SodaHead - Laura Schneider's Blog

Comic boundaries and women (the holy war against Letterman)

2009-06-15T18:38:23Z

-2 raves

Comedy is a very valuable reflective and introspective tool in our society. Comics can make us laugh at ourselves or, at least, not take ourselves so seriously. Comics can put the world in perspective when we get too caught up in political combat to "see the forest for the trees." And they can speak truth to power as only a court jester can and has for centuries. Comedy is an art, not a legal court proceeding or a news item. I honestly believe this cause célèbre is more of a distraction than a real issue. We are confusing the biased and deliberately inaccurate reporting by the MSM with comedy, which is an art. And, like all arts, art is in the "eye of the beholder." The right to free speech can only be measured by how a society treats the speech with which it does not agree or approve. Should there be reasonable limitations? Of course! And there are -- in factual media: they are libel and slander law. But in comedy, where it is clear the comments are not meant to be factual, but rather entertaining, libel and slander do not apply, or, at least, the bar is significantly lower. And this, for the most part, is a good thing. Comedians like Jon Stewart, Stephen Colbert and programs like Saturday Night Live may often blur the line between information and entertainment, as Katie Couric called it on her first broadcast, "infotainment," but there main function is the entertain. If they can inform in the process, so much the better. Was Letterman making a "bad" joke? Maybe. Was it in poor taste? Possibly, but he did not cross the line or even lower the bar -- all these kinds of jokes had been made before about other teenager girls (Paris Hilton, Nicole Richey, Britney Spears, Lindsay Lohan, Courtney Spears, Chelsea Clinton, Amy Carter, the Nixon girls, the Johnson girls and the Bush twins) in the public forum -- even as underage teenagers. His intended "victim" was the "of age," formerly married Bristol Palin (who he confused with her younger, underage sister Willow). Sarah Palin, like all politicians, knew when she entered the political arena that she and her family would be "fair game" for the media, both journalistic and entertainment. She knew that any mistake her kids made would be subject to public scrutiny. She also knew that, when Bristol got pregnant out-of-wedlock and underage, that, given her political beliefs and her public evangelical Christian-based positions, that both she, her family and, especially, Bristol, would be the fodder for many jokes, and, frankly, reasonably so. When Bristol decided to make "abstinence" ads targeted to prevent teen pregnancy, certainly Sarah should have known and informed her daughter if she didn't know, that Bristol would be putting herself in the public forum and inviting public scrutiny and public humiliation. So the false outrage shown by Sarah and her family mischaracterizing what Letterman said was not only a bit hysterical, it was more than a bit hypocritical. II honestly believe this is "much ado about nothing," or, at least, almost nothing. Certainly, it is not a measured and rational response. Further, it distracts from the real issues facing women. If women want equality with men in all areas, including politics, they must be willing to accept the good with the bad. Men in politics have been the brunt of jokes and personal attacks from the MSM for centuries now, as evidenced by every president, especially Bill Clinton and GWB. We wanted equality, now we have it. Suck it up and focus on the real issues that can advance the causes of women.

Suleman Octuplets: A study in irresponsible parenting

2009-02-11T18:14:19Z

Laura Schneider

0 raves

We really need to take a look at how this society encourages irresponsible parenting. Nadya Suleman (b. 1975) (also known as Natalie Suleman; Nadya or Natalie Suleman-Gutierrez while married; and Nadya or Natalie Doud) was born in Fullerton, California. She was raised in La Puente, Hacienda Heights and Rowland Heights, all cities in Los Angeles County. She is the only child of Ed and Angela Suleman, who married in Las Vegas in 1974 and divorced in 1999. Nadya Suleman mentioned that she is a half Arabic, half Lithuanian Protestant.[1][2][3][4][5][6][6][7][8] Suleman graduated from Nogales High School in La Puente, California in 1993[8] and studied to be a psychiatric technician at Mt. San Antonio College. She held a mental health technician license and worked as a psychiatric technician at Metropolitan State Hospital[9] where her back was injured while at work.[10] She filed a worker’s compensation claim in 1999 against the hospital, later filing another claim in 2001 against the Workers’ Compensation Appeals Board.[9] She received more than $165,000 in disability payments.[11][12] She attended Cal State Fullerton and received a Bachelor of Science degree in child and adolescent development in 2006[13]. Suleman returned to Cal State to pursue a master’s degree in counseling, leaving the program in 2008.[13] Suleman married Marcos Gutierrez, a produce manager, in 1996. The couple separated in 2000 and divorced in 2008.[14] Suleman moved back in with her parents started out on her effort to become a mother in 2001. Initially, she had three miscarriages. She told a psychiatrist that she suffered deep depression and had suicidal thoughts while starting a family. Suleman used an in vitro procedure, using a single sperm donor named David Solomon to father her first six children (as well as the octuplets) using the services of West Coast IVF Clinic run by Dr. Michael Kamrava.[15]In 2001, Suleman attempted to change her legal name to Nadya Solomon.[14][16] Several embryos had been implanted during each of her previous IVF procedures, resulting in four single births and one twin birth. As of 2009, her other six children are Elijah, age 7; Amerah, age 6; Joshua, age 5; Aidan, age 3; and 2-year-old twins Calyssa and Caleb. One of Suleman’s sons, Aidan, has autism. Suleman is receiving $490 a month in food stamps along with disability payments for three of her six previous children.[17][18] (Wiki) It is not humanly possible to take care of 14 children under the age of 7 — including 8 infants (even healthy ones) all the same age — at the same time and give them the individual attention they deserve. If you have to have an army of nurses and daycare workers to parent for you, then you are not being a real parent, are you? Likewise, it is an avoiable and unnecessary health risk, both for the mother and the children, to implant 8 embryos at the same time. In an interview on the Today Show today, it was revealed that two of her existing children receive $2400/month from SSI (Social Security disability for indigents) for four of her children ($600/month each), which also entitles them to Medicaid. I don’t know if the other three existing children were on Medicaid, but if she herself is disabled and unemployed, it would seem likely that they are also on Medicaid and that she is as well. She also admitted in an earlier interview that she was and planned to continue living off of federally insured student loans. So, to recap: an indigent single mother on disability herself (supposedly she injured her back, so how is it that she cannot work but can carry 8 babies?) who has six children under the age of 7, four of whom are disabled and receiving government assistance in the form of SSI and Medicaid for her existing children, and all of whom are receiving food stamps, who has a history of mental instability (depression and suicidal thoughts – great criteria for motherhood), and is living and planning to live on government assistance through federally insured student loans, decides that she can have not just ONE more baby, but has implanted SIX embryos (I assume two of the embryos split and became twins….). And now, because the number of fetuses caused the babies to be so small and born so early, the taxpayers will be footing the ENORMOUS bill for their healthcare, which is estimated to reach over $1M before they leave the hospital as infants, not to mention whatever disabilities they may have because of being born too early, etc. But she maintains she is not on “welfare.” She is, however, very much on public assistance, since SSI is basically a welfare program for the disabled who are indigent. And she is on food stamps, which she does not believe is welfare because she doesn’t get a check every month. And she is on Medicaid, which is also not welfare in her eyes because she does not get a check every month. But all these benefits are forms of public assistance. Suleman should be forced to undergo a full hysterectomy and prevented from future adoption of any more children. I personally would like to see all her children removed from the home until she undergoes a mental health examination to determine if she is mentally ill and incompetent to raise these children. My initial response is that she should have all her children taken from her and put up for adoption, especially the last 8, but let’s give her the benefit of the doubt and allow an independent professional to review her case. If we were talking about cats or dogs instead of children, the SPCA would have labelled her a “hoarder.” She appears to be obsessed with bearing children and possessing human property called children, not being a real parent. She needs psychiatric care, as do her crazy parents for supporting this obsession. And the doctor didn’t think that it would be unethical to do this operation? The doctor should have his license to practice jerked. And, finally, I’m not against the CHILDREN, I’m against the irresponsibility of the parent and the doctor. These children will experience a lifetime of AVOIDABLE and UNNECESSARY deformities and chronic impairments, including possibly mental retardation, because, by necessity, they were born early and there were too many fetuses. Many of them may never experience a full life with a normal education, job, independent living, a spouse and a family of their own because of their mother’s selfishness and irresponsibility. To me this is a crime against humanity. Had there only been two fetuses, they might have been born perfectly healthy. Even three. But any responsible doctor would tell you that implanting 8 fetuses at a time was an unnecessary and avoidable risk for the mother and the children. And now the children are the ones who suffer a lifetime for their mother’s selfishness and irresponsibility and a doctor’s greed and unethical professional behavior. Further proof that requiring parents to obtain a license before conception is a good, responsible way of preventing irresponsible idiots from producing offspring. In order to get the license, there should be a committed couple (two parents of either gender) with a civil union or marriage license, means testing (including the future ability to maintain the current standard of living or increase it), academic testing (for literacy and competency), and mental health screening (including testing for genetic/chemical deficiency illnesses like bipolar disorder and schizophrenia, etc.). Mentally retarded and mentally ill individuals should not be allowed to breed. Nor should anyone under the age of 21. Nor should anyone who does not have the ability to provide financial support for at least 25 years at the time of conception (which is the length of commitment based on the usual age for a young person graduating from a master’s degree, which is now required if you are to maintain a standard of living anywhere near what your middle class parents had). And, most certainly, anyone currently on ANY FORM OF PUBLIC ASSISTANCE — welfare, food stamps, Medicaid, SSI (which is social security disability for indigents), federally insured student loans or grants or ANY OTHER government provided or insured program — should not be allowed to make more if they can’t take care of the ones they already have — BY THEMSELVES. Any parent who becomes pregnant or impregnates his partner while on welfare or while behind on child support payments should be required to undergo mandatory sterilization. If you can’t take care of the ones who have, you have not earned the PRIVILEGE to make more. People with genetic illnesses or who carry genetic illnesses in their genes should not be allowed to breed. And, yes, I believe is a form of NEGATIVE EUGENICS based on preventing genetic illnesses and deformities. If they are not ill and the doctor projects they can physically perform their duties as a parent and a provider, then they can adopt. And, as for genetic engineering, we already engage in that by legally preventing closely related family members from breeding — we call it incest. If you know you have a genetic deformity or serious (meaning chronic or fatal) genetic illness, is it really responsible to pass that same burden on to generation upon generation of children? Why not become a parent by adoption? If parenting is what is important, not procreating, then HOW you become a parent should not matter. Procreating is an event. Parenting is a lifestyle choice. I’m not talking about instituting a breeding program to produce a “perfect” human being (POSITIVE EUGENICS), I’m talking about common sense rules that would prevent genetic illnesses from continuing from generation to generation that could easily be avoided. We already do this with RH factor and by preventing close relatives from marrying, and therefore inbreeding. Are we really so egotistical that we believe we must pass our genes on, even if they are seriously flawed, causing untold harm and anguish to our children? Becoming a parent has nothing to do with procreating. You can become a parent through adoption. Notice that I agree that anyone can experience temporary setbacks or illnesses. I was NOT saying that parents should lose their children if they become disabled or ill. I was saying that parents should not be allowed TO BRING CHILDREN INTO THE WORLD KNOWING they are unable to properly care for them — that is the distinction with a difference here. After two children, ALL individuals should be required to undergo mandatory sterilization. The choice of two children replaces the two parents. This world is overpopulated already. If a couple wants more children and can afford them and pass the criteria for legal adoption, let them adopt. Notice I did not say that parents were restricted to parent only two children, just procreate two. If they want more, there are millions of children of virtually any age group, sex, racial background, disability, etc., that desperately need homes that can be adopted. It is time that our society take responsibility for its children and the conditions under which they are brought into this world and continue to live in this world. It is not merely enough to guarantee their survival, we must be able to reasonably ensure that they thrive. It is a moral imperative to examine how our society, through whatever legislation and enforcement means necessary, can support and encourage better parenting and prevent irresponsible parenting, which is, after all, a form of child abuse that is also causing the taxpayers to assume a terrific financial burden that is avoidable — not only in public assistance, but in the resulting crime, conviction and imprisonment of many kids born into poverty and neglect. Having a child is not a right, it is a privilege. It is a sacred gift from God that requires parents to fulfill that sacred trust. And there is a huge difference between being able to give birth to a child and being a parent. Our society must relearn this lesson.

Crucifying Israelis for acting in self-defense

2009-01-29T23:30:36Z

Laura Schneider

+2 raves

Sadly, the seemingly pervasive attitude in the liberal press against Israel accuses any supporters of Israel or unbiased reporters as either Zionist or right-wing. I am neither. Likewise, any broadcasts that portray a balanced report of the issue are, in their minds, due to Jewish-controlled media. The reality is that the Jews in entertainment do not have the power to completely control journalism and, therefore, information; the corporations that own the media broadcasting (like GE) do, and they will do what is good for business, not what they think is right for either side. Also, I am seeing a swelling support from this mindset to identify and persecute Jewish owned or controlled companies in an effort to find a target for their hostility. This is the very same kind of persecution that gave rise and gave focus to the Nazi movement, which I find frightening. Likewise, holocaust deniers are propagandizing to increasingly uneducated youth who respond to their lies. Those who do not learn from history are doomed to repeat it. -- George Santayana As for victims, the Palestinians are willing victims of their own design. They continue to elect and support Islamic extremists like Hamas. If they didn’t bomb Israel daily, Israel would not be retaliating in defense. Likewise, the women and children killed in Israeli attacks are pawns in a game for Hamas, who deliberately uses them as human shields to create a picture for the world of dead Palestinian children “slaughtered” by Israeli bombs, causing the desired outcry of support for the poor Palestinians and anger and hostility toward Israel. And the worst part is that the liberal press throughout the world is too blinded by their own gullibility to see how they are being used to create this sympathy and support for terrorists who would, ironically enough, be happy to kill them if given a chance. Remember the numerous beheadings of journalists by Islamic extremists? 1. The chief suspect in the September 11, 2001, attacks, Khalid Sheikh Mohammed, confessed to beheading US journalist Daniel Pearl “with my blessed right hand,” the Pentagon said Thursday. (http://www.manilatimes.net/national/2007/mar/17/yehey/world/... 2. Sun Nov 11, 2007 3:04am EST-- KHARTOUM, Nov 11 (Reuters) - Ten Darfuris convicted of beheading a Sudanese journalist have been sentenced to death by hanging, state media said on Sunday, contradicting an earlier account by their lawyer that they would be shot. "The criminal court in Khartoum North presided over by Judge Osama Osman issued a judgment of death by hanging for all 10 accused in the case of the murder of journalist Mohamed Taha," the state-owned Sudanese Media Centre said. The beheading of al-Wifaq editor Taha last year shocked Sudan's media. Taha, himself an Islamist, had angered other Islamists by reprinting articles questioning the roots of the Prophet Mohammed. Authorities also said he had provoked Darfuris with unflattering articles about Darfuri women. All the accused were from the Darfuri Fur tribe. (Reporting by Opheera McDoom; editing by Philippa Fletcher; http://www.reuters.com/article/latestCrisis/idUSL11152692) 3. Monday, April 9, 2007, at 3:00 PM ET -- The beheading of Afghan journalist Ajmal Naqshbandi Sunday afternoon may well be remembered as the first casualty in a new wave of violence against journalists in Afghanistan. Naqshbandi was the translator working with Italian journalist Daniele Mastrogiacomo when they were kidnapped by Taliban forces last month; Mastrogiacomo was later freed in exchange for the release of five Taliban prisoners. The Taliban then demanded further prisoner releases in exchange for his translator. The Afghan government refused to negotiate, so the Taliban chopped off his head. Within the last two weeks, at least 13 more Afghans and two French aid workers have been kidnapped, and the Taliban warn of more to come. Many in Washington and Kabul blame the abduction spree on the prisoner-exchange deal arranged by the Afghan and Italian governments. "These kind of deals are Pandora's boxes," Afghan parliamentarian Daoud Sultanzoy told me. "Once we open them, anything can happen." (http://www.slate.com/id/2163793/fr/rss/) 2007-04-09 04:59 (KST) -- Taliban militants in Afghanistan announced on Sunday that they had killed the Afghan interpreter who was kidnapped with an Italian journalist while traveling in the country's southern Helmand province on March 6. According to a purported Taliban spokesman, who telephoned to media offices and correspondents in Kabul Sunday afternoon, they beheaded the Afghan translator, Ajmal Naqshbandi, around 3 p.m. (local time). (http://english.ohmynews.com/articleview/article_view.asp?art... 4. Aljazeera Broadcasts Report with Video of Italian Journalist Hostage: August 24, 2004 ... claiming to offer a link to the beheading video of Nicholas Berg. .(http://www.camerairaq.com/beheading/index.html) It’s no wonder journalists are afraid to publish the truth about Islamic terrorism. Nor does anyone seem to care that Hamas uses hospitals and schools to store weapons and as safe houses, even launching rockets into Israel from these positions. And they do not find it reprehensible that madrassas program children from kindergarten on to hate the Western world and embrace jihad by, for example, becoming suicide bombers. This, more than anything, indicates Palestinian priorities are not their children, but their ideology. Neither is the liberal press fretting over all the bombs Hamas lobs at Israel daily, which has been going on for years now. What about the Israeli children who live in fear? No one seems to care about them. I suggest to the liberal press lamenting the bloodshed and, believe it or not, “ethnic cleansing” allegedly waged by Israel and suffered by the “innocent” Palestinians the following: YOU plant YOUR ass in Israel in one of the Israeli border towns. Perhaps you might feel differently when a Hamas rocket (supplied most likely by Iranian funding) lands in YOUR living room or YOUR child’s school. Or an Islamic suicide bomber gets on a bus and blows your wife up on her way to work or your child on his or her way to school. Or maybe a few weeks spent running to and from a bomb shelter while trying to carry on work, school and life might change your perspective…. Likewise, Israel’s so-called “control” of the Palestinian territory apparently does not extend to any human being outside the Palestinian territory, because Palestinian guards will shoot you without question if you so much as set foot on Palestinian soil. If, perchance, you are invited in, you can guarantee you will see what THEY want you to see when THEY want you to see it. And should you report it in a way unpleasing to them: WATCH OUT! It might be you losing your head…. Yes, unfortunately, the liberal press (and this is coming from a moderate Democrat) has been hoodwinked by the clever Islamic extremists once again. Hamas controls access to virtually all territory and all information coming out of the territories it controls. It shows journalists what it wants them to see. Islamic groups all over Europe and in America are capitalizing on Western “guilt” and outrage at their “plight.” This victimization is largely a myth created by Islamic extremists in order to put political pressure on pro-Israel governments and organizations. The reality is, and I think it was Bill Clinton who said it (please someone, if you know give the exact quote): The Israeli-Palestinian conflict will never be resolved so long as Palestinians choose their ideology over their children’s future. I do not hate Muslims. I hate what Muslim extremists do with the passive acquiescence of moderate Muslims. But I do acknowledge the reality that Islam, as it is currently PRACTICED, is, by and large, intolerant of other religions and dedicated toward the obliteration of Western culture, other religions and, finally, world domination under the Caliphate. And women do not now nor will they get the freedom and protection under Shariah law, which has invaded Western government in England, Denmark, Sweden and other Western countries in an effort to broker a peace between Muslims in their countries. If Israel were to leave the Holy Land tomorrow, internecine war would ensue between Hamas and Fatah or whatever group might rise up in the wake of total anarchy. Hezbollah could conceivably invade and assume title. And there goes the neighborhood.... They are not victims as much of Israel expansionism as of Arab intransigence. That again, is cultural, not even so much a political position. And when you are living by enshrined religious zealotry, Lord help your opponent. Suicide is inculcated within that doctrine. -- Marilyn A.F. One thing we learned about terrorists in the sixties is that when one terrorist cause was taken off the table, most of the core group migrated to other causes. What does this say? Terrorists are in it for the violence, destruction and power. They achieve power through fear. They will use whatever cause célèbre to recruit supporters, but, at their core they are addicted to the violence and destruction because it creates fear, which gives them power. So, achieving power through fear is their pay-off. Hamas, Hezbollah and all the other Iran-supported terrorism is designed to accomplish several goals: 1. to keep the Middle East in turmoil, which raises the price of oil and empowers their countries and the terrorists they fund; 2. to keep their people united against a common enemy (just like Hitler—remember Neimöller’s poem?); and 3. to keep their own region united with each other instead of fighting each other (which, given the tribal structure of most of these countries, would likely happen internally and regionally). Israel is an excuse - the Western lifestyle is an excuse—for their terrorist activities, their recruiting, their funding solicitations, etc. If Israel were to cease to exist tomorrow, another cause would take its place very quickly. It would have to. Otherwise, these countries and this region would quickly descend into tribal wars against each other. This region has been marked by chaos for centuries. We in the Western world did not create it, and we cannot fix it. Selling the idea that we can somehow fix it to Westerners is a means of manipulating us into a delusional compliant state where we will do anything to appease these guys in order to achieve peace. We tried that once already with Hitler. Neville Chamberlain is the poster boy for appeasement. And where did that get us? Wake up to the reality. If moderate Muslims are the majority and they do not support this violence and terrorism, why don’t they rise up and defeat it? Or at least vote these guys out? They didn’t. They voted them in. One of the reasons I opposed the war in Iraq was because I believe that no government can exist against its people’s will. If the majority of the Iraqis were truly committed to getting rid of Saddam, they would have done it without us. The same is true for Palestine. If they did not see Hamas as representing their best interests, Hamas would be out, terrorism would be over, and Israel and Palestine could coexist peacefully. Such is not the case. The Palestinian people have had a number of opportunities to resolve the conflict. Israel has given back land won during several wars and settled by Israelis, uprooting the settlers at Israel’s expense. They left greenhouses in tact which could have provided food and income to the Palestinians, but the Palestinians CHOSE to destroy them instead, and now they whine about starvation and poor living conditions. But it is never enough. Islamic extremists elected by the Palestinian people, which (though Hamas is more so and Fatah less so) run Gaza and the West Bank, for all practical purposes, will not be content to have their own country ADJACENT to Israel. They will only be happy if Israel ceases to exist. This has been clearly stated by Hamas from the outset. Given that reality, there is nothing of substance that Israel can do to permanently resolve the conflict short of conquest. To the whining liberal press I say, “Give me a break!” Save the outrage for unwilling victims, like the persecuted people enduring real ethnic cleansing in Darfur.

UPDATE: Berg v. Obama, et al.

2008-10-02T23:18:50Z

Laura Schneider

+2 raves

http://dockets.justia.com/docket/court-paedce/case_no-2:2008c... Above is the case log showing what documents have been filed in this case. There is no RULING on Berg's RESPONSE to Obama's MOTION TO DISMISS yet. http://docs.justia.com/cases/federal/district-courts/pennsylv... Above s is Berg's Response to Obama's Motion to Dismiss in Phillip J. Berg, Esq. v. Barack Hussein Obama, et al.,, (U.S. District Court for the Eastern District of Pennsylvania, Case No. 08-cv-04083) and, if the judge accepts the Order included with the Response in those terms, it will be ordering Obama to produce the (original long version) certified "vault" copy of his birth certificate, a certified copy of Obama's Certificate of Citizenship and a certified copy of Obama's Oath of Allegiance within three days. In other words, if the judge rules against Obama, it will mean that Obama has not provided the Court acceptable proof that he is actually a citizen. This does not mean he can't provide it (as far as we actually know), but Berg apparently has some proof he was born in Kenya and not the United States, in which case he would not be eligible to run for the presidency. OBAMA is USING TERRORIST'S LAWYER to Defend LAWSUIT Here come another of those "Guilt by Associations" that Senator Barack Obama will try to weasel himself out of. As you may know, Philip Berg is suing Senator Obama in Civil Court. Berg wants Obama to Produce his real birth certificate to prove that he meets the citizenship requirements to be President. Rather than just product the birth certificate (is he trying to hide something?) Obama's legal team filed a Motion to Dismiss, which was denied. One of the lawyers filing the motion on behalf of Obama was Joe Sandler (sandler@sandlerreiff.com) of the Washington law firm Sandler, Reiff, and Young (see the document above or below). If Mr. Sandler's name sounds familiar it Should. He is the Legal Hit Man for the Council of American-Islamic Relations (CAIR). CAIR is an organization with terrorist ties, and has been as an un-indicted co-conspirator in the Holyland Foundation Hamas Funding trial. Sandler's role for CAIR has been to stifle people from telling the truth about Islam. For example, last year he tried to get Jihad Expert Robert Spencer banned from speaking to the Young American Foundation, by using a threatening letter. Sandler followed up by threatening columnist Mike Adams for writing about the Spencer incident. Look, everyone deserves legal representation that is not the Issue. The real issue is why is a candidate for President of the United States, a guy who wants to take over the role of Commander-in-Chief in the war on terror, using the Lawyer for CAIR a group with terrorist connections, to represent him in a law suit? Once again the Junior Senator from Illinois leave us with questions and no answers. http://yidwithlid.blogspot.com/2008/10/obama-is-using-terrori...

URGENT! IMMEDIATE ATTENTION REQUIRED!

2008-10-01T19:37:32Z

Laura Schneider

0 raves

hapi22 from another group asks everyone to spread the word: How can it be that a media person -- who has written a book praising Barack Obama -- is permitted to moderate a debate that will have an impact on Obama's presidential ambitions? See: "VP debate moderator [Gwen] Ifill releasing pro-Obama book" at: http://tinyurl.com/538x72 This is not fair. This is not rational. This is not the American way. If Gwen Ifill had ANY sense of decency, she would have revealed the existence of her book to the McCain campaign, but she didn't. If Gwen Ifill has ANY sense of decency, she will remove herself form her role as debate moderator, but I doubt she will. If the Commission on Presidential Debates had any sense of fair-play, they would REMOVE Gwen Ifill as the vice presidential moderator and replace Ifill with someone who is not only fair and non-aligned with either presidential candidate's fortunes, but is perceived to be fair. There are many possibilities: Bill Moyers would be one, someone from The League of Women Voters would be a possibility, Greta Van Susteren -- who has been the only TV pundit with any sense of fair-play in this campaign season -- is another. I find it impossible to believe that in all of the United States, the Commission on Presidential Debates cannot find a moderator who is not a partisan of one of the campaigns. Lacking any other choice, I offer my own services. I understand the issues and I believe in fairness and human decency -- and that's a good place to start. CONTACT the Commission on Presidential Debates at (202) 872-1020.

Obama quiet on his most important executive experience

2008-09-23T20:15:51Z

Laura Schneider

+4 raves

By Stanley Kurtz Wall Street Journal Despite having authored two autobiographies, Barack Obama has never written about his most important executive experience. From 1995 to 1999, he led an education foundation called the Chicago Annenberg Challenge (CAC), and remained on the board until 2001. The group poured more than $100 million into the hands of community organizers and radical education activists. The CAC was the brainchild of Bill Ayers, a founder of the Weather Underground in the 1960s. Among other feats, Mr. Ayers and his cohorts bombed the Pentagon, and he has never expressed regret for his actions. Barack Obama's first run for the Illinois State Senate was launched at a 1995 gathering at Mr. Ayers's home. The Obama campaign has struggled to downplay that association. Last April, Sen. Obama dismissed Mr. Ayers as just "a guy who lives in my neighborhood," and "not somebody who I exchange ideas with on a regular basis." Yet documents in the CAC archives make clear that Mr. Ayers and Mr. Obama were partners in the CAC. Those archives are housed in the Richard J. Daley Library at the University of Illinois at Chicago and I've recently spent days looking through them. The Chicago Annenberg Challenge was created ostensibly to improve Chicago's public schools. The funding came from a national education initiative by Ambassador Walter Annenberg. In early 1995, Mr. Obama was appointed the first chairman of the board, which handled fiscal matters. Mr. Ayers co-chaired the foundation's other key body, the "Collaborative," which shaped education policy. The CAC's basic functioning has long been known, because its annual reports, evaluations and some board minutes were public. But the Daley archive contains additional board minutes, the Collaborative minutes, and documentation on the groups that CAC funded and rejected. The Daley archives show that Mr. Obama and Mr. Ayers worked as a team to advance the CAC agenda. One unsettled question is how Mr. Obama, a former community organizer fresh out of law school, could vault to the top of a new foundation? In response to my questions, the Obama campaign issued a statement saying that Mr. Ayers had nothing to do with Obama's "recruitment" to the board. The statement says Deborah Leff and Patricia Albjerg Graham (presidents of other foundations) recruited him. Yet the archives show that, along with Ms. Leff and Ms. Graham, Mr. Ayers was one of a working group of five who assembled the initial board in 1994. Mr. Ayers founded CAC and was its guiding spirit. No one would have been appointed the CAC chairman without his approval. The CAC's agenda flowed from Mr. Ayers's educational philosophy, which called for infusing students and their parents with a radical political commitment, and which downplayed achievement tests in favor of activism. In the mid-1960s, Mr. Ayers taught at a radical alternative school, and served as a community organizer in Cleveland's ghetto. In works like "City Kids, City Teachers" and "Teaching the Personal and the Political," Mr. Ayers wrote that teachers should be community organizers dedicated to provoking resistance to American racism and oppression. His preferred alternative? "I'm a radical, Leftist, small 'c' communist," Mr. Ayers said in an interview in Ron Chepesiuk's, "Sixties Radicals," at about the same time Mr. Ayers was forming CAC. CAC translated Mr. Ayers's radicalism into practice. Instead of funding schools directly, it required schools to affiliate with "external partners," which actually got the money. Proposals from groups focused on math/science achievement were turned down. Instead CAC disbursed money through various far-left community organizers, such as the Association of Community Organizations for Reform Now (or Acorn). Mr. Obama once conducted "leadership training" seminars with Acorn, and Acorn members also served as volunteers in Mr. Obama's early campaigns. External partners like the South Shore African Village Collaborative and the Dual Language Exchange focused more on political consciousness, Afrocentricity and bilingualism than traditional education. CAC's in-house evaluators comprehensively studied the effects of its grants on the test scores of Chicago public-school students. They found no evidence of educational improvement. CAC also funded programs designed to promote "leadership" among parents. Ostensibly this was to enable parents to advocate on behalf of their children's education. In practice, it meant funding Mr. Obama's alma mater, the Developing Communities Project, to recruit parents to its overall political agenda. CAC records show that board member Arnold Weber was concerned that parents "organized" by community groups might be viewed by school principals "as a political threat." Mr. Obama arranged meetings with the Collaborative to smooth out Mr. Weber's objections. The Daley documents show that Mr. Ayers sat as an ex-officio member of the board Mr. Obama chaired through CAC's first year. He also served on the board's governance committee with Mr. Obama, and worked with him to craft CAC bylaws. Mr. Ayers made presentations to board meetings chaired by Mr. Obama. Mr. Ayers spoke for the Collaborative before the board. Likewise, Mr. Obama periodically spoke for the board at meetings of the Collaborative. The Obama campaign notes that Mr. Ayers attended only six board meetings, and stresses that the Collaborative lost its "operational role" at CAC after the first year. Yet the Collaborative was demoted to a strictly advisory role largely because of ethical concerns, since the projects of Collaborative members were receiving grants. CAC's own evaluators noted that project accountability was hampered by the board's reluctance to break away from grant decisions made in 1995. So even after Mr. Ayers's formal sway declined, the board largely adhered to the grant program he had put in place. Mr. Ayers's defenders claim that he has redeemed himself with public-spirited education work. That claim is hard to swallow if you understand that he views his education work as an effort to stoke resistance to an oppressive American system. He likes to stress that he learned of his first teaching job while in jail for a draft-board sit-in. For Mr. Ayers, teaching and his 1960s radicalism are two sides of the same coin. Mr. Ayers is the founder of the "small schools" movement (heavily funded by CAC), in which individual schools built around specific political themes push students to "confront issues of inequity, war, and violence." He believes teacher education programs should serve as "sites of resistance" to an oppressive system. (His teacher-training programs were also CAC funded.) The point, says Mr. Ayers in his "Teaching Toward Freedom," is to "teach against oppression," against America's history of evil and racism, thereby forcing social transformation. The Obama campaign has cried foul when Bill Ayers comes up, claiming "guilt by association." Yet the issue here isn't guilt by association; it's guilt by participation. As CAC chairman, Mr. Obama was lending moral and financial support to Mr. Ayers and his radical circle. That is a story even if Mr. Ayers had never planted a single bomb 40 years ago. Mr. Kurtz is a senior fellow at the Ethics and Public Policy Center http://en.wikipedia.org/wiki/Stanley_Kurtz For more information on this subject: http://author.nationalreview.com/?q=MjMxNA== http://justoneminute.typepad.com/main/2008/08/chicago-annenbe... http://blogs.wsj.com/washwire/2008/08/21/obamas-ties-to-ayers... http://article.nationalreview.com/?q=MTgwZTVmN2QyNzk2MmUxMzA5... http://wordpress.com/tag/chicago-annenberg-challenge/ http://time-blog.com/real_clear_politics/2008/08/obama_vs_kur...

The Bail-out NON-plan

2008-09-23T18:01:47Z

Laura Schneider

+2 raves

I’ve been listening to Dodd’s Senate Banking Committee meeting with witnesses Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke, Securities and Exchange Commission Chairman Christopher Cox and Director of the Federal Housing Finance Agency James Lockhart. The gist of the story is that Paulson wants Congress to give him $700B without providing even an initial plan, no organizational structure, no personnel (industry experts who got us into this mess in the first place), no definite structure for real accountability to the taxpayers, and no guarantee that the bad debt they are proposing we buy will ever return so much as even money, and no historical reference for which such a plan like this ever worked. In the past, when the U.S. government “bailed out” the Savings & Loans during 1987, they simply guaranteed the debt, they did not purchase it. But in this plan, we are actually buying bad mortgage-backed securities, hoping that the market will improve and the taxpayers will eventually be able to sell these securities off if and when the market improves and at least break even. There were dire predictions from Paulson about what would happen if Congress didn’t act quickly. Freezing credit markets means no business-to-business loans, no loans to farmers, no loans to consumers for mortgages or other items, inflation, etc. “The sky is falling!” as Chicken Little would say. Well, all I can say is there are dire consequences if Congress acts imprudently and rashly, too. Obama’s statement about Iraq could be applied here as well: we must be as careful and thoughtful about getting out of this mess as we were careless getting in. "I urge you to provide in statute the authority to regulate these products to enhance investor protection and ensure the operation of fair and orderly markets," he [Cox} said. The debt insurance is known as credit default swaps. (http://news.yahoo.com/s/ap/20080923/ap_on_bi_ge/financial_me... As part of their very vague, generalized proposal, which can be boiled down to “Give us unlimited authority and all the money now, and we’ll figure it out as we go along, they propose a reverse auction method, meaning that instead of the buyers competing with each other to purchase the product (an auction), the situation is reversed, where there are no real buyers, only the taxpayers, and the banks are bidding to sell their bad debt x amount of the dollar to us. We are, for all practical purposes, buying their bad debt so that they can look more profitable. And there are, so far as I can tell, no provisions which prevent these banks from rewarding their personnel with bonuses, etc., or golden parachutes for the executives (there has been some discussion about this from the Senators, but not from Paulson). Effectively, Paulson would be God of the Financial Universe, with no serious oversight from Congress, no real requirement for approval from Congress as to the structure, the regulatory rules, etc. In other words, no accountability to the American taxpayers. Paulson’s reasoning is that it takes too long for all that. I find this rush to produce legislation with no serious controls over this new “agency” we are creating to be very troubling, to say the least. The last time there was such a panic, “rush, Rush, RUSH” with legislation was the Defense Appropriations of 2007, wherein there was a clause transferring the power to declare a national emergency and impose martial law from the Congress to the president, UNILATERALLY, with not even notifying Congress of the decision until it was made, forget advice and consent. That little gem still stands and has been joined by the FISA Amendment of 2008, which effectively relieves us American citizens of the burden of having the protection of the Fourth Amendment (warrantless search and seizure). So, when I see the rush-Rush-RUSH to Congressional action with this administration, I am, to say the least, mightily concerned, and my reflexive response is to say “NO WAY!” “I understand speed is important, but I’m far more interested in whether or not we get this right,” said Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee. “There is no second act to this. There is no alternative idea out there with resources available if this does not work,” he added. (http://www.msnbc.msn.com/id/26850571#storyContinued) I agree with Dodd. While this was going on, “Vice President Dick Cheney and Jim Nussle, the administration's budget director, met privately with restive House Republicans, some of whom emerged from the session understated.” “Just because God created the world in seven days doesn't mean we have to pass this bill in seven days," said Rep. Joe Barton, R-Texas. (http://news.yahoo.com/s/ap/20080923/ap_on_bi_ge/financial_me... Rep. Barton speaks wisely in my view. And my own senator, Richard Shelby, who I normally have little agreement with, made what I consider a “spot-on” insight: “Sen. Richard C. Shelby of Alabama, the panel's senior Republican, was even more blunt. "I have long opposed government bailouts for individuals and corporate America alike," he said. Seated a few feet away from Paulson and Bernanke, he added, "We have been given no credible assurances that this plan will work. We could very well send $700 billion, or a trillion, and not resolve the crisis." (http://news.yahoo.com/s/ap/20080923/ap_on_bi_ge/financial_me... Senator Chuck Schumer (D-NY), in an exchange with Paulson, asked Paulson why they couldn’t accept a lower number that would get them through the first three months, which is when Paulson is due to report to Congress on how it worked. Schumer observed that, if the plan doesn’t work, they will be able to assess the damage in January and figure out what to do next at that time rather than handing Paulson the full$700B right now. Paulson admitted that the funds would be traunched (One of many influxes of cash that is part of a single round of investment.), but he wanted the full authority for all the money right now because it would restore market confidence. I think that is absolute crap. Schumer’s proposal to give $150B for the next three months would be sufficient to get Paulson through this initial phase of the response to this debacle. And Schumer added that if there were a further and unforeseen market problem, the Congress could be called back in an emergency session to deal with the problem. Paulson gave no concise, clear answers. He appeared to be totally unprepared to provide any vision of what he intended to do. This sparks absolutely no confidence in me that he is the man for the job. He may have a net worth of $500M, but being rich doesn’t mean you are smart at everything. He also could not provide any concrete suggestions of who he intended to call in to act as advisors or regulators for this project. The bottom line is that he wants all the money, he wants it now, he doesn’t want to have any requirement or second-guessing from Congress, he wants no accountability for himself or this team if they screw it up, he has no guarantee that the taxpayers won’t get caught holding bad debt that can’t be recovered. Further, he has no set of new regulations to propose by which to prevent further disasters like this. He intends to decide that later. Everything about his attitude, his vagueness and lack of any substantial ideas in the committee hearing, the rush to judgment in moving legislation with a huge price tag and no real substantial controls – all of this smacks of a really, really bad idea. Not prudent, as Bush 41 would say. It seems that Republicans are even more opposed to this than Democrats. I think Schumer has got it right. If it is, indeed, necessary at all to intervene in this market and purchase this bad debt to start a market recovery and avoid real disaster (and that is only a theory, not an absolute fact), then let’s try it for three months and see what happens. And let’s take our time in devising a plan that is carefully thought out with all the regulatory and oversight controls and mechanisms that we truly need to stop this problem cold and not see it continue. "Those who do not learn from history are doomed to repeat it." – George Santayana quotes (Spanish born American Philosopher, Poet and Humanist who made important contributions to aesthetics, speculative philosophy and literary criticism. 1863-1952)

Learning from history: Regulation Works.

2008-09-22T20:53:06Z

Laura Schneider

+2 raves

“Those who do not learn from history are doomed to repeat it.” -- George Santayana quotes (Spanish born American Philosopher, Poet and Humanist who made important contributions to aesthetics, speculative philosophy and literary criticism. 1863-1952) This housing market debacle that has occurred under George W. Bush's watch can be traced back to many of the same causes as the Savings & Loan debacle during Reagan's watch on October 1987: it's about how deregulation sets the market up for failure. This problem goes back to Carter. And every administration and every Congress since then has been complicit in this mess. The reason they waited until it was too late to put it off is that they are ALL in bed with the financial contributors. This year, Dodd, our Senate Banking Committee chair, got the most from the investment houses, Obama was second. (www.opensecrets.org). But, none of them are blameless. James A. "Jim" Johnson, a close friend of Richard Daley and the Chicago Daley political machine, Franklin Raines, Tim Howard, Jamie Gorelick and Penny Pritzker are Obama advisors, and McCain had Rick Davis as his campaign manager. “In 1990, [Jim] Johnson [Chairman and CEO, 1991-1998) went to work for the Federal National Mortgage Association (Fannie Mae) and quickly became its $5 million-a-year chairman. His compensation rose to a reported $21 million by his final year, 1998.... When he left his job at Fannie Mae, which long has had a reputation as a cushy landing spot for the political class in Washington, he was serenaded by 16 members of the Benson High band, which had been flown to D.C. at Fannie Mae's expense. He also received a number of perks, including a $600,000 annual consulting fee…. It should be noted that Johnson got out of Fannie Mae while the getting was good. Since his leaving, the massive, quasi-public home mortgage organization has been buffeted by negative headlines. Accounting scandals, dating back to Johnson's era, have been followed by recent news that Fannie Mae has lost more than $3 billion in the housing slump.” (http://www.minnpost.com/stories/2008/06/03/2078/obama_turns_... A news release, dated 12/18/2006, stated that OFHEO had filed a Notice of Charges against former Chairman and CEO Franklin Raines, Vice Chairman and Chief Financial Office Tim Howard and former Senior Vice President and Controller Leanne G. Spencer, which was ultimately settled. In that Notice, Office of Federal Enterprise Housing Oversight (OFHEO) Director James B. Lockhart stated, The 101 charges reveal how the individuals improperly manipulated earnings to maximize their bonuses, while knowingly neglecting accounting systems and internal controls, misapplying over 20 accounting principles and misleading the regulator and the public. The Notice explains how they submitted six years of misleading and inaccurate accounting statements and inaccurate capital reports that enabled them to grow Fannie Mae in an unsafe and unsound manner.The conduct cost the Enterprise and shareholders many billions of dollars and damaged the public trust. http://www.ofheo.gov/media/pdf/RainesNOC121806.pdf Let’s examine the relationships that two of those mentioned have with Obama: “Franklin Raines, Chairman and CEO of the Federal National Mortgage Association (Fannie Mae) from 1999-2004, is the individual most responsible for the subprime mortgage crisis. It was on Mr. Raines' watch that Fannie Mae went bankrupt. He was accused of manipulating earnings statements so he could be paid bonuses to which he was not entitled. He received a golden parachute valued at $240M, court ordered him to return $50M, leaving $190M, at least $20M of that sum was now worthless stock. Of Raines' $91 million in compensation between 1998 and 2003, more than $84 million was tied to earnings per share targets and faulty accounting, OFHEO said in 2006.: (http://www.reuters.com/article/ousiv/idUSN1835681920080419?p... Tim Howard was the Vice Chairman and Chief Financial Officer of Fannie Mae. Howard "was a strong internal proponent of using accounting strategies that would ensure a "stable pattern of earnings" at Fannie. In everyday English - he was cooking the books. The Government Investigation determined that, "Chief Financial Officer, Tim Howard, failed to provide adequate oversight to key control and reporting functions within Fannie Mae," On June 16, 2006, Rep. Richard Baker, R-La., asked the Justice Department to investigate his allegations that two former Fannie Mae executives lied to Congress in October 2004 when they denied manipulating the mortgage-finance giant's income statement to achieve management pay bonuses. Investigations by federal regulators and the company's board of directors since concluded that management did manipulate 1998 earnings to trigger bonuses. Raines and Howard resigned under pressure in late 2004. Howard's Golden Parachute was estimated at $20 Million, of which he had to return $5.4 million. (http://www.reuters.com/article/ousiv/idUSN1835681920080419). Mr. Johnson and Mr. Raines aren't the only figures in the subprime mortgage scandal to be connected to the Obama campaign. Jamie Gorelick, rumored to be an attorney general candidate in an Obama administration, was vice chairman of Fannie Mae from 1997 to 2003 [and was the former Deputy Attorney General in the Clinton administration]. Penny Pritzker, Mr. Obama's national finance chairman, has been described as "the Michael Milken of the subprime mortgage crisis" for her pioneering of the packaging of bad loans with good ones at her now defunct Superior Bank in suburban Chicago.” (http://www.realclearpolitics.com/articles/2008/09/how_close_... Penny Pritzker, a billionaire (Hyatt hotel chain and the Marmon Group industrial conglomerate. (Forbes Lists 2005), engaged in predatory lending “after the Pritzkers' bank acquired its wholesale mortgage organization division, Alliance Funding, in December 1992.” (http://gdaeman.blogspot.com/2008/02/who-is-penny-pritzker-an... http://www.thenation.com/bletters/20080211/fraser). According to the Encyclopedia Judaica, the Obama campaign's national finance chair, Pritzker "served as chairman of the Superior Bank from 1989 to 1994, but the savings and loan institution collapsed" in July 2001. Created at the end of 1988 as the successor bank to the failed Lyons Savings Bank, the Oakbrook Terrace/Hinsdale, Illinois-based Superior Bank was 50 percent owned by Chicago's billionaire Pritzker family. Yet according to an October 16, 2001, statement before the US Senate Committee on Banking, Housing and Urban Affairs by Ely & Company Inc. President Bert Ely, the Pritzker family's Superior Bank "started life with enormous tax benefits and a substantial amount of FSLIC-guaranteed assets under a FSLIC Assistance agreement." In a December 2002 Chicago magazine article, "Tremors In The Empire," Shane Tritsch noted, for instance, that for investing $42.5 million in the failed Lyons Savings Bank before it was reopened as Superior Bank, the Pritzkers and their business partner received an estimated $645 million in federal tax credits and loan guarantees; and "by one estimate, it would have cost the government $200 million less simply to shut Lyons down." But according to Ely's October 16, 2001, statement, "Superior's trick, or business plan" under Penny Prtizker's chairmanship was apparently "to concentrate on subprimelending, principally on home mortgages, but for a while in subprime auto lending, too," after the Pritzkers' bank acquired its wholesale mortgage organization division, Alliance Funding, in December 1992. With a business loss estimate of between $350 million and $1 billion, the 2001 failure of the Pritzkers' Superior Bank represented the largest US-insured deposition institution to fall between 1992 and 2001. But according to a February 7, 2002, report by FDIC Inspector General Gaston Gianni Jr., "the failure of Superior Bank was directly attributable to the Bank's Board of Directors and executives ignoring sound risk management principles." (http://www.thenation.com/bletters/20080211/fraser) And then there’s ACORN. Obama's direct involvement with ACORN, who intimidated banks into providing loans to those with bad credit, included serving on the board of the Woods Fund which provided money for ACORN's activities. Obama also trained "activists" on behalf of Madeline Talbot, who spearheaded the drive to pressure banks into providing high risk loans. A rundown: • Madeline Talbot, leader at Chicago ACORN, enlists Obama (between college & law school) to train her staff. • ACORN requests Obama as legal representation in “motor voter” case. • Obama (post law school) in partnership with ACORN organizes “Project Vote.” • Obama enlists ACORN volunteers for State Senate, (failed) Congress, US Senate campaigns. • Obama hires Daley-team to run State Senate election, kicks other 4 contenders (including incumbent) off the ballot, and wins by running unopposed (How did Obama’s legal team invalidate thousands of signatures? See article & video for more). • Obama directs millions in grants to ACORN (http://www.dingonation.com/politics/race-redistribution-and-... “Senator John McCain's campaign manager [Rick Davis] was paid more than $30,000 a month for five years as president of an advocacy group set up by the mortgage giants Fannie Mae and Freddie Mac to defend them against stricter regulations, current and former officials say. … several current and former executives of the companies came forward to discuss the role that Rick Davis, Mr. McCain’s campaign manager and longtime adviser, played in helping Fannie Mae and Freddie Mac beat back regulatory challenges when he served as president of their advocacy group, the Homeownership Alliance, formed in the summer of 2000.” (http://www.nytimes.com/2008/09/22/us/politics/22mccain.html?... As long as times were good, nobody complained too hard because you "don't fix what ain't broke." (Will Rogers) The markets were great, the bubble hadn't burst yet. But, then the bubble burst. This is not the first time de-regulated markets have posed a problem. The Glass-Steagall Act of 1933 was passed to protect homeowners. “Bad Government Policies Economist Robert Kuttner has criticized the repeal of the Glass-Steagall Act as contributing to the subprime meltdown. A taxpayer-funded government bailout related to mortgages during the Savings and Loan crisis may have created a moral hazard and acted as encouragement to lenders to make similar higher risk loans.” (Wiki -- http://en.wikipedia.org/wiki/Subprime_mortgage_crisis) Banking deregulation started in earnest during the Carter admin in 1978. Interest rate ceilings on deposits were phased out in the early 1980s, during Reagan's watch. Next came the Commodities Futures Modernization Act of 2000, HR.5660, also passed by a Republican Congress and signed by Clinton. “Additionally, there is debate among economists regarding the effect of the Community Reinvestment Act, with detractors claiming it encourages lending to uncreditworthy consumers and defenders claiming a thirty year history of lending without increased risk. Amendments to the CRA in the mid-1990s, dramatically raised the amount of home loans to otherwise unqualified low-income borrowers and also allowed for the first time the securitization of CRA-regulated loans containing subprime mortgages. Some have argued that, despite attempts by various U.S. states to prevent the growth of a secondary market in repackaged predatory loans, the Treasury Department's Office of the Comptroller of the Currency, at the insistence of national banks, struck down such attempts as violations of Federal banking laws. The U.S. Department of Housing and Urban Development's mortgage policies fueled the trend towards issuing risky loans. Like the second link says, HUD and the Community Reinvestment Act are major culprits. After their accounting scandals in 2003 and 2004, Fannie Mae and Freddie Mac committed to increased financing of "affordable housing." They became the largest buyers of subprime and Alt-A mortgages between 2004 and 2007, with total GSE exposure eventually exceeding $1 trillion. They greatly grew the subprime mortgage market, leading to a housing bubble and its subsequent collapse. Among banks and the regulatory agencies, there was a consensus that data collection, recordkeeping, and reporting requirements imposed a heavy burden on small community institutions. As a result of a 2002 review of the CRA regulations, and revision of an initial Federal Deposit Insurance Corporation (FDIC) proposal following a public commenting period that was largely negative, the FDIC, Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board (FRB), made substantive changes to the implementation of regulations for the CRA for banks (not thrifts). Previously, all institutions over $250 million in assets were subject to a three-part CRA test that covered lending (including community development loans), qualified investments, and services (including community development services) to their assessment areas. Institutions less than $250 million were subject only to a lending test. However, as of September 1, 2005, only those institutions with more than $1 billion in assets were subject to the three-part test. Institutions below $250 million remain subject to only a lending test, and a new CRA test was created for institutions with assets between $250 million and $1 billion. This latter category, referred to as Intermediate Small Banks, is subject to the same lending test to which institutions under $250 million were subject, along with a new combined community development test that covers community development loans, qualified investments, and community development services. The $250 million and $1 billion asset thresholds also were indexed to the consumer price index and could change annually. Thus, all institutions remain subject to the CRA test. These substantive changes were intended to be a compromise between changes advocated by banks and community groups. However, the changes were not received positively by all community groups. Changes to tests conducted on the Intermediate Small category were viewed by some as decreasing the institutions' obligations to meet lending requirements of low- and moderate-income households. Racial inequities in mortgage acceptance rates (as reported by Inner City Press, the National Community Reinvestment Coalition, ACORN and other groups) are cited as a primary reason to maintain or even increase the scope of the CRA.” (Wiki -- http://en.wikipedia.org/wiki/Community_Reinvestment_Act) The Gramm-Leach-Bliley Act, passed in1999, and the Commodities Futures Modernization Act, passed in 2000 "broke down the firewalls between Wall Street and commercial banks and banned regulation of credit default swaps, an insurance-like product bought by financial services companies to cover their risky subprime mortgage investments." (http://www.politico.com/news/stories/0908/13683.html) “The Gramm-Leach-Bliley Act, also known as the Gramm-Leach-Bliley Financial Services Modernization Act, Pub.L. 106-102, 113 Stat. 1338, enacted 1999-11-12, is an Act of the United States Congress which repealed part of the Glass-Steagall Act, opening up competition among banks, securities companies and insurance companies. The Glass-Steagall Act prohibited a bank from offering investment, commercial banking, and insurance services.” (Wiki -- http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act) American International Group, rescued by the Federal Reserve on Tuesday [September 16, 2008] is one of the biggest sellers of these swaps." Barney Frank commented to reporters that he had been sitting on a bill (S.190, then S.1100 refiled), tabling it until after the presidential election. Clinton had tried to get legislation through during his administration that modified some of this. Even Bush tried to do the same. McCain even raised the cry. Relaxation of geographical restrictions on bank expansion proceeded historically, and this resulted in the history of state-level regulation being completely abandoned. Over a period of 20 years, Glass-Steagall was pecked at and undermined and weakened. It was finally killed altogether in 1999 with the Graham-Leach-Bliley Financial Services Modernization Act of 1999, signed by Clinton, but passed by a Republican-dominated Congress. Triggering the financial implosion on Wall Street were the problems at Fannie Mae and Freddie Mac, which had its legislative roots in the Congressional Black Caucus. The concept for these institutions was a good one -- to break down the barriers of institutionalized racism in the financial market. But the implementation and de-regulation made for a situation is which widespread fraud and abuse and far-too-relaxed lending practices created an unstable situation. These firms were not properly leveraged, and their impending collapse should have been easy to predict. These firms, fostered lax lending practices and covered up their own financial deficiencies. And these two institutions have their tentacles in the 2008 presidential campaign in the forms of Jim Johnson, Franklin Raines and Rick Davis. Although I am not a fan of GWB, it is only fair to say that, going back to the beginning of his administration, President Bush warned of the problems at these institutions and the consequences if Congress did not bring them under control. Seventeen times, Bush publicly called for reform of both institutions. But Democrats and Republicans in Congress ignored the warnings and denied there were any problems. What follows is an administration chronology of efforts to achieve reform: At the beginning of 2005, a bill was introduced by Chuck Hagel to deal with the need for regulating Fannie and Freddie, among other investment banks. John McCain was a cosponsor: (http://uppitywoman08.wordpress.com/2008/09/21/john-mccains-f... And Barney Frank (http://www.house.gov/apps/list/press/financialsvcs_dem/press... and Chuck Dodd had a bill in the last Congress that was filed as S.190 and refiled as S.1100 that they have been sitting on until after the presidential election was over, only the economy wouldn't wait As with most idealistic theories, Adam Smith and his concept of a free market works very well in a laboratory setting, where all the factors are carefully controlled, much like any utopian philosophy. But in real life, with real people who have real greed and real problems with ethical behavior, it simply does not work. It works no better than its polar extreme socialism, which does not motivate people to work and to strive for excellence. That's why we need regulation of the markets. Because markets deal with real people and real temptation and real greed must be controlled. The next problem that is happening today is both a symptom of deregulation and a cause of the resulting debacle, and that is lack of transparency. It is a particularly strong trait of this administration. And this administration has set the tone for the entire country, especially the business world. Lack of transparency makes it impossible for real oversight or regulation to occur. People who hide things usually have something to hide. We have found this to be true of this administration, and now we see the same trait is both a cause and a symptom of this deregulated market and its result: the biggest market failure requiring the biggest bailout in history. The same applies to our other regulatory agencies which have been decimated during the Bush administration. We need environmental, labor and consumer protection regulation both at home and as it applies to our imports and trade agreements. We know from our own experience as children that rules work. Rules that are reasonable and that are fairly and consistently enforced make society work for everyone. It also applies to markets and to business. So, how do we fix it? The administration is pressuring Congress to move quickly. But I hope Congress realizes that there is a difference between moving quickly (and knowing what you're doing) and moving irresponsibly and imprudently. Rash behavior will only complicate the existing mess and create an even bigger mess. When you are reacting, you are not in control. We must get control of these markets, and that requires thoughtful, deliberate action that requires controls and oversight tools to be included in the pending legislation, which, in its current form, is a prescription for a larger disaster, but it basically writes a blank check to U.S. Treasury Secretary Hank Paulson, who helped oversee the making of this mess in the first place, and makes him an unregulated and uncontrolled God of the market economy. Paulson was Chairman and CEO of Goldman-Sachs since the firm’s initial public offering in 1999, and this tends to further erode my confidence in his ability to objectively select firms to bail out. All this leads me to believe that this legislation in its current for is a prescription for disaster. There are also some punitive actions that must be included, not the least of which is that the golden parachutes of the executives who got their company in this mess should not be permitted. And, most of all, there must be provisions within this deal that protects the American taxpayers in such a way that the funds they are lending these institutions are recoverable, at least in part. Otherwise, we will be encouraging the same behavior to happen again. If Uncle Sam bails you out every time you screw up, then why should you change your behavior? One of the most disturbing aspects of this bailout legislation in its first incarnation is that it provides for American taxpayers to bail out foreign firms that had business transactions in the United States. Since we are in a global economy, shouldn't the entire globe -- any nation that was involved with these transactions -- be participating in the pain? After all, it is their firms who did not observe good lending practices when buying these instruments. Why should the American taxpayers be held holding the bag for any of it? There must be some real controls and deliberation on bailing out a foreign-owned institution. What do we do if we can't recover our investment in bad paper? Invade the country where the firms originates? There is much about this bailout that gives me pause. The American taxpayers will be experiencing significant pain in this deal. They are taking on, with the recent deals already done, over $1.3T in bad debt that may not be recoverable. Remember, all the wonderful plans for healthcare, education and many other factors have been flushed down the toilet once this deal is signed. There will be no money for any of those programs. And if we are willing to take over the banking industry, we must also take measures to control the rising costs of commodities that has already occurred and will continue to occur with investors moving their money to this market. Just today oil went up $25/barrel. And rising food prices are already increasing starvation in third-world countries. The American taxpayer must have some protection with temporary price controls. Otherwise, other markets will start to fail as rising costs put small businesses out of business. The Commodity Futures Modernization Act of 2000 or CFMA (H.R. 5660 and S.3283) repealed the Shad-Johnson jurisdictional accord, which had banned single stock futures in 1982. The legislation also provided certainty that products offered by banking institutions would not be regulated as futures contracts. This act was incorporated by reference into HR.4577 (see below). The legislation thus became law as a part of HR.4577 - Public Law 106–554, §1(a)(5) signed by Bill Clinton December 21, 2000…. The Commodity Futures Modernization Act of 2000 has received criticism for the so-called "Enron Loophole," 7 U.S.C. §2(h)(3) and (g), which exempts most over-the-counter energy trades and trading on electronic energy commodity markets. The "loophole" was drafted by Enron Lobbyists working with Senator Phil Gramm [one of McCain’s financial advisors] seeking a deregulated atmosphere for their new experiment, "Enron On-line." Several Democratic Legislators introduced legislation to close the loophole from 2000-2006, but were unsuccessful. In September 2007, Senator Carl Levin (D-MI) introduced Senate Bill S.2058 to specifically close the "Enron Loophole." This bill was later attached to H.R.6124, the Food, Conservation, and Energy Act of 2008, aka "The 2008 Farm Bill". President Bush vetoed the bill, but was overridden by both the House and Senate, and on June 18th, 2008, the bill was enacted into law. One specific reason behind its introduction was to address the record high oil prices of the 2000s energy crisis. Since it was enacted, average gas prices of regular unleaded gasoline in the U.S. have dropped $0.357, from their record high of $4.114 on 7/17/2008 to an average of $3.757 as of 09/21/2008. The prohibition on single-stock futures and narrow-based indices that had been in effect until the passage of this act was known as the Shad-Johnson Accord because it was first announced in 1982, as part of a jurisdictional pact between John S.R. Shad, then chairman of the U.S. Securities and Exchange Commission and Phil Johnson, then chairman of the Commodity Futures Trading Commission. The act specifically banned regulation of credit default swaps. These unregulated instruments, insurance policies against default on risky investments like mortgage backed securities, necessitated the government bailout of insurer A.I.G. (Wiki -- http://en.wikipedia.org/wiki/Commodity_Futures_Modernization_... Next, if we protect the investors in these institutions, we must also take measures to protect the American taxpayers and the good homeowners who are struggling to pay their mortgages. I suggest that all homeowners be allowed to adjust their loans to current market value and refinance with fixed rate loans based on that value since the market has devalued their property so greatly. This strategy worked well during the Great Depression recovery. In fact, most banks following this practice made money. Keep these good homeowners who are paying their mortgages in their homes. This crisis could have been averted by practicing reasonable regulation and oversight. The market, big business and our government failed us on every level. “Ours is a system of corporate socialism, where companies capitalize their profits and socialize their losses...in effect, they tax you for their accidents, bungling, boondoggles, and mismanagement, just like a government. We should be able to dis-elect them.” -- Ralph Nader But we must also include our own culpability in this problem. Many people became speculators during the housing bubble. They were speculating on the fact that the market would be good and the value of the investment homes would increase so they could sell them at a profit. And then there were the folks living well above their means who entered into interest-only payments with a big balloon at the end of three- or five-year period, etc., living at the edge of their income and banking on their ability to sell their home for the balloon price or better, then doing it all over again with a new house. The market failed, the value of the house dropped, and they had no savings to cover the balloon, so they lost their home and ruined their credit. And one final note: The administration's view is that they are bailing out the "market," not just a few key firms. But the greatest beneficiaries ARE the few key firms. Granted, anyone who has investments, whether it be stock, money market accounts, 401Ks or other retirement or savings vehicles, and anyone who needs credit (especially businesses) will be impacted by this failure. But there must be some real controls and an objective bipartisan deliberative body who decides on what actions should be taken and with which firm. So, here we are again. Will we learn from history this time? Will Congress have the balls to face this crisis without giving into the panic-atmosphere that the administration has created to push this bill through without the necessary controls and oversight? We shall see. But, whatever, the outcome, we know the American taxpayers will get stuck with the bill. And, although life is not fair, this is particularly unfair, because it has to do with unbridled greed and mismanagement of private industry due to our elected officials rolling over and playing dead when deregulating the markets and then failing to perform their oversight duties. There is a record of legislation going back to the Clinton administration that addressed this problem, but could not get passed. The largest contributors in all the campaigns came from these same failed firms. If that does not wake us up to the need to get money and corporations out of our political campaigns, I don't know what will. It's our fault, too, because we did not demand better from our government. And then there were the honest folks who dealt with fraudulent real estate brokers, mortgage brokers, etc., that were encouraged to enter into mortgages with variable interest rates or graduated interest rates and hidden costs that caused them to be unable to pay their mortgage. These real estate brokers and mortgage brokers that falsely represented to their clients their ability to afford these homes, and fraudulently submitted false information about the client's income or down payment or the value of the home in an effort to put the deal through. Then they turned around and sold this bad paper to other investment firms. These conspirators must be brought to justice. “Capitalism will always survive in the United States as long as the government is willing to use socialism to bail it out.” -- Ralph Nader Bibliography http://en.wikipedia.org/wiki/Subprime_mortgage_crisis http://en.wikipedia.org/wiki/Glass-Steagall_Act http://en.wikipedia.org/wiki/Community_Reinvestment_Act http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act http://www.house.gov/apps/list/press/financialsvcs_dem/press0... http://en.wikipedia.org/wiki/Commodity_Futures_Modernization_... http://www.politico.com/news/stories/0908/13683.html http://www.newsmax.com/kessler/gse_financial_timeline/2008/09... http://uppitywoman08.wordpress.com/2008/09/21/john-mccains-fa... http://www.ofheo.gov/about.aspx?Nav=73 http://www.cbsnews.com/stories/2008/09/24/politics/washington... http://falkenblog.blogspot.com/2008/06/fannie-mae-ex-ceo-oust... http://news.aol.com/political-machine/2008/09/20/ex-fannie-ce... http://www.nysun.com/blogs/latest-politics/2008/09/fannie-mae... http://seattletimes.nwsource.com/html/businesstechnology/2003... http://phoenix.bizjournals.com/phoenix/stories/2008/09/15/dai... http://www.cftc.gov/files/ogc/ogchr5660.pdf http://www.allbusiness.com/finance-insurance/credit-intermedi... http://www.fdic.gov/bank/analytical/banking/2004nov/article1/ http://www.ecs-limited.com/download/Challenges%20facing%20Ban... http://fic.wharton.upenn.edu/fic/papers/02/0239.pdf

They [Congress] were warned!

2008-09-20T21:17:42Z

Laura Schneider

+4 raves

My "informant" on another blog, hapi22, who writes very well-informed pieces, e-mailed this to the group today: No one in the U.S. Senate can say he or she wasn't warned about the coming Fannie Mae and Freddie Mac meltdown. On May 25, 2006, Sen. John McCain stood up in the Senate and made the following statement. -------------------- "Mr. President, this week Fannie Mae's regulator reported that the company's quarterly reports of profit growth over the past few years were "illusions deliberately and systematically created" by the company's senior management, which resulted in a $10.6 billion accounting scandal. The Office of Federal Housing Enterprise Oversight's report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae's former Chief Executive Officer, OFHEO's report shows that over half of Mr. Raines' compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac. The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator's examination of the company's accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform. For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac -- known as Government-sponsored entities or GSEs -- and the sheer magnitude of these companies and the role they play in the housing market. OFHEO's report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO's report solidifies my view that the GSEs need to be reformed without delay. I join as a co-sponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S.190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole." http://www.govtrack.us/congress/record.xpd?id=109-s20060525-1... -------------------- McCain had joined with Senators Charles Hagel (Sponsor), Elizabeth Dole, and John Sununu (Cosponsors) to enact the Federal Housing Enterprise Regulatory Reform Act of 2005 (S. 190), The bill (S.190) stalled in the Senate Banking, Housing, and Urban Affairs Committee and expired at the end of the 109th Congress. On Apr 12, 2007, S.190 was re-introduced in the Senate (with a new bill number) as S.1100: Federal Housing Enterprise Regulatory Reform Act of 2007. It, too , is stalled in the Senate Banking, Housing, and Urban Affairs Committee, chaired by Chris Dodd (recipient of the MOST money from Fannie Mae and Freddie Mac. Obama comes in Number Two as having rec'd the most money from Fannie Mae and Freddie Mac.) http://savagepolitics.com/?p=1884 Is it ANY wonder that this bill (S.1100) regulating mortgage market enterprises is STALLED in the Banking, Housing, and Urban Affairs Committee? Ha. Geez, what a surprise. Not. -------------------- Sources: S.190: Federal Housing Enterprise Regulatory Reform Act of 2005, at: http://www.govtrack.us/congress/bill.xpd?bill=s109-190 Here is the "Congressional Research Service Summary" of S.190: http://www.govtrack.us/congress/bill.xpd?bill=s109-190&tab;=s... And here's the full text of S.190: http://www.govtrack.us/congress/billtext.xpd?bill=s109-190 McCain's senate statement re: S.190: http://www.govtrack.us/congress/record.xpd?id=109-s20060525-1... ~ ~ ~ S.1100: Federal Housing Enterprise Regulatory Reform Act of 2007, at: http://www.govtrack.us/congress/bill.xpd?bill=s110-1100 Summary of S. 1100 at: http://www.govtrack.us/congress/bill.xpd?bill=s110-1100&tab;=... Full text of S.1100 at: http://www.govtrack.us/congress/billtext.xpd?bill=s110-1100

It's the economy, stupid: So, what now?

2008-09-20T18:16:35Z

Laura Schneider

+2 raves

QUOTE OF THE DAY It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong. -- Warren Buffett WORDS OF THE DAY Stock market crash A stock market crash is a sudden dramatic decline of stock prices across a significant cross-section of a stock market. Crashes are driven by panic as much as by underlying economic factors. They often follow speculative stock market bubbles. Stock market crashes are social phenomena where external economic events combine with crowd behaviour and psychology in a positive feedback loop where selling by some market participants drives more market participants to sell. Generally speaking, crashes usually occur under the following conditions[citation needed]: a prolonged period of rising stock prices and excessive economic optimism, a market where Price to Earnings ratios exceed long-term averages, and extensive use of margin debt and leverage by market participants. There is no numerically-specific definition of a crash but the term commonly applies to steep double-digit percentage losses in a stock market index over a period of several days. Crashes are often distinguished from bear markets by panic selling and abrupt, dramatic price declines. Bear markets are periods of declining stock market prices that are measured in months or years. While crashes are often associated with bear markets, they do not necessarily go hand in hand. The crash of 1987 for example did not lead to a bear market. Likewise, the Japanese Nikkei bear market of the 1990s occurred over several years without any notable crashes. Wall Street Crash of 1929 The most famous crash, the Wall Street Crash of 1929, happened on October 29, 1929. The economy had been growing robustly for most of the so-called Roaring Twenties. It was a technological golden age as innovations such as radio, automobiles, aviation, telephone and the power grid were deployed and adopted. Companies who had pioneered these advances like Radio Corporation of America (RCA), and General Motors saw their stocks soar. Financial corporations also did well as Wall Street bankers floated mutual fund companies (then known as investment trusts) like the Goldman Sachs Trading Corporation. Investors were infatuated with the returns available in the stock market especially with the use of leverage through margin debt. On August 24, 1921, the Dow Jones Industrial Average stood at a value of 63.9. By September 3, 1929, it had risen more than sixfold, touching 381.2. It would not regain this level for another twenty five years. By the summer of 1929, it was clear that the economy was contracting and the stock market went through a series of unsettling price declines. These declines fed investor anxiety and events soon came to a head. October 24 (known as Black Thursday) was the first in a number of increasingly shocking market drops. This was followed swiftly by Black Monday on October 28 and Black Tuesday on October 29. On Black Tuesday, the Dow Jones Industrial Average fell 38 points to 260, a drop of 12.8%. The deluge of selling overwhelmed the ticker tape system that normally gave investors the current prices of their shares. Telephone lines and telegraphs were clogged and were unable to cope. This information vacuum only led to more fear and panic. The technology of the New Era, much celebrated by investors previously, now served to deepen their suffering. Black Tuesday was a day of chaos. Forced to liquidate their stocks because of margin calls, overextended investors flooded the exchange with sell orders. The glamour stocks of the age saw their values plummet. Across the two days, the Dow Jones Industrial Average fell 23%. By the end of the week of November 11, the index stood at 228, a cumulative drop of 40 percent from the September high. The markets rallied in succeeding months but it would be a false recovery that led unsuspecting investors into the worst economic crisis of modern times. Although it is popularly believed that the Crash inflicted heavy financial loss on investors during this period, the Great Depression which followed was far more terrible. While the Crash dealt a severe blow to many a stockholder's portfolio, the Great Depression brought obliteration and bankruptcy. The Dow Jones Industrial Average would lose 89% of its value before finally bottoming out in July 1932. The Crash of 1987 (Black Monday 1987) The mid-1980s were a time of strong economic optimism. From August 1982 to its peak in August 1987, the Dow Jones Industrial Average (DJIA) grew from 776 to 2722. The rise in market indices for the 19 largest markets in the world averaged 296 percent during this period. The average number of shares traded on the NYSE had risen from 65 million shares to 181 million shares. The crash on October 19, 1987, a date that is also known as Black Monday, was the climactic culmination of a market decline that had begun five days before on October 14th. The DJIA fell 3.81 percent on October 14, followed by another 4.60 percent drop on Friday October 16th. But this was nothing compared to what lay ahead when markets opened on the subsequent Monday. On Black Monday, the Dow Jones Industrials Average plummeted 508 points, losing 22.6% of its value in one day. The S&P; 500 dropped 20.4%, falling from 282.7 to 225.06. The NASDAQ Composite lost only 11.3% not because of restraint on the part of sellers but because the NASDAQ market system failed. Deluged with sell orders, many stocks on the NYSE faced trading halts and delays. Of the 2,257 NYSE-listed stocks, there were 195 trading delays and halts during the day. The NASDAQ market fared much worse. Because of its reliance on a "market making" system that allowed market makers to withdraw from trading, liquidity in NASDAQ stocks dried up. Trading in many stocks encountered a pathological condition where the bid price for a stock exceeded the ask price. These "locked" conditions severely curtailed trading. On October 19th, trading in Microsoft shares on the NASDAQ lasted a total of 54 minutes. The Crash was the greatest single-day loss that Wall Street had ever suffered in continuous trading up to that point. Between the start of trading on October 14th to the close on October 19, the DJIA lost 760 points, a decline of over 31 percent. The 1987 Crash was a worldwide phenomenon. The FTSE 100 Index lost 10.8% on that Monday and a further 12.2% the following day. In the month of October, all major world markets declined substantially. The least affected was Austria (a fall of 11.4%) while the most affected was Hong Kong with a drop of 45.8%. Out of 23 major industrial countries, 19 had a decline greater than 20%. Despite fears of a repeat of the 1930s Depression, the market rallied immediately after the crash, posting a record one-day gain of 102.27 the very next day and 186.64 points on Thursday October 22. It took only two years for the Dow to recover completely; by September 1989, the market had regained all of the value it had lost in the 1987 crash. The Dow Jones Industrial Average gained six-tenths of a percent during the calendar year 1987. No definitive conclusions have been reached on the reasons behind the 1987 Crash. Stocks had been in a multi-year bull run and market P/E ratios in the U.S. were above the post-war average. The S&P; 500 was trading at 23 times earnings, a postwar high and well above the average of 14.5 times earnings. Herd behaviour and psychological feedback loops play a critical part in all stock market crashes but analysts have also tried to look for external triggering events. Aside from the general worries of stock market overvaluation, blame for the collapse has been apportioned to such factors as program trading, portfolio insurance and derivatives, and prior news of worsening economic indicators (i.e. a large U.S. merchandise trade deficit and a falling U.S. dollar which seemed to imply future interest rate hikes). One of the consequences of the 1987 Crash was the introduction of the circuit breaker or trading curb on the NYSE. Based upon the idea that a cooling off period would help dissipate investor panic, these mandatory market shutdowns are triggered whenever a large pre-defined market decline occurs during the trading day. Mathematical theory of stock market crashes The mathematical characterisation of stock market movements has been a subject of intense interest. The conventional assumption that stock markets behave according to a random Gaussian or normal distribution is incorrect. Large movements in prices (i.e. crashes) are much more common than would be predicted in a normal distribution. Research at the Massachusetts Institute of Technology shows that there is evidence that the frequency of stock market crashes follow an inverse cubic power law.[6] This and other studies suggest that stock market crashes are a sign of self-organized criticality in financial markets. In 1963, Benoît Mandelbrot proposed that instead of following a strict random walk, stock price variations executed a Lévy flight. A Lévy flight is a random walk which is occasionally disrupted by large movements. In 1995, Rosario Mantegna and Gene Stanley analyzed a million records of the S&P; 500 market index, calculating the returns over a five year period.[8] Their conclusion was that stock market returns are more volatile than a Gaussian distribution but less volatile than a Lévy flight. Researchers continue to study this theory, particularly using computer simulation of crowd behaviour, and the applicability of models to reproduce crash-like phenomena. (Wiki: http://en.wikipedia.org/wiki/Stock_market_crash) Stock Market Bubble A stock market bubble is a type of economic bubble taking place in stock markets when price of stocks rise and become overvalued by any measure of stock valuation. The existence of stock market bubbles is at odds with the assumptions of efficient market theory which assumes rational investor behaviour. Behavioural finance theory attribute stock market bubbles to cognitive biases that lead to groupthink and herd behaviour. Bubbles occur not only in real-world markets, with their inherent uncertainty and noise, but also in highly predictable experimental markets. In the laboratory, uncertainty is eliminated and calculating the expected returns should be a simple mathematical exercise, because participants are endowed with assets that are defined to have a finite lifespan and a known probability distribution of dividends. Other theoretical explanations of stock market bubbles have suggested that they are rational, intrinsic, and contagious. (Wiki: http://en.wikipedia.org/wiki/Stock_market_bubble) Short Selling or Selling Short The selling of a security that the seller does not own, or any sale that is completed by the delivery of a security borrowed by the seller. Short sellers assume that they will be able to buy the stock at a lower amount than the price at which they sold short. Selling short is the opposite of going long. That is, short sellers make money if the stock goes down in price. This is an advanced trading strategy with many unique risks and pitfalls. Novice investors are advised to avoid short sales. http://www.investopedia.com/terms/s/shortselling.asp Sheep An investor who lacks a focused trading strategy and trades on emotion and the suggestions of others, including friends, family and financial gurus. This type of investor often makes rash investments without first determining whether these decisions are financially viable. The behaviour of sheep contrasts with that of bulls and bears, who have focused views about the market. Like a sheep, this type of investor is a follower, relying on a shepherd for guidance. These shepherds can come in the form of financial pundits or the latest trend or market story. Sheep-like investors are often the last to get in on a major market move, such as the tech boom of the late '90s, because they base their investments on what is being talked about the most. Many experts believe that sheep-like investors are the most likely to sustain investment losses because they have no clear investment strategy. http://www.investopedia.com/terms/s/sheep.asp -------------------- What were the factors causing the 1987 crash? "A large U.S. merchandise trade deficit and a falling U.S. dollar." What are the factors causing this stock market "correction?" (LOL! -- that's what the administration is calling it.) It doesn't take an economist to figure that out, does it? The same thing has happened here and now. We have a large trade deficit. Why? Part of the problem, IMHO, is that we no longer make tangible goods as the primary means of income, we have become an information services society. The only thing we have to trade is paper (financial products like stock, currency, etc.) and services. Globalization has moved industries that manufacture tangible goods to areas where cheap labor is available, and, given the lack of jobs and low living expenses in third-world countries, that is not us. And the real concern is that our services industry, which was going well because we used to be the leaders in technology, is also going to Asia (India, especially). This industrial and services shift to other countries also means we are no longer self-sufficient. We cannot close our borders and just take care of ourselves. We have lost the steel industry to Japan, the car industry to Asia, the IT industry to India and other parts of Asia and food production to South America. Toys and clothes now come from China. So, how do we change this trade imbalance? What can we do to stimulate our economy and provide a "saleable" product to trade with? Green Technology is the answer. We are not in front of the curve on this, either. Brazil has already converted to methanol. Japan has already developed a hydrogen fuel cell car, although it is still not cost-effective. Windmills have been around for quite a while now, and although they used to be used to grind grain into flour, etc., many countries have developed win technology. So we must get off our asses and get busy. Hydrogen fuel cells provide the best source of green energy that will be kind to our environment. Solar and wind energy can provide considerable "free" sources of energy to light and heat homes with electricity. And we have all this coal in the ground. We must figure out a way to convert coal to clean (or cleaner) energy that can be distributed more easily (liquefication). In the meantime, we have an abundance of natural gas that would provide a cleaner energy resource for fuelling vehicles. This would remedy our immediate dependence on foreign oil. There are so many reasons why we need to get this green economy going in a big way. We need a Manhattan Project-level effort, with leadership and subsidies from our government, to get us moving. The subsidies could be tax breaks rather than actual money allocated, since we really don't need to take on more debt (and that is what would happen, since we are operating on a deficit already). The other situation we need to correct our financial mess is to get serious about our national debt. We cannot continue to borrow money from the Chinese and Saudis and expect to keep living "high" as if we were "flush" with cash. Hard times are ahead, and we must face them with resolve, commitment and courage. And we must end the war in Iraq, which is draining us of our resources and creating more debt. The Iraqis have over $70B in assets now. Why can't they rebuild their own country? Why do we have to pay for it? I realize that we caused much of the destruction, but it seems unreasonable given our economic situation that we should be totally responsible for all the reconstruction. Whatever package the Congress finally comes up with, it must not be a bailout to private industry that allows for CEOs who mismanaged their companies into this mess to leave with "golden parachutes" (severance or retirement packages worth millions of dollars). And I would even suggest that all those BIOLLIONS of dollars of bonuses given out last year to investment managers should be recovered, at least in part. The taxpayers did not create this mess, and it is unreasonable to make us have to bail private industries out because of mismanagement, fraud and abuse. These executives and managers should be held accountable for their actions financially, as well as via criminal prosecution..