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Don't Tread On Me

Now that Alan Grayson is no longer in Congress, Fed hearings have certainly lost that certain dose of panache which only a man, wearing a dollar sign tie, and cross examining the Fed’s General Counsel which grinning like a diabolical Tasmanian Devil, would bring to the table.

We managed to catch up with Grayson during today’s session of Radio Free Dylan, in which the traditionally opinionated Fed critic had some very choice words about the President. In essence, the former Florida Democrat said that it is none other than the President, who is the reason there have been no prosecutions on banks: ”

I am not only blaming the Obama administration, if the Bush administration had its head on straight they would have prevented a lot of these things from happening to start with. But the President Obama administration said at the beginning, we are going to look forward and not back and therefore in the process of making that decision basically let these crooks off the hook.” But that’s ok – see the SEC, which incidentally has to give a person by person org chart and job description of its 3,500 porn addicts before it receive one additional penny of funding, is about to catch one or two criminal masterminds who bought some NYX calls after the information of today’s merger, which was so badly leaked that virtually everyone knew about the deal ahead of the announcement, are about to spend some time in prison.

In the meantime, all those who knowingly and willfully committed crimes in the great housing pump and dump (up to and including misrepresenting underwriting documents), are about to get away scott-free. Thank you Mr. President. That’s some might fine change you got there.

More choice selections from the Ratigan-Taz interview.

On the complete lack of prosecutions and Obama’s responsibility:

DYLAN:  Couple of last questions and then I will let you go. One thing that came out in the FCIC report and Bill Greider did a great job of highlighting this — was the explicit introduction of known to be fraudulent mortgages.  They have been audited by Clayton Holdings which is one of the bigger auditing firms if not the biggest auditing firms of these documents.  They were knowingly and knowingly insofar as they had been reviewed by Clayton Holdings, then installed inside of investments and sold to pension funds, et cetera et cetera, where then the banks would go out and buy insurance on that that obviously paid a lot of money when the government stepped in to bail out AIG who was one of the big insurers.

How is it that after the Great Depression, there were blue sky laws that said it is illegal to sell a worthless piece of paper as if it is stock in the company if its just Alan Grayson and Dylan Ratigan have gone downtown with a piece of paper with their names on it and they are selling it for money even though there is actually no business.  We created laws to prevent people from doing that sort of thing. And yet we found here that mortgages that have been deemed by some official authority — an auditor in this case — as nonconforming, will not get paid back, noncompliant with illegal investment standards for you, American pension fund, for you American mortgage buyer, Fannie Freddie etcetera, and then the FCIC comes out, shows that these fraudulent mortgages were being packaged and sold by Goldman, Deutsche, Morgan, the list goes on and yet, we have yet to see a single meaningful fraud investigation. I mean these guys makes Bernie Madoff look like Romper Room.

REP. GRAYSON: Well that’s right, and what it comes down to is they have been protected by one thing and one thing only which is prosecutor discretion. There is no doubt in a situation like that that people committed crimes, but in order to prosecute them for that you need to have a prosecutor who is willing to do it. And that is something that seems to have eluded us in the past, I guess, three years now. I am not only blaming the Obama administration, if the Bush administration had its head on straight they would have prevented a lot of these things from happening to start with.

But the President Obama administration said at the beginning, we are going to look forward and not back and therefore in the process of making that decision basically let these crooks off the hook.

DYLAN: And what does that sort of decision make, I call Obama the “turn the page president” whether it is war crimes, banking crimes or anything else, is there a point where the decision not to prosecute blatant crimes that are destructive to society really starts to breach the public trust with the government just because the President doesn’t really want to deal with the mess?

REP. GRAYSON:  It’s actually worst than that. The same people who were committing fraud and crimes at Bear Stearns, they are now committing fraud and crimes at Bank of America, at Goldman Sachs and other institutions, because it turns out that crime does pay. It turns out that if you steal a large amount of money that leads to the collapse of your institutions, there’s jobs for you somewhere else.

On the auditing the Fed process, for which Grayson, alongside Paul, had a major contribution in getting at least some partial disclosure from Bernanke:

Tim Geithner said when it was time to finish the bill on financial reform, he told people that his highest priority was to make sure – and this is the bill that was supposed to save America — to keep us from having a bail out — make sure that we didn’t have a total collapse of the economic system.

He said that his highest priority was to make sure that there was no auditing of the Fed! (laughs) So, in the fact of that kind of resistance, we were able to win and win big.  I mean we have now the first independent audit and nothing really bad has happened so far. People were saying well if you audit the Fed, the economy will collapse. Hasn’t happened yet and I think that people are going to realize the Fed  should be a responsible government body just like every other government body. We need to look behind the curtain and find out exactly what’s going on.

DYLAN:  What do you think Tim Geithner is so afraid would be found?

REP. GRAYSON:  I don’t know but I am sure that Tim Geithner didn’t want the Fed audited because Tim Geithner didn’t want Tim Geithner audited, he worked for the New York Fed, led the New York Fed for years before he became Treasury Secretary — and frankly it sounded a bit self serving to me that he said that.
DYLAN:  And what do you and not just you but I’ll add Dr. Ron Paul to it — what do the two of you think was so important about auditing the Fed?

REP. GRAYSON:  Well, what I think we are going to find is something that we’ve already have a little taste of here and there, which is that the Fed has made an enormous deals with entities like Citibank on terms that were completely unfair to the taxpayers. We got a little shred of information about that because one of those deals happened to be one involving the treasury, it has to be a released to us and we found that the Fed had assumed $238 billion dollars of liability from Citibank on mortgage back securities in exchange for nothing. I think we are going to find more deals like that and people are going to scratch their heads and say why are we doing this? Why are we allowing our money to be used in the secret bailouts of three or four or five or six institutions without people even finding out about it except for the fact that we pass this legislation to help to find out. The fed has been out of control now for quite a while and helping its friends at the expense of the rest of us.

DYLAN:  And why are we doing that? Why are we – why have we accepted a system in your opinion that allows a relatively anonymous, highly secretive group of people to provide infinite access of money to people who not only create no apparent value but creates lots of apparent loss?

REP. GRAYSON:  Because the banking system and the bankers, the people in charge of the system have created this meme that the Fed can do no wrong and it has to remain independent of everybody and everything. It is almost as if they believe that the Chairman of the Fed is the Wizard of Oz and it’s not true. I mean the Fed has the authority to create money but it should not have the authority to make the kind of deals that we’ve been seeing where they create massive liability off the books of their favorites while small community banks and small businesses suffer and get nothing. At one point we demonstrated that they had – lent so much money to the Central Bank in New Zealand that it corresponds to $4,000 for every single person in New Zealand. Wouldn’t it be nice if the Feds can extend that kind of credit to Americans?

Full interview can be heard here.

ZeroHedge

President Obama has an army of Czars. Counts vary from 32 to 45 (with 7 more planned). The interesting thing about Czars is Obama’s blatant hypocrisy about them. Let’s start with a look at Obama and his 32 czars

“The biggest problems that we’re facing right now have to do with George Bush trying to bring more and more power into the executive branch and not go through Congress at all. And that’s what I intend to reverse when I’m president of the United States.”

- Sen. Barack Obama, March 31, 2008

To say President Obama failed to follow through on this promise is an understatement. By appointing a virtual army of “czars” – each wholly unaccountable to Congress yet tasked with spearheading major policy efforts for the White House – the president has made an end-run around the legislative branch of historic proportions.

The Imperial Court

Please consider The Compleat List of Czars

1. Afghanistan-Pakistan (Af-Pak) czar, Richard Holbrooke
2. AIDS czar, Jeffrey Crowley
3. Auto recovery czar, Ed Montgomery
4. Behavioral science czar, position not yet filled
5. Bailout czar, Herbert Allison Jr., [replaced Bush bailout czar Neel Kashkari, Assistant Secretary of the Treasury for Financial Stability confirmed by Senate]
6. Border czar, Alan Bersin
7. Car czar, Ron Bloom [Counselor to the Secretary of the Treasury , under Senate oversight]
   UPDATE, 9/07/09: Obama announced his appointment of Ron Bloom as “senior counselor for manufacturing policy,” a move that will eliminate Senate oversight. This position has been dubbed “manufacturing czar” and so this listing moves to a different alphabetical location.
   UPDATE, 9/08/09: My bad. Ron Bloom continues as car czar and takes the appointment as manufacturing czar. He will be double dipping.
8. Climate change czar, Todd Stern
9. Copyright czar, not appointed yet
10. Counterterrorism czar, John Brennan
11. Cybersecurity czar, position will be vacant on August 21st [upon the departure of Melissa Hathaway]
12. Disinformation czar, Linda Douglass [This is a new media buzz since our earlier list, a response by pundits to the White House request for informants: see Glenn Beck and Lew Rockwell]
13. Domestic violence czar, Lynn Rosenthal
14. Drug czar, Gil Kerlikowske
15. Economic czar, Larry Summers
16. Economic czar number two, Paul Volcker
17. Education czar, Arne Duncan
18. Energy czar, Carol Browner
19. Food czar, Michael Taylor [a former Monsanto executive, or, the fox in charge of the henhouse]
20. Government performance czar, Jeffrey Zients
21. Great Lakes czar, Cameron Davis
22. Green jobs czar, Van Jones [who has a communist background]
    UPDATE, 9/06/09, Van Jones resigned after an exposé by Glenn Beck.
23. Guantanamo closure czar, Daniel Fried
24. Health czar, Nancy-Ann DeParle
25. Infotech czar, Vivek Kundra [Shoplifted four shirts, worth $33.50 each, from J.C. Penney in 1996 (source). His last day in DC government was March 4 but on March 12 the FBI raided his office and arrested two staffers.]
26. Intelligence czar, Dennis Blair [Director of National Intelligence, a Senate confirmed position. He is a retired United States Navy four-star admiral]
27. Latin-American czar, Arturo Valenzuela (nominee) [although this post is referred to as a czar, he is nominatied to be Assistant Secretary of State for Western Hemisphere Affairs and so is subject to Senate confirmation. Voting on his confirmation was delayed to clarify his position on Honduras. Watch WaPo's Head Count to track status of confirmation.]
28. Manufacturing czar, Ron Bloom, formerly a “car czar” under Senate oversight, now reporting directly to the President.
    UPDATE from Labor Day.
29. Mideast peace czar, George Mitchell
30. Mideast policy czar, Dennis Ross
31. Pay czar, Kenneth Feinberg
32. Regulatory czar, Cass Sunstein
33. Religion czar, aka God czar Joshua DuBois
34. Safe schools czar, Kevin Jennings [appointed to be Assistant Deputy Secretary of the Office of Safe and Drug-Free Schools, a newly created post (that does not require Senate confirmation); openly gay founder of an organization dedicated to promoting pro-homosexual clubs and curricula in public schools]
35. Science czar, John Holdren
36. Stimulus oversight czar, Earl Devaney
37. Sudan czar, J. Scott Gration
38. TARP czar, Elizabeth Warren [chair of the [Congressional Oversight Panel for the Trouble Assets Relief Program; note that Herb Allison is frequently called the TARP czar]
39. Technology czar, Aneesh Chopra
40. Trade czar, Ron Kirk
41. Urban affairs czar, Adolfo Carrion
42. War czar, Douglas Lute [retained from Bush administration, married to Jane Holl Lute, currently a Deputy Secretary of Homeland Security]
43. Water czar, David J. Hayes [a Deputy Interior Secretary and therefore subject to Senate oversight]
44. Weapons czar, Ashton Carter [actually Under Secretary of Defense for Acquisition, Technology, and Logistics and so subject to Senate confirmation]
45. Weapons of mass destruction czar, Gary Samore

Positions being planned:

1. Income redistribution czar
2. Land-use czar
3. Mortgage czar, formally “consumer financial protection czar” (source)
4. Radio-internet fairness czar
   UPDATE, 7/29/09: Mark Lloyd was appointed FCC diversity czar.
5. Student loan czar, to oversee a program of mandatory service in return for college money (source)
6. Voter list czar
7. Zoning czar

Enough is Enough (and Too Much is Too Much)

Republicans have had enough of this nonsense. The Hill reports Republicans introduce bill to eliminate presidential ‘czars’

Rep. Steve Scalise (R-La.) and 28 other House Republicans introduced legislation to do away with the informal, paid advisers President Obama has employed over the past two years.

The legislation, which was introduced in the last Congress but was not allowed to advance under Democratic control, would do away with the 39 czars Obama has employed during his administration.

The bill defines a czar as “a head of any task force, council, policy office within the Executive Office of the President, or similar office established by or at the direction of the President” who is appointed to a position that would otherwise require Senate confirmation.

Republicans had complained about the president’s use of czars to help advance his agenda in Congress. In particular, the GOP had harped about the personal history of Van Jones, the president’s czar for “green jobs,” over past comments Jones had made about Fox News came to light. Jones eventually resigned.

Another prominent czar over the past year was Carol Browner, the president’s energy and environmental adviser. She helped head up efforts in response to the Gulf of Mexico oil spill, and the ultimately unsuccessful effort for an energy and climate bill from Congress.

The vanity of Barack Obama

Inquiring minds are reading American Narcissus regarding the vanity of Barack Obama.

Obama’s vanity is even more jarring when paraded in the foreign arena. In April, Poland suffered a national tragedy when its president, first lady, and a good portion of the government were killed in a plane crash. Obama decided not to go to the funeral. He played golf instead. Though maybe it’s best that he didn’t make the trip. When he journeyed to Great Britain to meet with the queen he gave her an amazing gift: an iPod loaded with recordings of his speeches and pictures from his inauguration.

On November 9, 2009, Europe celebrated the 20th anniversary of the fall of the Berlin Wall. It was kind of a big deal.

When the leaders of Europe got together to commemorate it, he decided not to go to that, either. But he did find time to record a video message, which he graciously allowed the Europeans to air during the ceremony.

In his video, Obama ruminated for a few minutes on the grand events of the 20th century, the Cold War itself, and the great lesson we all should take from this historic passing:

“Few would have foreseen .??.??. that a united Germany would be led by a woman from Brandenburg or that their American ally would be led by a man of African descent. But human destiny is what human beings make of it.”

The fall of the Berlin Wall, the end of the Cold War, and the freedom of all humanity—it’s great stuff. Right up there with the election of Barack Obama.

In the presidential race in 2012. As he said to Harry Reid after the majority leader congratulated him on one particularly fine oration, “I have a gift, Harry.”

But Obama’s faith in his abilities extends beyond mere vote-getting. Buried in a 2008 New Yorker piece by Ryan Lizza about the Obama campaign was this gob-smacking passage:

I know more about policies on any particular issue than my policy directors. And I’ll tell you right now that I’m gonna think I’m a better political director than my political director.” After Obama’s first debate with McCain, on September 26th, [campaign political director Patrick] Gaspard sent him an e-mail. “You are more clutch than Michael Jordan,” he wrote. Obama replied, “Just give me the ball.”

It’s important to remember that our presidents aren’t always this way. When he accepted command of the Revolutionary forces, George Washington said “I feel great distress, from a consciousness that my abilities and military experience may not be equal to the extensive and important Trust. .??.??. I beg it may be remembered, by every Gentleman in the room, that I, this day, declare with the utmost sincerity, I do not think myself equal to the Command I am honored with.”

We need to reduce the deficit. We can make a tiny contribution by getting rid of 49 unneeded czars.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Call your Members of Congress NOW and tell them you will not tolerate this proposal to blatantly violate the rule of law in order to allow the criminal entities to continue to steal from you!  It is up to YOU to defend your rights under the Constitution.

This is unbelievable…..the other day we reported here and here about various companies (AT&T, CAT, 3M)  having to re-estimate costs and earnings due to the new mandates and taxes associated with the Healthcare Bill.  There is absolutely no evidence whatsoever that these companies were in some way being dishonest – to the contrary, the companies are gravely concerned about their earnings going forward in light of the REALITY of the new Healthcare Bill.  As we all should be.  Now the Obama administration wants them to shut up?  My goodness….I THOUGHT we still had the right to free speech and I THOUGHT private companies had not only a duty to their shareholders but a responsibility for honest estimates of costs and earnings.  Guess not.  We all must not utter a disparaging word against any of the policies of this Administration apparently.  Sig heil, comrades.  

Cat, others criticized by Obama administration for cost estimates

By PAUL GORDON (pgordon@pjstar.com)

Journal Star

PEORIA —

Caterpillar Inc. and other large companies are being criticized by the Obama administration for reporting now that they will take millions of dollars in hits to their earnings because of one portion of the new health care legislation.

Caterpillar and Deere were accused of being “premature and irresponsible” by U.S. Secretary of Commerce Gary Locke for saying a change to Medicare Part D laws would hurt their earnings in the present quarter.

Those companies are also being questioned about the amounts they are claiming — amounts that seem to get larger with every company that makes a report to the U.S. Securities and Exchange Commission about taking a one-time charge as a result of the legislation.

Caterpillar started it all by saying it would take a $100 million hit on its first quarter earnings. Deere & Co. followed with a report it would lose $150 million to its fiscal second quarter earnings.

The largest estimated hit yet, $1 billion, was announced Friday by AT&T.

At issue is what kind of hit corporate America will take because it is losing a tax deduction from Medicare Part D. Before, companies were paid subsidies of $1,330 a year, tax-free, for every retiree for whom it provided a prescription drug plan. Then, that amount could be deducted from the company’s taxes.

The new law still provides the subsidy tax free, but companies will no longer be able to deduct it from taxes.

Also on Friday the Wall Street Journal said in a published report that it calculates Caterpillar’s loss would be more like $7 million, based on the fact Caterpillar told the SEC it expected to receive about $20 million annually from the tax deduction and the 35 percent corporate tax rate that would now be applied to that deduction amount.

But Caterpillar on Friday defended itself, reiterating its belief it must, under accepted accounting rules and regulations, record any one-time tax charge in the quarter in which the legislation causing that charge is signed.

The $100 million, said Caterpillar spokesman Jim Dugan, “is our calculation of what that change in Medicare Part D will mean to the company.”

Dugan was pressed for further explanation of how the calculation was made, including whether the $100 million was an estimate of what the change will cost Caterpillar in perpetuity since it can only be charged once.

He said further details will be included in Caterpillar’s first quarter earnings report, which will be released April 26.

On the time of the filing, Dugan said, “We felt it was very appropriate and prudent to file the disclosure with the SEC immediately. We tend to take a conservative approach to SEC filings.”

Dugan declined to comment on the statement of Commerce Secretary Locke, which he made in a live interview Thursday on CNBC.

He also declined to say anything more about a telephone call made Thursday from the White House to Vice Chairman Doug Oberhelman, which Oberhelman revealed while speaking to the Morton Rotary Club later on Thursday.

While he acknowledged the call was regarding the health care legislation, Oberhelman would not say from it it came or what was said. He did describe the call as “productive.”

Paul Gordon can be reached at 686-3288 or pgordon@pjstar.com

UPDATE:

We have learned that AT&T has now been ‘requested’ by Congress to appear before the House Energy and Commerce Committee to ‘prove’ their earnings adjustment in response to the Healthcare Bill.  Uh….apparently, this is more proof Congress has no idea what was in this thing in its final incarnation.

There is an old saying, “when in doubt follow the money.” These days investors have lots of doubt about pretty much everything (if not so much money). And with data from the government increasingly bearing the Quality Control stamp of approval of the Beijing Communist Party, there is much doubt in store courtesy of an administration which will stop at nothing in its competition with China as to who can blow the biggest asset bubble the fastest, data integrity be damned. Undoubtedly, of all government released data, the most important is, and continues to be, anything relating to unemployment. Which is why this is precisely where the government’s propaganda armada is focused. Yet in matters of (un)employment, the ultimate authority is, luckily, the Treasury, and not the Fed. “Luckily,” because when it comes to making money “difficult to follow” Tim Geithner’s office still has much to learn. Which is why when we looked at the Daily Treasury Statement data we were very surprised: because it indicates that the government could be underrepresenting employment data by up to 32%!

The suddenly very prominent topic of Unemployment Insurance, whether it pertains to Initial Claims or to Emergency Unemployment, has one very useful characteristic: it is based on “money”, specifically money outflows from the US treasury which goes to fund the weekly “paychecks” of those that have not been in the workforce for well over a year. And as pointed out earlier, money can be followed. The US Treasury presents a daily in and outflow of all money sources in the Daily Treasury Statement prepared by the Financial Management Service. And in the plethora of data presented here, probably the most relevant and useful data series is the Withdrawals quantified in the form of Unemployment Insurance Benefits.

Compiling the monthly data of Treasury Disbursements for Unemployment Insurance Benefits and then superimposing it with the total number of people receiving Insurance Benefits as disclosed by the Department of Labor is a useful exercise, as the two series have historically correlated with an R² of well over 0.90. Below is an indexed comparison of UIB outlays and Unemployment Insurance Receivers for Fiscal 2007.

Surely this is logical: the more unemployed collecting benefits from the government, the more the outlays.

Yet what struck us is the when this chart is presented from 2007 until today. Something unusual emerges. An absolute chart of the money spent by the government superimposed with the total insured unemployed is presented below:

Yet the best way to see what this chart indicates is on an indexed basis with a September 2007 baseline.

What becomes obvious is that a correlation which used to be almost 1.000 has diverged massively, and now the relative outlays surpass what the government highlights are the number of people actually collecting benefits by 32%! This implies two things: either the average unemployment monthly paycheck has surged, which is not the case, or there is some gray unemployment area which is not disclosed by the government, and which accounts for a shadow unemployed insurance economy. Because while the DOL indicates there are about 9.5 million total unemployed, for the correlation to return to its near 1.0 trendline the number of unemployed on benefits has to be 14 million. At least this is what the actual cash outlays by the Treasury suggest: the government spent a record $14.7 billion on Unemployment Insurance Benefits as of December 30, a 24% jump sequentially from the $11.8 billion in November. Yet the DOL has disclosed a mere 1.7% increase in those to whom insurance benefits are paid: from 9.4 million to just under 9.6 million. To put the $14.7 billion number in perspective, in December the Federal Government paid a total of $14 billion ($700 million less) in Federal Salaries! A cynic could be temped to say that effectively the number of people employed by the government is double what is disclosed. A yet bigger cynic could claim that America is now the biggest socialist state in the world. Both cynics would not necessarily be wrong. 

And some more perspective: in calendar 2009 the government has paid $140 billion in Unemployment Insurance Benefits. This is yet  another economic stimulus that nobody in the administration discusses, yet which undoubtedly has the biggest impact on the economy, as all those millions unemployed can moderate their pain courtesy of a passable weekly check from the government which should just about cover the rent and beer. Which is why more than anything, Obama is dead set on extending insurance benefit payments in perpetuity: because if the 10 million official and 14 million unofficial people who are on benefits (not to mention the tens of millions of unemployed unlucky enough to even get their weekly allowance from Uncle Sam) start thinking about their true predicament and their real “employability”, then a landslide loss by this administration at the mid-term elections will actually be an upside surprise to what it can objectively expect.

h/t Michael