Archive for the ‘Texas’ Category

Do Ron Paul’s Supporters Refuse to Admit His Faults When It Comes to Earmarks?

March 5, 2009

I was reading an article on ConservativeHQ.com, “Ron Paul’s Pork Problem,” which basically criticized Representative Ron Paul (R-TX) for being a hypocrite on fiscal conservative principles by arguing for smaller government and less government spending but getting 22 earmarks (totaling $96.1 million) in the recent $410 billion omnibus spending bill.

Now, I love Dr. Paul.  He’s one of my favorite Congressmen, but I disagree with his stance on earmarks.  According to his Congressional website, “As long as the Federal government takes tax money from his constituents, he will make every effort to return that money to his district.”

So, while I disagree with him, I still have a HUGE amount of respect for Dr. Paul, but I am willing to admit that this (in my opinion) is a fault of his.

Now, take a look at some of the comments left on ConservativeHQ.com:

  • “Congrats, you just lost a member.”
  • “Ron Paul has never voted for a bill with unconstitutional provisions in it. He is the most principled statesmen in Congress. You lost all your credibility with this “Pork Problem” article. You also lost me as a member!”
  • “This article is very one sided. You obviously cannot stand the fact that Ron Paul is the only real conservative in the Republican Party. Please remove me from any of your biased e-mails! There is nothing conservative about this web site.”
  • “Ron Paul votes against the spending. Then if the money that they voted on doesn’t get spent on ear marks, it ends up being spent by the Executive Branch. Does that sound constitutional to you?! I can’t believe this was posted here. How completely irresponsible. I am out of here. I hope others with any logical sense of reason will follow unless this website retracts this article immediately and sends out an e-mail apologizing for being stupid.”

So, my message to those supporters of Dr. Paul who refuse to admit his faults, he’s a great man, but he’s not perfect, and I think his stance on earmarks is out of line with conservatism.

Done Ranting,

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The Bill that Nobody Read: The Economic Stimulus Package (H.R. 1)

February 23, 2009

So, I know it’s been a while since Congress passed H.R. 1, the economic stimulus plan, but C-SPAN finally uploaded and categorized all the videos, so better late than never.  I wanted to show you all just how much the Democratic leadership tried to hide the details of the latest stimulus plan:

Here’s the first clip, courtesy of C-SPAN. In this clip, Representative Jerry Lewis (R-CA) asks for additional time for debate, so that more than 90 minutes will available for debate. Lewis was not allowed to ask for the additional time (not sure if that’s in the rules of the House or one of the previous resolutions), so he asked Representative David Obey (D-WI) (Appropriations Committee Chairman) to do so, but Obey refused to allow for more debate time. Representative Tom Price (R-GA) then asked if the bill could be read aloud by the clerk, since no member had had time to read it; however, this request was refused because House resolution 168 made it so that the bill was to be considered read (even though it was physically impossible). This violated a previous promise by the Democrats to keep all bills available for 72 hours before a final vote was brought up.


 

In this clip, Representative Lewis shows how secretive the drafting of this bill was. Even many Democrats were left out of the negotiations.

 

Representative Harold Rogers (R-KY) emphasized that the Democrats refused to allow the House Clerk to read the bill and that debate was limited to 90 minutes. 

 

Representative Obey (D-WI) responds to Jack Kingston (R-GA) talking about appropriations to protect a mouse. He said that there’s nowhere in the bill that mentions a mouse. Well, that’s true – the word “mouse” is never in the bill; however, there is money for that’s given to the EPA for a saltwater marsh protection program where the focus of that is to protect a certain species of mouse (according to an EPA representative). So, while what Mr. Obey said was technically true, it would also be true if I said that the bill never talks about “tax cuts.” The phrase “tax cut” or “tax cuts” is never in the bill, but the legal equivalent is. So, Mr. Obey is really just playing with the words here, and he’s ultimately lying through his teeth. But what really makes him look like a fool is when he tells the Republicans to find the section they’re talking about, as he holds up the 1,000+ page bill that even HE didn’t have time to read through.


In this clip, Representative Zach Wamp (R-TN) has one of my favorite quotes of the debate, “If ever there was a massive bill where the devil is in the details, it is this bill. And there are many devils in the details of this bill.” He also does a good job at placing some of the blame on the Republicans.


Representative Mike Rogers (R-MI) explains the mouse in the bill: “They say there is no mouse in this bill. But there is, sir. What they don’t tell you is that in the EPA projects, it cites for sure and for certain they will spend money on the salt marsh habitat for the mouse in San Francisco. Certainly, the Speaker is getting her cheese.”


In this clip, Representative Jeb Hensarling (R-TX) shows where the blame lies in saying that people borrowed and spent too much: “Too many of our fellow citizens borrowed too much. They spent too much, and they couldn’t pay it back. And now the mistakes of individuals, the Democrats want to force upon us collectively.” He also explains how the Congressional Budget Office says this bill was a disaster.


Representative Aaron Schock (R-IL) (the youngest House member) talks about how we’re spending trillions at a time and that we can’t afford to get this wrong.


Representative Lewis shows, again, how unprepared Congress was to even debate the bill: “Mr. Speaker, we just received official scoring of the $792 billion bill at 12:04 p.m. Unfortunately, we didn’t receive this critical information until one-third of our very limited debate time was over.” He later goes on to say, “While portions of the bill were scored by CBO earlier, in the case of the appropriations section, 40 percent of this entire package, the Members have not had the benefit of knowing what effects this bill would have. Now that we have this information, let me tell you what the nonpartisan Congressional Budget Office concedes.” Lewis also shows that the Democrats are simply rushing this through in one big bill instead of going through the proper appropriations channels: CBO estimates that only 11 percent of the money will spend out this year. It begs the question why has the majority decided to include this in this bill rather than through the regular appropriations process? Why have they decided to create 33 new programs and permanently expand 73 programs? By growing the Federal Government now in this bill, the majority knows that they have a much better chance of permanently increasing government.”


House Minority Leader John Boehner (R-OH) goes over some great points on why he opposed the bill.


Alright, I hope that opened your eyes to how much the Democratic leadership in Congress tried to keep this bill hidden from the members of Congress before they voted on the bill.  So many of the Democrats in Congress have said that they wish that they would’ve asked more question before supporting the War in Iraq.  I’m guessing that many Democrats will be  saying the same about this bill in a year or 2.

Done Ranting,

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President Bush Approves $17.4 Billion Auto Bailout

December 19, 2008

Alright, well this morning, President Bush held a press conference where he announced his plans to give  a $17.4 billion loan to GM and Chrysler.  Here’s a video of  that press conference (courtesy of FOX), and I have a transcript (again, courtesy of FOX) which I’ve done a “play-by-play” analysis of below:

STATEMENT BY THE PRESIDENT ON THE ADMINISTRATION’S PLAN TO ASSIST THE AUTOMAKERS

Roosevelt Room

9:01 A.M. EST

THE PRESIDENT: Good morning. For years, America’s automakers have faced serious challenges — burdensome costs, a shrinking share of the market, and declining profits. In recent months, the global financial crisis has made these challenges even more severe. Now some U.S. auto executives say that their companies are nearing collapse — and that the only way they can buy time to restructure is with help from the federal government.

This is a difficult situation that involves fundamental questions about the proper role of government. On the one hand, government has a responsibility not to undermine the private enterprise system. On the other hand, government has a responsibility to safeguard the broader health and stability of our economy.

Well, personally, I think that the best way to safeguard the health and stability of our economy is to NOT give out loans to companies who were irresponsible!

Addressing the challenges in the auto industry requires us to balance these two responsibilities. If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers. Under ordinary economic circumstances, I would say this is the price that failed companies must pay — and I would not favor intervening to prevent the automakers from going out of business.

How exactly would the bankruptcy be disorderly?  The whole point of  bankruptcy is to keep the process orderly.  And if President Bush means liquidation as in the entire company, then this press conference was just a scare tactic to get the American people behind the auto bailout.  The companies wouldn’t go under.

But these are not ordinary circumstances. In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action. The question is how we can best give it a chance to succeed. Some argue the wisest path is to allow the auto companies to reorganize through Chapter 11 provisions of our bankruptcy laws — and provide federal loans to keep them operating while they try to restructure under the supervision of a bankruptcy court. But given the current state of the auto industry and the economy, Chapter 11 is unlikely to work for American automakers at this time.

American consumers understand why: If you hear that a car company is suddenly going into bankruptcy, you worry that parts and servicing will not be available, and you question the value of your warranty. And with consumers hesitant to buy new cars from struggling automakers, it would be more difficult for auto companies to recover.

Then by this argument, Chapter 11 would NEVER work for an auto company, because people would be hesitant to buy.  And how do you remedy these fears?  You emphasize the fact that 3rd party institutions offer warranties, and you don’t HAVE to go to the dealer to get your car serviced.  There are lots of other shops that do just as good of a job, if not a BETTER job than the dealership.

Additionally, the financial crisis brought the auto companies to the brink of bankruptcy much faster than they could have anticipated — and they have not made the legal and financial preparations necessary to carry out an orderly bankruptcy proceeding that could lead to a successful restructuring.

Um … when they were losing money years ago and asked the UAW members to take a pay cut, but the union said no, so in order to avoid a strike, the companies gave in, the companies should have known that continuing to pay wages that you can’t afford would make you go into bankruptcy eventually.  Like I’ve said before, it’s the companies’ heads’ fault for not cutting wages of the workers as well as taking pay cuts themselves, and it’s the UAW members’ fault for being greedy and refusing to budge at all.

The convergence of these factors means there’s too great a risk that bankruptcy now would lead to a disorderly liquidation of American auto companies. My economic advisors believe that such a collapse would deal an unacceptably painful blow to hardworking Americans far beyond the auto industry. It would worsen a weak job market and exacerbate the financial crisis. It could send our suffering economy into a deeper and longer recession. And it would leave the next President to confront the demise of a major American industry in his first days of office.

Are these the same economic advisors who encouraged the Economic Stimulus Package and the first bailout bill?  Because if so, they suck, and I would have fired them a LONG time ago.

A more responsible option is to give the auto companies an incentive to restructure outside of bankruptcy — and a brief window in which to do it. And that is why my administration worked with Congress on a bill to provide automakers with loans to stave off bankruptcy while they develop plans for viability. This legislation earned bipartisan support from majorities in both houses of Congress.

If bipartisan you mean Democrats along with traitorous Republicans, then yes, I guess it was bipartisan.  HOWEVER, I commend the brave and honorable REAL Republicans who stood up against this bailout, and the other bailouts.  I especially commend Bob Corker (R-TN) for standing up against the UAW.  Of course, Ron Paul (R-TX) must be mentioned, since he’s hugely against this as well.  I commend all 28 Republicans who had the common sense to vote against this bill.

Unfortunately, despite extensive debate and agreement that we should prevent disorderly bankruptcies in the American auto industry, Congress was unable to get a bill to my desk before adjourning this year.

This means the only way to avoid a collapse of the U.S. auto industry is for the executive branch to step in. The American people want the auto companies to succeed, and so do I. So today, I’m announcing that the federal government will grant loans to auto companies under conditions similar to those Congress considered last week.

These loans will provide help in two ways. First, they will give automakers three months to put in place plans to restructure into viable companies — which we believe they are capable of doing. Second, if restructuring cannot be accomplished outside of bankruptcy, the loans will provide time for companies to make the legal and financial preparations necessary for an orderly Chapter 11 process that offers a better prospect of long-term success — and gives consumers confidence that they can continue to buy American cars.

Because Congress failed to make funds available for these loans, the plan I’m announcing today will be drawn from the financial rescue package Congress approved earlier this fall. The terms of the loans will require auto companies to demonstrate how they would become viable. They must pay back all their loans to the government, and show that their firms can earn a profit and achieve a positive net worth. This restructuring will require meaningful concessions from all involved in the auto industry — management, labor unions, creditors, bondholders, dealers, and suppliers.

Well obviously they have to pay back the loans.  It’s not a loan if you keep the money!

In particular, automakers must meet conditions that experts agree are necessary for long-term viability — including putting their retirement plans on a sustainable footing, persuading bondholders to convert their debt into capital the companies need to address immediate financial shortfalls, and making their compensation competitive with foreign automakers who have major operations in the United States. If a company fails to come up with a viable plan by March 31st, it will be required to repay its federal loans.

OK, this is where this whole thing just confuses the crap out of me.  We give them the money, and they spend it.  If they don’t have a plan by March 31st, they have to give all the money back.  But does Bush really think that they’ll have all the money that we gave them?  If they do, then it’s OBVIOUS that they don’t NEED the loan, because they still have enough money!  If they can’t repay us back, how is it any different than a normal loan.  How are we going to force  them to pay us back?  The entire PREMISE around this bailout is just idiotic!

The automakers and unions must understand what is at stake, and make hard decisions necessary to reform, These conditions send a clear message to everyone involved in the future of American automakers: The time to make the hard decisions to become viable is now — or the only option will be bankruptcy.

The actions I’m announcing today represent a step that we wish were not necessary. But given the situation, it is the most effective and responsible way to address this challenge facing our nation. By giving the auto companies a chance to restructure, we will shield the American people from a harsh economic blow at a vulnerable time. And we will give American workers an opportunity to show the world once again they can meet challenges with ingenuity and determination, and bounce back from tough times, and emerge stronger than before.

Thank you.

END 9:08 A.M. EST

Well, I have now lost most all of the approval that I still had for the Bush administration.

There’s still a glimmer of hope: Once Treasury Secretary Paulson actually makes a formal request, the money will be released unless Congress rejects the request within 15 days.  I can only hope that Republicans oppose it and that enough Democrats, angry at the way Bush has handled the release of money, will oppose this awful plan.  Sadly, I don’t see that happening; however, I will hope and pray and continue advocating that we put a stop to all of this economic nonsense!

This bailout plan is NOT the solution.  Like I said, the entire premise of it is flawed: We’ll loan you money to spend, but if you don’t have a good plan, you have to give that money back.  Well, either the money is STILL in their bank accounts (meaning they didn’t NEED the money), or the money has already been SPENT (partially)!

We need some strong fiscal conservatives to show what the Republican party truly stands for.  We need more people like Neil Cavuto, Bob Corker, and Ron Paul.  I’m tired of the Republicans here in Michigan supporting the bailout because it will help our state.  It’s selfish and wrong.  I’m especially disappointed in Representative Pete Hoekstra, who has always been very outspoken about fiscal conservativism.  We need people who will fight for economic justice!  We need people who will fight for the American TAXPAYER!

Done Ranting,

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Ron Paul Was Right (The [Short] Movie!)

December 18, 2008

I ran across the following video on my homepage on YouTube earlier today.  It details some of the predictions that were made by Representative Ron Paul the Great (R-TX) and Peter Schiff (head of Euro Pacific Capital) about the economy:

Honestly, it amazes me how much Ron Paul has been right, yet people still dismiss him as some wacky libertarian politician.  Sure, SOME of his supporters may have been a little … weird, but for the most part, his supporters were normal, just like him.

And although I didn’t vote for him in the primary (he probably would’ve been my second or third pick), I at least have the common courtesy to say when he’s right, and when it comes to economic issues especially, that’s almost every time he speaks.  And I don’t think that it’s because Dr. Paul is some super-genius (although he is a VERY bright individual); I think it’s because he’s not afraid to call things as he sees them.  There’s no sugar coating with him.

He called things such as the trouble with adjustable rate mortgages (ARMs), the problems with the Federal Reserve, and inflation years ago.

I give a lot of credit to Neil Cavuto the Great for acknowledging that Paul was right.

And honestly, I am ashamed of the Republican Party for the way that they tried to ostracize Representative Paul because he has a different stance on a few issues.

That video also had a clip from an interview with Representative Joe Knollenberg (R-MI)  (the one where he said, “It’s not your money”) that I did a blog post on.  When I hear that, it still appalls me that he could say that (and he’s one of my favorite representatives).

My only hope is that we will start listening to the things that Ron Paul is saying, especially when it comes to the economy.  With the situation that we’re in, how can we afford not to listen to somebody who has the great track record that Dr. Paul does when it comes to the future of our economy!

Done Ranting,

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Analysis of the House Voting Down Yesterday’s Bailout Bill

September 30, 2008

I had hoped to do a post on this yesterday, but I wanted to actually see the bill before I did anything on it.  It took them a while to get the bill language up, and I found out that it was about 110 pages long (it is available here if you’re interested).  Also, here’s the bill that the Senate didn’t vote to pass (it needed 60% to pass).

As I’m sure all of you know, the House voted down yesterday’s bill, H.R. 3997, the “Emergency Economic Stabilization Act of 2008″ 205 (140D/65R) – 228 (95D/133R), with 1 not voting (R).

The following is the summary of the act, courtesy of the Financial Services Committee of the House:

SUMMARY OF THE “EMERGENCY ECONOMIC STABILIZATION ACT OF 2008″

I. Stabilizing the Economy

The Emergency Economic Stabilization Act of 2008 (EESA) provides up to $700 billion to the Secretary of the Treasury to buy mortgages and other assets that are clogging the balance sheets of financial institutions and making it difficult for working families, small businesses, and other companies to access credit, which is vital to a strong and stable economy. EESA also establishes a program that would allow companies to insure their troubled assets.

Alright, this basically explains the principle that the Representatives who were for the bill were advocating: This is an investment, not a bailout (similar to the Chrysler government loan guarantees of the 1970s and 1980s, where we co-signed on a $1.5 billion loan).  They argue that we will make our money back, and even possibly make a profit (like we did with Chrysler).  Here’s the problem with that thinking: many American people who are in crisis right now are NOT helping the situation.  I gave an example of a woman who simply left her old home and mortgage in the middle of the night and bought a house in the Carolinas (I don’t remember which off the top of my head) the next day, before the credit caught up to her.  There have been stories of people tearing apart houses right before the bank repossesses them, “because the bank is the bad guy” when in actuality, it’s both the bank’s fault for giving a loan to somebody who never should have been able to get one as well as the homeowner’s fault for trying to buy a house that he/she simply couldn’t afford.  It’s a lack of basic family budgeting and spending principles that helped get us into this situation.  Then mortgage companies gave out Adjustable Rate Mortgages to people who NEVER should’ve been able to get one, and people looking to buy homes ignored the first basic principle of fiscal responsibility: don’t buy something you can’t afford!  So, we’re going to buy these mortgages, but that’s not going to stop people from not being able to pay the mortgages.  Instead of banks losing money, it’ll be the government.

Now, on the other hand, it IS unfair for responsible buyers who happened to get a mortgage from the wrong company to have to suffer, and it is THESE instances that I am more willing to accept government intervention, but how the government is to analyze and weed out the good from the bad is quite a problem, considering the massiveness of banks and mortgage companies that have failed or are looking like they will fail.

II. Homeownership Preservation

EESA requires the Treasury to modify troubled loans – many the result of predatory lending practices – wherever possible to help American families keep their homes. It also directs other federal agencies to modify loans that they own or control. Finally, it improves the HOPE for Homeowners program by expanding eligibility and increasing the tools available to the Department of Housing and Urban Development to help more families keep their homes.

Now, that last sentence is where the government could lose a lot of money.  When you expand eligibility and increase tools for helping people stay in their homes, you’re saying that these people are getting help to stay in homes that they can’t afford, which means that the government is footing the bill, and that’s money that the government will not see back in its hands a good chunk of the time.

III. Taxpayer Protection

Taxpayers should not be expected to pay for Wall Street’s mistakes. The legislation requires companies that sell some of their bad assets to the government to provide warrants so that taxpayers will benefit from any future growth these companies may experience as a result of participation in this program. The legislation also requires the President to submit legislation that would cover any losses to taxpayers resulting from this program from financial institutions.

This is again, where the “investment” principle comes into the bill.  And this could be good for the government, like the bailout of Chrysler was profitable to the government in the 1980s and 1990s.  The part that confuses me is that last sentence – why the President is the one to draft legislation to cover taxpayer losses seems to confuse me, unless that’s their way of knowing that the President will approve of the measure, since he himself drafted it.  I’ll have to look into that a little more to understand what all that would do.

IV. No Windfalls for Executives

Executives who made bad decisions should not be allowed to dump their bad assets on the government, and then walk away with millions of dollars in bonuses. In order to participate in this program, companies will lose certain tax benefits and, in some cases, must limit executive pay. In addition, the bill limits “golden parachutes” and requires that unearned bonuses be returned.

If these executives cared about their companies, most of them just would stop taking pay.  I guarantee you that if I were the CEO of AIG, and if I were set for life, I wouldn’t take another pay check until the company was back on track.

V. Strong Oversight

Rather than giving the Treasury all the funds at once, the legislation gives the Treasury $250 billion immediately, then requires the President to certify that additional funds are needed ($100 billion, then $350 billion subject to Congressional disapproval). The Treasury must report on the use of the funds and the progress in addressing the crisis. EESA also establishes an Oversight Board so that the Treasury cannot act in an arbitrary manner. It also establishes a special inspector general to protect against waste, fraud and abuse [sic]

Good.  Frankly, I don’t trust the Treasury Department after they advocated the Fannie and Freddie bailouts.  I want to know where this money is going, and I want Congressional approval of it (even though I don’t support the Democrats in Congress, the more people that have to approve where the money goes, the better).

So, that’s the summary, and here’s the section-by-section analysis of the bill, basically the summary with details, also courtesy of the Financial Services Committee:

 SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short Title.

“Emergency Economic Stabilization Act of 2008.”

Section 2. Purposes.

Provides authority to the Treasury Secretary to restore liquidity and stability to the U.S. financial system and to ensure the economic well-being of Americans.

Section 3. Definitions.

Contains various definitions used under this Act.

Title I. Troubled Assets Relief Program.

Section 101. Purchases of Troubled Assets.

Authorizes the Secretary to establish a Troubled Asset Relief Program (“TARP”) to purchase troubled assets from financial institutions. Establishes an Office of Financial Stability within the Treasury Department to implement the TARP in consultation with the Board of Governors of the Federal Reserve System, the FDIC, the Comptroller of the Currency, the Director of the Office of Thrift Supervision and the Secretary of Housing and Urban Development.

Requires the Treasury Secretary to establish guidelines and policies to carry out the purposes of this Act.

Includes provisions to prevent unjust enrichment by participants of the program.

Like I said above.  The government has to be careful that this really is an investment, because if more companies say, “We can take risks, because we’re too big, so the government will HAVE to bail us out,” then it becomes purely a bailout and a terrible investment that will cost taxpayers billions (if not ultimately trillions, since this bill alone would authorize up to $700 billion).  Personally, I really don’t think the government should be doing this at all, but since some bailout bill will eventually pass, I’d want it filled with as many fiscal conservative principles as possible.

Section 102. Insurance of Troubled Assets.

If the Secretary establishes the TARP program, the Secretary is required to establish a program to guarantee troubled assets of financial institutions.

The Secretary is required to establish risk-based premiums for such guarantees sufficient to cover anticipated claims. The Secretary must report to Congress on the establishment of the guarantee program.

Again – I like the whole reporting to Congress idea.

Section 103. Considerations.

In using authority under this Act, the Treasury Secretary is required to take a number of considerations into account, including the interests of taxpayers, minimizing the impact on the national debt, providing stability to the financial markets, preserving homeownership, the needs of all financial institutions regardless of size or other characteristics, and the needs of local communities. Requires the Secretary to examine the long-term viability of an institution in determining whether to directly purchase assets under the TARP.

Section 104. Financial Stability Oversight Board.

This section establishes the Financial Stability Oversight Board to review and make recommendations regarding the exercise of authority under this Act. In addition, the Board must ensure that the policies implemented by the Secretary protect taxpayers, are in the economic interests of the United States, and are in accordance with this Act.

The Board is comprised of the Chairman of the Board of Governors of the Federal Reserve System, the Secretary of the Treasury, the Director of the Federal Home Finance Agency, the Chairman of the Securities and Exchange Commission and the Secretary of the Department of Housing and Urban Development.

Section 105. Reports.

Monthly Reports: Within 60 days of the first exercise of authority under this Act and every month thereafter, the Secretary is required to report to Congress its activities under TARP, including detailed financial statements.

Tranche Reports: For every $50 billion in assets purchased, the Secretary is required to report to Congress a detailed description of all transactions, a description of the pricing mechanisms used, and justifications for the financial terms of such transactions.

Regulatory Modernization Report: Prior to April 30, 2009, the Secretary is required to submit a report to Congress on the current state of the financial markets, the effectiveness of the financial regulatory system, and to provide any recommendations.

Section 106. Rights; Management; Sale of Troubled Assets; Revenues and Sale Proceeds.

Establishes the right of the Secretary to exercise authorities under this Act at any time. Provides the Secretary with the authority to manage troubled assets, including the ability to determine the terms and conditions associated with the disposition of troubled assets. Requires profits from the sale of troubled assets to be used to pay down the national debt.

Section 107. Contracting Procedures.

Allows the Secretary to waive provisions of the Federal Acquisition Regulation where compelling circumstances make compliance contrary to the public interest. Such waivers must be reported to Congress within 7 days. If provisions related to minority contracting are waived, the Secretary must develop alternate procedures to ensure the inclusion of minority contractors.

Allows the FDIC to be selected as an asset manager for residential mortgage loans and mortgage-backed securities.

Section 108. Conflicts of Interest.

The Secretary is required to issue regulations or guidelines to manage or prohibit conflicts of interest in the administration of the program.

Section 109. Foreclosure Mitigation Efforts.

For mortgages and mortgage-backed securities acquired through TARP, the Secretary must implement a plan to mitigate foreclosures and to encourage servicers of mortgages to modify loans through Hope for Homeowners and other programs. Allows the Secretary to use loan guarantees and credit enhancement to avoid foreclosures. Requires the Secretary to coordinate with other federal entities that hold troubled assets in order to identify opportunities to modify loans, considering net present value to the taxpayer.

This is the section that is most helpful directly to taxpayers, but will also award people for bad fiscal principles.  If you can’t afford a loan that you took out, it’s not the government’s job to use loan guarantees (essentially co-sign on the loan).  If you lose your house, that’s your own fault.  It’s harsh, but it’s fair.

Section 110. Assistance to Homeowners.

Requires federal entities that hold mortgages and mortgage-backed securities, including the Federal Housing Finance Agency, the FDIC, and the Federal Reserve to develop plans to minimize foreclosures. Requires federal entities to work with servicers to encourage loan modifications, considering net present value to the taxpayer.

Again, the government will lose a lot of money here, and so will banks.  If they’re letting people stay in houses when they can’t afford them, somebody is going to lose money, and it will be both banks and other lending agencies as well as the government.

Section 111. Executive Compensation and Corporate Governance.

Provides that Treasury will promulgate executive compensation rules governing financial institutions that sell it troubled assets. Where Treasury buys assets directly, the institution must observe standards limiting incentives, allowing clawback and prohibiting golden parachutes. When Treasury buys assets at auction, an institution that has sold more than $300 million in assets is subject to additional taxes, including a 20% excise tax on golden parachute payments triggered by events other than retirement, and tax deduction limits for compensation limits above $500,000.

Section 112. Coordination With Foreign Authorities and Central Banks.

Requires the Secretary to coordinate with foreign authorities and central banks to establish programs similar to TARP.

Section 113. Minimization of Long-Term Costs and Maximization of Benefits for Taxpayers.

In order to cover losses and administrative costs, as well as to allow taxpayers to share in equity appreciation, requires that the Treasury receive non-voting warrants from participating financial institutions.

Section 114. Market Transparency.

48-hour Reporting Requirement: The Secretary is required, within 2 business days of exercising authority under this Act, to publicly disclose the details of any transaction.

Good, if we’re going to screw our economy up more, I at least want to understand exactly how it happened.

Section 115. Graduated Authorization to Purchase.

Authorizes the full $700 billion as requested by the Treasury Secretary for implementation of TARP. Allows the Secretary to immediately use up to $250 billion in authority under this Act. Upon a Presidential certification of need, the Secretary may access an additional $100 billion. The final $350 billion may be accessed if the President transmits a written report to Congress requesting such authority. The Secretary may use this additional authority unless within 15 days Congress passes a joint resolution of disapproval which may be considered on an expedited basis.

Again, good – it at least gives us the hope that we won’t use all $700 billion, at least on this bailout.

Section 116. Oversight and Audits.

Requires the Comptroller General of the United States to conduct ongoing oversight of the activities and performance of TARP, and to report every 60 days to Congress. The Comptroller General is required to conduct an annual audit of TARP. In addition, TARP is required to establish and maintain an effective system of internal controls.

Section 117. Study and Report on Margin Authority.

Directs the Comptroller General to conduct a study and report back to Congress on the role in which leverage and sudden deleveraging of financial institutions was a factor behind the current financial crisis.

Section 118. Funding.

Provides for the authorization and appropriation of funds consistent with Section 115.

Section 119. Judicial Review and Related Matters.

Provides standards for judicial review, including injunctive and other relief, to ensure that the actions of the Secretary are not arbitrary, capricious, or not in accordance with law.

Section 120. Termination of Authority.

Provides that the authorities to purchase and guarantee assets terminate on December 31, 2009. The Secretary may extend the authority for an additional year upon certification of need to Congress.

Section 121. Special Inspector General for the Troubled Asset Relief Program.

Establishes the Office of the Special Inspector General for the Troubled Asset Relief Program to conduct, supervise, and coordinate audits and investigations of the actions undertaken by the Secretary under this Act. The Special Inspector General is required to submit a quarterly report to Congress summarizing its activities and the activities of the Secretary under this Act.

Section 122. Increase in the Statutory Limit on the Public Debt.

Raises the debt ceiling from $10.6 trillion to $11.3 trillion.

Section 123. Credit Reform.

Details the manner in which the legislation will be treated for budgetary purposes under the Federal Credit Reform Act.

Section 124. Hope for Homeowners Amendments.

Strengthens the Hope for Homeowners program to increase eligibility and improve the tools available to prevent foreclosures.

I’ve already voiced my opinions on this – this is gonna hurt us.

Section 125. Congressional Oversight Panel.

Establishes a Congressional Oversight Panel to review the state of the financial markets, the regulatory system, and the use of authority under TARP. The panel is required to report to Congress every 30 days and to submit a special report on regulatory reform

prior to January 20, 2009. The panel will consist of 5 outside experts appointed by the House and Senate Minority and Majority leadership.

Section 126. FDIC Enforcement Enhancement.

Prohibits the misuse of the FDIC logo and name to falsely represent that deposits are insured. Strengthens enforcement by appropriate federal banking agencies, and allows the FDIC to take enforcement action against any person or institution where the banking agency has not acted.

This wasn’t prohibited before?  I feel like that should’ve been outlawed back when the FDIC was FORMED!

Section 127. Cooperation With the FBI.

Requires any federal financial regulatory agency to cooperate with the FBI and other law enforcement agencies investigating fraud, misrepresentation, and malfeasance with respect to development, advertising, and sale of financial products.

Again, this needed to be in a bill?

Section 128. Acceleration of Effective Date.

Provides the Federal Reserve with the ability to pay interest on reserves.

Section 129. Disclosures on Exercise of Loan Authority.

Requires the Federal Reserve to provide a detailed report to Congress, in an expedited manner, upon the use of its emergency lending authority under Section 13(3) of the Federal Reserve Act.

Again, if we’re going to kill our economy, at least we know how we did it so we don’t do it again.

Section 130. Technical Corrections.

Makes technical corrections to the Truth in Lending Act.

Section 131. Exchange Stabilization Fund Reimbursement.

Protects the Exchange Stabilization Fund from incurring any losses due to the temporary money market mutual fund guarantee by requiring the program created in this Act to reimburse the Fund. Prohibits any future use of the Fund for any guarantee program for the money market mutual fund industry.

Section 132. Authority to Suspend Mark-to-Market Accounting.

Restates the Securities and Exchange Commission’s authority to suspend the application of Statement Number 157 of the Financial Accounting Standards Board if the SEC determines that it is in the public interest and protects investors.

Section 133. Study on Mark-to-Market Accounting.

Requires the SEC, in consultation with the Federal Reserve and the Treasury, to conduct a study on mark-to-market accounting standards as provided in FAS 157, including its effects on balance sheets, impact on the quality of financial information, and other matters, and to report to Congress within 90 days on its findings.

Section 134. Recoupment.

Requires that in 5 years, the President submit to the Congress a proposal that recoups from the financial industry any projected losses to the taxpayer.

Again, why is the President writing this proposal?  And how do they honestly plan on recouping losses?  How do you get back billions of dollars from the financial industry?  I feel sorry for whoever has to write that proposal.

Section 135. Preservation of Authority.

Clarifies that nothing in this Act shall limit the authority of the Secretary or the Federal Reserve under any other provision of law.

Title II-Budget-Related Provisions

Section 201. Information for Congressional Support Agencies.

Requires that information used by the Treasury Secretary in connection with activities under this Act be made available to CBO and JCT.

Section 202. Reports by the Office of Management and Budget and the Congressional Budget Office.

Requires CBO and OMB to report cost estimates and related information to Congress and the President regarding the authorities that the Secretary of the Treasury has exercised under the Act.

Section 203. Analysis in President’s Budget.

Requires that the President include in his annual budget submission to the Congress certain analyses and estimates relating to costs incurred as a result of the Act; and

Section 204. Emergency Treatment.

Specifies scoring of the Act for purposes of budget enforcement.

Title III-Tax Provisions

Section 301. Gain or Loss From Sale or Exchange of Certain Preferred Stock.

Details certain changes in the tax treatment of losses on the preferred stock of certain GSEs for financial institutions.

Section 302. Special Rules for Tax Treatment of Executive Compensation of Employers Participating in the Troubled Assets Relief Program.

Applies limits on executive compensation and golden parachutes for certain executives of employers who participate in the auction program.

That I agree with.  If we’re bailing out these companies, lets at least waste the money solely on the companies.

Section 303. Extension of Exclusion of Income From Discharge of Qualified Principal Residence Indebtedness.

Extends current law tax forgiveness on the cancellation of mortgage debt.

Alright, so that was the full summary of the bill that FAILED the House yesterday.

I want give you a quote from Representative Ron Paul (R-TX), given during yesterday’s House session:

Mr. PAUL. Madam Speaker, I rise in strong opposition to this bill. This is only going to make the problem that much worse. The problem came about because we spent too much; we borrowed too much, and we printed too much money; we inflated too much, and we overregulated. This is all that this bill is about is more of the same.

So you can’t solve the problem. We are looking at a symptom. We are looking at the collapsing of a market that was unstable. It was unstable because of the way it came about. It came about because of a monopoly control of money and credit by the Federal Reserve System, and that is a natural consequence of what happens when a Federal Reserve System creates too much credit.

Now, there have been a fair number of free market economists around who have predicted this would happen. Yet do we look to them for advice? No. We totally exclude them. We don’t listen to them. We don’t look at them. We look to the people who created the problem, and then we perpetuate the problem.

The most serious mistake that could be made here today is to blame free market capitalism for this problem. This has nothing to do with free market capitalism. This has to do with a managed economy, with an inflationary system, with corporatism, and with a special interest system. It has nothing to do with the failure of free markets and capitalism. Yet we’re resorting now, once again, to promoting more and more government.

Long term, this is disastrous because of everything we’re doing here and because of everything we’ve done for 6 months. We’ve already pumped in $700 billion. Here is another $700 billion. This is going to destroy the dollar. That’s what you should be concerned about. Yes, Wall Street is in trouble. There are a lot of problems, and if we don’t vote for this, there are going to be problems. Believe me: If you destroy the dollar, you’re going to destroy a worldwide economy, and that’s what we’re
on the verge of doing, and it is inevitable, if we continue this, that that’s what’s going to happen. It’s [Page: H10370]
going to be a lot more serious than what we’re dealing with today.

We need to get our house in order. We need more oversight–that is a certainty–but we need oversight of the Federal Reserve System, of the Exchange Stabilization Fund and of the President’s Working Group on Financial Markets. Find out what they’re doing. How much have they been meddling in the market?

What we’re doing today is going to make things much worse.

Pure economic genius from Dr. Paul.

And here’s a quote from Representative Marilyn Musgrave (R-CO):

Mrs. MUSGRAVE. Madam Speaker, I am pleased that the strong opposition to the initial administration proposal has helped to force some very important changes such as the bipartisan oversight board, which is an online database that will allow greater oversight of the Secretary’s actions, but this is still a bailout for Wall Street that will cost the average Colorado household thousands.

I simply cannot stomach transferring that kind of money from the middle class families to a bunch of Wall Street bankers whose avarice and greed put us in this situation in the first place. It’s interesting that, when working families were being crushed by soaring energy prices this summer, Congress went on vacation. Yet, when Wall Street faced the consequences of its actions, we worked around the clock to help them. We should place the same priority on helping Main Street that we place on helping
Wall Street.

And there she expresses what most Americans are expressing: “Why use my money to bail out people and companies who acted irresponsibly?”

A full record of everything said at yesterday’s House session is available on C-Span’s website here (it’s actually pretty cool – I never knew they had that!).

So, again, I am glad that the House voted down this bill.  Hopefully I’ll be able to see the next bill BEFORE there’s a vote on it – I was very disappointed that there was no record of this until today, and even then, so many people were trying to access it that they were killing GovTrack.us and the House websites.

On a side note, here’s a copy of the roll call vote, and I’d like to note that I’m terribly disappointed in Representative Tancredo (R-CO) for voting Aye on this.

Done Ranting,

Ranting Republican
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McCain Asks Obama, Debate Commission to Postpone Debate Due to Economic Crisis

September 24, 2008

Today, John McCain issued the following statement regarding the economic crisis:

Remarks on the Economic Crisis

September 24, 2008

America this week faces an historic crisis in our financial system. We must pass legislation to address this crisis. If we do not, credit will dry up, with devastating consequences for our economy. People will no longer be able to buy homes and their life savings will be at stake. Businesses will not have enough money to pay their employees. If we do not act, ever corner of our country will be impacted. We cannot allow this to happen.

Well, it was mainly legislation that got us into this mess, so let’s be careful not to make a temporary fix that will make things even worse 50 years down the road.

Last Friday, I laid out my proposal and I have since discussed my priorities and concerns with the bill the Administration has put forward. Senator Obama has expressed his priorities and concerns. This morning, I met with a group of economic advisers to talk about the proposal on the table and the steps that we should take going forward. I have also spoken with members of Congress to hear their perspective.

It has become clear that no consensus has developed to support the Administration’s proposal. I do not believe that the plan on the table will pass as it currently stands, and we are running out of time.

Tomorrow morning, I will suspend my campaign and return to Washington after speaking at the Clinton Global Initiative. I have spoken to Senator Obama and informed him of my decision and have asked him to join me.

I will say that this is a good move for both candidates to do.  This crisis is not something that we can end with a Congress that’s more worried about getting reelected than legislating.

I am calling on the President to convene a meeting with the leadership from both houses of Congress, including Senator Obama and myself. It is time for both parties to come together to solve this problem.

We must meet as Americans, not as Democrats or Republicans, and we must meet until this crisis is resolved. I am directing my campaign to work with the Obama campaign and the commission on presidential debates to delay Friday night’s debate until we have taken action to address this crisis.

Again, I’m glad he’s doing this, but on the other hand, this is gonna look kinda bad in the media, and personally, I’m not sure I want to see McCain’s plans for this economic crisis.  I’ve never exactly agreed with his stances on stuff like GSEs and the Economic Stimulus Act of 2008 (I’m much more in line with Representative Ron Paul (R-TX) and Senators Chuck Hagel (R-NE) and Elizabeth Dole (R-NC)).

I am confident that before the markets open on Monday we can achieve consensus on legislation that will stabilize our financial markets, protect taxpayers and homeowners, and earn the confidence of the American people. All we must do to achieve this is temporarily set politics aside, and I am committed to doing so.

Following September 11th, our national leaders came together at a time of crisis. We must show that kind of patriotism now. Americans across our country lament the fact that partisan divisions in Washington have prevented us from addressing our national challenges. Now is our chance to come together to prove that Washington is once again capable of leading this country.

Alright, so there’s his statement.

Again, I’m glad to see that he’s putting campaigning aside to resolve this, but I’m worried about what the Congress will do here.  The last thing we need is another Economic Stimulus Package-esque bill that’s going to look good to voters, but wind up screwing us up even more.  A $700 billion bailout WILL NOT HELP!

Done Ranting,

Ranting Republican
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Ron Paul on Bailouts: “We Are Headed for a Rough Ride”

September 24, 2008

The following is Representative Ron Paul’s (R-TX) statements regarding government bailouts of financial institutions, with my analysis sprinkled throughout his comments:

Many Americans today are asking themselves how the economy got to be in such a bad spot.

For years they thought the economy was booming, growth was up, job numbers and productivity were increasing. Yet now we find ourselves in what is shaping up to be one of the most severe economic downturns since the Great Depression.

Unfortunately, the government’s preferred solution to the crisis is the very thing that got us into this mess in the first place: government intervention.

And here’s the sad part – it’s been people like Paul, and his followers and others who believe like him that have predicted things like this would happen.  I’ve always been against government intervention into stuff like this, although, due to my age, haven’t had the opportunity to voice this as much as Dr. Paul.

Ever since the 1930s, the federal government has involved itself deeply in housing policy and developed numerous programs to encourage homebuilding and homeownership.

Blame a lot of it on FDR – he’s the one who started all this crap TRYING to get us out of the Great Depression.  Emphasis on “trying.”  None of FDR’s plans really worked–what got us out was going to war.

Government-sponsored enterprises Fannie Mae and Freddie Mac were able to obtain a monopoly position in the mortgage market, especially the mortgage-backed securities market, because of the advantages bestowed upon them by the federal government.

Well, they were, after all, created by the federal government – the first mistake that was made here.

Laws passed by Congress such as the Community Reinvestment Act required banks to make loans to previously underserved segments of their communities, thus forcing banks to lend to people who normally would be rejected as bad credit risks.

And even the Economic Stimulus Package did this.  It INCREASED loan limits for people using adjustable rate mortgages, and increased the amount of people getting loans–people who NEVER should’ve been able to get loans with their credit.

These governmental measures, combined with the Federal Reserve’s loose monetary policy, led to an unsustainable housing boom. The key measure by which the Fed caused this boom was through the manipulation of interest rates, and the open market operations that accompany this lowering.

When interest rates are lowered to below what the market rate would normally be, as the Federal Reserve has done numerous times throughout this decade, it becomes much cheaper to borrow money. Longer-term and more capital-intensive projects, projects that would be unprofitable at a high interest rate, suddenly become profitable.

Because the boom comes about from an increase in the supply of money and not from demand from consumers, the result is malinvestment, a misallocation of resources into sectors in which there is insufficient demand.

In this case, this manifested itself in overbuilding in real estate. When builders realize they have overbuilt and have too many houses to sell, too many apartments to rent, or too much commercial real estate to lease, they seek to recoup as much of their money as possible, even if it means lowering prices drastically.

And this is evident in my home state of Michigan.  Where I live, there are some housing areas just recently built that are largely still up for sale.  Either that, or people will buy the new houses before selling their own houses, and then the original houses are left up for sale.  But not all of this is the government’s fault.  My mother was telling me other day that the sister of her friend was going to have the bank repossess her house, so she left in the middle of the night, went down to South Carolina, and bought a house the next day, before the credit caught up with her.  Not only is that dishonest and despicable, it’s detrimental to the economy!  Or you have people vandalizing their own houses right before banks repossess them.  IT’S NOT THE BANK’S fault that you can’t make your payments (it’s the bank’s fault if they gave an undeserving person a loan, but still, these actions are NOT helping!).

This lowering of prices brings the economy back into balance, equalizing supply and demand. This economic adjustment means, however that there are some winners — in this case, those who can again find affordable housing without the need for creative mortgage products, and some losers — builders and other sectors connected to real estate that suffer setbacks.

The government doesn’t like this, however, and undertakes measures to keep prices artificially inflated. This was why the Great Depression was as long and drawn out in this country as it was.

I am afraid that policymakers today have not learned the lesson that prices must adjust to economic reality. The bailout of Fannie and Freddie, the purchase of AIG, and the latest multi-hundred billion dollar Treasury scheme all have one thing in common: They seek to prevent the liquidation of bad debt and worthless assets at market prices, and instead try to prop up those markets and keep those assets trading at prices far in excess of what any buyer would be willing to pay.

Additionally, the government’s actions encourage moral hazard of the worst sort. Now that the precedent has been set, the likelihood of financial institutions to engage in riskier investment schemes is increased, because they now know that an investment position so overextended as to threaten the stability of the financial system will result in a government bailout and purchase of worthless, illiquid assets.

And that was the attitude that Freddie and Fannie executives had.  “The government will HAVE to bail us out” mentality HAS GOT TO STOP!

Using trillions of dollars of taxpayer money to purchase illusory short-term security, the government is actually ensuring even greater instability in the financial system in the long term.

The solution to the problem is to end government meddling in the market. Government intervention leads to distortions in the market, and government reacts to each distortion by enacting new laws and regulations, which create their own distortions, and so on ad infinitum.

Easier said than done.  Once you start bailouts, it’s hard to stop.  It’s similar to returning to the gold standard.  Our money is so inflated now that it would take national cooperation to return to the gold standard.  Prices for anything purchased as well as wages would have to significantly decrease, and Americans are too greedy to do this.  People wouldn’t want their wages cut, even though they’d still be able to afford everything that they can now, because “it would look bad on paper.”  Getting out of the Great Depression would’ve been simple, if everybody agreed to a plan, but if one greedy person doesn’t agree to the set plan, that throws off the whole rest of the plan.  Complete cooperation is necessary, but in today’s world, it will never happen (unles the government forces you, but then you’re dealing with extreme government involvement, which STILL doesn’t work as evidenced in the massive failures of communism).

It is time this process is put to an end. But the government cannot just sit back idly and let the bust occur. It must actively roll back stifling laws and regulations that allowed the boom to form in the first place.

But where will they get their money from if they lose their corporate backers!  How’s a politician supposed to live if he doesn’t have businesses feeding him money!

The government must divorce itself of the albatross of Fannie and Freddie, balance and drastically decrease the size of the federal budget, and reduce onerous regulations on banks and credit unions that lead to structural rigidity in the financial sector.

And unfortunately neither of our major Presidential candidates will do this.  I’d like to see what Senator Hagel (R-NE) would’ve done about the Fannie and Freddie situation, since he voted AGAINST the Economic Stimulus Package.

Until the big-government apologists realize the error of their ways, and until vocal free-market advocates act in a manner which buttresses their rhetoric, I am afraid we are headed for a rough ride.

A very rough ride indeed, Dr. Paul.

And again, Paul shows just how smart he is when it comes to economic issues.  I disagree with him on a couple other issues (kinda a half disagreement on Iraq), but I honestly wouldn’t have been disappointed if he were the Republican nominee.

I just hope that people (especially McCain) start listening to him and realize that we can’t keep doing what we’ve been doing.

Done Ranting,

Ranting Republican
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Federal Government Takes Over Fannie Mae and Freddie Mac

September 7, 2008

Well, as of this afternoon, it’s official: the 2 mortgage giants, Fannie Mae and Freddie Mac, will be placed in conservatorship under the supervision of the Federal Housing Finance Agency (FHFA).  Under this plan, the federal government will temporarily run Fannie and Freddie until the 2 companies become more stable.

Along with this temporary takeover, the CEOs of Freddie and Fannie, Richard Syron and Daniel Mudd will be ousted, but kept on during the transition  process.  Herb Allison, the former president TIAA-CREF and former vice-chairman of Merrill Lynch, will take over Fannie Mae, while David Moffett, the former vice-chairman and chief financial officer of U.S. Bancorp and senior adviser at the Carlyle Group, will take over Freddie Mac.

The move was announced at a press conference today where Treasury Secretary Henry Paulson and FHFA director James Lockhart announced the plan:

  • Change in CEOs, as stated above.
  • Dividends on common and preferred shares will be eliminated in order to save the companies about $2 billion dollars per year.
  • All of the firms’ lobbying and political activities will immediately cease.
  • All charitable activities will be immediately reviewed.
  • The 2 companies will be allowed to “modestly increase” their existing investment portfolios until 2009.
  • Begin to shrink their investment portfolios by 10% a year, starting in 2010.
  • The Treasury Department will provide as much money as the companies need in order to keep their capital reserves from falling below the levels that would force them into receivership.
  • The Treasury Department will also buy Fannie and Freddie mortgage securities on the open market.
  • The Treasury Department will also create a “Secured Lending Credit Facility,” which will be a source for Freddie and Fannie to borrow money if they can’t borrow enough money on the open market.

Some quotes from Secretary Paulson (I’ll have full press releases for you to read at the very bottom):

  • “Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe.  This turmoil would directly and negatively impact household wealth: from family budgets, to home values, to savings for college and retirement.  A failure would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance.  And a failure would be harmful to economic growth and job creation.”
  • “We examined all options available, and determined that this comprehensive and complementary set of actions best meets our three objectives of market stability, mortgage availability and taxpayer protection.”
  • “Government support needs to be either explicit or non-existent, and structured to resolve the conflict between public and private purposes,” Mr. Paulson said. “We will make a grave error if we don’t use this time out to permanently address the structural issues presented by the GSE’s [Government sponsored enterprises.  Fannie and Freddie were created by Congress, but were made private back in1968 and 1970 {Freddie was directly made a private corporation from the beginning}, respectively].”

Personally, I think that Freddie and Fannie have done business assuming that the government would “have to bail them out,” and thus didn’t take necessary precautions to avoid this.  The assumption that the government would have to step in came from the fact that together, Fannie and Freddie guarantee around  70% of all new home mortgages.

I don’t think that the government should have stepped in here.  The more the government gets involved, the deeper they’ll continue to get involved, and the more it’s going to cost taxpayers.  We’ve seen government involvement with Bear Sterns cost taxpayers millions of dollars.  We had the Economic Stimulus package use taxpayer money to basically bail out citizens who made poor decisions.  It was people like Representative Ron Paul (R-TX) and Senator Chuck Hagel (R-NE) that stood up to that that are standing up to the takeover of Freddie and Fannie (I know that Paul is – I haven’t gotten a quote from Hagel yet, but based on past voting records, I’m going to guess that he’s against it).  This is going to cost the taxpayers BILLIONS of dollars.

And here are those press releases I promised you available on the Treasury Department’s website and the FHFA press release is available here):

September 7, 2008
hp-1129

Statement by Secretary Henry M. Paulson, Jr. on Treasury and Federal Housing Finance Agency Action to Protect Financial Markets and Taxpayers

Washington, DC–

Good morning. I’m joined here by Jim Lockhart, Director of the new independent regulator, the Federal Housing Finance Agency, FHFA.

In July, Congress granted the Treasury, the Federal Reserve and FHFA new authorities with respect to the GSEs, Fannie Mae and Freddie Mac. Since that time, we have closely monitored financial market and business conditions and have analyzed in great detail the current financial condition of the GSEs – including the ability of the GSEs to weather a variety of market conditions going forward. As a result of this work, we have determined that it is necessary to take action.

Since this difficult period for the GSEs began, I have clearly stated three critical objectives: providing stability to financial markets, supporting the availability of mortgage finance, and protecting taxpayers – both by minimizing the near term costs to the taxpayer and by setting policymakers on a course to resolve the systemic risk created by the inherent conflict in the GSE structure.

Based on what we have learned about these institutions over the last four weeks – including what we learned about their capital requirements – and given the condition of financial markets today, I concluded that it would not have been in the best interest of the taxpayers for Treasury to simply make an equity investment in these enterprises in their current form.

The four steps we are announcing today are the result of detailed and thorough collaboration between FHFA, the U.S. Treasury, and the Federal Reserve.

We examined all options available, and determined that this comprehensive and complementary set of actions best meets our three objectives of market stability, mortgage availability and taxpayer protection.

Throughout this process we have been in close communication with the GSEs themselves. I have also consulted with Members of Congress from both parties and I appreciate their support as FHFA, the Federal Reserve and the Treasury have moved to address this difficult issue.

 

Before I turn to Jim to discuss the action he is taking today, let me make clear that these two institutions are unique. They operate solely in the mortgage market and are therefore more exposed than other financial institutions to the housing correction. Their statutory capital requirements are thin and poorly defined as compared to other institutions. Nothing about our actions today in any way reflects a changed view of the housing correction or of the strength of other U.S. financial institutions.

***

I support the Director’s decision as necessary and appropriate and had advised him that conservatorship was the only form in which I would commit taxpayer money to the GSEs.

I appreciate the productive cooperation we have received from the boards and the management of both GSEs. I attribute the need for today’s action primarily to the inherent conflict and flawed business model embedded in the GSE structure, and to the ongoing housing correction. GSE managements and their Boards are responsible for neither. New CEOs supported by new non-executive Chairmen have taken over management of the enterprises, and we hope and expect that the vast majority of key professionals will remain in their jobs. I am particularly pleased that the departing CEOs, Dan Mudd and Dick Syron, have agreed to stay on for a period to help with the transition.

I have long said that the housing correction poses the biggest risk to our economy. It is a drag on our economic growth, and at the heart of the turmoil and stress for our financial markets and financial institutions. Our economy and our markets will not recover until the bulk of this housing correction is behind us. Fannie Mae and Freddie Mac are critical to turning the corner on housing. Therefore, the primary mission of these enterprises now will be to proactively work to increase the availability of mortgage finance, including by examining the guaranty fee structure with an eye toward mortgage affordability.

To promote stability in the secondary mortgage market and lower the cost of funding, the GSEs will modestly increase their MBS portfolios through the end of 2009. Then, to address systemic risk, in 2010 their portfolios will begin to be gradually reduced at the rate of 10 percent per year, largely through natural run off, eventually stabilizing at a lower, less risky size.

Treasury has taken three additional steps to complement FHFA’s decision to place both enterprises in conservatorship. First, Treasury and FHFA have established Preferred Stock Purchase Agreements, contractual agreements between the Treasury and the conserved entities. Under these agreements, Treasury will ensure that each company maintains a positive net worth. These agreements support market stability by providing additional security and clarity to GSE debt holders – senior and subordinated – and support mortgage availability by providing additional confidence to investors in GSE mortgage backed securities. This commitment will eliminate any mandatory triggering of receivership and will ensure that the conserved entities have the ability to fulfill their financial obligations. It is more efficient than a one-time equity injection, because it will be used only as needed and on terms that Treasury has set. With this agreement, Treasury receives senior preferred equity shares and warrants that protect taxpayers. Additionally, under the terms of the agreement, common and preferred shareholders bear losses ahead of the new government senior preferred shares.

These Preferred Stock Purchase Agreements were made necessary by the ambiguities in the GSE Congressional charters, which have been perceived to indicate government support for agency debt and guaranteed MBS. Our nation has tolerated these ambiguities for too long, and as a result GSE debt and MBS are held by central banks and investors throughout the United States and around the world who believe them to be virtually risk-free. Because the U.S. Government created these ambiguities, we have a responsibility to both avert and ultimately address the systemic risk now posed by the scale and breadth of the holdings of GSE debt and MBS.

Market discipline is best served when shareholders bear both the risk and the reward of their investment. While conservatorship does not eliminate the common stock, it does place common shareholders last in terms of claims on the assets of the enterprise.

Similarly, conservatorship does not eliminate the outstanding preferred stock, but does place preferred shareholders second, after the common shareholders, in absorbing losses. The federal banking agencies are assessing the exposures of banks and thrifts to Fannie Mae and Freddie Mac. The agencies believe that, while many institutions hold common or preferred shares of these two GSEs, only a limited number of smaller institutions have holdings that are significant compared to their capital.

The agencies encourage depository institutions to contact their primary federal regulator if they believe that losses on their holdings of Fannie Mae or Freddie Mac common or preferred shares, whether realized or unrealized, are likely to reduce their regulatory capital below “well capitalized.” The banking agencies are prepared to work with the affected institutions to develop capital restoration plans consistent with the capital regulations.

Preferred stock investors should recognize that the GSEs are unlike any other financial institutions and consequently GSE preferred stocks are not a good proxy for financial institution preferred stock more broadly. By stabilizing the GSEs so they can better perform their mission, today’s action should accelerate stabilization in the housing market, ultimately benefiting financial institutions. The broader market for preferred stock issuance should continue to remain available for well-capitalized institutions.

The second step Treasury is taking today is the establishment of a new secured lending credit facility which will be available to Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. Given the combination of actions we are taking, including the Preferred Share Purchase Agreements, we expect the GSEs to be in a stronger position to fund their regular business activities in the capital markets. This facility is intended to serve as an ultimate liquidity backstop, in essence, implementing the temporary liquidity backstop authority granted by Congress in July, and will be available until those authorities expire in December 2009.

Finally, to further support the availability of mortgage financing for millions of Americans, Treasury is initiating a temporary program to purchase GSE MBS. During this ongoing housing correction, the GSE portfolios have been constrained, both by their own capital situation and by regulatory efforts to address systemic risk. As the GSEs have grappled with their difficulties, we’ve seen mortgage rate spreads to Treasuries widen, making mortgages less affordable for homebuyers. While the GSEs are expected to moderately increase the size of their portfolios over the next 15 months through prudent mortgage purchases, complementary government efforts can aid mortgage affordability. Treasury will begin this new program later this month, investing in new GSE MBS. Additional purchases will be made as deemed appropriate. Given that Treasury can hold these securities to maturity, the spreads between Treasury issuances and GSE MBS indicate that there is no reason to expect taxpayer losses from this program, and, in fact, it could produce gains. This program will also expire with the Treasury’s temporary authorities in December 2009.

Together, this four part program is the best means of protecting our markets and the taxpayers from the systemic risk posed by the current financial condition of the GSEs. Because the GSEs are in conservatorship, they will no longer be managed with a strategy to maximize common shareholder returns, a strategy which historically encouraged risk-taking. The Preferred Stock Purchase Agreements minimize current cash outlays, and give taxpayers a large stake in the future value of these entities. In the end, the ultimate cost to the taxpayer will depend on the business results of the GSEs going forward. To that end, the steps we have taken to support the GSE debt and to support the mortgage market will together improve the housing market, the US economy and the GSEs’ business outlook.

Through the four actions we have taken today, FHFA and Treasury have acted on the responsibilities we have to protect the stability of the financial markets, including the mortgage market, and to protect the taxpayer to the maximum extent possible.

And let me make clear what today’s actions mean for Americans and their families. Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe. This turmoil would directly and negatively impact household wealth: from family budgets, to home values, to savings for college and retirement. A failure would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance. And a failure would be harmful to economic growth and job creation. That is why we have taken these actions today.

While we expect these four steps to provide greater stability and certainty to market participants and provide long-term clarity to investors in GSE debt and MBS securities, our collective work is not complete. At the end of next year, the Treasury temporary authorities will expire, the GSE portfolios will begin to gradually run off, and the GSEs will begin to pay the government a fee to compensate taxpayers for the on-going support provided by the Preferred Stock Purchase Agreements. Together, these factors should give momentum and urgency to the reform cause. Policymakers must view this next period as a “time out” where we have stabilized the GSEs while we decide their future role and structure.

Because the GSEs are Congressionally-chartered, only Congress can address the inherent conflict of attempting to serve both shareholders and a public mission. The new Congress and the next Administration must decide what role government in general, and these entities in particular, should play in the housing market. There is a consensus today that these enterprises pose a systemic risk and they cannot continue in their current form. Government support needs to be either explicit or non-existent, and structured to resolve the conflict between public and private purposes. And policymakers must address the issue of systemic risk. I recognize that there are strong differences of opinion over the role of government in supporting housing, but under any course policymakers choose, there are ways to structure these entities in order to address market stability in the transition and limit systemic risk and conflict of purposes for the long-term. We will make a grave error if we don’t use this time out to permanently address the structural issues presented by the GSEs.

In the weeks to come, I will describe my views on long term reform. I look forward to engaging in that timely and necessary debate.

-30-

And here’s the FHFA statement:

FEDERAL HOUSING FINANCE AGENCY

STATEMENT

Contact:      Corinne Russell     (202) 414-6921
Stefanie Mullin     (202) 414-6376

For Immediate Release
September 7, 2008

****EMBARGOED UNTIL 11 a.m. ****

STATEMENT OF FHFA DIRECTOR JAMES B. LOCKHART

Good Morning

Fannie Mae and Freddie Mac share the critical mission of providing stability and liquidity to the housing market. Between them, the Enterprises have $5.4 trillion of guaranteed mortgage-backed securities (MBS) and debt outstanding, which is equal to the publicly held debt of the United States. Their market share of all new mortgages reached over 80 percent earlier this year, but it is now falling. During the turmoil last year, they played a very important role in providing liquidity to the conforming mortgage market. That has required a very careful and delicate balance of mission and safety and soundness. A key component of this balance has been their ability to raise and maintain capital. Given recent market conditions, the
balance has been lost. Unfortunately, as house prices, earnings and capital have continued to deteriorate, their ability to fulfill their mission has deteriorated. In particular, the capacity of their capital to absorb further losses while supporting new business activity is in doubt.

Today’s action addresses safety and soundness concerns. FHFA’s rating system is called GSE Enterprise Risk or G-Seer. It stands for Governance, Solvency, Earnings and Enterprise Risk which includes credit, market and operational risk. There are pervasive weaknesses across the board, which have been getting worse in this market.

Over the last three years OFHEO, and now FHFA, have worked hard to encourage the Enterprises to rectify their accounting, systems, controls and risk management issues. They have made good progress in many areas, but market conditions have overwhelmed that progress.

The result has been that they have been unable to provide needed stability to the market. They also find themselves unable to meet their affordable housing mission. Rather than letting these conditions fester and worsen and put our markets in jeopardy, FHFA, after painstaking review, has decided to take action now.

Key events over the past six months have demonstrated the increasing challenge faced by the companies in striving to balance mission and safety and soundness, and the ultimate disruption of that balance that led to today’s announcements. In the first few months of this year, the secondary market showed significant deterioration, with buyers demanding much higher prices for mortgage backed securities.

In February, in recognition of the remediation progress in financial reporting, we removed the portfolio caps on each company, but they did not have the capital to use that flexibility.

In March, we announced with the Enterprises an initiative to increase mortgage market liquidity and market confidence. We reduced the OFHEO-directed capital requirements in return for their commitments to raise significant capital and to maintain overall capital levels well in excess of requirements.

In April, we released our Annual Report to Congress, identifying each company as a significant supervisory concern and noting, in particular, the deteriorating mortgage credit environment and the risks it posed to the companies.

In May OFHEO lifted its 2006 Consent Order with Fannie Mae after the company completed the terms of that order. Subsequently, Fannie Mae successfully raised $7.4 billion of new capital, but Freddie Mac never completed the capital raise promised in March.

Since then credit conditions in the mortgage market continued to deteriorate, with home prices continuing to decline and mortgage delinquency rates reaching alarming levels. FHFA intensified its reviews of each company’s capital planning and capital position, their earnings forecasts and the effect of falling house prices and increasing delinquencies on the credit quality of their mortgage book.

In getting to today, the supervision team has spent countless hours reviewing with each company various forecasts, stress tests, and projections, and has evaluated the performance of their internal models in these analyses. We have had many meetings with each company’s management teams, and have had frank exchanges regarding loss projections, asset valuations, and capital adequacy. More recently, we have gone the extra step of inviting the Federal Reserve and the OCC to have some of their senior mortgage credit experts join our team in these assessments.

The conclusions we reach today, while our own, have had the added benefit of their insight and perspective.

After this exhaustive review, I have determined that the companies cannot continue to operate safely and soundly and fulfill their critical public mission, without significant action to address our concerns, which are:
• the safety and soundness issues I mentioned, including current capitalization;
• current market conditions;
• the financial performance and condition of each company;
• the inability of the companies to fund themselves according to normal practices and prices; and
• the critical importance each company has in supporting the residential mortgage market in this country,

Therefore, in order to restore the balance between safety and soundness and mission, FHFA has placed Fannie Mae and Freddie Mac into conservatorship. That is a statutory process designed to stabilize a troubled institution with the

objective of returning the entities to normal business operations. FHFA will act as the conservator to operate the Enterprises until they are stabilized.

The Boards of both companies consented yesterday to the conservatorship. I appreciate the cooperation we have received from the boards and the management of both Enterprises. These individuals did not create the inherent conflict and flawed business model embedded in the Enterprises’ structure.

The goal of these actions is to help restore confidence in Fannie Mae and Freddie Mac, enhance their capacity to fulfill their mission, and mitigate the systemic risk that has contributed directly to the instability in the current market. The lack of confidence has resulted in continuing spread widening of their MBS, which means that virtually none of the large drop in interest rates over the past year has been passed on to the mortgage markets. On top of that, Freddie Mac and Fannie Mae, in order to try to build capital, have continued to raise prices and tighten credit standards.

FHFA has not undertaken this action lightly. We have consulted with the Chairman of the Board of Governors of the Federal Reserve System, Ben Bernanke, who was appointed a consultant to FHFA under the new legislation. We

have also consulted with the Secretary of the Treasury, not only as an FHFA Oversight Board member, but also in his duties under the law to provide financing to the GSEs. They both concurred with me that conservatorship needed to be undertaken now.

There are several key components of this conservatorship:

First, Monday morning the businesses will open as normal, only with stronger backing for the holders of MBS, senior debt and subordinated debt.

Second, the Enterprises will be allowed to grow their guarantee MBS books without limits and continue to purchase replacement securities for their portfolios, about $20 billion per month without capital constraints.

Third, as the conservator, FHFA will assume the power of the Board and management.

Fourth, the present CEOs will be leaving, but we have asked them to stay on to help with the transition.

Fifth, I am announcing today I have selected Herb Allison to be the new CEO of Fannie Mae and David Moffett the CEO of Freddie Mac. Herb has been the Vice Chairman of Merrill Lynch and for the last eight years chairman of TIAA-CREF. David was the Vice Chairman and CFO of US Bancorp. I appreciate the willingness of these two men to take on these tough jobs during these challenging times. Their compensation will be significantly lower than the outgoing CEOs. They will be joined by equally strong non-executive chairmen.

Sixth, at this time any other management action will be very limited. In fact, the new CEOs have agreed with me that it is very important to work with the current management teams and employees to encourage them to stay and to continue to make important improvements to the Enterprises.

Seventh, in order to conserve over $2 billion in capital every year, the common stock and preferred stock dividends will be eliminated, but the common and all preferred stocks will continue to remain outstanding. Subordinated debt interest and principal payments will continue to be made.

Eighth, all political activities — including all lobbying — will be halted immediately. We will review the charitable activities.

Lastly and very importantly, there will be the financing and investing relationship with the U.S. Treasury, which Secretary Paulson will be discussing. We believe that these facilities will provide the critically needed support to Freddie Mac and Fannie Mae and importantly the liquidity of the mortgage market.

One of the three facilities he will be mentioning is a secured liquidity facility which will be not only for Fannie Mae and Freddie Mac, but also for the 12 Federal Home Loan Banks that FHFA also regulates. The Federal Home Loan Banks have performed remarkably well over the last year as they have a different business model than Fannie Mae and Freddie Mac and a different capital structure that grows as their lending activity grows. They are joint and severally liable for the Bank System’s debt obligations and all but one of the 12 are profitable. Therefore, it is very unlikely that they will use the facility.

During the conservatorship period, FHFA will continue to work expeditiously on the many regulations needed to implement the new law. Some of the key regulations will be minimum capital standards, prudential safety and soundness standards and portfolio limits. It is critical to complete these regulations so that any new investor will understand the investment proposition.

This decision was a tough one for the FHFA team as they have worked so hard to help the Enterprises remain strong suppliers of support to the secondary mortgage markets. Unfortunately, the antiquated capital requirements and the turmoil in housing markets over-whelmed all the good and hard work put in by the FHFA teams and the Enterprises’ managers and employees. Conservatorship will give the Enterprises the time to restore the balances between safety and soundness and provide affordable housing and stability and liquidity to the mortgage markets. I want to thank the FHFA employees for their work during this intense regulatory process. They represent the best in public service. I would also like to thank the employees of Fannie Mae and Freddie Mac for all their hard work. Working together we can finish the job of restoring confidence in the Enterprises and with the new legislation build a stronger and safer future for the mortgage markets, homeowners and renters in America.

Thank you and I will now turn it back to Secretary Paulson.

Well, there you have it.  The government has again decided that it has to bail someone out “for the better good of all of the citizens.”  But where and when is this going to stop?  Is it going to be that any time a major financial institution, who greatly affects the economy, goes under the government is going to bail them out so that the the economy doesn’t get worse?  When it comes to the economy, the government needs to learn how to let things just run their course, otherwise major companies will begin to see a pattern that they can take risks, and if they wind up losing, the government “will have to bail us out!”

We cannot continue to allow this government intervention to happen, otherwise we will completely destroy the flow of our free economy.

Done Ranting,

Ranting Republican
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Fire Marshal Handcuffs Woman for Swearing

August 21, 2008

Alright, so I heard about this on the radio earlier this week, but I’ve been so busy getting ready for college and other stuff that I just haven’t had time to post this.

So, here’s what happened:

On August 4th, in La Marque, Texas, 28-year-old Kathryn “Kristi” Fridge went with her mother to the local Walmart (FM 1764 and Interstate 45) with her mother and 2-year-old daugter to get supplies in preparation for impending Tropical Storm Eduardo.

She went over to buy batteries, but there were none left.  Fridge told reporters, “I was like, ‘Dang.’  I looked at my mom and said, ‘They’re all f***ing gone.'”

Captain Alfred Decker, the La Marque assistant fire marshal (certified by the state of Texas as firefighter, peace officer, fire investigator and fire inspector) came up to her in uniform, and told her, “You need to watch your mouth” (quote from Fridge).

Fridge told reporters, “I was like, ‘Oh, OK.  Sorry?'”

Decker ordered Fridge to follow him to his car, because that was where his citation book was, but she protested.  She eventually listened, but as he led her to his car, she yelled to some on-lookers, “Can you believe this?  He’s f***ing arresting me for saying ‘f***’!”

She later told reporters, “When I got outside, I saw he was a fire marshal — I saw his car.  I said, ‘You’re not even a cop!’  He said,  ‘I can do this.'”

Decker then asked for her name, and she spelled it out both verbally and in sign language (according to her – Decker hasn’t commented because there’s a pending court case).  She said that this angered him and he handcuffed her.

But La Marque Fire Chief Todd Zacherl said that because Fridge made a scene, Decker was forced to act.  He told reporters, “She cussed him, she cussed everybody. By now, we have a huge group of people looking.”  Fridge denies this saying that she never cursed at Decker.  Her mother (Kathryn Rice, from Santa Fe) backed up her story, saying, “She never got nasty with him; she never cussed at him.”

Zacherl went on to say that Decker handcuffed her for his own safety, because Fridge was being belligerent and Decker had to turn his back to get his citation book and run her name to see if she had any warrants.

Fridge was then ticketed for disorderly conduct (a Class C misdemeanor) and then released.

On August 7th, Fridge went to the La Marque Fire Department to speak with Zacherl, and she took forms to file an official complaint, but as of last week had not filed the papers yet.

She told reporters, “I’m not out to sue or get money—I just want them to drop this ticket.  Yes, I probably shouldn’t have cussed in public, but he took it way too far.”

Zacherl disagreed, saying, “When you’re in uniform, you have to uphold the laws.  It’s like if he was on the way home and saw a drunk driver—he had to act.”

Personally, I think the fire marshal was perfectly in the right here.  He handcuffed her for his own safety.  He didn’t arrest her, he detained her.  This is a common practice that police officers use to ensure their safety.  It was HER who caused the scene, not him.  It was either handcuff her or call for back-up (which would mean calling the police department, since it’s not the fire marshal’s job to back somebody up like that).

As for the legality of the ticket, it’s perfectly within Texas law.  You can’t go around swearing.  The public as a whole has decided that they do not want profanity allowed in public (they did this by electing the officials who put that law into practice, and have not disagreed with that law by passing a citizen sponsored initiative to overturn it).

This was done in a public place where there are children who don’t need to be subjected to profanity.  I know little 3-year-olds who go around using the f-word because their parents just curse whenever they want to.

This isn’t a violation of free speech.  I can’t go up to a little 4-year-old and say, “Hey you little f****er!” so saying it within hearing distance of anybody else violates that principle of “breach[ing] the peace”.

On the radio show that I heard the story on, there was a caller who said she should file assault charges, since he touched her without her consent.  He is a certified officer, and has an obligation to uphold the law.  While upholding the law, he is exempt to some degree from assault charges.  He didn’t abuse her, he handcuffed her.  Criminals can’t sue cops for touching them as they are handcuffed, and this case is NO different.

The fact that there was an outcry because of this (although most reaction was in the fireman’s favor) shocks me.  Where is our sense of law and order?  There’s a difference between civil liberties and anarchy, but the two are beginning to become confused in the minds of many Americans.

Done Ranting,

Ranting Republican
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Federal Judge Rules Bush’s Aides (Like Karl Rove) Can Be Subpoenaed

August 1, 2008

So, as I said, before, a case looking into executive privilege in regards to subpoenas from Congress was in a federal court, and the federal judge, U.S. District Judge John Bates (a Bush-nominated Judge), ruled that Bush’s aides are NOT exempt from Congressional subpoenas.

The full Memorandum Opinion can be read here (it’s 93 pages long, otherwise I’d stick the whole quote in here).  Since it’s so long, I’ll give two key quotes that pretty much summarize the opinion:

  • “Harriet Miers [and Josh Bolten] is not immune from compelled congressional process; she is legally required to testify pursuant to a duly issued congressional subpoena.”
  • Regarding the lack of case law for White House aides being immune from Congressional subpoena: “That simple yet critical fact bears repeating: the asserted absolute immunity claim here is entirely unsupported by existing case law.”

And that’s really the problem here.  Executive orders have been used since  1789, and that gives the Executive Branch some limited power to influence and shape laws without actually making new laws.  The Supreme Court RARELY overturns these, and although Bush didn’t issue an executive order here, the same principle applies.  The difference is that Bush has VASTLY overstepped the bounds of the executive branch, and is now completely reshaping things and taking us into unknown territory.

I agree with Bates’s opinion, and have previously said (here and here) that Rove should testify to Congress (although Rove isn’t mentioned in this case, his predicament came after Miers’s and Bolten’s, but he’s essentially in the same place as Bolten and Miers, so this will apply to him as well).

Now, let’s get to the reactions:

  • “We disagree with the district court’s decision.”  White House press secretary Dana  Perino
  • “I have not yet talked with anyone at the White House … and don’t expect that this matter will be finally resolved in the very near future.”  Robert Luskin, Karl Rove’s attorney
  • “It certainly strengthens our hand.  This decision should send a clear signal to the Bush administration that it must cooperate fully with Congress and that former administration officials Harriet Miers and Karl Rove must testify before Congress.”  House Speaker Nancy Pelosi (D-CA)
  • “We look forward to the White House complying withthis ruling and to scheduling future hearings with Ms. Miers and other witnesses who have relied on such claims.  We hope that the defendants will accept this decision and expect that we will receive relevant documents and call Ms. Miers to testify in September.”  Representative John Conyers (D-MI), Chairman of the House Judiciary Committee
  • “I look forward to working with the White House and the Justice Department to coordinate the long overdue appearances.”  Senator Patrick Leahy (D-VT), Chairman of the Senate Judiciary Committee
  • “I’m sure it will be appealed and it will go on into next year, and it will become a moot issue.”  House Republican Leader John Boehner (R-OH), in regards to the fact that the subpoena will expire at the end of the 110thCongress in January.  Several Democrats have siad that they expect that the subpoenas will be reissued if and when they keep the Congress in this upcoming election.
  • “Unfortunately, today’s victory may be short-lived.  If the administration appeals the ruling, our congressional prerogatives will once again be put at risk.” Representative Lamar Smith (R-TX), Ranking Republican in the House Judiciary Committee.

I could not agree MORE with Lamar Smith (and the fact that a major Republican is siding with the Democrats and the Judge shows that Bush is in the wrong).  Smith, unlike some Republicans is not making this a partisan issue, but wants to keep the power that has been given to Congress in Congress’s hands (and thus, partly in his hands).  These cases simply don’t happen – Congress and the White House normally simply compromise.  The fact that this was taken to court means that there is now a LEGAL precedent set.  But before those who are happy with this precedent start celebrating, we must remember that precedents and rulings can be overturned by higher courts.  If a higher Court, and ultimately the Supreme Court rules to overturn this ruling, Congress will be hating themselves for not simply COMPROMISING with Bush.  Congress will lose a power that they’ve taken for granted, possibly forever.

I DO hope that the Bush administration doesn’t appeal this, but I think that they will.  I hope Congress prevails.  The executive branch has overstepped it’s power, and needs to be stopped.  Miers, Bolten, and Rove should ALL testify.  And the Bush administration needs to remember that if this ruling gets overturned, this precedent will remain in effect when the Republicans control the Congress and are trying to subpoena Democratic aides.

I have faith in the system, and I really don’t see how Bush can win any case here, but weirder things HAVE happened.

Done Ranting,

Ranting Republican
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