IRAQ IS NOT THE CENTRAL FRONT IN THE WAR ON TERROR

Under questioning from Senator Joe Biden, Ambassador Ryan Crocker makes it clear that Iraq is not the threat the Bush administration - and, now, John McCain - claim it is.



- Mark

THE CASE OF DON SIEGELMAN

I don't have much time to comment on this now. But the politicization of the Justice Department under President Bush is something we've had on our radar for some time. In a few words, the case of Don Siegelman is not an isolated one - and Karl Rove should be in jail.

A new form of political murder has taken its place -- character assassination. Over the last two decades, the Right has learned how to destroy its enemies without leaving a body. Hit teams roam the country, willing and eager to destroy reputations and careers, with the U.S. press corps as accomplices ... That's a much more effective way to destroy someone than a gun. Bullets only kill the physical body, but character assassination destroys the person's reputation -- and their political effectiveness. Martyrs are a powerful force, but disgraced leaders can't threaten the status quo.

Be sure to watch the "60 Minutes" introduction in the post.

- Mark

COUNTRYWIDE & "SLEAZE CAPITALISM"

After driving Countrywide Financial to the brink of financial ruin (in part by issuing $40.6 billion in subprime contracts), former president Stanford Kurland was recently named chairman and chief executive of Private National Mortgage Acceptance Co. (PennyMac). In his new position Kurland will help PennyMac buy loans "from financial institutions seeking to reduce their mortgage exposures.”

Cutting through the jargon, this means Kurland will take his knowledge of "which mortgaged-backed securities are toxic" and will help his new company pick out the ones with real value (we can all guess who's going to pick up the tab for the worthless stuff, right?). Putting Kurland's charmed financial life in perspective, MoneyNews.com reports ...

... If Kurland thrives at his new venture, he certainly won’t be the first person in the investment world to cause huge losses and then rebound ... Victor Niederhoffer, who first made his reputation as a partner of the legendary hedge fund mogul George Soros, has apparently made and lost at least two fortunes through his investments ... There is a difference between Niederhoffer and the Countrywide crew, however ... Niederhoffer’s mistakes hurt himself and his clients. Countrywide’s mistakes helped push the economy into what probably is a recession and the financial system into a serious crisis ...

As MoneyNews.com pointed out, while many people are to blame for the subprime mess, "the leaders of Countrywide ... played a role."

No doubt considering the recent billion dollar Countrywide bailout engineered by the government, consumer lawyer Irv Ackelberg told The Wall Street Journal, "The whole subprime mortgage fiasco was built on sort of Wall Street’s snake-oil salesmen convincing America this is a can’t-miss scheme.” Nouriel Roubini was even more blunt: "The lesson of this sad and sleazy episode is that when profits are privatized and losses are socialized we get sleaze capitalism ..."

- Mark

AGAIN, THE SURGE IS NOT WORKING ...

Last week I posted a brief review explaining why "The Surge" is not working in Iraq. The Washington Post is now reporting pretty much the same thing:

A new assessment of U.S. policy in Iraq by the same experts who advised the original Iraq Study Group concludes that political progress is "so slow, halting and superficial" and political fragmentation "so pronounced" that the United States is no closer to being able to leave Iraq than it was a year ago.

It really doesn't get any clearer than this.

- Mark

A FADING REPUBLIC?

A couple of years ago, in Nemesis: The Last Days of the American Republic, Chalmers Johnson reported that the United States had well over 700 military bases abroad. According to a 2007 Department of Defense report, we now have 823 bases overseas. And a good thing too. Apparently the Russians are breathing down our neck with 16 bases around the world, while the Chinese have, no doubt, some diabolical plan since we can't seem to find any of their bases abroad.

With all the strategic stability and global Good Will we've generated by adding another 100 bases over the past few years I say "Let's add a few more ..." And, for good measure, we should flush our Constitution down the toilet and allow the president's Signing Statements to become law, while granting the president free reign when it comes to FISA statute(s).

Militarism and domestic tyranny ... I feel safer just thinking about it, don't you?

- Mark

THE "SAUDI PRIZE" ... A BUSH IN THE WHITE HOUSE

It was 1986, conservation efforts were paying off, competition in the oil industry was returning, and gas prices were plummeting. In The Prize: The Epic Quest for Oil, Money & Power, author Daniel Yergin details the efforts of then Vice President George Bush to assure the Saudis – and U.S. domestic oil producers – that the U.S. should support artificially high prices in energy. On a trip to the Middle East VP Bush made it clear to the Saudis that, as Yergin put it, "market forces had gone too far" and had the potential to cripple America’s energy industry.

Well, I’m sure Papa Bush would be quite content with the following.

At its March 2000 meeting, OPEC set up a price band mechanism, triggered by the OPEC basket price, to respond to changes in world oil market conditions. According to the price band mechanism, OPEC basket prices above $28 per barrel for 20 consecutive trading days or below $22 per barrel for 10 consecutive trading days would result in production adjustments …

And, just like that, competition is mugged by collusion. Think about this the next time you hear some Talking Head drone on about “market” forces in the oil industry.

But I really liked this comment: “At its January 30, 2005 meeting, OPEC decided that market changes had rendered the band unrealistic, and decided to temporarily suspend the price band mechanism” … Translated this says “OPEC’s already making so much stinking money they no longer have to manipulate production levels.”

Papa Bush is no doubt pleased.

- Mark

SHAMELESS, OR JUST INCOMPETENT?

Well, it looks like the Attorney General may have just stepped in it. In what looks like an attempt at Scare-Mongering gone awry, AG Michael Mukasey is being called upon by Congress to explain the following.

During a discussion with the press AG Mukasey revealed that the government became aware of a call from an Afghanistan "safe house" that was fielded in the United States (apparently on 9/11) and that, suddenly, "3,000 people who went to work that day ... didn't come home ..."

This tells us two things. Either the Bush administration was even more grossly incompetent than we thought before 9/11, or AG Mukasey simply has no shame in exploting 9/11 fears for Bush's political agenda.

My guess? It's both.

- Mark

THE ROOTS OF MARKETS & WEALTH

As I've been doing from time to time, what's posted below is a piece from the book I've been working on, The Roots of Markets and Wealth ... And, yes, it's almost done. To the left is a photo of John D. Rockefeller.





... Whatever the roots of his “scathing disdain for the ‘waste’ of unbridled competition” John D. Rockefeller’s pursuit of monopoly power in the late 1800s helped bring organization and, perhaps more importantly, steady profits to the oil industry. However, by the early 1930s oil profits were again threatened by too many competitors. Indeed, by August 1931 producers in Oklahoma and Texas were so plentiful and productive that the price of crude dropped to thirteen cents a barrel and, by the spring of 1933, saw some ‘hot oil’ runners get little more than two cents a barrel. And this occurred after Texas Governor Ross Sterling had, in effect, “declared war” on East Texas by sending the National Guard and Texas Rangers to cut off rogue producers, and then “rammed” a bill through the legislature which allowed market prorationing.

To stabilize prices, the oil industry turned to the federal government. After initially going after black market producers Interior Secretary Harold Ickes sought to reduce production by sending production quotas to the governors of each oil state. And why not? Acording to Ickes, after the Depression many business leaders were shell-shocked and “crawling to Washington on their hands and knees…to beg the Government to run their businesses for them.”

Unfortunately for Ickes, and FDR, the Supreme Court declared much of the National Industrial Recovery Act – which gave the federal government its authority in oil – unconstitutional. Still, with memories of ten cents a barrel still fresh, the states decided to follow federal government determined quotas on a voluntary basis.

To insure cooperation, the Interstate Oil Compact was passed in 1935 and provided a “forum for states to exchange information and plans, to standardize legislation, and to coordinate prorationing and conservation in production.” To check the flow of foreign oil, which might undermine the “informal” quota system, Congress imposed tariffs on foreign crude, fuel oil, and gasoline. This cut U.S. oil imports in half, stabilized sales, and put the U.S. oil industry firmly under a government escorted quota and tariff system.

As was the case during Rockefeller’s time, the post-Depression oil industry was able to establish regular profits at “market prices” only after competition had been brought under control. Perhaps more importantly, the organizational mold that would inspire the creation of the Organization of Petroleum Exporting Countries (OPEC) had been cast ...


- Mark

"HEADS" THEY WIN, "TAILS" WE LOSE

As usual, Robert Reich does an excellent job explaining why the Big Financial players are walking away with Big Bucks, while our economy and our wallets take the hit for the very poor (and dumb) decisions the Big Guys made ...

Some of the dollars I'm sending to Washington are now being used to backstop Wall Street investment bankers, hedge fund and private equity managers, and anybody else associated with a borrower that's too big to fail. The reason they're too big to fail is they've borrowed so much from me and from you - from our pension funds and money-market funds - that if they went bust, our savings would disappear ... The reason they've been able to borrow so much from us without putting up much of their own capital is they're unregulated, and don't have to put up their own money. The tax code also rewards them for borrowing rather than investing, by letting them deduct interest payments on the money they borrow. The tax code also allows them to treat the earnings they get on the investments they make with the money you and I lend them [because our tax dollars subsidize their deductions] as capital gains rather than ordinary income.

It's not much longer, so read the entire link here.

- Mark

THIS ISN'T WHAT ADAM SMITH HAD IN MIND ...

In the previous post we learned the following about Countrywide:

1. The company’s stock price went into free fall in 2007 while its 3rd and 4th quarter performance saw losses in excess of $1.6 billion.

2. To soften the blow of increasingly unstable subprime loans on their books, Countrywide turned to the federal government for over $50 billion in loans.

3. As collateral for these loans, the federal government accepted Countrywide’s toxic subprime waste as collateral, in the process sticking the American taxpayer with Countrywide’s garbage.

4. At the same time, Countrywide’s board members and executives cashed out enough millions of dollars in options to be investigated by the Securities & Exchange Commission.

Well, brace yourselves. It looks like more Countrywide ugliness is around the corner.

Countrywide has billions in loans that allow(ed) borrowers to pay a lower amount on their monthly mortgage than they actually owed (with the unpaid balance added to the principal). The result? Countrywide is now warning of defaults in these once highly-touted “pay-option” loan programs. Not surprisingly, they’re laying all the blame on the homeowners, claiming:

“Our borrowers’ ability to defer portions of the interest accruing on their loans may expose us to increased credit risk …”

This makes so much sense.

I mean, who can blame the creditors and brokers who made stupid decisions by selling home loans to deadbeats and the unemployed, and then saying “I don’t need documentation”? Why should Countrywide be blamed for their part in the industry stampede to underwrite irresponsible loans to people with “no income, no job, and no assets” (so called “ninja” loans), right? That would be like blaming drug dealers for selling … Oh, wait, never mind …

Seriously, if we accept Countrywide’s claim that home owners alone are at fault for the financial mess around the corner – while the federal government continues to bail out only the investors – all notions of accountability in America's capitalist markets fly out the window.

Adam Smith, the intellectual godfather of capitalism, is no doubt turning in his grave.

- Mark