Our country would not be what it is today if not for the veterans who have fought to protect our freedom. We owe them a tremendous debt of gratitude for their service, and I am pleased to write you with news that the Congress has made an important step towards honoring our commitment to them.
Last night was a victory for Nevadas veterans. By passing my concurrent receipt budget amendment, the Senate took the first step in caring for our nations heroes. When it becomes law, this legislation will end the phase-in period that has kept disabled veterans from receiving disability and retirement pay simultaneously. The old phase-in legislation was an impractical policy that robbed our military men and women of benefits, and Im glad to see it go. The amendment I sponsored will allow veterans with at least 50 percent disability rating to become eligible for the concurrent receipt of both disability pay and retirement pay by the Fall of 2008.
I have worked to implement a better veterans benefit payment system for eight years now, introducing legislation every year since 2000. I am glad that this amendment passed. This is another step toward ensuring that our veterans will finally receive the full support and care they were promised when they enrolled.
I hope that you will share you questions or comments with me by calling 866-SEN-REID or visiting http://www.reid.senate.gov/issues/veterans.cfm
Sincerely,
Harry Reid
Posted by: Bobby ||
03/15/2008 15:03 ||
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#1
What the man is talking about is a policy that Congress implemented in treating retired military members different from all other citizens who've been injured while on active duty. If during the time of service you suffer a line of duty disability and you leave the service the VA pays a certain allowance above a specific percentage, be that rated as 10 per cent or higher. The VA compensation varies currently from $117, at 10%, up to $3000 for 100%, if the prior servicemember is supporting a spouse, children, and parents. If the servicemember departs with a general or honorable discharge this compensation is full UNLESS you are retired and are receiving retired pay. As a penalty for completing such service and as punishment for wearing the uniform Congress, which has billions of dollars for pork and kickbacks into their election fund, wrote the law so that for every dollar paid out in disability, then matching dollars are deducted from the retirement pay. We are not equal before the law. So Congress has been inching its way back from full withholding with 'exceptions' and various bookkeeping games to cover their image. First on the board was disability coverage that was directly combat related. [Gee Senator, nice that your son/daughter got a nifty job with the pork contractor who's funding you sponsored, but his hometown boy who gave of his body and soul in our fight is seeing money taken from his compensation.] Now they're using it as a tool to point out 'See, I support the troops' by not screwing as much as we could have.
Foreign Division Reported Captured in Insurgent Drive to Split Loyalist Spain
VICTORY FOR EQUIPMENT
Tanks and Planes Blast Way With Little Actual Contact Between Two Armies
By HERBERT L. MATTHEWS
Wireless to THE NEW YORK TIMES.
BARCELONA, Spain, March 14. The Spanish Government Army is fighting with its back to the wall. Alcaniz, one of two keys to Aragon the other being Caspe fell into Insurgent hands today. Government forces are trying to re-form their lines along the heights behind the city.
The finest units of the Loyalist Army retained their cohesion, according to reports from the front, but as separate units. In retreating they have suffered no heavy casualties, for one feature of this battle has been lack of mass contact between the opposing forces, all the work being done by material superiority. Therefore, there is still a chance that a shortened Loyalist line may be established where the Insurgents can be held. What the government army needs most now is a breathing spell.
While the fate of Spain hangs in the balance at the front, Barcelona and apparently all other cities in Loyalist territory remain calm, one might almost say indifferent, judging from outward appearances. War communiqués, although succinct, have been frank in admitting great losses are being incurred. The public, therefore, must realize how critical the situation is... The NYT was wrong then, as well. Franco won and the communists were destroyed. N.B.: "Republicans" were communists.
#1
Daniel Webster successfully argued for Dartmouth in the US Supreme Court, and Chief Justice John Marshall (in office 1801-35) handed down the landmark decision, interpreting the Fourteenth Amendment, that Dartmouth was a private rather than public entity, therefore, the state of New Hampshire did not have regulatory power over it. This is an important historic decision as it limits the control a state government may have, in the name of the common good, over a corporate charter which is in essence a private contract.
Marshall's interpretation of the Fourteenth Amendment transformed it into a Magna Carta of corporate right, ironically so, as the Amendment was originally added on June 16, 1866, and ratified on July 23, 1868, to the Constitution for protection against state violation of the rights of "Negro" persons to life, liberty or property without due process of law.
I find it interesting that the 14th Amendment ratified 9 July 1868 with the required States approval was viewed by John Marshall who died in 1835. The MSM at work again. There are a number of timeline inconsistencies, but then that would detract from some of the School of History according to Marx meme that underlines some of the points.
It is surprising to note that the Government of Pakistan seems satisfied at the unjust decision of the World Bank's mediator on the question of Baglihar Dam. The fact is that its construction will lead to an irreparable loss of Pakistan's economy, political stability and ideological frontiers. Apart from an unprecedented huge loss of water, its construction will prove to be a death knell for our Defence too. It must be noticed that Baglihar's construction is an illegal act in the light of Indus Water Treaty signed in September 1960. Through this treaty, it was agreed upon between the two countries that India will have the right on run of the river of Ravi, Sutlej and Beas whereas Pakistan will enjoy complete right of Chenab, Jhelum and Sindh waters.
It should be noted here that it was an unwise step on the part of the government to ask for mediation to an ineffective body which has cunningly provided opportunity to India to play the game as it likes thereby resulting into ratification of her international crime at the behest of the World Bank. This is highly dangerous for Pakistan. We must take into account the Indian nefarious designs. We should have dealt with the situation at the very outset. It is because of our remissness that India, by violating Indus Water Treaty, has already constructed about sixteen small and big size dams under Hydel Power Project on River Chenab.
This is a violation of the Treaty. Not once, but several times, India has been repeatedly committing violations against the Agreement because of Pakistan's negligence. The result of this negligence is the illegal construction of Salal Dam on Chenab by India. Baglihar is so huge that only in one day, it can decrease Pakistan's six to seven thousand cubic ft water. India has the capacity to store our water in these dams in three months. Such an act can cause unparallel havoc for Pakistan especially its agriculture.
Now let us have a look at the Defence of Pakistan. It may be noted that Marala Headworks on the river Chenab has significant importance. Its water is thrown in Ravi which is further distributed to different border area canals. In this context Marla Headworks can work until the run of the river Chenab is not intruded. If the flow decreases it will adversely affect the whole Punjab Canal System. The point is that in case the water of Chenab is blocked it will not only damage the irrigation system but at the same time it will paralyse the Defence Line too. In such a state of affairs, one is constrained to learn as to why such a trivial question remained unnoticed by the people at the helm of affairs. It is unfortunate that we are not taking the question seriously that Chenab's water is the only source of all products being grown in our country. India is storing every drop of our water in Kashmir and according to Mr Chakrawarti, irrigation Minister of India, who had already threatened Pakistan in 2002 that India will withdraw itself from World Bank Agreement and make Pakistan barren.
It may also be noted that India had tried to construct Wuller Barage on river Jhelum but thanks to the mujahideen who blew it up otherwise it would have become a problem for Pakistan by now. It may also be added here that some other projects are also being materialised on Kishan Ganga and efforts are being made to stop Sindh's water.
The question is as to why the people at the top are silent since 1999 when a calculated attack was launched on our Defence System. It was necessary for them to put an end to it immediately. What was the sense in it to take the matter to the World Bank when 80% of its construction work had been completed. The World Bank simply put some technical restrictions and gave walk over to India to carry on. During the same period, India remained busy erecting fences on our border. We kept mum. And, still the irony is that we claim our criminal negligence to be our success. It is a fact that India has turned its deserts of Rajisthan into a fertile green land on one hand and on the other, she is bent upon turning our fertile areas into a desert. When the right of run of the river has been accepted, who will stop India's further aggressions?
Is it such a simple question that we should wait and see the Indian attitude without uttering a word of caution? It is a question of our life and death. Silence from our side will mean turning Pakistan into a desert thereby dissolving Pakistan's Defence giving opportunity to India to materialise its plans of Akhand Bharat. In this context we shall have to ponder over the matter carefully and find the ways to protect our country from the Indian adventure.
First of all we must accept our fault that we went to the World Bank without taking into account that the matter was purely a political one and not a technical problem. The fact is that the matter lost its significance the moment India made open violation of the Treaty by constructing the Dam. India began its construction by force and plans to thrust its hegemony.
It is only apolitical crisis deeply linked to our Defence. Therefore, the matter can only be solved through a political dialogue and in case, India does not respond actively, then we must gird up our loins and be ready for war. Immediate solution to this problem is that we should take up the question boldly asking for the whole of Kashmir and should bring it back to point one.
It is important to note that before India withdraws itself from the Agreement, we should declare with courage that since India is utilising Indus Water Treaty for its benefit thereby causing damage to Pakistan, therefore, in such a situation we are no more a party to it. We wish that India should stop any further aggression and should remove all its installations and constructions on our rivers. In case it does not respond, all future talks with India should be discontinued. And last of all, make it clear that Pakistan will not hesitate to go for a war to get its rights back.
Posted by: john frum ||
03/15/2008 11:12 ||
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By ARIEL COHEN
An incessant and intensifying barrage of Qassam and Katyusha rockets recently forced Israel to undertake the largest ground operation in Gaza since the 2005 pullout. The use of Iranian-manufactured, Russian-designed BM-21 Grad multiple launch rocket systems by Hamas put the Israeli city of Ashkelon, with its power station and refinery, as well as its suburbs, in firing range.
Quadrupling the number of Israelis in danger of rocket fire may also place a stark choice before Prime Minister Ehud Olmert and his center-left coalition: stay under fire and look even weaker than before, or launch a massive land operation into Gaza, take casualties, and suffer more international condemnation.
Much has been written by analysts about how the low-tech Qassams have changed the strategic balance on the ground. Qassams are easy to manufacture: some 8,000 of them have been produced in the garages and back yards of Gaza since 2001. Their use is growing exponentially, turning a nuisance into an existential threat. The rockets may be inaccurate, but for the first time, they are working to achieve the depopulation of Israeli areas within the 1967 borders. Up to one-third of the citizens of Sderot have left.
Sderot is a working class town less than two kilometers from the Gaza border, predominantly populated by Jews from Arab lands. Their flight from the rockets encourages the hope of Iranian President Mahmoud Ahmadinejad and his Hamas and Hezbollah protégés that Israel can be, in their words, "wiped off the face of the Earth."
And there you have it. As far as Hamas and its Iranian sponsors are concerned, the conflict is not never really was about borders. It is about the ability of non-Muslims and non-Arabs to have their own state in the midst of the Muslim ocean.
Ahmadinejad, Sheikh Hassan Nasrallah and Ismail Haniyeh are tapping into a sentiment that runs deep a conviction that denies Israel the right to exist.
According to Hamas's charter, inspired by the Muslim Brotherhood's teachings, as well as Iranian preaching, there should be no Israel not within the 1967 borders, not within the 1948 armistice lines, and not according to the U.N. resolution of November 1947. After all, what are all these man-made lines, when voices in their heads tell Messrs Ahmadinejad et al directly, what should and shouldn't be?
If Qassams and Katyushas do the trick, so be it, says Hamas. If not, there are other means of warfare, from propaganda (jihad of the pen) to suicide bombers to nuclear-armed missiles. Iran, a country with a 3,000-year imperial tradition, takes its time putting the pieces into place. First, it was Hezbollah. Today, it is Hamas in Gaza. And tomorrow?
In a revealing publication in the Sunday Times of London, a Hamas leader revealed a program in which 150 Hamas members flew to Teheran from Damascus to undergo terrorism warfare training. "They come home with more abilities than we need, such as high-tech capabilities, knowledge about land mines and rockets, sniping, and fighting tactics like the ones used by Hezbollah, when they were able to come out of tunnels from behinds the Israelis and attack them successfully." Six hundred more were trained by the Iranians in Syria.
What the Hamas commander did not reveal, and what has been the strategy of Hamas since the early 1990s, is the plan to topple the Fatah-dominated administration in the West Bank. Then, said the late Hamas leader Abdel Aziz al-Rantisi to a confidant, Hamas will turn east, to topple the Hashemite monarchy in Jordan. Hamas will try to create a Palestinian dominated state from Iraq's Western desert to the Mediterranean (Gaza), and only then turn on Israel.
A Hamastan in the West Bank, replete with rockets shooting day after day at Tel Aviv, Petach Tikva, Ra'anana, and Ben Gurion airport, is likely to sap Israeli power and cause many to leave the country.
Yet, the United States, Israel's principal ally, the European governments, the United Nations, and the moderate Arab countries refuse to join or even support Israel in the struggle against the Iranian and Saudi Arabia-funded and trained terror statelet.
Not a single U.N. resolution has been passed condemning the shelling of pre-1967 Israel. The Security Council failed even to denounce the brutal murder of eight Jewish teenage seminary students by a Palestinian gunman, who was celebrated as a hero by militant crowds in Gaza and the West Bank.
This approach is myopic. First, it will signal to Israel that when its existence is on the line, it can expect no support from the international community. Neither the Arabs nor the Americans or Europeans appear to be either willing to or capable of effectively policing Gaza, leaving the job to Israelis. Desperate people are capable of desperate action, especially when cornered. If the world does not put pressure on Hamas to disarm, recognize Israel, and enter negotiations now, many more Jews and Palestinian Arabs could die.
Even more significant is the broader lesson of Hamas and Hezbollah to other Islamist terrorist organizations. The lesson is that not only does suicide terror pay off, but so does the creation of hybrid armies in areas with no effective state control. If not suppressed, al-Qaida in Iraq could have taken this route, and so could Iraq's radical Shiite militias. In the future, such 21st century armies, if created by al-Qaida and its clones, could bring down moderate or secular Arab regimes, such as Lebanon, Jordan, Saudi Arabia, or even the Baathist Syria.
The strategic imperative to sort out the situation with Hamas and its state sponsors, Syria and Iran, stems not only from concerns about Israel's security, but from the clear and present danger, that if not stopped, terrorist organizations can morph into terror armies, fundamentally changing the landscape of the Middle East.
--
Ariel Cohen, Ph.D., is senior research fellow at the Heritage Foundation.
Posted by: Fred ||
03/15/2008 00:00 ||
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#1
So why haven't the Israeli people run the idiot Olmert out of the country on a rail after taring and feathering him?
#2
I think they are going to take it for so long that when they do decide to react it will be some weird Israeli Final Solution or something. The paleos don't really seem to remember what they are trying to recreate. 1968 wasn't that long ago, and Israel has a lot more resources at its command now than they did then. If they only had the will to use them. I think they've given the paleos more than a fair shot at playing nice.
#3
I hate to be this cynical, but I suspect the calculation being made goes something like this: When an Israeli nursery school, hospital or old folks home is hit, there will be a one time, non-negotiable, near apocalyptic removal of paleo / arab dna from Gaza and the West Bank.
Posted by: M. Murcek ||
03/15/2008 14:28 Comments ||
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Saudi Scholar Dr. Walid Al-Rashudi: 50-60 People Perished in Jewish Holocaust. The Killing of All the Jews Will Not Be Satisfactory Compensation for the "Real Holocaust" in Gaza
Following are excerpts from a speech delivered by Dr. Walid Al-Rashudi, head of the Department of Islamic Studies at King Saud University, Saudi Arabia, which aired on Al-Aqsa TV on February 29, 2008.
Walid Al-Rashudi: One of the important things that we must tell people is that what is going on in Palestine today is a real holocaust. This is the real holocaust. A holocaust is not the burning of 50-60 Jews in Germany or Switzerland, but the Jews continue to call it the Holocaust. In case you don't know, let me tell you that more than 90% of the Muslims in the world do not know that the Jews receive reparations from Germany and Switzerland for the so-called Holocaust affair. We believe that there was indeed a holocaust, but how many died? 50-60 people? Afterwards, they used it to blackmail these two countries.
So what are we supposed to say in the face of the Gaza holocaust? What compensation will satisfy us? By Allah, we will not be satisfied even if all the Jews are killed.
EMILE EL-HOKAYEM AND FIRAS MAKSAD Today [March 14th], the Lebanese people should be celebrating the 2005 "independence intifada" that led to the withdrawal of Syrian troops in their country and the hope of peaceful popular change in the Arab world. But they're not. This year's anniversary of the huge gathering in central Beirut after the assassination of former prime minister Rafik Hariri is marked by gloom and fear, not hope and progress.
Story in a nutshell: Not all of their enemy left. The part that left is trying to return.
Three years after the Beirut Spring, Lebanon's sovereignty is besieged by Syria and undermined by Iranian-backed Hezbollah. The population is exhausted and polarized, the economy is in tatters, reconstruction is lagging and the once-improving image of the country is tarnished by violence. Even by the standards of other failing colour revolutions, Lebanon stands out by its tragic recent history and the huge disillusion of its population.
Yet this is what the Lebs have brought on themselves. They agreed to the Taif accords and implemented them for everybody but Hezbollah. They agreed to 1559 and it was implemented by everybody but Hezbollah. They allow self-ruling Paleostinian enclaves, complete with gun-totin' Paleoheroes openly walking the streets, within their territory -- literal no-go areas for their own army and police. Because of their own internal demographics they've decided to be Arab, not Phoenician.
Regaining full sovereignty remains the key objective, if only to open up the political space for much-needed reform of the country's Byzantine sectarian governance system. This is what so many Lebanese, much of the left and most liberals, arguably the progressive vanguard, understood when they joined hands with former warlords and feudal leaders.
They can join hands and play kissy-face all they'd like, but if Hezbollah controls a third of the country or better the remaining 67 percent of the country has to be unnaturally united in action and intent. The Hezbullies, the Syrians, and the Medes and Persians have been pretty good at making sure that doesn't happen. Even in its heyday, Phoenicia wasn't united -- it was a grouping of city states.
Three years ago, there was unprecedented momentum for such change. But then came a war with Israel, another against a jihadi outfit and a relentless campaign of foreign inspired political violence that has left Lebanon teetering on the verge of state failure, unable to elect a new president.
Because of their internal politix, the oligarchs bought into the war launched by the jihadis, lining up to condemn Israel in preference to controlling their own internal and well-armed cancer. Hezbollah's responsible for the damage to Beirut and surroundings just as surely as if they'd been aiming their rockets there instead of at norther Israel.
There are street fights between Sunni and Shia gangs and clashes between Christian factions.
The dukeouts between Shia and Sunni are what looks normal from this distance. A significant portion of the the Christians aligning themselves with the Shiite puppets is something else again. I'd say someone should shoot Aoun, but that's pretty self-evident, and it's entirely likely someone will eventually. But it's hard to sympathize with groups of people who do stoopid things.
While civil war is not yet on the horizon, the spectre of that outcome exists. And if civil war comes, the country will split along ideological lines, not sectarian ones. This would mirror the larger struggle in the Middle East, where forces aligned with ascending Iran are clashing with Arab states allied with the United States.
Much of Iran is "ascending" on mouth power. And ten years from now Hezbollah's likely to be its Frankenstein monster.
The Syrian problem is most acute. Damascus remains bent on reasserting its influence in Lebanon through a campaign of violence and intimidation. Fearing the international tribunal in the case of the Hariri assassination and eager to reverse the loss of Lebanon as its strategic backyard, Syria has made clear that it will break Lebanon unless it has it its way. In Syria's own words, normalization of relations can happen only if and when its allies come to power in Beirut. The two countries are too intertwined to afford such bad relations, and yet Syrian aggressiveness has antagonized huge segments of the Lebanese population. Lebanon needs not pose a threat to Syrian stability or align itself with enemies of Syria, but this is Damascus's call.
It's the measure of the Leb's lack of deviousness that they're not busy subverting Syria, rather than vice versa. You don't have to control a lot of real estate to be a power, only a lot of money, and Lebanon's always been a trade center. It's too bad Wally or Saad Hariri or Elias Murr or the group of them isn't of a mind to subvert the right people in Damascus. They could deflate quite a bit of the crisis without spending too many shekels. Especially with Soddy financial backing.
Only when Syria accepts to deal with Lebanon as a sovereign and equal state will the Lebanese really consider the Syrians fellow Arab brothers.
They'd be better off considering themselves Phoenecians and the Syrians as mere customers.
Another challenge is Hezbollah, the Shia militant organization whose agenda extends beyond Lebanon.
The Huzbullies are pretty much the same threat as Syria. Syria's a sponsor, Iran's an owner.
Hezbollah is an integral part of Lebanese society and a powerful and legitimate social and political actor.
I see where your problem lies. From where we stand, Hezbollah's a wholly owned subsidiary of Iran.
But it maintains a standing militia better trained and equipped than the Lebanese military, and makes decisions of war and peace that should otherwise be the purview of the state. Hezbollah has created an organic link between its weaponry and the security of the Shia community that is proving unbreakable under current conditions. But Hezbollah owes the country some strategic certainty about its objectives and behaviour.
Hezbollah doesn't see itself "owing" the country anything. Its purpose is to create an Iranian coloney on the shores of the Med. They don't regard themselves as Lebanese, but as Shiites.
Lebanon cannot afford another war provoked by Hezbollah's whims, nor can it defer political reform, economic development and integration into the global economy because of Hezbollah's grandiose agenda and foreign loyalties.
But that's precisely what's happening, isn't it?
Yet, for all the violence of the past three years, the various leaders, all too conscious of the enormous costs of an all-out confrontation and the impossibility of winning a decisive victory, have repeatedly walked back on their inflammatory rhetoric. Only a few, mostly the youth, romanticize war. If war comes, the promise of peaceful change becomes a dream deferred.
Most of Leb rebuilt itself after its last interminable civil war. Hezbollah built itself in a different direction than the rest of the country, different even from the direction Amal took, though I don't think Knobby realizes it.
The struggle today is not just over confessional power-sharing, as much of the commentary has it, but over the identity and direction of the country, and ultimately over the dream of a better future. This struggle over values and the future is as important to the West as it is to Lebanon. As a former warlord likes to put it, it is a contest between the merits of the Hong Kong model versus the Hanoi model. It is the hope of an open liberal society versus the entrenchment of a culture of resistance and radicalization. Let's remember, when Beirut's central square got flooded with a million Lebanese flags in 2005, hopes were high. Things did not turn out well, but the values of sovereignty and freedom still resonate powerfully.
I think it's more a reluctance on the part of the March 14 parties to acknowldge the true nature of the enemy that anything else. Once those are acknowledged openly you've started committing yourself to a couse of action -- either surrender or resistance. Either of those brings painful side effects with it. The question is at what point do the side effects they're avoiding become more painful than the effects they're living with.
If a people demonstrates peacefully and obtains what it wants, it is then the international community's responsibility to help protect this achievement when threatened by regional powers. Will the people who took to the streets in 2005, buoyed by progressive ideas, allow regional rivalries to trump their aspirations? Will the world community stand by as Lebanon once again becomes a battlefield for the wars of others? Those are questions worth asking on this anniversary.
Emile El-Hokayem is a research fellow at the Henry L. Stimson Center in Washington. Firas Maksad is executive director of the Lebanon Renaissance Foundation, USA.
Posted by: Fred ||
03/15/2008 00:00 ||
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#1
If a people demonstrates peacefully and obtains what it wants, it is then the international community's responsibility to help protect this achievement when threatened by regional powers
Posted by: Fred ||
03/15/2008 07:35 ||
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#1
To look at a bad situation for good news, with any significant down turn in the economy, the big advertising dollars are going to be targeted to where they think they're going to get an audience. Goodbye Mr. Mathews and take the NYT with you as you leave the building.
#2
Unfortunately while Fox is "conservative" the whole network news schtick isn't conductive to the conservative worldview. It's basically "ZOMGWTFPWNED! Lookit the Crisis! Lookit! Panic! Do Something Now!" and the something usually centralizes society another fraction of a percent.
Since the O-Club has been debating the issue, with reference as to why we have to bail these guys out, I thought I'd post this potential answer. Fire away.
Big American finance houses have collapsed before. Continental Illinois required a $4.5bn (£2.25bn) bail-out in 1984 after coming to grief in Texas as the oil boom deflated.
The giant hedge fund Long Term Capital Management was saved by a club of banks in 1998 under the guidance New York Federal Reserve. The fund blew up after Russia's default, which ravaged its portfolio of Danish, Italian and Spanish bonds.
On both occasions the US economy was in rude good health. The damage was quickly contained.
The implosion of Bear Stearns is more dangerous.
A host of other banks, broker dealers, and hedge funds have played the same game, deploying massive leverage at the top of the credit bubble to eke out extra yield. Dozens of them are saddled with the same toxic debt - sub-prime property, credit cards, auto loans, and mountains of unsold paper from the merger boom.
This time the market for default insurance is flashing bright red warning signals across the entire spectrum of US finance. The swap spreads on Lehman Brothers rocketed to 465 yesterday, mirroring the moves in Bear Stearns debt days before. Fannie Mae and Freddie Mac - the venerable agencies created by Roosevelt that underpin 60pc of the $11 trillion mortgage market - had a heart attack on Monday. Their bonds were in free-fall, threatening to set off another cascade of bank writedowns.
These are not sub-prime outfits. They sit at the apex of the US mortgage credit industry. Hence the dramatic move by the Fed this week to offer a $200bn lifeline, agreeing to accept Fannie Mae and Freddie Mac issues as collateral. Had the Fed delayed, many traders believe Wall Street would have plunged through resistance levels risking a full-fledged crash.
The 'monoline' bond insurers - MBIA, Ambac, and others - that guarantee most of the $2,600bn market for US municipal bonds have seen their shares collapse by 90pc since the Autumn. They are still battling to raise enough to capital to save their 'AAA' ratings. Should they fail, the insured bonds will be downgraded in lockstep. Pension funds would be forced to liquidate huge holdings. As New York Governor Eliot Spitzer said before his own liquidation, such an outcome is too dreadful to contemplate.
You have to go back to the banking crisis of the Great Depression to find a moment when the financial system as a whole seemed so close to the precipice.
Although 4,000 US banks failed in the early 1930s (mostly small ones), it was a long-drawn out affair. The bank runs began in the Prairies as falling food prices caused farmers to default in 1930. It seemed to be a local problem. The crisis reached New York in December 1930 when the Bank of the United States succumbed to panic withdrawals. Legend has it that the 'WASP' clearing banks refused to back a rescue because of the bank's Jewish links.
In those days the contagion spread slowly to the rest of the world. It is much swifter now. The Swiss bank UBS has suffered US sub-prime losses on a scale to match Merrill Lynch and Citigroup, thanks to the curse of mortgage securities.
"We are now experiencing the first truly major crisis of financial globalisation," said the Swiss central bank governor Philipp Hildebrand this week. "Never before have banks seen such destruction of their balance sheets in such a short time. Moreover, there are signs that the problems are spreading. The risk premiums on commercial property, consumer credit and corporate loans have risen sharply," he said.
Debt levels have been much higher than in the Roaring Twenties; the new-fangled tools of structured credit are more opaque: the $415 trillion nexus of derivative contracts is untested. Nobody knows for sure if the counter-parties are able to deliver on vast IOUs, or whether the construct is built on sand.
What keeps Federal Reserve officials turning at night is fear that the "financial accelerator" will now set off a vicious downward spiral. There is a risk of "very adverse economic outcomes," said Fed vice-chair Don Kohn.
Albert Edwards, global strategist at Societe Generale, said the toppling banks are merely a symptom of a deeper rot. "The banks are not the problem. Nor even the grotesquely leveraged funds. The problem is that an economic bubble financed by ridiculously loose monetary policy is unravelling," he said. "US house prices have a lot further to fall, which will simply crush the global economy. The lesson from Japan in the early 1990s is that the death dance goes on and on and on," he said.
The Fed blundered badly in the Slump, delaying rate cuts for too long. It allowed the money supply to implode. It is acting with breath-taking speed this time. Rates have already been cut from 5.25pc to 3pc, and will be slashed again this week. New means of showering liquidity on the banking system are being devised each weak.
As luck would have it, the world's greatest expert on the financial causes of depressions - Ben Bernanke - happens to be chairman of the Federal Reserve.
Posted by: Steve White ||
03/15/2008 00:00 ||
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#1
"US house prices have a lot further to fall, which will simply crush the global economy."
I wonder if it's ever occurred to the rest of the world that if their jealously-fueled fantasies about us come true, that hatred will also destroy them.
Posted by: Barbara Skolaut ||
03/15/2008 0:13 Comments ||
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#2
The lending against over-valued real estate is a worldwide problem. Although some countries are worse than others.
FWIIW, I think Australia has a bigger problem. Although, we are perhaps a year behind the US in the cycle.
#3
Oh, yes please, let's bail out the people whose irresponsibility and criminal culpability cause the situation in the first place.
And Barbara, they won't see it like that - they'll just hate us all the more, because it's our fault. It won't occur to them that the outcome they've been fervently wishing for has happened.
#4
The way I now understand the sub-prime game these folks can go down now. I don't care. If nasty folks try to collect from these funds ... I will look the other way. Them and the horse they ride on deserve whatever...
#6
These financial people should know better! Find the responsible parties that should have said no, and put them in prison.
And, if needed, pass legislation to prevent this crap from happening again. And Europe can get bent, Commie bastards.
Posted by: Large Uling4643 ||
03/15/2008 3:09 Comments ||
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#7
Warren Buffett once said about the financial world, "You only learn who has been swimming naked when the tide goes out " Bear Stearns should change its name to: "Bare Sterns"
The key risk at the moment is a collapse of credit, which hasn't happened in our lifetimes. Among other things, this would mean 1000's of viable businesses couldn't get loans to carry on, they would vanish, along with 100,000s (or more) of jobs in a tsunami of business contraction. It's not just about rewarding irresponsible and greedy bankers and financiers.
#8
It's not just about rewarding irresponsible and greedy bankers and financiers.
Odd, it seems to have that effect, no? The old argument of "think of the little people" has worn out its welcome. Don't you think that the bankers and financiers knew this argument would come out when they made their criminally negligent moves? And why did they do this? It wasn't to make a profit - profits were already good. They committed crimes to make extra money on top of their already good business.
#9
I've been through a mild housing price deflation just after the oil price collapse in in Tulsa, OK, March, 1982, when my rent went from 350 mo. to 220 mo.
There was a lot of whining and warnings, and some banks collapsed, but in the end there was no apocalyptic ending. Banks and businesses adjusted their balance sheets, and life went on.
My problem with this financial crisis is that banks rode the market, not the other way round; they gambled and now Vito the collector is pounding on the door, to use a metaphor.
Bailouts may save a player or two, but ultimately, the only medicine is the shakeout that is coming. Markets are too large and amorphous for government, any government no matter how large or how much they spend to handle, so the best governments can do is to be there with the usual help when the crackup is over.
#11
You have to go back to the banking crisis of the Great Depression to find a moment when the financial system as a whole seemed so close to the precipice.
Which is why the government instituted laws that inhibited banks from engaging in speculative market activity. Those laws were repealed in the 80s during the 'clean up' known as the non-FDIC Savings and Loan bailout. Since then we've had the DotCom and Housing Boom and Bust. Anyone paying attention? There will be no confidence by the general public till the effect of those laws is reinstituted. Otherwise we can cynically sit here and write that those who created the mess will in fact be bailed out at the expense of everyone else and things will continue to repeat themselves, because in the end we have to do it for 'the children' or some other tripe about how we're in this boat together. Bah. If we are to assume the liability as a whole, then we should damn well get the assets as a whole too.
#12
The non-FDIC S&L collapse was created by the same New Dealers who created the Glass Steagall Act. Returning to the bad old days will help nothing, as the Federal Reserve continues to demonstrate by its handling of this crisis.
Regardless of the stern measures taken, these sorts of events will continue to happen until humans are no longer motivated by greed and fear. And as the financial environment evolves, financial institutions and regulation will have to evolve. The current model of evolution in financial markets would seem to be punctuated equilibrium. We seem to be in one of the punctures. The faster we let all the air out of the bubble, the faster we will reach the new equilibrium.
#13
The non-FDIC Savings and Loans, chartered by states not by the federal government engaged in property speculation and we were towed under when their market went south. The MSM media drummed up the 'doom and gloom' with nightly pictures of 'poor old' Ma and Pa Kettle literally losing the farm, but not looking at the paper which showed that they either grossly mismanaged the farm or had hocked the farm to engage in property speculation which their friendly local banker greatly assisted in the precursor boom period. The FDICs weren't in trouble but you wouldn't have known that from MSM. Instead pressure was placed upon the federal government 'to do something'. What resulted was a windfall for the major banks, who in assuming the assets of the failed banks were able to pass the liability off to the American people to the sum of about a half a trillion dollars in paper debt and release from the Depression era market constraints. Which gets us here today. Why should we get hammered for the actions of a few? That makes this the good new days when the Fed is pumping billions into the market undermining the very value of the dollar to the average citizen. This is a socialist dream, we're all going to be equally poor.
Bad old days? You got me, what bad old days? When there was a throttle on the highs and the lows? When the average citizen wasn't expected to pick up the bill in one form or another of someone's gambling habit?
#14
There are a few cruel truths that this is exposing.
1) The US building market, not just the home market, is terribly inflated, far beyond its actual value. The US economy *as a whole* reflects inflation beyond value.
2) This happened through broad, international speculation over the course of decades. However, the US has a habit of sticking it to foreigners who try to make fast, huge profits on our soil.
3) There is a good chance the the US, and much of the world, is about to experience "less destructive deflation", in which there is a "global cooling" of the markets, which begins with lower prices, lower wages, and a sloughing off of "flimsy" companies and artificial financial constructs. Starts with something of a recession, but that is just a reduction of the overextension.
That is, everything declines back to more realistic levels. A retrenchment from an overactive growth economy to a more stable one. Less international trade, lower margins and interest.
Before Jimmy Carter, the DOW for years vacillated between 800 and 1000. The FED use those markers to determine their actions: decline to 800 meant to slightly stimulate, advance to 1000 meant to slightly soothe. But Carter's "stagflation" messed up that system.
In truth, the markets had built up a lot of potential for a great leap in growth, and Carter's economic avarice opened the door for Reagan to permit that growth.
So what we should look for in the future is a return to a FED policy that finds the comfortable upper and lower limits to the markets, then guides the economy between the two, like it used to do.
Already some guesses are that it will be between 6000 and 10,000 on the DOW, with other markets and financial systems having rough parallels.
#15
Behold the double-edged sword that is capitalism: raw, unadulterated greed has built the economic powerhouse that is this country; raw, unadulterated greed will tear us down. The inevitable pendulum-swing towards 'aggressive regulation' won't do squat to solve the problem. We'll use our scant regulatory resources to put a band-aid on the disaster-du-jour and stick our heads back in the sand, while the captains of industry figure out the next unregulated bonanza to risk our collective futures on. That's what happened here: folks like Bear Sterns figured out they could make/carry housing loans off-balance-sheet (and thus, beyond the reach of banking regulators), backing them up with complex financial instruments called derivatives that obscured their inherent risk. The Fed warned *years ago* that these instruments were very 'opaque' instruments: difficult for investors to understand the risk baked in and difficult for regulators to regulate. No one cared as long as the $$$$ rolled in. The 'unwinding' you're seeing from Bear Sterns, citibank, etc. is a *gradual* owning up to reality: they write-off, on balance sheet, $2B in bad debt, which, unfortunately, means they are now required to have reserves to back them - no reserves = no liquidity, which is the crisis we're in. Fact is, none of the banks - or the Chinese, for that matter, who hold a shitload of this bad debt, too - know just how exposed they are (see: derivatives, referenced earlier). They are giving us 'bones' of $2 billion here, $10 billion there, slowly fessing up to the rotting corpses they've accumulated. The smell is overpowering. Cue: the government, riding in on white horses to bail them all out, on the taxpayer's dime. I'm inclined to say 'screw the bankers, let them all burn.' Bailing them out means they learn nothing. Put a bunch of them in jail (didn't the CEO of Citibank get a $400M golden parachute upon retirement?). Let them go out of business.
Problem is, that could create a systemic collapse of the banking system. Which is what the Fed/government is most afraid of (but not telling anyone). Behold the roller-coaster ride that is capitalism.
#16
"We are now experiencing the first truly major crisis of financial globalisation," said the Swiss central bank governor Philipp Hildebrand this week. "
And what was the Asian currency crisis (1998-ish)? A hiccup? If we hadn't contained that, all hell would have broken loose.
#17
Demand laws that require liquidity of the banks and brokerages.
Outlaw the use of margin borrowing for speculative investment.
Require that all commodity futures traders take delivery and holding the commodity for at least 30 days. This kills off the hedge funds manipulation of the commodities market s with borrowed money - the source of a majority of the huge leaps in prices for oil and grains.
#21
Accountability. -I sincerely hop this is not more 'baby boomer' bullcrap which me and younger will have to clean up. Personally, I'd rather see my taxes go to fix this mess than to paleostan, also instead of paying outragous wages to the board room executives, especially for quitting, it should go to fix their company. My tax dollars should not be spent in this way- I am not a safety net for speculators.
And if it is really going to crush the global economy let the geniouses at the international banking system pay for it (oh you don't do that?), because they jumped off the building trying to land at the bottom of the rainbow.
Basically, I'm tired of other people spending my money, and cleaning up other people's messes.
More laws, spit. How about a law against falling down so no more old gentiles break their hips. I would love a law stating that all my golf shots are 'hole in one's but then it wouldn't be golf now would it?
#22
All this is well and good, and lots of excellent comments have been made. Unfortunately, two major factors have been left out - the huge increase of debt, both for the Federal Government and for the individual. I'd bet that I'm one of fewer than five regular commenters here who don't own a credit card. I'd also bet that if you went to the average bulletin board (not KKKos or DU), you'd find that half the regular posters had their credit cards maxed out.
The credit crunch that's just over the horizon won't affect me much. I have a fixed-rate mortgage that's more than half paid, and for the last ten years I've been making additional payments on the principal of the loan. My only other debt is an unsecured line of credit with my local bank. I've got enough income to make these payments and still have plenty to live on. My only worry is that the Federal Government will create a situation where there will be spiraling inflation with no concurrent increase in income - making us all paupers. This is the first step toward a totalitarian state, and will be a warning indicator to the rest of us. At that point, it's time to return to the second paragraph of the Declaration of Independence, in its entirety.
Posted by: Old Patriot ||
03/15/2008 21:20 Comments ||
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#23
I just gotta wonder.....
Will the Executives of Bear Stearns still get their big bonuses?
A multi-volume chronology and reference guide set detailing three years of the Mexican Drug War between 2010 and 2012.
Rantburg.com and borderlandbeat.com correspondent and author Chris Covert presents his first non-fiction work detailing
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Rantburg was assembled from recycled algorithms in the United States of America. No
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Today [March 14th], the Lebanese people should be celebrating the 2005 "independence intifada" that led to the withdrawal of Syrian troops in their country and the hope of peaceful popular change in the Arab world. But they're not. This year's anniversary of the huge gathering in central Beirut after the assassination of former prime minister Rafik Hariri is marked by gloom and fear, not hope and progress.
