Dear Tea Partiers, Let's Get Mad Together

Disturbing Truths About Our Government
By PAUL BUCHHEIT, COUNTERPUNCH

Not because the government does too much. But because it's done too little.

Consider a few disturbing truths:
-- We cry 'socialism!' at the mention of higher taxes, but we allow a
businessman to make enough money to pay the salaries of every police
officer, firefighter, and public school teacher in the city of Chicago.

-- The richest 1% had a big slice of the American income pie in 1980.
Since that time, they've cut a second piece of the same size for
themselves, and then a THIRD piece! Three times as much in 25 years. They
got this extra pie not from being good hard-working little boys, but from
tax cuts and deregulation.

-- As Howard Zinn argued, low-income people go to jail for thefts of a few
hundred dollars. The people who take BILLIONS from society by calling
their income "carried interest" instead of income are considered shrewd
capitalists.

-- And how about corporations, the driving force of a 'revitalized'
economy? Right now the 500 largest non-financial corporations are sitting
on $1.8 trillion in cash instead of investing in people. And they're not
paying much in taxes. The portion of federal revenue derived from
corporate income tax decreased from 33% in the 1950s to 12% in 2005.
Companies have saved billions by moving their headquarters to tax havens
such as Bermuda or the Cayman Islands. Business-backers claim that the
U.S. has one of the highest corporate tax rates among OECD countries, but
the U.S. is actually the fourth lowest among OECD countries in the
collection of corporate taxes as a percentage of GDP.

Tea Partiers, we should get mad together at government, because they've
done too little to correct these injustices. It is not in their own best
interests to raise taxes on the rich.

And we should get mad together at the mainstream media for not reporting
on the abuses of the small percentage of very wealthy people who make it
so hard on the rest of us.

Paul Buchheit teaches in the School for New Learning at DePaul University.

--
Pete
Belief is the death of intelligence--Robert Anton Wilson

Washington State Increases Basic Health Plan Premiums To Drive Poor Off The Rolls

Basic Health Plan premiums to rise sharply

By Kyung M. Song
Seattle Times health reporter

http://seattletimes.nwsource.com/html/localnews/2009314057_webbasichealth08m.html

Premiums for Washington's Basic Health Plan will as much as double in January as part of a strategy to drive thousands of members off the popular but cash-strapped state-subsidized insurance program.

Ending weeks of deliberations, officials announced this morning that they will boost Basic Health's rates by an average of 70 percent as part of their effort to boot 30,000 to 40,000 working-class people off its rolls.

Officials rejected four other potential options on how to shrink the 100,000-member pool, including a lottery and ejecting members based on how long they'd been on the program.

In the end, officials punted on the dilemma, leaving it up to the members themselves to decide whether to stay or to leave.

"This is the best possible option out of difficult choices," said Preston Cody, deputy administrator of Washington State Health Care Authority, the agency that operates Basic Health.

Currently, Basic Health's premiums range from $17 to $281 a month, depending on the member's age, income and county of residence. Starting in January, the poorest members with incomes below the poverty level will pay twice as much, $34 or $45.

Rates for higher-income enrollees will go up by about 50 percent, to about $400 a month for those 55 and older. This will be the biggest premium increase in the program's 21-year history.

In all, the average monthly premium for all members will climb to $61.60 from $36. Yet even with the increases, the average person will still will be paying only 25 percent of the actual cost of coverage, with the state chipping in the rest.

Read Entire Article:

U.S. Loses 533,000 Jobs in Biggest Drop Since 1974

By LOUIS UCHITELLE, EDMUND L. ANDREWS and STEPHEN LABATON

This article was reported by Louis Uchitelle, Edmund L. Andrews and Stephen Labaton and written by Mr. Uchitelle.

The government’s report of a giant job loss in November, the biggest monthly decline in a generation, puts more pressure on Congress and the administration to move quickly on a stimulus package, mortgage relief and perhaps financial aid for Detroit’s big automakers.

The nation’s employers cut 533,000 jobs in November, the Bureau of Labor Statistics reported Friday.

Not since December 1974, toward the end of a severe recession, have so many jobs disappeared in a single month — and the current recession, far from ending, appears to be just gathering steam.

“We are caught in a downward spiral in which employment, incomes and spending are collapsing together,” said Nigel Gault, chief domestic economist for IHS Global Insight. “With private spending frozen, we have no choice but to rely on a stimulus package to revive the economy.”

The unemployment rate rose to 6.7 percent, up just two-tenths of a percentage point from October, but up six-tenths over the last three months. More than 420,000 men and women who had been working or seeking work in October left the labor force in November.

More significantly, the unemployment rate does not include those too discouraged to look for work any longer or those working fewer hours than they would like. Add those people to the roster of the unemployed, and the rate hit a record 12.5 percent in November, up 1.5 percentage points since September.

Noting that 1.9 million jobs have been lost since the start of the recession a year ago — two-thirds of them since September — President-elect Barack Obama invoked public spending as the best way to get a dead-in-the-water economy moving again. “This painful crisis,” he said in a statement, is an opportunity “to improve the lives of ordinary people by rebuilding roads and modernizing schools for our children,” and by investing in clean energy projects.

A goal of all this spending is to generate 2.5 million jobs over the next two years, he said, repeating an earlier pledge. Given the accelerating job losses, hitting that target would barely recover the jobs that have disappeared over the last year.

As part of Friday’s announcement, the government revised higher its estimates of jobs lost in September and October. Instead of 524,000 jobs disappearing in those months, 723,000 were lost, or a total of 1.2 million jobs in just three months. In all, jobs have been lost in each of the last 11 months.

“Obama is being deliberately unclear about those 2.5 million jobs,” said Robert Pollin, a University of Massachusetts economist. “He is not going to add 2.5 million on top of recovering the 1.9 million that have been lost so far this year.”

Despite the deterioration of the labor market, Democrats in Congress and a lame-duck president remain in a standoff over rescue measures.

At its core, the stalemate between the Republicans and the Democrats springs from fundamentally different views about the nature of the crisis and the role of government in resolving it. The White House contends that it has rightly focused on the credit and housing markets, while the Democrats see economic problems that can be resolved only through broader intervention.

New efforts to adopt a broad economic package are likely to wait until the new president takes office and Democrats have bigger majorities in Congress. That delay poses the possibility of a deeper recession, according to some experts.

President Bush, appearing in front of cameras on Friday morning at the White House, said he was “concerned about our workers who have lost jobs.” But he offered no hint of softening his opposition to either a stimulus package or a bailout of the automobile industry, saying that the measures already put in place by the Treasury Department and the Federal Reserve to ease credit problems would take time to work.

Shortly after his appearance, a White House spokesman, Scott Stanzel, dashed any expectation of a change in policy when he said that officials expected a stimulus package would “happen in the next administration.”

Support is building for a significant stimulus package as the economy slips into a deep recession. Most forecasters expect the gross domestic product to contract in the current fourth quarter at an annual rate of 4 or 5 percent, and continue to contract through most of next year, shrinking by 2 percent for all of 2009 — a contraction that has occurred only once since World War II: in 1982, a year of severe recession.

“If there was any doubt that a very large fiscal stimulus is required, then the numbers we have been getting recently should dispel that doubt,” said Jan Hatzius, chief domestic economist for Goldman Sachs. To offset the private sector retrenchment, he added, “we will need a stimulus package of $600 billion at an annual rate, or $1.2 trillion over two years.”

Economists and policy makers increasingly share his estimate of what it will take to revive America’s $14 trillion economy, with Democratic leaders talking recently about a stimulus package of $400 billion or more.

Though any broad economic package seems to be delayed, Democrats still had faint hopes of approving next week a rescue package for the car companies. Their goal would be to prevent far more rapid deterioration in the job market.

The latest job numbers were stark evidence of a breakdown in consumer spending and business investment since mid-September, when the Treasury Department and the Federal Reserve decided to let Lehman Brothers fail, delivering a shock to the financial sector. Almost simultaneously, stock prices began a free fall, undermining the wealth and the retirement accounts of millions of Americans.

“We have recorded the largest decline in consumer confidence in our history,” said Richard T. Curtin, director of the Reuters/University of Michigan Survey of Consumers, which started its polling in the 1950s.

Job loss has played a big role in this erosion, he acknowledged. But so have fewer hours of work, smaller bonuses, less overtime, falling home prices, falling stock prices and a drumbeat of job cut announcements — the most recent, this week, from big names like AT&T, Viacom, CVS, DuPont and the Avis Budget Group.

The Dow Jones industrial average, down more than 20 percent since mid-September, fell Friday morning in response to the November jobs report, but recovered later and gained 259.18 points, or 3 percent, by the end of trading, to close at 8,635.42.

With home prices still in decline, one in 10 mortgage holders was either delinquent on loans in September or in foreclosure, the Mortgage Bankers Association reported Friday. That was up from 9.2 percent in June and the highest percentage since the association began to collect this data 30 years ago.

The mortgage crisis makes lenders ever more reluctant to lend for the purchase of homes, autos and other big consumer items. In more normal times, lenders bundle these loans into securities and sell them. The buyers of these securities have disappeared in the current credit crisis, however, and the Federal Reserve is considering ways for lenders to borrow from the Fed, using the securities as collateral.

Jobs disappeared last month from every sector of the economy except health care and state government, which mainly added educators. The biggest losses were in manufacturing, construction, retailing — despite the first month of Christmas shopping — financial services, hotel and restaurant work and temporary workers. Over the course of the recession, 604,000 jobs — nearly one-third of the total — have been eliminated in manufacturing, and the Big Three automakers promise more layoffs to qualify for a federal bailout.

“Business shut down in November,” said Mark Zandi, chief economist at Moody’s Economy.com. “Businesses are in survival mode and are slashing jobs and investment to conserve cash. Unless credit starts flowing soon, big job losses will continue well into next year.”

The administration says its recent actions are beginning to make credit flow more easily. “We are pulling some very significant levers on the economy right now, through what we’re doing with Treasury and what we’re doing with the Fed,” said Tony Fratto, a White House spokesman.

Jack Healy contributed reporting.

While Some of Us Are Hoping for Change, Others Are Literally Starving for It

By Chris Hedges, Truthdig
http://www.alternet.org/story/108622/

Elba Figueroa worked as a nurse’s aide until she got Parkinson’s disease. She lost her job. She lost her health care. She receives $703 a month in government assistance. Her rent alone costs $750. And so she borrows money from friends and neighbors every month to stay in her apartment. She laboriously negotiates her wheelchair up and down steps and along the frigid sidewalks of Trenton, N.J., to get to soup kitchens and food pantries to eat.

“Food prices have gone up,” the 47-year-old Figueroa said, waiting to get inside the food pantry run by the Crisis Ministry of Princeton and Trenton. “I don’t have any money. I run out of things to eat. I worked until I physically could not work anymore. Now I live like this.”

The pantry, which occupies a dilapidated three-story art deco building in Old Trenton, one of the poorest sections of the city, is one of about two dozen charities that struggle to provide shelter and food to the poor. Those who quality for assistance are permitted to come once a month and push a shopping cart in a U shape around the first floor where, clutching a piece of paper with allotted points, they can stock up on items using the pantry’s point system according to the number of people in a household. The shelves of the pantry hold bags of rice, jars of peanut butter, macaroni and cheese and cans of beets, corn and peas. Two refrigerated cases hold eggs, chickens, fresh carrots and beef hot dogs. “All Fresh Produce 2 pounds = 1 point,” a sign on the glass door of the refrigerated unit reads. Another reads: “1 Dozen EGGS equal 3 protein points. Limit of 1 dozen per household.”

The swelling numbers waiting outside homeless shelters and food pantries around the country, many of them elderly or single women with children, have grown by at least 30 percent since the summer. General welfare recipients receive $140 a month in cash and another $140 in food stamps. This is all many in Trenton and other impoverished areas have to live on.

Trenton, a former manufacturing center that has a 20 percent unemployment rate and a median income of $33,000, is a window into our current unraveling. The financial meltdown is plunging the working class and the poor into levels of destitution unseen since the Depression. And as the government squanders taxpayer money in fruitless schemes to prop up insolvent banks and investment houses, citizens are callously thrown onto the street without work, a place to live or enough food.

The statistics are already grim. Our banking and investment system, holding perhaps $2 trillion in worthless assets, cannot be saved, even with the $700 billion of taxpayer money recklessly thrown into its financial black hole. Our decline is irrevocable. The number of private sector jobs has dropped for the past 10 months and at least a quarter of all businesses say they plan to cut more jobs over the next year. The nation’s largest banks, including Citigroup, face collapse. Retail sales fell in October by the largest monthly drop on record. Auto companies are on the edge of bankruptcy. The official unemployment figures, which duplicitously mask real unemployment that is probably now at least 10 percent nationwide, are up to 6.1 percent and headed higher. We have lost 1.2 million jobs since January. Young men of color have 50 percent unemployment rates in cities such as Trenton. Twelve million houses are worth less than their mortgages and a million people will lose their homes this year in foreclosures. The current trends, if not swiftly reversed, mean that one in 33 home owners will face foreclosure.

There are now 36.2 million Americans who cope daily with hunger, up by more than 3 million since 2000, according to the Food Research and Action Center in Washington, D.C. The number of people in the worst-off category -- the hungriest -- rose by 40 percent since 2000, to nearly 12 million people.

“We are seeing people we have not seen for a long time,” said the Rev. Jarret Kerbel, director of the Crisis Ministry’s food pantry, which supplies food to 1,400 households in Trenton each month. “We are seeing people who haven’t crossed that threshold for five, six or seven years coming back. We are seeing people whose unemployment has run out and they are struggling in that gap while they reapply and, of course, we are seeing the usual unemployed. This will be the first real test of [Bill] Clinton’s so-called welfare reform.”

The Crisis Ministry, like many hard-pressed charities, is over budget and food stocks are precariously low. Donations are on the decline. There are days when soup kitchens in Trenton are shut down because they have no food.

“We collected 170 bags of groceries from a church in Princeton and it was gone in two days,” Kerbel said. “We collected 288 bags from a Jewish center in Princeton and it was gone in three days. What you see on the shelves is pretty much what we have.”

The largess of Congress to Wall Street bankers and investors does not extend to the growing ranks of the poor. The U.S. Department of Agriculture’s Emergency Food Assistance Program donated $240 million in surplus food in 2003 to food banks and other programs. Those donations fell last year to $59 million.

States, facing dramatic budget shortfalls, are slashing social assistance programs, including Medicaid, social services and education. New Jersey’s shortfall has tripled to $1.2 billion and could soar to $5 billion for the next fiscal year. Tax revenue has fallen to $211 million less than projected. States are imposing hiring freezes, canceling raises and cutting back on services big and small, from salting and plowing streets in winter to heating assistance programs. Unemployment insurance funds, especially with the proposed extension of benefits, are running out of money. Governors such as Arnold Schwarzenegger in California and David A. Paterson in New York have called special legislative sessions to deal with the crisis.

If Barack Obama continues to turn to the elites who created the mess, if he does not radically redirect the nation’s resources to assist the working class and the poor, we will become a third-world country. We will waste gargantuan amounts of money we cannot afford on our military, our national security state and bloated corporations while we damn the middle and working class to the whims, idiocy and greed of an entrenched, corporate oligarchy. Obama’s appointments of Timothy Geithner as treasury secretary and Lawrence Summers as director of the National Economic Council are ominous signals that these elites remain entrenched.

Dolores Williams, 57, sat in the cramped waiting room at the Crisis Ministry clutching a numbered card, waiting for it to be called. She has lived in a low-income apartment block known as The Kingsbury for a year. Two residents, she said, recently jumped to their deaths from the 19th floor. She had a job at Sam’s Club but lost it. No one, she says, is hiring. She is desperate.

She handed me a copy of The Trentonian, a local paper. The headline on the front page read: “Gangster Slammed for Bicycle Drive-By.” It was the story of the conviction of a man for a fatal drive-by shooting from a bicycle. The paper, as I flipped through it, was filled with stories like these, the result of social, economic and moral collapse. Poverty breeds more than hunger. It destroys communities. There was a report about a 56-year-old woman who was robbed and pistol-whipped in the middle of the afternoon. There was an article about the plight of four children whose two parents had been shot and seriously wounded. “Libraries OK Now, but Future Is Murky” a headline read. Another announced: “Still No Arrests in Hooker Slayings.”

“It is like this every day,” Williams said.

So while our nation crumbles, physically and morally, while our empire implodes, while our economy tanks, the bankrupt elites who got us here play the merry-go-round game of power in Washington. They will continue to oversee our demise, including the obscene drain of our military and security budget, which now accounts for half of all discretionary spending. Pentagon officials have reportedly asked the Obama transition team for $581 billion, an increase of $67 billion. This increase does not, of course, include the $3 trillion for the wars in Afghanistan and Iraq. We will pay these loans later.

Banks, automotive companies and investment firms, all sinking under the weight of their own incompetence and greed, head to Washington, usually in private jets, to engage in the largest looting of the treasury in American history. And Congress doles out our money without oversight in the greatest transference of wealth upwards in modern times.

As this pitiful march of folly rolls forward, children in Trenton and across America go to bed hungry.

Chris Hedges, a Pulitzer prize-winning reporter, is a Senior Fellow at the Nation Institute. His latest book is Collateral Damage: America's War Against Iraqi Civilians.

What it would cost to look like Laura Bush and Cindy McCain at GOP convention

Vanity Fair

Laura Bush:
Oscar de la Renta suit: $2,500
Stuart Weitzman heels: $325
Pearl stud earrings: $600-$1,500*
Total: Between $3,425 and $4,325

Cindy McCain:
Oscar de la Renta dress: $3,000
Chanel J12 White Ceramic Watch: $4,500*
Three-carat diamond earrings: $280,000*
Four-strand pearl necklace: $11,000-$25,000*
Shoes, designer unknown: $600
Total: Between $299,100 and $313,100

*assuming jewelry is real

Everything you always wanted to know about Fannie Mae and Freddie Mac

Adhip Chaudhuri, Al Jazeera - Both Fannie Mae and Freddie Mac are US government "sponsored" home loan banks. Each of them have formal names, but are primarily known by their nicknames. In fact, both these institutions prefer to go by their nicknames rather than their official names. That's like the US government going by "Uncle Sam" all the time.

Fannie Mae was created by the government in 1938 to guarantee mortgage loans made by private banks.
After the Great Depression, which was characterised by bank failures on the one hand, and substantial losses of income on the part of large number of households on the other, the private mortgage market was providing mortgage loans to too few households.

The objective of the Roosevelt Administration was to restore widespread homeownership, which had become almost an ideology in the United States from early on in the twentieth century.

Thirty years later, in 1968, the government freed Fannie Mae from its control and privatized it with a Congressional charter. It became just like any other bank, except that it still did not make mortgage loans directly to the public. Instead, it bought up what is called the "secondary" market - the mortgages which had already been made by the private banks.

Two years later, in 1970, the US government created Freddie Mac, an exact duplicate of Fannie Mae. The reason behind a second institution was that high economic growth of the 1960s had led to rising incomes and the resulting widespread homeownership made just one government sponsored mortgage institution, namely Fannie Mae, unappealingly, if not scarily, large.

Both Fannie Mae and Freddie Mac have been private enterprises since then, up until September 7, 2008.
They have stockholders who provide the equity capital, they both sell bonds to raise funds, and they both pay for their operations out of their profits. There has been no money paid by the American taxpayers to these two institutions.

The two were "sponsored" banks, meaning that there was an implicit guarantee from the US government that it would not allow these two institutions to fail.

The principal act that Fannie Mae and Freddie Mac are mandated to do is to buy mortgages from private banks. The private banks, meanwhile, make mortgage loans with the comfort of knowing that they will be able turn around and sell those loans to Fannie Mae and Freddie Mac.

This comfort has two aspects. First, the banks which make the initial loans in the primary market get their liquidity back when they sell off their mortgages in the secondary market to Fannie Mae and Freddie Mac.

They can, therefore, make fresh mortgages to new customers with the funds they received from selling the previous mortgages, thereby making it possible for greater homeownership.

The second benefit that private banks get from the existence of Fannie Mae and Freddie Mac is that they can offer mortgages to middle class and low income households at affordable interest rates with the sure knowledge that Fannie Mae and Freddie Mac will take those mortgages over.

Where do Fannie Mae and Freddie Mac . . . raise funds first by issuing bonds on Wall Street just like any private company.

Then, in addition, they sell some of their mortgage holdings in the tertiary markets. They pool together a lot of mortgages and create a marketable security. These are called mortgage backed securities. If any household, whose mortgage is part of a MBS, fails to pay its mortgage obligation for, say, a month, then Fannie Mae or Freddie Mac, whoever is the relevant party, will make good the payment to the MBS holder.

Similarly, if there is a foreclosure and the sale price of the distress sale ends up being less than the value of the mortgage, then Fannie Mae and Freddie Mac will make up the difference.

A lot of these MBS are sold in foreign markets, especially to central banks with large US dollar holdings. The central bank of China is reputed to be holding $340 billion worth of MBS. . .

The overly aggressive primary mortgage lenders knew full well that Fannie Mae and Freddie Mac would have to buy up all the mortgages below the congressional cap of $417,000.

The primary mortgage companies get their profits from commissions and fees per mortgage that they make, and not from the repayments of principal plus interest from the mortgage borrowers, that is, the homeowner. That is why they were so reckless in their lending - it is a classic case of "moral hazard".

As the housing prices have plummeted, there have been two problems that have hurt Fannie Mae and Freddie Mac very badly. First, they have had to make increasing payments to cover the defaults in the MBS which the two institutions have sold.

Second, they have had to set aside reserves for those mortgages in their own portfolios which are "non-performing", meaning that the borrower cannot keep up with their payments. These set-aside reserves do not earn any income for the two mortgage institutions and hence, contribute to losses.

As the profitability of Fannie Mae and Freddie Mac decreased, their borrowing costs went up, squeezing the interest rate differential between what they earn from the mortgages they hold and the rate they have to pay on the bonds that they issue.

Fannie Mae and Freddie Mac did not help themselves during the crisis much either. They did not implement the guidelines they normally impose on the primary mortgage lenders, but instead they accepted many bad mortgages including "sub-prime" mortgages.

"Sub-prime" mortgages refer to those loans which were made without the necessary information on the borrowers. For example, a "sub-prime" mortgage may not require borrowers to disclose their incomes.

In addition the two institutions followed highly spurious accounting concepts to overstate their capital base. And lastly, they continued paying their top executives obscenely high salaries, even when their stock values fell by 80 per cent.

Legally speaking, the US government has put the two institutions under its "conservatorship". It's not clear what exactly does that mean.

The following is what we know now: The US government will immediately take hold of $1 billion worth of equity in each of the institutions. These will be in the form of preferred stocks with a guaranteed 10 per cent rate of return. These $1 billion infusions are however, not real cash infusions but rather, just compensation for the privilege of being expropriated by the US government.

The government has allowed itself to infuse as much as $100 billion to each of the institutions, and thus the American tax payers could be out $200 billion by the time the housing crisis plays itself out. The savings and loan crisis cost the tax payers $120 billion. Presumably, this bail-out will be less expensive.

In addition, all cash infusions by the US government will be more like an investment because they will receive a 10 per cent return. . .

Government steps in again, bails out AIG with $85B

Socialism, or state capitalism, is getting very, very popular in these dark economic times. The people, for their part, are very proud to help out these grand and noble institutions of American magnanimity. During times of abject poverty among the dispossessed, these beneficent money changers have always stepped in and provided whatever was needed without asking for a return, knowing that their very existence - their charters - were held in trust by the people of this nation.

Wait...

Oh no, I think that was a dream I had. There was also something about a fish and a bicycle as well as a pig's eye. Sorry, carry on. Just the private sector gladly robbing us yet again with the help of their friends in government. See, socialism works - for the wealthy, anyway.--Pete

By Jeannine Aversa, Ieva M. Augstums and Stephen Bernard, AP Business Writers Government saves AIG with $85 billion loan, takes 80 percent stake in battered insurance giant WASHINGTON (AP) -- Another day, but not just another bailout. This one's a stunning government takeover.

In the most far-reaching intervention into the private sector ever for the Federal Reserve, the government stepped in Tuesday to rescue American International Group Inc. with an $85 billion injection of taxpayer money. Under the deal, the government will get a 79.9 percent stake in one of the world's largest insurers and the right to remove senior management.

AIG's chief executive, Robert Willumstad, is expected to be replaced by Edward Liddy, the former head of insurer Allstate Corp., according to The Wall Street Journal, citing a person it did not name. Willumstad had been at the helm of AIG since June.

A call to AIG to confirm the executive change was not immediately returned.

It was the second time this month the feds put taxpayer money on the hook to rescue a private financial company, saying its failure would further disrupt markets and threaten the already fragile economy.

AIG said it will repay the money in full with proceeds from the sales of some of its assets. It will be up to the company to decide which assets to sell and the timing. The government does, however, have veto power.

Under the deal, the Federal Reserve will provide a two-year $85 billion emergency loan at an interest rate of about 11.5 percent to AIG, which teetered on the edge of failure because of stresses caused by the collapse of the subprime mortgage market and the credit crunch that ensued. In return, the government will get a 79.9 percent stake in AIG and the right to remove senior management.

AIG shares sank $1.34, or 36 percent, to $2.41 in morning trading Wednesday. They traded as high as $70.13 in the past year.

The government's move was similar to its bailout of Sept. 7 of mortgage giants Fannie Mae and Freddie Mac, where the Treasury Department said it was prepared to put up as much as $100 billion over time in each of the companies if needed to keep them from going broke.

The Fed said it determined that a disorderly failure of AIG could hurt the already delicate financial markets and the economy.

It also could "lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance," the Fed said in a statement.

The decision to help AIG marked a reversal for the government from the weekend, when it refused to use taxpayer money to bail out Lehman Brothers Holdings Inc. Lehman, which filed for bankruptcy protection Monday, collapsed under the weight of mounting losses related to its real estate holdings.

The White House said it backed the Fed's decision Tuesday.

"These steps are taken in the interest of promoting stability in financial markets and limiting damage to the broader economy, " White House spokesman Tony Fratto said.

After meeting with Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke in a late-night briefing on Capitol Hill, Congressional leaders said they understood the need for the bailout.

"The administration is approaching an unprecedented step, but unfortunately we are living in unprecedented times. Hearing of these plans, you have to stop to catch your breath. But upon reflection, the alternatives are much worse," said Sen. Charles Schumer, D-N.Y.

In a statement late Tuesday, AIG's board of directors said the loan will protect all AIG policy holders, address concerns of rating agencies and buy the company time to sell off assets.

"We expect that the proceeds of these sales will be sufficient to repay the loan in full and enable AIG's businesses to continue as substantial participants in their respective markets," the statement said. "In return for providing this essential support, American taxpayers will receive a substantial majority ownership interest in AIG."

New York officials said the deal helps stave off a fiscal crisis for the state. AIG is based in New York.

"Policy holders will be protected, jobs will be saved," New York Gov. David Paterson said Tuesday night.

In an interview on ABC's "Good Morning America" program Wednesday, former longtime AIG CEO Maurice "Hank" Greenberg was asked whether critics are being fair who say the situation at AIG and the financial markets generally happened because of greed, bad business practices and corruption.

"No, I think it's an unfair appraisal," said Greenberg, who was replaced as CEO three years ago as part of an accounting probe. "You know, there are many things that contributed to this unfortunate episode. after I left the company, all the risk management procedures that we had in place were obviously dismantled. I can't explain that. There's a new board of directors. One should be asking that board of directors what they did and why."

Greenberg said he has lost "my entire net worth. Literally, my entire net worth.'

"Worked 40 years building the greatest insurance company in history, one that everyone in the world envied who was in this industry. I'll get by, but my heart goes out for the thousands and thousands of employees and their families who shareholders and not only in the united states but worldwide. That is a tragedy," he said.

The Fed's move was part of a concerted push to help calm jittery markets and investors around the world.

On Tuesday, the Fed decided to keep its key interest rate steady at 2 percent, but acknowledged stresses in financial markets have grown and hinted it stood ready to lower rates if needed.

The central bank also pumped $70 billion into the nation's financial system to help ease credit stresses. In emergency sessions over the weekend, the Fed expanded its loan programs to Wall Street firms, part of an ongoing effort to get credit flowing more freely.

The stock market, which Monday posted its largest point loss session since the Sept. 11 attacks, recovered Tuesday after the Fed's decision on interest rates. The Dow Jones industrials rose 141 points after losing 500 points on Monday.

AIG's shares swung violently, though, as rumors of potential deals involving the government or private parties emerged and were dashed. By late Tuesday, its shares had closed down 20 percent -- and another 45 percent after hours.

The problems at AIG stemmed from its insurance of mortgage-backed securities and other risky debt against default. If AIG couldn't make good on its promise to pay back soured debt, investors feared the consequences would pose a greater threat to the U.S. financial system than this week's collapse of the investment bank Lehman Brothers.

The worries were heightened Monday after Moody's Investor Service, Standard and Poor's and Fitch Ratings lowered AIG's credit ratings, forcing AIG to seek more money for collateral against its insurance contracts. Without that money, AIG would have defaulted on its obligations and the buyers of its insurance -- such as banks and other financial companies -- would have found themselves without protection against losses on the debt they hold.

Socialism for the wealthy, capitalism for the poor

It's been readily apparent to anyone with an education that socialism is alive and well and entrenched deeply wthin the private sector, which admittedly sounds like an oxymoron.

Major corporate loss is always socialized and the citizenry is always penalized for the obscene excesses and the attendant economic disasters of the wealthy classes.

It is only profit that is privatized.--Pete


By ZACHARY A. GOLDFARB, DAVID CHO and BINYAMIN APPELBAUM, Washington Post

For years I've watched well-meaning low income housing organizations like LISC put poor and moderate income people into homes they couldn't afford. I wonder how much of the banking crisis stems from failed mortgages made by the nonprofit sector. (not nearly as much as the private sector, idiot, but I guess you had to lay some of the the blame elsewhere, the current economic failure being as catastrophic as it is, right? Gotta wonder why it was the non-profits you were watching so closely when the real action was being perpetrated by your heroes, the money changers!--Pete)

WASHINGTON - The Bush administration on Saturday prepared to take over the troubled housing finance companies Fannie Mae and Freddie Mac, after concluding the companies don't have enough capital to continue to play their crucial role funding home mortgages.

Under the plan, engineered by Treasury Secretary Henry Paulson, the government would place the two companies under "conservatorship," a legal status akin to Chapter 11 bankruptcy. Their boards and chief executives would be fired and a government agency, the Federal Housing Finance Agency, would appoint new chief executives.

The action, which would be one of the most sweeping government interventions in private financial markets in decades, is planned for today, according to several sources.

Authorities see Fannie Mae and Freddie Mac as crucial to the recovery of the housing market. They have funded 70 percent of home loans in recent months. A reduction in their activities could send mortgage rates that ordinary home buyers pay soaring and result in a new, deeper crisis for the already reeling housing market.

Moreover, regulators are trying to prevent Fannie Mae and Freddie Mac's problems from triggering a new wave of failures among banks, which hold vast reserves of bonds and preferred shares issued by the two firms.

The administration is not expected to say how much the bailout ultimately will cost, in part because it does not know how much the Treasury will be able to ultimately sell the assets for. It could be politically uncomfortable to put a price tag on a huge bailout, only two months before the presidential election. The Congressional Budget Office said two months ago that it was impossible to say how much a bailout would cost, but estimated $25 billion based on the companies' projected losses at the time.

Real Road Rage

June, 24 2008 By Mumia Abu-Jamal

As the price of gasoline soars, Americans are forced to think in ways that they haven't in generations: to drive, or not to drive?

Do they park the car and opt for public transportation?

Or do they try to sell the ole gas guzzler (better known as SUVs) for a tiny foreign import?

For most of the latter 20th century, a car was seen as an American right, more sacred than freedom of the press, for while many may've felt that the functions of a free press was problematic, the freedom to drive (with relatively cheap gas) was part of the national psyche.

For 50 years suburbs sprang up in the hinterlands of major American cities -- white rings around blacker and bleaker urban centers. Those mass migrations were made possible by the car, and affordable gas.

Those days are fast receding into yesteryear as gas prices break records almost daily.

And despite the sound and fury echoing from the nation's Capitol, or various presidential campaigns, the simple truth is that U.S. politicians have little impact on this phenomenon.

That's because oil is an international resource, affected by global economic and political forces beyond American control. It's also true that the toxic tensions released by the Iraq war have destabilized the region so much that a mere rumor can send prices spiking, feeding speculation, which profits from his cycle.

In 2003, before bombing even began over Baghdad, oil was selling at nearly $30 a barrel.

It's now over $135 a barrel.

More than a natural resource, oil has become a financial asset in itself, like stocks, bonds, real estate or gold. And like many assets, as long as it appreciates in value it will attract speculators who trade in oil futures, and in the absence of any real regulation, will push the price as far as the market will bear (and, after all, isn't that what a 'free market' means?).

One industry observer, Daniel Yergin, of the Cambridge Energy Research Associates, noted, "People are hedging against a falling dollar by buying oil and that hits the price. The most important thing that could be done would be for the dollar to rebound. And that is nothing you can legislate. " * Moreover, some industry experts have written that speculation hikes prices from 20 to 40%! That means that the price of a barrel of oil is really closer to $54 than $135, and thus that the price per gallon should be closer to $2.70!

So, the next time you coast into a gas station, and your jaw tightens as you notice the latest gas prices, remember why. That price was spiked by the twin forces of the Iraq war, and the government policy of deregulation.

Those who expect politicians to ease this problem are dreaming, as shown by the rejection of a recent bill seeking a windfall profits tax on oil companies in the Senate.

Exxon, for example, made more money in the last several quarters than any corporation in the history of business. Will the politicians who accepted millions from the likes of them choke this golden goose?

I think not.

So, get angry at the goof who just cut you off, or stole your parking space. Get angry at the car full of boys who are banging the bass so loudly the highway is bouncing.

Get angry at everybody, except the system that made this situation inevitable.

Mumia Abu-Jamal is an acclaimed American journalist and author who has been writing from Death Row for more than twenty-five years. Mumia was sentenced to death after a trial that was so flagrantly racist that Amnesty International published a detailed report describing how the trial "failed to meet minimum international standards safeguarding the fairness of legal proceedings." Mumia is author of many books, including Jailhouse Lawyers: Prisoners Defending Prisoners vs. The USA, forthcoming from City Lights Books.

Note

[*Source: Mouawad, Jad, "Oil Prices Are Up and Politicians Are Angry, Yawn.," New York Times, May 11, 2008, Sun., p.2 (Week in Review section).

---

From:	Z Space - The Spirit Of Resistance Lives
URL:	http://www.zcommunications.org/zspace/commentaries/3533

Housing prices falling faster than during Great Depression

This is the time when the house-of-cards that is corporate crony capitalism will have to withstand the worst hit it has taken in its inequitable, wealth-to-the-wealthy history. The housing crisis is just the catalyst for the rest of the dominoes to fall.

It is a good thing to remember, though, that banks get bailed out while people get thrown out. The government, while not understanding how, will try to do everything to artificially prop up this dead dinosaur, beginning with the ridiculous "stimulus" rebates (used mine to pay down debt - not an approved usage). We need to be ready with our alternatives at the right time in the right place. Participatory Economics Now.--Pete

AMERICA'S HOUSE PRICES ARE FALLING EVEN FASTER THAN DURING THE GREAT DEPRESSION

ECONOMIST As house prices in America continue their rapid descent, market-watchers are having to cast back ever further for gloomy comparisons. The latest S&P/Case-Shiller national house-price index, published this week, showed a slump of 14.1% in the year to the first quarter, the worst since the index began 20 years ago. Now Robert Shiller, an economist at Yale University and co-inventor of the index, has compiled a version that stretches back over a century. This shows that the latest fall in nominal prices is already much bigger than the 10.5% drop in 1932, the worst point of the Depression. And things are even worse than they look. In the deflationary 1930s house prices declined less in real terms. Today inflation is running at a brisk pace, so property prices have fallen by a staggering 18% in real terms over the past year.

Retailing Chains Caught in a Wave of Bankruptcies

The end is near for corporate capitalism, or will the chieftains invent a new re-animation formula?--Pete

By MICHAEL BARBARO

The consumer spending slump and tightening credit markets are unleashing a widening wave of bankruptcies in American retailing, prompting thousands of store closings that are expected to remake suburban malls and downtown shopping districts across the country.

Since last fall, eight mostly midsize chains — as diverse as the furniture store Levitz and the electronics seller Sharper Image — have filed for bankruptcy protection as they staggered under mounting debt and declining sales.

But the troubles are quickly spreading to bigger national companies, like Linens ‘n Things, the bedding and furniture retailer with 500 stores in 47 states. It may file for bankruptcy as early as this week, according to people briefed on the matter.

Even retailers that can avoid bankruptcy are shutting down stores to preserve cash through what could be a long economic downturn. Over the next year, Foot Locker said it would close 140 stores, Ann Taylor will start to shutter 117, and the jeweler Zales will close 100.

The surging cost of necessities has led to a national belt-tightening among consumers. Figures released on Monday showed that spending on food and gasoline is crowding out other purchases, leaving people with less to spend on furniture, clothing and electronics. Consequently, chains specializing in those goods are proving vulnerable.

Retailing is a business with big ups and downs during the year, and retailers rely heavily on borrowed money to finance their purchases of merchandise and even to meet payrolls during slow periods. Yet the nation’s banks, struggling with the growing mortgage crisis, have started to balk at extending new loans, effectively cutting up the retail industry’s collective credit cards.

“You have the makings of a wave of significant bankruptcies,” said Al Koch, who helped bring Kmart out of bankruptcy in 2003 as the company’s interim chief financial officer and works at a corporate turnaround firm called AlixPartners.

“For years, no deal was too ugly to finance,” he said. “But now, nobody will throw money at these companies.”

Because retailers rely on a broad network of suppliers, their bankruptcies are rippling across the economy. The cash-short chains are leaving behind tens of millions of dollars in unpaid bills to shipping companies, furniture manufacturers, mall owners and advertising agencies. Many are unlikely to be paid in full, spreading the economic pain.

When it filed for bankruptcy, Sharper Image owed $6.6 million to United Parcel Service. The furniture chain Levitz owed Sealy $1.4 million.

And it is not just large companies that are absorbing the losses. When Domain, the furniture retailer, filed for bankruptcy, it owed On Time Express, a 90-employee transportation and logistics company in Tempe, Ariz., about $30,000.

“We’ll be lucky to see pennies on the dollar, if we see anything,” said Ross Musil, the chief financial officer of On Time Express. “It’s a big loss.”

Most of the ailing companies have filed for reorganization, not liquidation, under the bankruptcy laws, including the furniture chain Wickes, the housewares seller Fortunoff, Harvey Electronics and the catalog retailer Lillian Vernon. But, in a contrast with previous recessions, many are unlikely to emerge from bankruptcy, lawyers and industry experts said.

Changes in the federal bankruptcy code in 2005 significantly tightened deadlines for ailing companies to restructure their businesses, offering them less leeway.

And the changes may force companies to pay suppliers before paying wages or honoring obligations to customers, like redeeming gift cards, said Sally Henry, a partner in the bankruptcy law practice at Skadden, Arps, Slate, Meagher & Flom and the author of several books on bankruptcy.

As a result, she said, “it’s no longer reorganization or even liquidation for these companies. In many cases, it’s evaporation.”

Several of the retailers that filed for Chapter 11 bankruptcy protection over the last eight months, like the furniture sellers Bombay, Levitz and Domain, have begun to wind down — closing stores, laying off workers and liquidating merchandise.

In most cases, the collapses stemmed from a combination of factors: flawed business strategies, a souring economy and banks’ unwillingness to issue cheap loans.

Bombay, a chain with 360 stores, was considered a success in the furniture world, after its sales surged from $393 million in 1999 to $596 million in 2003.

Then the chain decided to move most of its stores out of enclosed malls into open-air shopping centers. It started a children’s furniture business, called BombayKids. And it started carrying bigger items, like beds and upholstered couches, with higher prices than its regular furniture.

Consumers balked at the changes, hurting Bombay’s sales and profits at the same time that its expenses for the ambitious new strategies began to grow. The timing was unenviable: By early 2007, the housing market began to falter, so purchases of furniture slowed to a trickle.

The company was running out of money, but banks refused to lend more. “They did not want to take the chance that we might not repay the loans,” Elaine D. Crowley, the chief financial officer, said in an interview.

In September 2007, Bombay filed for bankruptcy protection. The highest bid for the company came from liquidation firms, who quickly dismembered the 33-year-old chain. Bombay, which once employed 3,608, now has 20 employees left. “It is very difficult and sad,” Ms. Crowley said.

The bankruptcies are putting a spotlight on a little-discussed facet of retailing: heavy debt.

Stores may appear to mint money by paying $2 for a T-shirt and charging $10 for it. But because shopping is based on weather patterns and fashion trends, retailers must pay for merchandise that may sit, unsold, on shelves for long periods.

So chains regularly borrow large sums to cover routine expenses, like wages and electricity bills. When sales are strong, as they typically are during the holiday season, the debts are repaid.

Fortunoff, a jewelry and home furnishing chain in the Northeast, relied on $90 million in loans to help operate its 23 stores, using merchandise as collateral.

But by early 2008, as the housing market struggled, the chain’s profits dropped, meaning its collateral was losing value and the amount it could borrow fell.

In better economic times, the banks might have granted Fortunoff a reprieve. But with a recession looming, they refused, forcing it to file for bankruptcy in February. In filings, the chain said it was “facing a liquidity crisis.” (Fortunoff was later sold to the owner of Lord & Taylor.)

Plenty of retailers remain on strong footing. Arnold H. Aronson, the former chief executive of Saks Fifth Avenue and a managing director at Kurt Salmon Associates, a retail consulting firm, said the credit tightness and consumer spending slowdown have only wiped out the “bottom tier” companies in retailing.

“This recession dealt the final blow to these chains,” he said. But several big-name chains are looking vulnerable. Linens ’n Things, which is owned by Apollo Management, a private equity firm, is considering a bankruptcy filing after years of poor performance and mounting debts, though it has additional options, people involved in the discussions said Monday.

Whether more chains file for bankruptcy or not, it will be hard to miss the impact of the industry’s troubles in the nation’s malls.

J. C. Penney, Lowe’s and Office Depot are scaling back or delaying expansion. Office Depot had planned to open 150 stores this year; now it will open 75.

The International Council of Shopping Centers, a trade group, estimates there will be 5,770 store closings in 2008, up 25 percent from 2007, when there were 4,603.

Charming Shoppes, which owns the women’s clothing retailers Lane Bryant and Fashion Bug, is closing at least 150 stores. Wilsons the Leather Experts will close 158. And Pacific Sunwear is shutting a 153-store chain called Demo.

Those decisions were made months ago, when it was unclear how long the downturn in consumer spending might last. If March was any indication, it is nowhere near over. Sales at stores open at least a year fell 0.5 percent, the worst performance in 13 years, according to the shopping council.

IMF Says Mortgage Crisis Largest Financial Shock Since Great Depression

GUARDIAN, UK America's mortgage crisis has spiraled into "the largest financial shock since the Great Depression" and there is now a one-in-four chance of a full-blown global recession over the next 12 months, the International Monetary Fund warned. The US is already sliding into what the IMF predicts will be a "mild recession" but there is mounting pessimism about the ability of the rest of the world to escape unscathed, the IMF said in its twice-yearly World Economic Outlook. Britain is particularly vulnerable, it warned, as it slashed its growth targets for both the US and the UK. The report made it clear that there will be no early resolution to the global financial crisis.

"The financial shock that erupted in August 2007, as the US sub-prime mortgage market was derailed by the reversal of the housing boom, has spread quickly and unpredictably to inflict extensive damage on markets and institutions at the heart of the financial system," it said.

After warning earlier this week that the world's financial firms could end up shouldering $1 trillion worth of losses from the credit crunch, the IMF said it expects the US to achieve GDP growth of just 0.5% this year, and 0.6% in 2008, with the housing crash getting even worse.

Toxic Toys, Deadly Dog Food and Other Wonders of "Free Trade"

By Todd Tucker, Eyes on Trade
Posted on August 21, 2007
http://www.alternet.org/story/60323/

The Times had this gem this morning:

Separately, laboratory tests have found that some Chinese-made vinyl baby bibs sold at Toys "R" Us stores appear to be contaminated with lead.

Industry analysts said Mattel's woes are part of a much larger problem.

"If I went down the shelves of Wal-Mart and tested everything, I'm going to find serious problems," said Sean McGowan, managing director and the toy analyst at Wedbush Morgan Securities. "The idea that Mattel -- with its high standards -- has a bigger problem than everybody else is laughable. If we don't see an increase of recalls in this industry, then it's a case of denial."

Even Mattel executives said repeatedlyyesterday that the company may have more recalls.

"No system is perfect," Robert A. Eckert, Mattel's chairman and chief executive, said in a conference call. "There's no guarantee that we will not be here again."

Wow. Before yesterday, these mega corporations were saying, oh, it's just a few bad apples caught up in the supply chain. (Kinda like Enron… remember that?) Now, we have the mega-corps admitting that - no, actually it's part of the design of the system.

System?! You mean it's not just a few bad apples? How could such a "system" have ever been devised? Did anyone ever vote on this "system", because I can't imagine it would be popular among anyone that, well, eats or consumes. Oh, that's right - thanks Billy, Joey, Chrissy, Johnny, Sammy, Freddy, and Johnny, also known as the boy band of former and perhaps future presidents. (They unfortunately lack many of the redeeming qualities of those other boyz' bands.)

For an excellent read into what a stupid (in the dictionary definition of the term) SYSTEM we have now, please check out Barry Lynn's piece in Harpers on the madness of mega-corporations' unregulated, global sourcing strategies.

Look closely at today's global production system and you will see shockingly high degrees of specialization, in terms of both geography and ownership. More and more activities take place in only one or a few places on earth, and within one or a few companies. This is especially true in electronics: Taiwan produces more than half of the world's vital customized chips. But it is also ever more true of heavy industries, like automobile manufacturing, even of agriculture and food processing. One of the crowning conceptions of the Enlightenment has been achieved, yet economists appear entirely unwilling to recognize the fact, let alone begin the task of examining how this revolutionary event might alter the purposes and pathways of their work.

At the other side of the Times (the ed board), they don't like to think about that, saying that we shouldn't change the way we look at supply systems or trade policy, but rather we should have Mattel police itself and the U.S. government play global cop, flying around the world to inspect hundreds of thousands of factories. No doubt about it: I agree with the Times and 99.999999% of the civilized, non-libertarian world that the FDA needs more resources. But as we've shown, having trade agreements that prioritize safety over a race to the bottom is a far more efficient way of pursuing the same end.

How many more pets have to die or consumers get sick before we accept that states and social institutions have a legitimate role to play alongside the market?? These other institutions at least have the virtue of predating the market, as Karl Polanyi pointed out decades ago:

No society could, naturally, live for any length of time unless it possessed an economy of

some sort; but previously to our time no economy has ever existed that, even in principle, was controlled by markets. In spite of the chorus of academic incantations so persistent in the nineteenth century, gain and profit made on exchange never before played an important part in human economy. Though the institution of the market was fairly common since the later Stone Age, its role was no more than incidental to economic life.

Not that I want the Stone Age, mind you, but we also don't have to feel bashful about using state power to protect people. As Polanyi's book shows, state and social regulations were the only thing that made the emergence of the modern market even thinkable. Anyone wanting a sustainable globalization is going to have to make sure that states have the flexibility to be able to guide the process. First stop for that kind of alter-globalization - shrink or sink the WTO.

© 2007 Independent Media Institute. All rights reserved.
View this story online at: http://www.alternet.org/story/60323/