Ted Cruz: The first talk radio presidential candidate

Ted Cruz is the first talk radio presidential candidate, so it's no wonder Glenn Beck has endorsed him. Rush Limbaugh, Sean Hannity and others also gush over him.

I say that because Cruz, like a talk radio host, owes his popularity to staking out the "purest" (read: most extreme) views within his party, without any hope of ever getting what he wants. 

Cruz has never compromised in the Senate, he only grandstands, meaning he gets nothing done. He's a shameless self-promoter who has zero endorsements from his Republican colleagues in the Senate, who can't stand him. 

It's amazing that Cruz looks like a strong candidate for the GOP nomination, having just won Iowa. (But not without some dirty tricks.)

It just goes to show that talk radio runs the GOP. Too bad talk radio takes zero responsibility for governing, just like Ted Cruz.

Now if you want a good look at the real Ted Cruz, in his young and striving young-adult years, read this:

http://theslot.jezebel.com/heres-what-happens-when-you-try-and-track-down-a-ted-cr-1752337625 

News digest / Catching up on news (09.07.2014)

Here's more good stuff from my mailing list that I didn't have time to re-post on TILIS:

"Russia sees a military solution in Ukraine even if the West doesn’t." By Editorial Board, September 5, 2014, Washington Post. URL: http://wapo.st/Yj13ir  

"To recline your seat or not? Stop arguing. Capitalism already won this stupid war." By Oliver Burkeman, September 3, 2014, Guardian. URL:http://gu.com/p/4x9fj  

"The Senate Republicans’ foolish fight over ambassadors." By David Ignatius, Septmeber 2, 2014, Washington Post. URL: http://wapo.st/1w4aflz

"A second Sunni Awakening?" By Fareed Zakaria, September 2, 2014, Washington Post. URL: http://wapo.st/1lz1QpE

"Putin's Trap: Why Ukraine Should Withdraw from Russian-Held Donbas." By Alexander J. Motyl, September 1, 2014, Foreign Affairs. URL:http://www.foreignaffairs.com/articles/141946/alexander-j-motyl/putins-trap  -- A CONTROVERSIAL POINT OF VIEW; BUT IF THIS PAINFUL OUTCOME IS TO HAPPEN ANYWAY, SHOULDN'T UKRAINE TAKE THE INITIATIVE?

"Why does Putin wage war with Ukraine?" By Boris Nemtsov, September 1, 2014, Kyiv Post. URL: http://www.kyivpost.com/opinion/op-ed/why-does-putin-wage-war-on-ukraine-362884.html

"Labor Day: The Beginning of a Breakthrough." By Robert Kuttner, August 31, 2014, Huffington Post. URL: http://huff.to/1Chs0SW

"We need to tell the truth about what Russia is doing in Ukraine."  By Wesley Clark, August 31, 2014, Guardian. URL: http://gu.com/p/4x6hh

"A Market Basket of dignity." By E.J. Dionne, August 31, 2014, Washington Post. URL: http://wapo.st/1owAqLW  -- AT LEAST ONE CEO NOW GETS IT; I GUESS WE JUST HAVE TO FIRE THEM ALL SO THEY WILL UNDERSTAND

"Russian nationalism and the logic of the Kremlin's actions on Ukraine." By Henry E. Hale, August 29, 2014, Guardian. URL: http://gu.com/p/4x5tq  -- REMEMBER, IN UKRAINE NATIONALISM IS CALLED 'FASCISM'; IN RUSSIA IT'S PATRIOTISM

"Why Russia Wants the Federalization of Ukraine." By Alexander Motyl, August 28, 2014, Huffington Post. URL: http://huff.to/1tH7Uxu

"NC Pension Deal: How Wall Street Ends Up Getting Cash Meant for Main Street." By David Sirota, August 26, 2014, International Business Times. URL:http://www.ibtimes.com/nc-pension-deal-how-wall-street-ends-getting-cash-meant-main-street-1669174

"Subverting the Inversions: More Thoughts on Ending the Corporate Income Tax." By Dean Baker, August 26, 2014, CEPR. URL:http://www.cepr.net/index.php/blogs/beat-the-press/subverting-the-inversions-more-thoughts-on-ending-the-corporate-tax

"Donetsk POW March: When Is A Parade A War Crime?" By Carl Schreck, August 25, 2014, RFE/RL. URL: http://www.rferl.org/content/ukraine-pow-march-war-crime/26548667.html  -- OF COURSE IT'S A WAR CRIME BUT FAT CHANCE IT'LL BE PROSECUTED

"Hawks Crying Wolf." By Paul Krugman, August 22, 2014, New York Times. URL: http://huff.to/1BJIHpT  -- I BELIEVE THAT 'CHICKEN LITTLE' IS THE MORE APT FAIRY TALE HERE.

"If this is real religion, then you can count me as an atheist." By Giles Fraser, August 22, 2014, Guardian. URL: http://gu.com/p/4xx22  -- TAKE NOTE, CONSERVATIVE XENOPHOBES: MODERATE MUSLIMS ARE SPEAKING OUT

"Never an excuse for shooting unarmed suspects, former police chief says." By Joseph D. McNamara, August 19, 2014, Reuters. URL:http://www.reuters.com/article/2014/08/19/idUS212937500020140819  -- IT WORKED IN THIS MISSOURI TOWN, AND GEE, ALL THROUGHOUT GREAT BRITAIN WHERE POLICE AREN'T EVEN ARMED!

GOP candidate reveals Tea Parties' true motivation

You can read the rest of this article about one of the last "Republican Establishmentarians" fighting (albeit passively) for his political life, but what I found fascinating was this frank admission from Tea Party challenger, Glenn Beck/Breitbart darling and Senator wannabe Chris McDaniel of Mississippi [emphasis mine]:

McDaniel, however, routinely casts his mission not as a break with the past but as a bulwark against a frightening future."Millions in this country feel like strangers in this land," he says. "An older America is passing away. A newer America is rising to take its place. We recoil from that culture. It’s foreign to us. It’s offensive to us." This is a remarkably frank declaration of the vision of the Tea Party embraced by liberal social scientists: an expression, above all, of old white people's anxieties at the prospect of an urbanizing, liberalizing, diversifying America.

Tea Partiers can talk all they want about being for smaller government and fiscal conservatism -- they are -- but that's not what really drives them emotionally, it's not what gets their back up. 

It's the "culture wars" -- more precisely, the demographic destiny of America -- that alternately worries and infuriates them. 

America is getting less white and more liberal and this trend will only continue. The old white Tea Parties know it and it drives them nuts.

Thad Cochran, the Last of the Naive Republicans

By Molly Ball

June 3, 2014 | The Atlantic

URL: http://www.theatlantic.com/politics/archive/2014/06/thad-cochran-the-last-of-the-naive-republicans/372084/

U.S. intel. director: Earth is (still) a scary place

We're all gonna dieeeeeeeeeeeeee!  Aaaaaaaah!

Aw Lawdy, please save us CIA and NSA, save us!  

Let me quote Michael Cohen at length [emphasis mine] in his critique of the annual world threat assessment that the National Intelligence Director is obliged to give the Senate:

There is the habitually frightening adjective war front, "an assertive Russia, a competitive China; a dangerous, unpredictable North Korea, a challenging Iran." The sober-minded might look at these countries and conclude that a more accurate set of descriptors would be "an enfeebled and corrupt Russia, an economically slowing and environmentally challenged China, a contained and sort of predictable North Korea and an isolated and diplomatically-engaged Iran". But that would be a pretty lame threat assessment, wouldn't it?

Then there are the really scary sounding threats that aren't actually threats to Americans. Things like, "lingering ethnic divisions in the Balkans, perpetual conflict and extremism in Africa; violent political struggles in … the Ukraine, Burma, Thailand and Bangladesh." [...]  [B]ut the idea that any of these are serious "crises" or "threats" to America and its citizens is ludicrous.

This is what makes Clapper's argument – and indeed the entire process of writing a "worldwide threat assessment" so fundamentally unserious and distorting. America doesn't face a single truly serious security threat. We are a remarkably safe and secure nation, protected by two oceans, an enormous and highly effective military and dozens upon dozens of like-minded allies and friends around the world. Truly we have nothing to fear – except perhaps global climate change, which oddly merits a one-paragraph mention (pdf) in this year's threat assessment.

To listen to Clapper and others in the intelligence community one might never know that inter-state war has largely disappeared and that wars in general are in the midst of a multi-decade decline. 

And let's not forget that Clapper is the same guy who lied to Congress about not spying on U.S. citizens!:

The irony of all this is that Clapper has been under fire for months now because he allegedly lied to Congress over the extent to which the National Security Agency was collecting phone and e-mail records of individual Americans.

Yet, the yarn he spun on Capitol Hill last week was far worse than that: deceiving Americans about the nature of the world today and the threats facing the country. But in a political environment in which threat mongering and exaggeration is the norm rather than the exception, Clapper not only gets a pass – hardly anyone even noticed.

I've had enough of these obvious lies from "serious" spies protecting their administrative turf and bloated billion-dollar budgets.  There is no way that the U.S. is in more danger now than during the Cold War.  We have no enemies who can attack us, save Russia with its ICBMs. Terrorism is a mosquito on the list of actual threats to American citizens.

The James Clappers of the U.S. military-intelligence community might bamboozle and intimidate our Congressmen and journalists with their doomsday speeches, but not me.  What about you?

James Clapper might as well be called director of US fearmongering

By Michael Cohen

February 6, 2014 | Guardian

URL: http://gu.com/p/3mgk3

FOX tries its best to spin Senate BENGHAZI! report

Check out the GOP Spin Zone over at Fox News: 

• 
  COMPREHENSIVE REPORT BY the Senate Intelligence Committee definitively declares that individuals tied to 
• Al Qaeda groups were involved in the Benghazi attack, and that the attack could have been prevented.

Yet further down in the article it says:

The Senate committee report stressed that the intelligence still suggests the attack was not “highly coordinated,” but rather “opportunistic” – possibly put in place in “short order” after protests over an anti-Islam film elsewhere in the region.

“It remains unclear if any group or person exercised overall command and control of the attacks,” the report said. 

So those conclusions from the Senate committee's own biased, partisan report refutes two of the Republicans' four main accusations against the Obama Administration: that al Qaeda was behind the attacks (and not just al Qaeda-affiliate groups being "involved"); and that the anti-Islam film had nothing to do with the timing of the attack. 

The third main accusation by the GOP is that the State Department and the White House ignored security threats inside Libya. This I won't go into now. It suffices to say that Amb. Stevens alone made the decision to visit Benghazi that day, not Hillary Clinton or President Obama. He was quite aware of the risky post-conflict security situation in Libya. Rep. Grayson made this amply clear in a House hearing on Benghazi, see it here:

The fourth main accusation by the GOP is that Obama and his generals did not come to the rescue of Amb. Stevens and other U.S. personnel in time, for reasons unclear or speculative. I won't respond to this accusation now either, since I've written about it before, and no credible analysts have been able to dispute the actual events or timing.

So there you go.  BENGHAZI! has been reduced to plain old Benghazi, a political tempest in a teapot, where brave Americans' lives and memories have been used cynically as political ammunition by the GOP.  Moving on.

Dueling anecdotes for/against Obamacare

I've been saying for years that one of the main distinctions between liberals and conservatives is that liberals argue with statistics and facts, and conservatives argue with anecdotes, as in, something that happened to them or somebody they believe. Finally Milbank has noticed it, too [emphasis mine]:

Republicans are right to hammer President Obama for his dishonest — and now debunked — claim that those who like their insurance plans can keep their coverage. Millions who buy their own health insurance will not have that option. The White House knew this during the health-care debate and didn’t tell the truth.

But what Republicans are doing now is dishonest, too, because their constituents’ tales of woe, even if true, aren’t representative. Suppose the worst forecast proves to be true, and 12 million people cannot renew their coverage and must find new policies on the exchanges. In a country of 317 million people, that group would still be dwarfed by the number of people now able to get health insurance for the first time — and by the overwhelming majority of Americans who are largely unaffected by Obamacare.

Using props to make policy may be unreliable, but it’s apparently irresistible.

For political reasons, at this Senate hearing Democrats unfortunately followed suit with their own touching personal anecdotes, because frankly, it's too early for any of us to cite facts & statistics. It wouldn't be sensible or fair to draw any hard & fast conclusions about Obamacare yet, especially with the Healthcare.gov website not working.

Nevertheless, call me a partisan hack, but I predict that the Affordable Care Act will be with us for decades. It's time we started thinking of it as we do Social Security and Medicare: indelible and ineluctable. And instead of plotting futilely how to trash it, critics should be suggesting how to improve it. Because Obamacare's not going anywhere, sorry.

At Obamacare hearings, governing by anecdote

By Dana Milbank

November 7, 2013 | Washington Post

URL: http://wapo.st/1bb2UWP

KY Senate race could break spending record

Famous Kentucky politician Henry Clay, if he were alive today, would be so proud that three candidates (and their super PACs) are about to spend the yearly income of more than 4,300 Kentuckians in their campaigns for the U.S. Senate.

Seriously though, what will the Tea Parties say when their hero Rand Paul either stumps for McConnell, the face of "establishment Republicans," and/or refuses to endorse McConnell's rival from the Tea Parties, businessman Matt Bevin?  Won't they feel just a teensy-weensy bit manipulated and taken for granted in Paul and McConnell's game of thrones?

Kentucky Senate race could top $100 million

By Chris Cillizza

August 11, 2013 | Washington Post

URL: http://wapo.st/1cF4eVA

Taibbi: 'TBTF' bill faces opposition from...S&P?!

In the bizarro world of high finance, the ostensibly conservative ratings agency Standard & Poor's has come out against the bipartisan Brown-Vitter "TBTF" bill in the Senate Banking Committee that would "elegantly" eliminate, according to Matt Taibbi, the Too Big To Fail problem by requiring any bank with more than $500 billion in assets to keep about 15 percent of its capital in reserve, so as not to require a government bailout if their risky investments fail.  

Here's S&P excuse during Senate testimony:

Under our methodology, we would potentially no longer factor in government support if we believed that once large banks are broken up, we would not classify these banks as having high systemic importance.

Here's Taibbi's response to that:

S&P writes about having to factor out the implicit government backing of big banks as though that would be a bad thing. But if implicit government support is the only thing keeping the ratings of these companies even as high as they are now, that means they really should be rated lower, in a true free market.  And Standard and Poor's is, what – against admitting that?  It's nuts.

On the other hand, the Brown-Vitter TBTF bill is supported by the Independent Community Bankers of America, that is ostensibly sick and tired of borrowing at higher rates and having a constant institutional disadvantage compared to Wall Street banks. 

If the voting public continues to pay attention to the TBTF problem then we'll win, because both the far Left and far Right and everybody in between supports ending TBTF, ideologically. But if we get distracted, then the TBTF lobbyists and the corrupt institutions like S&P will cut and gut this bill in the Senate. They don't mind sounding absurd and hypocritical to protect their advantages with the status quo.  

Stay tuned, everybody!....

UPDATE (05.04.2013): For those who are interested, here's a summary from my man Ritholtz of the Brown-Vitter 'TBTF' bill:

• Stricter capital requirements on megabanks, defined as institutions with over $500 billion in assets.
• Six U.S. banks — JPMorgan Chase., Citigroup, Goldman Sachs, Morgan Stanley, Bank of America and Wells Fargo — meet the TBTF criteria.
• Eliminates risk-weights as part of a capital assessment (less reliance on unreliable ratings).
• Does not rely on ratings agency grades.
• Removes off-balance-sheet assets and liabilities as different class — they are treated as if they were on-balance sheet.
• Requires derivatives positions to be included in a bank’s consolidated assets.
• Requires capital cushion that a bank hold be liquid.
• Mandates capital measures be more transparent.
• Eliminates Basel III as a regulatory requirement.
• Restores competition to industry by removing competitive disadvantages mega banks have over smaller and regional community bankers.

Too-Big-to-Fail Takes Another Body Blow

By Matt Taibbi

May 1, 2013 | Rolling Stone:

URL: http://www.rollingstone.com/politics/blogs/taibblog/too-big-to-fail-takes-another-body-blow-20130501#ixzz2S8uS0vvn

McConnell filibusters his OWN proposal after Reid calls his bluff

You know, America's Founding Fathers wanted the Senate to do a few things. They wanted it to be a check on the power of bigger/more populous states, a great leveler in Congress. And, by having states appoint U.S. senators (before Progressives passed the 17th Amendment in 1913 to have the American people elect them), the Founding Fathers wanted senators to be above the noise of "mobocracy," and deliberate, debate and make decisions based on the best long-term interests of the country.  

Well, thanks to abuse of Senate filibuster rules -- the terms "filibuster" and "cloture" are not mentioned in the U.S. Constitution, by the way -- our senators don't do much debating or deliberating anymore: merely the threat of a filibuster means a bill cannot be brought to the floor of the Senate for debate. That means that all the real talking our senators do, if any, happens behind closed doors in smoked-filled rooms. Unfortunately, our senators spend a lot more time posturing in front of the media than they do talking to each other, or heaven forbid, actually putting their views on the Congressional record on the floor of the Senate!

That's why Harry Reid wants to reform the filibuster rule.

Dems Look on in Wonder as Mitch McConnell Filibusters His Own Proposal

Quite a moment in Senate history.

By Martin Longman

December 7, 2012 | Booman Tribune

URL: http://www.alternet.org/election-2012/dems-look-wonder-mitch-mcconnell-filibusters-his-own-proposal

Tea Party to cost GOP the Senate (again)

Here's how public affairs blogger Mark Kogan sums up the Tea Party's weighing down the GOP in its race to control the Senate:

If the numbers continue trending the way they are, the Tea Party will be responsible for single-handedly delivering five Senate seats to the Democrats in two election cycles. Beyond that 10 vote swing, 2012’s Tea Party Senate candidates have also all but ensured that the Democrats will retain their 51 seat majority in the Senate. Even in the unlikely case that all six “toss-up” races go in favor of Republicans on Tuesday, the Democrats would still hold a majority thanks to Tea Party supported candidates. In short, Republican dreams of retaking the Senate in 2012 have again been demolished by a kooky cadre of Tea Party nominees that seem to specialize in little more than torpedoing their own campaigns and their party’s hopes for congressional control.

Indeed, let's recall these famous Tea Party casualties in 2010 Senate races: Christine O'Donnell in Delaware; Joe Miller in Alaska; Sharron Angle in Nevada; and Ken Buck in Colorado.  

And several Tea Party freshman are in trouble this November: Reps. Allen West (R-Fla.), Joe Walsh (R-Ill.), Chip Cravaack (R-Minn.) and Frank Guinta (R-N.H.) are all likely losers.  Personally, I'll be glad that Allen West will have more time at home to spend with his beloved wife in exactly the way he wants.

Regardless of the outcome in the presidential race, I'll be eager to see the (negative) results next week for the GOP thanks to the Tea Party.   

U.S. Senators swear to Saudi gov't's role in 9/11

The lib'rul NYT deliberately released this story before Breitbart's murder to distract us from the real conspiracy!

Anyway, for what it's worth to those of you so easily distracted from Obama's crimes by the lamestream media, two former U.S. Senators submitted sworn affadavits about the Saudi government's possible involvement in 9/11. (YAAAAWN! 9/11, that was like, so 10 years ago.)

Saudi Arabia May Be Tied to 9/11, 2 Ex-Senators Say

By Eric Lichtblau

February 29, 2012 | New York Times

URL: http://www.nytimes.com/2012/03/01/us/graham-and-kerrey-see-possible-saudi-9-11-link.html?_r=4

Buchanan: Senate resolution on Georgia is Russia-baiting

While my heart is with Georgia, my mind is with Pat on this one. Sure, Russia likes to throw its weight around in the "near-abroad." And the term peacekeepers as applied to Russian troops in the former Soviet space is risible.

But where is the Senate's statement in favor of Georgia's territorial rights taking the United States? What is it going to get us? I mean, the U.S. is not about to send troops to help Georgia reclaim its lands occupied by Russian peacekeepers and risk nuclear war with Russia.

These territorial disputes are not a cut-and-dried case of neo-imperialism on Russia's part, nor of belligerent rapacity on Georgia's part. The truth of these frozen conflicts is muddled. And the U.S. Senate's unanimous declaration in favor of Georgia does nothing to change things. Not that I can see anyway. Indeed, nobody except Russia recognizes these two breakaway republics as independent states anyway.

And so Buchanan is correct in saying the Senate's resolution is equal to baiting Russia in its own back yard. But even worse, in my view, since the U.S. is doing nothing to back it up, such an empty resolution -- approved right before Congress goes on vacation -- makes America look weak and unserious.

Why Are We Baiting the Bear?

By Patrick J. Buchanan

August 23, 2011 | Human Events

URL: http://www.humanevents.com/article.php?id=45701

GOP's Graham slams teabaggers

"Graham said he challenged them: ' 'What do you want to do? You take back your country -- and do what with it?'. . . . Everybody went from being kind of hostile to just dead silent.'"

Yeah, you teabaggers, what do you want, besides abolishing the Department of Education and the EPA? (Crickets chirping)

Being in a constant state of anger & fear, and waiting next to the TV or radio to get your marching orders from shock jocks is dangerous. You are whipping yourselves up into a frenzy so that you can be easily used and abused to further somebody else's agenda, like, well, "drill, baby, drill!" for example.

Lindsey Graham spits out tea party

By Howard Kurtz

July 2, 2010 | Washington Post

The tea party has no shortage of critics, especially among left-leaning folks who regard it with a mixture of anxiety and suspicion.

But deciphering what this movement stands for can be like nailing Jell-O to the wall. It's not a real party, it has no platform, it's not clear who the members are, and it seems to encompass a range of views on the right.

Journalists too often characterize the tea people by the craziest fringe that shows up at rallies with offensive signs. Polling suggests they are largely small-government, anti-Obama activists -- assuming pollsters can get a good sample among folks who don't have to register for an official party -- but they seem more united by generalized anger than specific solutions.

Republicans love the grass-roots enthusiasm that the tea party generates -- even though the followers theoretically blame both parties for the mess in Washington -- but some are wary of being tarred with a brand that may turn off independents.

And then there's Lindsey Graham.

The South Carolina senator has already ticked off the right by being willing to negotiate deals with Democrats. He doesn't see bipartisanship as a dirty word.

Now he's turned his tart tongue on the tea types.

What's more, the New York Times Magazine brands him "This Year's Maverick"--which, given the source, is unlikely to boost his standing in some GOP circles.

Since it began posting articles online in midweek, the Times Magazine has boosted its impact to newsmagazine levels -- and I expect this new piece by Robert Draper will be no exception:

" 'Everything I'm doing now in terms of talking about climate, talking about immigration, talking about Gitmo is completely opposite of where the Tea Party movement's at,' Graham said. . . . On four occasions, Graham met with Tea Party groups. The first, in his Senate office, was 'very, very contentious,' he recalled. During a later meeting, in Charleston, Graham said he challenged them: ' 'What do you want to do? You take back your country -- and do what with it?'. . . . Everybody went from being kind of hostile to just dead silent.'

"In a previous conversation, Graham told me: 'The problem with the Tea Party, I think it's just unsustainable because they can never come up with a coherent vision for governing the country. It will die out.' Now he said, in a tone of casual lament: 'We don't have a lot of Reagan-type leaders in our party. Remember Ronald Reagan Democrats? I want a Republican that can attract Democrats.' Chortling, he added, 'Ronald Reagan would have a hard time getting elected as a Republican today.' "

Yow. He's saying the tea party has no answers, and that his party has moved so far to the right that Reagan would be seen as a squishy moderate.

Graham didn't duck when asked why the Original Maverick, John McCain, wasn't with him on his compromise efforts: "John's got a primary. He's got to focus on getting re-elected. I don't want my friend to get beat."

The lead for Politics Daily is Graham saying: "I ain't gay." Which I guess was a rumor out there.

Meanwhile, "three of 10 Americans describe themselves in the USA TODAY/Gallup Poll as Tea Party supporters. . . . They are overwhelmingly white and Anglo, although a scattering of Hispanics, Asian Americans and African Americans combine to make up almost one-fourth of their ranks. . . .

"Nine in 10 are unhappy with the country's direction and see the federal debt as an ominous threat to its future. Almost as many say neither President Obama nor most members of Congress deserve re-election. . . . Nearly half say blacks lag in jobs, income and housing 'because most African Americans just don't have the motivation or willpower to pull themselves up out of poverty.' One-third of non-supporters agree."

[Hey now! There's a confession for you! - J]

Liberals are buzzing about the Times piece. "As a matter of policy," says Washington Monthly's Steve Benen, "I don't agree with Graham about much of anything, but all of these observations are entirely sound. The reason I put 'movement' in quotes every time I write about the Tea Partiers is that it's a contingent with no clear agenda, no leadership, no internal structure, and no meaningful connection to reality. Its passionate members, while probably well meaning, appear to have no idea what they're talking about. Genuine political movements -- civil rights, women's suffrage, labor unions -- have, as Graham put it, a 'coherent vision.' The Tea Party has Hitler signs and a cable news network, but that's not much of a substitute."

James Galbraith's must-read Senate testimony on financial fraud

Galbraith: The Role of Fraud in the Financial Crisis

May 5, 2010 | Economist's View

Recent testimony from Jamie Galbraith before the Subcommittee on Crime on the role that fraud played in the financial crisis:

Statement by James K. Galbraith, Lloyd M. Bentsen, jr. Chair in Government/Business Relations, Lyndon B. Johnson School of Public Affairs, The University of Texas at Austin, before the Subcommittee on Crime, Senate Judiciary Committee, May 4, 2010: Chairman Specter, Ranking Member Graham, Members of the Subcommittee, as a former member of the congressional staff it is a pleasure to submit this statement for your record.

I write to you from a disgraced profession. Economic theory, as widely taught since the 1980s, failed miserably to understand the forces behind the financial crisis. Concepts including "rational expectations," "market discipline," and the "efficient markets hypothesis" led economists to argue that speculation would stabilize prices, that sellers would act to protect their reputations, that caveat emptor could be relied on, and that widespread fraud therefore could not occur. Not all economists believed this – but most did.

Thus the study of financial fraud received little attention. Practically no research institutes exist; collaboration between economists and criminologists is rare; in the leading departments there are few specialists and very few students. Economists have soft- pedaled the role of fraud in every crisis they examined, including the Savings & Loan debacle, the Russian transition, the Asian meltdown and the dot.com bubble. They continue to do so now. At a conference sponsored by the Levy Economics Institute in New York on April 17, the closest a former Under Secretary of the Treasury, Peter Fisher, got to this question was to use the word "naughtiness." This was on the day that the SEC charged Goldman Sachs with fraud.

There are exceptions. A famous 1993 article entitled "Looting: Bankruptcy for Profit," by George Akerlof and Paul Romer, drew exceptionally on the experience of regulators who understood fraud. The criminologist-economist William K. Black of the University of Missouri-Kansas City is our leading systematic analyst of the relationship between financial crime and financial crisis. Black points out that accounting fraud is a sure thing when you can control the institution engaging in it: "the best way to rob a bank is to own one." The experience of the Savings and Loan crisis was of businesses taken over for the explicit purpose of stripping them, of bleeding them dry. This was established in court: there were over one thousand felony convictions in the wake of that debacle. Other useful chronicles of modern financial fraud include James Stewart's Den of Thieves on the Boesky-Milken era and Kurt Eichenwald's Conspiracy of Fools, on the Enron scandal. Yet a large gap between this history and formal analysis remains.

Formal analysis tells us that control frauds follow certain patterns. They grow rapidly, reporting high profitability, certified by top accounting firms. They pay exceedingly well. At the same time, they radically lower standards, building new businesses in markets previously considered too risky for honest business. In the financial sector, this takes the form of relaxed – no, gutted – underwriting, combined with the capacity to pass the bad penny to the greater fool. In California in the 1980s, Charles Keating realized that an S&L charter was a "license to steal." In the 2000s, sub-prime mortgage origination was much the same thing. Given a license to steal, thieves get busy. And because their performance seems so good, they quickly come to dominate their markets; the bad players driving out the good.

The complexity of the mortgage finance sector before the crisis highlights another characteristic marker of fraud. In the system that developed, the original mortgage documents lay buried – where they remain – in the records of the loan originators, many of them since defunct or taken over. Those records, if examined, would reveal the extent of missing documentation, of abusive practices, and of fraud. So far, we have only very limited evidence on this, notably a 2007 Fitch Ratings study of a very small sample of highly-rated RMBS, which found "fraud, abuse or missing documentation in virtually every file." An efforts a year ago by Representative Doggett to persuade Secretary Geithner to examine and report thoroughly on the extent of fraud in the underlying mortgage records received an epic run-around.

When sub-prime mortgages were bundled and securitized, the ratings agencies failed to examine the underlying loan quality. Instead they substituted statistical models, in order to generate ratings that would make the resulting RMBS acceptable to investors. When one assumes that prices will always rise, it follows that a loan secured by the asset can always be refinanced; therefore the actual condition of the borrower does not matter. That projection is, of course, only as good as the underlying assumption, but in this perversely-designed marketplace those who paid for ratings had no reason to care about the quality of assumptions. Meanwhile, mortgage originators now had a formula for extending loans to the worst borrowers they could find, secure that in this reverse Lake Wobegon no child would be deemed below average even though they all were. Credit quality collapsed because the system was designed for it to collapse.

A third element in the toxic brew was a simulacrum of "insurance," provided by the market in credit default swaps. These are doomsday instruments in a precise sense: they generate cash-flow for the issuer until the credit event occurs. If the event is large enough, the issuer then fails, at which point the government faces blackmail: it must either step in or the system will collapse. CDS spread the consequences of a housing-price downturn through the entire financial sector, across the globe. They also provided the means to short the market in residential mortgage-backed securities, so that the largest players could turn tail and bet against the instruments they had previously been selling, just before the house of cards crashed.

Latter-day financial economics is blind to all of this. It necessarily treats stocks, bonds, options, derivatives and so forth as securities whose properties can be accepted largely at face value, and quantified in terms of return and risk. That quantification permits the calculation of price, using standard formulae. But everything in the formulae depends on the instruments being as they are represented to be. For if they are not, then what formula could possibly apply?

An older strand of institutional economics understood that a security is a contract in law. It can only be as good as the legal system that stands behind it. Some fraud is inevitable, but in a functioning system it must be rare. It must be considered – and rightly – a minor problem. If fraud – or even the perception of fraud – comes to dominate the system, then there is no foundation for a market in the securities. They become trash. And more deeply, so do the institutions responsible for creating, rating and selling them. Including, so long as it fails to respond with appropriate force, the legal system itself.

Control frauds always fail in the end. But the failure of the firm does not mean the fraud fails: the perpetrators often walk away rich. At some point, this requires subverting, suborning or defeating the law. This is where crime and politics intersect. At its heart, therefore, the financial crisis was a breakdown in the rule of law in America.

Ask yourselves: is it possible for mortgage originators, ratings agencies, underwriters, insurers and supervising agencies NOT to have known that the system of housing finance had become infested with fraud? Every statistical indicator of fraudulent practice – growth and profitability – suggests otherwise. Every examination of the record so far suggests otherwise. The very language in use: "liars' loans," "ninja loans," "neutron loans," and "toxic waste," tells you that people knew. I have also heard the expression, "IBG,YBG;" the meaning of that bit of code was: "I'll be gone, you'll be gone."

If doubt remains, investigation into the internal communications of the firms and agencies in question can clear it up. Emails are revealing. The government already possesses critical documentary trails -- those of AIG, Fannie Mae and Freddie Mac, the Treasury Department and the Federal Reserve. Those documents should be investigated, in full, by competent authority and also released, as appropriate, to the public. For instance, did AIG knowingly issue CDS against instruments that Goldman had designed on behalf of Mr. John Paulson to fail? If so, why? Or again: Did Fannie Mae and Freddie Mac appreciate the poor quality of the RMBS they were acquiring? Did they do so under pressure from Mr. Henry Paulson? If so, did Secretary Paulson know? And if he did, why did he act as he did? In a recent paper, Thomas Ferguson and Robert Johnson argue that the "Paulson Put" was intended to delay an inevitable crisis past the election. Does the internal record support this view?

Let us suppose that the investigation that you are about to begin confirms the existence of pervasive fraud, involving millions of mortgages, thousands of appraisers, underwriters, analysts, and the executives of the companies in which they worked, as well as public officials who assisted by turning a Nelson's Eye. What is the appropriate response?

Some appear to believe that "confidence in the banks" can be rebuilt by a new round of good economic news, by rising stock prices, by the reassurances of high officials – and by not looking too closely at the underlying evidence of fraud, abuse, deception and deceit. As you pursue your investigations, you will undermine, and I believe you may destroy, that illusion.

But you have to act. The true alternative is a failure extending over time from the economic to the political system. Just as too few predicted the financial crisis, it may be that too few are today speaking frankly about where a failure to deal with the aftermath may lead.

In this situation, let me suggest, the country faces an existential threat. Either the legal system must do its work. Or the market system cannot be restored. There must be a thorough, transparent, effective, radical cleaning of the financial sector and also of those public officials who failed the public trust. The financiers must be made to feel, in their bones, the power of the law. And the public, which lives by the law, must see very clearly and unambiguously that this is the case. Thank you.

Forbes: Senate bill too slow, with too many giveaways

Well, maybe the Senate bill is not so good. If the insurance companies support it, it can only mean that they stand to gain.

Charges Sen. Jay Rockefeller (D): "The insurance industry gets to walk away with nearly half a trillion dollars in federal subsidies--without any requirement that they spend those federal dollars on medical care."

Writes Lenzner for Forbes:

The so-called "public option" to insure less healthy patients will cost "typically higher premiums than the average plan," figures the Congressional Budget Office, which estimates that only 3 million to 4 million people will be covered by the public option. That's only about one out of every 10 uninsured people. That's scandalous and reveals the influence of the powerful insurance and pharmaceutical industries. This is not anything approaching socialism, but it is the thumb in the eye of the people that were supposed to be helped.

The Horrendous Truth About Health Care Reform
By Robert Lenzner
December 4, 2009 | Forbes

You were right if you thought the insurance companies would emerge unscathed from what the government wants to call reform.

URL:
http://www.forbes.com/2009/12/04/cigna-unitedhealth-aetna-personal-finance-investing-ideas-humana-wellpoint.html?partner=alerts

Senate Dems stab Americans in the back, as expected

Big surprise: 3 small-state Democratic Senators on the Finance Committee sided with the insurance lobby and voted down a voluntary public option for health insurance. The amendment lost 10-13, instead of passing 13-10 along party lines.

So forget your stupid fear of "socialized" medicine, government won't even have a role to play outside of Medicare! The draft bill in committee has no way to significantly bring down health costs, since single-payer never had a prayer, and since the public option is officially dead.

This post-vote statement by Senator Thomas "Traitor" Carper (D-DE) goes down as one of the dumbest ever:

"Carper said he did not vote for the [public option] amendment because 'it would give the government an unfair advantage in the marketplace by allowing it to negotiate prices initially based on Medicare. That would stifle competition, not increase it, and the end result, I believe, would not be good for the consumer.'"

In other words, if the government can use its negotiating leverage to get us, the American people, better prices for medical care than the private sector can, then that is unfair to the private sector.

Now we know whose side the Senate Millionaires Club is on. (Hint: not ours).

Senate Finance Committee Votes Against Including Public Option In Reform Bill

By Kris Alingod

September 30, 2009 | All Headline News

URL: http://www.allheadlinenews.com/articles/7016551229