May 31, 2009

The Collapse of the U.S. Economy and Government Finances

IRS Tax Revenue Falls Along with Taxpayers’ Income

May 27, 2009

USA Today - Federal tax revenue plunged $138 billion, or 34%, in April vs. a year ago — the biggest April drop since 1981, a study released Tuesday by the American Institute for Economic Research says.

When the economy slumps, so does tax revenue, and this recession has been no different, says Kerry Lynch, senior fellow at the AIER and author of the study. "It illustrates how severe the recession has been." For example, 6 million people lost jobs in the 12 months ended in April — and that means far fewer dollars from income taxes. Income tax revenue dropped 44% from a year ago. "These are staggering numbers," Lynch says.

Big revenue losses mean that the U.S. budget deficit may be larger than predicted this year and in future years...

Californians Crossing Border to Mexico for Health Care

May 26, 2009

McClatchy Newspapers - Nearly a million Californians, perhaps hundreds of thousands more, cross the border to Mexico every year because they cannot afford the rising cost of health care in the United States, according to UCLA researchers.

The study by the school's Center for Health Policy Research, published Tuesday in the journal Medical Care, affirms what has long been suspected – that the untamable cost of medicine is forcing many, particularly Latino immigrants, to look outside California for medical and dental care. As casualties from the recession rise and as budget-strapped government programs eliminate health services, more people are expected to head south to fill prescriptions, get teeth fixed or undergo care for chronic illnesses.

According to the study, at least 952,000 California adults – 488,000 of them described by the study as Mexican immigrants and about a quarter as non-Latino whites – head south annually for their medical, dental and prescription services...

Schwarzenegger Details $5.5 Billion More Cuts to State Budget

May 26, 2009

AP - Gov. Arnold Schwarzenegger on Tuesday proposed eliminating welfare for 500,000 families and terminating health coverage for nearly 1 million children to help close the state's ballooning budget deficit.

The Republican governor's administration released details of $5.5 billion in cuts, a week after state voters defeated special election ballot measures. The new proposals are on top of those previously announced by Schwarzenegger.

Also among the cuts are stops to college fee assistance for thousands of students, fewer vocational training opportunities for state inmates and the elimination of $70 million in funds for the state park system.

The state is trying to close a $21 billion deficit, although the Schwarzenegger administration said Tuesday that its proposed budget for the 2009-10 fiscal year was outdated. The governor's finance team said the deficit now was projected to grow to $24.3 billion through June 2010.

The revised budget now includes borrowing from local governments that will have to be repaid and consolidating state boards and commissions. The administration wants to eliminate a welfare-to-work program that provides more than 500,000 families, saving $1.3 billion but forgoing $4.2 billion in federal matching funds.

Schwarzenegger also seeks to cut health care coverage for nearly 1 million low-income children under the Healthy Families program, saving about $250 million for the year. For the state's students, he wants to phase out a college aid program and reduce $335 million in funding for the University of California and California State University systems.

Schwarzenegger's previously proposed cuts include laying off 5,000 state government employees and cutting billions of dollars from K-12 schools, potentially shortening the school year by a week. The administration also was expected to announce another $3 billion worth of budget solutions this week.

The governor had warned of "cuts, cuts, cuts" after voters defeated last week's ballot measures...

North Carolina Jobless Rate Remains in Double-Digits

May 23, 2009

World Socialist Web Site - Unemployment in North Carolina remained at 10.8 percent in April. The state’s jobless rate has jumped from 7 percent last October and was one of 8 US states with double-digit jobless rates last month, led by Michigan with 12.9 percent unemployed. The national jobless rate rose to 8.9 percent in April, up from 8.5 percent in March.

The NC Employment Security Commission reports that nearly half a million of the state’s 9 million residents are out of work. Harry Davis, a banking professor at Appalachian State University, predicts that the state unemployment rate will rise to 12 percent over the next few months, and will continue to climb for at least a year as the recession deepens and the manufacturing sector contracts.

The state has been devastated by a total of 450 reported factory and business closings this year. Textile and truck manufacturing, construction, finance and insurance, and retail have all been hit hard. The largest job losses came in manufacturing, with 4,600 jobs cut in April. The North Carolina manufacturing sector has shed 80,000 jobs, or 15 percent of its workforce, since December 2007...

Global Milk Glut Squeezes Dairy Farmers, Consumers

May 23, 2009

AP - A collapse in milk prices has wiped away the profits of dairy farmers, driving many out of business while forcing others to slaughter their herds or dump milk on the ground in protest. But nine months after prices began tumbling on the farm, consumers aren't seeing the full benefits of the crash at the checkout counter.

The average price for a gallon of milk at grocery stores last month is down just 19 percent from its peak of $3.83 in July. Farmers, on the other hand, got $1.04 a gallon in April — 35 percent less than they were paid last fall. This winter, wholesale prices were down as much as 45 percent.

Price disparities are a fact of life both for farmers and anyone who shops at a supermarket, but the nature of milk — how it's stored, priced and sold around the world — makes the gap all the more dramatic. In fact, the price that farmers get has been wildly volatile for years, creating a succession of booms and busts felt from pastures to the grocery store.

With each turn, proposals are floated to end the pricing seesaw, which at one extreme squeezes the profits of farmers and the other squeezes dairy processors. Any fix that boosts the price of milk runs the risk of bumping up how much consumers pay, too.

Today, frustrations are spilling over as the price crash creates widely divergent fortunes within the milk industry, boosting profits for the middlemen like dairy processors while pushing farmers to the edge of bankruptcy.

Darrell Kraus, a dairyman in Barnhart, Missouri, spends almost as much today on hay and other supplies for his herd of 160 cows as he did a year ago, but he's getting paid less for a gallon of milk than his father in the 1970s. He blames middlemen who buy the milk from the dairies, process it and sell it to grocery stores at higher prices.

"Somebody's getting a cut of this, but it's not the dairy farmer," he said. "It's sad, but they're going to see a lot of dairy farms go out of business."

At a grocery store in Fayetteville, Ark., Katherine Thacker noticed how milk prices were slowly falling — but not as drastically as last year's price hikes. She was surprised to learn that the lower wholesale milk prices were being absorbed by dairy processors.

"That's kind of criminal, isn't it?" she said.

Milk processors and supermarkets see it differently.

Last fall and summer, they swallowed losses because of high wholesale milk prices and government-mandated ceilings on what they can charge. They're now recouping some of what they lost and anticipating a rise in prices this winter, said Mike Nosewicz, vice president of dairy operations at Cincinnati-based Kroger Co., which operates its own dairy processing division and sells milk through 2,400 supermarkets.

At the heart of the problem is the nature of milk. Unlike grain farmers who can hold out for better prices by storing crops in a silo, dairymen must sell raw milk to processors or else it spoils. And cows keep producing whether the economy's expanding or in recession.

The price paid by processors to farmers is set by the US Department of Agriculture based on commodity markets, which rise and fall with global demand. Some of the raw milk is processed into milk for stores as well as butter, yogurt and other products for US consumption. The rest becomes powdered milk, cheese and whey for international and domestic markets...

China and Brazil Plan to Dump Dollar

May 20, 2009

Financial Times - Brazil and China will work towards using their own currencies in trade transactions rather than the US dollar, according to Brazil’s central bank and aides to Luiz Inácio Lula da Silva, Brazil’s president.

The move follows recent Chinese challenges to the status of the dollar as the world’s leading international currency.

Mr Lula da Silva, who is visiting Beijing this week, and Hu Jintao, China’s president, first discussed the idea of replacing the dollar with the renminbi and the real as trade currencies when they met at the G20 summit in London last month.

An official at Brazil’s central bank stressed that talks were at an early stage. He also said that what was under discussion was not a currency swap of the kind China recently agreed with Argentina and which the US had agreed with several countries, including Brazil...

Schwarzenegger Under Fire for Plans to Sell Calif. Landmarks

May 15, 2009

AFP - Faced with a massive budget crisis, California Governor Arnold Schwarzenegger has outlined major budget cuts and plans to sell some of the state's most treasured landmarks.

Schwarzenegger unveiled proposals on Thursday to replenish California's state coffers and counter an estimated budget shortfall of 15.4 billion dollars.

Plans include drastic budget cuts, as well as the sale of the Los Angeles Coliseum, which hosted the Olympic Games in 1932 and 1984, and sale of the 157-year-old San Quentin state prison, which houses over 5,000 inmates.

"To solve our immediate cash crisis, we simply cannot avoid deep and painful cuts in spending," said Schwarzenegger. "Some of these solutions are things I would never have considered in the past but, unfortunately, our state could be in a worst case scenario if the propositions fail."

But the new plans, which came less then a week before a vote was due in special elections that include five provisions to mend the state's budget woes, have faced strong criticism...

Schwarzenegger has said that if the state fails to vote through his tough measures on May 19, the deficit will increase to 21.3 billion dollars. He has also warned that his contingency plan would see thousands of lay-offs, shorten the public school year by at least seven days, as well as include healthcare cuts to about 225,000 children and the release of thousands of undocumented immigrants.

"Californians have a right to know the truth about the size of the problem our state is facing," he said. California has been battered by the recession, which has sent tax revenues nose-diving. The state, global center of high technology and the movie industry, has a 1.8-trillion-dollar economy that generates about 13 percent of U.S. gross domestic product.

U.S. Economy: Retail Sales Unexpectedly Fall for Second Month

May 13, 2009

Bloomberg - Retail sales in the U.S. unexpectedly dropped in April for a second month, indicating that rising unemployment is prompting consumers to conserve cash...

Is America About to Go Broke?

May 11, 2009

MSN Money - Prices dropped last year. But we still need to invest to protect ourselves from inflation. That’s why our retirement-plan investing needs an inflation “tilt.” You’ll understand why in a few paragraphs.

How bad will future inflation be? I don’t know. Neither does anyone else. It could be a normal inflation of 3% to 4% a year. It could also be a banana-republic 10% a month.

What we know is that all governments make promises they can’t fulfill. Our government certainly has. Under both political parties, it has taken promise making to a high art. This is not hyperbole. The figures can be found in regularly published government reports.

The figures exist, but they are ignored. News reports regularly inform us of the growing federal deficit, projected at a stunning $1.75 trillion for fiscal 2009 and $1.17 trillion for 2010. But regularly reported, less visible government obligations have been growing much faster.

In the nearly five years from January 2003 to December 2007, the Medicare trustees reported that the unfunded liabilities of Social Security and Medicare grew by a stunning $10.4 trillion. The average annual growth topped $2 trillion...

Financial condition of Social Security and Medicare worsening

U.S. Red Ink to Top $1.8 Trillion, 4 Times Record; Gov't Borrows 46 Cents for Every Dollar Spent

May 11, 2009

AP - The government will have to borrow nearly 50 cents for every dollar it spends this year, exploding the record federal deficit past $1.8 trillion under new White House estimates. Budget office figures released Monday would add $89 billion to the 2009 red ink — increasing it to more than four times last year's all-time high as the government hands out billions more than expected for people who have lost jobs and takes in less tax revenue from people and companies making less money...

Big U.S. Banks Selling Stock to Repay Taxpayers

May 11, 2009

Reuters - Three large U.S. banks deemed by the government to have sufficient capital Monday announced large common stock offerings, and will use proceeds to repay government investments under a bank bailout plan.

U.S. Bancorp said it plans to raise $2.5 billion, Capital One Financial Corp roughly $1.75 billion and BB&T Corp $1.5 billion. Capital One said its offering will total 56 million shares...

The three banks were among the 19 lenders to undergo government "stress tests" of their ability to weather a long and deep economic downturn, and were among the nine found not to need more capital.

U.S. Bancorp took $6.6 billion from the government's Troubled Asset Relief Program, while Capital One took about $3.55 billion and BB&T $3.1 billion.

Hundreds of lenders took money from the program, which was designed to spur lending and improve the economy. Yet many now view TARP as an albatross that imposes too many restrictions, including on executive pay, and suggests that recipients are desperate for capital...

On Friday, Wells Fargo & Co. and Morgan Stanley each found to need more capital under the stress test, sold a respective $8.6 billion and $4 billion of stock. Morgan Stanley also sold $4 billion of debt.

Fed Sees Up to $599 Billion in Bank Losses

May 8, 2009

Wall Street Journal - The federal government projected that 19 of the nation’s biggest banks could suffer losses of up to $599 billion through the end of next year if the economy performs worse than expected...

White House: Obama Seeks Hike in Domestic Spending

May 7, 2009

Associated Press – In twin strokes, President Barack Obama is calling on Congress to award generous budget increases to domestic programs while proposing relatively modest cuts to wasteful or obsolete programs that just won't seem to die.

Officials said Wednesday that Obama's promised line-by-line scrub of the federal budget had produced a roster of 121 budget cuts totaling $17 billion — or about one-half of 1 percent of the $3.4 trillion budget Congress has approved for next year. The details were being unveiled Thursday.

White House budget director Peter Orszag said the president's plan for program cuts is just a start and that a lot more needs to be done to dig the government out of its fiscal hole, especially curbing the growth of the Medicare and Medicaid health care programs for the elderly and the poor. "But $17 billion a year is not chump change by anyone's accounting," Orszag said on MSNBC's "Morning Joe."

Those savings are far exceeded by a phone-book-sized volume detailing Obama's generous increases for domestic programs that will accompany the call for cuts. Most of the major elements of Obama's budget for next year were released in February. Additional details were coming out Thursday and next week.

The roster of cuts won't be easy for Congress to swallow. Lawmakers from the potent California, New York and Florida delegations are sure to fight the elimination of the State Criminal Alien Assistance Program, which gives money to states to help defray the cost of incarcerating illegal immigrants who commit crimes. President George W. Bush tried and failed to kill the $400 million program several times.

About half the budget savings would come from an effort by Defense Secretary Robert Gates to curb defense programs, including ending production of the F-22 fighter and killing a much-maligned replacement helicopter fleet for the president.

Budget Director Peter Orszag briefed Democratic lawmakers on a partial roster of the cuts Wednesday. Obama also is fleshing out the details of the $1.3 trillion portion of the budget that he requested Congress pass through appropriations bills for the budget year beginning Oct. 1.

And just as Congress is beginning work on a new war bill to fund military operations in Iraq and Afghanistan into the fall, Obama is sending up a $130 billion request to fund them next year. That figure may not be adequate considering the increase in the tempo of operations in Afghanistan.

Obama has said repeatedly his administration will go through the budget "line by line" to eliminate waste. But the resulting savings are relatively minor compared with the government's fiscal woes, especially a deficit that's likely to exceed $1.5 trillion this year.

Administration and congressional officials described elements of the budget proposals only on condition of anonymity to discuss them before they're made public.

Republicans weren't impressed with the cuts. "While we appreciate the newfound attention to saving taxpayer dollars from this administration, we respectfully suggested that we should do far more," House Minority Leader John Boehner, R-Ohio, said.

Many of the cuts mirror those proposed previously by Bush but largely rejected by Congresses controlled by both Republicans and Democrats.

Rep. Dennis Cardoza, D-Calif., said Obama's recommendations won't be "universally embraced" but said Congress also would weigh in with savings recommendations of its own to cut spending. "This is something that's sorely needed," Cardoza said. In fact, Democrats already have pared about $10 billion from Obama's appropriations requests in passing the $3.4 trillion congressional budget plan last month.

And lawmakers are unlikely to go along with a call to raise — after 2010 — per-ticket fees on airline travel to fund airport security programs.

In a preview, administration officials named a few examples Thursday which mostly represented easy-to-pluck targets, like ending the Education Department's attache in Paris, at a savings of $632,000 a year. Another example: the obsolete LORAN-C aircraft navigation system, which still gets $35 million a year despite being made obsolete by the satellite-based Global Positioning System.

In other budget areas, the administration would keep paying for private-school vouchers for about 1,700 children receiving them in Washington, D.C., an administration official said. Obama is proposing $12.2 million for the 2010-11 school year and would like to continue the funding until the kids in the program graduate. He would not allow new students into the program.

Why Are Millions of Jobs Unfilled Amid Layoffs?

May 7, 2009

Business Week - Are American employers too picky? Are they rejecting reasonable candidates at the same time they claim to have lots of openings they would like to fill?

That's a key question because the job market is still getting worse even as the overall economy shows signs of reaching bottom. On May 6 the ADP National Employment Report said the private sector shrank payrolls by an estimated 491,000 jobs in April. Economists -- who don't always trust the ADP numbers -- expect the Bureau of Labor Statistics to report on May 8 a decline of about 600,000 jobs in the private and public sectors combined. The median unemployment-rate forecast in the latest Bloomberg survey of economists is 8.9% for April, vs. 8.5% in March.

With the labor market so weak, it's hard to understand why so many jobs are unfilled. As BusinessWeek pointed out in a recent magazine cover story, employers reported that they had 3 million openings they were actively trying to fill as of the end of February. (The March job-openings total will be released May 12.) By contrast, there were more than 13 million people unemployed in March.

So what gives? Why don't employers give jobs to some of those 13 million people who are eager to work? Wouldn't that make everybody happy?

Employers don't see it that way. They say that jobless people don't necessarily have the skills they're looking for -- especially since the sectors with the most openings (education and health care) are very different from the ones that are losing the most workers, manufacturing and construction. Even within the same industry, employers say, there are people whose skills are outdated or out of sync with what's needed for the jobs that need filling.

But BusinessWeek was deluged with comments from people, many of them unemployed, who said employers are too picky, want to avoid paying for training, want to export jobs, or would rather hire cheap foreigners on H-1B visas. Here's a typical comment from someone who signed herself Lucy: "I don't believe this article at all; it's hogwash. IBM is not laying off people because of a skills-mismatch problem. They are laying off people because they want to offshore all U.S. jobs to low-wage countries, or bring in more people to the U.S. under the H-1B visa program. They also don't want to train U.S. employees..."

May 30, 2009

RFID, GPS Technology and Electronic Surveillance

New Theme Park Wristbands Carry Ability of a Debit Card

May 25, 2009

Los Angeles Times - ...Here, in the northern stretches of suburban Los Angeles, the private company that began producing plastic hospital wristbands out of a Burbank garage more than 50 years ago has become the nation’s top producer of a new microchip-enhanced wristband for amusement parks, concerts, resorts and gyms.

The wristbands use the same technology as electronic toll booths, security key cards, and the newest U.S. passports. But at Precision Dynamics Corp., this sophisticated electronic know-how has found its niche at theme parks, where the high-tech wristbands act as high-security admission passes, cashless debit cards, hotel room keys, and a form of identification to reunite lost children with parents...

Obama-backed plan volunteers Americans to pay global taxes
The most “popular” proposals, which could generate tens of billions of dollars in revenue for global purposes, involve taxes on greenhouse gas emissions and financial transactions such as stock trades.Mexico’s Calderon Wants “Green Fund” Paid by U.S.
Countries “historically responsible” for green house gas emissions would have to pay Mexico and other developing nations.U.N. to Emerge as Global IRS
The United Nations is proceeding, with President Obama’s acquiescence, to implement a global plan to create a new international socialist order financed by global taxes on the American people.

Central Texas Farmers Voice Concerns on USDA Program

May 20, 2009

News 8 Austin - The federal government has proposed a program to identify and track farm animals, and the move has some local ranchers and farmers unhappy. At a U.S. Department of Agriculture hearing Wednesday, more than 100 farmers and ranchers voiced their concerns, many telling the government to butt out. The hearing was part of an effort by the USDA to get feedback from food producers in Central Texas and across the country.
"We're talking about a program that would be very costly and very intrusive," Farm and Ranch Freedom Alliance Director Judith McGeary said. "You're talking about anyone who owns, you know, a couple of backyard chickens having to report their movements to the government."
The USDA said not every farm animal would be tracked, but rather the purpose of the National Animal Identification System (NAIS) program is to keep up with animals in the food supply chain.
The NAIS program would tag farmers' and ranchers' animals "to help us provide trace ability information in the need of a disease outbreak, investigation or surveillance effort," NAIS Senior Staff Veterinarian Dr. David Morris said.
Morris said the program currently operates on a volunteer basis. Those opposed to the NAIS program like Gretchen Boyett, of Buda, fear the program could become mandatory and have a detrimental economic impact especially on small producers.
"Everyone would be affected eventually," Boyett said. "I mean if you want to buy organic products at the grocery store, you're going to be affected, because small farmers are going to end up being overtaxed and overworked to accommodate a program that doesn't solve the problem."
Joe Ross from Sonora is a retired veterinarian who believes a better solution lies in compromise.
"We need to work together," Ross said. " And one shoe doesn't fit all, but let's don't be criticizing the government for everything."
For the government, animal tagging is about food safety, but producers see it as government encroachment on their private property rights. Now, Central Texas producers will wait and see if they've convinced the government to keep the program voluntary. According to the USDA, states and tribes can choose whether or not they want to participate in the NAIS program. Some states have already passed anti-NAIS bills.

Microchips Tell Doctors If You are Taking Your Pills, or Not

April 13, 2009

Daily Mail - Microchips in pills could soon allow doctors to find out whether a patient has taken their medication. The digestible sensors, just 1mm wide, would mean GPs and surgeons could monitor patients outside the hospital or surgery...

NYPD Moves to Cloak Midtown with Camera License Plate Readers, and Radiation and Bio Scanners

April 1, 2009

The NYPD wants to cloak midtown with the same security blanket it rolled out for lower Manhattan: camera license plate readers, and radiation and bio scanners. Those measures covering Manhattan south of Canal St. will slowly be applied to midtown, from 34th to 59th Sts., river to river, Police Commissioner Raymond Kelly told the City Council Public Safety Committee. “We want to take that model, protecting the 1.7 square miles south of Canal and replicate it in midtown Manhattan,” Kelly said after the hearing Tuesday.

The NYPD wants $21 million in federal homeland security dollars to put toward the midtown project, estimated to cost $58 million. Aside from iconic buildings that could be terror targets, many financial companies relocated into midtown after the 2001 World Trade Center attack, police said.

Kelly did not outline how many cameras, license plate readers or radiation scanners would be deployed in midtown. The announcement is the latest in the NYPD’s attempts to use technology to scan huge swaths of the city...

London Police Turn ‘Big Brother’ for G20 Summit

April 1, 2009

Sky News - With security fears rising in the build-up to the G20 summit on Thursday, the Metropolitan Police have been given access to more than 3,000 CCTV cameras around London. The police will be watching over 3,000 CCTV cameras from the hub in Lambeth. Scotland Yard’s Central Communications Command in Lambeth, South London, will become the eyes of the city tomorrow when more than 100 officers monitor live links across the capital.

As the world’s most powerful leaders arrive in London, the priority will be to ensure their safety while also keeping an eye on the thousands of protesters expected to turn out.

The surveillance team will be managed by a team of 20 senior officers including tactical advisers and counter-terrorism staff. The team will be backed up representatives from the fire brigade and ambulance service. The control room will be the hub for co-ordinating the several-thousand strong police force who will work to ensure security throughout the G20 summit.

The huge operation, known as Operation Glencoe, is one of the biggest to have taken place in recent times.

The Liberal Democrats say they will be keeping a close eye on the policing of the G20 protests. The party’s justice spokesman, David Howarth, said: “We do not want to see a repeat of the policing of last year’s (climate change) camp at Kingsnorth, which was disproportionate, heavy-handed and provocative.

“I was encouraged to hear the Metropolitan Police talking seriously about proportionality when I met them today. I very much hope the that the rights of the protesters to make their important point peacefully will be fully respected.”

3,000 Cameras to Monitor G20 Summit

Big Brother is Watching: Surveillance Box to Track Drivers in Europe is Backed

April 1, 2009

Guardian - The government is backing a project to install a “communication box” in new cars to track the whereabouts of drivers anywhere in Europe, the Guardian can reveal.

Under the proposals, vehicles will emit a constant “heartbeat” revealing their location, speed and direction of travel. The EU officials behind the plan believe it will significantly reduce road accidents, congestion and carbon emissions. A consortium of manufacturers has indicated that the router device could be installed in all new cars as early as 2013.

However, privacy campaigners warned last night that a European-wide car tracking system would create a system of almost total road surveillance. Details of the Cooperative Vehicle-Infrastructure Systems (CVIS) project, a £36m EU initiative backed by car manufacturers and the telecoms industry, will be unveiled this year...

Private Prisons and Paramilitary Police Forces

Hersh: Cheney Ran SS-Style Political Assassination Unit

March 12, 2009

Prison Planet - Award-winning investigative reporter Seymour Hersh dropped another bombshell this week when he revealed that former Vice-President Dick Cheney had his own SS-style political assassination unit that reported directly to him.

Hersh told a University of Minnesota audience on Tuesday, “After 9/11, I haven’t written about this yet, but the Central Intelligence Agency was very deeply involved in domestic activities against people they thought to be enemies of the state. Without any legal authority for it. They haven’t been called on it yet.”

Hersh then went on to describe how the Joint Special Operations Command was an executive assassination unit that carried out political assassinations abroad... “It is a special wing of our special operations community that is set up independently,” he explained. “They do not report to anybody, except in the Bush-Cheney days, they reported directly to the Cheney office… Congress has no oversight of it.”

The revelation that Cheney had his own private assassination unit is not too far removed from Hitler’s notorious SA (Sturmabteilung), the much feared para-military wing of the Nazi party who were used to beat, torture and kill political opponents of the Nazi party in 1930’s Germany and the Waffen SS, who were later used in the war to carry out executions and war crimes.

The SA were later targeted by Hitler during the Night of the Long Knives, a brutal purge to eliminate political adversaries both inside and outside of the Nazi party. Hundreds of people were executed in cold blood by the Gestapo and the SS.

Tellingly, German courts and cabinet quickly swept aside centuries of legal prohibition against extra-judicial killings to demonstrate their loyalty to Hitler. The Waffen SS was deemed beyond prosecution despite it blatantly being involved in egregious and ongoing war crimes, as well as domestic assassinations.

The Joint Special Operations Command, Cheney’s assassination unit, is also described as an area of ‘extra-legal’ operations.

“It’s an executive assassination ring essentially, and it’s been going on and on and on,” Hersh stated. “Under President Bush’s authority, they’ve been going into countries, not talking to the ambassador or the CIA station chief, and finding people on a list and executing them and leaving. That’s been going on, in the name of all of us.”

And it’s still going on. None of Obama’s reversals of Bush executive orders say anything about abolishing the Joint Special Operations Command. Indeed, the specialist unit is an integral part of Obama’s vastly expanded bombing raids and other incursions in Pakistan.

Secret U.S. Forces Carried Out Assassinations in a Dozen Counties
The Militarization of Our Police and Privatization of Prisons

Cheney, Gonzales Indicted on Prison Abuse Charges

November 19, 2008

Associated Press (McAllen, Texas) – Vice President Dick Cheney and former Attorney General Alberto Gonzales have been indicted on state charges involving federal prisons in a South Texas county that has been a source of bizarre legal and political battles under the outgoing prosecutor.

District Attorney for Willacy County, Juan Angel Guerra, said the prison-related charges against Cheney and Gonzales are a national issue and experts from across the country testified to the grand jury.

Cheney is charged with engaging in an organized criminal activity related to the vice president's investment in the Vanguard Group, which holds financial interests in the private prison companies running the federal detention centers. It accuses Cheney of a conflict of interest and "at least misdemeanor assaults" on detainees because of his link to the prison companies.

Megan Mitchell, a spokeswoman for Cheney, declined to comment on Tuesday, saying that the vice president had not yet received a copy of the indictment.

The indictment accuses Gonzales of using his position while in office to stop an investigation in 2006 into abuses at one of the privately-run prisons.

Gonzales' attorney, George Terwilliger III, said in a written statement, "This is obviously a bogus charge on its face, as any good prosecutor can recognize." He said he hoped Texas authorities would take steps to stop "this abuse of the criminal justice system."

Gonzales and Cheney

Indictments Against Cheney, Gonzales Dismissed

December 2, 2008

Associated Press (Raymondville, Texas) – A judge dismissed indictments against Vice President Dick Cheney and former Attorney General Alberto Gonzales on Monday and told the southern Texas prosecutor who brought the case to exercise caution as his term in office ends.

Willacy County District Attorney Juan Angel Guerra had accused Cheney and the other defendants of responsibility for prisoner abuse. The judge's order ended two weeks of sometimes-bizarre court proceedings.

Guerra is leaving office at the end of the month after soundly losing in his March primary election.

"I suggest on behalf of the law that you not present any cases to the grand jury involving these defendants," Administrative Judge Manuel Banales said in court while ruling that eight indictments against Cheney, Gonzales and others were invalid.

He also set a Dec. 10 hearing on whether to disqualify Guerra from those cases.

Even in defeat, Guerra saw the outcome as confirmation of the very conspiracy he had pursued. "I expected it," he said. "The system is going to protect itself."

Banales withheld judgment on whether probable cause existed for the Cheney and Gonzales indictments because they were not represented in court and did not present any argument. For the other defendants, he found no probable cause to support the charges.

A White House spokeswoman said Monday night that Cheney's office had no comment. A call to Gonzales' attorney was not immediately returned.

Three of the eight indictments returned Nov. 17 targeted private prison operator The GEO Group, state Sen. Eddie Lucio Jr., Cheney and Gonzales, as part of an investigation into prisoner abuse at privately run federal prisons in the county.

Guerra ran the investigation into alleged prisoner abuse with a siege mentality. He worked it from his home, dubbed it "Operation Goliath" and kept it secret from his staff, he said. He gave all the witnesses biblical pseudonyms — his was "David."

Banales dismissed all eight indictments because GEO Group attorney Tony Canales showed that two alternate jurors were part of the panel that day but had not been properly substituted.

Five of the indictments — against two district judges, two special prosecutors and the district clerk — were dismissed because Guerra was the alleged victim, witness and prosecutor. The indictments accused the five of abusing their power by being involved in a previous investigation of Guerra.

The indictment against Cheney alleged that his personal investment in the Vanguard Group, which invests in private prison companies, made him culpable in alleged prisoner abuse at privately run federal detention centers.

Gonzales was accused of using his position to stop an investigation into abuses at a federal detention center.

Lucio was alleged to have used his Senate position to profit as a prison consultant, but Banales ruled that the indictment failed to address whether Lucio knew he was only being hired to consult because he was a state senator.

May 28, 2009

Swine Flu Brings Big Profit to Big Pharma at Taxpayer Expense

Swine Flu: Bringing Home the Bacon

April 27, 2009

Mother Jones - As the world gears up once again for a flu pandemic that may or may not arrive (it actually seems possible this time), we might want to remember some of the lessons of the last flu scare. One of these is that there are winners as well as losers in every high-profile outbreak of infectious disease. First and foremost among them, of course, is Big Pharma, which can always be counted on to have its hand out wherever human misery presents an opportunity to rake in some cash.

In 2005, I reported on the bird flu scare for the Village Voice in a piece called “Capitalizing on the Flu.” We can realistically hope that our current federal government will improve upon the bungled effort made by the Bush Administration to prepare for the onslaught of avian flu—which fortunately didn’t materialize. But certain aspects of the crisis are likely to be repeated, and profiteers will surely waste no time in gathering at the trough.

Then, as now, one of the two effective antidotes was a drug called Tamiflu. But this silver bullet came with side effects, as well as a high price tag. As I reported in 2005:
With no vaccine in sight, the U.S. government, along with others, is belatedly stocking up on Tamiflu, a drug that supposedly offers some defense against bird flu. But last week Japanese newspapers told how children who were administered Tamiflu went mad and tried to kill themselves by jumping out of windows. In a cautionary statement the FDA noted 12 deaths among children, and said there are reports of psychiatric disturbances, including hallucinations, along with heart and lung disorders. Roche, the manufacturer, is quoted by the BBC as stating that the rate of deaths and psychiatric problems is no higher among those taking its medication than among those with flu. The company is increasing Tamiflu production to 300 million doses a year to meet demand.

There are other reasons people are leery of Tamiflu. Given the rip-offs in Iraq and after the hurricanes, people are understandably interested in knowing just who is going to get rich off the plague. Secretary of Defense Donald Rumsfeld, himself former CEO of drug company Searle, currently owns stock in the one company that owns Tamiflu patents—to the tune of at least $18 million. Rumsfeld says he understands why people might question his holdings, but selling them would raise even more questions. So he is hanging on to what he’s got.
A report by Citicorp at the time described which pharmaceutical manufacturers and other companies stood to make money:
Winners could include drug makers such as Gilead Sciences, Roche, GlaxoSmithKline, and Sanofi-Aventis. Other possible winners are hospital chains such as Rhoen Klinikum, cleaning-products makers such as Henkel, Ecolab, and Clorox, as well as home entertainment companies such as Blockbuster and Nintendo….

In order for the pharmaceutical companies to profit from making flu vaccine in the administration’s $7.1 billion pandemic flu plan, Bush now is proposing to ban liability suits against them except in cases of willful misconduct. As for those injured by a flu vaccine, possible lawsuits remain an open question….

With a worldwide market estimated at more than $1 billion, there’s big money in a flu plague. Kimberly-Clark’s Chinese subsidiary is already ramping up manufacture of new lines of medical masks, wipes, and hand-washing liquids, according to Business Week, with consulting firms Kroll and Booz Allen Hamilton selling flu preparedness advice to companies and governments. “Crisis is an opportunity as long as you see it first,” Pitney Bowes’s Christian Crews tells the magazine.
Of course, that was then, and this is now. In the coming days we’re bound to discover who’s pulling in the pork this time. But even before the U.S. markets open this morning, early indications aren’t hard to find: “Fears of a potential pandemic are bringing down stock markets around the world today,” public radio’s “Marketplace” reports from London, “but two big pharmaceutical companies are getting a boost from the news”:
Shares in Switzerland’s leading drug maker, Roche, are up nearly 4 percent this morning. The company says it’s scaling up production of Tamiflu. The drug’s been show to be an effective vaccine against the virus.

In the U.K., GlaxoSmithKline, which manufacturers its own vaccine against deadly flu viruses, is also gaining in the markets. Glaxo’s drug is called Relenza….

Both drug makers have been approached by the World Health Organization about their readiness to deploy stocks in the case of a pandemic. Roche says it stands ready with 3 million treatments, but warned further production could take up to eight months.

Future of Pharmaceutical Industry - Video

May 27, 2010 The pharmaceutical industry is facing huge challenges - described in video.

Notes on content: Over the last five years there has been serious lack of innovation in pharma companies and product pipelines have been emptying. It takes up to 15 years and $1 billion in investment to bring a single new treatment to market, after which there may be as little as a decade left before patents expire. But before that happens there may be serious threats to the pharmaceutical industry from generic manufacturers. And at any point in development or after launch, an adverse problem can result in product recall. For these reasons Pharmaceutical companies tended to focus on the search for blockbuster drugs in the early years of the 2000s: drugs with expected revenues of more than $1bn a year.

The top 10 pharmaceutical companies have enjoyed research and development budgets greater than the combined GDP of the world's poorest 130 nations, yet have produced only 30% of new drugs being approved each year. The rest have largely been developed by some of the 4,000 small biotechnology companies, working on large molecule therapeutics.

It is an immensely complicated and risky process, working through laboratory studies, animal studies and then clinical trials. A key issue for the future will be routine gene profile typing and pharmacogenomics - or matching drug therapy to someone's genetic code. This will result in better targeting of the most effective therapies in each situation, but also in lower sales for each therapy since only those people in whom it is most likely to work will actually receive it.

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Watch out for a shift from health care or treating sickness, to wellness, disease prevention, enhanced performance and lifestyle drugs. This is the age of Viagra-like drugs, designed to rejuvenate, or to increase deteriorating function such as memory. But drugs developed for a condition like Alzheimers will also be widely used or abused, if they are shown to really stimulate human memory capacity for example.

Expect a new emphasis also on common cellular mechanisms of disease. There are only a few ways in which human cells age for example. If we can block one or two of these mechanisms the result may be an effective treatment for a wide range of conditions which are more common as people get old - and remember that diseases of aging drive most health care spending in developing nations. Indeed 75% of health spending in America and Western Europe is on those over the age of 65.

Watch out for major shifts in government purchasing policies, changes in US medicare and in health insurance cover. Over the counter and pharmacists sales will grow rapidly, helped by deregulation in developed nations, allowing more products to be available without prescription, "over the counter". Expect huge growth in so-called nutraceuticals (foods with active health-stimulating ingredients) and cosmetics with all kinds of anti-aging properties.

While most budget will be spent solving common chronic diseases, expect innovation in childhood diseases, with a special focus on emerging nations, funded by philanthropic foundations. Expect major progress with new vaccines. Rheumatoid arthritis and asthma share a root cause in abnormal immune systems - expect huge research into tackling auto-immune problems.

Expect also big investment into next generation antibiotics to solve multiple drug resistance problems, which are one of the major challenges for the future.

Other issues include future funding and aging populations - contrast with emerging markets.

The Handling of the H1N1 Pandemic: More Transparency Needed (Excerpt)

May 17, 2010

United Kingdom, Social Health and Family Affairs Committee - The Parliamentary Assembly is alarmed about the way in which the H1N1 influenza pandemic has been handled, not only by the World Health Organization (WHO), but also by the competent health authorities at the level of the European Union and at national level. It is particularly troubled by some of the consequences of decisions taken and advice given leading to distortion of priorities of public health services across Europe, waste of large sums of public money, and also unjustified scares and fears about health risks faced by the European public at large ...

The Assembly also calls on member states to ensure that the private sector does not gain undue profit from public health scares and that they are not allowed to absolve themselves of liabilities with a view to privatising profits whilst communitising risks ...

For the rapporteur, the possibility that representatives of the pharmaceutical industry may have directly influenced public decisions and recommendations made with regard to the H1N1 influenza remains one of the central issue of the ongoing debate. Amongst the factors leading to the suspicion of undue influence were the early measures taken on contractual arrangements for vaccine delivery between member states and pharmaceutical companies, as well as the enormous profits that companies were able to make as a result of the pandemic. The main suspicion, however, arises with regard to the issue of whether members of WHO advisory bodies have professional links to pharmaceutical groups, bringing into question the neutrality of their advice. Unfortunately, due to WHO’s refusal to release the names and declarations of interest of persons concerned, any current research on the matter depends entirely on the results of investigative journalism ...

The strong commercial interests in the pandemic and vaccination campaigns were further illustrated by the high levels of profit that pharmaceutical companies were able to make. According to estimations by the international investment bank JP Morgan, the sales of H1N1 vaccines in 2009 were expected to result in overall profits of between 7 and 10 billion dollars to pharmaceutical laboratories producing vaccines ...

According to figures presented by Sanofi-Aventis at the beginning of 2010, the group registered net profits of 7.8 billion Euros (+11%) due to a “record year” of anti-flu vaccines sales. As such, and from the point of view of the market economy, justified commercial interests cannot be generally criticised. The rapporteur would, however, like to raise the question as to whether it was justified to sell H1N1 vaccines to national governments at prices seemingly up to 2 to 3 times higher than those for the usual seasonal influenza by primarily using patented adjuvants, and thus making exaggeratedly high profits from a declared public health emergency?

Swine Flu Vaccine Makers Granted Legal Immunity

July 18, 2009

EmaxHealth - Swine flu manufacturers have now been granted legal immunity in case something goes wrong that causes side effects associated with the vaccine. Kathleen Sebelius, Secretary of Health and Human Services, signed a document making federal officials and vaccine makers immune from lawsuits related to any ill effects from the swine flu vaccine.

Fears about the effects of a novel swine flu vaccine have sparked much discussion. A swine flu outbreak among soldiers at Fort Dix, N.J in 1976 resulted in vaccinations that caused side effects including Guillain-Barre Syndrome, a condition that causes paralysis. The result was thousands of lawsuits.

Stephen Sugarman, a law professor who specializes in product liability at the University of California at Berkeley says, "The government paid out quite a bit of money,” following past swine flu vaccination side effects.

Most cases of swine flu have been mild. The WHO has stopped tracking cases. No one knows how many infections have really occurred, because not everyone seeks treatment.

Five pharmaceutical companies are manufacturing swine flu vaccine. The drugs are not as profitable as some, like cancer drugs, but immunity from legal action provides incentive to vaccine makers.

Paul Pennock, a New York plaintiffs attorney on medical liability cases, spoke out about the immunity granted to swine flu vaccine makers, saying: "If you're going to ask people to do this for the common good, then let's make sure for the common good that these people will be taken care of if something goes wrong."

The document granting protection from lawsuits to swine flu vaccine makers was signed by Sebelius last month.

Bankrupting the Common People

Record 12 Percent Behind on Mortgage or in Foreclosure

May 28, 2009

AP - A stunning 48 percent of the nation's homeowners who have a subprime, adjustable-rate mortgage are behind on their payments or in foreclosure, and the rate for homeowners with all mortgage types hit a new record, new data Thursday showed. But that's not the worst of it.

The reckless lending practices in states like Florida, California and Nevada that were the epicenter of the housing crisis are no longer driving up the nation's delinquency rate. Instead, the foreclosure crisis now is being fueled by a spike in defaults in states like Louisiana, New York, Georgia and Texas, where the economies are rapidly deteriorating and thousands are losing their jobs.

A record 5.4 million American homeowners with a mortgage of any kind, or nearly 12 percent, were at least one month late or in foreclosure at the end of last year, the Mortgage Bankers Association reported. That's up from 10 percent at the end of the third quarter, and up from 8 percent at the end of 2007.

Prime and subprime fixed-rate loans saw sharp increases in the fourth quarter, a sign that the problem is now the economy.

"We're seeing increases in fixed-rate categories and that's where the problems are coming from," said Jay Brinkmann, the group's chief economist. "The foreclosure picture is more clearly driven by the jobs market."

That trend highlights one of the biggest challenges confronting the Obama administration's mortgage relief plan launched this week. While the $75 billion plan could help change the loan terms or refinance up to 9 million homeowners, unemployed borrowers will have a hard time qualifying.

On Thursday, the Labor Department said new unemployment claims last week totaled 639,000, lower than expected, but still at elevated levels. Factory orders also slipped for the sixth month in a row in January, the Commerce Department reported.

"There can be no doubt that employers continue to shed labor at a frightening pace, with no end in sight," Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a client note Wednesday.

The key is what kind of workers are losing their jobs, Brinkmann said. Unemployment for people with college degrees, some college education or technical training—those most likely to own homes and have prime fixed-rate loans—has nearly doubled over the past six months. In New York, for example, where the financial industry is handing out pink slips like ticker tape, homeowners who once had good credit are defaulting at an increasing clip.

The only bright spot in the report is the devastation wrought by subprime ARMs appears to be waning. Their 30-day delinquency rate continues to fall and is at the lowest point since the first quarter of 2007. That offers little reassurance to Florida, where 60 percent of homeowners who have a subprime ARM are at least one payment behind and one in five of all mortgage holders aren't current.

The $4 Trillion Housing Headache

May 27, 2009

Fortune - Prices in big U.S. cities posted their biggest-ever decline in the first quarter, according to the most recent S&P/Case-Shiller National Home Price index. After nearly three years of declines, house prices nationwide are back at 2002 levels--and still falling.
Yet as bad as that is for overburdened homeowners and their bankers, the mighty mountain of mortgage debt Americans have taken on is an even bigger concern--especially for those who believe an economic recovery is in sight.

Even though the amount of home mortgage debt outstanding declined in 2008 for the first time since the Federal Reserve started keeping track in 1945, mortgage debt levels remain distressingly high. Home mortgage debt outstanding was 73% of gross domestic product last year, according to government data. That's the third-highest reading on record, after the 75%-plus bubble years of 2006 and 2007.

Getting that ratio down to a more manageable number will mean more lean years ahead, as Americans further cut spending to rebuild their savings and banks struggle to boost their capital amid heavy loan losses. How long this process might take is a key question for those trying to gauge the prospects for an economic recovery.

To get the mortgage debt-to-GDP ratio down to a more normal level such as the 46% average of the 1990s, Americans would have to cut their mortgage debt to $6.6 trillion from $10.5 trillion at the end of 2008. The last time the national mortgage debt count was below $7 trillion was 2003, according to Federal Reserve data.

We might call this mortgage overhang the $4 trillion elephant in the room for policymakers, who have spent the past year injecting liquidity into the economy--a course of action that will do little to solve the problem of too much debt. Of course, these figures reflect only back-of-the-envelope estimates. Depending on the level of interest rates and how successful officials are in restoring the vigor of the lending markets, mortgage debt may or may not need to drop that far to relieve some of the stress on consumers.

Still, there is little doubt that above-average debt levels will impede the sort of consumer-driven economic rebound that has taken place after the last few recessions.

"I don't think that there is any magic to the '90s debt levels," said Dean Baker, an economist at the Center for Economic and Policy Research in Washington. "The point is that with higher debt levels, people will be consuming less."

Senate OKs Bill to Rein in Credit Card Practices

May 19, 2009

AP - The Senate voted overwhelmingly on Tuesday to rein in credit card rate increases and excessive fees, hoping to give voters some breathing room amid a recession that has left hundreds of thousands of Americans jobless or facing foreclosure...

If enacted into law as expected, the credit card industry would have nine months to change the way it does business: Lenders would have to post their credit card agreements on the Internet and let customers pay their bills online or by phone without an added fee. They'd also have to give consumers a chance to spare themselves from over-the-limit fees and provide 45 days notice and an explanation before interest rates are increased.

Some of these changes are already on track to take effect in July 2010, under new rules being imposed by the Federal Reserve. But the Senate bill would put these changes into law and go further in restricting the types of bank fees and who can get a card.

For example, the Senate bill requires those under 21 who seek a credit card to prove first that they can repay the money or that a parent or guardian is willing to pay off their debt if they default.

Bankers warned the measure would restrict credit at a time when Americans need it most. They defended their existing interest rates and fees on grounds that their business — lending money to consumers with no collateral and little more than a promise to pay it back — is very risky.

"What has been a short-term revolving unsecured loan will now become a medium-term unsecured loan, which is significantly more risky," said Edward Yingling, president and CEO of the American Bankers Association.

"It is a fundamental rule of lending that an increase in risk means that less credit will be available and that the credit that is available will often have a higher interest rate," Yingling added.

Voting against the Senate measure were GOP Sens. Lamar Alexander of Tennessee, Robert Bennett of Utah, Jon Kyl of Arizona and John Thune of South Dakota, as well as Democratic Sen. Tim Johnson of South Dakota.

But other senators didn't want to face voters in the 2010 election without proof that they are listening to constituents crushed by foreclosure rates and joblessness. Recent reports show that the number of foreclosures jumped 32 percent in April compared with the same month last year, while the jobless rate that month rose to 8.9 percent.

The legislation would not cap interest rates as some lawmakers had hoped. It also wouldn't prevent lenders from finding new ways to drain customers' bank accounts or keep consumers from spending money they don't have.

But it would give spenders more flexibility and outlaw many of the surprise costs associated with credit cards at a time when money is tight in most households. For example, under the bill, a cardholder would have to opt to be allowed to go over a credit limit. If customers don't agree and the bank authorizes a charge that would push them over their limit, the lender couldn't levy an over-limit fee.

Another boon for consumers is limiting a practice known as "universal default," when a lender sharply increases a cardholder's interest rate on an existing balance because the customer is late paying that bill or other, unrelated bills. Under the new legislation, a customer would have to be more than 60 days behind on a payment before seeing a rate increase on an existing balance.

Even then, the credit card company would be required to restore the previous, lower rate after six months if the cardholder pays the minimum balance on time...

If the two bills are passed separately as expected, they would be rejoined before being sent to the president as a single bill, said Hoyer, D-Md.

U.S. Foreclosure Filings Hit Record for Second Straight Month

May 13, 2009

Bloomberg - A total of 342,038 properties received a default or auction notice or were seized last month...

“What you’re seeing is the inevitable result of severe job losses,” Nicolas Retsinas, director of housing studies at Harvard University in Cambridge, Massachusetts, said in an interview. “Until we stem the job losses, we can expect to see continuing foreclosures.”

Unemployment is hampering the housing market as property prices fall. The U.S. jobless rate rose to 8.9 percent, the highest in more than a quarter century, the Labor Department said May 9. Home prices fell the most on record in the first quarter to a median $169,000 amid sales of foreclosure properties, the National Association of Realtors said yesterday...

Senate Moves Toward Easing Mortgage Terms

May 7, 2009

AP – Trying to curb home foreclosures, the Senate voted on Wednesday to make it easier for homeowners with risky credit to switch to a lower-cost mortgage backed by the government. The bill, passed 91-5, also would give banks a break by encouraging reduced fees they must pay for the government to insure deposits.

While both steps put taxpayer money on the line, lawmakers say the legislation is needed to prevent the economy from getting worse.

"Given the size and scope of the struggles too many Nevadans and Americans endure, it will take more time before housing normalizes again," said Senate Majority Leader Harry Reid, D-Nev. "But with this bill, we are working to hasten that day so that no family will ever accept losing its home as the way it is."

Absent from the measure was a bankruptcy provision that President Barack Obama had promised to push through Congress, but backed down amid stiff opposition from banks. The provision, rejected by the Senate last week in a 45-51 vote, would have allowed bankruptcy judges to lower a person's mortgage payment.

While the House included the provision when it passed its version of the bill in March, lawmakers said it didn't have enough support to insist it be included in the final compromise bill. The two chambers have to iron out their differences in the legislation before it can be sent to Obama to sign.

"That issue is a dead letter," said Sen. Christopher Dodd, D-Conn., chairman of the Banking Committee.

Also on Wednesday, the House agreed to a Senate-passed bill that would hire hundreds more FBI agents and prosecutors to investigate mortgage fraud. The legislation, expected to reach the president's desk soon, also would establish a $5 million, independent commission to investigate the cause of the financial crisis and chart a path forward.

The Senate housing bill would expand an existing $300 billion program called "Hope for Homeowners," which encourages lenders to write down an individual's mortgage if the homeowner agrees to pay an insurance premium. The program, which is set to expire in 2011, is intended to swap out a homeowner's high-interest rate for a 30-year fixed loan backed by the Federal Housing Administration.

So far, the program has been a dud.

When it was established last year, Congress envisioned helping some 400,000 troubled homeowners. But because eligibility requirements were so strict, one borrower has completed the refinancing process and only 51 more are in the works, according to statistics released last week.

The Senate bill would expand eligibility. For example, the program currently bans participants who intentionally defaulted on the mortgage or other substantial debt. The Senate bill would narrow that prohibition to defaults within the last five years.

Republicans swung behind the proposal to expand the program using $2 billion from the $700 billion Wall Street bailout fund. Sen. Richard Shelby of Alabama, the top Republican on the Banking Committee, co-sponsored the bill with Dodd.

Still, some Republicans warned that increasing the burden of the government to insure risky mortgages — even if it saves people from foreclosure — could backfire. Sen. David Vitter, R-La., who called the Federal Housing Administration a potential "ticking time bomb," proposed letting the administration suspend any programs that threaten its solvency.

His effort was defeated 36-56.

Another issue is whether Hope for Homeowners will be enough to keep people in their homes, considering other voluntary efforts haven't provided homeowners steep discounts. According to a report released last month by federal regulators, fewer than half of the loan modifications made by lenders at the end of last year reduced payments by more than 10 percent.

The Senate housing bill also would permanently increase the borrowing authority for the Federal Deposit Insurance Corporation from $30 billion to $100 billion. Increasing the FDIC's credit would allow the agency to reduce large new premiums it has begun charging banks to insure deposits.

In addition, the bill extends through 2013 an increase in deposit insurance by the FDIC from $100,000 to $250,000.

More Than One in Five Homeowners Underwater: Zillow

May 6, 2009

Reuters - Home values in the United States extended their fall in the first quarter, with more than one in five homeowners now owing more on their mortgages than their homes are worth, real estate website said on Wednesday.

U.S. home values posted a year-over-year decline of 14.2 percent to a Zillow Home Value Index of $182,378, resulting in a total 21.8 percent drop since the market peaked in 2006, according to Zillow's first-quarter Real Estate Market Reports, which encompass 161 metropolitan areas and cover the value changes in all homes, not just homes that have recently sold.

U.S. homes lost $704 billion in value during the first quarter and have depreciated $3.8 trillion in the past 12 months, according to analysis of the reports.

Declining home values left 21.9 percent of all American homeowners with negative equity by the end of the first quarter, Zillow said.

By comparison, 17.6 percent of all homeowners owed more on their mortgage than their property was worth in the fourth quarter of 2008, and 14.3 percent were underwater in the third quarter of last year, the reports showed.

Nine consecutive quarters of declines have left eight regions--including the Modesto, California, Stockton, California, and Fort Myers, Florida regions--with median value declines of more than 50 percent since those markets peaked.

In 85 of the 161 markets covered in the report, the annualized change over the past five years is negative or flat, the reports showed...

Almost a Quarter of U.S. Homeowners Are Underwater

U.S. Families Rely on Handouts in World’s Richest Country

May 2, 2009

Guardian - One in six of West Virginia’s 1.8 million people receive government food stamps — one of the highest rates in the country — and the total is rising by the week...

Senate Defeats Bid to Let Homeowners Seek Foreclosure Relief in Bankruptcy Court

April 30, 2009

Associated Press - The Democratic-controlled Senate on Thursday defeated a plan to spare hundreds of thousands of homeowners from foreclosure through bankruptcy, a proposal that President Barack Obama embraced but did little to see through.

A dozen Democrats joined Republicans in the 45-51 vote to scuttle the measure, which Obama had said was important to saving the economy and promised to push through Congress. But facing stiff opposition from banks, Obama did little to pressure lawmakers who worried it would encourage bankruptcy filings and spike interest rates.

"The vote today was a bipartisan rejection of an interest-rate hike, which is exactly the wrong solution for jobs, homeowners and the economy," said Senate Republican leader Mitch McConnell of Kentucky.

Democratic leaders lamented that they were powerless, with the 45 votes falling far short of the 60 to overcome procedural hurdles. The newest Democrat, Sen. Arlen Specter of Pennsylvania, voted against it.

"The banks that are too big to fail are saying that 8 million Americans facing foreclosure are too little to count in this economy," said Senate Majority Whip Dick Durbin of Illinois, who championed the measure and had spent weeks negotiating with financial lobbyists in a bid to strike a deal.

Obama long has backed the proposal to give debt-ridden individuals the option of asking a bankruptcy judge to reduce their mortgage payment. He cited that support last fall as he privately lobbied skeptical Democrats to back the $700 billion Wall Street bailout. And once he was president, he had promised, he would push for its passage.

In February, the newly inaugurated president included the proposal as the stick in a housing plan full of carrots for the banking industry. The broader rescue plan encouraged, but did not require, lenders to cut homeowners' monthly payments and refinance loans for individuals whose home's market value has sunk below what they owe.

The following month, the House passed the bankruptcy legislation along party lines in a 234-191 vote.

But the bankruptcy option got only a tepid endorsement from Treasury Secretary Timothy Geithner. As debate on the measure brewed, Geithner was pushing for the creation of a government-sponsored program that would rely on private investors to buy the risky mortgage-backed securities weighing down the market.

The forced easing, or "cram-down," of a mortgage by a bankruptcy judge would have likely introduced additional uncertainty for investors.

Congressional Democrats also questioned the merits.

"Do I want to have my rate go up so that somebody else might be able to cram down" their mortgage payment? asked Sen. Ben Nelson, D-Neb., who voted against the measure.

In recent days, as it became clear the measure would fail, the administration did little to counter the aggressive lobbying by banks fighting the proposal and focused its efforts instead on a more popular bill targeting credit card companies.

Spokeswomen at the Treasury Department and White House did not respond to requests for comment, and absent from the debate was any statement of administration policy.

Obama supporters blamed the banks.

"There was a lot of fear-mongering," said Andrew Jakabovics, associate director for housing and economics at the Center for American Progress in Washington. "The banks put on a good show, saying, 'Hey, if you force us to take more losses, we're going to go out of business.'"

Indeed, the banking industry had a direct line to Capitol Hill. Officials from some of the biggest banks, including JP Morgan Chase & Co., Bank of America Corp. and Wells Fargo & Co., as well as groups representing credit unions and community banks, negotiated for weeks with Durbin and other leading Senate Democrats.

Trying to win support, Durbin narrowed the provision substantially. The latest proposal would have restricted eligibility to homeowners already in foreclosure whose lender had not offered them better terms. Homes would also have to be worth less than $729,000 and apply to mortgage loans originated before 2009.

Durbin had offered the measure as an amendment to a housing bill aimed at easing the nation's credit crunch. That bill would guarantee bank deposits up to $250,000 through 2013.

The bill also would permanently increase the borrowing authority for the Federal Deposit Insurance Corp. from $30 billion to $100 billion. Increasing the FDIC's credit would allow the agency to reduce large new premiums it has begun charging banks to insure deposits.

The Senate is expected to vote on that measure next week. Durbin said he would try to restore the bankruptcy provision in conference with the House, although it was considered unlikely he would succeed.

"I'll be back," he said. "I'm not going to give up."

Emanuel Pushes U.S. Value-Added Tax

Ezekiel Emanuel Pushes U.S. Value-Added Tax

May 27, 2009

Washington Post - With budget deficits soaring and President Obama pushing a trillion-dollar-plus expansion of health coverage, some Washington policymakers are taking a fresh look at a money-making idea long considered politically taboo: a national sales tax.

Common around the world, including in Europe, such a tax -- called a value-added tax, or VAT -- has not been seriously considered in the United States. But advocates say few other options can generate the kind of money the nation will need to avert fiscal calamity.

At a White House conference earlier this year on the government's budget problems, a roomful of tax experts pleaded with Treasury Secretary Timothy F. Geithner to consider a VAT. A recent flurry of books and papers on the subject is attracting genuine, if furtive, interest in Congress. And last month, after wrestling with the White House over the massive deficits projected under Obama's policies, the chairman of the Senate Budget Committee declared that a VAT should be part of the debate.
"There is a growing awareness of the need for fundamental tax reform," Sen. Kent Conrad (D-N.D.) said in an interview. "I think a VAT and a high-end income tax have got to be on the table."
A VAT is a tax on the transfer of goods and services that ultimately is borne by the consumer. Highly visible, it would increase the cost of just about everything, from a carton of eggs to a visit with a lawyer. It is also hugely regressive, falling heavily on the poor. But VAT advocates say those negatives could be offset by using the proceeds to pay for health care for every American -- a tangible benefit that would be highly valuable to low-income families.

Liberals dispute that notion.
"You could pay for it regressively and have people at the bottom come out better off -- maybe. Or you could pay for it progressively and they'd come out a lot better off," said Bob McIntyre, director of the nonprofit Citizens for Tax Justice, which has a health financing plan that targets corporations and the rich.
A White House official said a VAT is "unlikely to be in the mix" as a means to pay for health-care reform. "While we do not want to rule any credible idea in or out as we discuss the way forward with Congress, the VAT tax, in particular, is popular with academics but highly controversial with policymakers," said Kenneth Baer, a spokesman for White House Budget Director Peter Orszag.

Still, Orszag has hired a prominent VAT advocate to advise him on health care: Ezekiel Emanuel, brother of White House chief of staff Rahm Emanuel and author of the 2008 book "Health Care, Guaranteed." Meanwhile, former Federal Reserve chairman Paul A. Volcker, chairman of a task force Obama assigned to study the tax system, has expressed at least tentative support for a VAT.
"Everybody who understands our long-term budget problems understands we're going to need a new source of revenue, and a VAT is an obvious candidate," said Leonard Burman, co-director of the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, who testified on Capitol Hill this month about his own VAT plan. "It's common to the rest of the world, and we don't have it."
Seeking New Revenue

The surge of interest in a VAT is testament to the extraordinary depth of the nation's money troubles. While some conservatives have long argued that a consumption tax would provide a simpler and more efficient alternative to the byzantine U.S. income tax code, this time it's all about the money.

The federal budget deficit is projected to approach $1.3 trillion next year, the highest ever except for this year, when the deficit is forecast to exceed $1.8 trillion. The Treasury is borrowing 46 cents of every dollar it spends, largely from China and other foreign creditors, who are growing increasingly uneasy about the security of their investments. Unless Congress comes up with some serious cash, expanding the nation's health-care system will only add to the problem.

Obama wants to raise income taxes for high earners and impose new levies on business, but those moves would not generate enough cash to cover the cost of health care, much less balance the budget, and they have not been fully embraced by Congress. Obama's plan to tax greenhouse-gas emissions could raise trillions of dollars, but again, Congress is balking.

Key lawmakers are considering other ways to pay for health reform, including new taxes on sugary soda, alcohol and employer-provided health insurance. The last proposal could raise a lot of money -- nearly $1 trillion over the next five years, according to White House budget documents. But options on the table would raise a fraction of that sum. And while it might pay for health care, it would barely dent deficits projected to total nearly $4 trillion over the next five years and to grow rapidly in the future, as baby boomers draw on Social Security and Medicare.

Enter the VAT, one of the world's most popular taxes, in use in more than 130 countries. Among industrialized nations, rates range from 5 percent in Japan to 25 percent in Hungary and in parts of Scandinavia. A 21 percent VAT has permitted Ireland to attract investment by lowering its corporate tax rate.

The VAT has advantages: Because producers, wholesalers and retailers are each required to record their transactions and pay a portion of the VAT, the tax is hard to dodge. It punishes spending rather than savings, which the administration hopes to encourage. And the threat of a VAT could pull the country out of recession, some economists argue, by hurrying consumers to the mall before the tax hits.

A VAT's Bottom Line

What would it cost? Emanuel argues in his book that a 10 percent VAT would pay for every American not entitled to Medicare or Medicaid to enroll in a health plan with no deductibles and minimal copayments. In his 2008 book, "100 Million Unnecessary Returns," Yale law professor Michael J. Graetz estimates that a VAT of 10 to 14 percent would raise enough money to exempt families earning less than $100,000 -- about 90 percent of households -- from the income tax and would lower rates for everyone else.

And in a paper published last month in the Virginia Tax Review, Burman suggests that a 25 percent VAT could do it all: Pay for health-care reform, balance the federal budget and exempt millions of families from the income tax while slashing the top rate to 25 percent. A gallon of milk would jump from $3.69 to $4.61, and a $5,000 bathroom renovation would suddenly cost $6,250, but the nation's debt would stabilize and everybody could see a doctor.

Sales Tax Gains Momentum

Burman, who helped House Democrats craft an unsuccessful 2007 plan to repeal the alternative minimum tax, said he's received a number of phone calls from lawmakers interested in his idea, though "they can't quite imagine how to make it happen politically." Burman said the 25 percent rate has caused some sticker shock, and he's trying to figure out how to bring it down.

Graetz's proposal drew an endorsement from Volcker, who last year called it "a sensible plan for reform." (Volcker did not respond to a request for comment.) It also has piqued the interest of Conrad, the Senate Budget Committee chairman who argues that it could be modified to accommodate Obama's pledge not to raise taxes on families who make less than $200,000 a year.
"I think interest is quietly picking up," Graetz said. "People are beginning to recognize that the mathematics of the current system are just unsustainable. You have to do something. And a VAT has got to be on the table if you want to do something big and serious."
Still, the Senate Finance Committee declined to include a VAT among the options it is considering to pay for health reform. And even VAT supporters doubt the tax will find a place among the tax-reform proposals the Volcker panel has been asked to produce by Dec. 4.

Though the nation's fiscal outlook is grim, Burman said "the situation will have to get more desperate" before lawmakers are likely to consider a new levy aimed directly at the pocketbooks of every one of their constituents.

Most lawmakers are still looking for "a painless source of revenue" to overhaul the health-care system and dig the nation out of debt, Burman said. "
Who knows?" he added. "Maybe the tooth fairy will bring that to them."

Banking Crisis: Money-Spinning Operation for the Financial Giants

Federal Reserve Would Serve as Risk Regulator Under Obama Plan

The economic collapse is a manmade disaster created by the Federal Reserve, banking and Wall Street; and this is the same corrupt group who our government has chosen to rectify the problem. - Bob Chapman, The Secrets of the Federal Reserve

May 27, 2009

AP - The Obama administration is proposing that the Federal Reserve serve as an all-seeing regulator to detect activities that could pose risks to the entire financial system.

Under a plan circulating among key lawmakers, the administration also is recommending a new agency to protect consumers and another aimed at protecting investors and maintaining the integrity of the markets. The Federal Deposit Insurance Corp. would get expanded authority to unwind troubled bank holding companies and a new government agency would conduct "prudential regulation," supervising state and federally chartered depository institutions, bank holding companies and insurance companies.

The sweeping proposals are part of six regulatory overhaul recommendations designed to address weaknesses in the financial system that contributed to the current crisis. People familiar with the plan say details still need to be hammered out. They spoke on condition of anonymity because the proposals aren't final.

"The president is committed to signing a regulatory reform package by the end of the year and officials at the White House and the Treasury department are continuing work with Congress on the final phases of a proposal," White House spokeswoman Jen Psaki said Wednesday. "But there is no final proposal in place and any announcement will not be for a couple of weeks."

Obama will be traveling in Europe and the Middle East next week.

Treasury Secretary Timothy Geithner and other administration officials have discussed the regulatory proposals in the past. But the plan circulating on Capitol Hill indicated that the ideas are beginning to come together into a formal package for Congress to consider.

The plan to create two protection agencies — one for consumers and the other for investors — appears to address a potential turf fight with regulatory agencies.

The consumer protection agency would focus on financial products but exclude securities, defusing objections raised by Securities and Exchange Commission Chairman Mary Schapiro. Last week, Schapiro said any new agency whose oversight would include mutual funds, a form of securities, would chip away at the SEC's powers. She said that giving any new entity authority over mutual funds would lessen the government's protection of investors, her agency's core mission.

The investor protection function could be carried out by an agency that merges the SEC and the smaller Commodity Futures Trading Commission, which oversees the trading of oil, gas and other commodities.

By expanding the FDIC's role, the administration would give the government a centralized means for addressing failing banking institutions. Scores of bank holding companies, such as Citigroup Inc. and Bank of America Corp., fall under the supervision of the Federal Reserve. The FDIC now can take over and resolve only the subsidiaries of bank holding companies that take federally insured deposits.

FDIC Chairman Sheila Bair earlier this month suggested to Congress that it give her agency new authority to take over and resolve bank and thrift holding companies — before the overall revamp of financial rules is finished. That stirred a sympathetic response from several members of the Senate Banking Committee.

Lawmakers have been divided on whether the Fed should act as an overarching "systemic risk regulator," with some arguing that such a task would stretch the central bank too thinly. Both Bair and Schapiro have objected to making the Fed alone the new supercop for "too-big-to-fail" financial companies.

Bair has advocated the notion of a "systemic risk council" to monitor large institutions against financial threats, to include Treasury, the Fed, the FDIC and the SEC. Schapiro favors that idea, saying she's concerned about an "excessive concentration of power" over financial risk in any single agency.

Scott Talbott, senior vice president of the Financial Services Roundtable, said his industry group opposes the creation of a consumer protection agency that focuses on financial products, but welcomes overall regulatory changes.

"It is comprehensive and necessary to strengthen the system to prevent this from happening again," he said.

Stress Tests Find 10 Big Banks Need $75 Billion More

May 7, 2009

Associated Press - Ten of the nation's largest financial firms need to raise $75 billion more to withstand the losses that would come with a deeper recession, the government said Thursday in a report card that found the banking system viable but still vulnerable.

The Federal Reserve, issuing the long-awaited results of its "stress tests" for banks, found nine of the firms are stable enough that they need no additional capital.

Among the 10 banks that need to raise more capital, Bank of America Corp. needs by far the most — $33.9 billion. Wells Fargo & Co. needs $13.7 billion, GMAC (General Motors' finance arm) $11.5 billion, Citigroup Inc. $5.5 billion, and Morgan Stanley $1.8 billion.

The banks will have until June 8 to develop a plan and have it approved by their regulators. If they can't raise the money on their own, the government said it's prepared to dip further into its bailout fund.

The stress tests are a big part of the Obama administration's plan to fortify the financial system in the wake of last fall's credit crisis. As home prices fell and foreclosures increased, banks took huge hits on mortgages and mortgage-related securities they were holding.

Last fall, the government approved $700 billion to bail out banks and embarked on a series of historic government rescues, including the takeovers of mortgage finance giants Fannie Mae and Freddie Mac and insurer American International Group Inc.

The government hopes the stress tests will restore investors' confidence that not all banks are weak, and that even those that are can be strengthened. They have said none of the banks will be allowed to fail.

The five other firms found to need more of a capital cushion are all regional banks — Regions Financial Corp. of Birmingham, Ala.; SunTrust Banks Inc. of Atlanta; KeyCorp of Cleveland; Fifth Third Bancorp of Cincinnati; and PNC Financial Services Group Inc. of Pittsburgh.

Among the banks that the government did not ask to raise more capital were JPMorgan Chase & Co., brokerage house Goldman Sachs Group Inc., insurer MetLife Inc. and credit card companies Capital One Financial Corp. and American Express Co.
Together, the 19 firms that took the test hold two-thirds of the assets and half the loans in the U.S. banking system...
Describing the purpose of the tests, Federal Reserve Chairman Ben Bernanke said at a news conference with Geithner, "This is to make sure banks have enough capital to offset the losses we know are coming in the next couple of years."

If You Believe Banks Are Recovering...

May 5, 2009

James Quinn - President Obama and his cronies at Treasury and the Federal Reserve are trying to mislead the public regarding the health of our banking system. The government has something up its sleeve this time. They are perpetrating the greatest fraud in the history of the world. The conspirators are Barack Obama, Timothy Geithner and the Treasury Department, Ben Bernanke and the Fed, Sheila Baer and the FDIC, and Barney Frank and the Democratic Congress.
  • They have colluded to commit taxpayer funds to enrich bankers that brought down the financial system, without getting congressional approval.
  • They have delayed foreclosures and have tried to artificially prop up the housing market.
  • They have poured billions of stimulus pork into the states, praying for some of it not to be wasted.
  • They have confiscated billions in taxpayer funds, bestowed them on reckless banks, and forced them to lend it to anyone with a pulse, again.
The International Monetary Fund has estimated total credit write-downs of $4.1 trillion, with $2.7 trillion in U.S. institutions. McKinsey has concluded that there are still $2 trillion of toxic assets sitting on the books of U.S. banks. Economist Nouriel Roubini, who has been correct from the beginning, estimates total losses on loans made by U.S. financial firms and the fall in the market value of the assets they are holding will reach $3.6 trillion ($1.6 trillion for loans and $2 trillion for securities). The U.S. banks and broker dealers are exposed to half of this figure, or $1.8 trillion; the rest is borne by other financial institutions in the U.S. and abroad. [The $1.8 billion of future losses do not include the commercial real estate losses, credit card losses, and losses from the next wave of mortgage resets in 2010 that will wash over these banks.]

With $2 trillion of write-offs to go, how could Treasury Secretary Geithner make the following statement to a Congressional panel late last month, "Currently, the vast majority of banks have more capital than they need to be considered well capitalized by their regulators"? Is he lying or shading the truth?
Roubini's estimate of $1.8 trillion more losses for U.S. banks will cause a slight problem for the U.S. banking system. The entire U.S. banking system has only $1.4 trillion of capital. Therefore, the U.S. banking system is effectively insolvent.

The vast majority of the 8,500 banks in the country are in good shape... [but] the top 19 banks control 45% of all the deposits in the country, [and] these are the banks that are insolvent. Citigroup, Bank of America, Wells Fargo and the other "Too Big To Fail" banks destroyed the economic system...

This brings us to the stress tests for the 19 biggest banks in the land. The most stressful conditions are supposed to be 10% unemployment and a 20% further fall in home prices. That doesn't sound too stressful to me. Considering the government reported figures are a manipulated lie, we already have unemployment between 15% and 20% in the real world. A 20% further decline in home prices is a given. The Case Shiller futures index forecasts that the New York Metro area will fall by 31% by the end of 2010.

The massive overhang of housing inventory, the coming onslaught of mortgage resets in 2010, and the millions of foreclosures in the pipeline guarantee at least 20% further downside in housing prices. I have a feeling these 19 banks are going to need to study a little harder for their test. Professor Geithner is giving them an open book take home exam and gave them the answers. They will still flunk.

William Black is a former senior bank regulator. He is currently an associate professor of economics and law at the University of Missouri. Mr. Black held a variety of senior regulatory positions during the S&L crisis. He managed investigations with teams of examiners reporting to him, redesigned how exams were conducted, and trained examiners. He calls the stress tests conducted on the 19 biggest banks in the country a complete sham. In his own words:
  • "You can't conduct a meaningful stress test without reviewing (sampling) the underlying loan files and it seems likely that the purchasers of securitized instruments (not just mortgages) do not even have the loan file data. Moreover, loss ratios vary enormously depending on the issuer, so even a bank that originates (or has purchased a bank that originates) similar product cannot simply take its own loss rate and extrapolate it to the measure the risk on the value of securitized credit instruments.

  • "It is vastly more difficult to examine a bank that is engaged in accounting control fraud. You can't rely on the bank's books and records. It doesn't simply take more, far more [employees]. It takes examiners with experience, care, courage, and investigative instincts and abilities. Very few folks earning $60,000 are willing to get in the face of the CEO and CFO making $25 million annually and tell them that they are running a fraudulent bank and they are liars. FYI, this is one of the reasons why having "resident examiners" never works.

  • "Examiners certainly can't do the stress testing that Geithner describes or evaluate the reliability of a large bank's proprietary stress test. If they were serious about constructing reliable stress tests, which they aren't, you'd require their analytics to be made public. You'd have the industry fund independent investigations by rocket scientists chosen by a committee selected by the regulators of the soundness of the analytics. You'd also have the industry fund competitions to rip them apart (a bit like we hire legit hackers to test security by trying to defeat it) and show where they produce absurd results. The concept that there are 100 examiners with these skills, suddenly freed up from all other duties, assigned to CONDUCT stress tests is a lie."
On Thursday, we will see how much transparency and disclosure the Treasury and Fed will provide regarding the not-so-stressful tests. Obama's minions have been hinting that six banks have failed. Sheila Baer stated that the $110 billion left in the TARP kitty should be enough to cover the capital shortfalls. This is a lie.

As we saw previously, the U.S. banking system will need close to $1 trillion more capital to stay viable. If the Fed was so keen on disclosure and transparency, why hasn't it released the names of the banks that have borrowed from them, and the collateral provided for the loans? Because the Fed has taken worthless toxic paper onto their books and loaned newly printed dollars against the worthless paper. The taxpayers are on the hook.

Government Sets Rules to Leave Bailout Program

May 6, 2009

Associated Press — The nation's largest banks that want to exit the financial rescue program will have to demonstrate to the government that they can survive without its support.

In a joint statement, Treasury Secretary Timothy Geithner and other government banking officials said Wednesday that the 19 largest banks seeking to withdraw from the $700 billion rescue program will have to prove that they can borrow money without the support of the Federal Deposit Insurance Corp.

The new rules for repayment of bailout money were issued by the Federal Reserve and the Treasury Department one day before the government is scheduled to provide the results of "stress tests" it ran on the 19 banks.

The statement said that the 19 banks will be allowed to exit the $700 billion bailout program only if they have the enhanced capital requirements called for in the stress tests. In addition, they will have to show they can borrow money without the support of the emergency program established by the FDIC in October at the height of the financial crisis. That program allows banks to borrow money at lower rates because the FDIC guarantees the bank loans. Banks have more than $330 billion in debt outstanding under the program...

The government has said in the past that no large bank will be allowed to fail, and the statement said "the U.S. government reaffirms its commitment to stand firmly behind the banking system during this period of financial strain."

Officials also have said that if banks are unable to raise capital to meet the stress test requirements, they will be able to obtain support from the $700 billion bailout fund.