FedUpUSA

Archive for January 2nd, 2010

The reason for posting this article is that I see many people who are in the state described by Dr. Levine below.

In his article Are Americans a Broken People? Why We’ve Stopped Fighting Back Against the Forces of Oppression… he asks, “Have consumerism, suburbanization and a malevolent corporate-government partnership so beaten us down that we no longer have the will to save ourselves?”

I see this reaction from many people regarding actually implementing Freedom’s Vision. Some people believe that there is just no way we could ever overcome our oppressors and institute those ideas. Well, I call B.S.! We are the ONLY ONES who do possess the power to implement change – and we’re going to!

Freedom’s Vision is designed to get us from our current debt and derivative saturated existence to one where the majority of that has been cleansed from the system and our money can once again go to work for us. It does so in a way that directly benefits most people in our society – it gives them an incentive to back it. The SWARM concept is meant to do exactly what Dr. Levine suggests, give the people small morale building victories on their way to achieving significant change.

Are Americans a Broken People? Why We’ve Stopped Fighting Back Against the Forces of Oppression…

By Bruce E. Levine

A psychologist asks: Have consumerism, suburbanization and a malevolent corporate-government partnership so beaten us down that we no longer have the will to save ourselves?

Can people become so broken that truths of how they are being screwed do not “set them free” but instead further demoralize them? Has such a demoralization happened in the United States?

Do some totalitarians actually want us to hear how we have been screwed because they know that humiliating passivity in the face of obvious oppression will demoralize us even further?

What forces have created a demoralized, passive, dis-couraged U.S. population?

Can anything be done to turn this around?

Can people become so broken that truths of how they are being screwed do not “set them free” but instead further demoralize them?

Yes. It is called the “abuse syndrome.” How do abusive pimps, spouses, bosses, corporations, and governments stay in control? They shove lies, emotional and physical abuses, and injustices in their victims’ faces, and when victims are afraid to exit from these relationships, they get weaker. So the abuser then makes their victims eat even more lies, abuses, and injustices, resulting in victims even weaker as they remain in these relationships.

Does knowing the truth of their abuse set people free when they are deep in these abuse syndromes?

No. For victims of the abuse syndrome, the truth of their passive submission to humiliating oppression is more than embarrassing; it can feel shameful — and there is nothing more painful than shame. When one already feels beaten down and demoralized, the likely response to the pain of shame is not constructive action, but more attempts to shut down or divert oneself from this pain. It is not likely that the truth of one’s humiliating oppression is going to energize one to constructive actions.

Has such a demoralization happened in the U.S.?

In the United States, 47 million people are without health insurance, and many millions more are underinsured or a job layoff away from losing their coverage. But despite the current sellout by their elected officials to the insurance industry, there is no outpouring of millions of U.S. citizens on the streets of Washington, D.C., protesting this betrayal.

Polls show that the majority of Americans oppose U.S. wars in Afghanistan and Iraq as well as the taxpayer bailout of the financial industry, yet only a handful of U.S. citizens have protested these circumstances.

Remember the 2000 U.S. presidential election? That’s the one in which Al Gore received 500,000 more votes than George W. Bush. That’s also the one that the Florida Supreme Court’s order for a recount of the disputed Florida vote was overruled by the U.S. Supreme Court in a politicized 5-4 decision, of which dissenting Justice John Paul Stevens remarked: “Although we may never know with complete certainty the identity of the winner of this year’s presidential election, the identity of the loser is perfectly clear. It is the nation’s confidence in the judge as an impartial guardian of the rule of law.” Yet, even this provoked few demonstrators.

When people become broken, they cannot act on truths of injustice. Furthermore, when people have become broken, more truths about how they have been victimized can lead to shame about how they have allowed it. And shame, like fear, is one more way we become even more psychologically broken.

U.S. citizens do not actively protest obvious injustices for the same reasons that people cannot leave their abusive spouses: They feel helpless to effect change. The more we don’t act, the weaker we get. And ultimately to deal with the painful humiliation over inaction in the face of an oppressor, we move to shut-down mode and use escape strategies such as depression, substance abuse, and other diversions, which further keep us from acting. This is the vicious cycle of all abuse syndromes.

Do some totalitarians actually want us to hear how we have been screwed because they know that humiliating passivity in the face of obvious oppression will demoralize us even further?

Maybe.

Shortly before the 2000 U.S. presidential election, millions of Americans saw a clip of George W. Bush joking to a wealthy group of people, “What a crowd tonight: the haves and the haves-more. Some people call you the elite; I call you my base.” Yet, even with these kind of inflammatory remarks, the tens of millions of U.S. citizens who had come to despise Bush and his arrogance remained passive in the face of the 2000 non-democratic presidential elections.

Perhaps the “political genius” of the Bush-Cheney regime was in their full realization that Americans were so broken that the regime could get away with damn near anything. And the more people did nothing about the boot slamming on their faces, the weaker people became.

What forces have created a demoralized, passive, dis-couraged U.S. population?

The U.S. government-corporate partnership has used its share of guns and terror to break Native Americans, labor union organizers, and other dissidents and activists. But today, most U.S. citizens are broken by financial fears. There is potential legal debt if we speak out against a powerful authority, and all kinds of other debt if we do not comply on the job. Young people are broken by college-loan debts and fear of having no health insurance.

The U.S. population is increasingly broken by the social isolation created by corporate-governmental policies. A 2006 American Sociological Review study (“Social Isolation in America: Changes in Core Discussion Networks over Two Decades”) reported that, in 2004, 25 percent of Americans did not have a single confidant. (In 1985, 10 percent of Americans reported not having a single confidant.) Sociologist Robert Putnam, in his 2000 book, Bowling Alone, describes how social connectedness is disappearing in virtually every aspect of U.S. life. For example, there has been a significant decrease in face-to-face contact with neighbors and friends due to suburbanization, commuting, electronic entertainment, time and money pressures and other variables created by governmental-corporate policies. And union activities and other formal or informal ways that people give each other the support necessary to resist oppression have also decreased.

We are also broken by a corporate-government partnership that has rendered most of us out of control when it comes to the basic necessities of life, including our food supply. And we, like many other people in the world, are broken by socializing institutions that alienate us from our basic humanity. A few examples:

Schools and Universities: Do most schools teach young people to be action-oriented — or to be passive? Do most schools teach young people that they can affect their surroundings — or not to bother? Do schools provide examples of democratic institutions — or examples of authoritarian ones?

A long list of school critics from Henry David Thoreau to John Dewey, John Holt, Paul Goodman, Jonathan Kozol, Alfie Kohn, Ivan Illich, and John Taylor Gatto have pointed out that a school is nothing less than a miniature society: what young people experience in schools is the chief means of creating our future society. Schools are routinely places where kids — through fear — learn to comply to authorities for whom they often have no respect, and to regurgitate material they often find meaningless. These are great ways of breaking someone.

Today, U.S. colleges and universities have increasingly become places where young people are merely acquiring degree credentials — badges of compliance for corporate employers — in exchange for learning to accept bureaucratic domination and enslaving debt.

Mental Health Institutions: Aldous Huxley predicted today’s pharmaceutical societyl “[I]t seems to me perfectly in the cards,” he said, “that there will be within the next generation or so a pharmacological method of making people love their servitude.”

Today, increasing numbers of people in the U.S. who do not comply with authority are being diagnosed with mental illnesses and medicated with psychiatric drugs that make them less pained about their boredom, resentments, and other negative emotions, thus rendering them more compliant and manageable.

Oppositional defiant disorder (ODD) is an increasingly popular diagnosis for children and teenagers. The official symptoms of ODD include, “often actively defies or refuses to comply with adult requests or rules,” and “often argues with adults.” An even more common reaction to oppressive authorities than the overt defiance of ODD is some type of passive defiance — for example, attention deficit hyperactivity disorder (ADHD). Studies show that virtually all children diagnosed with ADHD will pay attention to activities that they actually enjoy or that they have chosen. In other words, when ADHD-labeled kids are having a good time and in control, the “disease” goes away.

When human beings feel too terrified and broken to actively protest, they may stage a “passive-aggressive revolution” by simply getting depressed, staying drunk, and not doing anything — this is one reason why the Soviet empire crumbled. However, the diseasing/medicalizing of rebellion and drug “treatments” have weakened the power of even this passive-aggressive revolution.

Television: In his book Four Arguments for the Elimination of Television (1978), Jerry Mander (after reviewing totalitarian critics such as George Orwell, Aldous Huxley, Jacques Ellul, and Ivan Illich) compiled a list of the “Eight Ideal Conditions for the Flowering of Autocracy.”

Mander claimed that television helps create all eight conditions for breaking a population. Television, he explained, (1) occupies people so that they don’t know themselves — and what a human being is; (2) separates people from one another; (3) creates sensory deprivation; (4) occupies the mind and fills the brain with prearranged experience and thought; (5) encourages drug use to dampen dissatisfaction (while TV itself produces a drug-like effect, this was compounded in 1997 the U.S. Food and Drug Administration relaxing the rules of prescription-drug advertising); (6) centralizes knowledge and information; (7) eliminates or “museumize” other cultures to eliminate comparisons; and (8) redefines happiness and the meaning of life.

Commericalism of Damn Near Everything: While spirituality, music, and cinema can be revolutionary forces, the gross commercialization of all of these has deadened their capacity to energize rebellion. So now, damn near everything – not just organized religion — has become “opiates of the masses.”

The primary societal role of U.S. citizens is no longer that of “citizen” but that of “consumer.” While citizens know that buying and selling within community strengthens that community and that this strengthens democracy, consumers care only about the best deal. While citizens understand that dependency on an impersonal creditor is a kind of slavery, consumers get excited with credit cards that offer a temporarily low APR.

Consumerism breaks people by devaluing human connectedness, socializing self-absorption, obliterating self-reliance, alienating people from normal human emotional reactions, and by selling the idea that purchased products — not themselves and their community — are their salvation.

Can anything be done to turn this around?

When people get caught up in humiliating abuse syndromes, more truths about their oppressive humiliations don’t set them free. What sets them free is morale.

What gives people morale? Encouragement. Small victories. Models of courageous behaviors. And anything that helps them break out of the vicious cycle of pain, shut down, immobilization, shame over immobilization, more pain, and more shut down.

The last people I would turn to for help in remobilizing a demoralized population are mental health professionals — at least those who have not rebelled against their professional socialization. Much of the craft of relighting the pilot light requires talents that mental health professionals simply are not selected for nor are they trained in. Specifically, the talents required are a fearlessness around image, spontaneity, and definitely anti-authoritarianism. But these are not the traits that medical schools or graduate schools select for or encourage.

Mental health professionals’ focus on symptoms and feelings often create patients who take themselves and their moods far too seriously. In contrast, people talented in the craft of maintaining morale resist this kind of self-absorption. For example, in the question-and-answer session that followed a Noam Chomsky talk (reported in Understanding Power: The Indispensable Chomsky, 2002), a somewhat demoralized man in the audience asked Chomsky if he too ever went through a phase of hopelessness. Chomsky responded, “Yeah, every evening . . .”

If you want to feel hopeless, there are a lot of things you could feel hopeless about. If you want to sort of work out objectively what’s the chance that the human species will survive for another century, probably not very high. But I mean, what’s the point? . . . First of all, those predictions don’t mean anything — they’re more just a reflection of your mood or your personality than anything else. And if you act on that assumption, then you’re guaranteeing that’ll happen. If you act on the assumption that things can change, well, maybe they will. Okay, the only rational choice, given those alternatives, is to forget pessimism.”

A major component of the craft of maintaining morale is not taking the advertised reality too seriously. In the early 1960s, when the overwhelming majority in the U.S. supported military intervention in Vietnam, Chomsky was one of a minority of U.S. citizens actively opposing it. Looking back at this era, Chomsky reflected, “When I got involved in the anti-Vietnam War movement, it seemed to me impossible that we would ever have any effect. . . So looking back, I think my evaluation of the ‘hope’ was much too pessimistic: it was based on a complete misunderstanding. I was sort of believing what I read.”

An elitist assumption is that people don’t change because they are either ignorant of their problems or ignorant of solutions. Elitist “helpers” think they have done something useful by informing overweight people that they are obese and that they must reduce their caloric intake and increase exercise. An elitist who has never been broken by his or her circumstances does not know that people who have become demoralized do not need analyses and pontifications. Rather the immobilized need a shot of morale.

I want to caution that I believe that, indeed, there are some people who do need to be on medication and that not all psychological medication is bad. That’s not my point in posting this article which centers more around his notion that debt and corporatism have created a society of compliant but sometimes unhappy people controlled by debt. They are happy when the bubble is growing and the prices of their “assets” are increasing, but the game is exposed for what it truly is when asset prices begin to fall.

We don’t have to accept this system as our fate. We do have the power to change it. Money, after all, is simply an invention of man which at its core is meant to be a medium of exchange so that we may all trade the fruits of our labors. Breaking free of the shackles of DEBT is entirely possible and achievable. Give it a try at the personal level, you will be far more likely to find happiness and meaning in your own life when you are no longer shackled! And together we will unshackle our nation for future generations, that is our intention.

The first audio link is the portion of the Two Beers with Steve interview with Bill Still:

Bill Still on Two Beers with Steve (.mp3)

This link is a question and answers format explaining the basic concepts of Freedom’s Vision with both Bill and Nathan.

Nathan and Bill – Freedom’s Vision beginning questions… (.mp4)

Again, questions and comments are welcome. At some point in the near future we would like to have a call in question and answer session.

20 Million-Plus Collect Unemployment Checks in ’09

By CHRISTOPHER S. RUGABER

WASHINGTON (AP) – A record 20 million-plus people collected unemployment benefits at some point in 2009, a year that ended with the jobless rate at 10 percent.

As the pace of layoffs slows, the number of new applicants visiting unemployment offices has been on the decline in recent months. But limited hiring means the ranks of the long-term unemployed continues to grow, with more than 5.8 million people out of work for more than six months.

The number of new claims for jobless benefits dropped last week to 432,000, the Labor Department said Thursday, down sharply from its late March peak of 674,000. The decline signals that the economy could begin adding a small number of jobs in January, several economists said.

Still, hiring is unlikely to be strong enough to quickly bring down the unemployment rate, which fell from 10.2 percent in October to 10 percent in November. December’s rate will be announced Jan. 8.

Companies will remain cautious about adding staff until they are confident the economic recovery is sustainable – something they remain unsure about as consumers and businesses keep a lid on spending, and as the government begins to wind down various stimulus programs.

The Federal Reserve and private economists expect joblessness to stay above 9 percent through the end of 2010.

The slow pace of hiring will force Congress and the Obama administration in 2010 to spend as much as $70 billion to extend jobless aid for the long-term unemployed, or else let benefits – which were extended several times in 2009 – expire for millions of people.

“Fewer people are getting fired, but nobody is finding a job,” said Dan Greenhaus, chief economic strategist at Miller Tabak.

Thursday’s report illustrates the two different trends: first-time jobless claims are falling as layoffs ease, but the total number of people collecting unemployment checks is still rising.

More than 10.1 million people collected jobless benefits in the week of Dec. 12, the latest data available. That’s up by about 200,000 compared with the previous week.

That figure includes 5.3 million people receiving the 26 weeks of aid customarily provided by the states, and 4.8 million people that have shifted to the extended benefit programs enacted by Congress over the past two years and paid for by the federal government. Unemployment insurance averages about $300 per week.

But the extensions are set to expire in February. That could mean as many as 1 million people would run out of unemployment aid in March, according to the National Employment Law Project, a nonprofit group.

The total number of people who at one point collected benefits in 2009 – roughly 20.7 million – is also a record. A larger proportion of the unemployed received jobless benefits in the last steep recession in 1981-82, but the work force has grown by about one-third since then.

Fifteen million Americans are out of work, an increase of 3.8 million since the start of 2009. There are six unemployed people, on average, for each available job. And the so-called underemployment rate, counting part-time workers who want full-time jobs and laid-off workers who have given up their job hunt, stands at 17.2 percent.

Budget-strapped state governments will struggle with higher spending on unemployment insurance in 2010. States are required to set aside money in a trust fund to pay jobless benefits, but 25 have already run through their funds and have borrowed $26 billion from the federal government.

The Labor Department has projected that 40 states may need to borrow as much as $90 billion by 2012.

Thirty-five states have already increased the unemployment insurance taxes they levy on employers for 2010, according to the National Association of State Workforce Agencies. Some are also cutting benefits as they try to reduce the size of budget shortfalls that are expected to reach $180 billion in the coming fiscal year.

The drain on federal and state finances could force Congress to consider raising the federal unemployment insurance tax, which is currently 0.8 percent on the first $7,000 of wages, or making other changes.

Origins of an American Kleptocracy

Submitted by Marla Singer

Some days ago we wondered aloud at the blank check extended to Fannie and Freddie along with the suspiciously convenient timing of those announcements on Christmas Day.  Back then we wondered if we had been told the entire story.  To wit:

So.  Let us summarize:

We do not expect the GSEs to grow their portfolios at all, so we are fixing the bloated portfolio problem by easing the portfolio caps to permit a quarter trillion dollar expansion thereof.

We do not expect either of the GSEs to need more help from the Treasury, so we are responding to the underutilized $400 billion “lifeline” the GSEs have with the Treasury ($111 of which is currently used) by expanding it to… infinity.

Oh, and though they have collectively lost nearly $200 billion, we are paying the CEOs around $6 million each.

Great work team!  It’s already almost 11:00.  Let’s go to lunch.

The other shoe having now dropped, Bloomberg has joined in our skepticism:

Taxpayer losses from supporting Fannie Mae and Freddie Mac will top $400 billion, according to Peter Wallison, a former general counsel at the Treasury who is now a fellow at the American Enterprise Institute.

“The situation is they are losing gobs of money, up to $400 billion in mortgages,” Wallison said in a Bloomberg Television interview. The Treasury Department recognized last week that losses will be more than $400 billion when it raised its limit on federal support for the two government-sponsored enterprises, he said.

Wallison continues:

“It was always safe to buy these notes,” he said. The U.S. government was always going to stand behind them. They’re as good as Treasury notes.”

We are no longer sure this is the most inspiring comparison. Wallison also chimes in via the Wall Street Journal and points to a darker vein shot through the GSE story:

New research by Edward Pinto, a former chief credit officer for Fannie Mae and a housing expert, has found that from the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime or Alt-A.

In general, a subprime mortgage refers to the credit of the borrower. A FICO score of less than 660 is the dividing line between prime and subprime, but Fannie and Freddie were reporting these mortgages as prime, according to Mr. Pinto. Fannie has admitted this in a third-quarter 10-Q report in 2008.

But because of Fannie and Freddie’s mislabeling, there were millions more high-risk loans outstanding. That meant default rates as well as the actual losses after foreclosure were going to be outside all prior experience. When these rates began to show up early in 2007, it was apparent something was seriously wrong with assumptions on which AAA ratings had been based.

Losses, it was now certain, would invade the AAA tranches of the mortgage-backed securities outstanding. Investors, having lost confidence in the ratings, fled the MBS market and ultimately the market for all asset-backed securities. They have not yet returned.

It has become conventional wisdom, perhaps even cliche, to pin the origins of the credit crisis on the big banks or, AIG or even the practice of financial modeling.  Certainly, these actors have received the most play in the media, and have now endured the focus of populist ire for more than a year.  We now think that the analysis leading commentators to focus blame on these entities is fatally flawed.

We have seen no credible data that any of the large banks or other underwriters of mortgage backed securities (“MBSs”) or collaterized debt obligations (“CDOs”) or firms like AIG selling protection on same actually misrepresented the character of underlying collateral.  This is in direct contrast to the allegations of Edward Pinto as printed by the Wall Street Journal.  If Pinto is correct such that the mis-marking of mortgages by the GSEs and the discovery thereof destroyed confidence in the accuracy of ratings in mortgage backed securities and their derivatives (and it seems probable to suspect that he is) then it seems almost beyond question that the policies (or policy malfeasance) of Fannie and Freddie, and not the actions of large banks or firms like AIG are the proximate cause of not just the credit crisis, but also the continuing multi-act, multi-bailout farce that continues to be passed off to the public as necessary “stimulus.”

It takes only a cursory examination to suspect that misdirection plays a key part in the latest act of the ongoing crisis theater of the absurd.  Misdirection to distract attention from the key complicity of GSEs in the crisis.  Misdirection to deflect scrutiny away from the political personalities from both sides of the aisle responsible.  Misdirection to conceal what could only be described as the most damaging acts of accounting and securities fraud in the history of accounting, securities or fraud.

Precious few assumptions are required to come to conclusions laying responsibility for the largest economic disaster in recent memory at the feet of the GSEs.

First, that the GSEs had substantial influence over the mortgage market.

This is a no-brainer with the GSEs either holding or guaranteeing 51% of outstanding home mortgage debt in 2003.  To put this in perspective, that figure was around 33% of the GDP of the entire United States in 2003.  Read that last line again.  Anyone wishing to play in the market had to compete with the rates set by Fannie and Freddie.

Second, that the GSEs artificially depressed rates (read: underpriced risk).

This is equally trivial to find given that this precise mandate has been the express purpose of the GSEs since at least 1993.  The GSEs were not tasked with increasing the capacity for mortgage lending.  They were tasked with making loans “affordable.”  They used a number of tools to do so, but the key elements were acting as a proxy for quasi-government guarantees and bundling mortgages into risk tiers to act as a sort of clearing house for securitization pools.  It is often said that providing a guarantee (particularly governmental) reduces risk.  This is, of course, a fantasy.  All that explicitly or implicitly tax dollar backed guarantees do is socialize risk.  However, they manage to do so without requiring consolidation of the resulting liabilities on the government’s balance sheet.  Convenient that, yes?  A guarantee is a subsidy.  Period.  Failing to understand this is what permitted the political class to mislead the American public into thinking that cheap loans for everything from housing to small businesses to education (the next fiscal disaster on the horizon) come with no cost.  (Or that cheap debt wouldn’t pump up the price of everything from education to housing).  Today’s pundits seem to enjoy blaming “moral hazard” (by which they mean “corporate moral hazard”) for the crisis.  Oddly, government guarantees, particularly those that everyone assumes will be costless, are not typically part of this definition.

These assumptions, on their own should be sufficient to indict the GSEs, the totally unqualified and unaccountable recipients of political payoffs who occupied the executive offices of these fiscal singularities1 and their other supporters (including the voters who continued year after year to return these jokers to public office) on charges of gross negligence.

If, as Pinto suggests, we add purposeful misrepresentation of underlying collateral to the mix three things become apparent:

First, absent some intervening criminal act by actors farther downstream (and we may yet find some), we have isolated absolutely the cause of all that followed.

Second, it becomes quite easy to construct a criminal case for literally millions of counts of accounting, securities, wire and mail fraud against the GSEs.  To the extent executives at Fannie and Freddie signed off on financial statements disclosing the portion of their balance sheets that held “AAA” securities and these had been purposefully misidentified we should be exploring prosecution for violations under e.g., Sarbanes-Oxley.  (Given, however, Rham Emanuel’s involvement in Freddie and Fannie, we aren’t holding our breath).

Third, given the presence of blatant government price fixing in more than a third of the entire economy, the United States hasn’t been anything like a “free market” since before 2003.

It should shock you that literally a third of the U.S. economy should become a playground for the social experiments of any political group of any party affiliation.

It probably will not shock you (since you are reading Zero Hedge) to find what may be the largest example of securities fraud ever directly connected to elected officials of the United States and their cronies.

Taking a step back, it should shock you that power over literally a third of the U.S. economy should ever have been allowed to become concentrated in two entities with blatantly socialist aims and under the control of executives with no relevant qualifications of any note other than loose purse strings on their political contribution satchels.

What should grip readers with even more substantial alarm is the combination of blank checking for Fannie and Freddie backstops, and the shifty manner in which these disclosures were made.  Is it possible anymore to doubt that the administration simply lied through its teeth while promising us it expects no need of increased credit lines for the GSEs while simultaneously expanding same literally to infinity?

Given that Fannie, Freddie and the FHA have now taken up the mandate of supporting housing prices at any cost (to the taxpayer via endless bailouts and unlimited credit) is it possible in any way to credit the current “upturn” to fundamentals?  When we factor in similar capture of the FDIC and the like, where does this leave us, exactly?

Permit us to ask a few questions:

1.  Why are Fannie and Freddie still operating in any way whatsoever?

2.  Given that their credibility for reliable (or even remotely non-fiction) financial disclosure nears complete obliteration, who is likely to buy anything from these entities in the future?  (If you said “The Fed” you may advance to the bonus round).  Surely the conflict of interest implicit in government ownership does nothing to improve the situation.  Perhaps the news that the Fed plans to issue securities to shrink its balance sheet and reverse “quantitative easing” describes an attempt to securitize the tattered reputation of the GSEs?  Will the Fed simply aggregate its balance sheet and issue tranches?  Does that make the Fed simple the collateralized debt obligation (“CDO”) of last resort?  Who will do the rating?  Who will be writing protection on CDO Fed Tranch A-1 (AAA)?

3.  Given that neither entity is currently monitored by an Inspector General (despite what used to be statutory language so mandating) and both entities are completely captured by the current administration, how can it be anything other than insanity to expect any result from these entities other than the formation (or expansion) of a ravenous fiscal black hole?

4.  Given increasing government control beyond Fannie and Freddie that now extends far beyond 33% of GDP, what can we expect if we continue to permit political parties of any stripe to exercise command and control influence over what is now probably a simple majority of our economy?

There was a time when we hoped that the United States would learn its lesson with respect to permitting political control over large swaths of private markets.  Today that time seems very long ago, and somewhat naive.

Perhaps we are being too harsh on the likes of Barney Frank and other GSE proponents.  Adopting a slighty more relativistic economic morality, we might count Frank as one of the greatest legislators of all time.  Consider:

To the extent Mr. Frank and his ilk self-identify as advocates for low-cost housing for those ill-able to afford it, or beset by poor credit, the last 20 years have represented the largest single wealth transfer (composed primarily of real estate and flat screen TVs) to that sector known to us.  Not only that, but given the de facto nationalization of MBS portfolios (we’ll give you three guesses who have been the largest MBS buyers over the last several quarters) the GSEs and their supporters have managed to get taxpayers to pay for it all.  Of course, had they simply proposed such a measure in Congress it would have been laughed from the chamber.  And yet, it almost seems as if these individuals simply wrote a multi-trillion dollar check to their constituents that happened to be drawn on the United States Treasury.

It almost seems this way because it was this way.

1. 1. Just consider Fannie Mae’s torrid leadership history: James A. Johnson (Fannie CEO 1991-1998, Democratic luminary, Obama fundraiser, John Kerry vice presidential selection committee chair, $21 million in Fannie compensation). Franklin Raines (Fannie CEO 1999-2004, Clinton’s Director Office of Management and Budget, $90 million+ in Fannie compensation later the subject of a civil suit) Daniel Mudd (Fannie CEO 2005-2008, $80 million in Fannie compensation) Herbert M. Allison (Fannie CEO 2008-2009, National Finance Chair, John McCain Campaign).  Freddie’s record is no better.

Arizona could be weeks away from going broke

By Barbara Grijalva – email  KOLD-TV

You can bet that getting finances in order is the top resolution for the State of Arizona.

It will get an early test this month.

A massive education payment is expected to drain state resources down to zero.

What happens next will affect anyone who works for or with state government.

It’s what happens when you run out of money.

You can’t pay your bills.

KOLD News 13 talked with State Representative Vic Williams (R-District 26) on New Year’s Day to get his take on the budget crisis, and what he thinks it will take to get out of this mess.

He says something like this hasn’t happened in nearly three-quarters of a century. 

“I don’t know what’s going to unfold here, but it’s not going to be good,” Williams said.

Arizona legislators have not been able to resolve the budget crisis, and our state could be weeks away from running out of money.

That means having to issue IOU’s to everyone.

And it’s not only state workers, but also those who provide services, such as child care centers.

For instance, about 70% of the children at Outer Limits School in Tucson get a state subsidy.

Owner Bill Berk said the crisis could be devastating to his industry.

 ”We can’t give our employees IOU’s for their paychecks. We can’t give the electric company an IOU,” Berk said.

Representative Williams hopes to be able to work something out with banks so they’ll accept the IOU’s, but he knows that can’t last forever.

He says this is going to take legislators forgetting their differences, and working together to begin a very long process to fix Arizona’s budget.

“We got here by mismanagement of our budget. We’ve been over spending for the last few years,” Williams said.

 And then there’s the recession that has slammed Arizona.

“We’re not coming out of this in the next year. This is going to be here in 2012, 2013,” Williams said.

And, over the years, voters have approved propositions that cost a lot of money for education and health care for the poor, for instance.

It’s mandated spending the legislature can’t touch.

“Over 60% of our state budget is locked down by those voter mandates,” Williams said.

Williams said dramatic and difficult decisions are coming for legislators, voters and taxpayers.

“There are several areas where the state could look at fees or look at taxes. But, as well, we have to have significant reductions in spending with some regenerated revenue coming into the state. That’s the only way we’re going to get out of this problem,” he said.

Tax increases.  Budget slashing.

We’ll have to see what actually does come to the table when the legislative session opens January 11th, and how the people we elected to represent us finally handle this crisis.

How the Financially Connected Prospered in a Decade where Wealth Evaporated for the Majority: S&P 500 Down 24 Percent for the Decade, Real Home Values down 3%, U.S. Dollar down 23%, and Unemployment back to 1980 Levels.

Posted by mybudget360

As we usher in the New Year the filthy rich are counting their blessings and must be very appreciative of the massive bailouts that protected their wealth.  The top one percent of this country control 42 percent of all financial wealth so it shouldn’t come as any surprise that most of the bailouts went to Wall Street and those that are tethered to it for income.  As the stock market continues to rally Americans collecting food stamps stands at the highest number ever at 37 million.  We also have 27 million Americans looking for work or are simply stringing a few hours together to keep some sort of paycheck coming in.  The vast majority of Americans are simply exhaling a sigh of relief that the 2000s are now a thing of the past.  Yet if something isn’t changed radically in our system we are bound to enter another financial shock in the near term.

First, the S&P 500 is down a stunning 24.1 percent since the start of the decade.  Yet Goldman Sachs managed to pull off almost an 80 percent gain during the same time:

So for the poor average American who simply dollar cost averaged into the stock market as every good corporatocracy banker would tell them, they would have fallen behind someone who simply dollar cost averaged into their mattress.  Yet if you happened to dump your money with the government sponsored and back stopped Goldman Sachs you would have done much better.  Ironically these bankers are the same people who created the financial instruments that sent our economy into a tailspin.

The average American is finally realizing that much of the corporate power in Washington is doing very little for them and doing more and more for Wall Street.  So the stock market over the decade brought negative returns to Americans.  How did the housing market do?

The median U.S. home price in November of 1999 came in at $137,600 and ended November 2009 at $172,600.  This 25 percent gain is wiped out once we factor in the Federal Reserve inflating away the U.S. Dollar.  Housing over the decade is actually down 3 percent.  This is where the largest store of the average American wealth is stashed and it went negative for the decade.  Yet somehow the ultra rich seemed to make out like bandits with all the bailouts even though are economy was still fizzling out from two mega bubbles.  There is a reason they call it a golden parachute.

Let us recap.  The stock market brought negative returns both nominally and in real terms for the decade and housing is actually down in real terms.  So how did Americans do over the decade in the employment front?

The unemployment rate is the highest it has been since the early 1980s.  If we look at the employment population ratio we will see that our economy is still trending to the downside.  Yet the corporatocracy is happy to feed the propaganda line that the average American is better off.  Really?  How so?  Once the bubble decade wealth imploded the typical American is now in a worse position.  The national debt also exploded during this decade.  So housing values cratered, the stock market is still massively down, and employment is still in shambles.  Yet we are to believe things are just fine.  People are now finally waking up to the reality that the current system is designed to rip them off and steal from them at every point in the road.

Take credit cards and bailouts for example.  Some credit card companies are hiking fees up on customers before new regulations hit this year.  These are the same companies that benefitted handsomely from the corporatocracy bailouts.  This money came from the average American yet they are sticking it to them each and every other way.  For example, last month I was stuck by a “savings withdrawal fee” from Chase.  I never saw this before.  So I called up the bank and asked them what this was.  It amounted to a $12 fee for each transaction.  As it turns out, the wonderful Federal Reserve through Regulation D yanks money out for people making more than 6 ACH transfers per month from savings accounts.  So if you wanted to move your money from say your toxic too big to fail bank to say a local community bank, make sure you don’t do more than 6 transfers for the month or you are going to be hit with a $12 fee for this.  Insane policies like this make me realize that something is going to give in this decade.

But over the decade our U.S. dollar must have gone up right?  Let us take a look:

The U.S. dollar is down 23.5 percent for the decade.  So if any of you actually left the country and spent abroad you would quickly realize how weak the dollar has gotten.  This has to do with the massive government spending over the decade.  Over the holiday Congress voted to up the debt ceiling since we are breaking through every imaginable barrier possible.  Take a look at this below chart:

We went from $5.7 trillion to over $12 trillion in Federal government public debt in 10 years.  And what did we really get?  We just went through countless data points and where are we better off?  The reality is the money is being dumped into the vortex of the banking and corporate interest that run this country.  It is amazing that even with unemployment claims the media is championing this as a good sign yet they don’t even bother to look at emergency unemployment claims that are flying off the chart!  That is, they are focusing once again on the wrong data.

So it is going to be a challenging decade for average Americans.  The economy flew off the cliff and instead of reforming the system things are back to normal and the corporatocracy keeps on stealing from the population.  The mega wealthy are doing fine and the gap between rich and poor is the largest it has been since the Great Depression.  Welcome to the new gilded age.  Our lost decade is now in the bag.  Are we up for another one?  Let us hope not.

Why the Health-Care Bills Are Unconstitutional

If the government can mandate the purchase of insurance, it can do anything.

By ORRIN G. HATCH, J. KENNETH BLACKWELL AND KENNETH A. KLUKOWSKI

President Obama’s health-care bill is now moving toward final passage. The policy issues may be coming to an end, but the legal issues are certain to continue because key provisions of this dangerous legislation are unconstitutional. Legally speaking, this legislation creates a target-rich environment. We will focus on three of its more glaring constitutional defects.

First, the Constitution does not give Congress the power to require that Americans purchase health insurance. Congress must be able to point to at least one of its powers listed in the Constitution as the basis of any legislation it passes. None of those powers justifies the individual insurance mandate. Congress’s powers to tax and spend do not apply because the mandate neither taxes nor spends. The only other option is Congress’s power to regulate interstate commerce.

Congress has many times stretched this power to the breaking point, exceeding even the expanded version of the commerce power established by the Supreme Court since the Great Depression. It is one thing, however, for Congress to regulate economic activity in which individuals choose to engage; it is another to require that individuals engage in such activity. That is not a difference in degree, but instead a difference in kind. It is a line that Congress has never crossed and the courts have never sanctioned.

In fact, the Supreme Court in United States v. Lopez (1995) rejected a version of the commerce power so expansive that it would leave virtually no activities by individuals that Congress could not regulate. By requiring Americans to use their own money to purchase a particular good or service, Congress would be doing exactly what the court said it could not do.

Some have argued that Congress may pass any legislation that it believes will serve the “general welfare.” Those words appear in Article I of the Constitution, but they do not create a free-floating power for Congress simply to go forth and legislate well. Rather, the general welfare clause identifies the purpose for which Congress may spend money. The individual mandate tells Americans how they must spend the money Congress has not taken from them and has nothing to do with congressional spending.

Associated PressA second constitutional defect of the Reid bill passed in the Senate involves the deals he cut to secure the votes of individual senators. Some of those deals do involve spending programs because they waive certain states’ obligation to contribute to the Medicaid program. This selective spending targeted at certain states runs afoul of the general welfare clause. The welfare it serves is instead very specific and has been dubbed “cash for cloture” because it secured the 60 votes the majority needed to end debate and pass this legislation.

A third constitutional defect in this ObamaCare legislation is its command that states establish such things as benefit exchanges, which will require state legislation and regulations. This is not a condition for receiving federal funds, which would still leave some kind of choice to the states. No, this legislation requires states to establish these exchanges or says that the Secretary of Health and Human Services will step in and do it for them. It renders states little more than subdivisions of the federal government.

This violates the letter, the spirit, and the interpretation of our federal-state form of government. Some may have come to consider federalism an archaic annoyance, perhaps an amusing topic for law-school seminars but certainly not a substantive rule for structuring government. But in New York v. United States (1992) and Printz v. United States (1997), the Supreme Court struck down two laws on the grounds that the Constitution forbids the federal government from commandeering any branch of state government to administer a federal program. That is, by drafting and by deliberate design, exactly what this legislation would do.

The federal government may exercise only the powers granted to it or denied to the states. The states may do everything else. This is why, for example, states may have authority to require individuals to purchase health insurance but the federal government does not. It is also the reason states may require that individuals purchase car insurance before choosing to drive a car, but the federal government may not require all individuals to purchase health insurance.

This hardly exhausts the list of constitutional problems with this legislation, which would take the federal government into uncharted political and legal territory. Analysts, scholars and litigators are just beginning to examine the issues we have raised and other issues that may well lead to future litigation.

America’s founders intended the federal government to have limited powers and that the states have an independent sovereign place in our system of government. The Obama/Reid/Pelosi legislation to take control of the American health-care system is the most sweeping and intrusive federal program ever devised. If the federal government can do this, then it can do anything, and the limits on government power that our liberty requires will be more myth than reality.

Mr. Hatch, a Republican senator from Utah, is a former chairman of the Senate Judiciary Committee. Mr. Blackwell is a senior fellow with the Family Research Council and a professor at Liberty University School of Law. Mr. Klukowski is a fellow and senior legal analyst with the American Civil Rights Union.