Moral Hazard

Ineptocracy (in-ep-toc-ra-cy)- a system of government where the least capable to lead are elected by the least capable of producing,and where the members of society least likely to sustain themselves or succeed,are rewarded with goods and services paid for by the confiscated wealth of a diminishing number of producers.

THE $7 Trillion Dollar Secret

The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.

The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.

Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse.

A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.
‘Change Their Votes’

“When you see the dollars the banks got, it’s hard to make the case these were successful institutions,” says Sherrod Brown, a Democratic Senator from Ohio who in 2010 introduced an unsuccessful bill to limit bank size. “This is an issue that can unite the Tea Party and Occupy Wall Street. There are lawmakers in both parties who would change their votes now.”

The size of the bailout came to light after Bloomberg LP, the parent of Bloomberg News, won a court case against the Fed and a group of the biggest U.S. banks called Clearing House Association LLC to force lending details into the open.

The Fed, headed by Chairman Ben S. Bernanke, argued that revealing borrower details would create a stigma — investors and counterparties would shun firms that used the central bank as lender of last resort — and that needy institutions would be reluctant to borrow in the next crisis. Clearing House Association fought Bloomberg’s lawsuit up to the U.S. Supreme Court, which declined to hear the banks’ appeal in March 2011.

$7.77 Trillion

The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.

“TARP at least had some strings attached,” says Brad Miller, a North Carolina Democrat on the House Financial Services Committee, referring to the program’s executive-pay ceiling. “With the Fed programs, there was nothing.”

Bankers didn’t disclose the extent of their borrowing. On Nov. 26, 2008, then-Bank of America (BAC) Corp. Chief Executive Officer Kenneth D. Lewis wrote to shareholders that he headed “one of the strongest and most stable major banks in the world.” He didn’t say that his Charlotte, North Carolina-based firm owed the central bank $86 billion that day.
‘Motivate Others’

JPMorgan Chase & Co. CEO Jamie Dimon told shareholders in a March 26, 2010, letter that his bank used the Fed’s Term Auction Facility “at the request of the Federal Reserve to help motivate others to use the system.” He didn’t say that the New York-based bank’s total TAF borrowings were almost twice its cash holdings or that its peak borrowing of $48 billion on Feb. 26, 2009, came more than a year after the program’s creation.

Howard Opinsky, a spokesman for JPMorgan (JPM), declined to comment about Dimon’s statement or the company’s Fed borrowings. Jerry Dubrowski, a spokesman for Bank of America, also declined to comment.

The Fed has been lending money to banks through its so- called discount window since just after its founding in 1913. Starting in August 2007, when confidence in banks began to wane, it created a variety of ways to bolster the financial system with cash or easily traded securities. By the end of 2008, the central bank had established or expanded 11 lending facilities catering to banks, securities firms and corporations that couldn’t get short-term loans from their usual sources.
‘Core Function’

“Supporting financial-market stability in times of extreme market stress is a core function of central banks,” says William B. English, director of the Fed’s Division of Monetary Affairs. “Our lending programs served to prevent a collapse of the financial system and to keep credit flowing to American families and businesses.”

The Fed has said that all loans were backed by appropriate collateral. That the central bank didn’t lose money should “lead to praise of the Fed, that they took this extraordinary step and they got it right,” says Phillip Swagel, a former assistant Treasury secretary under Henry M. Paulson and now a professor of international economic policy at the University of Maryland.

The Fed initially released lending data in aggregate form only. Information on which banks borrowed, when, how much and at what interest rate was kept from public view.

The secrecy extended even to members of President George W. Bush’s administration who managed TARP. Top aides to Paulson weren’t privy to Fed lending details during the creation of the program that provided crisis funding to more than 700 banks, say two former senior Treasury officials who requested anonymity because they weren’t authorized to speak.
Big Six

The Treasury Department relied on the recommendations of the Fed to decide which banks were healthy enough to get TARP money and how much, the former officials say. The six biggest U.S. banks, which received $160 billion of TARP funds, borrowed as much as $460 billion from the Fed, measured by peak daily debt calculated by Bloomberg using data obtained from the central bank. Paulson didn’t respond to a request for comment.

The six — JPMorgan, Bank of America, Citigroup Inc. (C), Wells Fargo & Co. (WFC), Goldman Sachs Group Inc. (GS) and Morgan Stanley — accounted for 63 percent of the average daily debt to the Fed by all publicly traded U.S. banks, money managers and investment- services firms, the data show. By comparison, they had about half of the industry’s assets before the bailout, which lasted from August 2007 through April 2010. The daily debt figure excludes cash that banks passed along to money-market funds.
Bank Supervision

While the emergency response prevented financial collapse, the Fed shouldn’t have allowed conditions to get to that point, says Joshua Rosner, a banking analyst with Graham Fisher & Co. in New York who predicted problems from lax mortgage underwriting as far back as 2001. The Fed, the primary supervisor for large financial companies, should have been more vigilant as the housing bubble formed, and the scale of its lending shows the “supervision of the banks prior to the crisis was far worse than we had imagined,” Rosner says.

Bernanke in an April 2009 speech said that the Fed provided emergency loans only to “sound institutions,” even though its internal assessments described at least one of the biggest borrowers, Citigroup, as “marginal.”

On Jan. 14, 2009, six days before the company’s central bank loans peaked, the New York Fed gave CEO Vikram Pandit a report declaring Citigroup’s financial strength to be “superficial,” bolstered largely by its $45 billion of Treasury funds. The document was released in early 2011 by the Financial Crisis Inquiry Commission, a panel empowered by Congress to probe the causes of the crisis.
‘Need Transparency’

Andrea Priest, a spokeswoman for the New York Fed, declined to comment, as did Jon Diat, a spokesman for Citigroup.

“I believe that the Fed should have independence in conducting highly technical monetary policy, but when they are putting taxpayer resources at risk, we need transparency and accountability,” says Alabama Senator Richard Shelby, the top Republican on the Senate Banking Committee.

Judd Gregg, a former New Hampshire senator who was a lead Republican negotiator on TARP, and Barney Frank, a Massachusetts Democrat who chaired the House Financial Services Committee, both say they were kept in the dark.

“We didn’t know the specifics,” says Gregg, who’s now an adviser to Goldman Sachs.

“We were aware emergency efforts were going on,” Frank says. “We didn’t know the specifics.”
Disclose Lending

Frank co-sponsored the Dodd-Frank Wall Street Reform and Consumer Protection Act, billed as a fix for financial-industry excesses. Congress debated that legislation in 2010 without a full understanding of how deeply the banks had depended on the Fed for survival.

It would have been “totally appropriate” to disclose the lending data by mid-2009, says David Jones, a former economist at the Federal Reserve Bank of New York who has written four books about the central bank.

“The Fed is the second-most-important appointed body in the U.S., next to the Supreme Court, and we’re dealing with a democracy,” Jones says. “Our representatives in Congress deserve to have this kind of information so they can oversee the Fed.”

The Dodd-Frank law required the Fed to release details of some emergency-lending programs in December 2010. It also mandated disclosure of discount-window borrowers after a two- year lag.
Protecting TARP

TARP and the Fed lending programs went “hand in hand,” says Sherrill Shaffer, a banking professor at the University of Wyoming in Laramie and a former chief economist at the New York Fed. While the TARP money helped insulate the central bank from losses, the Fed’s willingness to supply seemingly unlimited financing to the banks assured they wouldn’t collapse, protecting the Treasury’s TARP investments, he says.

“Even though the Treasury was in the headlines, the Fed was really behind the scenes engineering it,” Shaffer says.

Congress, at the urging of Bernanke and Paulson, created TARP in October 2008 after the bankruptcy of Lehman Brothers Holdings Inc. made it difficult for financial institutions to get loans. Bank of America and New York-based Citigroup each received $45 billion from TARP. At the time, both were tapping the Fed. Citigroup hit its peak borrowing of $99.5 billion in January 2009, while Bank of America topped out in February 2009 at $91.4 billion.
No Clue

Lawmakers knew none of this.

They had no clue that one bank, New York-based Morgan Stanley (MS), took $107 billion in Fed loans in September 2008, enough to pay off one-tenth of the country’s delinquent mortgages. The firm’s peak borrowing occurred the same day Congress rejected the proposed TARP bill, triggering the biggest point drop ever in the Dow Jones Industrial Average. (INDU) The bill later passed, and Morgan Stanley got $10 billion of TARP funds, though Paulson said only “healthy institutions” were eligible.

Mark Lake, a spokesman for Morgan Stanley, declined to comment, as did spokesmen for Citigroup and Goldman Sachs.

Had lawmakers known, it “could have changed the whole approach to reform legislation,” says Ted Kaufman, a former Democratic Senator from Delaware who, with Brown, introduced the bill to limit bank size.
Moral Hazard

Kaufman says some banks are so big that their failure could trigger a chain reaction in the financial system. The cost of borrowing for so-called too-big-to-fail banks is lower than that of smaller firms because lenders believe the government won’t let them go under. The perceived safety net creates what economists call moral hazard — the belief that bankers will take greater risks because they’ll enjoy any profits while shifting losses to taxpayers.

Moral hazard arises because an individual or institution does not take the full consequences and responsibilities of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to hold some responsibility for the consequences of those actions. For example, a person with insurance against automobile theft may be less cautious about locking his or her car, because the negative consequences of vehicle theft are (partially) the responsibility of the insurance company.

If Congress had been aware of the extent of the Fed rescue, Kaufman says, he would have been able to line up more support for breaking up the biggest banks.

Byron L. Dorgan, a former Democratic senator from North Dakota, says the knowledge might have helped pass legislation to reinstate the Glass-Steagall Act, which for most of the last century separated customer deposits from the riskier practices of investment banking.

“Had people known about the hundreds of billions in loans to the biggest financial institutions, they would have demanded Congress take much more courageous actions to stop the practices that caused this near financial collapse,” says Dorgan, who retired in January.
Getting Bigger

Instead, the Fed and its secret financing helped America’s biggest financial firms get bigger and go on to pay employees as much as they did at the height of the housing bubble.

Total assets held by the six biggest U.S. banks increased 39 percent to $9.5 trillion on Sept. 30, 2011, from $6.8 trillion on the same day in 2006, according to Fed data.

For so few banks to hold so many assets is “un-American,” says Richard W. Fisher, president of the Federal Reserve Bank of Dallas. “All of these gargantuan institutions are too big to regulate. I’m in favor of breaking them up and slimming them down.”

Employees at the six biggest banks made twice the average for all U.S. workers in 2010, based on Bureau of Labor Statistics hourly compensation cost data. The banks spent $146.3 billion on compensation in 2010, or an average of $126,342 per worker, according to data compiled by Bloomberg. That’s up almost 20 percent from five years earlier compared with less than 15 percent for the average worker. Average pay at the banks in 2010 was about the same as in 2007, before the bailouts.
‘Wanted to Pretend’

“The pay levels came back so fast at some of these firms that it appeared they really wanted to pretend they hadn’t been bailed out,” says Anil Kashyap, a former Fed economist who’s now a professor of economics at the University of Chicago Booth School of Business. “They shouldn’t be surprised that a lot of people find some of the stuff that happened totally outrageous.”

Bank of America took over Merrill Lynch & Co. at the urging of then-Treasury Secretary Paulson after buying the biggest U.S. home lender, Countrywide Financial Corp. When the Merrill Lynch purchase was announced on Sept. 15, 2008, Bank of America had $14.4 billion in emergency Fed loans and Merrill Lynch had $8.1 billion. By the end of the month, Bank of America’s loans had reached $25 billion and Merrill Lynch’s had exceeded $60 billion, helping both firms keep the deal on track.
Prevent Collapse

Wells Fargo bought Wachovia Corp., the fourth-largest U.S. bank by deposits before the 2008 acquisition. Because depositors were pulling their money from Wachovia, the Fed channeled $50 billion in secret loans to the Charlotte, North Carolina-based bank through two emergency-financing programs to prevent collapse before Wells Fargo could complete the purchase.

“These programs proved to be very successful at providing financial markets the additional liquidity and confidence they needed at a time of unprecedented uncertainty,” says Ancel Martinez, a spokesman for Wells Fargo.

JPMorgan absorbed the country’s largest savings and loan, Seattle-based Washington Mutual Inc., and investment bank Bear Stearns Cos. The New York Fed, then headed by Timothy F. Geithner, who’s now Treasury secretary, helped JPMorgan complete the Bear Stearns deal by providing $29 billion of financing, which was disclosed at the time. The Fed also supplied Bear Stearns with $30 billion of secret loans to keep the company from failing before the acquisition closed, central bank data show. The loans were made through a program set up to provide emergency funding to brokerage firms.
‘Regulatory Discretion’

“Some might claim that the Fed was picking winners and losers, but what the Fed was doing was exercising its professional regulatory discretion,” says John Dearie, a former speechwriter at the New York Fed who’s now executive vice president for policy at the Financial Services Forum, a Washington-based group consisting of the CEOs of 20 of the world’s biggest financial firms. “The Fed clearly felt it had what it needed within the requirements of the law to continue to lend to Bear and Wachovia.”

The bill introduced by Brown and Kaufman in April 2010 would have mandated shrinking the six largest firms.

“When a few banks have advantages, the little guys get squeezed,” Brown says. “That, to me, is not what capitalism should be.”

Kaufman says he’s passionate about curbing too-big-to-fail banks because he fears another crisis.

‘Can We Survive?’

“The amount of pain that people, through no fault of their own, had to endure — and the prospect of putting them through it again — is appalling,” Kaufman says. “The public has no more appetite for bailouts. What would happen tomorrow if one of these big banks got in trouble? Can we survive that?”

Lobbying expenditures by the six banks that would have been affected by the legislation rose to $29.4 million in 2010 compared with $22.1 million in 2006, the last full year before credit markets seized up — a gain of 33 percent, according to OpenSecrets.org, a research group that tracks money in U.S. politics. Lobbying by the American Bankers Association, a trade organization, increased at about the same rate, OpenSecrets.org reported.

Lobbyists argued the virtues of bigger banks. They’re more stable, better able to serve large companies and more competitive internationally, and breaking them up would cost jobs and cause “long-term damage to the U.S. economy,” according to a Nov. 13, 2009, letter to members of Congress from the FSF.

The group’s website cites Nobel Prize-winning economist Oliver E. Williamson, a professor emeritus at the University of California, Berkeley, for demonstrating the greater efficiency of large companies.
‘Serious Burden’

In an interview, Williamson says that the organization took his research out of context and that efficiency is only one factor in deciding whether to preserve too-big-to-fail banks.

“The banks that were too big got even bigger, and the problems that we had to begin with are magnified in the process,” Williamson says. “The big banks have incentives to take risks they wouldn’t take if they didn’t have government support. It’s a serious burden on the rest of the economy.”

The Moral Hazard.

Dearie says his group didn’t mean to imply that Williamson endorsed big banks.

Top officials in President Barack Obama’s administration sided with the FSF in arguing against legislative curbs on the size of banks.
Geithner, Kaufman

On May 4, 2010, Geithner visited Kaufman in his Capitol Hill office. As president of the New York Fed in 2007 and 2008, Geithner helped design and run the central bank’s lending programs. The New York Fed supervised four of the six biggest U.S. banks and, during the credit crunch, put together a daily confidential report on Wall Street’s financial condition. Geithner was copied on these reports, based on a sampling of e- mails released by the Financial Crisis Inquiry Commission.

At the meeting with Kaufman, Geithner argued that the issue of limiting bank size was too complex for Congress and that people who know the markets should handle these decisions, Kaufman says. According to Kaufman, Geithner said he preferred that bank supervisors from around the world, meeting in Basel, Switzerland, make rules increasing the amount of money banks need to hold in reserve. Passing laws in the U.S. would undercut his efforts in Basel, Geithner said, according to Kaufman.

Anthony Coley, a spokesman for Geithner, declined to comment.
‘Punishing Success’

Lobbyists for the big banks made the winning case that forcing them to break up was “punishing success,” Brown says. Now that they can see how much the banks were borrowing from the Fed, senators might think differently, he says.

The Fed supported curbing too-big-to-fail banks, including giving regulators the power to close large financial firms and implementing tougher supervision for big banks, says Fed General Counsel Scott G. Alvarez. The Fed didn’t take a position on whether large banks should be dismantled before they get into trouble.

Dodd-Frank does provide a mechanism for regulators to break up the biggest banks. It established the Financial Stability Oversight Council that could order teetering banks to shut down in an orderly way. The council is headed by Geithner.

“Dodd-Frank does not solve the problem of too big to fail,” says Shelby, the Alabama Republican. “Moral hazard and taxpayer exposure still very much exist.”
Below Market

Dean Baker, co-director of the Center for Economic and Policy Research in Washington, says banks “were either in bad shape or taking advantage of the Fed giving them a good deal. The former contradicts their public statements. The latter — getting loans at below-market rates during a financial crisis — is quite a gift.”

The Fed says it typically makes emergency loans more expensive than those available in the marketplace to discourage banks from abusing the privilege. During the crisis, Fed loans were among the cheapest around, with funding available for as low as 0.01 percent in December 2008, according to data from the central bank and money-market rates tracked by Bloomberg.

The Fed funds also benefited firms by allowing them to avoid selling assets to pay investors and depositors who pulled their money. So the assets stayed on the banks’ books, earning interest.

Banks report the difference between what they earn on loans and investments and their borrowing expenses. The figure, known as net interest margin, provides a clue to how much profit the firms turned on their Fed loans, the costs of which were included in those expenses. To calculate how much banks stood to make, Bloomberg multiplied their tax-adjusted net interest margins by their average Fed debt during reporting periods in which they took emergency loans.
Added Income

The 190 firms for which data were available would have produced income of $13 billion, assuming all of the bailout funds were invested at the margins reported, the data show.

The six biggest U.S. banks’ share of the estimated subsidy was $4.8 billion, or 23 percent of their combined net income during the time they were borrowing from the Fed. Citigroup would have taken in the most, with $1.8 billion.

“The net interest margin is an effective way of getting at the benefits that these large banks received from the Fed,” says Gerald A. Hanweck, a former Fed economist who’s now a finance professor at George Mason University in Fairfax, Virginia.

While the method isn’t perfect, it’s impossible to state the banks’ exact profits or savings from their Fed loans because the numbers aren’t disclosed and there isn’t enough publicly available data to figure it out.

Opinsky, the JPMorgan spokesman, says he doesn’t think the calculation is fair because “in all likelihood, such funds were likely invested in very short-term investments,” which typically bring lower returns.
Standing Access

Even without tapping the Fed, the banks get a subsidy by having standing access to the central bank’s money, says Viral Acharya, a New York University economics professor who has worked as an academic adviser to the New York Fed.

“Banks don’t give lines of credit to corporations for free,” he says. “Why should all these government guarantees and liquidity facilities be for free?”

In the September 2008 meeting at which Paulson and Bernanke briefed lawmakers on the need for TARP, Bernanke said that if nothing was done, “unemployment would rise — to 8 or 9 percent from the prevailing 6.1 percent,” Paulson wrote in “On the Brink” (Business Plus, 2010).
Occupy Wall Street

The U.S. jobless rate hasn’t dipped below 8.8 percent since March 2009, 3.6 million homes have been foreclosed since August 2007, according to data provider RealtyTrac Inc., and police have clashed with Occupy Wall Street protesters, who say government policies favor the wealthiest citizens, in New York, Boston, Seattle and Oakland, California.

The Tea Party, which supports a more limited role for government, has its roots in anger over the Wall Street bailouts, says Neil M. Barofsky, former TARP special inspector general and a Bloomberg Television contributing editor.

“The lack of transparency is not just frustrating; it really blocked accountability,” Barofsky says. “When people don’t know the details, they fill in the blanks. They believe in conspiracies.”

In the end, Geithner had his way. The Brown-Kaufman proposal to limit the size of banks was defeated, 60 to 31. Bank supervisors meeting in Switzerland did mandate minimum reserves that institutions will have to hold, with higher levels for the world’s largest banks, including the six biggest in the U.S. Those rules can be changed by individual countries.

They take full effect in 2019.

Meanwhile, Kaufman says, “we’re absolutely, totally, 100 percent not prepared for another financial crisis.”(Bloomberg)

Feel better now? 🙂

Political Cartoons by Henry Payne

Political Cartoons by Jerry Holbert

 Political Cartoons by Michael Ramirez

May Day Call

Michelle Malkin: On May 1, left-wing vigilantes will target companies across the country that have committed a mortal sin: sending donations to GOP Gov. Scott Walker of Wisconsin. Rest assured, such intolerable acts of political free speech will not go unpunished by tolerant Big Labor activists. They’re calling for both a national boycott of Walker’s corporate donors and a coordinated sticker vandalism campaign on GOP-tainted products.

The Wisconsin Grocers Association is bracing for the anti-Walker witch hunt. Anonymous operatives have circulated sabotage stickers on the Internet and around Wisconsin that single out Angel Soft tissue paper (“Wiping your (expletive) on Wisconsin workers”), Johnsonville Sausage (“These Brats Bust Unions”) and Coors (“Labor Rights Flow Away Like A Mountain Stream”). Earlier this week, a “Stick It To Walker” website boasted photos of vandalized Angel Soft tissue packages at a Super Foodtown grocery store in Brooklyn, N.Y.

This destruction of private property is illegal. Not that it matters to anti-Walker protest mobsters, who trampled Wisconsin’s Capitol at an estimated $5 million in security, repair and cleaning costs to taxpayers. According to the Milwaukee Journal Sentinel, “The identity of the backers of the sticker effort is unknown, although many assume it is being orchestrated by public employee unions. This latest effort follows boycotts organized by members of the Wisconsin State Employees Union AFSCME 24.”

AFSCME 24 is the same union affiliate that recently disseminated intimidation letters throughout southeast Wisconsin, demanding that local businesses support unions by putting up signs in their windows. The letter threatened not just Walker supporters, but any and all businesses that have chosen to sit on the sidelines and stay out of politics altogether: “Failure to do so will leave us no choice but (to) do a public boycott of your business. And sorry, neutral means ‘no’ to those who work for the largest employer in the area and are union members.” Others on Big Labor’s hit list: Kwik Trip, Sargento Foods Inc. and M&I Bank.

Walker, of course, has been at the forefront of government pension and budget reforms. Similar measures are being advanced by Democratic governors and Democrat-run legislatures from Massachusetts to New York to California. But union bosses have yet to sic their goons on individual and corporate donors to Democratic politicians imposing long-overdue benefit and collective bargaining limits for public employee unions.

How convenient, yes? Just as they secured a big fat waiver from the federal health care mandate and tax scheme they lobbied to impose on the rest of America, Big Labor is giving Democratic legislative water-carriers who have been forced to adopt cuts and cost controls a big fat waiver from their organized wrath and vandalism.

Now, a few hundred or thousand ruined grocery store items may not seem to matter much to the average reader, but this little property destruction campaign spotlights a nasty tactic increasingly employed by the left: campaign finance disclosure as a speech-squelching weapon.

We saw it last fall when Democratic operatives targeted the U.S. Chamber of Commerce for donating to Obamacare opposition ads.

We saw it in 2008 when a top MoveOn.org alumnus launched attacks on Republican donors with the express purpose of “hoping to create a chilling effect that will dry up contributions.”

We saw it when Obama campaign committee lawyers lobbied the Justice Department to investigate and prosecute a GOP donor for funding campaign ads exposing Obama’s ties to Weather Underground terrorist Bill Ayers.

We saw it during the Proposition 8 traditional marriage battle in California, where gay rights avengers compiled black lists, harassment lists and Google target maps of citizens who contributed to the ballot measure.

We saw it when “progressive” zealots smeared Target Corporation and Chick-fil-A for daring to associate with social conservatives.

And we’re seeing it again this month as the Obama White House readies an executive order that would force federal contractors to disclose all political donations to candidates and independent groups in excess of $5,000 made not just by a corporate entity, but by all of its individual executives, directors and officers.

Former Federal Election Commission official Hans von Spakovsky obtained the sweeping draft executive order, which — surprise, surprise — exempts unions and predominantly left-wing federal grant recipients from the mandate. On Wednesday, GOP senators spelled out the bullying agenda in an open letter objecting to the Obama order: “Political activity would obviously be chilled if prospective contractors have to fear that their livelihood could be threatened if the causes they support are disfavored by the administration.” Join the club.

When disclosure’s a bludgeon, all but Obama’s cronies are nails.

As I have said many times before, the Democrats only have 3 plays in their playbook: Class Ware, fear, and Intimidation.

That’s all folks.

Political Cartoons by Chuck Asay

Weiss Ratings downgraded U.S. debt this week.

Yes, the superman of all debts, public and private, got it some kryptonite.    

“We believe that the AAA/Aaa assigned to U.S. sovereign debt by Standard & Poor’s, Moody’s and Fitch is unfair to investors and savers, who are undercompensated for the risks they are taking,” Weiss Ratings President Martin D. Weiss said according to the South Florida Business Journal.

Weiss rated the U.S. a “C” credit risk, behind even Mexico.

The U.S. isn’t just a banana republic under Obama, it’s close to a failed state; at least in its ability to pay the bills.

To make matters worse, Weiss made the announcement after Federal Reserve “superman” Ben Bernanke admitted in a press conference that his policy of printing money has resulted in higher inflation and no jobs.

The announcement by Weiss may not be unrelated to the Bernanke press conference.

As Forbes observed this week, the Fed under Bernanke may not have the ability to judge anything anymore.

Just last month, the web site reminded us, the Fed assured everyone that “The economic recovery is on firmer footing, and overall conditions in the labor market appear to be improving gradually.”

On Wednesday the Fed told us “The economic recovery is proceeding at a moderate pace and overall conditions in the labor market are improving gradually.”

On cue, right after the Bernanke press conference, the estimates for GDP by the Fed were then slashed to 1.8 percent after posting 3.7 percent in the first quarter. Think that Ben didn’t know about those new numbers at his all-is-well press conference?

The revised estimates confirmed what we already knew; that the Fed policy was igniting inflation that would eventually hurt economic growth by spiking prices for things like gas, food, common stocks.

1.8 percent growth is hardly enough growth to ensure that jobless claims don’t start going up again.

Then on Friday, the Fed chief told an audience that he wants more sub-prime lending.

We’re getting into the area where we just can’t make this stuff up.

Yes, Ben Bernanke is calling on lenders to give more money to people who can’t afford mortgages.

Really.

“Federal Reserve Chairman Ben Bernanke on Friday called for more lending to people and small businesses in lower-income neighborhoods,” reports the AP “saying they’ve been disproportionately hurt by the recession.”

Does Bernanke think he’s running for re-election? What’s worse is that our chief banking officer doesn’t seem to understand how the country got where we are fiscally.     

And things have just become too complicated- and political- and dangerous for Bernanke to remain the front man for U.S. economic policy.

Instead Ben should do the decent thing:

Take off that silly cape.

It looks ridlculous. (John Ransom)

But don’t worry, everything’s fine, we aren’t broke.

We just need more investments in infrastructure and higher taxes on “rich” people to solve all our woes! 😦

Political Cartoons by Ken Catalino

I Have a Secret

Very disturbing: http://www.youtube.com/watch?feature=player_embedded&v=ajkAP_M4ZAM#at=60

******

Ben Bernanke, The Fed Chairman held a news conference for the first in it’s history. Be Afraid Be very Afraid.

If the Fed is resorting to explaining itself in a press conference, you know we are in the doo-doo big time.

“The markdown of growth in 2011, in particular, reflects the somewhat slower than anticipated pace of growth in the first quarter,” Bernanke said in prepared remarks before he took reporter questions.

The U.S. dollar fell to a fresh 3-year low against major currencies while Bernanke spoke.

Politics, re-election, and The Fed’s policies. A Lethal combination??

U.S. economic growth slowed more than expected in the first quarter as higher food and gasoline prices dampened consumer spending, and sent a broad measure of inflation rising at its fastest pace in 2-1/2 years.

Political Cartoons by Eric Allie

As usual, Paul Krugman is leading the liberals to the briar patch, calling death panels a necessity to help balance the budget. In a roundtable discussion on ABC’s “This Week,” Krugman said of what recently came out of the president’s deficit commission: “Some years down the pike, we’re going to get the real solution, which is going to be a combination of death panels and sales taxes.” He also said, “Medicare is going to have to decide what it’s going to pay for. And at least for starters, it’s going to have to decide which medical procedures are not effective at all and should not be paid for at all. In other words, [the deficit commission] should have endorsed the panel that was part of the health care reform.”

Once Krugman pulled back the curtain, other liberals started talking about the “lie of the year.”

Writing for the Atlanta Constitution, Jay Booker admitted that death panels exist and defended their goals in a column entitled “Why ‘Death Panels’ are a necessary evil.” He said:

By law, the panel is prohibited from recommending health-care rationing; its role is simply to find the most cost-effective approaches to health care, with Congress given the power to override its decisions.

Inevitably, that proposal revived talk of “death panels.” It’s an emotionally powerful phrase, but only because it strips things down to uncomfortable truth: Death panels exist, they will exist in any conceivable system of health-care delivery, and we all know they are necessary but prefer to ignore it.

The only problem is, when it comes to medicine, what works for someone else may not work for you. But if the IPAB deems something unworthy of payment, it doesn’t matter that your doctor thinks is may work for you. You won’t get it, unless you’re wealthy and can pay for it yourself.

Leftist columnist Cynthia Tucker also joined the crusade, proclaiming: “Yes, we need death panels.” In Tucker’s world, the government would pick winners and losers in the health care arena. She writes, “If we keep spending our health care dollars disproportionately on the elderly, we will have little left to spend on children. That makes for an upside-down society that cannot thrive for long.” Kids win. Seniors lose.

These liberals are giving cover to the bureaucrats who are beginning to implement their vision of a new health care system in America. While this may seem a ways away, the bureaucrats at the FDA are already moving to deny the cancer drug Avastin to breast cancer patients. This is just the fist volley in the fight over rationing, and the IPAB hasn’t even started yet.

MASSACHUSETTS VOTES TO CUT COLLECTIVE BARGAINING!

Oh here’s news you probably won’t here on the Mainstream Liberal media:

Government-sector collective bargaining reform: When the Republican dictator Governor of Wisconsin accomplishes it with a series of high-profile votes, all hell breaks loose.  When the Democrat-dominated Massachusetts House passes it by a huge margin — crickets:

House lawmakers voted overwhelmingly last night to strip police officers, teachers, and other municipal employees of most of their rights to bargain over health care, saying the change would save millions of dollars for financially strapped cities and towns.

The 111-to-42 vote followed tougher measures to broadly eliminate collective bargaining rights for public employees in Ohio, Wisconsin, and other states. But unlike those efforts, the push in Massachusetts was led by Democrats who have traditionally stood with labor to oppose any reduction in workers’ rights.

DeLeo said the House measure would save $100 million for cities and towns in the upcoming budget year, helping them avoid layoffs and reductions in services. He called his plan one of the most significant reforms the state can adopt to help control escalating health care costs.

“By spending less on the health care costs of municipal employees, our cities and towns will be able to retain jobs and allot more funding to necessary services like education and public safety,’’ he said in a statement.

But union leaders said that even with the last-minute concessions, the bill was an assault on workers’ rights, unthinkable in a state that has long been a bastion of union support. Some Democrats accused DeLeo of following the lead of Governor Scott Walker of Wisconsin and other Republicans who have targeted public employee benefits

By the looks of that quote in bold, it seems as though Speaker DeLeo hired Scott Walker’s speechwriter.  Meanwhile, the Bay State’s liberal Democratic Governor, Deval Patrick, has lent some mild support to the measure and is urging incensed labor leaders to “dial down” their heated rhetoric in opposing the bill:

There’s “room for debate” about whether a House-passed bill gives labor unions enough of a seat at the table on health insurance issues, Gov. Deval Patrick said today, adding that he’s glad the House dealt with the controversial topic and hopes to see a final bill soon.

“I want labor to be involved,” Patrick told reporters after signing a financial literacy bill. “I want labor to be at the table.”

The governor also urged labor unions, who are comparing the House plan to the stripping of collective bargaining rights that has occurred in Wisconsin, to pull back on their commentary. “They should dial it down because that’s not what’s happening here,” said Patrick, who plans to visit Wisconsin on Saturday at the invitation of Democrats in that state to discuss collective bargaining issues.
True, the Wisconsin law limits the scope of government-sector employees’ collective bargaining privileges to wages, whereas the Massachusetts law only constrains the public unions’ ability to collectively bargain on healthcare benefits.  But the Wisconsin law exempted unions representing first responders from the new rules; the Massachusetts has no such carve-outs. 

After Gov. Walker signed his controversial bill into law, lefty commentators predicted that his actions would trigger a powerful pro-labor backlash across the country.  No dice.  Wisconsinites re-elected a conservative supreme court justice in the face of intense left-wing opposition, Ohio passed a more expansive measure, and now deep blue Massachusetts has taken a major step to do the same.  It’s amazing what a little political courage can do.

UPDATE: In case you’re curious about just how blue Massachusetts is, the state House is currently comprised of 128 Democrats and 32 Republicans.  All but two of the GOP lawmakers voted with the Speaker’s plan.  Theoretically, every single Republican in the chamber could have voted no, and the bill still would have passed comfortably.

Soo…shh..It’s a secret…

Just like Bernanke working to get Obama re-elected regardless of the harm and the inflation it will cause… 🙂

Political Cartoons by Steve Kelley

Political Cartoons by Michael Ramirez