Tuesday, July 22, 2008

Fannie and Freddie

Fannie and Freddie

Serge Truffaut

Go To Original

Serge Truffaut suggests that the financial meltdowns of the last three decades have a common denominator: "People listened to those raving lunatics of ultra free market neo-liberalism who would like the culture of privatization to extend to every human activity, up to and including - this is no joke - consumption of the air we ... breathe." (Photo: o2-products.com)

The rescue the American government effected for mortgage giants Fannie Mae and Freddie Mac is the latest episode in a crisis that has now persisted for twelve months. This episode's peculiarity? Fannie and Freddie were not feeding on the subprime and exotic mortgages that have hurt the whole banking sector.

Fannie and Freddie, as our neighbors call them, hold or guarantee close to $6 trillion of real estate loans. To comprehend their economic importance, let me add that this amount equals half the mortgage loans contracted by Americans. Thus cautioned, anyone will have understood that the collapse of either of them would straightaway result in a chain of bankruptcies likely to plunge the continent into a hard recession like that of 1973-75, and not the weak one the authorities are hoping for.

Those authorities - Federal Reserve boss Ben Bernanke and Treasury Secretary Harry Paulson - had no choice, whatever some may think, but to rescue the two companies once they had observed, like everyone else, that 50 percent of the market value of their shares had melted away in a week. The violence of the speculation they were subjected to is outrageous in that Freddie and Fannie's financial foundation is ... healthy!

In fact, unlike Countrywide, Bear Stearns, Citigroup, Merrill Lynch or IndyMac - which has just been taken over by the government - Fannie and Freddie were not crippled by subprime lending. These companies had not soaked up financial vehicles of which the objective of the extreme complexity was to make the credulous pay for the financial well-being of the swindlers with portfolios stuffed with stock options. Certainly, they had to declare losses last year caused by the indirect use of subprimes, but not in the proportions of the banks named above.

In fact, in the weakening of the Fannie-Freddie couple, the most interesting aspect, or rather the most surprising of those listed before members of Congress, bears the signature of Securities and Exchange Commission President Christopher Cox, the stock exchange policeman. The latter fingered Wall Street actors who threw fuel on the fire by bringing down the share prices of certain companies in the hope of picking them up at ridiculous prices.

Notably, Cox insisted on a disinformation operation, to use his words, concocted in order to weaken the couple in question as well as the investment bank Lehman Brothers. According to his analysis, the stock market failures of these companies are partly attributable to a white collar sabotage operation. We won't be surprised to learn that Cox has ordered an investigation be opened with the objective of ultimately bringing those responsible before the courts.

On top of that, Cox as well, moreover, as Paulson and Bernanke, confided to the members of Congress that they intend to prepare the ground to better frame certain activities presently current on Wall Street. In retrospect, they are finally understanding that, between the consumption of abstruse financial vehicles and the strictly speculative offensives some investors have brutally conducted, the world of finance is confronted with a situation that could worsen between now and the end of the year. Since ...

Since the number of personal bankruptcies on account of real estate indigestion is likely to grow and grow and grow between now and the end of the year. And not only in the United States, but also in Spain, the United Kingdom and Ireland. That is, in the three countries where the sale and distribution of subprimes occurred. Following the example we observe south of our border, households in these countries took on debt like crazy because they believed as in an iron law that the value of their real estate asset would grow. In short, they believed in the nonsense put forward by another profession: real estate agents.

That said, we must remember and emphasize that between the savings and loan failures in the 1980s, the billions and billions written off by Citigroup, Merrill Lynch, German banks and French establishments, we observe a common denominator: governments allowed just anybody to do whatever. And that because people listened to those raving lunatics of ultra free market neo-liberalism who would like the culture of privatization to extend to every human activity, up to and including - this is no joke - consumption of the air we ... breathe.

Michael Collins: Election Fraud and Tyranny

Michael Collins: Election Fraud and Tyranny

Mark Crispin Miller's new book, "Loser Take All," identifies and analyzes election fraud, the foundation of extremist power in the United States since 2000. Manipulated elections have enabled everything we've experienced from the Iraq war to the current economic meltdown. None of that would have been possible without the ongoing series of "surprise" wins for extremists and their enablers following the outright theft of the 2000 presidential election.

Miller illustrates his overarching analysis with a collection of carefully chosen essays. They map the rise of what key figures on the right and left refer to as tyrannical rule by the Bush - Cheney administration. Through a sequence of critical elections from 2000 on, Miller shows the particular outrages in each that enabled the retention and expansion of power. In doing so, he defines the basis for our current troubles.

A Sequence of Outrages

"Loser Take All" is organized sequentially beginning with the critical election of 2000 through 2006. In addition, we're given predictions of anticipated problems in 2008. Just part of what we learn is how: Gore lost Florida 2000 even before election day; key Georgia voting machines were modified before the stunning losses by Gov. Barnes and Sen. Cleland in 2002; and, Bush won 2004 in the big cities, if you believe the national exit poll. Part 1 of this series covers the 2000, 2002, and 2004 federal elections.

2000 Air and Land Assault

Florida 2000

The Bush ascendancy and the tragedies that followed began with the "shock and awe" of a combined air and land assault worthy of our greatest generals. There were no weapons or troops involved just public officials, various bureaucracies, party operatives, and "the machines."

Lance Dehaven-Smith outlines the cooperation between Florida Gov. Jeb Bush and Secretary of State Catherine Harris and the national Republican campaign starting well before the election. A database vendor, DBT, was charged with purging felons from the rolls of Florida voters. Like many states, Florida felons were effectively denied the vote for life. The task consisted of matching felon lists from Florida and other states, most prominently Texas, with names on Florida's registration rolls.

The standards used to match registered voters with the combined list of felons were so loose nearly 91,000 legitimate voters were wrongly eliminated as registered voters. When they showed up to vote, they were told to go home. Before and during the process, the Florida Department of Elections was warned by DBT that the criteria was producing "false positives" - voters tagged as felons who were not true matches with the felons on the lists used.

After the lists were distributed to county boards of elections, several election administrators offered serious warnings about inaccuracies. Nothing was done to correct the errors.

The removal of tens of thousands of legitimate voters from Florida's election rolls before the election sealed candidate Al Gore's fate. More than half of those excluded were minority voters, predominantly black. Given the turnout rates and Gore's huge advantage with black voters, nearly 9 to 1 in Florida, a clean election would have given Al Gore the presidency in 2000.

David B. Moore describes the "air" war against democracy in 2000. The critical moment in the public perception of the campaign came when Fox News called the election in Gore's favor. It didn't matter that Gore won the popular vote. That was not "hot news." What did matter was that Fox declared Bush the winner prematurely.

Wasn't there some sophisticated polling analysis to justify this call? Only if you consider this phrase science: "Jebbie says we got it. Jebbie says we got it." That's what John Ellis, head of the Fox decision team, told his crew shortly after 2:00 am. Why would Fox be getting such an odd message from the Governor of Florida, Jeb ("Jebbie") Bush? Because Ellis was his first cousin. Fox made the call based on Gov. "Jebbie" and created a perceived advantage for Bush that remained unchanged even after Fox withdrew its irresponsible election call two hours later.

For the entire election, Gore had been on the defensive as a result of a media tear down that betrayed news reader and network loyalties to their corporate pay masters. It was the perfect lie to accompany the imperfect crime.

Moore and Dehaven-Smith offer much more in their well written essays, required reading for anyone who wants to know how election 2000 began the process of mindless war and torture and domestic neglect.

2002 Surprise Attack

Barnes, Cleland and Their Stunning "Losses"

Robert Kennedy Jr. tells the compelling story of the 2002 Georgia election where two popular incumbents, with solid leads four days before the election, lost in stunning reversals.

Atlanta Journal Constitution - WSB TV Poll, Nov. 1, 2002
Change from Nov. 1 poll to Election Day.
Atlanta Journal Constitution - WSB TV Poll, Nov. 1, 2002
Change from Nov. 1 poll to Election Day.

How could two popular incumbents, in the same state, with leads like these, both experience rarely seen reversals?

Under pressure due to uncounted votes in the 2000 election, the Georgia Secretary of State virtually turned over the election to the state's touch screen e-voting vendor, Diebold. Chris Hood was a Diebold technical consultant who bravely reported that he and others applied a software "patch" to Diebold voting machines just before the election.

This patch was so important that the president of Diebold, Bob Urosevich delivered it in person to Diebold technical personnel in Georgia. State law required that any changes to e-voting machines be cleared by the state. This was not done. When questions were raised after these highly improbable election results, Urosevich claimed the patch simply changed the clock on the voting machines, a claim deemed not serious by whistle blower Hood. The state failed to mount a thorough investigation and the Democrats were largely silent.

This bold move in the Georgia elections was a major alarm that was ignored and dismissed by the press and Democratic leadership.

The Beginning of the End for Don Siegelman

There was another 2002 outrage that also failed to gain the attention of the national media and federal authorities. Larisa Alexandrovna and James H. Gundlach provide the narrative and analytic proof that incumbent Democratic Governor Don Siegelman's 2002 election night win was, in fact, just that. On election eve, state wide results showed that Siegelman taking a narrow victory in a hard fought campaign.

That wasn't good enough for heavily Republican Baldwin County. Election officials there recounted the votes in the very early morning after Election Day. The wee hours recount reduced Siegelman's Baldwin County total from 19,000 to 12, 000 votes, just enough to give the Republican challenger a 3,000 vote victory. Gundlach efficiently deconstructs the improbable election and turns it into a case study of high probability election fraud.

2004 Sealing our Fate

Bush Wins it in the Big Cities

Miller reveals a more sophisticated election theft in 2004 I wrote the chapter, "Election 2004: The Urban Legend" (by Michael Collins, see disclosure*) based on research by Internet poster " anaxarchos " who discovered some remarkable anomalies in the final exit poll for 2004: Bush won reelection in the nation's "big cities" (500,000 > pop.).

The national exit poll is sponsored by the Media Consortium consisting of the Associated Press ABC, CBS, FOX, NBC, and CNN. It provides the acknowledged source of national data on who voted, where, and why. There was great controversy generated by the unintentional release of a late Election Day exit poll showing Kerry winning by 3%. The official version, released the day after the election had Bush winning by 3%.

We examined the official exit poll and discovered data that casts serious doubt on the claimed vote totals. According to the official version of the exit poll:

2004 was not a red versus blue election, as reported. The rural sector in 2000 was 23% of the total vote but in 2004, it was just 16%. Bush total votes were down by two million in 2004 compared to 2000 in that segment. Bush lost significant ground in red states in 2004 and started the election in the hole.

Bush made spectacular gains in "big cities" (pop. 500,000 or greater) going from 26% to 39% of the total votes in that segment. According to the official exit poll, he picked up these gains largely with the help of four million white big city voters, ghosts so to speak, who rose from their graves and other hiding places to hand the election to Bush.

According to the official exit poll, the Bush big city magic took place amidst a 66% increase in big city voter turnout compared to a more modest 16% national turnout increase using reported vote totals.

There was no 66% increase in big city turnout. Actual big city vote totals, available election eve or shortly thereafter, show big city turnout slightly below the national average. The exit poll's 66% turnout increase and the four million white ghosts were the only way to make the poll agree with the election results, neither of which was accurate.

According to the official exits, Bush became the first president to be re-elected while both losing significant ground in his base and, at the same time, making it up in hostile territory, the nation's big cities. The same people who gave us this mess did the exit polling for the 2008 primaries and will conduct the 2008 national exit poll in November.

Electronic Ballot Box Stuffing

On a more pragmatic level, Miller includes two chapters that define how things were done at the state and local level. Activist John R. Brakey was so shocked at what he saw on Election Day 2004, he began gathering extensive data. The more he saw, the more he was convinced that there was systematic election manipulation in Arizona's Legislative District 27 located in Pima County, Arizona.

When the distinguished research physicist David L. Griscom came on the scene, he had more than enough data to demonstrate the specific techniques that switched votes from Kerry to Bush. The model on "how to stuff an electronic ballot box" is sufficiently detailed for application across the nation in case anyone in the government is interested. Credence for The Griscom-Brakey findings was just provided by recent events in Pima County.

Making Nevada Safe for Touch Screens

2004 also featured the state of Nevada as a demonstration project to legitimize the now totally discredited touch screen voting devices. Brad Friedman and Michael Richardson tell us how touch screens were introduced to Nevada with claims of accuracy and federal certification, when neither claim applied. This is a cautionary tale repeated across the country in the era of elections out sourced to vendors and unelected bureaucrats. Ironically, in the gaming capitol of the world, the voting machines were not nearly as secure as the slots.

Bush drive-by at the Jan 20, 2005 inauguration Image

"Mission Accomplished"

By Nov. 2, 2004, the mission of returning the extremists to power and retaining their agenda was complete. The process of distortions began with the smears of Kerry by the "swift boaters," Bush partisans who mounted a relentless campaign against Sen. John F. Kerry. This wasn't new. Marginal groups attacking candidates are common in our elections.

Full cooperation by the mainstream media with the vicious attacks was a first. The worst elements of partisan politics were willingly incorporated into the national dialog by the network talking heads and the shouting cable clones. And they treated it as business as usual instead of an unfair but devastating attack on the core character issue of Sen. Kerry's campaign, his service to the nation.

At the same time, the 2004 reporting of the networks and press consistently ignored the obvious signs of looming election disasters around the country. Coverage of the partisan set up in Ohio for an Election Day melt down was inadequate. Little attention was paid to the biased Department of Justice handling of voting and civil rights violations. And, of course, there had been no correction whatsoever of the problems of Florida 2000, which were characterized by 175,000 spoiled ballots, largely in minority precincts.

When it came time to vote on Nov. 2, 2004, the forces working for a perpetuation of illegitimate power swung into action and sealed our fate without even bothering to consult us. We were guaranteed four more years of decline and debasement, all enabled through election fraud on a scale never seen. It became the new business as usual with a bonus of more war, more torture, and a yet to be delivered economic melt down that would affect us all.

Miller's latest effort bears witness to his ability to inspire others to investigation and action after looking into the abyss of extremist corruption that he has observed so well in the past.

He provides an elegant framework for the collection of essays with his ongoing commentary forming the articles into a persuasive whole. If you want to understand how the tragedy of the last eight years began and developed into the current crisis, this book is one of your key resources.

In part 2 of this series, we'll see how "Loser Take All" unmasks the real surprise of the 2006 elections and provides a cogent warning about what awaits us in 2008.

Part 2

Go To Original

How did we reach our current state of decline in just eight excruciating years? Aren't we working hard enough? Was there some millennial shift in consciousness and morality? How could we elect leaders like Bush and Cheney and their minions on Capitol Hill?

Mark Crispin Miller's latest book, "Loser Take All," provides an explanation that precedes any other: election fraud. In his collection of essays, Miller shows that the losers took everything in both the 2000 and 2004 presidential elections. That made all the difference.

We're working harder than ever. Citizens are no less concerned and compassionate than they were in 1999. But as Miller demonstrates, the way we elect leaders is inherently unreliable and corrupt. He shows how the current group of extremists who dominate public policy used a loosely regulated, unwatched election system to create the results they willed in order to achieve the power they craved.

Part 1 of this review of "Loser Take All" discussed how Miller's theme showed up in the 2000, 2002, and 2004 elections. In Part II, we'll take a look at Miller's explanation of events in 2006 and the system in place for the November 2008 elections.

2006 - Landslide Denied

The Big Picture - the U.S. House of Representatives

The 2006 election resulted in major pickups for the Democratic Party in the House, enough to return them to power with a significant but not overwhelming margin. Senate seats were a tougher fight but the Democrats managed to gain a one seat majority in the Senate with surprise wins in Virginia and Montana. But that's wasn't the whole story.

Election Defense Alliance researchers Jonathan Simon and Bruce O'Dell studied the 2006 results and found that there was a net shift of at least three million votes away from the Democratic candidates in the 2006 elections for the House of Representatives. The Democratic victory margin was shaved by 4% according this highly persuasive analysis.

Simon and O'Dell conclude:

"there was gross vote count manipulation [that] had a great impact on the results of E2006, significantly decreasing the magnitude of what would have been, accurately tabulated, a [Democratic] landslide of epic proportions." (Emphasis added)

How do we know that a landslide was denied? Simon and O'Dell persuade us in two rather simple steps. First, they show that the 2006 Election Night national exit poll sample gave the Democrats a victory margin at least 3 million votes greater nationwide than that tabulated by the vote-counting computers. Then they examine the exit poll sample itself and very simply and persuasively refute the charge that it over-sampled Democrats. This is the excuse that corporate media used to dismiss the obvious signs of election fraud and justify their own silence. Their analysis is based not on a general assertion of the reliability of exit polls, but on the specific and publicly available evidence that this particular exit poll was highly reliable.

Their thorough handling of these necessary and logical steps builds a strong foundation of credibility for their analysis. By the end of this process, which turns into an engaging narrative, they've established these remarkable findings regarding vote manipulation.

A 12% victory margin measured on Election Day 2006 was
reduced to 7.6% through the vote counting process. This meant
3 million less votes for Democrats in House races

In a separate paper, "Fingerprints of Election Theft," Simon, O'Dell, et al established a clear pattern indicating that certain competitive races were targeted for manipulation. Adding that information, a 3 million vote shift nationwide would likely determine the outcome of dozens of targeted competitive races.

Simon and O'Dell are a quantitative version of Holmes and Watson and like those two sleuths, they're right. Election 2006 was a "landslide denied."

A 14 Point Lead Vanishes at the Last Minute

This meticulous high level analysis was brought into reality in Jean Kaczmarek's chapter on "Fighting Dem" Tammy Duckworth's race for the U.S. House of Representatives, centered in DuPage County, Illinois. In addition to strong civic credentials, Duckworth served in Iraq with her National Guard unit. She lost both legs when her helicopter was attacked.

This looked like a sure Democratic win of the seat formerly held by Henry Hyde. Duckworth was ahead of her opponent. 54% to 40% right before the election Somehow, Republican Peter Roskam pulled a win out right at the last minute.

Kaczmarek and her partner Melisa Urda had been looking at election problems in DuPage for some time. They'd discovered the improper destruction of public records; cronyism and political bias in contract awards; tens of thousands of purged voters; and "Suspiciously large voter turnout in many elections, affecting the outcomes in local and state races." An observer reported that a representative of Robis, DuPage's election manager in 2006, was in the tabulation room and appeared to have access to memory cards and the tabulator. Robis also was in charge of election night web hosting.

Does all of this add up to a fair out come for Tammy Duckworth? Does it help us understand how a 14 point lead turns into a 2 point loss?

More Trials for Don Siegelman

2006 also saw the return of Don Siegelman to the political scene after losing the governor's race in a dead of night recount in 2002. Larisa Alexandrovna's chapter tells this story with revelations that should have created a national scandal and mandated an investigation. In 2005, the Bush Department of Justice ended Seligman's attempt to retake the governorship by indicting Siegelman and gaining a conviction in October 2006 amidst rumors of jury tampering.

This was a death sentence for this once popular governor's political comeback. With help from the extremist establishment, Siegelman has gone from a broad majority win of 57% in 2002 to a seven year sentence in a federal prison.

Alexandrovna reports on the subsequent deposition and testimony by Dana Jill Simpson, an Alabama lawyer and opposition researcher who targeted Siegelman in 2002. Simpson told of White House involvement in the 2002 election and 2006 prosecution. She offered information on threats of federal prosecution in 2002 if Siegelman chose to contest the highly questionable recount that cost him the election. There was more. Simpson's car was run off the road and her home burned down before her testimony given to the House Judiciary Committee.

Siegelman has been freed from jail and the investigation continues with Karl Rove traveling overseas instead of honoring a House subpoena to testify on this matter. This series of attacks on Siegelman has turned him into a real world political version of Job.

2008 And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?

Given this sorry decline of elections since 2000, what can we anticipate in 2008?

Activists Nancy Tobi and Paul Lehto outline the regulatory and legal hurdles facing us.

Tobi has been a fierce advocate for clean elections for years. Her assessment of the Help America Vote Act of 2002 (HAVA) and the nearly dictatorial powers of the federal Election Assistance Commission (EAC) have favorably influenced national policy. In her chapter, she shows the connection between the lobbyist friendly HAVA, the politically appointed EAC, and the series of election disasters experienced under the rule of partisans with little regard for democracy. Her solution is both simple and practical, a return to citizen run elections with hand counted paper ballots.

Paul Lehto presents an engaging analysis of the Bush v. Gore Supreme Court decision. The court claimed it was a one time only decision and not to be used as a precedent. This decision effectively terminated the 2000 recounts in Florida. Lehto sees bigger things coming out of that ruling and questions the court's ability to resist the political power offered by expanding that precedent. He sees a malevolent future for the court and argues that by re-animating Bush v. Gore, the court will assume a new function -- "election termination."

Attorney, journalist and college professor Bob Fitrakis has been in the trenches opposing election fraud well before the 2004 Ohio travesty. During that post election controversy, he faced down threats of contempt of court for even speaking of a stolen election. Fitrakis summarizes the sad history of Ohio before, during and after 2004 from a position of real authority and uses it to anticipate what we can expect in the future.

By skillfully illustrating the latest outrage, Fitrakis tells us why Ohio's election problems continue. In 2007, we discovered that 56 of 88 Ohio counties destroyed 2004 ballots; evidence in a federal law suit on election fraud. Ballot preservation was ordered by a federal court and required by both Ohio and federal law. The same people in the 56 counties who wrongfully destroyed ballots from 2004 are in charge of running the elections in 2008. This is not a comforting situation.

What should we anticipate in 2008? We'll have at least more of the same according to journalist Steven Rosenfeld. He reminds us that election fraud almost always begins with the race-based strategy of contracting the vote of minority citizens. This is accomplished through voter suppression tactics like voter identification laws, active campaigning to restrict the right to vote by the Bush Department of Justice, and the ever present, unreliable, and always secret voting machines.

Rosenfeld reveals that the U.S. Department of Justice has made proactive requests for a number of states to "purge" their voting roles. This is exceptionally bad news since "purges" are inherently biased against poor and minority citizens. It was the Florida pre-election "purge" that got us into our current troubles.

Election 2008 will have all of the effective voter suppression tactics from the past and the lock step support of corporate media. There will, no doubt, be some new tricks to dazzle and amaze all of us in the multilevel, three dimensional magic show that passes for open and fair elections.

Mark Crispin Miller's Contributions

Without any doubt, Mark Crispin Miller is one of our most astute, accurate, and prolific critics of the Bush administration. He provided a dire warning in 2001 and two critical analyses of the 2004 election. Combined, these explain the shift from human rights to torture as the defining feature of our approach to the world and the relentless diminishment of the vast majority in order to subsidize the decadent elements of the corporate elite.

The Bush Dyslexicon by Miller was an early roadmap to the little explored territory of the Bush mind. Miller knew what few would admit. We had a president who could barely speak the English language when dealing with just about any topic other than war and revenge. On those topics, the brain fog cleared and Bush became alarmingly coherent.

Miller's compilation of Bush distortions was a source of humor for many. At the same time, it served as one of the great warnings for the next seven years: Bush and his cabal were extremists with a radical plan that would bring the nation to its knees.

Bush had won by losing in 2000. He did it again in 2004 but with better planning and support. Miller had no illusions about the "integrity" of the 2004 election. His efforts gave broad credibility to the notion of a stolen presidential election. He wrote a ground breaking article for the respected Harpers Magazine in August 2005, "None dare call it stolen: Ohio, the election, and America's servile press."

After showing the rampant fraud and irregularities in Ohio, all readily available to those who chose to look, Miller concluded that "the press has unilaterally disarmed" in the battle to maintain our very best national values.

Miller followed up with one of the great exposes of modern political commentary, "Fooled Again: The Case for Electoral Reform." He documented and analyzed the connection between the Republican extremists, corporate interests, and the political-religious factions that chose to serve as foot soldiers for a world view characterized by violence abroad and greed everywhere.

Miller's latest effort, Loser Take All, documents this sorry but powerful chapter of election fraud that started with the 2000 election. The carefully chosen articles and cogent narrative provided by Miller form a whole that is required reading for those interested in the restoration of our lost rights and the mobilization needed to put citizens in charge of their fate. Elections are the point at which capital, greed, and personal ambition dominate the field. It's not all about elections, but that's where it starts.

Fannie, Freddie Rescue May Cost Taxpayers $25 Billion, CBO Says

Fannie, Freddie Rescue May Cost Taxpayers $25 Billion, CBO Says

By Brian Faler and Dawn Kopecki

Go To Original

Treasury Secretary Henry Paulson's rescue package for Fannie MaeFreddie Mac would probably cost taxpayers $25 billion, the Congressional Budget Office said. and

‘‘There is a significant chance -- probably better than 50 percent -- that the proposed new Treasury authority would not be used before it expired at the end of December 2009,'' the nonpartisan agency, which provides economic and budget analysis for lawmakers, said in a report today.

Democratic lawmakers were seeking to determine the cost of Paulson's plan to offer emergency funding to Fannie Mae and Freddie Mac, which own or guarantee almost half of the $12 trillion in U.S. home loans outstanding. Paulson today said Congress understands ‘‘the demands'' of the housing downturn and will likely approve this week his request to help the government- sponsored enterprises.

‘‘We need to act in the short-term because the GSEs are vital institutions in our capital markets today and are vital to emerging from the housing correction,'' Paulson, 62, said in a speech in New York. Fannie Mae and Freddie Mac are among the ‘‘most interconnected of all global financial institutions,'' he said.

Fannie Mae fell $1.61, or 11 percent, to $12.52 at 9:35 a.m. in New York Stock Exchange composite trading. Freddie Mac dropped $1.25, or 14 percent, to $7.50.

Paulson on July 13 asked Congress to grant the Treasury the power for 18 months to buy equity in Fannie Mae and Freddie Mac and expand their credit lines with the government after concern that the companies don't have enough capital sent the shares to the lowest in more than 17 years. Paulson also requested expanded powers for the Federal Reserve to oversee capital requirements.

Political Pressure

The cost of the plan will depend upon terms of the credit, whether the companies have to put up collateral, pay fees or commit a portion of profit to the Treasury, said Marvin Phaup, a CBO economist for almost 20 years who retired in 2007 and is now a research scholar at George Washington University in Washington.

‘‘This is a very very difficult thing to do and of course the political pressure will be great to make the cost estimate zero,'' Phaup said in a telephone interview last week. ‘‘You can make a reasoned argument that it will be zero with some probability, but of course, it's also with some probability it could be very costly to taxpayers.''

Neither the Treasury nor the White House budget office has estimated publicly the cost of the bailout. Paulson has said the plan would restore investor confidence in the companies and thereby pose little cost to IND' ))">taxpayers.

Lawmakers have negotiated with Paulson over the details, with the goal of putting the package to a vote in the House of Representatives tomorrow. The Senate would also need to vote.

The Federal Reserve is talking with the Office of Federal Housing Enterprise Oversight, the regulator for Fannie Mae and Freddie Mac, to determine whether the companies have enough capital to offset credit losses.

More Market Stress

‘‘The Federal Reserve is working with Ofheo to get a better understanding of the issues facing the GSEs,'' Fed spokesman David Skidmore said. The New York Times earlier reported that the Fed and the Comptroller of the Currency are examining the books of Fannie Mae and Freddie Mac to evaluate their health, citing an interview with Paulson.

Paulson said the Treasury has no plans to execute the financial backstop plan, and added that before doing so he would consult with the Congress and the companies. Paulson said financial market turmoil will take ‘‘additional time'' to be resolved and that progress ‘‘won't come in a straight line.''

‘‘Until the housing market stabilizes further, we should expect some continued stresses in our financial markets,'' he said.

Savior No More

The Bush administration is depending on Fannie Mae and Freddie Mac to help pull the U.S. out of the worst housing slump since the Great Depression. The companies, which buy mortgages from banks, face mounting credit losses stemming from the collapse of the subprime-mortgage market.

Freddie Mac may cut purchases of home loans from banks and bonds backed by housing debt to shore up its capital amid record delinquencies.

Freddie Mac, which last week registered with the U.S. Securities and Exchange Commission for the first time, is also considering selling securities and reducing its dividend while it prepares to issue $5.5 billion of stock. JPMorgan Chase & Co. analyst Matthew Jozoff said last week that growth in the mortgage holdings of Freddie Mac and Fannie Mae will be ‘‘weak.''

‘‘This just means much less credit availability for mortgage borrowers,'' said Paul Colonna, who manages more than $100 billion as chief investment officer for fixed income at GE Asset Management in Stamford, Connecticut. ‘‘They were teed up to be saviors of the mortgage crisis, but now they've got their own capital issues.''

Mortgage Losses

Combined losses at the companies will probably total $48 billion through 2009, Jozoff said in a July 18 report.

‘‘Mortgage losses are significant, and will probably foster capital conservation from the agencies rather than portfolio growth,'' he said.

House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, has said he agrees with Paulson that the cost of a rescue would be insignificant.

Lawmakers will probably cap federal aid by counting any liabilities against the government's debt limit, Frank said. Such a safeguard may reassure lawmakers concerned about taxpayers' exposure to losses, he said.

Minimum Capital

Fannie Mae, created in Franklin Delano Roosevelt's New Deal plan, and Freddie Mac, started in 1970, have the implicit backing of the U.S. government and get access to funds at lower rates than banks, became more indispensable this year after private providers of mortgages collapsed or were acquired.

At the end of March Freddie Mac had $6 billion more than the minimum capital required by its regulator, and Fannie Mae had surplus capital of $5.1 billion. The companies already raised $20 billion in the past year to cover losses and meet Ofheo rules.

Freddie Mac will probably report a surplus exceeding the minimum 20 percent required for the second quarter, according to a company filing with the SEC last week. The SEC registration and equity raising will allow the company to reduce its capital surplus level to 10 percent.

Paulson Says Fannie Mae-Freddie Mac Rescue Is Needed to Stabilize Markets

Paulson Cites Global Stakes in Fannie-Freddie Rescue

By Kathleen Hays and Rebecca Christie

Go To Original

Treasury Secretary Henry Paulson, trying to persuade Congress to approve his rescue plan for Fannie Mae and Freddie Mac, said U.S. financial market stability is at stake and international investors are awaiting the outcome.

‘‘This is about not only our housing markets, but it's about our capital markets more broadly,'' Paulson said in an interview with Bloomberg Television today. ‘‘This goes well beyond the two institutions -- Fannie and Freddie -- it has to do with investors in the United States and investors all over the world.''

The Treasury chief said his plan is about restoring confidence in the two companies, which account for almost half the $12 trillion U.S. mortgage market, and he doesn't expect to have to use taxpayer funds. Paulson predicted that lawmakers will back his proposals, which would give him the right to buy equity in and lend funds to Fannie Mae and Freddie Mac.

‘‘I am confident they recognize the demands of the current situation, and will act to complete work on this legislation this week,'' Paulson said in a speech at the New York Public Library earlier today. ‘‘We must, in the short term, take steps to boost confidence'' in the firms, he said.

Paulson plans to talk with lawmakers when he returns to Washington later today, spokeswoman Michele Davis said. He made two trips to Capitol Hill last week to lobby for his plan after legislators criticized the proposals in a Senate Banking Committee hearing he attended. They expressed concern that the authority could expose taxpayers to unlimited liability.

Taxpayer Funds

‘‘We have no plans right now to put capital in,'' he said in the interview. ‘‘It's very important that the markets know that we're there with capital if necessary,'' Paulson said.

Paulson's outlook is ‘‘far from the only possible result,'' the Congressional Budget Office said today, estimating the cost of his plan at $25 billion. ‘‘Many analysts and traders believe that there is a significant likelihood that conditions in the housing and financial markets could deteriorate more than already reflected'' on the two companies' balance sheets.

‘‘Such continuing problems would increase the probability that this new authority would have to be used,'' said the CBO, a nonpartisan agency that provides economic and budget analysis for lawmakers.

Fannie Mae fell 95 cents, or 6.7 percent, to $13.18 at 11:27 a.m. in New York Stock Exchange composite trading. Freddie Mac dropped 41 cents, or 4.7 percent, to $8.34. Fannie has dropped about 42 percent in the past month, and Freddie is down about 58 percent, on concern the companies have insufficient capital to cover writedowns and losses amid the mortgage-market collapse.

‘Divisive' Measures

Paulson urged Congress not to include ‘‘extraneous'' or ‘‘divisive'' measures in the housing bill, which the House expects to pass tomorrow. The legislation originally was designed to set up a stronger regulator for Fannie Mae and Freddie Mac, and provide for mortgage guarantees to help stem foreclosures.

The Treasury chief asked in an emergency statement on Sunday, July 13, that the bill include the right for the Treasury to buy equity in Fannie Mae and Freddie Mac, and expand their lines of credit. He also urged a role for the Federal Reserve in overseeing the companies' capital.

Democratic lawmakers in the House want to add $4 billion to the bill to provide funds for authorities to buy foreclosed properties, and ease the damage to communities. President George W. Bush's administration has repeatedly threatened to veto the housing bill if it includes the measure.

Wasting Time

‘‘We shouldn't be spending time debating extraneous provisions which I think are counterproductive,'' Paulson said on Bloomberg Television. The GSE-related items in the bill are ‘‘orders of magnitude'' more important than any other items, he said.

‘‘Both sides'' will work to avoid a veto of the bill, he said later on Fox Business Network.

The Treasury chief said that he's worked since 2006 to get Congress to set up a stronger regulator for the two government- sponsored enterprises, recognizing the risks they posed to markets because of their size.

‘‘I would rather not be in the position of asking for extraordinary authorities to support the GSEs'' now, Paulson said. ‘‘But I am playing the hand that I have been dealt.''

Answering questions after his speech, he said that any aid to Fannie Mae and Freddie Mac would be ‘‘collateralized,'' helping provide protection for taxpayers.

Assessing Finances

Paulson also said the Fed and Office of the Comptroller of the Currency are helping assess Fannie Mae and Freddie Mac finances. There is a discrepancy between the judgments of investors and the firms' current regulator, the Office of Federal Housing Enterprise Oversight, he said in an interview with the New York Times yesterday, the paper reported.

The Treasury chief today said he has ‘‘confidence'' in Ofheo, which has said Fannie Mae and Freddie Mac are adequately capitalized.

‘‘The Federal Reserve is working with Ofheo to get a better understanding of the issues facing the GSEs,'' Fed spokesman David Skidmore said today. He said the Fed doesn't have examiners on site at the companies.

Financial market turmoil will take ‘‘additional time'' to be resolved, and progress ‘‘won't come in a straight line,'' Paulson reiterated in his speech. ‘‘Until the housing market stabilizes further, we should expect some continued stresses.''

Arabs Buying Out Collapsing Western Banks

Arabs Buying Out Collapsing Western Banks

by Tzvi Ben Gedalyahu

Go To Original

First it was Citibank. Now it's Barclay's and New York City's Chrysler Building skyscraper. Muslim Arabs are buying out collapsing Western banks and businesses and gaining growing international power, but some Arab investors are worried their investments may go down the drain with the American economy.

The current financial crisis in the United States has spread to other countries because of a massive debt that was not backed by enough real and liquid collateral. Banks and businesses gasping for financial breath are up for sale at basement prices, but no one is certain if the basement is the bottom.

"The possibility remains that more Arab white knights will be sought to rescue ailing financial institutions," wrote Dr. Mohammed Ramady, a former banker and Visiting Associate Professor at the King Fahd University of Petroleum and Minerals in the Financial Adviser magazine. He said he fears that Arab investors will end up chasing their investments with more money to keep them from going under.

The Abu Dhabi Investment Council of the oil-rich United Arab Emirates kingdom of Abu Dhabi last November announced it was bailing out the mammoth Citibank financial institution, formerly headed by Bank of Israel Governor Prof. Stanley Fischer, with $7.5 billion.

Next in line was Britain's Barclay's Bank, which raised $9 billion from investors in the oil-rich kingdom of Qatar and in Asian countries. The Abu Dhabi Investment Council last month forked out approximately $800 million for a 75 percent stake in New York City's 1,046-foot-tall Chrysler Building, which was the world's tallest building for a year until the Empire State Building surpassed it in the 1930's.

The purchase of American banks by foreigners has been blocked in the past by security and political considerations, but the barriers have come down, wrote Dr. Ramady. "How long this lasts is only a matter of guesswork, as once again, the specter of foreign takeovers of 'national' symbols will be hard to accept," he added.

The latest American symbol to go down the drain is the Anheuser-Busch beer brewer. The Times of London wrote, "The weak dollar and weak economy mean the United States is up for sale. Japs are conquering the car industry. Arabs just bought part of the Chrysler Building. Jeez, they even tried to buy the ports a while back. Whatever next? A hijab on the Statue of Liberty?"

In a more serious vein, The Australian editor-at-large Paul Kelly wrote earlier this month that the foreign investments, headed by Arabs, signal a major change in international power.

"The energy, financial and political woes that grip the U.S. signal a decisive shift in world power, mocking the liberal delusion that Barack Obama or John McCain can return American prestige and power to its pre-Bush year 2000 nirvana," he wrote. "There is no such nirvana. There is instead a new reality: the greatest transfer of income in human history [and] the rise of a new breed of wealthy autocracies that cripple U.S. hopes of dominating the global system and demands on the U.S. to make fresh compromises in a world where power is rapidly being diversified."

Flynt Leverett, former director of Middle East Affairs on the National Security Council, thinks that "the international economic position of the United States has deteriorated substantially since the new millennium."

In the current issue of The American Interest, Gal Luft, from the Institute for the Analysis of Global Security, warned that OPEC's Arab countries could potentially "buy the Bank of America with two months' worth of production and General Motors with six days' worth."

The growing Arab takeover of American businesses continues unhindered. The giant Dow Chemical company and a Kuwaiti company have agreed to set up world headquarters for their joint petrochemical venture in Dearborn, Michigan, which has a high concentration of American Arabs.

The Abu Dubai Investment Council years ago entered the international media business, buying a nine percent stake in Reuters News Agency, which usually reports with an open anti-Israeli bias.

However, Abu Dhabi's' director of international affairs, Yousef al Otaiba, has reassured American officials that its purchase of Citibank will not be used to exert political pressure on the U.S. He wrote the Treasury Department, "It is important to be absolutely clear that the Abu Dhabi government has never and will never use its investment organizations or individual investments as a foreign policy tool."

8,500 U.S. Banks; Many Will Die Soon

8,500 U.S. Banks; Many Will Die Soon

Go To Original

How bad is this going to get?

Bear Stearns got bailed out 'cause they were highly visible (read: failure would have exposed aforementioned funny money to the average Joe), Freddie Mac and Fannie Mae are Government Sponsored Entities who now have their sickly balance sheets backstopped by the U.S. Treasury (read you & me), but all the commercial banks have is the Federal Deposit Insurance Corporation.

Great! All accounts are insured to $100,000! We're saved!

Way wrong. The FDIC is an insurance operation. They make an educated guess as to how many banks will fail and what the total exposure is, then they collect insurance premiums from them. They've got $51 billion … and Indymac alone sucked up 10% of that. If a big one lets go, like Washington Mutual or Wachovia, then the FDIC will look just like FEMA did facing down hurricane Katrina. Don't go and look at the scoreboard on the Bank Implode-O-Meter unless you've got a very strong stomach. Oh, and do note that a good bit of those write downs are investment banks - the FDIC does not cover their activities.

OK, very scared now, so what do I do?

Run, don't walk, to your bank and get the funds you have clear of this mess before it gets any worse. The safe deposit box … isn't. There were rules during the Great Depression such that a treasury agent got to paw through any that were opened before the owner got to touch their stuff; gold, silver, and cash could easily be confiscated in an emergency.

So, what to do? Cash at home in the First Bank of Serta? A fire proof safe? Maybe cashier's checks in your name and leave the receipts in the safe deposit box, thusly meeting the portability requirement with safety? Nope on that last one, cashier's checks drawn on a dead bank are dead. Treasury Bills? Wow, look at the Fannie Mae and Freddie Mac bailout … they'll not go *poof* instantly, but they're going down in value bigtime. Swiss bank account? Hey, look at that first salvo in making sure dollars in the U.S. stay in the U.S.

OK, terrified, what do I do?

The GSEs, Freddie Mac and Fannie Mae are indeed "too big to fail" – they'd whack the whole U.S. economy if they went down hard. Ditto for Bear Stearns – had they not moved to conceal the troubles there the failure would have sucked all of the monoline bond insurers under. Monoline bond insurers? If you don't know I've laid enough pain down in this diary – we'll cover that mess another day. 8,500 commercial banks, putatively protected by the FDIC? Only a few are large enough to receive the "too big to fail" label. The government doesn't dare touch the FDIC (yet) for fear of clearly communicating they expect the worst. A lot of folks got trimmed in the Indymac crash, with $BIGBUCKS reset to the $100,000 maximum and no recourse. Once this truly gets rolling there will be a reduction in the amounts covered and probably withdrawal limits even with solvent banks.

This can not be stopped. The losses have already occurred. It isn't an "if", it's a "when" and I was expecting it around 4/1/2008, but they held it off for another quarter. It looks for all the world like July is the lucky month with the Indymac stuff coming down right next to Fannie and Freddie's corpses hitting the mighty U.S. Treasury Reanimator. Someone, somewhere is going to pull a joker out of this house of cards – some innocuous bond sale somewhere will fail, a monoline insurer will get pushed over the edge, and then the rout will begin.

The Ginormous Banking Enema has begun with the first little squirt from Indymac Bancorp's failure. It won't end until we're all up to our nostrils in an alphabet soup of make believe financial instruments and newly created federal agencies conceived to clean up the mess.

McCain gets $1,930 a month from 'broken' Social Security system

McCain gets $1,930 a month from 'broken' Social Security system

Go To Original

Republican presidential candidate John McCain cashes his monthly Social Security checks despite calling the federal program "a disgrace," the Associated Press reports.

"I'm receiving benefits," McCain told campaign reporters, but added, "the system is broken."

In 2007, he received benefits of $23,157 from Social Security, approximately $1,930 a month. The maximum monthly benefit under Social Security is $2,185. Social Security benefits are determined by age at retirement.

McCain, who is 71, has received benefits since he was 65.

Last week, McCain told observers at a town-hall meeting in Portsmouth, Ohio, "Americans have got to understand that we are paying present-day retirees with the taxes paid by young workers ... and that's a disgrace."

B.J. Jarrett from the Social Security Administration said that individuals can refuse retirement benefits.

In 2006, McCain's wife Cindy earned $6 million, and has a net worth of approximately $100 million.

Wachovia loses $8.9B, cuts 6,350 workers, dividend

Wachovia loses $8.9B, cuts 6,350 workers, dividend


Go To Original

Wachovia Corp. reported a surprisingly large second-quarter loss Tuesday, deflating Wall Street's hopes that the nation's big banks are weathering the credit crisis well. The nation's fourth-largest bank by assets said it lost $8.86 billion, is slashing its dividend and eliminating 10,750 positions after losses tied to mortgages soared.

Even excluding one-time items, the results substantially missed Wall Street estimates.

"These bottom-line results are disappointing and unacceptable," Chairman Lanty Smith said in a statement. "While to some degree they reflect industry headwinds and weaker macroeconomic conditions, they also reflect performance for which we at Wachovia accept responsibility."

Wachovia said it lost the equivalent of $4.20 per share in the April-June period. In the same timeframe last year, the bank earned $2.34 billion, or $1.22 per share.

Excluding $6.1 billion in write-downs to the value of its intangible assets and merger-related and restructuring charges of $128 million, Wachovia lost $2.67 billion, or $1.27 per share. Second quarter results include the bank's October acquisition of A.G. Edwards Inc.

Analysts on average expected a loss of 78 cents per share on revenue of almost $8.4 billion.

Earlier this month, Wachovia had projected a $2.6 billion to $2.8 billion quarterly loss, equal to $1.23 to $1.33 per share, excluding goodwill items.

The Charlotte-based bank cut its quarterly dividend to 5 cents per share from 37.5 cents, which will conserve approximately $700 million of capital per quarter. In April, Wachovia slashed its dividend 41 percent.

As part of a plan to cut 2009 expenses by $1.5 billion, the bank said it would lay off 6,350 workers and eliminate 4,400 open positions and contractors.

During the quarter, the Wachovia boosted its provision for loan losses to $5.57 billion from $179 million a year ago, and added $4.2 billion to its reserves for bad loans.

Wachovia has been suffering from its 2006 acquisition of Golden West Financial Corp. The bank paid roughly $25 billion for the California mortgage lender known for exotic loans.

The so-called "Pick-a-Payment" loans, which Wachovia inherited from Golden West, have proved a headache for the bank and a lightning rod for shareholders, defaulting at higher rates than other mortgages.

Wachovia recently discontinued offering the "Pick-A-Payment" loan option, which allows customers to pay a less-than-full interest payment on all new home loans. The bank also had hired The Goldman Sachs Group Inc. to conduct an analysis of its loan portfolio and advise it on strategic alternatives.

Late Monday, Wachovia announced plans to leave the wholesale mortgage lending business. And beginning Friday, the company will no longer offer mortgages through brokers, joining other lenders making similar moves to exit the troubled sector.

Big banks, such as Bank of America Corp. and National City Corp., have stopped making loans through brokers entirely, relying instead on their loan officers. National City said it was forced to do so by a continuing downturn in loan demand, while Bank of America said it saw better "long-term opportunity" in working through its own loan officers.

Wachovia spokesman Don Vecchiarello said in a statement that the company "recognized some opportunities to re-position our business" given the current market conditions.

Earlier this month, Wachovia named former Treasury Undersecretary and Goldman Sachs executive Robert Steel as chief executive, replacing the ousted Ken Thompson. Within a week of being on the job, the bank's shares tumbled to a new 17-year low.

Homeland Security claims far reaching power over your guns

REAL ID – A very real threat to gun rights

By Mark Rauterkus

Go To Original

Homeland Security claims far reaching power over your guns

Harrisburg, PA - Pennsylvania gun owners breathed a sigh of relief at the Heller vs. DC Supreme Court ruling, but the Libertarian Party of Pennsylvania (LPPa) warns that major threats to gun rights still exist. One such threat is REAL ID, the federal mandate turning driver’s licenses into national ID cards.

The long-term plan for REAL ID is to force its biometric ID functions on federal, state, local and private entities for all transactions. Thus, ID confirmation by a distant bureaucracy becomes permission for essential daily activities including banking, doctor visits, transit, school attendance and purchases — including guns.

According to the Department of Homeland Security’s (DHS) final rule handed down in January, DHS “will continue to consider additional ways in which a Real ID license can or should be used and will implement any changes to the definition of ‘official purpose’ or determinations regarding additional uses for Real ID consistent with applicable laws and regulatory requirements. DHS does not agree that it must seek the approval of Congress as a prerequisite to changing the definition in the future.”

Do you want to risk your gun rights on the appointment of someone opposed to our second amendment rights as Secretary of Homeland Security?

“The very thought that the sale of firearms and ammunition could be stopped based on some political agenda in Washington is frightening,” remarked LP Activist Mark Crowley. “We saw the disastrous consequences of such an agenda in New Orleans during Katrina when some police abandoned their posts leaving citizens defenseless and criminals armed. We must never put Pennsylvanians into a position where they can only hope that distant Washington bureaucrats will do the right thing.”

“The implementation of REAL ID presents a significant threat to gun ownership in the United States of America.” added Michael Robertson, LPPa Chair.

By participating in REAL ID, Pennsylvanians will be subjected to scrutiny by a host of federal agencies with every swipe of a REAL ID card. This is de facto gun registration, only worse. Once a gun buyer is identified, other information such as military service, purchases, rentals, travel, and medical history will be easily cross-referenced and subjected to interpretation. It’s inevitable that politicized standards will emerge that can be used to deny Pennsylvanians the right to keep and bear arms — everyone except violent criminals and politicians’ bodyguards.

LPPa Media Relations Chair, Doug Leard, added, “A few years ago when the NICS [National InstaCheck System] computer system crashed, no one could be validated for a gun purchase. A political agenda is one thing and bureaucratic incompetence is another. When a state submits to REAL ID, it submits its citizens to the possibility of being denied not just gun purchases, but ATM cash, credit card purchases and even a critical prescription pickup. Pennsylvania must emphatically reject REAL ID.”

The LPPa urges Pennsylvanians to contact their state legislators and instruct them to support state House Bill 1351 and state Senate Bill 1220. Be wary of other recently introduced legislation such as H.B. 2537 that claims to oppose REAL ID, but ignores the central issue of biometric data collection of Pennsylvanians.

Despite the Heller case, the anti-gun movement will continue to seek alternatives to eliminate our gun rights. REAL ID provides them an unguarded backdoor. Let’s nail it shut in Pennsylvania.

The abuses of the Federal Reserve System

The abuses of the Federal Reserve System

Louis T. McFadden (1876-1936): An American Hero

By Richard C. Cook

Go To Original

Dr. Ron Paul, the Republican candidate for the 2008 presidential nomination, is not the first U.S. politician to point to the abuses of the Federal Reserve System and call for its abolishment. Similar pleas to get rid of the Fed were made by Reps. Wright Patman (1893-1976) and Henry Gonzales (1916-2000), both Democratic congressmen from Texas and chairmen of the House Banking Committee.

Few recall, however, how controversial the Fed was when it was first proposed and then maneuvered through a recessing Congress just before Christmas 1913. Rep. Charles Lindbergh, Sr., R-MN and father of the future aviator, called the Federal Reserve Act “the worst legislative crime of the ages.”

But the strongest opposition came later, during the Great Depression. The source was Rep. Louis T. McFadden, a Republican representative from Pennsylvania who, as a former bank cashier and president, knew the financial system intimately.

McFadden was born in Granville Center , Bradford County , Pennsylvania , on July 25, 1876, just three weeks after the nation celebrated its centennial at the Philadelphia Exposition. He graduated from Warner’s Commercial College in Elmira , New York , and went to work at the First National Bank of Canton , PA , in 1892.

McFadden was elected to Congress in 1920 and served until 1934. Though a Republican, he moved to impeach President Herbert Hoover in 1932 and introduced a resolution to bring conspiracy charges against the Board of Governors of the Federal Reserve.

He also made a 25-minute speech on the House floor accusing the Federal Reserve of deliberately causing the Depression. At the time, the chairman of the Federal Reserve Board was Eugene Meyer, who resigned after Frankin D. Roosevelt was inaugurated as president in 1933 and purchased the Washington Post at a bankruptcy auction.

Later in 1933, McFadden introduced House Resolution No. 158, Articles of Impeachment for the Secretary of the Treasury, two assistant Secretaries of the Treasury, the Board of Governors of the Federal Reserve, and the officers and directors of its twelve regional banks. This was McFadden’s political swan song. In the election of 1934, he lost his reelection bid to a Democrat by 561 votes.

Let’s fast forward to 2008. We are in the early stages of an economic collapse that
Nouriel Roubini, professor of economics at the NYU Stern School of Business, calls “the worst financial crisis since the Great Depression.”

Once again the Federal Reserve is implicated, this time for having enabled the creation of gigantic investment bubbles in home mortgages, commercial real estate, equity funds, hedge funds, and derivatives that are now bursting. Mayhem is now starting to be sown within the producing economy of working men and women after having wreaked devastation on Wall Street and within the banking industry despite massive Federal Reserve bailouts over the past year.

The chief culprit would appear to be Alan Greenspan, chairman of the Federal Reserve from 1987 to 2006, who presided not only over the ongoing subprime mortgage fiasco, but previously over the dot.com bubble of the 1990s. This blew up when the stock market crashed in 2000-2001, obliterating $6 trillion of investor wealth.

The subprime conflagration of the 2000s was ignited by an orgy of application fraud that commenced just after George W. Bush became president. According to former New York Governor Eliot Spitzer, the investigation of this fraud by state attorneys-general was blocked by Bush’s Treasury Department.

Perhaps Louis T. McFadden was onto something. After his premature death, his words faded into history as he was derided for being anti-Semitic when he said such things as, “ America has to choose between
God and the money changers who have unlawfully taken our gold and lawful money into their possession.” Today he is dismissed, sneeringly, as “one of the heroes of the Federal Reserve conspiracy theorists.” (Edward Flaherty, PublicEye.org)

But maybe McFadden said some things that are still worth listening to. In his June 10, 1932, address on the House floor, he declared, as reported in the Congressional Record:

“Mr. Chairman, we have in this country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve banks. The Federal Reserve Board, a Government board, has cheated the Government of the United States out of enough money to pay the national debt. The depredations and the iniquities of the Federal Reserve Board and the Federal Reserve banks acting together have cost this country enough money to pay the national debt several times over. This evil institution has impoverished and ruined the people of the United States , has bankrupted itself, and has practically bankrupted our Government. It has done this through defects of the law under which it operates, through the maladministration of that law by the Federal Reserve Board, and through the corrupt practices of the moneyed vultures who control it.”

Remember, this was a former bank president and member of the Republican Party speaking! McFadden added:

“From the Atlantic to the Pacific our country has been ravaged and laid waste by the evil practices of the Federal Reserve Board and the Federal Reserve banks and the interests which control them ... This is an era of economic misery, and for the conditions that caused that misery, the Federal Reserve Board and the Federal Reserve banks are fully liable.”

Further statements by McFadden in his House speeches may be found at:
http://home.hiwaay.net/~becraft/mcfadden.html As we watch today with dismay while the U.S. dollar shrinks in value and foreign investors continue to buy huge quantities of federal government debt, we might recall McFadden’s words from a 1934 speech:

“The Fed Note is essentially unsound. It is the worst currency and the most dangerous that this Country has ever known. When the proponents of the act saw that the Democratic doctrine would not permit them to let the proposed banks issue the new currency as bank notes, they should have stopped at that. They should not have foisted that kind of currency, namely, an asset currency, on the United States Government. They should not have made the Government [liable on the private] debts of individuals and corporations, and, least of all, on the private debts of foreigners.”

Of the twelve regional Federal Reserve Banks, or corporations, McFadden said in words that also prefigured the life-and-death stranglehold the Fed has over every aspect of the U.S. economy today:

“The imperial power of elasticity of the public currency is wielded exclusively by the central Corporations owned by the banks [i.e., the regional Federal Reserve Banks.] This is a life and death power over all local banks and all business. It can be used to create or destroy prosperity, to ward off or cause stringencies and panics. By making money artificially scarce, interest rates throughout the Country can be arbitrarily raised and the bank tax on all business and cost of living increased for the profit of the banks owning these regional central banks, and without the slightest benefit to the people. The twelve Corporations together cover and monopolize and use for private gain every dollar of the public currency and all public revenue of the United States . Not a dollar can be put into circulation among the people by their Government, without the consent of and on terms fixed by these twelve private money trusts.”

In language that suited the 1930s but are also prophetic of our own disjointed times, McFadden summarized his outrage by saying:

“Are you going to let these thieves get off scot free? Is there one law for the looter who drives up to the door of the United States Treasury in his limousine and another for the United States Veterans who are sleeping on the floor of a dilapidated house on the outskirts of Washington ?”

McFadden may have paid with his life for his outspokenness. After he lost his congressional seat in 1934, he remained in the public eye as a vigorous opponent of the financial system; that is, until his sudden death on October 3, 1936, of a “dose” of “intestinal flue” after attending a banquet in New York City.

Reporting his death in its October 14 issue, Pelley’s Weekly stated that it had “became known among his intimates that he had suffered two [previous] attacks against his life. The first attack came in the form of two revolver shots fired at him from ambush as he was alighting from a cab in front of one of the Capital hotels. Fortunately both shots missed him, the bullets burying themselves in the structure of the cab.”

Next, 'He became violently ill after partaking of food at a political banquet at Washington . His life was only saved from what was subsequently announced as a poisoning by the presence of a physician friend at the banquet, who at once procured a stomach pump and subjected the congressman to emergency treatment.'

Evidently the third time the assassins succeeded, and the most articulate critic of the Federal Reserve and the financiers’ control of the nation was dead. He was 60 years old.

Richard C. Cook is a former U.S. federal government analyst, whose career included service with the U.S. Civil Service Commission, the Food and Drug Administration, the Carter White House, NASA, and the U.S. Treasury Department. His articles on economics, politics, and space policy have appeared on numerous websites and in Eurasia Critic magazine. His book on monetary reform, entitled We Hold These Truths: The Hope of Monetary Reform, will be published soon by Tendril Press. He is also the author of Challenger Revealed: An Insider’s Account of How the Reagan Administration Caused the Greatest Tragedy of the Space Age, called by one reviewer, “the most important spaceflight book of the last twenty years.” His website is at www.richardccook.com.