"The Reign of Terror" at the OSC Is Over!

Wow!  The Bush administration has finally dismissed Mr. Bloch.  I fear long-term damage has been done to the reputation and integrity of the Office of Special Counsel, but at least a change has been made.



Fresh Details Emerge In Special Counsel's Ouster

by Ari Shapiro

October 28, 2008

New details are emerging about the White House's dismissal of Scott J. Bloch as special counsel last week. The Bush administration told Bloch on Thursday that he would no longer serve as head of the office that protects federal government workers from mistreatment.

Government watchdog groups had complained for years that Bloch abused his power. They said he ignored legitimate whistle-blower complaints and retaliated against his own employees whom he perceived as disloyal.

The Office of Personnel Management eventually began an investigation into the claims against Bloch. Bloch then hired a private company to scrub his computer, triggering an FBI investigation into whether the scrub violated obstruction-of-justice laws. Bloch claimed it was to eliminate a computer virus. But even when FBI agents staged a high-profile raid on Bloch's home and office last May, the White House did not take any action.

Sources close to the Office of Special Counsel say the first indication that something was about to happen came about 10 days ago. The White House told Bloch to attend a meeting the following Friday. A few days after he learned of the meeting, Bloch sent the president a resignation letter saying he would step down in January, at the conclusion of his five-year term. After the letter was released, White House officials moved up Bloch's meeting. Thursday morning, they told Bloch he was done.

He was placed on administrative leave with salary through December. While Bloch was at the White House meeting, federal police officers showed up outside his office door to make sure he didn't return.

"It seems like this has been a long time in coming," said Elaine Kaplan, who preceded Bloch as special counsel. "I don't think it matters that he's going to get a paycheck through the next couple months."

She says Bloch's leadership in the past five years has demoralized the career staff, and that many experienced employees have left.

"I view the departure of Scott Bloch with great satisfaction," said Jim Mitchell, who was Bloch's spokesman and chief of staff until Bloch forced him out over the summer. "Bloch was doing harm to the credibility of the office because of all of his problems," Mitchell said. "He also was not much of a leader. He spent most of his days sitting in his office, interacting only with a few senior people and rarely with any of the people who were doing the work in the office."

The current office spokesman referred requests for comment to the White House. White House spokesman Carlton Carroll declined to comment on personnel matters but said the decision to dismiss Bloch was not based on any ongoing investigations.

Debra Katz, a lawyer who represents whistle-blowers in a lawsuit against the OSC, described Bloch's departure as "a really significant event."

"If whistle-blowers get protection again," she said, "the public will be better served."

Katz has a theory about why the White House put Bloch on administrative leave instead of firing him outright. Bloch was investigating White House officials at the same time the FBI was investigating Bloch. Katz says that if the Bush administration had fired Bloch, he might have countersued, claiming he was a whistle-blower being punished for investigating the White House.

"We have felt all along that Bloch has been trying to insulate himself from termination," Katz said, "so here it appears that the White House has taken the easy road out, and instead of firing him for misconduct is just allowing him to receive a paycheck."

Another possibility is that the White House wanted to fire Bloch but could not find a good enough reason. After all, Bloch's supporters point out, although the complaints against him are legion, no one has charged Bloch with a crime.

The Office of Special Counsel had an all-staff meeting Thursday afternoon. The agency's top lawyer told everyone that Bloch was gone. Sources said there was an awkward silence at first before someone cracked a joke about getting Bloch a going-away present. Then everyone relaxed, and at the end of the meeting, people burst into applause.

When asked why, an OSC employee replied, "The reign of terror was over."

Link to article: http://www.npr.org/templates/story/story.php?storyId=96184109

Copyright 2008 NPR

Dear Joe the Plumber: if you wind up paying more taxes, you’re an idiot

It's like watching a train wreck in slow-motion...and I can't turn away!!!



Posted on October 16, 2008 by JS OBrien on Scholars and Rogues

Dear Joe the Plumber,

Welcome to your 15 minutes of fame. It’s not everyone who gets his name mentioned 286 times in a presidential debate.  If you haven’t already, you simply must change your business’s name to Joe the Plumber.  That’s just good marketing.  Oh, and don’t forget to add the tag line, “As seen on TV!”

OK, Joe, so you had a conversation with Barack Obama and, while media reports are very sketchy about exactly what your circumstances are (not surprising), it appears you want to buy a business that “brings in” more than $250,000.  I have yet to find out if “brings in” means $250,000 in revenue or profit (a very important distinction, Joe), but let’s assume for a moment that it’s profit we’re talking about.  Under Barack Obama’s plan (as sketchy as it is on his website), a good guess would be that you would go into a higher tax bracket, paying about 3.6% more in taxes on every dollar you earn over $250,000, for a total marginal tax rate of 39.6% — exactly the same as it was in the 1990s.

But let’s take a closer look at your situation, shall we Joe?

You say you’re planning to buy this business, and it must be a very large small business, indeed, if it covers salaries, expenses, trucks, inventory and the like and still yields a $250,000 + profit.  I’m going to guess that you don’t have the cash to buy this business outright, Joe, and if you do, I think you’re holding back on us.  I think you’ve inherited some money.  But let’s assume that you’re borrowing a fair amount of money to buy the business, using its book value (what the business is worth if you sold all the assets and paid off all your debts) as security and using the revenue stream to pay off the loan.  Let’s also assume a business this size is incorporated.

Here’s what you do, Joe.  First off, you have your corporation pay you a salary of, say, $249,000 per year.  Now you’re not in the higher marginal tax bracket, right?  Payments on the loan you took out to buy the business are fully tax deductible, so profits will be reduced by that amount.  If you still have more than $250,000 in profit, we’re talking about a rather large business here, and probably a very large down payment (which suggests that you can manipulate your down payment to reduce your taxes, doesn’t it?)

But here’s the thing, Joe.  When you own a business, you can do all kinds of things to reduce taxable income (profit).  For instance, you can buy more equipment, which can then be depreciated over the years, providing a tax deduction and increasing the company’s book value and, thus, your wealth.  Even fully depreciated equipment can generally be sold, in the future, for something.  You can spend more money on advertising and hire on a new plumber or two.  The advertising costs and the employment costs are generally fully tax deductible.  Well, let me take that back.  If you provide your employees with health insurance, your costs for health insurance won’t be tax deductible under John McCain’s plan, but who’s counting, right?

By advertising and hiring on, you can drastically increase your revenues (the amount of money coming in) while keeping profits below the $250,000 mark.  The increased revenues will make the resale value of your business much higher than it already is, increasing your wealth without getting taxed on that increase.  If you want to take more wealth out right now without paying taxes, there is a cornucopia of tax-free or tax-deferred retirement options, benefits, and the like that can move money right around the IRS’s outstretched palm.

Eventually, Joe, your company will be so large, and you will be so wealthy, than an extra 3.5 pennies in tax on each dollar on income you earn over $250,000 will be chickenfeed to you (if it isn’t already).  But, hey, it’s up to you.  Increase the underlying wealth in your company without paying taxes, or take cash now and pay a few additional taxes on it.

But, please, don’t complain to me about paying more taxes.  All it says to me is that you’re not smart enough to run your business’s financial side.

All the best to you and yours,

JS O’Brien

UPDATE

It turns out that Joe is not a good businessman for a simple reason:  He doesn’t own a business, appears to have no immediate prospects to do so, has no plumber’s license, works for a small firm doing residential work (which means his employer is unlikely to be clearing $250k per year), and has occasionally talked to the owner about buying the business — someday.

Poor Joe.  He’s about to get ripped to shreds by the media, and he seems like a pretty decent guy.  I feel for him.

On the other hand, Joe is a great example of those who are so terrified that they’ll get rich some day and owe an extra 3.5 cents on every dollar over $250,000 that they spend a lot of time worrying about it.  Joe doesn’t know that he is unlikely ever to make that kind of money.

UPDATE #2

It just gets better and better.  Bloomberg is reporting that Joe owes around $1200 in back taxes, and there is an Ohio lien filed against him.

Link to Article:
http://www.scholarsandrogues.com/2008/10/16/dear-joe-the-plumber-if-you-wind-up-paying-more-taxes-youre-an-idiot/

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American debt nightmare ends easy credit era

"Experts say crisis could spark shift away from maxing out credit cards."  Amen and amen!



The Associated Press
updated 1:38 p.m. CT, Tues., Oct. 14, 2008

An inflatable gorilla beckoned from the roof of Don Brown Chevrolet in St. Louis, servers doled out free bowls of pasta and a salesman urged potential customers to "come on up under the canopy and put your hands on" a new set of wheels.

But sitting across from a salesman in a quiet back room, Adrian Clark could see it would not be nearly that easy. This was the ninth or tenth dealership for Clark, a steamfitter looking for a car to commute to a new job. Every one offered a variation on the discouragement he was getting here: Without $1,000 for a downpayment, no loan.

"It's just rough times right now," Clark said. "Rough times."

For Clark, and for a nation of consumers heavily dependent on credit, there are growing signs that those rough times could prove to be more than just a temporary problem, that they could be the beginning of a stark, new reality.

Is America's long era of easy credit over?

Experts say that even when the current credit crunch eases, the nation may finally have maxed out its reliance on borrowed cash. Today's crisis is a warning sign, they say, that consumers could be facing long-term adjustments in the way they finance their everyday lives.

"I think we're undergoing a fundamental shift from living on borrowed money to one where living within your means, saving and investing for the future, comes back into vogue," said Greg McBride, senior analyst at Bankrate.com. "This entire credit crunch is a wakeup call to anybody who was attempting to borrow their way to prosperity."

A prolonged period of tighter credit is ahead, experts say.

U.S. consumers will find it much harder to get a credit card, and to carry large balances. Late fees will rise and lines of credit will be reined in. After years of buying homes with interest-only loans, or loans that allowed people to borrow more than the value of the home, substantial payments and downpayments will be required. Interest rates are also likely to rise.

Lenders, far more wary of risk, have tightened the standards they use to judge potential borrowers. Regulators will be looking over their shoulders.

The changes cap three decades in which U.S. consumers — along with businesses and government — have run up ever-increasing debt. Americans became accustomed to financing purchases large and small with plentiful credit cards, easily approved loans for cars and the latest conveniences, and by siphoning the equity in their homes. Lenders did far more than just make credit plentiful. They aggressively marketed it as a necessity, a way for the smart consumer to leverage themselves into a better lifestyle.

The financial meltdown has made clear the role an increasingly global economy played in facilitating U.S. consumers' borrowing, with banks packaging and selling debt to investors, providing cash to people who once would have been considered too risky to get a loan.

The expansion of credit has, in many ways, been a good thing. It has allowed many more people to buy homes. At a time when household incomes have stagnated, borrowing has made it possible for many people to afford purchases and cover short-term expenses they might otherwise have had to delay or abandon.

But all that borrowing came at a heavy cost.

Americans are more reliant on debt then ever before.

The portion of disposable income that U.S. families devote to debt hit an all-time high in the second half of last year, topping 14 percent, figures from the Federal Reserve show. When other fixed obligations — like car lease payments and homeowner's insurance — are added in, about one of every five household dollars is now claimed by bills.

The credit card industry lobbied heavily in 2005 to tighten bankruptcy laws to make it more difficult for consumers to seek court protection and shed responsibility for paying off debt. But in a sign of just how much households have become dependent on borrowing, the average amount of credit card debt discharged in Chapter 7 bankruptcy filings has tripled — to $61,000 per person — from what it was before the law was passed.

"We are going to have to cut back," said Dean Baker of the Center for Economic and Policy Research, a Washington, D.C. thinktank. "We've really been living beyond our means."

Americans, borrowing to cover ordinary living expenses, have all but abandoned saving.

The U.S. personal saving rate dropped to well below 1 percent in late 2007 and early this year, according to figures from the federal Bureau of Economic Analysis. The figure has edged up in the last few months, but the actual savings rate may still be near zero, given that many people are covering living costs by using credit cards or money saved earlier, according to the BEA. The lack of savings is a sharp contrast with the decades after World War II. Americans routinely saved more than 10 percent of their income in the early 1970s.

Now, many families spend virtually all of their incomes covering living expenses, and even that is not enough.

"In the credit era, which is like living on steroids, you're not saving money, you're not breaking even. You're actually borrowing 20 to 30 percent," said Robert Manning, author of "Credit Card Nation: The Consequences of America's Addiction to Credit."

The new era of tighter credit will largely be a mandate, as consumers are forced to adjust to tougher rules and tighter limits. But consumers have also begun showing signs of a change in mind-set, putting off purchases, buying less expensive substitutes, going out to eat less, and rethinking their propensity to do so on credit.

Consumer borrowing fell for the first time in more than a decade in August, the Federal Reserve reported this week. The decline, at annual rate of 3.7 percent, reflected a sharp drop in the category of borrowing including auto loans and a smaller decline in the category including credit cards.

The tightening of credit will force American families to cut their spending, mindful of their current paychecks instead of borrowing against future ones, said Frank Badillo, senior economist with TNS Retail Forward, a consulting and market research firm in Columbus, Ohio.

"We're going to see some fundamental changes in consumer behavior," he said.

Badillo and others compare the psychology to the way people reacted after gasoline reached $4 a gallon last summer. Prices have eased considerably since then, but consumers seem to have decided that the good old days of very cheap gasoline are over. In response, people have moved to buying smaller, more efficient cars, and trying to reduce the miles they drive. Demand for homes in outlying suburbs has declined.

Like gasoline prices, the availability of credit should improve once the current crisis eases. But consumers are confronting what some see as a long-term change.

After years of living off one income and drawing on credit to fill the gap, Portland, Ore., legal assistant Susie Shepherd and her partner, Kaite Chase, are rethinking their finances. In the past few years, they regularly ran up debt to pay Chase's tuition and repeatedly refinanced their home, pulling out equity to pay bills and drawing on lines of credit to cover expenses.

But Shepherd was caught short this fall when her brother asked for help in paying moving expenses. She tried to draw on a credit card, but found her line of credit had been cut in half. The only way to help, the couple decided, was to sell some household items.

"We'd been living on credit for so many years," Shepherd said.

Borrowing against the future has always been part of the American story.

"How did those religious English people get to this country on the Mayflower? They came on what we would call the installment plan," said Lendol Calder, author of "Financing the American Dream: A Cultural History of Consumer Credit."

But the Great Depression chastened consumers. After World War II, and the explosive growth of the suburbs, consumption rose sharply. But the modern era of easy credit really began with the deregulation of the late 1970s.

In a 1978 Supreme Court decision, banks won the right to charge whatever interest rate their home state allowed and to do so across state lines. States repealed usury laws capping interest rates. Banks began pursuing consumers in ways they hadn't before.

When inflation soared in the early '80s, banks aggressively marketed credit cards to struggling consumers as a good deal. The interest rates were high, but not as high as inflation. In the recession of 1990-91, banks who saw their profits tightening seized on the margins available by lending more to consumers. When Congress eliminated income tax deductions for interest on credit cards, banks pushed home equity loans, encouraging people to take money out of their homes to pay off the credit cards.

As families took on debt, they were encouraged to follow a rule of thumb: It's OK as long as you don't devote more than 25 percent of income to borrowing costs.

Lenders, though, found a way around that. The 20-year home loan was repackaged as a 30-year loan and lenders stretched three-year car payment schedules to seven, masking the extent of the debt load.

Consumers "think they're doing fine by their parents' standards," Manning said. "But boy, have they fallen far behind."

The industry came up with subprime loans in the 1990s, then used them to encourage consumers with checkered credit history to buy homes. When very low interest rates early this decade sent home prices skyrocketing, and Wall Street demanded even more lending to feed a market for mortgage-backed securities, lenders went into overdrive. Consumers could buy with no money down and no documentation of income and were encouraged to borrow against the rising value of their homes.

Before the housing bubbled popped, many consumers were pulling money out of their houses to pay for expenditures — from boats to big-screen TVs — well beyond ordinary living expenses.

Over the years, economists have tried to figure out when, if ever, consumers might finally reach their debt limit. But each time, Americans have proven far more resilient than pessimists imagined, financing their spending by borrowing.

The credit crunch, though, may be the breaking point.

Dolores Holmes took out an interest-only $515,000 loan two years ago to buy a bed and breakfast in Lambertville, N.J., a Delaware River town popular with weekend antique hunters. Once the business took root, she planned to refinance into a fixed-rate loan and cut her cost. But as the economy declined, she had trouble filling rooms.

That increased pressure on her to find a way to cut her mortgage payments. But her accountant and financial adviser say her hopes of getting a more affordable loan are slim without a profit that convinces a lender she's worth the risk.

"I've been cutting back on anything personal," she said. "It's like everything I have has to go back into the business."

In Kansas City, Mo., David and Norine Piet were surprised to get a letter in September from USAA Federal Savings Bank that it was freezing their $40,000 home equity line of credit. The bank told the couple it was doing so because their home's value had plunged from $310,000 to $141,200.

The couple had been poised to refinish their basement to add a bedroom and make it suitable for visitors — a place to have people over and play cards, shoot pool and cook. Now that plan has been shelved.

"It's kind of like we had this $40,000 cushion there, that if anything happened we had an emergency fund," David Piet said. "At least we had a source of funds there, and now that's gone. That has caused us to cut back and try to put more money into savings, and be cautious on what we're spending money on."

The Piets are comfortable enough financially to have retired early. But for consumers of more modest means the new restrictions on credit are cutting into their ability to make what would have been relatively ordinary purchases.

Clark, the steamfitter shopping for a car, returned home to Fairview Heights, Mo., in January after a 12-month tour of duty with the U.S. Army in Afghanistan. He found a new job and expected that a regular paycheck would be enough to secure a loan for the car he needs to commute.

At the dealership last weekend, Clark and his wife, Flora Rivera, settled on a Dodge Stratus with 8,000 miles on the odometer. But the dealership was looking for a $1,000 downpayment and Clark had just $200.

The problem is that Clark, 22, has almost no credit history, a problem compounded by the time he spent serving overseas. A few months ago, multiple banks would have been happy to give such a consumer a loan, salesman Scott Ziegler said. But now only companies offering pricier subprime loans are interested, and that still doesn't solve the problem of the downpayment.

Clark left the dealership without a loan, but decided to put down his $200 as a deposit and try to find another source for the remainder of the downpayment. In recent weeks, such scenarios have become the norm, said the dealership's loan manager, Jarrod Campbell.

"I'm getting a lot more customers who are saying, 'I've been to 10 other car lots,"' Campbell said, "and no one will give me a loan."

© 2008 The Associated Press. All rights reserved.

URL: http://www.msnbc.msn.com/id/27149408/

© 2008 MSNBC.com

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Next Generation Skyscrapers to Exceed One Kilometer in Height

Astounding, at least we get to see where some of our petrodollars are going.  I would like to know how I can have my name listed on the cornerstone or dedication plaque as a primary investor?!



Saudi prince to build tallest building

By Mark Tutton
For CNN

LONDON, England (CNN) -- Saudi Prince and billionaire Al-Waleed bin Talal says he will build the world's tallest building, planned to be over a kilometer (3,281 feet) high. The tower will be built in the Saudi town of Jeddah and will be part of a larger project that will cost $26.7 billion, (100 billion Saudi riyals) said the Prince's firm, Kingdom Holding Company.

The project, entitled Kingdom City, will span 23 million square meters (248 million square feet) and will include luxury homes, hotels and offices.

The booming city of Dubai in the United Arab Emirates has also joined the skyscraper race.

While the ever-growing Burj Dubai is already the tallest man-made structure in the world, the Nakheel Tower is set to go even higher.

Developers suggest the finished building will be at least 1 km tall.

While in Europe, Paris is leading the skyscraper revolution -- plans for a 50-story building have been given the green light, which will make it the first skyscraper to be built in the city for 30 years.

These buildings are part of a new generation of innovative, exciting skyscrapers set to appear all over the world over the next 10 years.

Some truly mind-blowing structures are being planned for the Middle East.

Hot on its heels, the Burj Mubarak Al Kabir, proposed for the planned 'City of Silk' in Kuwait, could also break the 1000-meter barrier.

While they may be mere midgets compared to the mega structures of the Middle East, Russia Tower in Moscow and the Okhta Center Tower in St Petersburg promise to provide some stunning eye candy.

Spiraling its way through the Chicago skyline, the Chicago Spire will have a striking corkscrew design, while a gleaming Freedom Tower is to be the highlight of the rebuilt World Trade Center. And proving the skyscraper renaissance is a global phenomenon there are stylish giants planned for Panama, Pakistan and South Korea.

Anouk Lorie also contributed to this report
 
Find this article at:
http://www.cnn.com/2008/TECH/10/13/future.skyscraper/index.html
 
Copyright 2008 Cable News Network

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States Warned about Mortgage Crisis: Bush administration, financial industry thwarted efforts to curb greed

A long, but nonetheless interesting, read on the current financial crisis.  I find it interesting and instructive that most of the problem is rooted in poor character, greed, low integrity, and the interests of the powerful and rich being placed ahead of the poor and marginalized.  "Let justice roll on like rivers, and righteousness like a mighty stream" (Amos 5:24).


("To' Nizhoni Ani" found on Al_HikesAZ's flickr photostream)

By Robert Berner and Brian Grow
Business Week
updated 11:59 a.m. CT, Sun., Oct. 12, 2008

More than five years ago, in April 2003, the attorneys general of two small states traveled to Washington with a stern warning for the nation's top bank regulator. Sitting in the spacious Office of the Comptroller of the Currency, with its panoramic view of the capital, the AGs from North Carolina and Iowa said lenders were pushing increasingly risky mortgages. Their host, John D. Hawke Jr., expressed skepticism.

Roy Cooper of North Carolina and Tom Miller of Iowa headed a committee of state officials concerned about new forms of "predatory" lending. They urged Hawke to give states more latitude to limit exorbitant interest rates and fine-print fees. "People out there are struggling with oppressive loans," Cooper recalls saying.

Hawke, a veteran banking industry lawyer appointed to head the OCC by President Bill Clinton in 1998, wouldn't budge. He said he would reinforce federal policies that hindered states from reining in lenders. The AGs left the tense hour-long meeting realizing that Washington had become a foe in the nascent fight against reckless real estate finance. The OCC "took 50 sheriffs off the job during the time the mortgage lending industry was becoming the Wild West," Cooper says.

This was but one of many instances of state posses sounding early alarms about the irresponsible lending at the heart of the current financial crisis. Federal officials brushed aside their concerns. The OCC and its sister agency, the Office of Thrift Supervision (OTS), instead sided with lenders. The beneficiaries ranged from now-defunct subprime factories, such as First Franklin Financial, to a savings and loan owned by Lehman Brothers, the collapsed investment bank.

Some states, including North Carolina and Georgia, passed laws aimed at deterring rash loans only to have federal authorities undercut them. In Iowa and other states, mortgage mills arranged to be acquired by nationally regulated banks and in the process fended off more-assertive state supervision. In Ohio the story took a different twist: State lawmakers acting at the behest of lenders squelched an attempt by the Cleveland City Council to slow the subprime frenzy.

A number of factors contributed to the mortgage disaster and credit crunch. Interest rate cuts and unprecedented foreign capital infusions fueled thoughtless lending on Main Street and arrogant gambling on Wall Street. The trading of esoteric derivatives amplified risks it was supposed to mute.

One cause, though, has been largely overlooked: the stifling of prescient state enforcers and legislators who tried to contain the greed and foolishness. They were thwarted in many cases by Washington officials hostile to regulation and a financial industry adept at exploiting this ideology.

The Bush Administration and many banks clung to what is known as "preemption." It is a legal doctrine that can be invoked in court and at the rulemaking table to assert that, when federal and state authority over business conflict, the feds prevail — even if it means little or no regulation.

‘Fundamental disagreement’

"There is no question that preemption was a significant contributor to the subprime meltdown," says Kathleen E. Keest, a former assistant attorney general in Iowa who now works for the Center for Responsible Lending, a nonprofit in Durham, N.C. "It pushed aside state laws and state law enforcement that would have sent the message that there were still standards in place, and it was a big part of the message to the industry that it could regulate itself without rules."

"That's bull----," says Hawke, the former comptroller. He returned to private law practice in late 2004 with the prominent Washington firm Arnold & Porter. Once again representing lenders as clients, he confirms the substance and tone of the April 2003 meeting with the state AGs, saying they "simply had a fundamental disagreement." But he denies that federal preemption played a role in the subprime debacle.

Hawke blames much of the mess on mortgage brokers and originators who, he says, were the responsibility of states. "I can understand why state AGs would try to offload some responsibility here," he adds. "It's important to remember when people are trying to assign blame here that the courts uniformly upheld our position."

His arguments have some merit. The federal judiciary has bolstered preemption in the name of uniform national rules, not just for banks but also for manufacturers of drugs and consumer products. And state oversight alone is no panacea, as the chaotic state-regulated insurance market illustrates. Inadequate supervision of mortgage companies in some states contributed to the subprime explosion. But the hands-off signals sent from Washington only invited complacency. When some state officials fired warning flares, the Administration doused them.

Consider a clash in 2004 between the OCC and regulators in Michigan. In January of that year attorneys working for Hawke filed a brief in federal court in Grand Rapids on behalf of Wachovia, the national bank with $800 billion in assets based in Charlotte, N.C. Michigan wanted to continue to examine a Wachovia-controlled mortgage unit in the state, which the bank had converted to a wholly owned subsidiary. The parent bank sued, claiming Michigan could no longer look at the mortgage lender's books. Citing the threat of unspecified "hostile state interests," the OCC argued in its brief that "states are not at liberty to obstruct, impair, or condition the exercise of national bank powers, including those powers exercised through an operating subsidiary."

Michigan countered that Wachovia Mortgage was not itself a national bank. The Constitution preserves state authority to protect its residents when federal statutes don't explicitly bar such regulation, Michigan contended. Ken Ross, the state's top financial regulator, says his department fought Wachovia all the way to the U.S. Supreme Court in part because it feared a growing subprime mortgage problem: "We knew there needed to be [state] regulation in place or there could be gaps." The OCC, he adds, "did not have robust regulatory provisions over these operating subsidiaries."

The nation's highest court sided with the Bush Administration, ruling in April 2007 that the OCC had exclusive authority over Wachovia Mortgage. Justice Ruth Bader Ginsburg, writing for a five-member majority, pointed to the potential burdens on mortgage lending if there were "duplicative state examination, supervision, and regulation." In a dissenting opinion, Justice John Paul Stevens said that it is "especially troubling that the court so blithely preempts Michigan laws designed to protect consumers."

By the time of the Supreme Court decision last year, Wachovia and its mortgage operations in Michigan and elsewhere were feeling the ill effects of unwise lending. As real estate prices continued to fall this year, pushing many borrowers into default, Wachovia teetered on the edge of failure. In late September the federal government stepped in to arrange a fire sale. On Friday, federal antitrust regulators cleared Wells Fargo's $11.7 billion acquisition of Wachovia, a day after Citigroup Inc. walked away from its own efforts to buy the Charlotte, N.C.-based bank.

Confrontations such as Michigan's battle with Wachovia became far more common after George W. Bush took over the White House in 2001 and instituted a broad deregulatory agenda. The OCC, an arm of the Treasury Dept., has adhered closely to it. The agency oversees more than 1,700 federally chartered banks, controlling two-thirds of all U.S. commercial bank assets. Historically, its examiners have monitored bank capital levels and lending to corporations more attentively than they have the treatment of individual borrowers. "Consumer protection has always been an orphan [among federal bank regulators]," says Adam J. Levitin, a commercial law scholar at Georgetown University Law Center.

The OCC brought 495 enforcement actions against national banks from 2000 through 2006. Thirteen of those actions were consumer-related. Only one involved subprime mortgage lending. OCC spokesman Robert Garsson says the figures could be misinterpreted because the agency addresses many problems informally during bank examinations. He declined to provide any examples.

Beyond the influence of free-market theory, turf concerns have reinforced the Administration's determination to exercise responsibility for as many lenders as possible — and prevent state incursions, notes Arthur E. Wilmarth Jr., a professor at George Washington University Law School. Almost all of the funding for the OCC and OTS comes from fees paid by nationally chartered institutions.

The fight in Georgia

Hawke says the OCC seeks only to exercise powers that it has long held under federal law. It is far more efficient for national banks to deal with one set of federal rules than a hodgepodge of state directives, he argues, echoing the Supreme Court's majority view. By the late 1990s, he adds, more state legislatures and AGs were trying to bully national banks by, for example, restricting ATM fees charged to nondepositors. State officials "found it politically advantageous to assert these kinds of initiatives," he says. The OCC's heightened preemption campaign "was occasioned by the fact the states were becoming more aggressive."

The current head of the OCC, John C. Dugan, concurs. "To claim that it is our fault from preemption is just a total smokescreen to shield the fact that the state mortgage brokers and mortgage companies were just not regulated," Dugan says.

Efforts in Georgia to rein in unwise lending provoked a particularly fierce federal reaction. In 2002 the state passed a law that imposed "assignee liability" on the mortgage-finance process. Understanding the significance of this requires a little background.

One of the forces that accelerated the proliferation of dangerous home loans was the Wall Street business of buying up millions of mortgages, bundling them into bonds, and selling the securities to pension funds and other investors. Securitization, which grew to a $7 trillion industry, meant the lenders could pass along the risk of default to a huge universe of investors. Many of those investors, in turn, relied uncritically on reassurances from fee-collecting investment banks and ratings agencies that mortgage-backed securities were high-quality. When many of the reassurances proved hollow, the securitization market collapsed this year.

Assignee liability would radically reshape that market by making everyone involved potentially responsible when things go bad. Investment banks that created mortgage-backed securities and investors who bought them would be liable for financial damage if mortgages turned out to be fraudulent. The financial industry opposed assignee liability, maintaining that it would cripple the market for asset-backed securities. Major ratings agencies later agreed that allowing unlimited damages would be disruptive. The agencies threatened to stop evaluating many bonds tied to mortgages covered by the Georgia law.

But some banking experts speculate that if Georgia's example had spurred more states to adopt broad assignee liability, greater caution would have prevailed in the mortgage-securities market, possibly preventing the blowups of Lehman, Bear Stearns, and other once-mighty institutions. "If the Georgia law had held, it is possible that other states would have followed and there might have been change earlier," says Ellen Seidman, who headed the OTS from 1997 through 2001.

‘Outgunned’ advocates

Roy Barnes, Georgia's governor in 2002, understood the potential significance of assignee liability when he signed the state's new Fair Lending Act that year. He recalls a breakfast meeting with banking lobbyists during which he admonished the industry to clean up reckless lending. He jokingly threatened to hire "the longest-haired, sandal-wearing bank commissioner you ever saw." But the bankers fought back, seeking to undermine the new law.

The OCC's Hawke assisted the industry by issuing a ruling in July 2003 saying the Georgia law did not apply to national banks or their subsidiaries. A fact sheet prepared at the time — and still available on the OCC's Web site — says: "There is no evidence of predatory lending by national banks or their operating subsidiaries, in Georgia or elsewhere."

The OCC ruling had been requested by Cleveland-based National City Bank on behalf of several of its units, including First Franklin Financial, a subprime lender that operated in Georgia and other states. First Franklin, which was acquired by Merrill Lynch in 2006, has been hit with dozens of suits alleging unfair lending practices. Merrill shut down First Franklin's troubled lending business in March. Itself hobbled by mortgage-securities losses, Merrill agreed last month to be acquired by Bank of America. The bank and Merrill declined to comment.

In August 2004, Hawke went a step further in a letter to the Georgia Banking Dept. He said even state-chartered mortgage brokers and lenders were exempt from the Georgia law — if the loans they handled were funded at closing by a national bank or its subsidiary.

By then support for the Georgia law was already eroding. Barnes, a Democrat, lost his reelection campaign in November 2002, and his Republican successor moved to dilute the lending act. Still, supporters mobilized to defend the legislation. One was William J. Brennan Jr., an Atlanta legal aid attorney who specializes in housing and had testified before the U.S. Congress in 2000 about what he saw as the looming mortgage mess. He told the House Financial Services Committee: "The entry of many prominent national banks into the subprime mortgage-lending business has resulted not in reform, but in the expansion of the abusive practices." Federal regulators, he testified, "have done little to stop" the trend. In early 2003, Brennan and a legal aid colleague, Karen E. Brown, consulted with Georgia legislators trying to block amendments softening the lending law. At a hearing in February, Brennan requested a police escort because he feared that angry mortgage brokers would block his way. "The words that come to mind are 'outgunned' and 'overwhelmed,' " says Brown.

The Georgia legislature sharply curtailed the assignee liability provision in March 2003 and eliminated other elements of the law as well. Subprime lenders such as Ameriquest Mortgage that had halted lending in Georgia in protest of the law resumed marketing high-interest, high-fee mortgages. But by late 2007, Ameriquest had gone out of business after agreeing to a $325 million settlement to resolve suits alleging that it had made fraudulent loans.

Escaping state enforcement

Georgia now has the sixth-highest rate of foreclosure in the country. Consumer advocates and state attorneys general contend the weakening of the state's law was a severe blow to efforts to curb careless lending. "Had the Georgia Fair Lending Act not been watered down, we would be in a very different place right now," says Brown.

In some states, dubious local mortgage firms sold themselves to national banks, gaining protection against state enforcement. The Iowa Division of Banking in 2006 sought to examine a subprime broker called Okoboji Mortgage in the town of Arnolds Park. A borrower had accused the firm (named for an area lake) of duplicitous lending practices. Cheryl Riley, a 52-year-old janitor, told state officials she had not received the 30-year fixed-rate mortgage she thought she had arranged with Okoboji in 2005. Instead of one monthly statement, Riley got two: one for a 9.25 percent adjustable-rate loan and another for a 15-year fixed loan at 12 percent. Both rates were far higher than what Riley and her husband thought they had negotiated. "We were horrified," she says.

A preliminary state investigation found that Okoboji's manager had headed a mortgage firm in Nebraska that lost its license for falsifying loan documents. But Okoboji refused Iowa's demand for an examination, forcing the agency to file suit in August 2006. Okoboji responded by announcing that it had been acquired by Wells Fargo, a nationally chartered bank regulated by the OCC. Okoboji handed in its state license, saying it no longer had to comply with Iowa rules. "We'd had red flags but were now blocked from investigating," says Shauna Shields, an Iowa assistant AG.

Okoboji's former manager, Lyda Neuhaus, calls Nebraska's earlier actions "a witch hunt" based on "12 miserable complaints." Her father, Juan Alonso, who owned Okoboji, says he sold his company because he wanted to retire, not to escape state regulation. Both deny any wrongdoing. A Wells Fargo spokesman declined to comment on Iowa's concern about Okoboji and defended the acquisition as benefiting customers and shareholders.

A playing field with no rules

The experience with Okoboji was the sort of thing that Iowa AG Miller had warned about when he joined his counterpart from North Carolina on their visit to OCC chief Hawke in 2003. "Now, we could not do anything with federally chartered banks or subsidiaries," Miller says. In 2006 and 2007 the Iowa legislature shot down proposals by Miller for more-restrictive lending laws. Lax regulatory standards at the federal level helped undermine his efforts, he explains. State-chartered banks insisted that tougher rules in Iowa would put them at a competitive disadvantage with federally chartered banks overseen by the OCC. "We had to acknowledge the [political] environment we were in," Miller says.

The banking industry repeated the argument for regulatory "parity" in many states that tried and failed to tighten supervision of subprime lenders, says Keest of the Center for Responsible Lending: "State institutions then wanted a level playing field, which was a playing field with no rules."

Hawke says that it would have been inappropriate for the states to impose more-stringent standards on federally chartered institutions: "Had they tried to apply those rules to national banks, they clearly would have been preempted."

In Cleveland in 2002, Frank G. Jackson, then a member of the City Council, could see that many lower-income residents were being persuaded by lenders to pile on high-interest debt. "It was pure greed, based on exploitation," he says. "[Some subprime lending] is just the same as organized crime." He started negotiating with mortgage lenders for more-favorable terms. To his surprise, the lenders bypassed him and persuaded the state legislature to enact a less stringent version of an anti-predatory lending act he was drafting. "I figured the good faith had ended, so I passed my law [at the city level]," Jackson says. That law required lenders to register with the city and provided counseling to prospective borrowers.

His accomplishment was short-lived. That same year, the American Financial Services Assn. (AFSA), a national trade group, sued to block Ohio municipalities from passing lending laws that conflicted with state statutes. The Ohio Supreme Court later sided with the industry. AFSA's goal was to ward off conflicts between federal, state, and local rules, says spokesman Bill Himpler. "Different municipalities moving different anti-predatory lending legislation ... would have brought the credit markets to a screeching halt."

Fulfilling Jackson's fears, the Cleveland area has become one of the places worst hit by the mortgage catastrophe. More than 80,000 homes have gone into foreclosure since 2000, the highest per capita rate in the country.

In January, Jackson, elected the city's mayor in 2005, tried a new tactic. He filed suit in state court against Lehman, Wells Fargo, and 19 other lenders, alleging that they sold "toxic subprime mortgages ... under circumstances that made the resulting spike in foreclosures a foreseeable and inevitable result." The city's attorneys based the suit on an Ohio law banning "public nuisances," which is usually used against defendants such as manufacturers whose factories emit pollution. The idea was to steer clear of conventional banking law and head off any claim of federal preemption. The suit is pending; the banks all deny wrongdoing.

Copyright © 2008 The McGraw-Hill Companies Inc. All rights reserved.

URL: http://www.msnbc.msn.com/id/27121535/

© 2008 MSNBC.com

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Reversing the Politics of Race...

Things that make you go...hummm?!



the following was posted by Mikey on October 08, 2008
Riddle me this, Cindy
TheGoodWord, a column of TheAmericanBoy

I’m not sure who wrote this, but I received it in an e-mail the other day. After John McCain’s seemingly racist disdain and commentary offered to Barack Obama last night and Cindy McCain’s claim today that Barack is running the dirtiest campaign in history, I thought it appropriate to share. While reading the following think hard about how race plays a part in this election.

——————————————————————————

What if John McCain were a former president of the Harvard Law Review?
What if Barack Obama finished fifth from the bottom of his graduating
class?

What if McCain were still married to the first woman he said “I do” to?

What if Obama were the candidate who left his first wife after she no
longer measured up to his standards?

What if Michelle Obama were a wife who not only became addicted to pain
killers, but acquired them illegally through her charitable organization?

What if Cindy McCain graduated from Harvard?

What if Obama were a member of the Keating-5*?

What if McCain were a charismatic, eloquent speaker?

If these questions reflected reality, do you really believe the election
numbers would be as close as they are?

This is what racism does.  It covers up, rationalizes and minimizes
positive qualities in one candidate and emphasizes negative qualities in
another when there is a color difference.

PS: What if Barack Obama had an unwed, pregnant teenage daughter….
*******
You are The Boss… which team would you hire?

With America facing historic debt, 2 wars, stumbling health care, a
weakened dollar, all-time high prison population, mortgage crises,
bank foreclosures, etc.

Educational Background:

Obama:
Columbia University - B.A. Political Science with a Specialization in
International Relations.
  Harvard - Juris Doctor (J.D.) Magna Cum Laude

Biden:
University of Delaware - B.A. in History and B.A. in Political Science.
   Syracuse University College of Law - Juris Doctor (J.D.)

  vs.

McCain:
United States Naval Academy - Class rank: 894 of 899

Palin:
   Hawaii Pacific University - 1 semester
   North Idaho College - 2 semesters - general study
   University of Idaho - 2 semesters - journalism
   Matanuska-Susitna College - 1 semester
   University of Idaho - 3 semesters - B.A. in Journalism

——————————————————-

Kinda makes you take a step back and think about things doesn’t it? If you’re leaning McCain, think for a second about why you’re even considering McCain and make sure it’s not because Obama is black.

© 2008 TheAmericanBoy. All Rights Reserved.

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Financial Crisis: Rooted at the Board of Director Level of Leadership

The financial crisis that we are facing as a nation (and perhaps an entire world) is ultimately rooted in a crisis of leadership.  At a national level, our leaders are acting in selfish and self-serving ways that create and perpetuate debt and ignore the general welfare of our nation.  At a corporate level, boards of directors are ignoring sloppy executive management or outright fraud in order to protect their places of oligarchical power and wealth, as well as ignore the welfare of shareholders and the interests of all citizens.  Pat Lencioni, of The Table Group, offers some provocative words that, in part, challenge all of us to be(come) people of courage and clarity.  Thanks for speaking truth to power, Pat!



Pat's POV: September 2008
 
The Financial Crisis

In the midst of the financial crisis going on in America these days, there is a natural tendency to search for a villain we can blame and move on with a sense of tidiness and moral certitude. Unfortunately, I don’t think there is such a villain.

Sure, there’s more than likely a good number of people who made serious mistakes out of carelessness or greed, and they will need to be held accountable for that. But the real culprit here, in my opinion, has nothing to do with economics or regulations or finance. It is about the desire of leaders to avoid interpersonal discomfort.

I realize that this doesn’t sound very sexy, and certainly isn’t going to make for a compelling television movie-of-the-week. It would be better if there were a group of sinister old men out there who sit around in three piece suits smoking stogies and laughing about how rich and powerful they are going to get stealing people’s homes and investments. That would actually be easier because then we could track those guys down, throw them in jail, and achieve a measure of closure. But based on my experience consulting to CEOs and their teams over the past decade, I can say with a high degree of confidence that this just isn’t the case.

The biggest cause of this and other crises is that most leaders operate under the assumption that they should never have to engage in discussions that are awkward, confrontational or career-limiting. As a result, they rarely have the kind of uncomfortable discussions that prevent people from doing stupid and harmful things. Instead, they are polite and guarded and collegial with one another, even when what is called for is passionate disagreement or even outrage.

This is a surprise to people who don’t have a view into corporate America. They are usually shocked when I tell them that I rarely see people passionately argue with one another or take a strong, moral stand. What they don’t realize is that the real world is nothing like what we see in movies where executives routinely pound their fists on the table and announce, “this is just plain wrong and I won’t stand for it!”

Consider the current situation at various banks, some of which no longer exist. Plenty of intelligent and well-intentioned board members and executives must have known that something was wrong with granting a CEO a $20 million bonus in the event that he were fired. And even the least sophisticated executive had to have seen the potential problem with approving home loans to people who would not be able to afford them if and when interest rates changed. So why didn’t they do something?

Because they looked around and saw other intelligent and well-intentioned people who weren’t standing up on their chairs and objecting. And they figured that perhaps what was going on wasn’t so bad after all, especially if so many other executives and banks and boards of directors were doing it. “Who am I to rain on this parade?”

To be fair, some of them probably made a quiet comment during a meeting, or more likely, mentioned something to another board member over lunch. But they weren’t laying down on the railroad tracks and risking their compensation or their friendships or their reputation if no one else would. Of course, plenty of them will come out now and say they saw the problem all along, and they might even be able to convince enough people that they should be considered whistle blowers.

The fact is, too few people in life have the courage and clarity of thinking to stand up at the right time and say what needs to be said. And that’s what makes real leaders different. They are ready and willing to do what is unseemly, uncomfortable, and even personally risky for the sake of what is right.

And so the lesson that comes from all of his, or at least one of the most important ones, has nothing to do with legislation or economic policy or oversight. It is a personal lesson that each of us can learn by honestly and humbly asking ourselves what we would have done had we been a board member or an executive at one of those companies that did something that seems so clearly wrong in hindsight. By considering that question, we will probably shift our emotional energy away from trying to find a legislative, economic or legal explanation for the mess we’re in, and shine the light on the behavioral one that really deserves the attention. And perhaps that will help us avoid the next crisis.

Copyright © 2008 The Table Group Inc.

 

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Butterfly (song and lyrics)

I was on youtube.com when I clicked on this.  Now it is one of my favorite songs.  ENJOY!

Dr. Ron Paul Diagnoses Our Economic Illness: Buying bad debt is the wrong solution

If it is impossible to dig ourselves out of a hole...then how can we expect to borrow our way out of debt?!  Ron Paul is not crazy...he is a patriot and a prophet who believes that the Constitution means what it says.  Listen as he speaks truth to power!



(CNN) -- Two days after the House rejected the $700 billion bailout bill, the Senate is set to vote on the rescue plan for financial institutions.

The vote is scheduled for after sundown Wednesday.

Republican presidential nominee Sen. John McCain, Democratic nominee Sen. Barack Obama, and Obama's running mate, Sen. Joe Biden, all said they would be present for the vote.

Speaking to CNN's John Roberts on Wednesday, House Financial Services Committee member and former Republican presidential candidate Rep. Ron Paul discussed why he thinks the bailout bill is the wrong solution to the economic problem and what he would do to secure financial security.

John Roberts: Congressman, great to see you. I was browsing around on your Web site, Campaign for Liberty. And right there on the very front page, you are appealing to your supporters -- and there are tens of thousands of them -- to get in touch with key senators to tell them to vote this bill down when it comes to a vote in the Senate at sundown tonight.

Why do you want them to vote it down?

Rep. Ron Paul: I think it's a bad bill. I think it's bad for the taxpayers. I think it's doing more of the same thing. The same policy that we're following now with this bill is exactly how we got into that trouble. VideoWatch Ron Paul explain why he opposes the bailout »

And you know, I really don't have that much clout in Washington, D.C. And I recognize it. But there are a couple people outside of Washington that care about what I'm thinking and care about free market ... economics. And they will respond. And I think we did help generate a little bit of mail to the House members.

So you go where you can have the influence. And I think that people -- the grassroots -- understand this a lot better than members of Congress give them credit for.

Roberts: So, instead of the bills that are currently before the Senate, the one that may be before the House as early as Thursday, what would you do?

Paul: Well, we need to do a lot, but a lot differently. We have to recognize how we got into this problem. We have too much debt. We have too much malinvestment.

Roberts:OK, OK. So we recognize all of the things that got us here. But, right now, today, what would you do, if not this bill?

Paul: You have to liquidate those mistakes. Those mistakes were made due to monetary policy. So you have to allow the market to adjust prices downward. And that's what we're not allowing to do.

If there are too many houses and the prices are too high, the sooner we get the prices down to the market level, as soon as we quit trying to encourage more housing -- this is what we're doing. They're trying to stimulate houses and keep prices high. It's exactly opposite of what we should do.

So, we should get out of the way and not buy up bad debt. There's illiquid assets, but most of those are probably worthless. They're mostly derivatives. And we're sticking those with the taxpayer. So we have to recognize that the liquidation of debt is crucial. And if we did that, we would have tough times, there's no doubt about it, for a year. But if we keep propping a system up that's not viable, we're going to have a problem for decades, just like we did in the Depression. That's what we're on the verge of doing.

Roberts: Congressman Paul, what do you think of this idea that's being floated -- this process called mark to market, which would, they would modify the rules so that the, right now, paper that a lot of these institutions are holding, which is worth nothing, they would actually be able to assign some sort of value to it.

Some people are saying that that would just hide the problem. Other people are wondering if maybe that might create some sort of voodoo accounting that would allow widespread abuse in the system.

What do you think?

Paul: It demonstrates the problem. You know, when they prevented them from marking them down, this was an SEC [Securities and Exchange Commission] regulation. Shows how regulations backfire.

If you had a market economy and then if you had a market-adjusted FDIC, where insurance was based on the strength of the bank, this would have happened on a daily basis. But instead, we insure everybody, no matter what the bank is doing, and we do it, either we overkill -- we give you too much credit on bad investments -- and then we make changes all of a sudden, and they're drastic, to what they have done.

So, it's impossible. It's either too little or too much. And what you need is insurance of, FDIC type of insurance, has to be driven by the marketplace to measure the viability of a bank.

Roberts: So what do you think?

Paul: This adds to all the moral hazard that we have in the system.

Roberts: So what do you then think of this idea of raising the limit on [FDIC] insurance to $250,000, from its current cap of $100,000?

Paul: Well, on the short run it will calm the markets. People will feel better. I might even personally feel better for a week or two.

But I know that long term, it's the wrong thing to do. I opposed this in the early '80s when they went from 30 [thousand dollars] to 100 [thousand dollars], saying it would lead to more problems like this with malinvestment. It would cover over the mistakes. And the same thing will happen.

But if we raise it to 250 [thousand dollars], people are going to feel better, then it will keep the bubble going for a little while longer and putting more pressure on the dollar. If the dollar lasts longer, then finally the world will give up on the dollar -- and then we will have a big problem that nobody has even really begun to think about.

Roberts: A lot of people might hope that you're wrong with your projection.

Paul: I do too. I hope I'm wrong.

Roberts: You tend to be right on these things on occasion, though. Dr. Paul, it's good to talk to you. Appreciate it.

Paul: Thank you.

Find this article at:
http://www.cnn.com/2008/POLITICS/10/01/paul.qanda/index.html
 
Copyright 2008 Cable News Network

Saving the wealthy with socialism, conservative-style

Bush economic policy...another success story for supply-side, trickle-down economics!



September 23, 2008

by Thomas F. Schaller
baltimoresun.com

Like it or not, we're all socialists now. You can thank those free-market conservatives and their deregulatory idol, George W. Bush, for that.

Conservatives love to wield the word socialism like some all-purpose, liberal-slaying sword. Redistribution to the poor, the right to unionize and affirmative action are decried as anti-market, unfair advantages for filthy socialists who can't compete and fail to appreciate the almighty, equalizing power of self-determination and an unfettered market.

To social conservatives, Darwinism is merely an unproven "theory" about how our species evolved. But "social Darwinism" is an ineluctable fact: The smart and hardworking prosper, while the stupid and lazy fail.

Yet notice how those same chest-thumping capitalists of talk radio and at the corporate-funded think tanks often fall silent in the face of fixed markets, no-bid contracts, bailouts and subsidies for the very corporations that demand less government oversight when things are going well, then turn to Washington when things go horribly wrong.

The hypocrisies abound.

If unionized teachers were given 15 percent annual raises, regardless of performance, that would be socialist. But when easily repaired military equipment in Iraq is discarded so no-bid defense contractors can charge the automatic 15 percent overhead for replacements (watch Iraq for Sale, a documentary exposing Defense Department contracting), that's the cost of doing business during wartime.

If Congress proposes legislation to extend leniency to Americans who, because of unexpected medical expenses or a job recently shipped overseas, go bankrupt, Republicans fret about governmental dependency. But when Chrysler, insurance giant AIG or the airlines after 9/11 take Beltway bailouts, executives such as Lee A. Iacocca are still esteemed as corporate masters of the universe.

If affirmative action provides a minority or female applicant the inside track for a job or college admission, conservatives lecture us about the power of competition. But when the pharmaceutical companies and the Bush administration collude in passing a Medicare Part D prescription drug bill that expressly prohibits the government from using its competitive buying power to negotiate the best price for those taxpayer-funded drugs, Fox News cues the video for the latest Paris Hilton scandal.

Propose a national health care program to cover everyone, or invest a mere $7 billion per year over five years to expand the children's health insurance program? Sounds like "each according to need" Marxism. But spend several times that amount to bail out AIG, the nation's largest insurance company? That's, um, market stabilization.

While we're debunking myths, now is a good time to revisit those free-market, tax-cutting promises that economic conservatives have been feeding us for years.

The Dow Jones Industrial Average recently dropped to the level it was back in summer 2001, when Mr. Bush signed the first of his four income-tax cuts. That means that if you put $5,000 into blue chip stocks seven years ago, and rolled another $5,000 into sweat socks and hid them under your mattress, your socks and your stocks would have about the same value today.

And you may have to break those socks out now, because the government's proposed $700 billion bailout of the mortgage and finance industries will translate into $4,000 from the pocket of every employed American. (Plus interest, since the money is all borrowed, and Mr. Bush will soon retire as the fifth straight Republican president to leave office without submitting a single balanced budget.)

Meanwhile, rising unemployment means those who are working will continue to shoulder a larger share of our mounting national debt.

The U.S. economy must generate about 150,000 net new jobs each month just to employ Americans entering the work force from high school, college or the military; in a seven-year period, that requires 12.6 million new jobs just to keep pace. The Bush administration's job creation record these past seven years: 4.7 million.

Those of us who work hard and pay our taxes are getting screwed. Our Christmas bonus this year? The privilege of covering the tab for greedy executives in the deregulated insurance and mortgage industries who scoff at safety nets for you but demand a safety trapeze for themselves.

As I said, we're all socialists now. Too bad all that filthy, pinko socialist redistribution is moving up, rather than down, the economic food chain.

Thomas F. Schaller teaches political science at UMBC. His column appears regularly in The Sun. His e-mail is schaller67@gmail.com.

Article Link: http://www.baltimoresun.com/news/opinion/oped/bal-op.schaller23sep23,0,7915225.column

Copyright © 2008, The Baltimore Sun

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Becoming a "True Conservative"

He has said some pretty rough stuff at times, but Pat Buchanan is consistently conservative. Therefore, when he offers criticism of the Republican machine (along with the Democratic machine), it is worth noticing. If Buchanan's definition of a "true conservative" is accurate, then call me a friend of Pat Buchanan. Now, if we could just get the Republican Party or Democratic Party to be truly conservative too?! "A true conservative cherishes prudence and believes in fiscal responsibility, balanced budgets and a self-reliant republic. He believes in saving for retirement and a rainy day, in deferred gratification, in not buying on credit what you cannot afford, in living within your means."

One final thought...there is usually more baggage in being a "true conservative" than Mr. Buchanan's simple definition...which requires a "true conservative" to be able and willing to consistently speak truth to power on behalf of those whom Jesus was interested and focused.



The Party's Over
Fri Sep 19, 3:00 AM ET

The Crash of 2008, which is now wiping out trillions of dollars of our people's wealth, is, like the Crash of 1929, likely to mark the end of one era and the onset of another.

The new era will see a more sober and much diminished America. The "Omnipower" and "Indispensable Nation" we heard about in all the hubris and braggadocio following our Cold War victory is history.

Seizing on the crisis, the left says we are witnessing the failure of market economics, a failure of conservatism.

This is nonsense. What we are witnessing is the collapse of Gordon Gecko ("Greed Is Good!") capitalism. What we are witnessing is what happens to a prodigal nation that ignores history, and forgets and abandons the philosophy and principles that made it great.

A true conservative cherishes prudence and believes in fiscal responsibility, balanced budgets and a self-reliant republic. He believes in saving for retirement and a rainy day, in deferred gratification, in not buying on credit what you cannot afford, in living within your means.

Is that really what got Wall Street and us into this mess — that we followed too religiously the gospel of Robert Taft and Russell Kirk?

"Government must save us!" cries the left, as ever. Yet, who got us into this mess if not the government — the Fed with its easy money, Bush with his profligate spending, and Congress and the SEC by liberating Wall Street and failing to step in and stop the drunken orgy?

For years, we Americans have spent more than we earned. We save nothing. Credit card debt, consumer debt, auto debt, mortgage debt, corporate debt — all are at record levels. And with pensions and savings being wiped out, much of that debt will never be repaid.

Our standard of living is inevitably going to fall. For foreigners will not forever buy our bonds or lend us more money if they rightly fear that they will be paid back, if at all, in cheaper dollars.

We are going to have to learn to live again without our means.

The party's over

Up through World War II, we followed the Hamiltonian idea that America must remain economically independent of the world in order to remain politically independent.

But this generation decided that was yesterday's bromide and we must march bravely forward into a Global Economy, where we all depend on one another. American companies morphed into "global companies" and moved plants and factories to Mexico, Asia, China and India, and we began buying more cheaply from abroad what we used to make at home: shoes, clothes, bikes, cars, radios, TVs, planes, computers.

As the trade deficits began inexorably to rise to 6 percent of GDP, we began vast borrowing from abroad to continue buying from abroad.

At home, propelled by tax cuts, war in Iraq and an explosion in social spending, surpluses vanished and deficits reappeared and began to rise. The dollar began to sink, and gold began to soar.

Yet, still, the promises of the politicians come. Barack Obama will give us national health insurance and tax cuts for all but that 2 percent of the nation that already carries 50 percent of the federal income tax load.

John McCain is going to cut taxes, expand the military, move NATO into Georgia and Ukraine, confront Russia and force Iran to stop enriching uranium or "bomb, bomb, bomb," with Joe Lieberman as wartime consigliere.

Who are we kidding?

What we are witnessing today is how empires end.

The Last Superpower is unable to defend its borders, protect its currency, win its wars or balance its budget. Medicare and Social Security are headed for the cliff with unfunded liabilities in the tens of trillions of dollars.

What we are witnessing today is nothing less than a Katrina-like failure of government, of our political class, and of democracy itself, casting a cloud over the viability and longevity of the system.

Notice who is managing the crisis. Not our elected leaders. Nancy Pelosi says she had nothing to do with it. Congress is paralyzed and heading home. President Bush is nowhere to be seen.

Hank Paulson of Goldman Sachs and Ben Bernanke of the Fed chose to bail out Bear Sterns but let Lehman go under. They decided to nationalize Fannie and Freddie at a cost to taxpayers of hundreds of billions, putting the U.S. government behind $5 trillion in mortgages. They decided to buy AIG with $85 billion rather than see the insurance giant sink beneath the waves.

An unelected financial elite is now entrusted with the assignment of getting us out of a disaster into which an unelected financial elite plunged the nation. We are just spectators.

What the Greatest Generation handed down to us — the richest, most powerful, most self-sufficient republic in history, with the highest standard of living any nation had ever achieved — the baby boomers, oblivious and self-indulgent to the end, have frittered away.

To find out more about Patrick Buchanan, and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at www.creators.com.

COPYRIGHT 2008 CREATORS SYNDICATE INC.

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What brought down Wall Street?

I confess that I am no expert in the arena of investments and macro economics; but, it seems to me that this can all be boiled down to character and integrity, or the lack there of.  The subtitle of this Business Week article is, "Financial crisis arose from bad choices, greed, failure to learn from mistakes."  It is not about bears and bulls...it is more about which end that you get!



By Paul Barrett
Business Week
updated 5:06 p.m. CT, Fri., Sept. 19, 2008

In times of high stress, many in the financial world seek solace in watery metaphors. We hear of vast irresistible forces converging in "perfect storms" and unforeseeable events contributing to "100-year floods."

How could we have expected, let alone prevented, this?

Count on Warren E. Buffett to cut to the truth. Years ago, referring to reckless corporate debt, Buffett noted (or so the story goes): "You never know who is swimming naked until the tide goes out."

The tide's moving, and we're starting to get the full, not-so-pretty view. Along with the bare swimmers emerging from the soggy murk, we're being reminded of some of the dumb ideas and reckless choices that helped deliver us to our current debacle. As stunning as the scene seems, we've actually had plenty of experience with this sort of thing. But like some stubborn residents of hurricane zones, we swiftly choose to forget the last tempest and reassure ourselves that things will be different from now on. Why don't we learn the obvious lesson to the contrary? Answers: the timeless power of hubris during periods when profits seem easy, and a set of foolish financial notions that have become prevalent over the past three decades.

One of those beliefs is the indiscriminate anti-regulatory ideology one hears preached on Wall Street with tent-revival fervor. What makes this thinking so perplexing is that many of the free-market true believers also assume the federal government will save them if they flop. Consider the extraordinary taxpayer-backed rescues of insurance titan American International Group, housing financiers Fannie Mae and Freddie Mac, and, before those, the Treasury-guided merger of Bear Stearns into JPMorgan Chase. It brings to mind the homeowner who rants about getting Washington off his back but wants federally guaranteed flood insurance no matter how close to the Gulf Coast he builds his house.

Other by-now-familiar attitudes have helped put us in the drink: In good times, there's no such thing as too much leverage. (Remember Michael Milken?) Derivatives don't require oversight, even though almost no one understands them. (How now, Long-Term Capital Management?) And, don't worry, the quantitative geniuses have devised models to eliminate extreme risk. (Enron, anyone?)

"Now, again, the banks and the Bush administration and [Treasury Secretary Henry] Paulson and [Federal Reserve Chairman Ben] Bernanke would like you to think these crises are like floods or hurricanes," says Michael Greenberger, a senior official at the Commodity Futures Trading Commission during the Clinton administration. An advocate of more aggressive regulation of investment banks, he was shot down in the late 1990s by Democratic colleagues, not just GOP foes.

Most financial calamities aren't like natural forces beyond control, Greenberger says. "These are predictable events." Predictable events, of course, are more likely to be prevented with sound rules and stiff enforcement.

The long view
Alfred E. Kahn offers the long view — a very long view. As the Carter administration's aviation czar, he unshackled airline routes and fares in the late 1970s, reshaping that industry (for better and worse) and helping spur a lengthy era of economic deregulation. Still sharp at 91, the retired Cornell University economist and part-time consultant recalls that almost as soon as the free-market spirits were set loose, a furious stampede ensued.

Lenders, for one, demanded lots more freedom. But they "were a different kind of animal" from airlines and trucking firms, which the Carterites also deregulated, Kahn says. "They were animals that had a direct effect on the macroeconomy. That is very different from the regulation of industries that provided goods and services. ... I never supported any type of deregulation of banking."

During the Reagan years, Kahn's cautious industry-by-industry analysis was replaced by the all-encompassing anti-regulatory ideology of the University of Chicago. One result: the liberation of an armada of savings and loan pirates, abetted by congressional Democrats as well as Republicans, many of them drunk on S&L campaign largesse. (Wall Street lobbyists with open wallets have since perfected the practice of neutralizing Congress on a bipartisan basis.) Hundreds of thrifts ultimately collapsed in the late 1980s and 1990s amid greedy and, in some cases, fraudulent real estate deals.

As early as 2000, William J. Brennan, a prominent consumer attorney who has represented mortgage borrowers since the S&L catastrophe, warned in testimony before the House Financial Services Committee that real estate finance would return in new guises to haunt us. Few listened. Behind every burst of ill-advised lending lurk financial innovators creating new mechanisms to entice ever-more-sketchy borrowers, says Brennan, the director of Atlanta Legal Aid Society's Home Defense Program.

In the 1980s, Michael Milken and his comrades at the now-defunct Drexel Burnham Lambert investment bank exacerbated the S&L fiasco by hawking their thrift clients' high-risk junk bonds. More recently the likes of soon-to-be-defunct Lehman Brothers and Bear Stearns engineered the securitization of mortgages, encouraging home lenders to spew wildly unwise loans. "Lending without regard [for] the ability to pay back started with the S&L scandal," says Brennan. In the 1980s the borrowers were reckless shopping-mall developers; in the recent boom, unsophisticated and sometimes cavalier homeowners.

Wall Street transformed dicey subprime mortgages into the toxic securities that have required hundreds of billions in writedowns and that drove once-mighty Merrill Lynch to sell itself to Bank of America. One of the most striking aspects of the current turbulence is the degree to which banks invested in the noxious fare themselves, notes Emanuel Derman, who heads risk management at Prisma Capital Partners, a hedge fund in Jersey City, N.J. "These guys ate their own cooking; they didn't just pass it on to clients."

The outsize appetite on Wall Street for hazardous mortgage-backed securities and even more obscure derivatives has had a lot to do with the people in the kitchen failing to understand fully what was in their recipes. All of this is painfully familiar to anyone who paid attention to past adventures with wizards who claimed their esoteric models had magically eliminated risk and uncertainty. Hedge fund Long-Term Capital Management couldn't imagine Russia defaulting on its debt, much as Lehman apparently couldn't conceive of housing prices across the country deteriorating simultaneously, followed by a paralyzing credit crunch.

For four years in the mid-1990s, LTCM boasted extraordinary profits based on supposedly flawless computer formulas devised by a team that included two Nobel laureates. But in the summer of 1998, Russian credit disintegrated, one of several concurrent global shocks that the LTCM crew had failed to factor into their algorithms. After losing more than $4 billion in a few months — in retrospect, the amount seems almost quaint — the hedge fund received a federally organized rescue, although it later shut down altogether.

Financial "rocket scientists," says Henry T. Hu, a corporate law professor at the University of Texas in Austin, have a knack for neglecting low-probability, catastrophic events. The smartest guys in the room at Enron similarly assumed away risks they didn't want to confront. "These models … work in normal circumstances but not during times of market stress, when it really matters," Hu says. "It is almost like a safety belt that only fails in a serious car crash."

One of the things that dismayed outsiders about LTCM after it came apart was the size and complexity of its derivatives portfolio. Some in the Clinton administration pushed for more oversight of the unregulated, privately traded instruments whose value derives from price shifts in currencies, securities, or other assets. Then-Fed Chairman Alan Greenspan, allied with Robert E. Rubin, Clinton's Treasury secretary (and now a director and senior counselor at Citigroup), opposed tougher policing of derivatives. Banks could watch over each other more effectively than regulators could, Greenspan argued. This turned out to be shortsighted.

In an interview, Greenspan doesn't back down, even after all we've seen lately. "The majority of lawyers, in my experience, seek to regulate — that is, to contain certain activities with little weight given to the lost benefits of such activities," he says. "The question is: What do you lose? In this case, a very valuable instrument [credit default swaps, the derivatives at the core of the current mess] for the diminution of systemic risk. You can stop the system dead and eliminate speculative losses. But you will also get significantly reduced economic activity and ultimately lower standards of living."

Greenspan adds: "I've been extraordinarily distressed by how badly the most sophisticated people in the business handled risk management. But the question is: If, protecting their own resources, they can't do it, who's going to do it better?" (Well, maybe regulators who don't have big bonuses at stake would be less likely to get carried away by the euphoria.)

‘Too big to fail’
Rubin says separately that he didn't oppose the general idea of scrutinizing derivatives, but instead argued against particular proposals in the late '90s to expand CFTC authority. "I have always been concerned about derivatives," he says.

Michael Greenberger served as the CFTC's director of trading and markets at the time. A proponent of tougher oversight, he recalls the Greenspan-Rubin resistance as being fierce and across-the-board. "If we had prevailed, the [subprime-securitization] party would never have gotten started; the wildness wouldn't have happened," he says. "There would have been auditing requirements, capital requirements, transparency. No more operating in the shadows. Bear Stearns, Lehman, Enron, and AIG would be thriving, and spending every waking hour complaining about regulatory restraints imposed upon them."

Now a law professor at the University of Maryland, Greenberger adds: "In a booming economy, people couldn't be convinced that without corrections, LTCM would happen again — bigger and with more ramifications." Today, Bear, Lehman, and AIG have untold amounts of outlandish derivatives on their books. It could be years before anyone untangles what they're worth.

One other legacy of LTCM is "moral hazard": the prospect that other financial actors would take greater risks because at some level they'd assume that they, too, would be considered "too big to fail." Surely one can surmise that Fannie Mae and Freddie Mac overstepped in part because of an implied federal safety net that turned out to be a very real one.

Edward S. Lampert, the hedge fund tycoon who controls Sears Holdings, worries about yet another twist. He says the current wave of federal intervention sends the opposite signal from what's intended: that officials are panicking because of broader instability. "As an investor, that was my immediate reaction" to the Fannie and Freddie moves, he says. "They completely destroyed confidence in any financial institution."

Lampert frets that with investment banks failing and merging, the resulting consolidation will concentrate risk and invite more rescues. "You are going to have Citi, JPMorgan, and Bank of America with $2 trillion-plus in assets each," he notes. "That's three times the size of Fannie and Freddie. Now if they end up with problems, what do you think is going to happen? They are too big to fail."

Copyright © 2008 The McGraw-Hill Companies Inc. All rights reserved.

URL: http://www.msnbc.msn.com/id/26793500/

© 2008 MSNBC.com

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It's Sarah's Way, or It's the Highway

Woah...I really wonder if we will ever know the "real" Governor Palin?!



By Barbara Koeppel

September 17, 2008


The idea that Alaska Governor Sarah Palin is experienced, ethical and
wise would be laughable if it weren't so alarming, and millions have
fallen for the fable. In truth, the pretty woman's story is not so
pretty.

While a majority of Alaskans are thrilled their local beauty queen is center stage, some are horrified.

Her populist persona--the "just plain hockey mom"--is preposterous, her notion of decency defective, her ambition unbridled, her compassion counterfeit, her actions extreme, her intelligence limited and her judgment flawed.

Fearing retribution, only one of the more than twenty elected state and city officials, lawyers, doctors, health administrators, librarians, clergy and just plain residents I interviewed while in Alaska and over the phone agreed to be named.

"It's Sarah's way or the highway," claim many who've worked with her. As one state representative confided to me, "the public doesn't know the real Sarah Palin."

After elected mayor of Wasilla in 1996, one of Palin's first victims was Irl Stambaugh, the longtime police chief who opposed her NRA-backed plan to allow concealed guns. Then, too, he wanted to close the bars at 2 am, instead of 5 am, due to the high number of alcohol-related road accidents. But as the bar owners and NRA were among her base, Palin axed him. She then installed her own chief, who, besides following her line on bars and guns, slapped a charge of $300 to $1,200 on rape victims for medical tests for injuries and sexually transmitted diseases--fees previously covered by the city. Since medical staff at the same time also offered morning-after pills to rape victims, this was anathema to Palin's anti-abortion agenda. Outraged, then-Democratic Governor Tony Knowles pushed through a bill banning her tactics, and the tests were once again free.

Other victims are now well known, like Mary Ellen Baker, the librarian who wouldn't ban the books that offended Palin. Originally fired along with other city department heads who backed Palin's mayoral opponent, Baker (also president of Alaska's Library Association), was reinstated because several hundred residents protested the sacking. But, according to a librarian who knows Baker, Palin met with her several times, pressuring her to remove books from the shelves--among which was Pastor, I Am Gay by Howard Bess, an American Baptist minister in Wasilla. Baker finally resigned in 1999 and moved away. The librarian friend says Baker is keeping silent: "Why wouldn't she? The period was so painful that after she left her job, she had a breakdown."

Then there's Dr. Susan Lamagie, an obstetrician who practices in Wasilla and delivered Palin's first two children. She also performed abortions at what was then called Valley Hospital. While Palin was on Wasilla's City Council, members of her church, the Wasilla Assembly of God, and its minister, picketed Lamagie's office. Because the doctor held her ground, the group ousted the hospital board and installed a new one, whose first act was to ban abortions. Lamagie and Howard Bess organized a group that sued the hospital in a case that went to Alaska's Supreme Court, which ruled the hospital had to allow abortions, as before.

Palin's claims that she's a cost-cutter and corruption cop are equally crazy, since she hiked the state budget by 20 percent in the less than two years since becoming governor.

But it's not all smoke and mirrors: Palin did slash some funds. She vetoed $150,000 for the Fairbanks Catholic Community Counseling and Adoption Services, $3.5 million to build a daycare facility and student housing for unemployed Alaska Natives, $500,000 for the Safe Harbor Muldoon Housing for Homeless Families and People with Disabilities, and eliminated funds for the Fairbanks Community Food Bank.

And in a state with one of the highest drug and alcohol rates in the United States, she killed funds for a substance abuse facility and an education and prevention program for youths in a northwest Alaska village, as well as for addiction rehabilitation services.

Then there's her record on health, another alleged Palin priority. State Senator Bill Wielechowski says, "We sponsored a bill to improve children's health care, since we're forty-seventh in the US in terms of the services we offer. Had Palin supported it, the Republican-controlled House would have approved it. But she refused and the bill died."

Flip-flops are another Palin specialty, though you'll hear zip from GOP fans who dissed candidate John Kerry for similar misdemeanors in 2004. There's the now well-known story of the "bridge to nowhere" (from the city of Ketchikan to the island of Gravina), that she promised Ketchikans she would back when she ran for governor in 2005. In the same year, Congress earmarked hundreds of millions for two Alaskan bridges to nowhere, but reversed itself in 2006, when the deals became a national poster for pork. However, the cash still landed in Alaska, and Palin, now wearing the maverick's mantle, says she abhors earmarks and has shunned the money. In fact, she kept the roughly $230 million and, according to officials, used it for other transport projects. Only about $50 million remains unspent.

What also remains of the affair is a 3.2-mile, $25 million access road to nowhere (which would have connected to the bridge), on which construction continues.

Critics also point to her unfettered drive. Until she was mayor, Wasilla and the nearby town of Palmer successfully shared a regional dispatch center located in Palmer for state troopers and emergency services in the region. Unknown to Palmer officials, she lobbied Washington for funds to build a second center in Wasilla. The Palmer "partners" learned of the move only when she announced it in the press. "It was completely redundant, said one Palmer official, "just a notch in Palin's belt."

Then there's her environmental myopia. A Palmer borough assemblyman told me Palin courted development in any form, with no city planning or zoning, mainly by removing business property taxes. Thus, big box stores flocked to Wasilla and Park Highway, which runs through the town (population 4,600 when Palin became mayor), is one long strip mall; through the sales tax the stores collected, Wasilla pocketed the huge revenues Palin lusted after. Although Wasilla's city council introduced the tax before she was mayor, she raised it--and it applies to most everything except medicine.

The new growth spells problems. The city's sanitation capacity is stretched since the sewage system, faulty even when built, is overwhelmed, says a former Palmer city official. Effluent is piped to the sewage plant from which it is pumped into a large field, and many residents worry the liquid is leaching into the groundwater. Thus candidate Palin's promise of a waste treatment plant evaporated in favor of a sports complex. "Sewage treatment plants aren't sexy, but hockey rinks are," said the Palmer official.

Link to Article: http://www.thenation.com/doc/20080929/koeppel

Copyright © 2008 The Nation

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Palin comes under fire for using Yahoo e-mail for state biz

This does not really reflect a government of the people, by the people, and for the people.  Seriously, why would good Republicans support this type of obfuscation and subterfuge within their ranks?  I really thought they were better than this?!



By Julian Sanchez | Published: September 16, 2008 - 10:35PM CT

John McCain has caught his share of flak for not knowing his way around e-mail. But as his running mate has been discovering over the past week, being a bit too clever with e-mail has its pitfalls as well. As Sarah Palin seeks to beat back charges that she improperly used her position as governor to urge the firing of her estranged brother-in-law, an Alaska state trooper, internal documents suggest that her staff may have hoped to channel sensitive correspondence through unofficial personal e-mail accounts to evade potential subpoenas.

"Troopergate," as the iron laws of American political scandal nomenclature dictated the fracas would be dubbed, began as a dispute worthy of Judge Judy: Palin's sister was embroiled in a nasty divorce and custody dispute with State Trooper Mike Wooten, and the newly elected governor made no secret of her displeasure that the ex-in-law was not yet an ex-lawman. The family tiff blossomed into a full-blown ethics investigation after Palin dismissed public safety commissioner Walt Monegan, who has claimed his refusal to fire Wooten led to his own termination.

Palin has indicated she won't cooperate with the investigation, which she regards as "tainted" by political motivations, but the McCain-Palin campaign yesterday released a batch of e-mails that her lawyers say demonstrate Monegan was fired for insubordination. But over the past week, press attention has focused on other e-mails that Palin appears more reticent about releasing. In response to a request filed by a conservative activist under Alaska's Public Records Act, Palin sought to invoke executive privilege in order to withhold some 1,100 e-mails (PDF), many of whose subject lines suggest little connection to sensitive policy deliberation.

Moreover, Palin's appeal to executive privilege appears to be at odds with a strategy she discussed with aides in correspondence obtained by the Washington Post and New York Times: using unofficial e-mail accounts, like "gov.sarah@yahoo.com" and personal devices like BlackBerries to shield communications from subpoenas as official public records. As bloggers were quick to note, this was the same tactic adopted by White House aides worried that their correspondence could be disclosed to investigators probing the allegedly political firing of US attorneys.

Even before the US attorney scandal, the present administration had exhibited a spectacular gift for losing track of digital correspondence. Thanks to a purported upgrade implemented soon after the Clintons cleared out, the White House e-mail system was left without an effective means of archiving correspondence. Millions of e-mails vanished at least temporarily, and thousands may well be gone for good: A leaked memo suggested, at any rate, that there is little hope of completing the recovery before a new president is sworn in.

Whether the Yahoo-loophole exploited by Palin holds up would depend on how courts interpret the relevant Alaska statues, according to Meredith Fuchs, an attorney with the National Security Archive at George Washington University. "It is a basic tenet of legal ethics that records should not be destroyed if litigation is anticipated," Fuchs told Ars. "If one anticipates litigation, then the destruction of the evidence is called 'spoliation' and in some cases is subject to court sanctions."

That's not to say that alternation between official and unofficial channels is some nefarious Republican invention. One former Democratic congressional staffer with whom Ars spoke noted that colleagues would typically switch to personal mobile phones or e-mail accounts when discussing electoral campaign activities—a form of fuzzy half-compliance with the ban on using congressional office resources for partisan campaign purposes. (Perhaps that's why Palin staffer Ivy Frye waited until a Saturday evening to phone up blogger Sherry Whistine. Whistine, a conservative critic of Palin's, told Ars that Frye angrily demanded she—and perhaps others on what the blogger termed the "Poison Ivy call list"—stop attacking the governor.)

Even if all this proves technically permissible, however, it can't do much good for Palin's straight-shooting reformer image to have traded her official account for Yahoo as a means of avoiding transparency. As with so many political scandals, the cover-up may prove more damaging than the underlying controversy. But if a suit launched Tuesday by five GOP state legislators that aims to end or delay the Troopergate probe until after the election succeeds, Palin stands a good chance of shrugging off the fracas. And it seems even more unlikely that the Bush administration will face any real consequences for its record-keeping failures.

One nagging question, then, is whether these cases don't illustrate the double-edged nature of transparency and "sunshine" rules. Regulation of the intelligence community may make abuse of power less likely, but it makes it downright inconceivable a future generation of spymasters would pen the candid memos, openly admitting criminality, uncovered by the Church Commission in the 1970s. Faced with strong disclosure obligations, public officials may find ways to game the rules and simply avoid leaving trails—paper or pixelated—if there's the slightest doubt about the propriety of their communications. That's surely no reason to abandon the ideal of more open government, but is a reminder that the law of unintended consequences remains in effect. In some cases, at least, eternal sunshine yields the spotless drive.

Link to article:  http://arstechnica.com/news.ars/post/20080916-palins-e-mail-habits-come-under-fire.html

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