting a lesson in civics. The world he has entered is different than the wheeling-and-dealing Goldman Sachs world where he made his fortune.”

Shadegg called for the suspension of the “mark to market” accounting rule that requires mortgage-backed securities to be valued at “fire-sale prices.” That would help prevent the current crisis from reoccurring, but Shadegg said it is “incomprehensible” that Paulson and Congressional Democrats refused to include such a provision in the bill.

He also called for an increase in the Federal Deposit Insurance Corp.’s $100,000 limit on coverage to alleviate the concerns of millions of Americans, and said “it’s hard to imagine why anyone would oppose such a change.”

Rep. Shadegg, who was first elected in 1994 and has held a number of GOP leadership positions in the House, concluded: “We have ample time to reach an acceptable compromise if all parties act in good faith. The Democratic House majority can move to reconsider its bill if Speaker Nancy Pelosi will allow an amendment to improve it by making changes, including those I have outlined.

“This market can be solved in the very near future, and the market will come back.”

Saturday, September 27, 2008

Alaska Abandons Bridge to Nowhere

The following post originally appeared on Nationaldebtbusters on Sept. 21, 2007. Since it has come back in the news again, I thought I'd repost this for your edification.

Americans for Prosperity Calls Victorious Defeat of Bridge to Nowhere a Testament to the Power of Grassroots Activism

Citizen Group Visited the Bridge to Nowhere in August 2006

WASHINGTON, Sept. 21 /PRNewswire-USNewswire/ -- On the heels of news today that the state of Alaska has officially abandoned plans to pursue the infamous Gravina Bridge to Nowhere project, Americans for Prosperity President Tim Phillips issued the following victory statement:

"The death of the Alaska Bridge to Nowhere is a testament to the power of grassroots activism. Citizen outrage against hard-earned tax dollars being wasted on questionable pet projects delivered this victory for taxpayers. To paraphrase the late Senator Everett Dirksen of Illinois, when citizen activists turned up the heat on Congress, lawmakers saw the light.
By communicating their frustration over this incredibly wasteful use of federal tax dollars, citizens created an environment in which the Bridge to Nowhere could not survive any longer.

"I applaud those hard-nosed lawmakers that helped to fight against the Bridge to Nowhere, including Senator Tom Coburn, Representative Jeff Flake, and Representative Mark Kirk.

"As we drove more than 10,000 miles across 37 states on our Ending Earmarks Express road tour last year, which visited the Bridge to Nowhere, one outraged citizen after another told us that the earmark favor factory must be shut down. By refusing to remain silent while their tax dollars were abused, citizens defeated the Bridge to Nowhere.

"This victory today is a key reason why over 1,000 citizens are committed to come to Washington, DC, as part of Americans for Prosperity Foundation's Defending the American Dream Summit on October 4-5. This Summit will be a massive show of force in support of fiscal restraint and against abuse of tax dollars. With these grassroots troops we can restore genuine fiscal restraint to Washington and bring an end to questionable earmarks like the Bridge to Nowhere."

Editors Note: Americans for Prosperity Foundation traveled over 10,000 miles across the nation on the Ending Earmarks Express road tour last year, visiting 37 states and 50 earmarks, including the Bridge to Nowhere. AFPF was the first Washington, DC-based group to visit the proposed site of the Gravina Bridge to Nowhere.

To view video of AFP President Tim Phillips speaking on the ferry from Gravina Island to Ketchikan, please visit:

Americans for Prosperity (AFP) is the nation's premier grassroots
organization committed to advancing every individual's right to economic freedom and opportunity. AFP believes reducing the size and scope of government is the best safeguard to ensuring individual productivity and prosperity for all Americans. AFP educates and engages citizens in support of restraining state and federal government growth, and returning government to its constitutional limits.

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