Congress Check

Troops Randomly Patrol Streets In Pittsburgh, Respond To “Domestic Disputes”

Congress Check — Tue, 09 Feb 2010 12:14:00 +0000

Flagrant violation of Posse Comitatus as Americans conditioned to accept military Humvees rolling around their neighborhoods

Paul Joseph Watson
Prison Planet.com
Tuesday, February 9, 2010

Americans are once again being conditioned to accept the sight of troops patrolling the streets and dealing with domestic law enforcement issues under the pretext of National Guard soldiers “helping” recovery efforts after the deluge of snow that has hit the East coast, the same soldiers who just months ago were also “helping” authorities to brutalize innocent people during the G20 summit in Pittsburgh.

“In the aftermath of the weekend’s storm, hundreds of National Guard members have been helping Pittsburgh’s emergency personnel respond to residents’ needs; and beginning tonight, they’re also going to be patrolling some city streets,” reports KDKA.

“We will also begin to have the National Guard patrol our neighborhoods to deal with any issues that come up,” Pittsburgh Mayor Luke Ravenstahl announced at an afternoon news conference. “So city residents,” he added, “be advised that you will begin to see National Guard Humvees in some of your neighborhoods beginning this evening.”

The Pittsburgh Post-Gazette also reported that Gov. Ed Rendell dispatched the troops to deal with all manner of calls that would normally be handled by police, including “domestic disputes”.

The use of National Guard soldiers to provide aid in emergency situations is a perfectly reasonable measure, but when those troops start to randomly patrol the streets and work with cops in dealing with “domestic disputes” and “any issues that come up,” then a dangerous precedent is being set, especially considering the fact that less than five months ago, these same troops were working with the Army and the Air Force to conduct “crowd control” duties and run military checkpoints during the G20 summit.

Indeed, Pittsburgh Guardsmen kept themselves busy “helping” troops, military, and multi-agency task force teams to abduct protesters off the streets, attack and terrorize peaceful demonstrators, and inflict LRAD torture weapons on innocent bystanders during the martial law showcase last September.

The troops had previously been deployed “in support of military operations around the world” under the banner of the war on terror.

(ARTICLE CONTINUES BELOW)

It is important to emphasize the fact that not only are National Guard now being deployed on a regular basis around the country on virtually any pretext, battle hardened active duty combat soldiers are also being used in “humanitarian exercises” under the banner of Northcom.

As we reported in 2008, troops from 3rd Infantry Division’s 1st Brigade Combat Team trained to rescue people from wrecked cars in a propaganda piece aimed at convincing Americans to accept soldiers on the streets as routine. The troops were part of Northcom’s move to deploy tens of thousands of active duty soldiers inside America by September 2011 to deal with “domestic security,” including “civil unrest” and “crowd control”.

As Alex Jones exposed back in the late 1990’s, U.S. troops have been training for this eventuality for a considerable amount of time. During numerous urban warfare drills that Jones attended and reported on, troops were trained to raid, arrest and imprison U.S. citizens in detention camps as well as taking over public buildings and running checkpoints. During role playing exercises, actors playing prisoners would scream “I’m an American citizen, I have rights” as they were being dragged away by troops.

Deploying National Guard troops on a completely random basis to deal with “any issues that come up,” including “domestic disputes” is a clear violation of Posse Comitatus. Guardsmen need to be tightly restricted to aiding only in emergency situations. Governor Rendell’s use of the soldiers in such a slapdash way is a flagrant violation of the 1878 law that forbids the Army, Air Force, and State National Guard forces from exercising nominally state law enforcement, police, or peace officer powers to maintain “law and order”.

Rendell, along with Mayor Luke Ravenstahl, have both breached the oath they swore to preserve and protect the Constitution.

Watch a You Tube clip below where a Pittsburgh resident explains how the deployment of the Guard is another example of mission creep and fascism as the United States accelerates towards a military form of government.

Australia to introduce body scanners after failed US attack

Congress Check — Tue, 09 Feb 2010 12:09:20 +0000

Times Of India
Tuesday, February 9th, 2010

SYDNEY: Australia will introduce full body scans for airline passengers as it strengthens aviation security in response to a failed attempt to bring down a US-bound plane, the government said on Tuesday.

Prime Minister Kevin Rudd said 200 million dollars (173 million US) would be spent over four years on increased airport policing and security technology after the attempted bombing of a jet flying from Amsterdam to Detroit on December 25.

“The Christmas Day attempt showed that no nation can afford to be complacent when it comes to security,” he told reporters in Canberra. “The government’s highest priority is the safety and security of Australians.”

Rudd said the government would spend 28.5 million dollars helping the industry fund a range of new screening technologies, including body scanners, multi-view x-ray machines, and bottle scanners that detect liquid explosives.

Full article here

“When the people find they can vote themselves money, that will herald the end of the republic.” – Fall Of The Republic – Buy the DVD here

My Left Breast Put Fancy TSA Scanner to the Test

Congress Check — Tue, 09 Feb 2010 12:09:19 +0000

Sandra Fish
Politics Daily
Tuesday, February 9th, 2010

A funny thing happened to me at airport security this week: The full-body scanner appeared to detect my fake left breast.

After I sauntered sleepily through the regular scanner at Denver International Airport, the TSA guy motioned me into the clear, cylindrical, full-body scanner (aka, the Millimeter Wave). The woman there asked me to step on the yellow footprints and raise my arms above my head. She murmured into a headset to start the scan. There was a quick motion through the plexiglass. She asked me to turn, step on the green footprints and hold my arms straight out. Another scan.

She motioned me out of the scanner and asked me to wait for word from someone in some secret room somewhere, someone looking at a vision of my body sans jeans, cardigan, turtleneck, etc. Hmmm . . .

Then she said she needed to check something. And she began sweeping her hands around my left breast and rib cage.

[...]

Back to the TSA. As the security screening woman felt me up, I mentioned to her that I have an implant, the result of mastectomy. She relayed the information to those unseen through her microphone.

A few seconds later, she sent me on my way. And I tweeted and Facebooked about the experience. A friend in Tallahassee mentioned that friend of his had to lift his shirt to expose his colostomy bag to the TSA in Philadelphia. I’m happy I didn’t have to expose anything to the scanning lady, and she should be too. Medical professionals I’ve met consider my surgical aftermath a work of art, but laypeople might be kind of weirded out by the oval skin graft and the way I can flex my breast (the lat dorsi still seems to work!). Then again, this is nothing compared to what my friend Diane goes through — she has two rebuilt hips and two fake tatas, the latter courtesy of breast cancer.

Full article here

“When the people find they can vote themselves money, that will herald the end of the republic.” – Fall Of The Republic – Buy the DVD here

75% Are Angry At Government’s Current Policies

Congress Check — Tue, 09 Feb 2010 12:09:08 +0000

Rasmussen
Tuesday, February 9th, 2010

Voters are madder than ever at the current policies of the federal government.

A new Rasmussen Reports national telephone survey shows that 75% of likely voters now say they are at least somewhat angry at the government’s current policies, up four points from late November and up nine points since September. The overall figures include 45% who are Very Angry, also a nine-point increase since September.

Just 19% now say they’re not very or not at all angry at the government’s policies, down eight points from the previous survey and down 11 from September. That 19% includes only eight percent (8%) who say they’re not angry at all and 11% who are not very angry.

Part of the frustration is likely due to the belief of 60% of voters that neither Republican political leaders nor Democratic political leaders have a good understanding of what is needed today. That finding is identical to the view last September, just after the tumultuous congressional town hall meetings the month before. But only 52% felt this way in November.

Full article here

“When the people find they can vote themselves money, that will herald the end of the republic.” – Fall Of The Republic – Buy the DVD here

Residents Fumed Over Weekend Alcohol, Firearm Ban

Congress Check — Tue, 09 Feb 2010 12:09:06 +0000

WXII12
Tuesday, February 9th, 2010

Residents in King were fumed over the weekend after a state of emergency declaration restricted the sale of alcohol and the carrying of firearms in vehicles.

King Police Chief Paula May said she’s received hundreds of threats related to the restrictions, which banned driving from 12 a.m. Sunday to 5 a.m.

The state of emergency for King was declared by members of the City Council after Stokes County authorities also declared a state of emergency.

Under North Carolina law, May said, when a state of emergency is put into place that includes a ban on driving, the sale of alcohol and carrying of firearms in vehicles is also banned. King Police Chief Paula May said she’s received hundreds of threats related to the restrictions, which banned driving from 12 a.m. Sunday to 5 a.m.

Full article here

IPCC faces another desertion – its own past chair!

Congress Check — Tue, 09 Feb 2010 12:08:53 +0000

Lawrence Solomon
Financial Post
Tuesday, February 9th, 2010

The past chairman of the UN’s Intergovernmental Panel on Climate Change has joined the growing list of IPCC critics. According to the Sunday Telegraph, Rajendra Pachauri, the disgraced current IPCC chair, now faces criticism from his immediate predecessor, Robert Watson. The Telegraph reports that Watson “stressed that the chairman must take responsibility for correcting errors.” In another indication that Watson is taking pains to distance himself from the organization he once headed, the Sunday Times, in a story entitled Top British scientist says UN panel is losing credibility, reports that Watson warned the IPCC that it must tackle its blunders.

Watson’s comments come on the heels of another glaring embarrassment to come out of the IPCC, this time a claim that global warming could cut crop production in north Africa by up to 50% by 2020. “Any such projection should be based on peer-reviewed literature from computer modelling of how agricultural yields would respond to climate change,” Watson stated. “I can see no such data supporting the IPCC report.”
In this latest high-profile IPCC gaffe, which has been repeated around the world, including by UN Secretary-General Ban Ki-moon, the IPCC seems to have relied on a 2003 report from a Winnipeg-based think tank called the International Institute for Sustainable Development. The report, which was not peer-reviewed, in turn seems to have relied on submissions to the UN by civil servants from Tunisia, Algeria, and Morocco, which also appear not to have been peer-reviewed.

Apart from his post as past IPCC chair, Watson is also the UK’s highest level environmental scientist, as Chief Scientist at the UK’s environment ministry. Prior to his current position, which he assumed in 2007, Watson was Chair of Environmental Science and Science Director of the Tyndall Centre at the University of East Anglia, the same university caught up in the Climategate scandal.

Watson’s new-found scepticism of the science being produced by the IPCC represents an ironic reversal. In 2002, he remarked that “The only person who doesn’t believe the science is President Bush.”

“When the people find they can vote themselves money, that will herald the end of the republic.” – Fall Of The Republic – Buy the DVD here

Yet Another War On Terror Myth Bites The Dust

Congress Check — Tue, 09 Feb 2010 12:03:43 +0000

YOUR NEW REALITY
Tuesday, February 9th, 2010

Stunning. It doesn’t matter what kind of bullshit you try and spin when it comes to the War On/Of Terror, the American mainstream media will line up to let you create a new reality that goes against the law, humanity and downright commonsense.

From ABC News :

John Kiriakou, the former CIA operative who affirmed claims that waterboarding quickly unloosed the tongues of hard-core terrorists, says he didn’t know what he was talking about.Kiriakou, a 15-year veteran of the agency’s intelligence analysis and operations directorates, electrified the hand-wringing national debate over torture in December 2007 when he told ABC’s Brian Ross and Richard Esposito in a much ballyhooed, exclusive interview that senior al Qaeda commando Abu Zubaydah cracked after only one application of the face cloth and water.

“From that day on, he answered every question,” Kiriakou said. “The threat information he provided disrupted a number of attacks, maybe dozens of attacks.”

“It works, is the bottom line,” conservative talk show host Rush Limbaugh exclaimed on his radio show the day after Kiriakou’s ABC interview. “Thirty to 35 seconds, and it works.”

A cascade of similar acclamations followed, muffling — to this day — the later revelation that Zubaydah had in fact been waterboarded at least 83 times.

Kiriakou did his job. He got the Torture Works! idea into the mainstream media.

Now he’s got a book out, he’s oh so sorry he lied, and so successfully seeded disinformation not only through US media, but international media as well.

“I wasn’t there when the interrogation took place; instead, I relied on what I’d heard and read inside the agency at the time.”

….Kiriakou….didn’t have any first hand knowledge of anything relating to CIA torture routines, and still doesn’t. And he claims that the disinformation he helped spread was a CIA dirty trick: “In retrospect, it was a valuable lesson in how the CIA uses the fine arts of deception even among its own.”

Right. That’s why he gave literally dozens of interviews, repeating the claim that waterboarding suspects works to stop terrorism.

I don’t believe him. Let’s waterboard him and see what he has to say then.

Medicaid: False Solutions vs. American Solutions

Congress Check — Tue, 09 Feb 2010 12:00:59 +0000

David McKalip, M.D.
Campaign For Liberty
Tuesday, February 9th, 2010

In Florida, as in the rest of the country, Medicaid is on the Ropes. Medicaid is the government run single payer system for the poor. This fiscally unsustainable program created during the 60’s Great Society utopian dream is failing like all of its other programs. Sadly it is the people who need the help the most — the poor — that are needlessly suffering. There are ways to modify the program so the government can provide help that taxpayers can afford while allowing real help through the best parts of our society: the free market and charity. But it will require that politicians stop promising something for nothing – promises that can’t be kept.

Problems and false solutions

Medicaid’s problems are numerous but action by Florida government is appropriately motivated by its enormous cost. Medicaid currently consumes nearly 29% of the Florida’s $66.5 billion budget and serves 2.9 million of Florida’s 18.9 million people. This number has grown more rapidly lately given Florida’s 11% unemployment rate, but unemployment is not the main reason for Medicaid’s problems. The state needs $19.1 billion ($19,000,000,000) to serve the 2.9 million people who enter the program if they earn less than 100% of the federal poverty level. The state budgeted $17.5 billion for the 2009-2010, but now is about $1.8 billion short which may climb to $3 billion. Now the health insurance companies are vying to take over the $19.1 billion in spending. They claim they can save money for the state by imposing “managed care” models on the medical care these patients receive. Unfortunately, the problems faced by Medicaid patients don’t stem from lack of management of their care by bureaucrats — they stem from a failed economic model to help the poor: a government program. But let’s first dissect the broad principles of a managed care take over.

Clearly, Florida’s health insurance industry would enjoy adding a gross revenue of $19.1 billion to its balance sheet and can then plan on a guaranteed profit margin that will result in another billion or so for its stock holders and CEO’s. While Profits in companies operating in a truly free market should be celebrated, profits from taxpayers should be derided when they rely on companies engaging in “rent-seeking” behavior off of the government. This is also known as “corporate welfare” or profiting from the rent paid by taxpayers to a non-governmental entity. At some points, the bailouts will start. Insurance companies control doesn’t mean there will be more money for patient care. In fact, under the mandated Medicaid managed care model, available funds for patient care will actually decrease as companies necessarily take unnatural profits for their services from these limited funds. That profit will be made by decreasing spending on patients.

The insurance companies, and governments, like to claim that they can squeeze “efficiencies” out of the system by ensuring that the “right care”, is delivered at the “right time” to the “right patients”. In this model, every episode of care will be given a global or “capitated” budget. For instance, if the insurance company arbitrarily decides it will spend no more than $10,000 on a patient’s heart surgery over a 90 day episode, it will do everything it can to force medical care to meet this budget. They will offer incentives to doctors and hospitals who will receive more money if they spend less on medical care. Voluntary capitation system has its place in a free (voluntary) market. But at some point advanced medical care actually does cost significant dollars and no amount of bureaucratic planning or tinkering can fix that without hurting patients. It also hurts the doctors who won’t compromise their professionalism with high volume, lower quality care at cut-rate prices and interference in the patient-physician relationship. The insurance companies and government will seek to intimidate doctors into taking less and punish them if they are deemed “inefficient” with withheld bonuses. This is known as a “pay for performance” program and requires the companies to withhold financial “incentives” that actually came from lowering payments to all those doctors who choose not to participate for many good reasons. In addition, when insurance companies own all Medicaid dollars, they will force doctors to accept them if they want to take private patients. This will mean an increase in cost to private patients to compensate, or doctors dropping out of some private plans and becoming unavailable to private patients.

While the third parties to the patient-physician relationship (government and insurance companies) claim they are acting in the name of “quality”, they are motivated only by cost. In fact “value-based purchasing” programs have been shown to lead doctors and hospitals to avoid higher risk (sicker) and costlier patients and game the system to get a good report card. Pay for Performance has actually been scientifically demonstrated to have no beneficial effect on patient’s actual health or lifespan and has also been proven to hurt patients. For instance, the government required all hospitals to publicly report how frequently patients got beta-blockers within 24 hours after a heart attack. This is a generally a good clinical practice when doctors make the right decision about giving the right patients the drug at the right time. The doctor. Unfortunately, the committees and bureaucrats that created these policies prompted automatic delivery of these drugs to patients in the emergency rooms whether it was right for the heart attack patient or not (to get a good report card). Sadly, there are patients that should not receive these drugs- those with congestive heart failure. They got them and went into shock resulting in earlier deaths. As a result, the government committees “retired” this “quality” measure — but only after four years of damage being caused to patients. There are many similar stories about the failures of centrally planned and delivered medical care by committee. These examples should teach everyone that this is not the way to help patients. Such quality initiatives should not be hijacked by insurance companies and government as an excuse to justify a cost-savings or rationing program.

Medicaid patients also face tremendous problems accessing the care they need. Right now these patients can’t easily find specialists and don’t have rapid access to the same primary care doctors others do. There reason is simple: Medicaid pays doctors 56% of what Medicare pays. Medicare already limits the amount of money a doctor can collect for their services to a price that is lower than the cost of care. When Medicaid adopts nearly half that rate, doctors disappear. It is thus hard to find neurologists, orthopedic surgeons, neurosurgeons, cardiologists and pain management specialties for them. They enter primary care situations where nurses serve as the doctor. They also end up using the emergency room about twice as often as even the uninsured (per the Urban institute) since they can’t get rapid and needed primary care in the community. There is no solution in Tallahassee, Washington D.C. or the insurance company board room that will solve this problem. Most government plans turn the system over to insurance companies, force money from taxpayers, borrow it from china or simply have the Federal Reserve print it like monopoly money. In fact the state of Florida is receiving over $12 billion in borrowed and printed federal “stimulus” money just to stay afloat now. These approaches are having very negative effects on Americans and our national security and are failing to meet the needs of the most vulnerable people with health problems: the poor.

An American solution for Medicaid

But there is an American solution already present in our society to help those in need. It is time start activating the most powerful anti-poverty programs in the history of mankind: the free market and charitable activity. Right now, the government forbids patients who receive Medicaid from having a charity donate money to assist in the care of Medicaid patients. If a family member wants to help pay the bill of a Medicaid patient, they too are forbidden. I had a brain tumor patient show up in the ER and tell me that a large cancer center wouldn’t take care of her since she had Medicaid. Her story helped inspire me to found a charity to help patients like her and others. We would raise private money and give her a check so that the cancer center could take what Medicaid can pay and the charity would pay the rest. The only problem that this is currently against the law! The state calls that “balance billing” and feels it is inappropriate for purely political reasons. It is also against the law for Medicare and the insurance industry wants to outlaw it for private insurance so they can force doctors to be controlled by their payment policies that hurt patients. It is worth noting that the right of patients to privately contract with their doctors for balance billing in exchange for faster and desired care was allowed until the end of the ‘80’s. Doctors always adjusted rates voluntarily in this system to help the poor as well. A great American solution would have politicians change the law to allow charity to grow and flourish and provide the financial help patients need while allowing the taxpayers and government to provide the limited, economically sustainable and temporary help they can afford.

Another American solution involves restoring the free market in health care. (The over-regulated insurance industry engaging in rent seeking and reliant on government bailouts is not a true free market). We can lower the costs of health care and health insurance if we encourage people to pay for routine annual medical care out of pocket through health savings accounts that build up tax free (the government let’s you keep your own money). People should also consider buying lower cost high-deductible health insurance and use it only rarely when they have a medical catastrophe. In fact, we can fund health savings accounts for Medicaid patients, match funds into them through charity, and stop treating them like they aren’t smart enough to spend money on medical care wisely. I know they are capable, because I have taken care of so many patients on Medicaid. They could also benefit from participating with everyone else in society in low cost catastrophic insurance pools.

We could also ease regulation to permit insurance companies to offer lower cost basic health policies people want rather than saddle them with expensive “benefits” many don’t need: like a hair prosthesis, marriage counseling or acupuncture. It has also been shown that when people who aren’t poor pay out of pocket for medical care, they drive down costs for all- including the poor. Costs have gone up with government and insurance company control and their solutions aren’t helping Americans or the poor. Florida should change the law to allow charity and families to supplement Medicaid spending and work to encourage growth of health savings accounts and catastrophic health insurance plans. They should encourage the growth of more basic health insurance plans and allow Floridians to buy cheaper plans across state lines. Applying these American solutions will give people better care at lower cost than any plan concocted by politicians, a government committee or insurance company. Then the government can send billions back to the taxpayer, instead of to insurance companies — money that will be used to create jobs and actually lower the number of poor requiring assistance.

Man nearly dies after one spray of Lynx deodorant

Congress Check — Tue, 09 Feb 2010 11:58:56 +0000

Ethan A. Huff
Natural News
Tuesday, February 9th, 2010

A British man who had never before had an allergic reaction in his life almost died on Christmas Day after using a popular deodorant spray called Lynx. After spraying himself with it, Darren Palmer began to develop an itchy rash that quickly developed into anaphylactic shock which left him unconscious.

Palmer indicated that he had used this brand of deodorant before without any problems, however the product that almost killed him was from a new line called “Fever” which may have had new, unknown chemicals in it that caused a severe reaction. After his initial reaction, Palmer immediately tried to take a shower to get the product off his body. When he realized that the reaction was only getting worse, he panicked and tried to get out of the shower but collapsed in the bathtub.

The spray caused Palmer’s throat and windpipe to swell, rendering him unable to breathe. According to paramedics, he would have died were it not for the quick response of his wife, Joanne, who immediately called for help upon discovering her husband unconscious.

The paramedics arrived in time to administer adrenaline and oxygen which helped Palmer to begin breathing again. He was rushed to the hospital where he eventually recovered, but experts have been unable to figure out exactly what triggered the reaction.

Interestingly, Palmer makes a living as a motorway maintenance worker where he deals with chemical sprays all the time. He explained to reporters that he had never had any sort of allergic reaction from the chemicals he works with nor with any food products.

Public health officials were also at a loss for providing any sort of explanation, indicating that it is rare for a person to suffer anaphylactic shock after spraying themselves with deodorant. Nevertheless, the armpits are a sensitive area where a quick reaction from an allergen is likely to have the worst effect.

Spokesmen from Lynx expressed regret about the situation, explaining that they plan to investigate the situation further. According to the company, Lynx’s “Fever” line of deodorants were tested more rigorously than all their other products.

Many spray deodorants are filled with potentially toxic substances, some of which can lead to cancer. Since these things are going to end up in your body, it is important to seek out brands that do not use toxic chemicals in their formulas and research all the ingredients before making a decision.

Sources for this story include: http://www.dailymail.co.uk/news/art…

“When the people find they can vote themselves money, that will herald the end of the republic.” – Fall Of The Republic – Buy the DVD here

Officer: U.S. missionaries had tried to take other Haitian kids

Congress Check — Tue, 09 Feb 2010 11:54:55 +0000

Karl Penhaul,
CNN
Tuesday, February 9th, 2010

The group of American missionaries in Haiti facing kidnapping charges for trying to take 33 children out of the country last week made an earlier, unsuccessful attempt at taking dozens of other children, a Haitian police officer said Monday.

The officer did not want to be identified for fear of reprisals. He told CNN that he had stopped the 10 Baptist missionaries, including group leader Laura Silsby, on January 26 as they tried to transport 40 children on a bus from Haiti to the Dominican Republic.

The officer said he discovered Silsby and the nine other Americans on a bus in the Port-au-Prince neighborhood of Petionville in the early afternoon of January 26 after receiving a tip from a concerned citizen.

He stopped the group and ordered the children to get off the bus. He then directed Silsby to the Dominican embassy.

Full article here

“When the people find they can vote themselves money, that will herald the end of the republic.” – Fall Of The Republic – Buy the DVD here

Remarks By Bill Dudley At Australia Dodecatuple Secret Banker Meeting: Where We Have Been, Where We Are And Where We Need To Go

Congress Check — Tue, 09 Feb 2010 11:53:01 +0000

Tyler Durden
Zero Hedge
Tuesday, February 9th, 2010

Remarks at the Reserve Bank of Australia’s 50th Anniversary Symposium, Sydney, Australia

The U.S. Financial System: Where We Have Been, Where We Are and Where We Need to Go

by William C. Dudley

Today, my remarks will focus on the U.S. and global financial systems:

What went wrong to produce the worst financial crisis in the past 70 years?
Where are we now?
What should be our top priorities to ensure that this never happens again?

As always, my views are my own and do not necessarily reflect those of the Federal Open Market Committee or the Federal Reserve System.

With respect to what went wrong, it is important to recognize that the financial crisis occurred for a host of reasons and, thus, there is no single silver bullet to avoid such crises in the future. At the heart of the crisis was a tremendous buildup in leverage, which our regulatory framework failed to prevent. Large amounts of opaque, illiquid, long-term assets were financed by short-term liabilities, and much of this financing occurred in the shadow banking system. When the housing bubble burst, financial asset prices fell and exposed the deep linkages and overall fragility of our system. Interbank funding markets seized up, the shadow banking system crumpled and several major financial firms—banks and nonbanks alike—collapsed or approached the brink of collapse. Extraordinary interventions of governments and central banks around the world were necessary to prevent a complete collapse of the financial system and the broader economy.

As a general matter, regulators did not appreciate beforehand how vulnerable the system was to shocks. In particular, there was a failure to appreciate the important interconnections among the banking system, capital markets, and payment and settlement system. For example, the disruption of the securitization markets caused by the poor performance of highly rated debt securities led to significant problems for major financial institutions. These banks had to take assets back on their books, backstop lines of credit were triggered, and banks could no longer securitize loans, thus increasing the pressure on their balance sheets. This reduced credit availability, which increased the downward pressure on economic activity, which caused asset values to decline further, and in turn, increased the degree of stress in the financial system.

Moreover, regulators did not adequately understand how the dynamics of the system tended to exacerbate shocks, rather than dampen their impact. For example, with respect to capital, firms under stress had incentives to continue to pay dividends to show that they were strong. These dividend payments actually depleted capital, making the firms weaker and vulnerable to credit rating downgrades. When credit ratings were indeed cut, that increased collateral calls, which intensified the pressure on scarce liquidity resources.

Regulatory gaps were another important factor in causing the crisis. American International Group, Inc. (AIG) is a case in point. AIG Financial Products, a subsidiary of the AIG parent company, provided guarantees against default on complex collateralized debt obligations, leveraging the AAA rating of the AIG parent company in the process. This activity was conducted with inadequate regulatory oversight, poor risk management and insufficient capital.

Finally, many of the incentives built into the system ultimately undermined its stability. The problems with incentives were evident in a number of areas, including faulty compensation schemes and risk management that was too narrowly focused on one business area without regard for the broader entity. These incentives created important externalities in which participants did not bear the full costs of their actions.

Turning to where we are now, the U.S. financial system is in much better shape today than it was a year ago. The capital markets are generally open for business—with the important exception of some securitization markets—and the major securities dealers that survived the crisis have seen a sharp recovery in profitability. The largest U.S. bank holding companies, which went through the Supervisory Capital Assessment Program exercise, have more and better quality capital, having raised more than $100 billion of common equity over the past year in the capital markets and generated nearly as much common equity via preferred stock conversions and from gains on asset sales.

However, many smaller and medium-sized banks remain under significant pressure. This reflects several factors. First, such institutions hold assets that are carried mainly on the books on an accrual basis. Compared with mark-to-market assets, such assets adjust much more slowly to changes in market conditions and the economic environment. Second, many of these banks have a much more concentrated exposure to commercial real estate, a sector that remains under considerable pressure. Not only have capitalization rates risen sharply—meaning the investors will pay much less for a dollar of rental income than before—but the rental income streams on these properties also have declined as the performance of the U.S. economy has declined. Together, these two factors have pushed U.S. commercial real estate prices down by about 40 percent to 50 percent from the peak reached in 2006. Loan losses in commercial real estate and consumer and mortgage loans seem likely to continue to pressure smaller banks for some time to come. This in turn means that credit availability to households and small businesses will still be curtailed.

The improvement in the overall health of the financial system and in market function has allowed the Federal Reserve to phase out many of the special liquidity facilities that were enacted in response to the crisis. These facilities were generally successful in achieving their objectives—helping to restore confidence and rebuild market liquidity in a way that safeguarded the taxpayers’ interests. When a full accounting of the special liquidity facilities is complete, it seems likely that the facilities will have generated substantial incremental earnings that the Federal Reserve will remit to the Treasury. Although these incremental earnings were not the objective of these facilities, they are a pleasant outcome relative to the alternative.

As the crisis has abated, our attention has shifted to what we need to do to prevent another crisis in the future. We need to take the necessary steps to build a strong and resilient financial system. In my opinion, three broad sets of actions are needed:

Effective macroprudential supervision. By this, I mean conducting supervision not just vertically institution by institution, but also horizontally across institutions and markets. We need to better understand how the system operates as a whole and how problems in one area can affect financial stability elsewhere. This means both how the overall system affects individual firms and how the activities of a single firm or market affects the entire financial system.
Make financial institutions and market infrastructures more robust to withstand shocks and become less prone to failure.
Change the system so that no financial firm is “too big to fail.”

Macroprudential supervision is essential for two reasons. First, it addresses the problem of gaps in the regulatory regime and the regulatory arbitrage that such gaps can encourage. Second, macroprudential supervision is needed because the financial system is interconnected. Siloed regulatory oversight is not sufficient. Supervisory practices must be revamped so that supervision is also horizontal—looking broadly across banks, nonbanks, markets and geographies. This also means that regulatory standards need to be harmonized across different regions. Without harmonization, there will inevitably be a “race to the bottom” and regulatory arbitrage will be encouraged, rather than inhibited.

Many steps are needed to make financial institutions and infrastructure more robust. For example, we need to strengthen bank capital requirements, improve liquidity buffers and make financial market infrastructures more resilient to shocks when individual firms get into trouble.

In terms of capital requirements, many changes are needed, including global capital standards that put more emphasis on common equity, establish an overall leverage limit and better capture all of the sources of risk in the capital assessment process. Improved risk capture, for example, includes the trading accounts of banks. Some institutions had clearly not set aside adequate levels of capital given the risks that were embedded in their trading positions.

It would also be very desirable to develop a mechanism to bolster the amount of common equity available to absorb losses in adverse economic environments. This might be done most efficiently by allowing the issuance of debt instruments that would automatically convert to common equity in stress environments, under certain pre-specified conditions. Such “contingent capital” instruments might have proven very helpful had they been in place before and during this crisis. Investors would have anticipated that common equity would be replenished automatically if a firm came under stress, and this knowledge might have tempered anxieties about counterparty risk. At a minimum, contingent capital instruments might have enabled common equity buffers at the weaker firms to be replenished earlier and automatically, thereby reducing uncertainty and the risk of failure.

On the liquidity front, there are a host of initiatives underway. The Basel Committee on Banking Supervision is working on establishing international standards for liquidity requirements. There are two parts to this. The first is a requirement for a short-term liquidity buffer of sufficient size so that an institution that was shut out of the market for several weeks would still have sufficient liquidity to continue its operations unimpaired. The second is a liquidity standard that limits the degree of permissible maturity transformation—that is, the amount of short-term borrowing allowed to be used in the funding of long-term illiquid assets. Under these standards, a firm’s holdings of illiquid long-term assets would need to be funded mainly by equity or long-term debt.

With respect to financial market infrastructures, the Federal Reserve is working with a broad range of private-sector participants, including dealers, clearing banks and tri-party repo investors to dramatically reduce the structural instability of the tri-party repo system. Similarly, over-the-counter (OTC) derivatives clearance activity is being pushed toward central counterparties and exchanges. In addition, the Federal Reserve and others are evaluating how greater transparency with respect to OTC derivatives prices would improve financial stability. The Committee on Payment and Settlement Systems and the Technical Committee of the International Organization of Securities Commissions are doing a review of standards for payment, clearing and settlement systems. This work will inform the efforts of the Financial Stability Board to strengthen such standards.

There is also work underway on the problem of how to ensure that financial institutions have compensation structures that curb rather than encourage excessive risk-taking.

Finally, it is critical that we ensure that no firm is too big to fail. This is about both fairness and having proper incentives in the financial system. Having some firms that are too big to fail creates moral hazard. These firms are able to obtain funding on more attractive terms because debt holders expect that the government will intervene rather than allow failure. In addition, too big to fail creates perverse incentives. In a too-big-to-fail regime, firms have an incentive to get large, not because it facilitates greater efficiency, but instead because the implicit government backstop enables the too-big-to-fail firm to achieve lower funding costs.

To solve the too-big-to fail problem, we need to do two things. First, we need to develop a truly robust resolution mechanism that allows for the orderly wind-down of a failing institution and that limits the contagion to the broader financial system. This will require not only domestic legislation, but also intensive work internationally to address a range of legal issues involved in winding down a major global firm.

Second, we need to reduce the likelihood that systemically important institutions will come close to failure in the first place. This can be done by mandating higher capital requirements, improving the risk capture of those requirements and by requiring greater liquidity buffers for such firms.

Although the raging crisis appears to be over, our work is not close to being complete. Making sure this work keeps moving forward and is coordinated internationally is hugely important. Differences in views across countries and regions should not divert the international community from the more important prize—taking the actions collectively that will ensure a robust and resilient financial system.

“More Empires Have Fallen Because Of Reckless Finances Than Invasion”

Congress Check — Tue, 09 Feb 2010 11:51:45 +0000

Washington’s Blog
Tuesday, February 9th, 2010

While Eric Margolis’ entire comment in the Toronto Sun is a must-read, the following two quotes really hit the nail on the head:

More empires have fallen because of reckless finances than invasion…

If Obama really were serious about restoring America’s economic health, he would demand military spending be slashed, quickly end the Iraq and Afghan wars and break up the nation’s giant Frankenbanks.

Margolis is right.

As I have repeatedly shown, war is bad for the economy. According to a Nobel prize-winning economist, the head of JP Morgan and others, the Iraq war and the war on terror in general were huge factors in destroying our economy.

America is a dying empire, destroying the last of its resources to fight unnecessary wars. Instead of rebuilding our economy so that we can once again be a strong nation, we are wasting trillions fighting those unnecessary wars, thus guaranteeing that we do not have the economic resources to defend ourselves in the future from real threats.

Don’t believe me?

Well, our military and intelligence leaders say that the economic crisis is now the biggest threat to America’s national security.

And as leading economic historian Niall Ferguson recently wrote in Newsweek:

Call the United States what you like—superpower, hegemon, or empire—but its ability to manage its finances is closely tied to its ability to remain the predominant global military power…

This is how empires decline. It begins with a debt explosion. It ends with an inexorable reduction in the resources available for the Army, Navy, and Air Force…

If the United States doesn’t come up soon with a credible plan to restore the federal budget to balance over the next five to 10 years, the danger is very real that a debt crisis could lead to a major weakening of American power.
The precedents are certainly there. Habsburg Spain defaulted on all or part of its debt 14 times between 1557 and 1696 and also succumbed to inflation due to a surfeit of New World silver. Prerevolutionary France was spending 62 percent of royal revenue on debt service by 1788. The Ottoman Empire went the same way: interest payments and amortization rose from 15 percent of the budget in 1860 to 50 percent in 1875. And don’t forget the last great English-speaking empire. By the interwar years, interest payments were consuming 44 percent of the British budget, making it intensely difficult to rearm in the face of a new German threat.

Call it the fatal arithmetic of imperial decline. Without radical fiscal reform, it could apply to America next.

And William R. Hawkins (formerly an economics professor at Appalachian State University, the University of North Carolina-Asheville, and Radford University) fills in some details on the fall of the Hapsburg empire:

As for the need to break up the “Frankenbanks”, see this.

Spain was the first global Superpower…With Spain as its political base, and gold and silver flowing in from its American colonies, the Hapsburg dynasty became the dominant power in Europe. It controlled rich parts of Italy through Naples and Milan, and Central Europe from the Netherlands through the Holy Roman Empire to Austria. In the 16th century it added the far distant Philippine islands to its empire. The Hapsburgs held off the Ottoman Turks, whose resurgent wave of Islamic conquest in the 16th century swept across the Balkans and nearly captured Vienna.

The Hapsburgs went into decline in the 17th century, and while any such momentous event has many causes, for our purposes the focus will be on the economic collapse of Spain, which not only sapped the empire of strength but served to build up the power of its rivals.

The demands of empire required a strong and growing economy, but Spain did not keep up with the economic expansion that was taking place in other parts of Europe. Madrid’s financial base fell out from under its empire. Spain could continue to consume in the short term because of the flow of precious metals from American mines, but it could not produce the goods it needed at home, which in the long-run proved fatal to its standing as a Great Power and as an advanced society.

Spanish imports were double exports and the precious metals became scarce within weeks of the arrival of the American treasure fleets as the money flowed to Spain’s many creditors. What industry there was, along with banking and shipping, was in the hands of foreign owners. As a modern historian, Jaime Vicens Vives, has concluded, “This was one of the fundamental causes of the Spanish economy’s profound decline in the seventeenth century, maritime trade had fallen into the hands of foreigners.” This, plus the “opening of the internal market to foreign goods,” produced a “fatal result.” Spain’s exports were at the same time under heavy pressure by competitors in third country markets. A nation that cannot control its domestic market will seldom be able to sustain itself in foreign markets, which are inherently less accessible and more unstable.

Yet, Spanish leaders were deluded by a sense of false prosperity. This is testified by the statement of a prominent official, Alfonso Nunez de Castro in 1675: “Let London manufacture those fine fabrics of hers to her heart’s content; let Holland her chambrays; Florence her cloth; the Indies their beaver and vicuna; Milan her brocade, Italy and Flanders their linens…so long as our capital can enjoy them; the only thing it proves is that all nations train their journeymen for Madrid, and that Madrid is the queen of Parliaments, for all the world serves her and she serves nobody.” A few years later, the Madrid government was bankrupt. The Spanish nobleman had foolishly elevated consumption, a use for wealth, above production, the creation of wealth.

Historians have traced the flow of Spanish gold and silver across the markets of Europe. Those who “served” Spain by establishing industries to manufacture goods for the Spanish market gained the money. Spain’s rivals, France, Holland (which started a successful revolt in 1568) and England, prospered by their trade surpluses, and reinvested the money to expand their own capabilities. Another modern expert on Hapsburg history, Henry Kamen, has cited contemporary sources who referred to 17th century Spain as “the Indies for the foreigner.” The military empire of the Hapsburgs became the economic colony of other powers, or, to use a current phrase, Spain was the “engine of growth” for the rest of the continent.

Where there were jobs and prosperity, there was also rapid population growth, and rising tax revenue. Rival powers were able to field and finance military forces that could defeat the once superior Spanish forces both on land and at sea. The irony of this is that Spain was ruled by a warrior aristocracy tempered by centuries of constant warfare against Islamic hordes and Christian heretics. These nobles looked down on merchants and manufacturers and disparaged their mundane professions only to find that without a strong domestic business class they could not afford the fleets and armies that guarded the empire they had built.

Today, the American “empire” is also trying to consume more than it produces. The U.S. trade deficit is nearing Spain’s nadir of imports being double exports. Both government spending and private consumption are financed heavily by debt. Washington is printing money, the modern equivalent of digging gold out of the ground, rather than earning the means to pay its bills. And the political and military elites are apparently indifferent to the fate of domestic business and industry. Americans must learn … from the Spanish experience … and take corrective action while they still can.

Alex Jones Tv: The ‘Eco Green’ Police-You Are The Slaves!!

Congress Check — Tue, 09 Feb 2010 11:49:43 +0000

The Alex Jones Channel
Tuesday, February 9th, 2010

Alex reviews the audi ‘eco green’ police ad that come out on Super Bowl Sunday, and talks about how the fake green movement is all about control over your life, and not about real inviromental issues.

NOAA: Blizzard Rearranges Climate Change Announcement

Congress Check — Tue, 09 Feb 2010 11:47:27 +0000

Louise Radnofsky
Wall St Journal
Tuesday, February 9th, 2010

As D.C. continued to dig out from Snowmageddon and is keeping an eye on another storm system, the National Oceanic and Atmospheric Administration was busy making a climate change announcement.

NOAA, part of the Department of Commerce, is going to be providing information to individuals and decision-makers through a new NOAA Climate Service office. “More and more, Americans are witnessing the impacts of climate change in their own backyards, including sea-level rise, longer growing seasons, changes in river flows, increases in heavy downpours, earlier snowmelt and extended ice-free seasons in our waters. People are searching for relevant and timely information about these changes to inform decision-making about virtually all aspects of their lives,” the release says.

Earlier snowmelt? That would be nice.

Turns out the release was planned prepared ahead of the snowstorm, which shut federal agencies today and forced its senders to hold a press conference by telephone instead of at the National Press Club.

It’s not the first time inclement weather has put a chill on official efforts to tackle climate change. House Speaker Nancy Pelosi had to leave the Copenhagen summit early in December to get back to D.C. before the blizzard known as Snowpocalypse grounded all flights.

Full article here

“When the people find they can vote themselves money, that will herald the end of the republic.” – Fall Of The Republic – Buy the DVD here

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