Saturday, November 28, 2009

GOP Needs Six Weeks To Debate Health Care Bill That All Republicans Will Oppose

Original Link:

By Sam Stein

Senate Minority Leader Mitch McConnell (R-KY) argued last Sunday that Republicans deserve at least six additional weeks to consider health care reform before letting the bill come to a vote. But on Friday, his top lieutenant said the entire GOP has already made up its mind on the legislation.

Appearing on Fox News Friday morning, Sen. Jon Kyl (R-Ariz.) insisted that "every single Republican will oppose" even debating health care reform because "they know it will only get worse."

"None of the things that they like about the bill will get better; and the things they object to would take 60 votes to change, and they know they're not going to get 60 votes to amend the bill to their liking," said Kyl, the minority whip in the Senate.

The opposition isn't unexpected. For some time it's been clear that Democrats would be getting either one (Sen. Olympia Snowe of Maine) or no Republican Senate votes on health care legislation. But Kyl's prophecy of across-the-board opposition does seem to undercut that other GOP tactic. Why do Senate Republicans need six weeks to debate and consider the legislation if they're already determined to vote against it?

"We know it's been in Harry Reid's office for six weeks and the other 99 senators haven't seen it," McConnell told "Fox News Sunday" last week. "I think we ought to at least have as much time for the other 99 senators and all of the American people to take a look at this bill as Majority Leader Reid has had."

And why, for that matter, are Senate Republicans complaining about a limited three-day window to read the legislation if they have already come to a final verdict on its contents?

"We're now going to have about 72 hours to figure this out," said Sen. Judd Gregg (R-NH), during a speech on the Senate floor on Friday. "But I know this much -- when a bill costs $2 billion a page and when it includes language like that, it's something that we should spend some time on. And this bill's being rushed, and it shouldn't be rushed."

GOPers Decrying "Socialized Medicine" Go To Govt. Hospital For Surgeries

Original Link:

By Sam Stein

Republicans in Congress have raised the specter of a bloated, "socialized," bureaucrat-run nightmare of a health care system as a means of undermining the White House's effort at a systematic overhaul. And yet, as Democratic sources are now pointing out, when medical crisis hit close to home, many of these same officials turned to a government-run hospital for their own intensive care and difficult surgeries.

Take, for instance, Senate Minority Leader Mitch McConnell (R-Ky.), who warned that "a government takeover of health care" would "take away the care that people already have [and] are perfectly satisfied with." In its place, the senator said, would be "a system in which care and treatment will be either delayed or denied."

That was July 2009. In February 2003, McConnell actually went to one of those government-run institutions (where treatment is, apparently, "either delayed or denied") for a procedure of his own. The Kentucky Republican traveled to the National Naval Medical Center in Bethesda, Maryland, to have an elective coronary artery bypass surgery after it had been revealed that he had arterial blockages.

Also known as Bethesda Naval Hospital, the National Naval Medical Center is the premier branch of the United States Navy's system of medical centers -- as in, the government runs it. It's also the place where elected officials of all ideological stripes and political branches often go get surgery performed. Indeed, members of Congress pay an annual fee for the privilege of getting treatment at Bethesda Naval Hospital or, for that matter, Walter Reed Army Medical Center. It is, as longtime Democrat Martin Frost wrote for Politico, "like belonging to an HMO." Only, in these cases, the surgery is conducted at a public facility.

None of this has stopped some of the same officials who have taken advantage of this congressional perk from railing against the intrusiveness and inefficiencies of a health care system with greater government involvement.

Senator John McCain, (R-Ariz.) for instance, recently applauded the town hall protesters who were, in his words, revolting "against a government-run health system." That was August 2009. In May of 2000, McCain had surgery at the Bethesda Naval Hospital to remove a potentially lethal melanoma from his left temple.

Senator Kit Bond (R-Mo.), meanwhile, has warned of the rationing of care, expensive costs, and reduced quality that would come under a government-run health care plan. In April 2003, however, he traveled to Bethesda Naval Hospital to undergo hip replacement surgery in an attempt to alleviate degenerative arthritis in his left hip.

Senator George Voinovich, (R-Ohio), has declared that a "bureaucratic Washington-run government plan is not the answer" to the nation's health care needs. In June 2003, the Ohio Republican (who is retiring from the Senate in 2010) went to Bethesda Naval Hospital to have a pacemaker installed.

The best example of this double standard, however, may be Rep. Roy Blunt, (R-Mo.) who compared government-run health care to an elephant, stomping on and killing off the mice of the private insurance industry.

Blunt has had two procedures done at Bethesda Naval Hospital. The first came in July 2002, when he underwent surgery to remove his left kidney. The second came a year later, when he underwent prostate surgery after being diagnosed with early-stage prostate cancer.

To be strictly accurate, there is an important distinction between a government-run hospital and a government-run health insurance agency. The public plan, which is the focus of much of the GOP's ire, is the latter. Bethesda Naval Hospital is the former.

But conservatives have long used the notion of "socialized medicine" to defeat health care reform efforts -- even though when it comes to the flagship Naval Hospital just miles away, the worries about bureaucratic nightmares, low quality care, and long lines seem to be wiped away.

Friday, November 27, 2009

Murdoch Is Big Muscle Behind Fraudulent Astro Turfers

Origina Link:

By Adele M. Stan

Burrowing inside the radical right's gathering of astroturfers and mouthpieces, AlterNet Reporter Adele Stan discovers what makes the anti-health reform machine tick.

As nearly 2,000 progressives made their way last weekend to Pittsburgh for the annual Netroots Nation conference, the right made its stand in the same town with a conference called RightOnline, sponsored by Americans for Prosperity, a group that has gained notoriety for its involvement in organizing seemingly grassroots opposition to health-care reform.

Billed as a counterconference to the Netroots Nation gathering of bloggers and online activists, RightOnline convened at a Sheraton hotel, offering a few 101-level workshops on new technologies like Twitter and YouTube.

But the highlight of the conference was a red-meat program of speakers designed for a crowd of older activists who were hungry to hear myriad myths about the myriad forms of oppression in store for them if they don't stop the purportedly nefarious agenda of President Barack Obama.

"Great news to report," AFP policy director and FoxForum contributor Phil Kerpen told the crowd. "Our numbers are up; Netroots Nation's numbers are down; we are catching up to them online."

AFP claimed to draw 600 participants to RightOnline; Netroots actually drew about the same number of registrants as last year, according to conference organizer Raven Brooks -- about 1,900.

Americans for Prosperity is by far the slickest of the astroturf groups organizing disgruntled right-wingers of the "regular folks" variety into shouting mobs at town-hall meetings focused on health-care reform.

Sponsored in the past, according to SourceWatch, by the oil interests of Koch Industries, and a foundation headed by notorious right-wing financier Richard Mellon Scaife, AFP is wedding public fear about health-care reform -- fear it has done its best to stoke -- to a larger agenda embraced by ground-level activists that includes opposition to the cap-and-trade climate bill and Internet neutrality.

Indeed, AFP's exploitation of fears about health-care reform appear to be merely a means to a larger end.

Think these guys are appeased by the administration's talk of dumping the public health insurance option from the health-care reform bills currently working their way through Congress?

Phil Kerpen all but said he'd rather the plan be kept in the bill, the better to organize against.

"I'm scared that they're gonna take the public option out of this bill," Kerpen told the crowd, "and we're gonna be caught a little off-guard if we're not ready. Because, frankly, without the public option, it's not socialism anymore, but it's pretty close to fascism. It's a corporatist kind of thing. … So don't just focus on the public option. We have to kill this whole plan."

Not Your Father's Astroturf

Americans for Prosperity is, perhaps, the brightest and shiniest of the astroturf organizations responsible for the misinformed, disruptive and sometimes dangerous citizens who continue to turn up at town hall meetings conducted by members of Congress over the August recess. All count themselves as members of the Tea Party movement of anti-tax activists.

His activists tour the country in a big, luxury motor coach painted in red, white and blue, sporting the slogan, "Keep Your Hands Off My Health Care!" With its spiffy graphics and tech-savvy persona, the aesthetics of Americans for Prosperity are reminiscent of the Christian Coalition events and materials of the mid-1990s.

That's not surprising, given that AFP President Tim Phillips is a former business partner of Ralph Reed, who, as its executive director, brought the Christian Coalition to national prominence. Phillips and Reed continue to work in tandem.

Although Reed went on to ignominy for his involvement in the Jack Abramoff lobbyist scandal, he is now attempting a comeback with a new organization, the Faith and Freedom Coalition.

While Phillips was the master of ceremonies at the RightOnline event, Reed shared the stage with Dick Armey at an anti-health-care rally in Atlanta that was co-sponsored by Americans for Prosperity.

By comparison, the other astroturfing operations AlterNet covered in previous reporting -- all of which count themselves as part of the Tea Party movement -- look rough around the edges.

FreedomWorks, led by former House Majority Leader Dick Armey, R-Texas, is basically your father's astroturfing outfit, rallying the grumpy-old-man crowd to great effect on behalf of Armey's former K Street clients.

ResistNet, the "official community" of, is a home-made-looking meeting place for gun enthusiasts, militia types, birthers and the most ardent of the Obama-is-Hitler contingent.

Glenn Beck's 9-12 Project draws from the audience for the derangement he displays on his Fox News Channel program, but he has closed down the comments section of his site ever since rowdies at a Tampa town hall that turned violent mentioned Beck as their inspiration to the local newspaper. (However, a link to a schedule of town hall events does appear on the 9-12 Project's home page.)

Of course, there's plenty of crossover among the constituencies of the various sites, and plenty of links among the players.

For instance, Sen. Jim DeMint, R-S.C., who famously predicted that health-care reform would be Obama's "Waterloo," appeared in the video that opened the RightOnline general session. His endorsement also graces the Web site, as do the plaudits of Rep. Mike Pence, R-Ind., chairman of the Republican Caucus, who sent in a video message to the RightOnline crowd.

Phillips, the AFP president, worked on Armey's political campaigns.

While Fox News has hardly been secretive about its involvement in the anti-health care cause, the reach of its parent company, Rupert Murdoch's News Corp., goes further than the utterances of its pundits over the airwaves, or Beck's 9-12 Project.

The Americans for Prosperity roster of RightOnline conference speakers was heavily populated by those who toil for Murdoch -- fully one-third of the list of 15 -- in addition to two others who have links to Murdoch.

Fox News contributors Michelle Malkin and Jim Pinkerton addressed the crowd, as did columnists John Fund and Stephen Moore of the Wall Street Journal, another News Corp. property. AFP Policy Director Kerpen writes a column for Pittsburgh radio host Glen Meakem works for a Clear Channel station whose featured programming includes the Wall Street Journal Report, Glenn Beck and Sean Hannity. Ronald Kessler writes for NewsMax, which was founded by a former reporter for the New York Post, yet another News Corp.entity.

When I asked Phillips about the Fox/Wall Street Journal connection to his organization, he looked surprised.

"We have someone from Fox News?" he asked.

"Well, Fox News Channel contributors," I replied.

"OK. So, they're not on the payroll of Fox News. Do any of those guys get money from Fox News?"

He's asking me? "I don't know if they're paid by Fox," I said, "but I assume that they are. Do you have a partnership with Rupert Murdoch?"

"Not at all, not at all," he replied with a little laugh. "The fact is, the Wall Street Journal's my favorite newspaper; I love those guys. I like what they write. I look at Steve Moore and John Fund, and those are two of the smartest guys. They're also entertaining, in addition to being philosophically sound.

"I don't know if you've read The End of Prosperity, Arthur Laffer and Steve Moore's book; it's one of my favorite books of the last three or four years. I've really found it to be incisive, so I really like those guys. But there's no partnership -- financially, understood, or anything else."

I checked with the Fox News Washington bureau, and indeed Malkin and Pinkerton are paid by Fox, and are branded by the news channel, listed on the "talent" page of its Web site. Fund and Moore are full-time employees of the Wall Street Journal, and AFP's Kerpen has a weekly platform on Fox's well-traveled Web site.

What Murdoch Hath Wrought

In the cable and broadcast spectrum occupied by Fox News Channel and Fox Television, Murdoch operates through a public trust, as do all cable and broadcast outlets.

As much as he hates to share, Murdoch is using the common property of the United States to turn out mobs at town hall events for the purpose of intimidating members of Congress and spreading disinformation about what's in the health care bills.

There's nothing unusual about media properties whose editorial and opinion content reflects the views of the owner. What's new here is Murdoch's use of his media empire as an organizing tool in a campaign designed not only to affect several very particular pieces of legislation, but concocted to "break," in the words of DeMint, a U.S. president.

While Phillips may have been a little shy about his kinship with Murdoch and his minions, the minions themselves were not.

Speaker after speaker railed against "the left's" campaign against Beck's show (in the wake of Beck calling Obama a racist and worse), and Pinkerton and Moore cheer-led for their employer.

"I should say that, for 13 years now, it's been my enormous privilege to work at Fox News," Pinkerton said from the podium, and although I'm proud of the work that I'm a very small part of that Fox does … I'm watching the effort to boycott Glenn Beck, and I think that it's telling you that it's just a part of the ongoing efforts that you're going to be seeing against Fox as the federal government does its best to squelch what Barack Obama said was his greatest source of pain in the media was Fox."

Likewise, the Wall Street Journal's Moore asked the audience, "What would we do without Fox News and the Wall Street Journal?"

But Pinkerton couldn't let it rest: He kept naming Fox as an integral player in the Tea Party movement, lauding the role of cable television in showing video of raucous town hall events. "This has been very much a TV struggle," he said.

He urged activists in the online community to "work with Fox," and cited a Fox-manufactured controversy about people receiving unsolicited e-mails from the White House as a "major story."

"Keep it up; we'll win," he said.

The Murdoch Agenda

As I listened to the speakers, a I took note of a curious phenomenon. Some bashed the pharmaceutical industry for its reported deal with the White House on health-care reform legislation; others took aim at the health insurance industry.

"The insurance industry is spending tens of millions of dollars supporting this," said Phil Kerpen of and AFP. "Why? Because they know that public option is gonna come out sometime in September, and once the public option is out, they're going to get government-guaranteed profits for life.

"We're going to be forced by law to buy their product, and it's going to be subsidized with our tax dollars. Why not support that? That's a dream for them. Of course they're … supporting it; so are the pharmaceutical companies; they're all supporting it."

Kerpen also asserted that the health-care bill would build "a massive new bureaucracy of federal workers that will be unionized and have control over our lives." Scary. Unionized workers.

In his opening remarks, Phillips included "card check" in his list of legislation his followers need to defeat, referring to the Employee Free Choice Act, which would make it easier for workers to unionize.

It occurred to me that liberal analysts like me have been too literal as we have tried to assess just which corporate interests are behind the mobs. (Of with groups like AFP, we have only a snapshot of where their money comes from; they are not required by law to publicly disclose that information.)

The easy assumption is that the resistance all comes from the health-care industry, since it will be the most directly affected by the bill. But that's thinking too small.

This is about something much bigger -- Very Big Business writ large, and amplified and organized by one very big media mogul.

Murdoch's personal political views appear to come down to three: he's against regulation of virtually any kind, he hates taxes and he's a union-buster, famous for breaking the unions at British newspapers he owns.

In not so many words, Kerpen essentially spelled out the Murdoch agenda when explaining to the AFP crowd why health-care reform, even without a public option, is a bad thing: "They're going to mandate by law that employers must provide health insurance. They're going to mandate by law that every individual must buy it. They're going to massively subsidize it from taxpayers. They're going to regulate it every single way to micromanage it."

A Research 2000 poll released this week by the Daily Kos (the organization that sponsored Netroots Nation) found that a whopping 65 percent of Republicans believe Fox to be a reliable news source, and that 74 percent of Republicans never watch CNN, while 89 percent never watch MSNBC.

This week's NBC/Wall Street Journal poll shows that those who believe the lies promoted about health-care reform legislation -- the tropes that it includes taxpayer-funded abortion and mandatory end-of-life counseling -- are overwhelmingly Republican. Rachel Maddow reported [video] that 75 percent of those who say they believe the Democratic health-care plan will limit care to the elderly watch Fox News.

But a disinformation campaign by which viewers absorb twisted "facts" is not enough for Murdoch. He's sending his minions out to rallies like AFP's to spread the fear. And with his 9-12 Project, Beck is Murdoch's community organizer, rallying the troops to turn up at events where they have been known to misbehave.

I doubt Murdoch cares how many sponsors Beck's show loses as a result of his rants; in terms of the greater dividends he's bound to reap from the derailing of health care, Net neutrality and energy reform, he can afford to keep Beck on as a loss leader.

Real People Told Real Lies

Throughout the RightOnline program, liberals and mainstream media were derided for characterizing town-hall disrupting tea-baggers as an angry mob. Sen. Majority Leader Harry Reid, D-Nev., was predictably derided for his description of movement leaders as "evilmongers."

But that's just grist for the mill compared to the stunning displays of deception trotted out in plain view before the Tea Party enthusiasts.

Phillips opened the program suggesting that a White House request for Americans to submit, through an e-mail address, questionable claims made about the health-care legislation in media or elsewhere was a Nixonian "enemies list" operation, "asking Americans to turn in other Americans for fishy e-mails …"

"I hope and encourage you to go to that Web site and turn in yourself," he added.

Glen Meakem, the local radio host, used his time on the stage to promote an outright lie: He told the audience that page 425 of the House bill required seniors to meet every five years with a government official for mandatory counseling on "dying with dignity." The bill says no such thing; go to page 425 [PDF] yourself and have a look.

As has oft been repeated, what the bill does offer on end-of-life issues, should one choose it, is coverage for a paid counseling session with your doctor or health-care practitioner, for which senior citizens are eligible every five years.

But Meakem just ignores that, claiming that the bill‘s alleged "compulsory" counseling would require the hiring of 7,000 bureaucrats before whom 55,000 seniors per day would be required to sit and reveal their plans for how they would like to die.

"Imagine the assembly line," he said. "Imagine what a quiet, private, intimate discussion that would be -- a bureaucratic paper chase with government officials, and it would be an incredible, incredible violation of our privacy."

Yet, the exposure by progressive journalists of the right's astroturfing seemed to have movement leaders on the defensive, assuring their troops that they were indeed real people.

And they are. They're frightened, misinformed real people who have been organized by corporate interests.

The night before the general session, at the RightOnline dinner (which featured Pennsylvania Senate GOP candidate Pat Toomey as its speaker), I sat next to a lovely woman from Pittsburgh named Linda. She had never before been involved in politics, but the Obama plan, she said, had moved her. She was almost as distrustful of the GOP as she was of the Democrats, she said, on account of George H.W. Bush's embrace of, "what was that world government thing?"

"Oh, the New World Order?" I asked.

"Yes, that, and that, oh, I can't remember the name of it, Tri--"

"The Tri-Lateral Commission?" I offered.

"That's it," she replied. "The Tri-Lateral Commission."

Still, she would rather have the Republicans than Obama's socialism, she told me.

Or there was the woman waiting in line to get her copy of Michelle Malkin's book, The Culture of Corruption, signed by the author.

She didn't want to give me an on-the-record interview, but I can tell you this much: Her family owns a local manufacturing business, and she's convinced that "the America I know is disappearing," and that Obama is intent on turning the United States into "a Marxist nation."

Like most of the participants in the Saturday session, the women appeared to be well over 40.

Dog Whistles For Violence

Malkin, Fox News contributor and founder of Hot Air, delivered the keynote to the RightOnline general session. Malkin was the only nonwhite person to grace the RightOnline podium, and one of two women.

A practiced speaker, Malkin's tone was by turns snide and gracious as she assured the crowd that they were doing the work of freedom. Like other conference speakers, she counseled RightOnline attendees to not be demoralized by their relative lack of numbers when compared to progressives.

"Don't worry about tallying up how many people are at the Nutroots conference versus this conference," told the audience. "That is not the metric; the metric is, what is the White House worried about right now? Are they worried about the Nutroots, or are they worried about you? Who are they trying to silence? Them or you?"

Then Malkin took her exhortation one step further. "On the White House health-care takeover plan, you have the majority running scared. Think about this, contemplate this: Democrat lawmakers on recess now are hiding from their constituents, in SEIU offices."

The crowd began to shout. "Cowards!" several yelled.

It was at an event focused on health-care reform sponsored by Service Employees International Union in Tampa that Tea Party crowds tried to force their way into the forum after the room in which was held was already to capacity. A scuffle ensued.

Earlier in the RightOnline conference, Rep. Tom Price, R-Ga., addressing the crowd in a video message, expressed a similar sentiment, in the words of Revolutionary War hero Samuel Adams: "It doesn't take a majority to prevail," Price said, "but an irate and tireless minority …"

Or sometimes, an angry mob.

As AlterNet reported earlier this week, Americans for Prosperity opened its general session with Joe Wurzelbacher, a.k.a., Joe the Plumber, telling the crowd that there was a time when he would have taken politicians like House Speaker Rep. Nancy Pelosi, D-Calif., "out behind the woodshed and beat the livin' tar out of ‘em." The crowd roared.

In one instance, the iconography of the militia-inspired "freedom movement" bubbled up in the exhibition hall outside the plenary session. A group called American Majority offered for sale posters featuring the coiled snake of the Revolutionary War Gadsen flag, which has been appropriated by organized gun enthusiasts.

The flag's iconic coiled snake graced the sign held by the man with a gun strapped to his leg outside the New Hampshire high school where Obama conducted a forum on health-care reform earlier this month.

Were it not for repeated instances of weaponry brought into or near health-care town-hall meetings, and death threats made on members of Congress conducting town halls, it might be easier to dismiss remarks such as Malkin's as just so much rhetoric.

What's worse, it has been given the seal of approval by mainstream Republicans. Appearing on the Aug. 17 edition of NBC's Meet the Press -- the day after the RightOnline conference closed -- Sen. Tom Coburn of Oklahoma told host David Gregory that members of Congress have "earned" the physically threatening consternation they are experiencing.


Lean and energetic, AFP President Tim Phillips sports an obvious dye-job on his full head of hair and exudes the sort of studied affability common among leaders of the religious right. But there's an unmistakable hardness around his eyes and in the set of his jaw.

After the general session concluded, I caught Phillips in the hotel lobby and asked him to respond to the threats of violence that have surrounded some town-hall meetings dedicated to health-care reform.

"Do you see any violence here today? I see the most kind, warm, friendly people in America," he said. "I mean, there's 600 people here; there's no talk of negative stuff or nasty stuff or attacking anyone. It's about being civil. That's how you win: by being civil"

As if I hadn't just sat through Malkin's less-than-civil speech.

I mentioned ResistNet, an AFP partner in the Tea Party coalition, whose site abounds with racist and violent material.

"I can only speak for Americans for Prosperity," he replied, "and we've got over 800,000 members now, and what you heard today is what you'll hear anywhere we are. … With all the media that's out there today, if you're trying to play games with this audience being one way, and this audience being -- you get caught, and we're not going to do that."

Malkin was no more philosophical when I asked her the same question.

"Look, I think we always have to be concerned about outliers and individual lone nuts out there, whatever their political ideology is," she said, "and certainly in the wake of some of these cases where there have been people who have claimed to be right-wingers -- or at least that's how it's been portrayed -- that ended up perpetrating violence.

"I mean, I condemn any violence in the name of political ideology. But the White House and the Democrat (sic) National Committee, and a lot of these liberal bloggers I think have completely overreached in tarring the entire movement of people who have risen up since the stimulus bill. How long -- you've been here all day, I take it? Do you fear for your life around these people?"

Well, no, I didn't. But they were highly unlikely to misbehave in a place where they were surrounded by their own kind. Malkin then went on to say that there had been a "whitewashing" of the degree of assassination threats against President George W. Bush, and she dismissed the Southern Poverty Law Center report that says the militia movement is on the rise.

Joe the Plumber repeated his "woodshed" line to me, justifying it by saying that Congress has "been lyin' to us for years." However, Wurzelbacher said, he didn't advocate violence.

Well, then, what about the sober Wall Street Journal columnist and Murdoch employee, John Fund?

"We heard these same concerns, and they certainly need to be taken seriously," he said, "during the Social Security protests in 2005, and during the anti-war protests in 2--"

I interrupted him. "Yeah, but you didn't have a guy showin' up with a gun strapped to his leg," I said.

"I can send you the articles on that," he replied. "Anti-war protesters that basically stormed speakers' rostrums, silenced speakers. I was at Columbia University when two speakers were silenced.

"[O]bviously, groups should control their members, but most of the people who do this on the left and right are rogue actors. So, you can discourage them, and they should be discouraged, but, you know, democracy has costs. And one of them is that on both the left and the right, you're going to have people who misbehave.

"If they violate the law, they should be punished, if they disrupt meetings, they should be prevented from doing that, but this is part of democracy."

I gave Fund my e-mail address; I'm still waiting for those articles.

In New Hampshire, the armed man who sought to greet Obama carried a sign that read, "It Is Time to Water the Tree of Liberty." The reference was to a Thomas Jefferson quote -- one adored by the so-called freedom movement: "The tree of liberty must be refreshed, from time to time, with the blood of patriots and tyrants."

As Phillips moved among his crowd of gentle, peaceful people, his former business partner, Ralph Reed, took the stage in Atlanta at the anti-health-care rally co-sponsored by Americans for Prosperity.

Where the New Hampshire gunslinger drew from the first part of Jefferson's quote, Reed picked from the second:

"Our right to protest has been purchased with the blood of patriots who paid the ultimate price so that we could be free men and women and have the ability to petition our government," he said. "We will not be intimidated, we will not be silenced, and we will not go away."

Friday, November 13, 2009

Credit Card Companies Face a Grim Future

Original Link:

By Josh Lipton

The past quarter century was a fun one for the American consumer. But after all that borrowing and spending, consumers have re-discovered the benefits of thrift and prudence. This is good news for personal balance sheets, but bad news for credit card companies.

In a recent report, Fitch Ratings forecast that US credit card issuers will continue suffering with respect to their earnings over the near term as a result of the lousy labor market, bankruptcies, and losses.

The report, as summarized here for us by the gang at Zacks Equity Research, notes that major credit card issuers are still dealing with tough losses as the US unemployment rate hurdled over 10%.

“Also, as it is expected that the rate will remain above 10% through 2010, consumers will increasingly fall behind on payments,” write the crew at Zacks. “As a result, the losses of the credit card issuers could worsen further.”

Fitch’s rating outlooks are negative on the less diversified credit card companies, which are at risk of a downgrade. That hit list includes: Capital One Financial Corporation (COF), American Express Company (AXP), and Discover Financial Services (DFS).

According to Fitch, prime credit card delinquencies of 60 days or more climbed 16 basis points to 4.22% in October. The rating agency forecasts higher loss rates in 2010.

Additionally, more trouble for these companies is coming in the form of the Credit Card Accountability, Responsibility, and Disclosure law signed by President Barack Obama in May 2009.

Key components of the act include an inability to raise rates on existing card balances, a requirement to maintain promotional rates for at least six months, and a restriction on fees for subprime, low limit cards. See also The Gall in Your Credit Card's Fine Print.

Most of the new requirements will take effect in February 2010.

At the same time, write the analysts at Zack’s, consumers have been transitioning from credit cards to debit cards (See Seven Ways to Avoid the Debit Card Blues). So the credit card companies don’t have much room for improvement until the economy starts to enjoy a sustainable recovery.

But there are more than just near-term speed bumps for these companies. Strategists say these shops are getting squeezed and that’s a headwind they could face for some time.

The models and analyses of these companies, so these market pros write, assumed that the borrowing-and-spending binge in the US would go on forever.

However, those go-go years came to a screeching halt as unemployment spiked higher. The unemployment rate jumped to 10.2% in October from 9.8% in September, and is now just 60 basis points shy of taking out the post-World War II high of 10.8%.

When will the unemployment picture begin to brighten?

According to our central bankers, we shouldn’t hold our collective breaths.

Dr. Janet Yellen, president of the Federal Reserve Bank of San Francisco, recently said that “unemployment could well stay high for several years to come… [and] our recovery is likely to feel like something well short of good times.”

Her colleague, Mr. Dennis Lockhart, the president of the Federal Reserve Bank of Atlanta, didn’t sound too much more optimistic, saying that he expects to see “very slow net job gains… sometime next year.”

Given that backdrop, it's thoroughly unsurprising that you and your neighbors are now more interested in saving rather than spending. No data captures that shift more clearly than the contraction in US consumer debt.

In September, total consumer credit fell $14.8 billion, making it the eighth month in a row of debt repayment. This, say economists, is an unprecedented string of declines. See also Could You Get Cut Off From Credit?

Dr. Gary Shilling, the noted economist, strategist, and founder of A. Gary Shilling & Company, recently told clients that he would steer far and wide of credit card companies.

“Recent developments are virtually all negative for the credit card business now and for years to come,” Dr. Shilling wrote in his most recent research note, adding, “With the switch from a quarter century consumer borrowing-and-spending binge to a long run saving spree, the credit card business has moved from a growth industry to a laggard.”

Sunday, November 8, 2009

Mortgage crisis shows why financial regulation is needed

Original Link:

By Kevin G. Hall

Why didn't Wall Street firms tell potential investors that the bonds they were selling them were rotten? Why did their business partners, including subprime mortgage lenders, ignore glaring evidence that borrowers weren't qualified and give loans to virtually anyone with a heartbeat?

The answer is simple: Because they could.

In many cases, no law or regulation prohibited these firms from doing what they did. In others, former regulations that might have impeded them had been rolled back.

After 30 years of a national political culture that damned government regulation and celebrated unfettered markets, the lions of Wall Street were free to practice the social Darwinism at the heart of their world — survival of the fittest, and the winner feasts on the spoils. Smaller players down the financial food chain played by the same ethics-free ethos.

That's the back story to the U.S. financial crisis. At every turn where regulation was missing in action, the actors did the wrong thing, all along the long, interconnected trail of transactions that make up mortgage finance.

"This crisis started one household at a time. As much as everyone wants to talk about derivatives and shadow markets and rating agencies, it started as one lousy mortgage sold to one family, repeated millions of times," said Elizabeth Warren, a Harvard University business law professor whose thinking has helped shape the regulatory overhaul efforts now under way in Congress.

At the front of the chain were homeowners who took out loans with no documentation or little verification of income, bidding for more home than they could afford and betting that prices would keep rising forever. Mortgage brokers who originated their loans often received legal kickbacks from conscience-free lenders if they got borrowers into creative loans with high and adjusting interest rates.

The mortgage brokers churned volume for big subprime lenders such as New Century Financial and Ameriquest Financial, both now defunct. They exploited a regulatory gap to become nonbank lenders, which were regulated only on the state level, and spottily at that.

To address the "liar's loans" and mortgage-broker trickery, Congress is pushing to create a Consumer Financial Protection Agency. It would regulate consumer credit products such as mortgages, credit cards and payday loans.

The agency would force lenders to offer products with simpler terms and greater disclosure. It would regulate consumer credit in the interest of borrowers, not lenders. This agency, Warren's brainchild, would address directly the weakened lending standards that Wall Street exploited, and which led to the financial crisis.

"This is trying to move that to a world where there is light. One of the necessary ingredients is light, that people can track the terms of a deal, make comparisons among products, and not take on crazy risks," she said. "We've learned the consequence of too much risk aggregated in the system, it's brought us to our knees. The CFPA isn't about playing the Nanny State; it's giving customers the tools to protect themselves."

Bad lending practices wouldn't have done so much damage, especially in places such as Florida and California, if they hadn't happened on such a large scale thanks to Goldman Sachs Group and its competitors.

Investment banks such as Goldman took possession of the poor-quality mortgages and then, working in consultation with credit-rating agencies, packaged them into a highly rated securities backed by pools of mortgages for sale to big institutional investors.

Many institutional investors — state pension funds and charitable endowments, among others — were required to purchase only the highest-rated securities. So it was imperative for the rating agencies to help their deep-pocketed investment bank clients attain top ratings for the mortgage-backed securities the banks issued.

As recent history shows, top-rated securities quickly became junk as the housing market tanked and homeowners couldn't make their mortgage payments. The reputations of Goldman, its competitors, and rating agencies such as Moody's Investors Service, fell along with home prices.

Because their sole mission is to provide investors with reliable signals about the risk they're assuming, the rating agencies' failure to score the securities accurately is particularly damning. They were supposed to keep investors in mind, even as they were paid to rate the bonds and mortgage securities by their issuers, such as Goldman.

Congress is now addressing the role of investment banks and rating agencies. Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee, on Oct. 27 introduced legislation that would force investment banks to retain 10 percent of whatever mortgage-backed securities they sell to investors. The banks thus would be forced to eat their own cooking.

Frank's legislation also would require about 120 banks with assets valued above $10 billion to share the cost of closing down one of their brethren if necessary. That means that the cost of any future crisis would be borne by Goldman and other big banks, not taxpayers.

Separate legislation revamping the regulation of credit rating agencies seeks to make it much harder for Goldman or any other "investment" bank to influence securities' ratings.

During the housing boom, investment banks could withhold a preliminary rating from say, Moody's, while seeking a better rating from Standard & Poor's or Fitch Ratings. A bill passed Oct. 28 by Frank's committee would force Goldman or one of its rivals to publish any preliminary rating to prevent shopping around for better ratings.

Robert Pozen, the chairman of MFS Investment Management, a large fund manager, and a former teacher at Harvard's business and law schools, thinks that requirement falls short.

"I think that's a step in the right direction, but the reality is more of this is done before you get to the preliminary rating. Most of it is done where you have an information conversation with someone and that's worked out," Pozen said. "I think once you get to the preliminary rating stage, it's pretty far along. Most of the (questionable) stuff is done on a handshake pretty early in the process."

Pozen favors having regulators appoint a consultant to assign rating agencies randomly to issuers of securities.

One key component of the crisis isn't being addressed directly.

The financial crisis was made possible in part by the late 1999 decision by the Clinton administration and a Republican-led Congress to roll back the Depression-era Glass-Steagall Act.

This 1933 law prevented deposit-taking commercial banks from engaging in the securities business. The rollback allowed Bank of America, Citigroup and other large conventional banks to create massive and lucrative trading operations. They got deeply involved in complex financial instruments such as credit-default swaps that eventually threatened their core businesses and the global financial system.

Former Federal Reserve Chairman Paul Volcker, who's advising the Obama administration, has called for a restoration of the Glass-Steagall's separation of commercial banks from more speculative investment banks.

"There are deep-seated, almost unmanageable, conflicts of interest with normal banking relationships -- individuals, businesses, investment management clients seeking credit, underwriting and unbiased advisory services," Volcker wrote in September congressional testimony. "I also think we have learned enough about the challenges and distractions for management posed by the risks and complexities of highly diversified activities."

Volcker's calls have gone unheeded, even by Obama, but Volcker recently picked up support from former Citigroup Chief Executive John Reed. In a letter to the New York Times, Reed supported Volcker's call to restore the Glass-Steagall protections.

Saturday, November 7, 2009

10 of the Nuttiest Statements Elected Officials Have Made in the Health Care Battle

Original Link:

By Joshua Holland

Wild, over-the-top rhetoric and bizarre conspiracy theories about health reform aren't just coming from the right-wing blogs and talk-radio loudmouths.

Even by the standards of our typically debased public discourse, one has to step back and marvel for a moment at the sheer, unmitigated craziness the debate over health care reform has elicited from the right wing.

It hasn't been the usual conservative boilerplate -- blather about "tort reform" or dubious "analyses" predicting the latest proposal would break the budget and blow up the national debt. We've been treated to some truly extreme, and sometimes bizarre, arguments about American health care and even lied to about what the proposed health reform bills contained.

We're accustomed to that kind of hyperbole from hate-radio and the conservative bloggers, but this summer it hasn't been limited to Rush Limbaugh fulminating about socialism or Glenn Beck weepily warning that the Dems' health care legislation are stealthy reparations for slavery.

What makes the ocean of crazy surrounding this debate truly remarkable is that the overheated, ill-informed spew is also coming from the mouths of actual public officials, people tasked with creating legislation. National office holders -- not loopy local GOP party chairs, but people who supposedly represent the interests of entire congressional districts and earn a public salary -- have offered up months of bizarre tales about our health care system and the effort to reform it that are every bit as outlandish as anything scribbled on an overheated right-wing blog.

The most charitable view is that some of the lawmakers who oppose reform most vehemently just have no clue what they're talking about. Sen. James Inhofe, R-Okla., whom some have dubbed "the dumbest senator of them all," suggested as much when asked what he didn't like about the reform bill.

"I don't have to read it or know what's in it. I'm going to oppose it anyways," he told Grady County Express Star. According to the report, "information provided by news media have helped [Inhofe] become a staunch non-supporter of the bill." In other words, his opposition is firmly grounded in whatever he's picked up from the fair-and-balanced conservative media.

Whether examples of dumb-as-a-box-of-rocks ignorance or intentional obfuscation, here are some of the craziest things that have been said about health care this summer by real-live elected officials.

It's by no means comprehensive!

1. Policy Terminated!

The thing that makes the rhetoric against health care reform so outlandish is how divorced it is from reality.

The Democrats' health care proposals, as any critic on the left can tell you, are rather compromised, incremental reforms that won't directly impact the vast majority of Americans who have decent health care already. It has a public insurance option, but only 1 in 50 Americans would be covered by it in 2019. According to the Congressional Budget Office, it wouldn't add to the deficit. It's moderate.

Although the legislation is obviously significant, it's tough to portray as a radical and frightening shift in our health care system. So opponents in Congress have taken the novel approach of arguing against a bill that doesn't exist.

Rep. Steve King, R-Iowa, warned that the House reform bill "cancels every [health insurance] policy" in America. "[House Speaker Nancy] Pelosi's agenda takes every [policy] away," King told MSNBC.

Not to be outdone, Minnesota Republican Rep. Michele Bachmann -- always a favorite of lazy left-wing bloggers on the hunt for a gem -- told Fox News the House bill would make private insurance illegal.

2. Health Care Crisis? What Health Care Crisis?

One often hears that virtually everyone agrees that the American health care system has deep, deep problems, even as they disagree on exactly where the problems lie and how they should be fixed.

But have you ever wondered who it is that is not counted among "virtually everyone"? Turns out they include some of Washington's most conservative lawmakers who insist that there is no problem and that the whole thing is just another liberal myth (like global warming, poverty or the war in Iraq).

Another member of Congress named King -- Rep. Peter King, R-N.Y., -- told MSNBC that health care is "not a major issue among the American people." The Huffington Post points out that King based the claim on a poll that in fact found that Americans ranked the issue as the third most important, after jobs and the deficit.

But Rep. Virginia Foxx, R-N.C., one of the craziest members of the House (and that's saying something), took the prize when she held a press conference to proclaim, "there are no Americans who don't have health care." Which would come as a surprise for the 46 million or so who lack coverage today.

"We do have about 7.5 million Americans who want to purchase health insurance who can not afford it," she granted before urging people not to "give the government control of our lives."

3. There's No Problem, and Nobody Cares About Health Care, but … Oh My God!

If you're in the mood for consistency, the Republican caucus is probably not the place to look. Because while Reps. Foxx and Peter King were telling us everything's fine, and besides, nobody much cares about the issue, others were rending their hair over the profound injustice of it all.

Sen. Lamar Alexander, R-Tenn., insisted that the Democrats' plans will inspire "a minor revolution" if lawmakers don't heed the confused outrage of the tea-partiers.

"The intensity on this issue across the country is like nothing I've seen in a long, long time," he told CNN, adding that if health reforms squeak through, it'll "wreck our health care system and wreck the Democratic Party."

Newt Gingrich (OK, he used to be an elected official) told Fox News that if the Dems used an obscure procedural maneuver to advance the legislation, "I think you'll have an extraordinary explosion both in the Senate and in the country." And Rep. Paul Broun, R-Ga., decided not to quibble and warned that the Dems' rather business-friendly incremental reforms would "destroy America as we know it today."

With so much at stake, you have to credit Bachmann for reacting in the calm, measured tones for which she's become so well-known: "What we have to do today is make a covenant, to slit our wrists, be blood brothers on this thing. This will not pass. We will do whatever it takes to make sure this doesn't pass," she told an enthusiastic audience at a corporate think-tank.

4. ET Get Health Insurance?

Like some grotesque apparition from Orson Wells' War of the Worlds, aliens are descending upon us to defile our women and eat our health-insurance dollars!

Only these are illegal aliens, and according to Iowa Republican King, a repeat offender, the Congressional Budget Office says almost 6 million unauthorized immigrants would be covered, gratis of course, under the Dems' health reform bill.

Mind you he's not saying it -- he's just issuing press releases saying that the CBO is saying it!

But, as it turns out, not so much. The truth is not only are the undocumented barred from receiving benefits by the legislation itself, but also by a variety of other laws already on the books. So did the CBO get it wrong? According to

So, where does King get his 5.6 million figure? His press release says that the CBO projected that the uninsured would include 14.1 million illegal immigrants in 2019. The CBO's analysis of the House health care bill estimates that in 2019, 17 million would remain uninsured, "nearly half of whom would be unauthorized immigrants." This is where math comes in: Taking the 14.1 million illegal immigrants in 2019 and subtracting half of 17 million (8.5 million) gets you … 5.6 million illegal immigrants that have suddenly gained coverage, right? Actually, no. About half of illegal immigrants in the U.S. have health care coverage now.

5. Rationing

House Minority Leader John Boehner, R-Ohio, warned that health care "rationing" is inevitable. Sue Myrick, a cancer survivor and GOP representative from North Carolina, said she wouldn't have gotten the treatment she needed to beat her disease "under the government-run health care system they have in Canada and the United Kingdom," and cautioned people to "make no mistake, [the proposals in Congress] are all gateways to government-run health care."

It's a common refrain. And one Canadians and British find pretty confusing.

But the thing that makes this one so crazy is that rationing health care is the private insurance industry's entire business model. As Ezra Klein wrote in the Washington Post, "We Ration. We Ration. We Ration. We Ration."

This is not an arguable proposition. It is not a difference of opinion or a conversation about semantics. We ration. We ration without discussion, remorse or concern. We ration health care the way we ration other goods: We make it too expensive for everyone to afford.

The rationing meme did lead to hilarity when Investor's Business Daily ran an editorial arguing that physicist Stephen Hawking "wouldn't have a chance in the U.K., where the National Health Service would say the life of this brilliant man, because of his physical handicaps, is essentially worthless." Hawking, still a Brit last time he checked, responded: "I wouldn't be here today if it were not for the NHS. I have received a large amount of high-quality treatment without which I would not have survived."

Less amusing was Sen. Chuck Grassley, R-Iowa, advancing the same nonsensical argument about the late Sen. Ted Kennedy, the Democrat from Massachusetts who fought hard for the Dems' plan before his death by cancer.

6. Health Care Reform Is Just Like Terrorism, but Far Worse!

North Carolina's Foxx is the gift that just never stops giving!

Just this week, after having sworn that the status quo was just peachy, Foxx said that reform, on the other hand, would be just like an ax-murderer crawling into the room of a small, defenseless child in the dark of night, only much scarier.

Creative Loafing, a Charlotte political blog, documented her exact phrasing:

Give Foxx credit … she always ups the ante in her nutcase sweepstakes. Now, she's gone onto the House floor to declare that she and everyone in her district are living in fear (which, along with anger, seem to be the only two emotions right-wing extremists like Foxx have left at their disposal) and that health care reform is a more terrible threat to America than "any terrorist right now in any country." Um, thanks for that valuable insight, Congresswoman; maybe next time remember to take your meds before giving a public speech.

In this week's crazy-off, Foxx has to compete with Sen. Joe Lieberman, I-Conn., bravely challenging the swine flu virus to choose a side -- either with us or with the terrorists -- but Foxx may have the edge.

7. Health Care Reform Spawns Tenthers!

You heard of "birthers" and probably know the health care debate has completed the cycle of life by giving us "deathers" (discussed below).

But it's also spawned a generation of "tenthers" -- self-anointed right-wing constitutional scholars who insist that the Founding Fathers, no-doubt shilling for the insurance industry, enshrined ironclad prohibitions against the government helping Americans get halfway decent health care in the country's charter.

And they include elected officials!

The gist of their "argument" is that the 10th Amendment says that powers that aren't expressly given to the feds remain in the hands of the states. That's true, of course, but the Constitution doesn't grant the feds the power to build interstate highways, either. According to Think Progress:

Tenther claims are far from the mainstream. In their world, landmark federal programs such as Medicare, Social Security, the federal highway system and rules regulating airplane safety are unconstitutional. In fact, the South "justified both secession and the Civil War on the theory that the Constitution is nothing more than a pact between sovereigns that each state is free to leave at will."

Real constitutional scholars, of course, dismiss the claim as nonsense. But that hasn't kept a gaggle of Republican officials from jumping on the bandwagon, including Minnesota's Republican Gov. Tim Pawlenty -- a potential candidate for the White House in 2012; Texas Gov. Rick "the Hair" Perry, who toyed with the idea of secession before a crowd of "tea-party" activists earlier in the year; Sens. Jim Demint, R-S.C. and Tom Coburn, R-Okla.; and a handful of GOP House members. (Pawlenty later backed away from his statement.)

How thoughtful are the tenthers? The Wall Street Journal offered a report about befuddled Georgia State Sen. Judson Hill proclaiming at a gathering of like-minded lawmakers, "The 10th Amendment protects us from such federal mandates." But when asked whether "the Commerce Clause of the U.S. Constitution, which grants Congress the right to regulate and enforce matters related to interstate commerce, would interfere with their plan," the Journal informs us "Hill could not say."

When asked if "Medicare, which is government-run health care for seniors, would also then be unconstitutional," Hill was unsure.

"That's a good question," he replied, "I don't know yet. We'll fight that battle when it comes before us."

Medicare was established by an act of Congress in 1965.

8. Astroturf Groups Are Just Like Revolutionary War Heroes … or Something

The whole summer of outrage -- with its "tea parties," its loud displays of "patriotism" and dark whispers of revolution -- was nothing short of bizarre. Perhaps swept up in the fervor, Iowa's Steve King (who is now, I suppose, the champion), took to the floor of the House to warn of a "great diminishment of American freedom" if health care reform were to pass.

"If the Founding Fathers could stand in here tonight," he said, "the tears would be running down their cheeks."

He then compared busloads of protesters sent to Washington by deep-pocketed corporate lobbyists to Paul Revere.

If King were a fictional character rather than an actual voting member of our legislature, he would be endlessly entertaining.

9. When You Can't Oppose Something Rationally, Just Tell People It'll Kill 'Em!

And when telling people that socialism is creeping up just over the horizon fails to stir up their ire, up the ante and promise them that reformers are bent on nothing short of killing off American citizens in order to control health costs. These are the "deathers."

And in America, the media treat their outlandish charges as if they were a credible matter of debate.

Begun by veteran wack-a-loon Betsy McCaughey, a former lieutenant governor of New York, the infamous "death panels" were soon being touted by GOP hitters like Boehner and Grassley, who said, "We should not have a government program that determines if you‘re going to pull the plug on Grandma."

If you're reading this, you probably know the whole thing is nonsense, but some may not realize how benign the provision that started the death-panels nonsense really is. It just directs Medicare to pay doctors to consult with patients who want help drawing up a living will -- a way to control their own health care if they become incapacitated. That's it -- the deaths panels. That's the government taking decisions out of the hands of doctors and patients.

Although it's been widely debunked, some prominent Republicans were still trying to push the "deather" story as recently as last week. And, as is so often the case, it turns out that many were for death panels before they were against them.

10. Health Care Reform Will Kill the Republican Party … No, the Entire Two-Party System!

House Speaker Nancy Pelosi, D-Calif., told reporters that the GOP fears the political ramifications of a decent reform bill being passed by the Dems. Saying that around 100,000 people in each congressional district would directly benefit from the House bill, Pelosi said, "Republicans know that passing real health care reform, meaningful health care reform for the American people, which is relevant to their lives [and] solves their problems, is politically powerful, and they must stop it."

It's probably overstating the case, but it's a fairly straightforward analysis. In the hands of Sen. Orrin Hatch, R-Utah, however, it became darker, as he warned that passing a bill people actually liked would spell doom for our entire two-party system -- government as we know it. Describing the proposals in Congress as a "step-by-step approach to socialized medicine," Hatch told a conservative Web site:

If they get there, then of course you're going to have a rough time, you're going to have a very rough time, having a two-party system in this country. Because almost everybody's going to say all we ever were, all we ever are, all we ever hope to be depends on the Democratic Party.

So, Looking Forward to the Climate Change Debate Heating Up?

Blather about a government takeover of health care with ashen-faced bureaucrats rationing out treatments has been ubiquitous among conservative elected officials, so much so that it almost seems a natural part of the discussion.

But given the degree to which Democrats have been forced to water down their legislation to appease conservatives within their party, these memes really represent a mass psychosis in the literal sense, as in "a distorted or nonexistent sense of objective reality."

Which might explain why 1 in 3 Americans trust congressional Republicans to deal with our health care mess and 4 percent of the electorate has a "great deal" of confidence in them on the issue.

But the crazy charges flying around also help explain some of the oddly divided public opinion on health care reform. According to the latest polling, while 55 percent favor a public insurance option, 45 percent favor what they understand to be "Obama's" health care reforms.

Given that the public option is the most controversial and hotly debated aspect of the health care bills in Congress, that would appear to confirm earlier polling, which basically found that most Americans just didn't have a firm handle on the proposals.

We can laugh at the anti-reformers' hyperbole, but it does muddy the waters to at least a degree.

Yet despite it all -- all the talk of death panels and losing our of liberty -- support for the public insurance plan has remained pretty steady over the past months, which has to make you wonder what the political landscape would look like if we were ever to have a serious, fact-grounded debate about health care reform in this country.

Sunday, November 1, 2009

Tom Donohue and the Chamber of Open Secrets

Original Link:

By David Swanson

Pulling pranks on the U.S. Chamber of Commerce is just too easy. The Yes Men held a press conference this week pretending to speak for the chamber and fooled the journalists in the room, because "We are no longer going to promote the destruction of the earth's climate" is such a compelling position that it's very tempting to imagine that any human being could adopt it.

But Tom Donohue and his chamber take the opposite position and have for years. William Kovacs, a senior vice president at the chamber, told the LA Times he'd like to stage a "Scopes monkey trial of the 21st century" to deny, not evolution, but human-made climate change.

In place of William Jennings Bryan arguing "Ladies and gentlemen of the jury, I put it to you: if we were descended from monkeys, then why aren't I stupid, hirsute, and scratching my purple ass?" we would have a chamber lawyer advocating "My fellow believers in free enterprise, let me ask you: if liberal elites who claim we're heating up the planet are to be trusted, then I'm sure we'll all evolve into heat-loving lizards, so what's the worry?"

How does one mock the U.S. Chamber of Commerce? Only by announcing an outbreak of sanity. Here are some other similar announcements I can imagine being made at phony press conferences:

The U.S. Chamber of Commerce announces that minimum wage laws don't actually hurt workers.

The U.S. Chamber of Commerce concludes that deregulating financial industries does not really create jobs.

The U.S. Chamber of Commerce announces that the right to unionize is not, in truth, an infringement on workers' rights.

The U.S. Chamber of Commerce announces that the Family and Medical Leave Act has not, as it turns out, destroyed families.

The U.S. Chamber of Commerce announces its support for healthcare as a human right.

The U.S. Chamber of Commerce concludes that the deregulation that allowed the collapse of Wall Street will not actually be best remedied by more of the same.

A U.S. Chamber of Commerce report finds that bailing out bankers is not, strictly speaking, free enterprise after all.

The U.S. Chamber of Commerce now opposes tax breaks for the off-shoring of jobs as detrimental to local job creation.

The U.S. Chamber of Commerce is no longer proud of having gutted a legal settlement for tobacco victims.

The U.S. Chamber of Commerce discovers that corporations are not homo sapiens.

A U.S. Chamber of Commerce study finds that restricting the bribing of political candidates does not infringe on our freedom of speech.

The U.S. Chamber of Commerce announces that funding campaigns to defeat majority views in elections, courts, legislatures, and presidential actions does not actually advance democracy.

All of these announcements and breakthroughs would, of course, line up with the overwhelming majority understanding in the United States. It would be easy to believe that the chamber meant them. But these are all announcements that only the Yes Men or other pranksters would make.

I'm working with a coalition of groups at and have been reading up on just how crazy and just how massive this chamber is. It's not your local or state chamber of commerce. Those are not chapters of a national entity, and they often oppose what it is doing. The U.S. Chamber of Commerce is a major force for the rightwingiest right-wing positions. It buys ads, it makes campaign "contributions", it lobbies, it sues, it presents court arguments, it runs a "think tank", it funds front groups that attack political candidates, and it brags about how much money it spends on activities it never reports to the government as legally required.

The chamber promoted financial deregulation and is now pouring tens of millions of dollars into a campaign to oppose any regulation. The chamber claims, absurdly, that its purpose is to create jobs. How does one parody that? Only be falsely announcing the opposite. There's no other way it can be done. Imposing stiffer regulations on Wall Street is backed by over three-quarters of Americans, at least prior to the chamber's new ad campaign.

I used to work with ACORN on local living wage and minimum wage campaigns, and the U.S. Chamber of Commerce was our most powerful adversary, swooping in and taking us to court after we passed higher standards through public votes. Why was New Orleans so poor and ill-equipped when Hurricane Katrina hit? One reason is that the chamber led a successful effort to overturn a minimum wage law that we had put in place. The chamber has run ads against the Employee Free Choice Act claiming to be speaking in defense of workers.

The chamber supports the idea that corporations are persons with human and civil rights, as well as the idea that spending money on political candidates (which we used to call bribery) is a free-speech right, even for corporations. The chamber has submitted a lengthy amicus brief in the case of Citizens United v. Federal Election Commission arguing against restrictions on corporate election spending on the grounds that this would infringe on corporate free speech and that the single greatest victim of this infringement would be the Chamber of Commerce itself, which -- in the brief, as on its website -- falsely claims to have three million companies as members. In contrast, the American Independent Business Alliance has submitted a brief arguing the opposite view and considers the chamber's position dangerous to businesses other than Wal-Mart and Goldman Sachs. The AIBA denounces the chamber as favoring the purchase of political favors over engagement in actual competitive enterprise.

As revealed by Mother Jones magazine this week, the chamber actually has 200,000 to 300,000 members, and falling. Companies that have pulled out of the chamber in protest of its promotion of climate destruction include: Apple, Exelon Energy, Pacific Gas and Electric, and the Public Service Co. of New Mexico. Even Nike has dropped its Board of Directors position while maintaining its membership. Even General Electric says that the chamber does not speak for it on climate issues, while maintaining its membership. When GE has to distance itself from you on the environment, you know something's wrong. And companies like Wal-Mart, Target, and Kelly Services Inc. have objected to the chamber's opposition to healthcare.

Who's running this national train wreck? Tom Donohue, former CEO of the American Trucking Associations, currently serving on the board of directors of Union Pacific Corporation, a railroad company that hauls a lot of coal and has given Donohue over $1.3 million in pay plus over $3.8 million in shares, and another $700,000 to the chamber.

How Goldman secretly bet on the U.S. housing crash

Original Link:

By Greg Gordon

In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.

Goldman's sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation's premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.

Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk.

Now, pension funds, insurance companies, labor unions and foreign financial institutions that bought those dicey mortgage securities are facing large losses, and a five-month McClatchy investigation has found that Goldman's failure to disclose that it made secret, exotic bets on an imminent housing crash may have violated securities laws.

"The Securities and Exchange Commission should be very interested in any financial company that secretly decides a financial product is a loser and then goes out and actively markets that product or very similar products to unsuspecting customers without disclosing its true opinion," said Laurence Kotlikoff, a Boston University economics professor who's proposed a massive overhaul of the nation's banks. "This is fraud and should be prosecuted."

John Coffee, a Columbia University law professor who served on an advisory committee to the New York Stock Exchange, said that investment banks have wide latitude to manage their assets, and so the legality of Goldman's maneuvers depends on what its executives knew at the time.

"It would look much more damaging," Coffee said, "if it appeared that the firm was dumping these investments because it saw them as toxic waste and virtually worthless."

Lloyd Blankfein, Goldman's chairman and chief executive, declined to be interviewed for this article.

A Goldman spokesman, Michael DuVally, said that the firm decided in December 2006 to reduce its mortgage risks and did so by selling off subprime-related securities and making myriad insurance-like bets, called credit-default swaps, to "hedge" against a housing downturn.

DuVally told McClatchy that Goldman "had no obligation to disclose how it was managing its risk, nor would investors have expected us to do so ... other market participants had access to the same information we did."

For the past year, Goldman has been on the defensive over its Washington connections and the billions in federal bailout funds it received. Scant attention has been paid, however, to how it became the only major Wall Street player to extricate itself from the subprime securities market before the housing bubble burst.

Goldman remains, along with Morgan Stanley, one of two venerable Wall Street investment banks still standing. Their grievously wounded peers Bear Stearns and Merrill Lynch fell into the arms of retail banks, while another, Lehman Brothers, folded.

To piece together Goldman's role in the subprime meltdown, McClatchy reviewed hundreds of documents, SEC filings, copies of secret investment circulars, lawsuits and interviewed numerous people familiar with the firm's activities.

McClatchy's inquiry found that Goldman Sachs:

Bought and converted into high-yield bonds tens of thousands of mortgages from subprime lenders that became the subjects of FBI investigations into whether they'd misled borrowers or exaggerated applicants' incomes to justify making hefty loans.

Used offshore tax havens to shuffle its mortgage-backed securities to institutions worldwide, including European and Asian banks, often in secret deals run through the Cayman Islands, a British territory in the Caribbean that companies use to bypass U.S. disclosure requirements.

Has dispatched lawyers across the country to repossess homes from bankrupt or financially struggling individuals, many of whom lacked sufficient credit or income but got subprime mortgages anyway because Wall Street made it easy for them to qualify.

Was buoyed last fall by key federal bailout decisions, at least two of which involved then-Treasury Secretary Henry Paulson, a former Goldman chief executive whose staff at Treasury included several other Goldman alumni.

The firm benefited when Paulson elected not to save rival Lehman Brothers from collapse, and when he organized a massive rescue of tottering global insurer American International Group while in constant telephone contact with Goldman chief Blankfein. With the Federal Reserve Board's blessing, AIG later used $12.9 billion in taxpayers' dollars to pay off every penny it owed Goldman.

These decisions preserved billions of dollars in value for Goldman's executives and shareholders. For example, Blankfein held 1.6 million shares in the company in September 2008, and he could have lost more than $150 million if his firm had gone bankrupt.

With the help of more than $23 billion in direct and indirect federal aid, Goldman appears to have emerged intact from the economic implosion, limiting its subprime losses to $1.5 billion. By repaying $10 billion in direct federal bailout money — a 23 percent taxpayer return that exceeded federal officials' demand — the firm has escaped tough federal limits on 2009 bonuses to executives of firms that received bailout money.

Goldman announced record earnings in July, and the firm is on course to surpass $50 billion in revenue in 2009 and to pay its employees more than $20 billion in year-end bonuses.


For decades, Goldman, a bastion of Ivy League graduates that was founded in 1869, has cultivated an elite reputation as home to the best and brightest and a tradition of urging its executives to take turns at public service.

As a result, Goldman has operated a virtual jobs conveyor belt to and from Washington: Paulson, as Treasury secretary, sent tens of billions of taxpayers' dollars to rescue Wall Street in 2008, and former Goldman employees populate some of the most demanding and powerful posts in Washington. Savvy federal regulators have migrated from their Washington jobs to Goldman.

On Oct. 16, a Goldman vice president, Adam Storch, was named managing executive of the SEC's enforcement division.

Goldman's financial panache made its sales pitches irresistible to policymakers and investors alike, and may help explain why so few of them questioned the risky securities that Goldman sold off in a 14-month period that ended in February 2007.

Since the collapse of the economy, however, some of those investors have changed their opinions of Goldman.

Several pension funds, including Mississippi's Public Employees' Retirement System, have filed suits, seeking class-action status, alleging that Goldman and other Wall Street firms negligently made "false and misleading" representations of the bonds' true risks.

Mississippi Attorney General Jim Hood, whose state has lost $5 million of the $6 million it invested in Goldman's subprime mortgage-backed bonds in 2006, said the state's funds are likely to lose "hundreds of millions of dollars" on those and similar bonds.

Hood assailed the investment banks "who packaged this junk and sold it to unwary investors."

California's huge public employees' retirement system, known as CALPERS, purchased $64.4 million in subprime mortgage-backed bonds from Goldman on March 1, 2007. While that represented a tiny percentage of the fund's holdings, in July CALPERS listed the bonds' value at $16.6 million, a drop of nearly 75 percent, according to documents obtained through a state public records request.

In May, without admitting wrongdoing, Goldman became the first firm to settle with the Massachusetts attorney general's office as it investigated Wall Street's subprime dealings. The firm agreed to pay $60 million to the state, most of it to reduce mortgage balances for 714 aggrieved homeowners.

Attorney General Martha Coakley, now a candidate to succeed Edward Kennedy in the U.S. Senate, cited the blight from foreclosed homes in Boston and other Massachusetts cities. She said her office focused on investment banks because they provided a market for loans that mortgage lenders "knew or should have known were destined for failure."

New Orleans' public employees' retirement system, an electrical workers union and the New Jersey carpenters union also are suing Goldman and other Wall Street firms over their losses.

The full extent of the losses from Goldman's mortgage securities isn't known, but data obtained by McClatchy show that insurance companies, whose annuities provide income for many retirees, collectively paid $2 billion for Goldman's risky high-yield bonds.

Among the bigger buyers: Ambac Assurance purchased $923 million of Goldman's bonds; the Teachers Insurance and Annuities Association, $141.5 million; New York Life, $96 million; Prudential, $70 million; and Allstate, $40.5 million, according to the data from the National Association of Insurance Commissioners.

In 2007, as early signs of trouble rippled through the housing market, Goldman paid a discounted price of $8.8 million to repurchase subprime mortgage bonds that Prudential had bought for $12 million.

Nearly all the insurers' purchases were made in 2006 and 2007, after mortgage lenders had lifted most traditional lending criteria in favor of loans that required little or no documentation of borrowers' incomes or assets.

While Goldman was far from the biggest player in the risky mortgage securitization business, neither was it small.

From 2001 to 2007, Goldman hawked at least $135 billion in bonds keyed to risky home loans, according to analyses by McClatchy and the industry newsletter Inside Mortgage Finance.

In addition to selling about $39 billion of its own risky mortgage securities in 2006 and 2007, Goldman marketed at least $17 billion more for others.

It also was the lead firm in marketing about $83 billion in complex securities, many of them backed by subprime mortgages, via the Caymans and other offshore sites, according to an analysis of unpublished industry data by Gary Kopff, a securitization expert.

In at least one of these offshore deals, Goldman exaggerated the quality of more than $75 million of risky securities, describing the underlying mortgages as "prime" or "midprime," although in the U.S. they were marketed with lower grades.

Goldman spokesman DuVally said that Moody's, the bond rating firm, gave them higher grades because the borrowers had high credit scores.

Goldman's securities came in two varieties: those tied to subprime mortgages and those backed by a slightly higher grade of loans known as Alt-A's.

Over time, both types of mortgages required homeowners to pay rapidly rising interest rates. Defaults on subprime loans were responsible for last year's housing meltdown. Interest rates on Alt-A loans, which began to rocket upward this year, are causing a new round of defaults.

Goldman has taken multiple steps to put its subprime dealings behind it, including publicly saying that Wall Street firms regret their mistakes. Last winter, the company cancelled a Las Vegas conference, avoiding any images of employees flashing wads of bonus cash at casinos.

More recently, the firm has launched a public relations campaign to answer the criticism of its huge bonuses, Washington connections and federal bailout. In late October, Blankfein argued that Goldman's activities serve "an important social purpose" by channeling pools of money held by pension funds and others to companies and governments around the world.


For investment banks such as Goldman, the trick was knowing when to exit the high-stakes subprime game before getting burned.

New York hedge fund manager John Paulson was one of the first to anticipate disaster. He told Congress that his researchers discovered by early 2006 that many subprime loans covered the homes' entire value, with no down payments, and so he figured that the bonds "would become worthless."

He soon began placing exotic bets — credit-default swaps — against the housing market. His firm, Paulson & Co., booked a $3.7 billion profit when home prices tanked and subprime defaults soared in 2007 and 2008. (He isn't related to Henry Paulson.)

At least as early as 2005, Goldman similarly began using swaps to limit its exposure to risky mortgages, the first of multiple strategies it would employ to reduce its subprime risk.

The company has closely guarded the details of most of its swaps trades, except for $20 billion in widely publicized contracts it purchased from AIG in 2005 and 2006 to cover mortgage defaults or ratings downgrades on subprime-related securities it offered offshore.

In December 2006, after "10 straight days of losses" in Goldman's mortgage business, Chief Financial Officer David Viniar called a meeting of mortgage traders and other key personnel, Goldman spokesman DuVally said.

Shortly after the meeting, he said, it was decided to reduce the firm's mortgage risk by selling off its inventory of bonds and betting against those classes of securities in secretive swaps markets.

DuVally said that at the time, Goldman executives "had no way of knowing how difficult housing or financial market conditions would become."

In early 2007, the firm's mortgage traders also bet heavily against the housing market on a year-old subprime index on a private London swap exchange, said several Wall Street figures familiar with those dealings, who declined to be identified because the transactions were confidential.

The swaps contracts would pay off big, especially those with AIG. When Goldman's securities lost value in 2007 and early 2008, the firm demanded $10 billion, of which AIG reluctantly posted $7.5 billion, Viniar disclosed last spring.

As Goldman's and others' collateral demands grew, AIG suffered an enormous cash squeeze in September 2008, leading to the taxpayer bailout to prevent worldwide losses. Goldman's payout from AIG included more than $8 billion to settle swaps contracts.

DuVally said Goldman has made other bets with hundreds of unidentified counterparties to insure its own subprime risks and to take positions against the housing market for its clients. Until the end of 2006, he said, Goldman was still betting on a strong housing market.

However, Goldman sold off nearly $28 billion of risky mortgage securities it had issued in the U.S. in 2006, including $10 billion on Oct. 6, 2006. The firm unloaded another $11 billion in February 2007, after it had intensified its contrary bets. Goldman also stopped buying risky home mortgages after the December meeting, though DuVally declined to say when.


Despite updating its numerous disclosures to investors in 2007, Goldman never revealed its secret wagers.

Asked whether Goldman's bond sellers knew about the contrary bets, spokesman DuVally said the company's mortgage business "has extensive barriers designed to keep information within its proper confines."

However, Viniar, the Goldman finance chief, approved the securities sales and the simultaneous bets on a housing downturn. Dan Sparks, a Texan who oversaw the firm's mortgage-related swaps trading, also served as the head of Goldman Sachs Mortgage from late 2006 to April 2008, when he abruptly resigned for personal reasons.

The Securities Act of 1933 imposes a special disclosure burden on principal underwriters of securities, which was Goldman's role when it sold about $39 billion of its own risky mortgage-backed securities from March 2006 to February 2007.

The firm maintains that the requirement doesn't apply in this case.

DuVally said the firm sold virtually all its subprime-related securities to Qualified Institutional Buyers, a class of sophisticated investors that are afforded fewer protections than small investors are under federal securities laws. He said Goldman made all the required disclosures about risks.

Whether companies are obliged to inform investors about such contrary trades, or "hedges," is "a very hot issue" in cases winding through the courts, said Frank Partnoy, a University of San Diego law professor who specializes in securities. One issue is how specific companies must be in disclosing potential risks to investors, he said.

Coffee, the Columbia University law professor, said that any potential violations of securities laws would depend on what Goldman executives knew about the risks ahead.

"The critical moment when Goldman would have the highest liability and disclosure obligations is when they are serving as an underwriter on a registered public offering," he said. "If they are at the same time desperately seeking to get out of the field, that kind of bailout does look far more dubious than just trading activities."

Another question is whether, by keeping the trades secret, the company withheld material information that would enable investors to assess Goldman's motives for selling the bonds, said James Cox, a Duke University law professor who also has served on the NYSE advisory panel.

If Goldman had disclosed the contrary bets, he said, "One would have to believe that a rational investor would not only consider Goldman's conduct material, but likely compelling a decision to take a pass on the recommendation to purchase."

Cox said that existing laws, however, don't require sufficient disclosures about trading, and that the government would do well to plug that hole.

In marketing disclosures filed with the SEC regarding each pool of subprime bonds from 2001 to 2007, Goldman listed an array of risk factors that grew over time. Among them was the possibility of a pullback in overheated real estate markets, especially in California and Florida, where the most subprime loans had been made.

Suits filed by the pension funds, however, allege that Goldman made materially false or misleading statements in its public offerings, failing to disclose that many loans were based on inflated appraisals and were bought from firms with poor lending practices.

DuVally said that investors were fully informed of all known risks.

"What's going to happen in the next few years," said San Diego's Partnoy, "is there's going to be a lot of lawsuits and judges will have to decide, should Goldman have disclosed more or not?"