New York Fed President: Excess Reserves at the Fed Are Put to Good Use

This video was one of the three that were posted on Zero Hedge on Monday. It is a video of CNBC's Steve Liesman interviewing the New York Fed president Bill Dudley.

About 3 minutes into the interview, the NY Fed president admits that the Fed is using the excess reserves to purchase Treasuries, agency bonds, and mortgage-backed securities for its Open Market Operations.

The Fed is doing what?

The excess reserves belong to the member banks (national and regional commercial banks). Since the near-collapse of the financial system last September, banks park their excess reserves at the Federal Reserve instead of lending them out as loans, and earn interest. The excess reserves sit on the LIABILITIES side of the Fed's balance sheet. The banks are "lending" money to the Fed by parking their reserves, but it is an extremely short-term lending: 24 hours.

Now the NY Fed president says they've been "borrowing" this short-term money and "lending" it to the Treasury Department, by purchasing Treasury notes, bonds, agency bonds (that no one in the world wants to touch at this point), and MBS. They are all longer-term investment, the shortest being 2-year note, the longest 30-year Treasury or agency bond.

Naturally, he downplays the risk of higher "borrowing" cost. He doesn't seem to think that the economy will recover in a meaningful way any time soon for the short-term rate to rise.

Why do they need to do this? They can simply print money to buy Treasuries, and a lot of people already think that's what they've been doing. Just to technically avoid the dreaded word "monetization"?

Borrowing short and lending long is what banks do, and what killed Bear Stearns and Lehman Brothers when the short-term liquidity simply vanished from under them. And they didn't have $2 trillion balance sheet that the Federal Reserve has.

Does Tim Geithner know that the Federal Reserve has been using the excess reserves to buy Treasuries? Do the member banks know? They must and they must have agreed. They just didn't bother telling us, because there's nothing to worry about. Right? (Bear Stearns? Lehman Brothers?)

Between the Fed acting like a highly leveraged investment bank and FDIC outdoing AIG with its paltry $10 billion (reserve ratio of 0.22%) to cover nearly $5 trillion deposits (not to mention hundreds of billions of dollars of loan guarantees and loss-sharing agreements), we are somehow supposed to feel secure that we're in good hands.

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Tyranny in Your Front Yard

from Lewrockwell.com blog.

Tyrrany in Your Front Yard (Butler Shaffer, 9/1/09 LRC Blog)

"A news report advises that federal agents are beginning to swoop down on neighborhood yard sales, allegedly for the purpose of discovering whether federally-banned products are being resold by unsuspecting homeowners. This comes in the wake of local governments arresting and fining children who operate unlicensed lemonade stands. What next? Will federal SWAT teams descend on children’s birthday parties to inspect gifts to see if any violate product safety standards for toys? “And as long as we’re there, bring along some government nurses to vaccinate the little brats.”"

Yard sales, kids' "unlicensed" lemonade stands. The government doesn't know where and when to stop, does it?

For news of federal agents descending on yard sales which is yet to happen, click here. (The operation has a code name of course, and it is "Resale Roundup" (I wonder if it was named after the herbicide developed by Monsanto. Kill off those weeds like yard sales, unless we extract some tax out of the sales.)

For news of local governments arresting and fining children for unlicensed operation of selling lemonade, click here and here.

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President Obama to Address Students Across America

and the Department of Education issues a to-do list for teachers across the country.

President Obama’s Address to Students Across America September 8, 2009 (posted on Docstoc) [emphasis is mine, my comment in italic]

PreK-6 Menu of Classroom Activities: President Obama’s Address to Students Across America Produced by Teaching Ambassador Fellows, U.S. Department of Education
September 8, 2009

Before the Speech:
 Teachers can build background knowledge about the President of the United States and his speech by reading books about presidents and Barack Obama and motivate students by asking the following questions: Who is the President of the United States? What do you think it takes to be President? To whom do you think the President is going to be speaking? Why do you think he wants to speak to you? What do you think he will say to you?
 Teachers can ask students to imagine being the President delivering a speech to all of the students in the United States. What would you tell students? What can students do to help in our schools? Teachers can chart ideas about what they would say.
 Why is it important that we listen to the President and other elected officials, like the mayor, senators, members of congress, or the governor? Why is what they say important?

During the Speech:
 As the President speaks, teachers can ask students to write down key ideas or phrases that are important or personally meaningful. Students could use a note-taking graphic organizer such as a Cluster Web, or students could record their thoughts on sticky notes. Younger children can draw pictures and write as appropriate. As students listen to the speech, they could think about the following: What is the President trying to tell me? What is the President asking me to do? What new ideas and actions is the President challenging me to think about?
 Students can record important parts of the speech where the President is asking them to do something. Students might think about: What specific job is he asking me to do? Is he asking anything of anyone else? Teachers? Principals? Parents? The American people?
 Students can record any questions they have while he is speaking and then discuss them after the speech. Younger children may need to dictate their questions.

After the Speech:
 Teachers could ask students to share the ideas they recorded, exchange sticky notes or stick notes on a butcher paper poster in the classroom to discuss main ideas from the speech, i.e. citizenship, personal responsibility, civic duty. [citizenship??]
 Students could discuss their responses to the following questions: What do you think the President wants us to do? Does the speech make you want to do anything? Are we able to do what President Obama is asking of us? What would you like to tell the President?
 Teachers could encourage students to participate in the Department of Education’s “I Am What I Learn” video contest. On September 8th the Department will invite K-12 students to submit a 2 video no longer than 2 min, explaining why education is important and how their education will help them achieve their dreams. Teachers are welcome to incorporate the same or a similar video project into an assignment. More details will be released via http://www.ed.gov/.

Extension of the Speech:
Teachers can extend learning by having students
 Create posters of their goals. Posters could be formatted in quadrants or puzzle pieces or trails marked with the labels: personal, academic, community, country. Each area could be labeled with three steps for achieving goals in those areas. It might make sense to focus on personal and academic so community and country goals come more readily.
 Write letters to themselves about what they can do to help the president. These would be collected and redistributed at an appropriate later date by the teacher to make students accountable to their goals.
 Write goals on colored index cards or precut designs to post around the classroom. Interview and share about their goals with one another to create a supportive community.
 Participate in School wide incentive programs or contests for students who achieve their goals.
 Write about their goals in a variety of genres, i.e. poems, songs, personal essays.
 Create artistic projects based on the themes of their goals. [See my post on National Endowment of Arts; 3rd topic in the post]
 Graph student progress toward goals.

Who are the Teaching Ambassador Fellows? Here's the link to the Department of Education. There are 13 of them. They were appointed on August 4, so this announcement must be their very first job.

This is downright creepy to me. But the parents who have their children in public schools may tell us that this is totally in line with what the schools have been doing.

You may want to check:
http://www.billayers.org/
http://en.wikipedia.org/wiki/Rules_for_Radicals

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Talk of Transaction Tax on Stock Trading Is Back Again

The game is on again. Let's tax those greedy traders! We have to curve this, uh..what is it, High Frequency Trading, whatever that is, but since Wall Street guys are doing it it must be bad. (And incidentally it will dramatically increase the government's tax revenue.) Hard-working Americans win! Right?

The idea has been promoted several times in the past year, as a way to raise tax revenue for the increasingly cash-strapped federal government. This time around, it has a unique twist. The one who's pushing for it is AFL-CIO, the largest federation of labor union in the U.S. and Canada.

AFL-CIO, Dems push new Wall Street tax (Alexander Bolton, 8/30/09, The Hill)

"The nation’s largest labor union and some allied Democrats are pushing a new tax that would hit big investment firms such as Goldman Sachs reaping billions of dollars in profits while the rest of the economy sputters.

"The AFL-CIO, one of the Democratic Party’s most powerful allies, would like to assess a small tax — about a tenth of a percent — on every stock transaction.

"Small and medium-sized investors would hardly notice such a tax, but major trading firms, such as Goldman, which reported $3.44 billion in profits during the second quarter of 2009, may see this as a significant threat to their profits."

Oh really? The writer probably doesn't trade much on his 401K or IRA. Small and medium-sized investors would indeed notice significant increase in transaction cost. Who is he kidding?

Let's look at an example.

You are a small retail investor who watches the market and trades fairly frequently, say 2 times a week. You decide to buy 100 shares of AAPL (that's Apple, Inc.). It will be $16,600 or so at today's price. On top of this amount, you normally pay a commission to your online broker, anything from $0 to $13 per transaction, plus ECN fee. These days, the total transaction cost of online brokerages rarely goes above $15.

Now, AFL-CIO wants to impose 0.1% tax on your transaction. $16,600 times 0.1% equals $16.60. Add that to the normal transaction cost, and you now have to shell out between $16.60 to $31.60 for your purchase. That's a 111% to near-infinite (in case your transaction cost is zero) increase.

Suppose AAPL jumps in price after the announcement of new iPod or tablet notebook, and now it is $190. You decide to sell. Now, 0.1% of $19,000 is $19. Your total cost to sell AAPL is now between $19 and $34.

Without this tax on your transaction, your total cost of buying and selling AAPL is between $0 and $30. With this tax, your total cost will be between $35 and $65, of which this transaction tax is $35.

After one year of trading AAPL twice a week, you will end up paying $1,750 in additional tax, more or less, depending on the stock's price movement. The tax you are not paying at all today, and the money you could be putting to good use elsewhere. Instead, it will go to the government. Whether you make money or lose money, you will have to pay the tax on the transaction.

Now, back to this article:

"“It would have two benefits, raise a lot of revenue and discourage speculative financial activity,” said Thea Lee, policy director at the AFL-CIO.

"“The big disadvantage of most taxes is that they discourage some really productive activity,” she said. “This would discourage numerous financial transactions. People flip their assets several times in an hour or a day. They make money but does it really add to the productive base of the United States?”"

Now, why is it the business of AFL-CIO if people flip their assets several times in an hour or a day? Besides, what does it have to do with High Frequency Trading at all? People who flip their assets several times in an hour or a day are not Goldman Sachs or Citadel. They are more likely to be small, retail investors trying to recover what they have lost in the past year.

High Frequency Trading trades 100 times or more in a second.

So, confusing (intentionally or out of ignorance) the active retail investors and big financial firms that do High Frequency Trading, AFL-CIO, if it has its way, would actually punish the small investors who no doubt include AFL-CIO members whose 401K or pension fund has plummeted.

Back to the article:

"The AFL-CIO and some allied Democrats would like to cut down on the overall level of trading, or at least give the U.S. government a piece of the action, which would likely tamp down trading."

Give the U.S. government a piece of the action?? A-ha. But they already are active, through Working Group on Financial Markets, a.k.a. Plunge Protection Team. Or do they mean that the government should gamble taxpayers money in the stock market against the likes of Goldman Sachs, Morgan Stanley (who's hiring a lot of traders), and numerous hedge funds? Good luck with that.

Cut down on the overall level of trading?? Why don't they just shut down the stock market, then? Soviet Union didn't have a stock market.

Things are getting more hilarious by the day, on all fronts. What's next? That the government will decide the price of any publicly traded stock, as they see "fair" to whatever principle that they want to uphold?

I have a sinking feeling though, that this time around this idiocy will become law under the Obama administration. Unintended consequences that I can think of are numerous: stock market crash because the liquidity, however contrived and artificial, disappears; small investors are crushed, yet again, with their portfolios plunging in value and taxed when they try to get out of the positions; traders big and small desert the publicly traded markets, with big traders moving to dark pools, small traders stopping altogether; lack of transactions causes this proposed tax to collect far less than anticipated, and the government may actually lose money as it has to pay for the new bureaucracy to handle the new tax; the U.S. will lose the global financial center status.

Lastly, what has a trade union got to do with stock trading, you may ask. You've seen the news, I'm sure, but in case, here it is: the most powerful of the Federal Reserve banks, New York Fed, just announced that the president of AFL-CIO New York State branch will be the new chairman of the New York Fed.

New York Fed Names AFL-CIO Leader as Chairman of the Board (8/25/09 Washington Post)

AFL-CIO may be emboldened more than ever, as one of them presides over the most powerful Federal Reserve bank.

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Vanity Fair: "Henry Paulson's Longest Night"

It looks like a campaign is on at CNBC with the help of Vanity Fair to exonerate the former Treasury Secretary Hank Paulson, or at least paint him in a very sympathetic color. According to this video that was posted at Market Ticker, Paulson was very pleased with Nancy Pelosi, and Barney Frank had a high respect for him.

The Vanity Fair writer then reveals that 10 days before he was to present the TARP plan to Congress to buy troubled assets from the nation's banks, Paulson told him that he would use the TARP money to inject capital into the banks.

(Of course) CNBC crew pay absolutely zero attention to what he's just said.

And here's the link to the Vanity Fair article, "Henry Paulson’s Longest Night" (Vanity Fair, October 2009 issue).

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Japan's Democratic Party Already Feels Like the U.S. Democratic Party

under President Obama.

The Democratic Party of Japan, or DPJ, won 308 seats out of 480 in the powerful Lower House in the August 30 election. A landslide bigger than anticipated, it is indeed a historic event. The Liberal Democratic Party, or LDP, who held the grip on the Japanese politics since the end of World War II, has only itself to blame for the crushing defeat. DPJ, whose leadership is mostly made up of ex-LDP members, is understandably ecstatic.

However, what is rapidly emerging in post-election political scene in Japan should be disturbing to the proponents of free market economy and of smaller government.

DPJ won in a landslide, and in their euphoria they may think they have the mandate. However, I suspect many of the DPJ votes were the votes against LDP, similar to the 2008 U.S. election where many voters voted against George Bush.

About the very first thing that the DPJ leadership announced after the election was the creation of the National Strategy Bureau (Kokka Senryaku Kyoku 国家戦略局）, which will be placed in the Cabinet and under the direct control of the Prime Minister. The head of the Bureau will have the same power as a Cabinet Minister. The Bureau will be in charge of deciding on "important national strategies and policies" including budget, which has long been the domain of the bureaucrats in the government ministries. 30 people will be appointed to this Bureau, and they will include politicians, experts from private sector and bureaucrats (a token gesture). The Bureau will be created initially by a Cabinet Order, which only requires the approval by the Cabinet, two signatures (of the Minister in charge and of the Prime Minister) to become a law.

Can you feel, see, smell the Obama administration here? DPJ seems intent on creating the equivalent of Obama's "czar" system, except the Japanese version will be created with the equivalent of the U.S.'s executive order.

The very name of the "National Strategy Bureau" sounds oddly dictatorial, coming from a party that is supposed to be left of center.

With the creation of the National Stretegy Bureau, DPJ makes it clear that the important policies, even down to the details, will be led by politicians, not bureaucrats. As if these career politicians, often 2nd or 3rd generation, more often than not from well-connected, wealthy families, actually know what to do. For good or bad, Japan has functioned because of the career bureaucrats who know how the system really works, without the meddling from the bumbling politicians. Now DPJ proposes to create an organization that sits on top of the sprawling bureaucracy to impose the DPJ leaders' vision.

Yukio Hatoyama, ex-LDP leader of DPJ who is himself a 4th-generation politician from a prominent family that has produced a Speaker of the Lower House, a Prime Minister, and a Foreign Minister in the past 120 years, is positioning himself as a champion (for the mass, I suppose) to battle the entrenched bureaucracy. Good luck with that.

Another DPJ leader, Naoto Kan, declared that DPJ may nullify the budget proposals that were coming up from the ministries (deadline for submission was 8/31) and that the new administration under DPJ may create the budget from scratch through this Bureau of National Strategy.

Their party's stated policies read like those of the Obama administration. A few examples:

Global warming:

• Create "cap and trade" carbon exchange market
• Create new tax to combat global warming

Finance:

• Comprehensive, structural reform to protect investors

Crisis management:

• Create a new agency to manage crisis, natural and man-made (terrorism, cyber-attack), under the control of the Cabinet

Community renewal:

• Modify tax law to benefit non-profit organizations

So it even has policies for "community". (I have a feeling that they don't know what "community" means these days in the U.S.)

Stanford-educated Yukio Hatoyama, who is slated to become the Prime Minister in the new administration, is also a proponent of giving a voting right to foreigners who live in Japan; he also wants to make Japan more "liveable" for foreigners.

These all suggest to me that the fear in the U.S. that Japan will distance herself from the U.S. in policies is overblown. After all, the leadership of DPJ is made up of ex-LDP members. Even on the defence and foreign policy front, I don't see much difference from the previous administration. On the contrary, the Obama administration should be comforted that at least one U.S. ally is very closely following his footsteps. He may regret, though, having appointed a virtual nobody to the position of ambassadorship to Japan.

(Links, except the last one, are in Japanese.)

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FDIC Update: August Bank Failures 15, DIF $10 Billion (Do They Have A Plan?)

So FDIC closed three banks on Friday, bringing the August bank closure numbers to 15. "What an impressive improvement from July, when 24 banks failed!" would be the "green shooters" remark.


On Thursday FDIC finally released its Quarterly Banking Profile for the 2nd Quarter. It must have been a much-awaited event, because I couldn't get on to the FDIC's website for quite a while after the release of the report at 10:00 AM EST. All I was interested in was to find out what happened to the DIF (Depositors Insurance Fund), which was barely $13 billion or 0.27 reserve ratio at the end of March 31, 2009.

At the end of 2nd quarter that ended June 30, the FDIC's DIF, O miracle of all miracles, decreased by only $3 billion from the 1st quarter because, according to Sheila Bair, her institution managed to collect $6 billion from the member banks as additional assessment fees. Still, FDIC has only $10 billion of DIF, or 0.22 reserve ratio, and this is before the massive (so far) bank failures in July and very costly ones (Colonial Bank and Guaranty Bank, $6 billion) in August. FDIC estimates that bank failures will cost them $70 billion through 2013. But the chairwoman had this to say on Thursday's news conference:

"The FDIC was created specifically for times such as these," Sheila C. Bair said. "Our resources are strong. Your insured deposits are safe."

She also said this:

Asked about a possibility of tapping the Treasury, FDIC Chairman Sheila Bair said: "Not at this point in time. I never say 'never,' but not at this point in time, no."

Now, the congressionally mandated minimum reserve ratio for FDIC is 1.15%.

With that in mind, please take a look at this table. It shows the DIF balance and DIF-insured deposits over the 3 years, and the reserve ratio calculated from the two numbers. The reserve ratio dipped below the mandated minimum in the 2nd quarter of 2008, well before the banking crisis hit in earnest in September.

Why didn't the chairwoman act then? Why didn't Congress require that FDIC raise the assessment to the banks or force it to take the line of credit to replenish the fund? Why isn't Congress demanding that FDIC replenish the fund now? And why does Bair still refuse even now to recognize this 0.22% reserve ratio as danger beyond critical stage and refuse to use the line of credit?

She just keeps repeating the mantra "No one has lost the money with us."

Meanwhile, the emergency assessment fee imposed on smaller banks are taking the toll on their bottom line. FDIC has a line of credit of up to $500 billion with the Treasury Department, yet she refuses to draw from it. The only way to raise additional funds for DIF then is to assess another emergency fee, that will further penalize small banks disproportionately.

If I become more cynical than I already am, I would say Ms. Bair is doing it on purpose - to kill off as many small banks as possible to feed the big banks, even the foreign ones, as cheaply as possible. I can easily think of worse possibilities but those are not the good ones to contemplate right before going to bed...

OK, I found more details about DIF and the congressionally mandated minimum reserve ratio. I couldn't believe my eyes.. This is from March 2009 Journal of Accountancy Highlights:

"With the DIF reserve ratio at 1.01% at the start of the third quarter, the FDIC is required by the Federal Deposit Insurance Reform Act of 2005 to establish a restoration plan to raise the ratio to 1.15% no later than five years after establishing the plan. The plan to restore the ratio includes a combination of uniform higher assessment rates and other risk-based adjustments that place a greater burden of increased assessments on riskier institutions."

All the law requires is that FDIC devise a plan, and raise the ratio to 1.15% within 5 years after they devise the plan. So, by law, the chairwoman can simply sit on her hands doing nothing as long as she has a plan. And she doesn't even seem to have a plan, but she assures us "No one has lost money with us."

This is getting surreal.

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Did You Know This Is Not Ameria Any More?

And this officer tells the townhall meeting protester, "It ain't [America] no more, OK?" Then what is it that we are in, officer?

From Lewrockwell.com's LRC Blog.

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Government Will Run Just About Everything (At Least They Are Trying Hard)

The best news I read today was the last post, Barney Frank saying Ron Paul's Audit the Fed bill will probably pass in October.

However, aside from that one piece of news, and buried underneath the extensive coverage of Ted Kennedy, news continues to be 5D to me - dismaying, disheartening, depressing, disingenuous, or demoralizing.

Bill would give president emergency control of Internet (Declan McCullagh, 8/28/09 CNET; the author of the article is a CBS writer who dare asked questions about health care bill H.R. 3200. See my post.)

The ever-obliging and eager-to-please Senator Jay Rockefeller has crafted a bill S. 733. The recently revised version of this bill would "allow the president to "declare a cybersecurity emergency" relating to "non-governmental" computer networks and do what's necessary to respond to the threat. Other sections of the proposal include a federal certification program for "cybersecurity professionals," and a requirement that certain computer systems and networks in the private sector be managed by people who have been awarded that license. "

(Has the United States elected a king? or worse?)

Students' take-home assignment: Census kits (8/26/09 USA Today)

To counter the growing fear that the 2010 Census is a gross invasion of privacy, the government has already started a preemptive strike. They are arming school children with "Census kit" to take home and basically educate the parents.

"Anyone tempted to ignore the 2010 Census will have a tough time doing it — especially if they have kids in school.

"The government has launched Census in Schools, an all-out campaign targeting superintendents, principals, teachers, students and, indirectly, parents, as schools open across the nation this month and next. The message: The Census is coming and here's why everyone should care. "

The government is also partnering with Sesami Street to sell the concept to pre-schoolers.

(Red Guard of Mao's China, Komsomol of Soviet Russia, Hitler Youth in Germany under Hitler. Obama Youth Brigade in the U.S. 2009.)

The National Endowment for the Art of Persuasion? (Patrick Courrielche, 8/25/09, Big Hollywood)

"Backed by the full weight of President Barack Obama’s call to service and the institutional weight of the NEA [National Endowments for the Art], the conference call was billed as an opportunity for those in the art community to inspire service in four key categories, and at the top of the list were “health care” and “energy and environment.” The service was to be attached to the President’s United We Serve campaign, a nationwide federal initiative to make service a way of life for all Americans."

With the other key categories being "security and safety", "education", and "community renewal". Artists to be the lackeys of the government. (Again, nothing new. Stalin did it. Hitler did it. Mao did it.)

(In case you are not aware of it yet, "community" may not mean what you think, just like "gay" doesn't mean "merry" or "cheerful" any more.)

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Barney Frank Says Ron Paul's Audit the Fed Bill Will Pass In October

That's the bill H.R. 1207, which now has 282 co-sponsors in the House. Barney Frank, answering the question in his townhall meeting, says he wants to curtail the power of the Federal Reserve, and that the bill will probably pass in October.

The video was posted on Mish's Global Economic Analysis. (Transcription is probably by Mish.)

Barney Frank:

I have been pushing for more openness from the Fed. I want to restrict the powers of the Federal Reserve. First of all, the Fed will be the major losers of power if we are successful, as I believe we will be, setting up a financial product protection commission.

The Federal Reserve is now charged with protecting consumers. They were supposed to do subprime mortgage restrictions.

Congress in 1994 gave the Fed powers to ban subprime mortgages. Alan Greenspan refused to do it. They had the power to ban credit card abuses. Under Greenspan they did nothing. Under Bernanke they started but only after Congress acted.

That's one of the reasons why in the new consumer protection agency, we will take away from the Federal reserve the power to go consumer protection.

Secondly, they have has since 1932 a right under Herbert Hoover to intervene in the economy whenever they could. Last September, the Federal Reserve they were going to advance $82 billion to AIG.

I was kind of surprised and said Mr Bernanke do you have $82 billion? Mr. Bernanke replied I have $800 billion and under section 13.3 of the Federal Reserve Act they can lend anything they want.

We are going to curtail that lending power. We are going to put some restrictions on it.

Finally we will subject them to a complete audit. I have been working with Ron Paul, who is the main sponsor of that bill. He agrees that we don't want to have the audit appear as if influences monetary policy as that would be inflationary.

One of the things the audit will show you is what the Federal Reserve buys itself. And that will be made public, but not instantly because if it was made instantly people would be trading off it, so the data would be released after a time period of several months, enough time so it will not be market sensitive.

This will probably pass in October.

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Ultimate Chutzpah: ABC Rejects Ad Ciritical of Obama Health Care "Reform" as "Partisan"

More on the mainstream media coverage on the administration's health care "reform" and on-going debate among citizenry.

ABC (who aired the special program on health care from within the White House) and NBC (the CEO of the parent company, GE, is an economic advisor to President Obama, who also happens to be a director at New York Federal Reserve Bank) refuse to air an ad critical of Obama Administration's health care "reform".

ABC, NBC Won't Air Ad Critical of Obama's Health Care Plan
(8/27/09 Fox News) [emphasis is mine]

"The refusal by ABC and NBC to run a national ad critical of President Obama's health care reform plan is raising questions from the group behind the spot -- particularly in light of ABC's health care special aired in prime time last June and hosted at the White House.
The 33-second ad by the League of American Voters, which features a neurosurgeon who warns that a government-run health care system will lead to the rationing of procedures and medicine, began airing two weeks ago on local affiliates of ABC, NBC, FOX and CBS. On a national level, however, ABC and NBC have refused to run the spot in its present form."

The ad was created by the League of American Voters (according to Fox article, a national nonprofit group with 15,000 members who advocate individual liberty and government accountability).

"[Bob] Adams [executive director of the League of American Voters] said the advertisement is running on local network affiliates in states like Louisiana, Arkansas, Maine and Pennsylvania. But although CBS has approved the ad for national distribution and talks are ongoing with FOX, NBC has questioned some of the ad's facts while ABC has labeled it "partisan.""

""The ABC Television Network has a long-standing policy that we do not sell time for advertising that presents a partisan position on a controversial public issue," spokeswoman Susan Sewell said in a written statement. "Just to be clear, this is a policy for the entire network, not just ABC News."

"NBC, meanwhile, said it has not turned down the ad and will reconsider it with some revisions."

No one, not even Obama, seems to know exactly what's in the House bill H.R. 3200, what's in the Senate version, what's in the versions that different committees in the House and the Senate have been discussing. However, NBC apparently knows all the "facts" to dispute the ad (I wonder it's a "fact sheet" provided by the White House/Democratic Party, instead of "facts"), and ABC labels it "partisan", totally oblivious to the fact that by rejecting the "partisan" ad the network itself is taking a "partisan" position.

As the article cites Dick Morris (a FOX News political analyst and the League of American Voters' chief strategist, who was a onetime advisor to former President Bill Clinton):

""It's the ultimate act of chutzpah because ABC is the network that turned itself over completely to Obama for a daylong propaganda fest about health care reform," he said. "For them to be pious and say they will not accept advertising on health care shuts their viewers out from any possible understanding of both sides of this issue.""

Speaking of being partisan, ABC is clearly excited about the return of "Harry and Louise" ad, this time promoting their dear leader's health care "reform". The ad, as I wrote in my posts, was created by a pharmaceutical industry lobby PhRMA who reportedly has had a secret deal on health care with the White House and whose slogan on their website says "Disease is our enemy. Working to save lives is our job."

And here I was, thinking the days of militarizing everything was over and done with, with the previous administration. By the way, as I mentioned in my post also, the health care bill H.R. 3200 is full of "corps" and "force" for the "positive" "change".

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CBS Raises Questions on Health Care "Reform" Bill H.R. 3200

Even the mainstream media seems to have started to read the health care "reform" bill H.R. 3200 and started asking some relevant questions.

Democratic Health Care Bill Divulges IRS Tax Data
(Declan McCullagh, 8/26/09 CBS News)

"One of the problems with any proposed law that's over 1,000 pages long and constantly changing is that much deviltry can lie in the details. Take the Democrats' proposal to rewrite health care policy, better known as H.R. 3200 or by opponents as "Obamacare." (Here's our CBS News television coverage.) "

After that preamble, the article goes on to actually list specific sections of the bill H.R. 3200 and discuss potential problems: [emphasis is mine]

"Section 431(a) of the bill says that the IRS must divulge taxpayer identity information, including the filing status, the modified adjusted gross income, the number of dependents, and "other information as is prescribed by" regulation. That information will be provided to the new Health Choices Commissioner and state health programs and used to determine who qualifies for "affordability credits."

[And remember, this Health Choices Commissioner is to be appointed by the President, and accountable only to the President. No confirmation by Congress is required, ever.]

"Section 245(b)(2)(A) says the IRS must divulge tax return details -- there's no specified limit on what's available or unavailable -- to the Health Choices Commissioner. The purpose, again, is to verify "affordability credits."

"Section 1801(a) says that the Social Security Administration can obtain tax return data on anyone who may be eligible for a "low-income prescription drug subsidy" but has not applied for it. "

Whether they want to apply for it or not.

"Over at the Institute for Policy Innovation (a free-market think tank and presumably no fan of Obamacare), Tom Giovanetti argues that: "How many thousands of federal employees will have access to your records? The privacy of your health records will be only as good as the most nosy, most dishonest and most malcontented federal employee.... So say good-bye to privacy from the federal government. It was fun while it lasted for 233 years."

"I'm not as certain as Giovanetti that this represents privacy's Armageddon. (Though I do wonder where the usual suspects like the Electronic Privacy Information Center are. Presumably inserting limits on information that can be disclosed -- and adding strict penalties on misuse of the information kept on file about hundreds of millions of Americans -- is at least as important as fretting about Facebook's privacy policy in Canada.)

"A better candidate for a future privacy crisis is the so-called stimulus bill enacted with limited debate early this year. It mandated the "utilization of an electronic health record for each person in the United States by 2014," but included only limited privacy protections."

Bingo.

A very important component of the so-called health care "reform" by the administration is already SIGNED INTO LAW, because it was buried in the so-called "stimulus" (so far all it has stimulated is government, local, state and federal) bill that no one read (and the Democratic Congressman of my area actually expressed pride in not having read it - that would be so below him). In other words, the administration/Democrats can make any concession to please Republicans and skeptical Democrats regarding the privacy issue in the health care bill, and the concession is basically irrelevant.

The opponents of this bill and the health care "reform" as presented by this administration and Democratic Congress should start thinking about ways, if any, to repeal this part of the stimulus bill. (I will discuss the particular segment of the stimulus bill that is related to health care in a later, separate post.)

The writer concludes:

"If we're going to have such significant additional government intrusion into our health care system, we will have to draw the privacy line somewhere. Maybe the House Democrats' current bill gets it right. Maybe it doesn't. But this vignette should be reason to be skeptical of claims that a massive and complex bill must be enacted as rapidly as its backers would have you believe. "

Well, it's not given that we will have to have such government intrusion. But I am glad to see the mainstream media like CBS News is starting to ask questions, instead of simply being a spokesperson for the government like certain other networks (the one that starts with "N" comes to mind, whose parent company starts with "G").

If you go to the linked site, be sure to check out the comment section. The writer is bombarded with the supporters of the bill and/or the administration's "reform" calling him all sorts of names, but there are opponents to the bill who seem rather surprised that CBS has allowed this article to be published at all.

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(Talk about health... Sorry for tardy posting today. There were many topics that I wanted to write about, but I couldn't concentrate enough to write anything while those drummers on the beach (not the beach right nearby but several blocks away) just bonging and bonging, creating low-frequency sound wave that physically pressured my skull and my heart, making me ill. Think twice before you consent to a power-generating wind turbine near you.)

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Swine Flu Hoax?

Back to a serious topic. Dead serious.

In case you haven't noticed, the "threat" of H1N1 flu, a.k.a. swine flu has been quietly but steadily ramped up, and since mid August it's been raised to a fevered pitch, as the administration's health care "reform" continues to lose support.

Half the US could get swine flu, says Baltimore Sun.

Swine flu could hospitalize 2 million in U.S. this winter, says Los Angeles Times.

Swine flu vaccine not enough to go around, says ABC News.

National Guard drill at high school to prepare for possible H1N1 riot, says Sun Journal in Maine.

Then I saw this today, at Lewrockwell.com. The article was written by Andrew Bosworth.

Exposed: The Swine Flu Hoax (Andrew Bosworth, 8/26/09 Lewrockwell.com) [emphasis is mine]

Dr. Bosworth starts the article by stating that the flu pandemic of 1918 evolved out of very unique conditions that arose during the World War I and right after (e.g. U.S. soldiers packed like sardines and shipped back home).

What caught my particular attention, though, is the section on origin of the swine flu virus:

"The Mysterious Origins of the H1N1 "Swine Flu" Virus

"If the current H1N1 swine flu virus does become abnormally lethal, there would be three leading explanations: first, that the virus was accidentally released, or escaped, from a laboratory; second, that a disgruntled lab employee unleashed the virus (as happened, according to the official version of events, with the 2001 anthrax attack); or third, that a group, corporation or government agency intentionally released the virus in the interests of profit and power.

"Each of the three scenarios represents a plausible explanation should the swine virus become lethal. After all, the 1918 flu virus was dead and buried – until, that is, scientists unearthed a lead coffin to obtain a biopsy of the corpse it contained. Later, researchers similarly disturbed an Inuit woman buried under permafrost.3

"The US Armed Forces Institute of Pathology, with a scientist from the Mount Sinai School of Medicine, then began to reconstruct the 1918 Spanish flu. Had Iran or North Korea engaged in Frankenstein experiments (complete with ransacking graves) to reverse engineer the 1918 virus the US and the UK would have gone ballistic at the UN Security Council.

"Interestingly, numerous doctors and scientists suspect that the swine flu virus was cultured in a laboratory. A mainstream Australian virologist, Adrian Gibbs – who was one of the first to analyze the genetic properties of the 2009 swine flu – believes that scientists accidentally created the H1N1 virus while producing vaccines. And Dr. John Carlo, Dallas Co. Medical Director, "This strain of swine influenza that’s been cultured in a laboratory is something that’s not been seen anywhere actually in the United States and the world, so this is actually a new strain of influenza that’s been identified."4 Because of this, the 2009 swine flu virus – which has yet to be detected in any animals – has a rather suspicious pedigree."

What?? This virus is yet to be detected in any animals? Why is it then called swine flu?

It seems it is called swine flu because "the closest relatives to the new virus are viruses that were isolated from pigs in the United States in the past few years", according to a CNN report back in May. "It's origin is unknown", says Wikipedia.

In the next section, he talks about the media coverage and the administration's campaign.

"The Propaganda Campaign

"Across the mainstream media, reports announce one swine flu death after another (even though ordinary flu kills about 35,000 Americans each year). Upon closer scrutiny of what passes for journalism, the victims have "underlying health problems," or "a common underlying health condition," or "significant medical conditions."

One news headline even blared: "Swine flu mother dies after giving birth, leaving her premature baby fighting for life," and only later, buried deep in the story underneath, did it explain that she had "other medical problems" which included being confined to a wheelchair because of a serious car accident.

"Citizens the world over are increasingly skeptical of hyped headlines followed by smaller-print caveats. They are uneasy with the effort to create "doublethink" – a term coined by George Orwell in 1984 and a reference to holding two contradictory ideas in one’s mind simultaneously, paralyzing critical thought.

"The media has never been in the habit of reporting the cases of people who, for no known reason, die of the flu. Out of the 35,000 Americans who die each year from flu-related illnesses, some are bound to be relatively young and healthy. It happens. This year, however, their stories are front-page news.

"More recently, news reports now claim that the H1N1 swine flu can affect people in the lungs and lead to pneumonia. This, however, is what separates the flu from the common cold in the first place; and this is why tens of thousands of elderly people die of flu-related symptoms each year. Fox News even claimed that "this one morphs and mutates and comes back in different ways…," (like all flu viruses). In short, the media now uses the flu’s own ordinary symptoms to fuel fear.

"Fortunately, a growing wave of online media challenges the propaganda. Back in 1976, there were no rival voices, and the Center for Disease Control’s manipulative television commercials dominated the airwaves. Fortunately, as a testament to official shamelessness, these videos are now archived and searchable on the Internet under the title of "1976 Swine Flu Propaganda."


"Now, like then, the US government’s pandemic policy alternates between the ridiculous and the repugnant. The government’s flu website is revealing. First, the historical section on the 1918 virus is intellectually dishonest, making absolutely no link between the unique conditions of World War I and the flu pandemic; instead, the site propagates the erroneous notion that this virus came out of the blue.5

"Second, the site announces an absurd American Idol-style video contest: "Create a Video About Preventing or Dealing With the Flu & Be Eligible to Win $2500 Cash!" (Congress has earmarked 8 billion dollars for swine flu prevention and can only offer $2,500 to the proles – or, rather, to the one prole who, rising above mediocrity, best parrots the Party Line.)

"And third, the site encourages the use of Twitter to "stay informed…" There is something mildly disturbing about the US federal government promoting Twitter as a form of resistance to foreign authoritarianism, while, simultaneously, using social networking to further federalize and protect the abuse of power at home.

"1976 + 1984 = 2009

"In sum, it appears that the 2009 swine flu pandemic will not be 1918. It might be a 1976-style hoax, however, serving profit and power – with a bit of Orwell’s 1984 thrown in for good measure.

Notes

1. JS Oxford, A Sefton, R Jackson, W Innes, RS Daniels, and NPAS Johnson, "World War I may have allowed the emergence of ‘Spanish’ influenza," The Lancet/ Infectious Diseases Vol. 2 February 2002.
2. Byerly CR. 2005. Fever of War: The Influenza Epidemic in the U.S. Army During World War I. New York, NY: New York University Press.
3. Ann H. Reid, Thomas G. Fanning, Johan V. Hultin, and Jeffery K. Taubenberger, "Origin and Evolution of the 1918 Spanish Influenza Virus Hemagglutinin Gene, PNAS Proceedings of the National Academy of Sciences of the United States of America. Division of Molecular Pathology, Department of Cellular Pathology, Armed Forces Institute of Pathology, Washington, DC. Communicated by Edwin D. Kilbourne, New York
4. Paul Joseph Watson, "Medical Director: Swine Flu Was ‘Cultured In A Laboratory," This strain of swine influenza that’s been cultured in a laboratory is something that’s not been seen anywhere actually in the United States and the world, so this is actually a new strain of influenza that’s been identified, April 26, 2009.
5. http://www.flu.gov/

I hope the author is right, that 2009 swine flu will be remembered as a hoax. I am not that trusting these days. There are too many people willing to "manufacture", if necessary, a trouble, a crisis, a catastrophe, to promote their projects and agendas. (Here's a minor one, "agent provocateur" caught red-handed: Colorado Democratic Party headquarters attacked, by Democrat activist.)

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OT: Trojan Again... Thank You Google...

Google did it again! My site is hosting a supposedly context-based ad, fed by Google AdSense.

Is it Timmy Geithner? Or is it Elvis Presley that triggered the feed?

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Feds: Stimulus money sent to 4,000 cons

Your stimulus money hard at work.

Feds: Stimulus money sent to 4,000 cons (8/26/09 Boston Herald)

"One day after the Herald reported some surprised Bay State inmates - including murderers and rapists - were cashing in $250 stimulus checks, federal officials revealed the same behind-bars bonus was mailed to nearly 4,000 cons nationwide.

"A federal watchdog is now probing how the cons were cut the checks. The same cash also may have been sent to fugitive felons, people kicked out of the country and even individuals now deceased.

"It’s all part of the massive American Recovery and Reinvestment Act of 2009 - and what is becoming an accounting nightmare for red-faced feds."

Convicts, felons, deceased... Does that ring a bell?

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Timmy Geithner Interview with WSJ/Digg

The site that posted this video has a very good accompanying article that you should go read: "Geithner: Auditing the Fed is a "line that we don't want to cross"

The interviewer is from Wall Street Journal, but the questions were submitted and voted on by the Digg community, with the top 10 questions being posed to Mr. Geithner.

Geithner looks extremely uncomfortable with the questions which are much sharper and pointed than what he's used to from mainstream media. (Citizen journalism, way to go! )

He is nervous, fussing with his shirt cuff, obfuscating, evading, lying, literally through his teeth. (He hardly opens his mouth when he speaks.) It is 20 minutes long, but please do watch. We need to be reminded just what kind of people are running the show and why.

Another interesting thing I've noticed: the interviewer looks just as nervous asking these pointed questions. (Maybe he should start asking real questions like these.)

(I laughed hard as Timmy tried to paint the Fed innocent in the creation of the bubbles, blaming every other country but this one. I laughed harder when he defended the ex-Goldman Sachs officials at Treasuries as "great statesmen". I'm sure they are, to be sarcastic. But that was not even the point of the question.)

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Goldman: Fed Could Double Balance Sheet to $4 Trillion

Now that Wall Street got the central banker that they wanted (partly due to the self-promoting campaign by the Fed chairman himself), they may be getting bolder in their calls.

Goldman Sach's chief U.S. economist Jan Hatzius thinks the Federal Reserve's balance sheet, which has been at $2 trillion since last September, could double to $4 trillion in order for the Fed to support the economy.

Goldman’s Hatzius Says Fed Balance Sheet Could Hit $4 Trillion (8/25/09 Bloomberg)

"Aug. 25 (Bloomberg) -- Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc., said the Federal Reserve could double the size of the central bank’s balance sheet again if needed to support economic growth.

"A rise in the balance sheet to $4 trillion is a “possibility,” Hatzius said in an interview on Bloomberg Radio in New York. “It is going to depend on not just what inflation does, but also on whether the economy does move back to a slower growth pace.”

"The Fed must now guide the world’s largest economy back to growth and reduce unemployment approaching 10 percent while shrinking the balance sheet to prevent a surge in inflation, Hatzius said.

"“Rates need to stay low,” he said. The Fed “could become more aggressive in purchasing assets. They have not gotten a lot of bang for the buck on that policy so far.” "

Hmmm. Aren't the last two statements contradicting with each other? If the Fed aggressively purchase more assets, that's going to increase the balance sheet, not shrink it.

Let's go back again to the Fed's balance sheet and look at the components on Assets and Liabilities. These are selected components so they do not balance.

The top table is created from the balance sheet as of May 20, 2009, and the bottom one from the latest as of August 19, 2009. The Fed's various loan programs do seem to be winding down, for which the Fed is compensating with increased purchase of Treasuries, agency bonds, and MBS backed by Fannie, Freddie, and Ginnie. (Hardly anyone wants the last two types of government securities these days.)

Now to the Liabilities side. Notice the currency in circulation (M1) has had a slight increase, and the deposits from depository institutions (i.e. banks) have decreased markedly. That's 14% decrease. Is it possible that banks have started to put the money to use?

In order to double this balance sheet, I see only two ways to do it. One is to expand the lending programs again (assets) and have the banks deposit the money back into the Fed (liabilities). That presupposes another financial disaster, a huge disaster. The other way is to double the size of the government securities holdings (assets) and either figure out the way to entice the banks to park the money at the Fed or print more money into circulation (liabilities) or both.

If the Fed doubles the balance sheet by buying more government securities and at the same time devises a plan to keep or increase the deposits from the banks, that defeats the purpose of stimulating the growth, doesn't it? Can we say "inflation"?

See also my post on Bernanke's so-called exit strategy.

Goldman Sachs is also calling for oil price to go back up to 2008 high.

(They must know what we do not yet know.)

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Sen. Feingold: No Health Care Bill Before End of Year

- and perhaps, not at all. Uh-oh.

Feingold: No health care bill before Christmas
(8/25/09 Lakeland Times) [emphasis is mine]

"U.S. Sen. Russ Feingold told a large crowd gathered for a listening session in Iron County last week there would likely be no health care bill before the end of the year - and perhaps not at all.

"It was an assessment Feingold said he didn't like, but the prospect of no health care legislation brought a burst of applause from a packed house of nearly 150 citizens at the Mercer Community Center.

""Nobody is going to bring a bill before Christmas, and maybe not even then, if this ever happens," Feingold said. "The divisions are so deep. I never seen anything like that."

Senator Feingold, who is the proponent of health care reform in principle, doesn't think the "reform" that's on the table right now is a right one. He favors experimentation and evidence-gathering before proceeding:

"The senator, a declared proponent of health care reform in principle, nonetheless did not seem too concerned about a potential failure of the Obama administration's effort. He said there was merit to the idea of trying a variety of proposals in various states first.

""Lindsay Graham and I sponsored legislation to have pilot programs in five states," Feingold told the audience. "Maybe we should try some different things. There might be a single-payer state. There might be a co-op state. Let's get some evidence on the ground. This thing right now is not going in the right direction. We might be in a situation where there won't be a bill worth passing.""

The Senator allayed some fears regarding several contentious issues in the current health care "reform". He said the public funding for abortion, which was removed from the House bill, won't be re-introduced in the Senate bill. He was also willing to join the "rest of us" in the health care plan, if he was eligible. (Under the current "reform", Congress would be exempt.)

What I liked most about Senator Feingold, though, was his repudiation of Harry Reid's "evil-mongers" comment:

"Finally, Feingold repudiated Senate Majority Leader Harry Reid's remarks calling vocal critics of health care reform at town hall meetings "evil mongers." Feingold called Reid's remarks unfortunate and inappropriate. "I've been listening to the people for 16 years, and I have never impugned their motives," the senator said."

One participant in the Senator's townhall meeting seems to summarize the national sentiment quite well:

""This issue has definitely awakened a sleeping giant," the man said. "We're mad as hell and we're not going to take it anymore.""

Senator Feingold does not support cap and trade scheme, and he opposes "legislation to require gun registration, and he said such legislation would die a quick death in the Senate."

If you recall, he was the only Senator who voted no on the original Patriot Act. He also voted no on the resolution that authorized President Bush to invade Iraq. He is a Democratic Senator from Wisconsin.

(On these issues, he seems like my kind of Senator. Instead, here in California we have Feinstein and Boxer.)

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Are Banks Lending Again?

Is it possible that banks have been increasing lending?

I do not have hard evidence, and most of the news I read continue to talk about unwillingness of the nation's banks to lend to businesses and consumers. But I have this distinct feel that the money that's been stashed away at the Federal Reserve as excess reserves has been on the loose (albeit very slowly), say for about a few months.

Here is anecdotal evidence that I suspect the money may have gotten loose...

Anecdote 1: Bank of America advertisement
B of A seems to be back heavily advertising their mortgage products on TV (I heard it from people with TV). I saw their ad myself on the Internet several weeks ago, inviting the home buyers and people who want to refinance to contact them. Up to $3 million dollars, no less. That means jumbo loans are back. For quite a while, there was no jumbo loan available here, and that at least partly contributed to pricey beach properties in multi-million dollar range not moving. (Here's B of A web page that says jumbo loans up to $3 million.)

Anecdote 2: Leveraged loans are back
See my yesterday's post. Big national banks like J.P. Morgan Chase, Bank of America and Citigroup are rushing to finance leveraged deals again. In the case of Warner Chilcott, the combined total loan amount of $4 billion may seem tiny, but I suspect that's because of the government rescue and stimulus packages ever since last September - they carry price tags above $700 billion, and by comparison $4 billion loan looks small.

Anecdote 3: Cup and handle formation in M1 Money Multiplier?
I have no idea if one can treat that kind of index as if it were stock price chart. But if I do treat it that way, what I see is a "cup and handle" breakout about to happen. (The chart was created using St. Louis Fed's FRED. Data is from FRED, too.)


And indeed, the M1 Money Multiplier has been increasing since May this year, crawling back to 1, backing my suspicion.

The money multiplier could snap back hard, particularly because the drop since last September was so severe. If that happens, we can forget about deflation.

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Bernanke Will Get Another Term As Fed Chairman

It's surely the change we can believe in.

Obama to Reappoint Bernanke as Fed Chief (8/25/09 Wall Street Journal)

"President Barack Obama will announce the nomination of Ben Bernanke to a second term as Federal Reserve chairman on Tuesday, opting for continuity in U.S. economic policy despite criticism in Congress of the low-key central banker's frantic efforts to rescue the financial system.

"Mr. Obama's decision had become a subject of growing speculation and uncertainty in financial markets and in Washington policy circles.

"The president called the Fed chairman to the Oval Office Wednesday evening to offer him another term. Mr. Bernanke then flew off to Wyoming where he gave a spirited defense of his controversial policies at the Fed's annual meetings in Jackson Hole. Mr. Obama left for Martha's Vineyard, Mass., where he will deliver the news Tuesday with Mr. Bernanke at his side."

You can read the rest of the article by following the link above.

The Fed Chairman has been mounting a campaign in recent weeks to get reappointed. The media pundits have been split: those in favor, those against. Some, who are in favor, recommended reappointment because Big Ben was a much better choice than Larry Summers.

This reappointment by President Obama comes when the court orders the Federal Reserve to disclose the details of $2 trillion emergency bank loans under the Freedom of Information Act request by Bloomberg LP within five days.

It also comes when in the House of Representatives Ron Paul's Audit the Fed bill H.R. 1207 languishes even though it has now 282 co-sponsors, and when Rasmussen survey finds 75% of Americans favor auditing the Fed.

Even the Democrats in Congress express doubts about giving the Federal Reserve and its Chairman greater power via Obama's financial restructuring plan.

What do I think? I think Bernanke, along with Paulson, effective killed what was left of the free-market capitalism with their frantic plans starting early September 2008. Fannie Mae and Freddie Mac takeover by the government, same for AIG, letting Lehman Brothers go bankrupt and see the world seize up. He and Paulson (and let's not forget President Bush) paved the way for an autocratic statist government we have now.

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