Press and Journal Article, Henry Kaufman Predicts Socialization of Credit, and A Rather Strange Bloomberg Article on the Fed's Bailouts

 I have an article in the Press and Journal this week:

War Is Our Politicians' Latest Whim
by James Miller

“The President does not have power under the Constitution to unilaterally authorize a military attack in a situation that does not involve stopping an actual or imminent threat to the nation.” Ironic words coming from then-Senator Barack Obama.

We are taught that Congressional approval of military intervention is one of the key elements in our governmental system of check and balances. In order to prohibit a gung-ho president from using America’s military on any slight whim, the founders of this country vested the power to declare war in a body of people rather than one.

Somewhere within the past century, both political parties have abandoned this principle for fear of appearing weak.

“America is the beacon of freedom,” they say. The country must act to “make the world safe for democracy” according to Woodrow Wilson. Under his presidency, we were lead into World War I after the Lusitania was secretly stockpiled with armaments and purposefully left as an open target for German submarines. One hundred Americans lost their lives and Wilson got his war.

Was it to save democracy? No. Was it to drastically change the way our foreign policy is guided for the worse? Most definitely.

The United States is currently embroiled in wars in two predominantly Islamic countries. Our military is stretched for resources and manpower. Yet it still only took three weeks to gain enough Allied support to intervene in Libya by establishing a “no fly zone” in order to protect rebels who are attempting to overthrow President Muamar Gaddafi.
Gaddafi has been in power for 40 years – unheard of in a democracy not plagued by corruption. Still, the “no fly zone” quickly became an excuse for tomahawk missiles to reign down on Gaddafi’s compound.

We are engaged in military combat, plain and simple. President Obama acted unilaterally in ordering our military to intervene. With the exception of Dennis Kucinich making the call for impeachment, we have heard nothing but crickets coming from the anti-war left who vehemently opposed the invasion of Iraq.

Republicans, whose giddiness for war is no secret, have been largely silent. Speaker of the House John Boehner has publicly stated that Obama must seek Congressional approval for further strikes.  He approved of the initial attacks.  Presidential hopeful Newt Gingrich literally flip-flopped three times on the issue. First he approved, then disapproved, then approved again. Just like marriage, three times is the charm for ol’ Newt.

When it comes to military excursions, both parties are guilty of feeding at the trough. At the onset of World War I, progressive writer Randolph Bourne declared that “war is the health of the state.” This statement is as accurate today as it was back then.

Libya never posed a threat to the United States. Innocent lives are being put in danger for the sake of buying votes.
The U.S. has become entrenched in another tribal-based country that we do not fully comprehend.
Gaddafi has promised a drawn out war. The governments of Bahrain, Yemen, and Syria are firing upon protestors. Obama has yet to address these atrocities. He refuses to acknowledge the oil soaked elephant in the room.
An illegal war. Another conquest for cheap energy. Choosing sides in an Islamic country. A never-ending deficit.
Welcome to the new norm, America.

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I had the same article in The Slate last week.


So check out this interview of Henry Kaufman at Bretton Woods II.  Mr. Kaufman predicts that within 5-8 years, the U.S., as well as others, will socialize the allocation of credit.  He also predicts the big banks will only get better, but that the government should regulate more.  Another case of diagnosing the problem but prescribing the wrong medicine.  Scary stuff though, perhaps a preview on what is being discussed up in New Hampshire?

Here is just one example of a what the socialization of credit will do, it's all the rage on the blogosphere:

The Fed sent billions in bailout aid to banks in places like Mexico, Bahrain and Bavaria, billions more to a spate of Japanese car companies, more than $2 trillion in loans each to Citigroup and Morgan Stanley, and billions more to a string of lesser millionaires and billionaires with Cayman Islands addresses. "Our jaws are literally dropping as we're reading this," says Warren Gunnels, an aide to Sen. Bernie Sanders of Vermont. "Every one of these transactions is outrageous."

At first glance, Waterfall's haul doesn't seem all that huge — just nine loans totaling some $220 million, made through a Fed bailout program. That doesn't seem like a whole lot, considering that Goldman Sachs alone received roughly $800 billion in loans from the Fed. But upon closer inspection, Waterfall TALF Opportunity boasts a couple of interesting names among its chief investors: Christy Mack and Susan Karches. Christy is the wife of John Mack, the chairman of Morgan Stanley. Susan is the widow of Peter Karches, a close friend of the Macks who served as president of Morgan Stanley's investment-banking division. Neither woman appears to have any serious history in business, apart from a few philanthropic experiences. Yet the Federal Reserve handed them both low-interest loans of nearly a quarter of a billion dollars through a complicated bailout program that virtually guaranteed them millions in risk-free income.

Two well connected wives getting $220 million in risk free loans? This is of course from the Rolling Stone's The Real Housewives of Wall Street: Why is the Federal Reserve forking over $220 million in bailout money to the wives of two Morgan Stanley bigwigs?

In a world under socialism, only the well connected have access to all the perks; the rest wait in bread lines.


The New Yorker has an article out on Bretton Woods II today, here is one gem from it:

Some economists, such as L.S.E.’s Richard Layard, have taken the happiness research even further, arguing that it justifies a radical program of tax increases, income distribution, and environmental measures.

Hmmm...so why are a few financial elite deciding the monetary policy for the whole world again?  Paul Volcker, who agrees with Kaufman in that the big banks won't be broken up, gets another thing right:

Today, he noted, there wasn’t any formal international system but rather a de facto arrangement characterized by a lack of fiscal discipline and huge current account imbalances. “Who would ever sit down and think of designing a system that permitted China to get three trillion dollars worth of reserves, and for the U.S. to happily use all that money to run up housing prices?” Volcker said. “I think there really was a connection between the international monetary system … and the great financial crisis. And nobody has had any interest” in reforming it.

I wouldn't say nobody, just those who benefit from it.  Unfortunately, those who benefit also make the big decisions.

So check out this weird Bloomberg article by Micheal Lewis entitled The Fed Rescue Program Too Bizarre to Be True

I seriously don't know if he is serious or not:

“We decided not to release any more details,” said one Fed spokesman, “because frankly, the American public is too stupid to understand them.” Instead, to prevent another pesky Freedom of Information Act request of the sort that led to its first brave disclosure, the Fed has offered physical access to its building.

Well, I don't doubt that statement was made, but check this out:

A team of Bloomberg investigative reporters, led by Kram Namttip, was allowed to spend a day examining what remains of the collateral collected by the Fed during the crisis. What follows is a brief summary of their findings. To wit:
-- A vault in the Fed basement filled with young women, who claimed, in broken but excited English, they had been repo-ed by the Italian government.

“That the Fed relaxed its policy and made no distinction between the 16-year-olds and the 18-year-olds indicated just how severe they felt the crisis was at the time,” says Merkle Stewart, associate professor of finance at the University of Louisiana at Bogalusa.

Hastily scrawled receipts for several hundred million dollars in short-term loans to the Taliban. To the untrained eye, it isn’t obvious how an outlaw sect in a nation devoid of financial assets became systematically important to U.S. interests. Apparently, in the heat of the moment, the Fed saw the high quality of the Taliban’s collateral, and jumped at the chance to get its hands on it.

The Fed does some shady stuff, but I am highly doubtful of the Taliban thing (though not the basement full of girls).  I guess this was just an example of Lewis' tongue-in-cheek.  Still, why would Bloomberg post something like this?  April 1st was two weeks ago.


I will end with a few aggravating and intriguing pieces of news.  First, Did You Know that there are 25,000 open workers' comp claims for Illinoiss 70,000 state workers?  Does that honestly surprise you?  So Amazon is demonized for delivering cheap goods without paying sales tax for the sake of this kind of fraudulence?


According to John Mellow of CNBC, inflation would be close to 10% under the old accounting standards.  And now Germany warns the Greece may need to restructure its debt (bankruptcy) to even get market attention.


Good thing George Soros and his buddies are currently deciding what is good monetarily wise for all of us right now.