Quotations Between November 18-25, 2009
To Accompany the November 25, 2009 edition of Tidbits
Bob Jensen at Trinity University

U.S. Debt/Deficit Clock --- http://www.usdebtclock.org/

Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm

The Real National Debt (booked + unbooked entitlements) 2008
Source --- http://www.pgpf.org/about/nationaldebt/

Video:  President Obama lectures China on its shortcomings
The Best One Yet from Saturday Night Live --- http://www.youtube.com/watch?v=yZorJZ5ixOo

The New York Times Timeline History of Health Care Reform in the United States ---
Click the arrow button on the right side of the NYT timeline.

What went so wrong with health care system reform in the United States?
Mostly what went wrong is our ill-conceived and underfunded attempts to reform the system!

U.S. Debt/Deficit Clock --- http://www.usdebtclock.org/

Obama Criticizes Himself, Warns on High Deficits
President Barack Obama gave his sternest warning yet about the need to contain rising U.S. deficits, saying on Wednesday that if government debt were to pile up too much, it could lead to a double-dip recession. With the U.S. unemployment rate at 10.2 percent, Obama told Fox News his administration faces a delicate balance of trying to boost the economy and spur job creation while putting the economy on a path toward long-term deficit reduction . . . As if things could not possibly get more weird and delusional, President Obama now criticizes the very high government deficits he himself supported, promoted, and helped create. I don’t think the word “pathological” is sufficient to describe this man. We need to invent a new term.
Reuters, November 18, 2009 --- Click Here
Also see http://www.foxnews.com/politics/2009/11/18/obama-warns-double-dip-recession/ 

In the Testimony of a Former Congressional Budget Office Director
"The Coming Deficit Disaster:  The president says he understands the urgency of our fiscal crisis, but his policies are the equivalent of steering the economy toward an iceberg." by Douglas Hotlz-Eagen, The Wall Street Journal, November 20, 2009 --- Click Here

President Barack Obama took office promising to lead from the center and solve big problems. He has exerted enormous political energy attempting to reform the nation's health-care system. But the biggest economic problem facing the nation is not health care. It's the deficit. Recently, the White House signaled that it will get serious about reducing the deficit next year—after it locks into place massive new health-care entitlements. This is a recipe for disaster, as it will create a new appetite for increased spending and yet another powerful interest group to oppose deficit-reduction measures.

Our fiscal situation has deteriorated rapidly in just the past few years. The federal government ran a 2009 deficit of $1.4 trillion—the highest since World War II—as spending reached nearly 25% of GDP and total revenues fell below 15% of GDP. Shortfalls like these have not been seen in more than 50 years.

Going forward, there is no relief in sight, as spending far outpaces revenues and the federal budget is projected to be in enormous deficit every year. Our national debt is projected to stand at $17.1 trillion 10 years from now, or over $50,000 per American. By 2019, according to the Congressional Budget Office's (CBO) analysis of the president's budget, the budget deficit will still be roughly $1 trillion, even though the economic situation will have improved and revenues will be above historical norms.

The planned deficits will have destructive consequences for both fairness and economic growth. They will force upon our children and grandchildren the bill for our overconsumption. Federal deficits will crowd out domestic investment in physical capital, human capital, and technologies that increase potential GDP and the standard of living. Financing deficits could crowd out exports and harm our international competitiveness, as we can already see happening with the large borrowing we are doing from competitors like China.

At what point, some financial analysts ask, do rating agencies downgrade the United States? When do lenders price additional risk to federal borrowing, leading to a damaging spike in interest rates? How quickly will international investors flee the dollar for a new reserve currency? And how will the resulting higher interest rates, diminished dollar, higher inflation, and economic distress manifest itself? Given the president's recent reception in China—friendly but fruitless—these answers may come sooner than any of us would like.

Mr. Obama and his advisers say they understand these concerns, but the administration's policy choices are the equivalent of steering the economy toward an iceberg. Perhaps the most vivid example of sending the wrong message to international capital markets are the health-care reform bills—one that passed the House earlier this month and another under consideration in the Senate. Whatever their good intentions, they have too many flaws to be defensible.

First and foremost, neither bends the health-cost curve downward. The CBO found that the House bill fails to reduce the pace of health-care spending growth. An audit of the bill by Richard Foster, chief actuary for the Centers for Medicare and Medicaid Services, found that the pace of national health-care spending will increase by 2.1% over 10 years, or by about $750 billion. Senate Majority Leader Harry Reid's bill grows just as fast as the House version. In this way, the bills betray the basic promise of health-care reform: providing quality care at lower cost.

Second, each bill sets up a new entitlement program that grows at 8% annually as far as the eye can see—faster than the economy will grow, faster than tax revenues will grow, and just as fast as the already-broken Medicare and Medicaid programs. They also create a second new entitlement program, a federally run, long-term-care insurance plan.

Finally, the bills are fiscally dishonest, using every budget gimmick and trick in the book: Leave out inconvenient spending, back-load spending to disguise the true scale, front-load tax revenues, let inflation push up tax revenues, promise spending cuts to doctors and hospitals that have no record of materializing, and so on.

If there really are savings to be found in Medicare, those savings should be directed toward deficit reduction and preserving Medicare, not to financing huge new entitlement programs. Getting long-term budgets under control is hard enough today. The job will be nearly impossible with a slew of new entitlements in place.

In short, any combination of what is moving through Congress is economically dangerous and invites the rapid acceleration of a debt crisis. It is a dramatic statement to financial markets that the federal government does not understand that it must get its fiscal house in order.

What to do? The best option would be for the president to halt Congress's rush to fiscal suicide, and refocus on slowing the dangerous growth in Social Security, Medicare and Medicaid. He should call on Congress to pass a comprehensive reform of our income and payroll tax systems that would generate revenue sufficient to fund its spending desires in a pro-growth and fair fashion.

Reducing entitlement spending and closing tax loopholes to create a fairer tax system with more balanced revenues is politically difficult and requires sacrifice. But we will avert a potentially devastating credit crisis, increase national savings, drive productivity and wage growth, and enhance our international competitiveness.

The time to worry about the deficit is not next year, but now. There is no time to waste.

Mr. Holtz-Eakin is former director of the Congressional Budget Office and a fellow at the Manhattan Institute. This is adapted from testimony he gave before the Senate Committee on the Budget on Nov. 10.

U.S. Debt/Deficit Clock --- http://www.usdebtclock.org/

"Voter Anger Is Building Over Deficits:  The generic poll shows a 16-point swing to the GOP over last year," The Wall Street Journal, November 26, 2009 --- Click Here

"CBS Catches Up with Conservatives and Realizes Obama Has 'Credibility' Problem," by Brent Baker, Newsbusters, November 24, 2009 --- Click Here

Long after conservatives and the American people figured it out, CBS on Monday night came to the realization President Barack Obama has a “credibility” problem fueled by the “disconnect” between Obama's promise to reduce the deficit as he pushes for massive new spending. Back in August, the CBS Evening News denigrated the town hall questioners as “unruly protests,” but on Monday reporter Chip Reid warned:

The American people are increasingly questioning the President's credibility. He says the stimulus has saved or created 640,000 jobs, but only seven percent of Americans believe it has created any. And he's repeatedly promised health care reform will not increase the deficit, but a mere 19 percent believe him.

Reid proceeded to relay how CBS News analyst John Dickerson “says for many Americans there's a basic disconnect -- a President who promises to trim the budget but only seems to want to spend and spend.” More amazing for CBS, Reid noted how “highly respected foreign policy analyst Leslie Gelb” called Obama's just-completed Asia trip “'amateur hour' for failing to get deals locked in before the President left home.”

Katie Couric set up the story by asking: “Is the honeymoon over? Though President Obama has been in office less than a year, many Americans are growing disenchanted with his handling of the enormous problems he and the country are facing -- from unemployment to health care to Afghanistan.” She introduced Reid by worrying: “Are there signs of strain apparent at 1600 Pennsylvania Avenue these days?”

(Meanwhile, over on World News, ABC anchor Charles Gibson fretted over all the “problems” Obama “faces, all coming to a head, it seems, soon. Health care to be debated by the Senate but support could easily unravel, a much delayed presidential decision on more troops for Afghanistan and, on the horizon, the huge ballooning costs of the federal deficit.”)

The MRC's Brad Wilmouth corrected the closed-captioning against the video to provide this transcript of the story on the Monday, November 23 CBS Evening News:

Continued in article

Bob Jensen's threads on the pending collapse of the United States (not just the economy) ---

"We Pay Them to Lie to Us," by my hero John Stossel, Townhall, November 25, 2009 ---

When you knowingly pay someone to lie to you, we call the deceiver an illusionist or a magician. When you unwittingly pay someone to do the same thing, I call him a politician.

President Obama insists that health care "reform" not "add a dime" to the budget deficit, which daily grows to ever more frightening levels. So the House-passed bill and the one the Senate now deliberates both claim to cost less than $900 billion. Somehow "$900 billion over 10 years" has been decreed to be a magical figure that will not increase the deficit.

It's amazing how precise government gets when estimating the cost of 10 years of subsidized medical care. Senate Majority Leader Harry Reid's bill was scored not at $850 billion, but $849 billion. House Speaker Nancy Pelosi said her bill would cost $871 billion.

How do they do that?

The key to magic is misdirection, fooling the audience into looking in the wrong direction.

I happily suspend disbelief when a magician says he'll saw a woman in half. That's entertainment. But when Harry Reid says he'll give 30 million additional people health coverage while cutting the deficit, improving health care and reducing its cost, it's not entertaining. It's incredible.

The politicians have a hat full of tricks to make their schemes look cheaper than they are. The new revenues will pour in during Year One, but health care spending won't begin until Year Three or Four. To this the Cato Institute's Michael Tanner asks, "Wouldn't it be great if you could count a whole month's income, but only two weeks' expenditures in your household budget?"

To be deficit-reducers, the health care bills depend on a $200 billion cut in Medicare. Current law requires cuts in payments to doctors, but let's get real: Those cuts will never happen. The idea that Congress will "save $200 billion" by reducing payments for groups as influential as doctors and retirees is laughable. Since 2003, Congress has suspended those "required" cuts each year

Do you feel the leaked information from a global warming alarmist organization is meaningful? This was an illegal information leak that should be ignored It makes me question my belief in global warming activists It's an example of dangerous scientific politicization I haven't really heard about the controversy

This was an illegal information leak that should be ignored (1 %)

It makes me question my belief in global warming activists (8 %)

It's an example of dangerous scientific politicization (86 %)

I haven't really heard about the controversy (5 %)

Our pandering congressmen rarely cut. They just spend. Even as the deficit grows, they vomit up our money onto new pet "green" projects, bailouts for irresponsible industries, gifts for special interests and guarantees to everyone.

Originally, this year's suspension, "the doc fix," was included in the health care bills, but when it clearly pushed the cost of "reform" over Obama's limit and threatened to hike the deficit, the politicians moved the "doc fix" to a separate bill and pretended it was unrelated to their health care work.

Megan McArdle of The Atlantic reports that Rep. Paul Ryan of Wisconsin asked the Congressional Budget Office what the total price would be if the "doc fix" and House health care overhaul were passed together. "The answer, according to the CBO, is that together they'd increase the deficit by $89 billion over 10 years." McArdle explains why the "doc fix" should be included: "They're passing a bill that increases the deficit by $200 billion in order to pass another bill that hopefully reduces it, but by substantially less than $200 billion. That means that passage of this bill is going to increase the deficit."

From the start, Obama has promised to pay for half the "reform" cost by cutting Medicare by half a trillion over 10 years. But, Tanner asks, "how likely is it that those cuts will take place? After all, this is an administration that will pay seniors $250 to make up for the fact that they didn't get a Social Security cost-of-living increase this year (because the cost of living didn't increase). And Congress is in the process of repealing a scheduled increase in Medicare premiums."

Older people vote in great numbers. AARP is the most powerful lobby on Capitol Hill. Like the cut in doctor's pay, the other cuts will never happen.

I will chew on razor blades when Congress cuts Medicare to keep the deficit from growing.

Medicare is already $37 trillion in the hole. Yet the Democrats proudly cite Medicare when they demand support for the health care overhaul. If a business pulled the accounting tricks the politicians get away with, the owners would be in prison.

From The Wall Street Journal's Best of the Web Newsletter, November 24, 2009

 "The United States government is financing its more than trillion-dollar-a-year borrowing with i.o.u.'s on terms that seem too good to be true. But that happy situation, aided by ultralow interest rates, may not last much longer. Treasury officials now face a trifecta of headaches: a mountain of new debt, a balloon of short-term borrowings that come due in the months ahead, and interest rates that are sure to climb back to normal as soon as the Federal Reserve decides that the emergency has passed."--news story, New York Times, Nov. 23

 "Ever since the Great Recession began economic analysts at some (not all) major Wall Street firms have warned that efforts to fight the slump will produce even worse economic evils. In particular, they say, never mind the current ability of the U.S. government to borrow long term at remarkably low interest rates--any day now, budget deficits will lead to a collapse in investor confidence, and rates will soar. . . . Well, spikes in long-term interest rates have happened in the past, most famously in 1994. But in 1994 the U.S. economy was adding 300,000 jobs a month, and the Fed was steadily raising short-term rates. It's hard to see why anything similar should happen now, with the economy still bleeding jobs and the Fed showing no desire to raise rates anytime soon."--
former Enron adviser Paul Krugman, New York Times, Nov. 23

With war looming, it's time to be prepared. So last week I switched to a fixed-rate mortgage. It means higher monthly payments, but I'm terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits."--
former Enron adviser Paul Krugman, New York Times, March 11, 2003

 "Well, spikes in long-term interest rates have happened in the past, most famously in 1994. But in 1994 the U.S. economy was adding 300,000 jobs a month, and the Fed was steadily raising short-term rates. It's hard to see why anything similar should happen now, with the economy still bleeding jobs and the Fed showing no desire to raise rates anytime soon. . . . And shouldn't we consider the source? As far as I can tell, the analysts now warning about soaring interest rates tend to be the same people who insisted, months after the Great Recession began, that the biggest threat facing the economy was inflation. And let's not forget that Wall Street--which somehow failed to recognize the biggest housing bubble in history--has a less than stellar record at predicting market behavior."--
former Enron adviser Paul Krugman, New York Times, Nov. 23, 2009


"Five Reasons Obama is Looking Less Like a Leader," by George Packer, The New Yorker, November 24, 2009 ---

"Turkeys of the Year 2009," by Michelle Malkin, Townhall, November 25, 2009 ---

Tim Geithner's getting ready to shovel more taxpayer money down the rat hole, this time to GMACGMAC, in case you're in understandable denial, has been bailed out twice already.And now Tim Geithner wants to shovel another $2.8 billion in.
Henry Blodgett, "Tim Geithner, Don't You Dare Bail Out GMAC Again,"  Business Insider, October 28, 2009 ---

How well does GM's Volt automobile test model work on a test track?
Very, very well ---
The ultimate test will be battery life/cost and years/miles of full warranty.

An unmentioned problem is the weight of the car that now requires specially made tires. Driving this tank down the road on a gas-fed generator can hardly get good mileage (my guess is less than five miles to the gallon). GM does not like to talk about this problem. Also not mentioned is the cost of the electricity needed to charge the battery when the car is in a garage. "You load 16 tons and what do you get?" Another 40 miles.

Tina Brown agrees with David Letterman about the "total ignorance" of Sarah Palin

It's now been certified by none other than the genius Tina Brown that Sarah Palin is "totally ignorant" ---
Newsbusters, November 24, 2009 --- 
Jensen Comment
What is really stupid is the Brown's assumption that millions of voters aren't equally ignorant. She forgets how many voted for George W. Bush. I mean nobody in the world can be as smart as Tina Brown.

Tina Brown is just too smart to read The Washington Post ---
"Yes, she can: Palin has a shot at the presidency," by Matthew Dowd
Jensen Comment
Please don't construe this as meaning I would vote for her. I just hate flippant people like Tina Brown who shoot from the hip calling other people "ignorant."

Tina Brown's 2007 book The Diana Chronicles has a Barnes & Noble reader rating of 2.5 out of 5.0 and sells in hardcover (used) for a whopping $1.99 at Barnes & Noble. Must not be much of a collector's item.

Let's face it. Tina Brown has just grown too smart for the public. Readers do not seem to be lining up in the streets for her forthcoming book on the Clintons. Yawn!

On November 22, 2009 CBS Sixty Minutes aired a video featuring experts (including physicians) explaining how the single largest drain on the Medicare insurance fund is keeping dying people hopelessly alive who could otherwise be allowed to die quicker and painlessly without artificially prolonging life on ICU machines.
"The Cost of Dying," CBS Sixty Minutes Video, November 22, 2009 ---

What is really sad is the way Republicans are standing in the way of making rational cost-benefit decisions about dying by exploiting the "Kill Granny" political strategy aimed at killing a government option in health care reform.
See the "Kill Granny" strategy at --- www.defendyourhealthcare.us

 IOUSA (the most frightening movie in American history) ---
(see a 30-minute version of the documentary at www.iousathemovie.com ).

More links to David Walker --- http://www.trinity.edu/rjensen/entitlements.htm

The New York Times Timeline History of Health Care Reform in the United States ---
Click the arrow button on the right side of the NYT timeline.

"The Unbearable Paradox of Glenn Beck (Beck needs to be more careful with the facts) ---

I don’t really want to shut him up. I want him to change. Take those enormous talents and make all the arguments that he can legitimately make. Keep the cutesy gimmicks (I understand that we’re talking entertainment here), but have an iceberg of evidence beneath the surface. Fox is making so much money from the show that it can afford the staff to do the homework.

Absent that change, and I’m not holding my breath, let me suggest to my colleagues who want a better public policy debate that we’ve got to avoid the if-I-were-God fallacy. It’s not in our power to decide whether Glenn Beck’s show continues. He will save the Republic or fail to save it whatever we do. All we can do is be honest about what we think. I’ll go first. I say it’s spinach and I say the hell with it. What Beck does is propaganda. Maybe propaganda has its place, but let’s not kid ourselves. Glenn Beck and Keith Olbermann are brothers (in biased exaggerations unwillingness to to face facts and real debates --- Olbermann only invites his choir).

Combating Transnational Terrorism: Searching for a New Paradigm edited by Steve Tsang (Praeger Publishers; 2009/ 169 pages; $49.95). Writings that advocate, among other things, a concerted campaign to win the hearts and minds of nonextremist Muslims.

Interpreting Islamic Political Parties edited by M.A. Mohamed Salih (Palgrave Macmillan; 2009, 302 pages; $90). Presents case studies of parties in Algeria, Egypt, Eritrea, Indonesia, Kuwait, Lebanon, Malaysia, the Maldives, Mauritius, Somalia, South Africa, and Sudan.

In science, what is value-added (quality controlled and homogenised) data?
Is is common place to discard contradictory data that was not homgenised?

My colleagues and I accept that some of the published emails do not read well. I regret any upset or confusion caused as a result. Some were clearly written in the heat of the moment, others use colloquialisms frequently used between close colleagues.
Phil Jones, Head ("scientist") of the Climatic Research Unit, University of East Anglia, November 24, 2009
Jensen Comment
"colloquialisms frequently used" = "only publish outcomes consistent with funding and political goals"
Or in other words "accentuate the positive, eliminate the negative, and don't mess with Mr. Inbetween."

Climate Science Video --- http://www.youtube.com/watch?v=nEiLgbBGKVk&feature=player_embedded

Leading British scientists at the University of East Anglia, who were accused of manipulating climate change data - dubbed Climategate - have agreed to publish their figures in full.The U-turn by the university follows a week of controversy after the emergence of hundreds of leaked emails, "stolen" by hackers and published online, triggered claims that the academics had massaged statistics. In a statement welcomed by climate change sceptics, the university said it would make all the data accessible as soon as possible, once its Climatic Research Unit (CRU) had negotiated its release from a range of non-publication agreements.
Robert Mendick, "Climategate: University of East Anglia U-turn in climate change row Leading British scientists at the University of East Anglia, who were accused of manipulating climate change data - dubbed Climategate - have agreed to publish their figures in full," London Telegraph, November 28, 2009 --- Click Here

Oops! Scratch the Above Tidbit: 
This is beginning to sound more like ACORN and the Houston Office of Arther Andersen.

SCIENTISTS at the University of East Anglia (UEA) have admitted throwing away much of the raw temperature data on which their predictions of global warming are based. It means that other academics are not able to check basic calculations said to show a long-term rise in temperature over the past 150 years....In a statement on its website, the CRU said:
“We do not hold the original raw data but only the value-added (quality controlled and homogenised) data.”
Jonathan Leake, "Climate change data dumped," London Times, November 29, 2009 ---
Jensen Comment
Phil Jones was not in charge in the 1980s when the raw data were discarded.

The Economist believes that global warming is a serious threat, and that the world needs to take steps to try to avert it. That is the job of the politicians. But we do not believe that climate change is a certainty. There are no certainties in science. Prevailing theories must be constantly tested against evidence, and refined, and more evidence collected, and the theories tested again. That is the job of the scientists. When they stop questioning orthodoxy, mankind will have given up the search for truth. The sceptics should not be silenced.
"A Heated Debate," The Economist, November 25, 2009, Page 15 --- Click Here

A new scientific scandal Alert:  If a peer review fails in the woods...,
A scientific scandal is casting a shadow over a number of recent peer-reviewed climate papers. At least eight papers purporting to reconstruct the historical temperature record times may need to be revisited, with significant implications for contemporary climate studies, the basis of the IPCC's assessments. A number of these involve senior climatologists at the British climate research centre CRU at the University East Anglia. In every case, peer review failed to pick up the errors. At issue is the use of tree rings as a temperature proxy, or dendrochronology.
Andrew Orlowski, "A new scientific scandal Alert:  Print If a peer review fails in the woods...," The Register, September 29, 2009 --- http://www.theregister.co.uk/2009/09/29/yamal_scandal/

Noted University of Arizona Scientist Caught Up in the Scandal
"Global warming fraud uncovered," by Kathy G. Boatman, London Times, November 27, 2009 ---

The documents released make it clear that this particular situation involved a notable University of Arizona climate change scientist by the name of Jonathan Overpeck.

The university issued a press release regarding Jonathan Overpeck in 2007 that seems to confirm his involvement, “The Intergovernmental Panel on Climate Change was one of the winners of the 2007 Nobel Peace Prize, and a professor at The University of Arizona was one of only 33 lead authors on an IPCC assessment report released earlier this year.”

Overpeck, director of the University of Arizona’s Institute for the Study of Planet Earth and professor of geosciences and atmospheric sciences, was a coordinating lead author of a chapter on Paleoclimate, for the IPCC’s fourth assessment report.

“This is pretty awesome,” Overpeck was quoted as saying in the news release. “So much work went into this on the part of so many scientists. The recognition is a reflection of the impact that climate science is having. It’s also a reflection that society is moving from questioning climate change to realizing that it’s happening and discuss what to do about it.”

The fourth assessment report, which focused on the science of climate change, presented expert consensus on greenhouse gas levels, global land and ocean temperatures, sea level rising, changes in sea ice and predictions of future change.

However, it now appears that Overpeck and others have manipulated the science and the consensus they claim to have. Perhaps congressional hearings will help to determine Overpeck’s role in this situation.

In addition to these problems, the attempts to brainwash the public are evident. CRU apparently utilized a public relations firm to communicate its climate change message. Most notable is the statement, “Changing attitudes toward climate change is not like selling a particular brand of soap, it’s like convincing someone to use soap in the first place.” Another one of the PR rules is, “Everyone must use a clear and consistent explanation of climate change.”

Before you take start purchasing carbon credits, I suggest you peruse the documents and e-mails that were leaked and are available in a searchable database at www.anelegantchaos.org/cru/search.php 

Jensen Comment
Dr. Michael Mann of Penn State’s Earth System Science Center is also caught up in the scandal and under some pressure to resign.


Hackers are revealing the moral hazards of climate science
However, we do now have hundreds of emails that give every appearance of testifying to concerted and coordinated efforts by leading climatologists to fit the data to their conclusions while attempting to silence and discredit their critics. In the department of inconvenient truths, this one surely deserves a closer look by the media, the U.S. Congress and other investigative bodies.

Scientists have long endured the criticism that many of them cheat in their grant applications, experiments, and in their race to be the first to publish findings that ultimately do not stand the test of more deliberative replications. But the open-minded willingness of journals and editors to publish contradictory findings has always been viewed as saving the credibility of science. In the natural sciences replication or other confirmation is the name of the game. In the social sciences replication and confirmation is more problematic, but increasingly attempts are being made to improve the credibility of social science experimentation --- http://www.trinity.edu/rjensen/theory01.htm#Myths

This is why it is very disheartening to see the politics of climate-change scientists destroying the credibility of their journals and their editors who control the gates of publication of climate change research.

Since science funding in the United States has become largely a game of gaming for grants, there are many other examples in virtually all branches of science where scientists engage in fraud just for the money and the prestige. Politicians have created enormous moral hazards in the world of science and medicine.

"E-Mail Fracas Shows Peril of Trying to Spin Science," by John Tierney, The New York Times, November 30, 2009 ---

As the scientists denigrate their critics in the e-mail messages, they seem oblivious to one of the greatest dangers in the climate-change debate: smug groupthink. These researchers, some of the most prominent climate experts in Britain and America, seem so focused on winning the public-relations war that they exaggerate their certitude — and ultimately undermine their own cause.

Consider, for instance, the phrase that has been turned into a music video by gleeful climate skeptics: “hide the decline,” used in an e-mail message by Phil Jones, the head of the university’s Climatic Research Unit. He was discussing the preparation of a graph for the cover of a 1999 report from the World Meteorological Organization showing that temperatures in the past several decades were the highest of the past millennium.

Most of the graph was based on analyses of tree rings and other “proxy” records like ice cores and lake sediments. These indirect measurements indicated that temperatures declined in the middle of the millennium and then rose in the first half of the 20th century, which jibes with other records. But the tree-ring analyses don’t reveal a sharp warming in the late 20th century — in fact, they show a decline in temperatures, contradicting what has been directly measured with thermometers.

Because they considered that recent decline to be spurious, Dr. Jones and his colleagues removed it from part of the graph and used direct thermometer readings instead. In a statement last week, Dr. Jones said there was nothing nefarious in what they had done, because the problems with the tree-ring data had been openly identified earlier and were known to experts.

But the graph adorned the cover of a report intended for policy makers and journalists. The nonexperts wouldn’t have realized that the scariest part of that graph — the recent temperatures soaring far above anything in the previous millennium — was based on a completely different measurement from the earlier portion. It looked like one smooth, continuous line leading straight upward to certain doom.

The story behind that graph certainly didn’t show that global warming was a hoax or a fraud, as some skeptics proclaimed, but it did illustrate another of their arguments: that the evidence for global warming is not as unequivocal as many scientists claim. (Go to nytimes.com/tierneylab for details.)

In fact, one skeptic raised this very issue about tree-ring data in a comment posted in 2004 on RealClimate, the blog operated by climate scientists. The comment, which questioned the propriety of “grafting the thermometer record onto a proxy temperature record,” immediately drew a sharp retort on the blog from Michael Mann, an expert at Penn State University:

“No researchers in this field have ever, to our knowledge, ‘grafted the thermometer record onto’ any reconstruction. It is somewhat disappointing to find this specious claim (which we usually find originating from industry-funded climate disinformation Web sites) appearing in this forum.”

Dr. Mann now tells me that he was unaware, when he wrote the response, that such grafting had in fact been done in the earlier cover chart, and I take him at his word. But I don’t see why the question was dismissed so readily, with the implication that only a tool of the fossil-fuel industry would raise it.

Contempt for critics is evident over and over again in the hacked e-mail messages, as if the scientists were a priesthood protecting the temple from barbarians. Yes, some of the skeptics have political agendas, but so do some of the scientists. Sure, the skeptics can be cranks and pests, but they have identified genuine problems in the historical reconstructions of climate, as in the debate they inspired about the “hockey stick” graph of temperatures over the past millennium.

It is not unreasonable to give outsiders a look at the historical readings and the adjustments made by experts like Harry. How exactly were the readings converted into what the English scientists describe as “quality controlled and homogenised” data?

Trying to prevent skeptics from seeing the raw data was always a questionable strategy, scientifically. Now it looks like dubious public relations, too.

In response to the furor over the climate e-mail messages, there will be more attention than ever paid to those British temperature records, and any inconsistencies or gaps will seem more suspicious simply because the researchers were so determined not to reveal them. Skeptical bloggers are already dissecting Harry’s work. As they relentlessly pore over other data, the British scientists will feel Harry’s pain:

"Settled Science? Computer hackers reveal corruption behind the global-warming "consensus." by James Taranto, The Wall Street Journal, November 23, 2009, Best of the Web Wall Street Journal Newsletter

"Officials at the University of East Anglia confirmed in a statement on Friday that files had been stolen from a university server and that the police had been brought in to investigate the breach," the New York Times reports. "They added, however, that they could not confirm that all the material circulating on the Internet was authentic." But some scientists have confirmed that their emails were quoted accurately.

The files--which can be downloaded here--surely have not been fully plumbed. The ZIP archive weighs in at just under 62 megabytes, or more than 157 MB when uncompressed. But bits that have already been analyzed, as the Washington Post reports, "reveal an intellectual circle that appears to feel very much under attack, and eager to punish its enemies":

In one e-mail, the center's director, Phil Jones, writes Pennsylvania State University's Michael E. Mann and questions whether the work of academics that question the link between human activities and global warming deserve to make it into the prestigious IPCC report, which represents the global consensus view on climate science.

"I can't see either of these papers being in the next IPCC report," Jones writes. "Kevin and I will keep them out somehow--even if we have to redefine what the peer-review literature is!"

In another, Jones and Mann discuss how they can pressure an academic journal not to accept the work of climate skeptics with whom they disagree. "Perhaps we should encourage our colleagues in the climate research community to no longer submit to, or cite papers in, this journal," Mann writes. . . .

Mann, who directs Penn State's Earth System Science Center, said the e-mails reflected the sort of "vigorous debate" researchers engage in before reaching scientific conclusions. "We shouldn't expect the sort of refined statements that scientists make when they're speaking in public," he said.

This is downright Orwellian. What the Post describes is not a vigorous debate but an attempt to suppress debate--to politicize the process of scientific inquiry so that it yields a predetermined result. This does not, in itself, prove the global warmists wrong. But it raises a glaring question: If they have the facts on their side, why do they need to resort to tactics of suppression and intimidation?

Continued in article

"Global Warming With the Lid Off The emails that reveal an effort to hide the truth about climate science," The Wall Street Journal, November 245, 2009 --- Click Here

'The two MMs have been after the CRU station data for years. If they ever hear there is a Freedom of Information Act now in the U.K., I think I'll delete the file rather than send to anyone. . . . We also have a data protection act, which I will hide behind."

So apparently wrote Phil Jones, director of the University of East Anglia's Climate Research Unit (CRU) and one of the world's leading climate scientists, in a 2005 email to "Mike." Judging by the email thread, this refers to Michael Mann, director of the Pennsylvania State University's Earth System Science Center. We found this nugget among the more than 3,000 emails and documents released last week after CRU's servers were hacked and messages among some of the world's most influential climatologists were published on the Internet.

The "two MMs" are almost certainly Stephen McIntyre and Ross McKitrick, two Canadians who have devoted years to seeking the raw data and codes used in climate graphs and models, then fact-checking the published conclusions—a painstaking task that strikes us as a public and scientific service. Mr. Jones did not return requests for comment and the university said it could not confirm that all the emails were authentic, though it acknowledged its servers were hacked.

Yet even a partial review of the emails is highly illuminating. In them, scientists appear to urge each other to present a "unified" view on the theory of man-made climate change while discussing the importance of the "common cause"; to advise each other on how to smooth over data so as not to compromise the favored hypothesis; to discuss ways to keep opposing views out of leading journals; and to give tips on how to "hide the decline" of temperature in certain inconvenient data.

Some of those mentioned in the emails have responded to our requests for comment by saying they must first chat with their lawyers. Others have offered legal threats and personal invective. Still others have said nothing at all. Those who have responded have insisted that the emails reveal nothing more than trivial data discrepancies and procedural debates.

Yet all of these nonresponses manage to underscore what may be the most revealing truth: That these scientists feel the public doesn't have a right to know the basis for their climate-change predictions, even as their governments prepare staggeringly expensive legislation in response to them.

Consider the following note that appears to have been sent by Mr. Jones to Mr. Mann in May 2008: "Mike, Can you delete any emails you may have had with Keith re AR4? Keith will do likewise. . . . Can you also email Gene and get him to do the same?" AR4 is shorthand for the U.N.'s Intergovernmental Panel of Climate Change's (IPCC) Fourth Assessment Report, presented in 2007 as the consensus view on how bad man-made climate change has supposedly become.

In another email that seems to have been sent in September 2007 to Eugene Wahl of the National Oceanic and Atmospheric Administration's Paleoclimatology Program and to Caspar Ammann of the National Center for Atmospheric Research's Climate and Global Dynamics Division, Mr. Jones writes: "[T]ry and change the Received date! Don't give those skeptics something to amuse themselves with."

When deleting, doctoring or withholding information didn't work, Mr. Jones suggested an alternative in an August 2008 email to Gavin Schmidt of NASA's Goddard Institute for Space Studies, copied to Mr. Mann. "The FOI [Freedom of Information] line we're all using is this," he wrote. "IPCC is exempt from any countries FOI—the skeptics have been told this. Even though we . . . possibly hold relevant info the IPCC is not part of our remit (mission statement, aims etc) therefore we don't have an obligation to pass it on."

It also seems Mr. Mann and his friends weren't averse to blacklisting scientists who disputed some of their contentions, or journals that published their work. "I think we have to stop considering 'Climate Research' as a legitimate peer-reviewed journal," goes one email, apparently written by Mr. Mann to several recipients in March 2003. "Perhaps we should encourage our colleagues in the climate research community to no longer submit to, or cite papers in, this journal."

Mr. Mann's main beef was that the journal had published several articles challenging aspects of the anthropogenic theory of global warming.

For the record, when we've asked Mr. Mann in the past about the charge that he and his colleagues suppress opposing views, he has said he "won't dignify that question with a response." Regarding our most recent queries about the hacked emails, he says he "did not manipulate any data in any conceivable way," but he otherwise refuses to answer specific questions. For the record, too, our purpose isn't to gainsay the probity of Mr. Mann's work, much less his right to remain silent.

However, we do now have hundreds of emails that give every appearance of testifying to concerted and coordinated efforts by leading climatologists to fit the data to their conclusions while attempting to silence and discredit their critics. In the department of inconvenient truths, this one surely deserves a closer look by the media, the U.S. Congress and other investigative bodies.

Also see http://hotair.com/archives/2009/11/24/cbs-east-anglia-cru-covered-up-bad-data-computer-modeling/

Leading British scientists at the University of East Anglia, who were accused of manipulating climate change data - dubbed Climategate - have agreed to publish their figures in full.The U-turn by the university follows a week of controversy after the emergence of hundreds of leaked emails, "stolen" by hackers and published online, triggered claims that the academics had massaged statistics. In a statement welcomed by climate change sceptics, the university said it would make all the data accessible as soon as possible, once its Climatic Research Unit (CRU) had negotiated its release from a range of non-publication agreements.
Robert Mendick, "Climategate: University of East Anglia U-turn in climate change row Leading British scientists at the University of East Anglia, who were accused of manipulating climate change data - dubbed Climategate - have agreed to publish their figures in full," London Telegraph, November 28, 2009 --- Click Here

From The Wall Street Journal's Best of the Web Newsletter on November 25, 2009

The Litigation Begins
Yesterday "the Competitive Enterprise Institute filed three Notices of Intent to File Suit against NASA and its Goddard Institute for Space Studies (GISS), for those bodies' refusal--for nearly three years--to provide documents requested under the Freedom of Information Act," CEI fellow Christopher Horner announces at Pajamas Media:

The information sought is directly relevant to the exploding "Climategate" scandal revealing document destruction, coordinated efforts in the U.S. and UK to avoid complying with both countries' freedom of information laws, and apparent and widespread intent to defraud at the highest levels of international climate science bodies. Numerous informed commenters had alleged such behavior for years, all of which appears to be affirmed by leaked emails, computer code, and other data from the Climatic Research Unit of the UK's East Anglia University.

All of that material, and that sought for years by CEI, goes to the heart of the scientific claims and campaign underpinning the Kyoto Protocol, its planned successor treaty, "cap-and-trade" legislation, and the EPA's threatened regulatory campaign to impose similar measures through the back door.

A lawyer writes us that "'the purloined 'global warming emails' suggest several lines of legal inquiry":

Tortious interference. For researchers and academicians, publication in peer-reviewed journals is important to advancement, raises, grant funding, etc. Wrongful interference with the ability to publish has monetary and reputational damages. If that interference is based not on editorial judgment of worthiness for publication, but rather on protecting reputations, scientific positions, political goals or "places in history" (as mentioned in one email), then it could give rise to liability in tort for the individual scientist and possibly for the university or organization for which he works.

Breach of faculty ethics standards or contracts. Most universities and research organizations have ethics clauses in their faculty/employee manuals and in their contracts with faculty/researchers. If (as suggested by the purloined emails) these individuals cooked data or manipulated assumptions to achieve preferred outcomes, or denied others access to data essential for replication of result that is essential to the scientific method, they could have violated university or organizational ethics standards.

State-chartered universities. Some of these individuals appear to work for state-chartered and state-funded institutions, and might well be classified as state employees (and thereby eligible for generous state benefits). The conduct suggested by the purloined emails might violate state ethics or funding policies. State governments and legislatures therefore might have a basis for inquiry and oversight.

Federal grants. Federal grants typically have ethics/integrity clauses to assure that the research funded by the grant is credible and reliable (and to assure that the agency can avoid accountability if it isn't). As noted, the purloined emails suggest that data might have been cooked and assumptions might have been manipulated to generate a predetermined outcome. If true, and if the work in question was funded by federal grant, the researchers in question might well have violated their federal grant contracts--for which there are legal consequences. Inspectors general of the grant agencies should be in position to make inquiry if the data/assumptions in question could be linked in time and topic to a contemporaneous federal grant to the researchers in question.

This promises be a boon for comedians as well as lawyers. Here's our first effort:

Q: How many climate scientists does it take to change a light bulb?

A: None. There's a consensus that it's going to change, so they've decided to keep us in the dark.

How did academic accounting research become a pseudo science?

Guilty Until Proven Innocent
Further, Obama's and Holder's assurances that KSM will be convicted (and, according to the president, "put to death") make a mockery of due process. Nothing is more fundamental to America's criminal justice system than the presumption of innocence, and if terrorist detainees are to be treated as criminal defendants, they are entitled to that presumption.
James Taranto, "'Failure Is Not an Option':  Obama and Holder's assault on due process," The Wall Street Journal,  November 20, 2009 --- Click Here
Jensen Comment
Obama and Holder fail to recall what happened to the OJ Simpson jury that would've found OJ innocent even if he stood up in the trial and confessed aloud. Also how diverse will the jury be that Holder insists upon or does he intend to pack the jury with red necks (not really a Holder type thing to do until now).

What's really sad is that Obama and Holder are in reality inviting (daring?) terrorists to hit NYC harder than before. Reminds me of Monty Python's robotic sword fight ("Gosh that feels good. Take another swing.")

Makes you think Blue State Senators from NY, Massachusetts, Illinois, and California Sold Out Too Cheap
But none of the rogue Senators are getting the tens of millions in earmarks Nancy Pelosi doled out for votes.
"Health Care Payola:  Harry Reid is passing out goodies in hopes of garnering the 60 votes he needs," by John Fund, The Wall Street Journal, November 21, 2009 --- Click Here

Maneuvering on health care in the Senate may come down to who wants it more -- and Republicans are drawing a line at some of the more aggressive dilatory parliamentary tactics open to them.

On the Democratic side, Majority Leader Harry Reid is passing out goodies in hopes of garnering the 60 votes he needs for a motion to proceed to debate on the bill. Yesterday, Mr. Reid announced he'll hold that vote on Saturday at 8 pm after a day-long debate. Whether he has the 60 votes is uncertain at the moment, but you can bet he will open the taxpayer spigots to secure those he needs.

Take Louisiana Senator Mary Landrieu. She's now likely to vote with Mr. Reid on Saturday after an amendment was inserted to increase her state's federal Medicaid subsidies by $100 million. The amendment devotes two pages to language making certain that only Louisiana would be entitled to the extra cash.

On the Republican side, Mr. Reid must be relieved the GOP has apparently decided not to force a reading of the entire 2,074-page bill over the weekend. Instead, Republicans will settle for a full day of debate before the Saturday night vote.

Republicans had the option of staying on the floor and having Senator Tom Coburn of Oklahoma and others read the bill, a process that would take at least two days. They opted for a less strenuous path that will allow them to spend plenty of time at home during the Thanksgiving holiday. "Republican members oppose the bill, but they don't appear willing to stay up nights arguing against it," one former Hill staffer told me.

Mr. Reid still has to be nervous as he corrals his 60 votes. He has no margin for error, since he needs all 58 Democrats plus the two independents who caucus with the party to bring his health care bill to the floor. He has to worry particularly about Senator Robert Byrd, who turns 92 today, and has missed more than 130 roll call votes this year due to illness. The old adage that every vote counts actually applies here as the Senate sets about the task of reordering one-sixth of the nation's economy.


The Greatest Swindle in the History of the World

Paulson and Geithner Lied Big Time:  The Greatest Swindle in the History of the World
What was their real motive in the greatest fraud conspiracy in the history of the world?

Bombshell:  In 2008 and early 2009, Treasury Secretary leaders Paulson and Geithner told the media and Congress that AIG needed a global bailout due to not having cash reserves to meet credit default swap (systematic risk) obligations and insurance policy payoffs. On November 19, 2009 in Congressional testimony Geithner now admits that all this was a pack of lies. However, he refuses to resign as requested by some Senators.

"AIG and Systemic Risk Geithner says credit-default swaps weren't the problem, after all," Editors of The Wall Street Journal, November 20, 2009 --- Click Here

TARP Inspector General Neil Barofsky keeps committing flagrant acts of political transparency, which if nothing else ought to inform the debate going forward over financial reform. In his latest bombshell, the IG discloses that the New York Federal Reserve did not believe that AIG's credit-default swap (CDS) counterparties posed a systemic financial risk.


For the last year, the entire Beltway theory of the financial panic has been based on the claim that the "opaque," unregulated CDS market had forced the Fed to take over AIG and pay off its counterparties, lest the system collapse. Yet we now learn from Mr. Barofsky that saving the counterparties was not the reason for the bailout.

In the fall of 2008 the New York Fed drove a baby-soft bargain with AIG's credit-default-swap counterparties. The Fed's taxpayer-funded vehicle, Maiden Lane III, bought out the counterparties' mortgage-backed securities at 100 cents on the dollar, effectively canceling out the CDS contracts. This was miles above what those assets could have fetched in the market at that time, if they could have been sold at all.

The New York Fed president at the time was none other than Timothy Geithner, the current Treasury Secretary, and Mr. Geithner now tells Mr. Barofsky that in deciding to make the counterparties whole, "the financial condition of the counterparties was not a relevant factor."

This is startling. In April we noted in these columns that Goldman Sachs, a major AIG counterparty, would certainly have suffered from an AIG failure. And in his latest report, Mr. Barofsky comes to the same conclusion. But if Mr. Geithner now says the AIG bailout wasn't driven by a need to rescue CDS counterparties, then what was the point? Why pay Goldman and even foreign banks like Societe Generale billions of tax dollars to make them whole?

Both Treasury and the Fed say they think it would have been inappropriate for the government to muscle counterparties to accept haircuts, though the New York Fed tried to persuade them to accept less than par. Regulators say that having taxpayers buy out the counterparties improved AIG's liquidity position, but why was it important to keep AIG liquid if not to protect some class of creditors?

Yesterday, Mr. Geithner introduced a new explanation, which is that AIG might not have been able to pay claims to its insurance policy holders: "AIG was providing a range of insurance products to households across the country. And if AIG had defaulted, you would have seen a downgrade leading to the liquidation and failure of a set of insurance contracts that touched Americans across this country and, of course, savers around the world."

Yet, if there is one thing that all observers seemed to agree on last year, it was that AIG's money to pay policyholders was segregated and safe inside the regulated insurance subsidiaries. If the real systemic danger was the condition of these highly regulated subsidiaries—where there was no CDS trading—then the Beltway narrative implodes.

Interestingly, in Treasury's official response to the Barofsky report, Assistant Secretary Herbert Allison explains why the department acted to prevent an AIG bankruptcy. He mentions the "global scope of AIG, its importance to the American retirement system, and its presence in the commercial paper and other financial markets." He does not mention CDS.

All of this would seem to be relevant to the financial reform that Treasury wants to plow through Congress. For example, if AIG's CDS contracts were not the systemic risk, then what is the argument for restructuring the derivatives market? After Lehman's failure, CDS contracts were quickly settled according to the industry protocol. Despite fears of systemic risk, none of the large banks, either acting as a counterparty to Lehman or as a buyer of CDS on Lehman itself, turned out to have major exposure.

More broadly, lawmakers now have an opportunity to dig deeper into the nature of moral hazard and the restoration of a healthy financial system. Barney Frank and Chris Dodd are pushing to give regulators "resolution authority" for struggling firms. Under both of their bills, this would mean unlimited ability to spend unlimited taxpayer sums to prevent an unlimited universe of firms from failing.

Americans know that's not the answer, but what is the best solution to the too-big-to-fail problem? And how exactly does one measure systemic risk? To answer these questions, it's essential that we first learn the lessons of 2008. This is where reports like Mr. Barofsky's are valuable, telling us things that the government doesn't want us to know.

In remarks Tuesday that were interpreted as a veiled response to Mr. Barofsky's report, Mr. Geithner said, "It's a great strength of our country, that you're going to have the chance for a range of people to look back at every decision made in every stage in this crisis, and look at the quality of judgments made and evaluate them with the benefit of hindsight." He added, "Now, you're going to see a lot of conviction in this, a lot of strong views—a lot of it untainted by experience."

Mr. Geithner has a point about Monday-morning quarterbacking. He and others had to make difficult choices in the autumn of 2008 with incomplete information and often with little time to think, much less to reflect. But that was last year. The task now is to learn the lessons of that crisis and minimize the moral hazard so we can reduce the chances that the panic and bailout happen again.

This means a more complete explanation from Mr. Geithner of what really drove his decisions last year, how he now defines systemic risk, and why he wants unlimited power to bail out creditors—before Congress grants the executive branch unlimited resolution authority that could lead to bailouts ad infinitum.

Jensen Comment
One of the first teller of lies was the highly respected Gretchen Morgenson of The New York Times who was repeating the lies told to her and Congress by the Treasury and the Fed. This was when I first believed that the problem at AIG was failing to have capital reserves to meet CDS obligations. I really believed Morgenson's lies in 2008 ---

Here's what I wrote in 2008 --- http://www.trinity.edu/rjensen/2008Bailout.htm#Bailout
Credit Default Swap (CDS)
This is an insurance policy that essentially "guarantees" that if a CDO goes bad due to having turds mixed in with the chocolates, the "counterparty" who purchased the CDO will recover the value fraudulently invested in turds. On September 30, 2008 Gretchen Morgenson of The New York Times aptly explained that the huge CDO underwriter of CDOs was the insurance firm called AIG. She also explained that the first $85 billion given in bailout money by Hank Paulson to AIG was to pay the counterparties to CDS swaps. She also explained that, unlike its casualty insurance operations, AIG had no capital reserves for paying the counterparties for the the turds they purchased from Wall Street investment banks.

"Your Money at Work, Fixing Others’ Mistakes," by Gretchen Morgenson, The New York Times, September 20, 2008 --- http://www.nytimes.com/2008/09/21/business/21gret.html
Also see "A.I.G., Where Taxpayers’ Dollars Go to Die," The New York Times, March 7, 2009 --- http://www.nytimes.com/2009/03/08/business/08gret.html

What Ms. Morgenson failed to explain, when Paulson eventually gave over $100 billion for AIG's obligations to counterparties in CDS contracts, was who were the counterparties who received those bailout funds. It turns out that most of them were wealthy Arabs and some Asians who we were getting bailed out while Paulson was telling shareholders of WaMu, Lehman Brothers, and Merrill Lynch to eat their turds.

You tube had a lot of videos about a CDS. Go to YouTube and read in the phrase "credit default swap" --- http://www.youtube.com/results?search_query=Credit+Default+Swaps&search_type=&aq=f
In particular note this video by Paddy Hirsch --- http://www.youtube.com/watch?v=kaui9e_4vXU
Paddy has some other YouTube videos about the financial crisis.

Bob Jensen’s threads on accounting for credit default swaps are under the C-Terms at

The Greatest Swindle in the History of the World
"The Greatest Swindle Ever Sold," by Andy Kroll, The Nation, May 26, 2009 ---


The legislation's guidelines for crafting the rescue plan were clear: the TARP should protect home values and consumer savings, help citizens keep their homes and create jobs. Above all, with the government poised to invest hundreds of billions of taxpayer dollars in various financial institutions, the legislation urged the bailout's architects to maximize returns to the American people.

That $700 billion bailout has since grown into a more than $12 trillion commitment by the US government and the Federal Reserve. About $1.1 trillion of that is taxpayer money--the TARP money and an additional $400 billion rescue of mortgage companies Fannie Mae and Freddie Mac. The TARP now includes twelve separate programs, and recipients range from megabanks like Citigroup and JPMorgan Chase to automakers Chrysler and General Motors.

Seven months in, the bailout's impact is unclear. The Treasury Department has used the recent "stress test" results it applied to nineteen of the nation's largest banks to suggest that the worst might be over; yet the International Monetary Fund, as well as economists like New York University professor and economist Nouriel Roubini and New York Times columnist Paul Krugman predict greater losses in US markets, rising unemployment and generally tougher economic times ahead.

What cannot be disputed, however, is the financial bailout's biggest loser: the American taxpayer. The US government, led by the Treasury Department, has done little, if anything, to maximize returns on its trillion-dollar, taxpayer-funded investment. So far, the bailout has favored rescued financial institutions by subsidizing their losses to the tune of $356 billion, shying away from much-needed management changes and--with the exception of the automakers--letting companies take taxpayer money without a coherent plan for how they might return to viability.

The bailout's perks have been no less favorable for private investors who are now picking over the economy's still-smoking rubble at the taxpayers' expense. The newer bailout programs rolled out by Treasury Secretary Timothy Geithner give private equity firms, hedge funds and other private investors significant leverage to buy "toxic" or distressed assets, while leaving taxpayers stuck with the lion's share of the risk and potential losses.

Given the lack of transparency and accountability, don't expect taxpayers to be able to object too much. After all, remarkably little is known about how TARP recipients have used the government aid received. Nonetheless, recent government reports, Congressional testimony and commentaries offer those patient enough to pore over hundreds of pages of material glimpses of just how Wall Street friendly the bailout actually is. Here, then, based on the most definitive data and analyses available, are six of the most blatant and alarming ways taxpayers have been scammed by the government's $1.1-trillion, publicly funded bailout.

1. By overpaying for its TARP investments, the Treasury Department provided bailout recipients with generous subsidies at the taxpayer's expense.

When the Treasury Department ditched its initial plan to buy up "toxic" assets and instead invest directly in financial institutions, then-Treasury Secretary Henry Paulson Jr. assured Americans that they'd get a fair deal. "This is an investment, not an expenditure, and there is no reason to expect this program will cost taxpayers anything," he said in October 2008.

Yet the Congressional Oversight Panel (COP), a five-person group tasked with ensuring that the Treasury Department acts in the public's best interest, concluded in its monthly report for February that the department had significantly overpaid by tens of billions of dollars for its investments. For the ten largest TARP investments made in 2008, totaling $184.2 billion, Treasury received on average only $66 worth of assets for every $100 invested. Based on that shortfall, the panel calculated that Treasury had received only $176 billion in assets for its $254 billion investment, leaving a $78 billion hole in taxpayer pockets.

Not all investors subsidized the struggling banks so heavily while investing in them. The COP report notes that private investors received much closer to fair market value in investments made at the time of the early TARP transactions. When, for instance, Berkshire Hathaway invested $5 billion in Goldman Sachs in September, the Omaha-based company received securities worth $110 for each $100 invested. And when Mitsubishi invested in Morgan Stanley that same month, it received securities worth $91 for every $100 invested.

As of May 15, according to the Ethisphere TARP Index, which tracks the government's bailout investments, its various investments had depreciated in value by almost $147.7 billion. In other words, TARP's losses come out to almost $1,300 per American taxpaying household.

2. As the government has no real oversight over bailout funds, taxpayers remain in the dark about how their money has been used and if it has made any difference.

While the Treasury Department can make TARP recipients report on just how they spend their government bailout funds, it has chosen not to do so. As a result, it's unclear whether institutions receiving such funds are using that money to increase lending--which would, in turn, boost the economy--or merely to fill in holes in their balance sheets.

Neil M. Barofsky, the special inspector general for TARP, summed the situation up this way in his office's April quarterly report to Congress: "The American people have a right to know how their tax dollars are being used, particularly as billions of dollars are going to institutions for which banking is certainly not part of the institution's core business and may be little more than a way to gain access to the low-cost capital provided under TARP."

This lack of transparency makes the bailout process highly susceptible to fraud and corruption. Barofsky's report stated that twenty separate criminal investigations were already underway involving corporate fraud, insider trading and public corruption. He also told the Financial Times that his office was investigating whether banks manipulated their books to secure bailout funds. "I hope we don't find a single bank that's cooked its books to try to get money, but I don't think that's going to be the case."

Economist Dean Baker, co-director of the Center for Economic and Policy Research in Washington, suggested to TomDispatch in an interview that the opaque and complicated nature of the bailout may not be entirely unintentional, given the difficulties it raises for anyone wanting to follow the trail of taxpayer dollars from the government to the banks. "[Government officials] see this all as a Three Card Monte, moving everything around really quickly so the public won't understand that this really is an elaborate way to subsidize the banks," Baker says, adding that the public "won't realize we gave money away to some of the richest people."

3. The bailout's newer programs heavily favor the private sector, giving investors an opportunity to earn lucrative profits and leaving taxpayers with most of the risk.

Under Treasury Secretary Geithner, the Treasury Department has greatly expanded the financial bailout to troubling new programs like the Public-Private Investment Program (PPIP) and the Term Asset-Backed-Securities Loan Facility (TALF). The PPIP, for example, encourages private investors to buy "toxic" or risky assets on the books of struggling banks. Doing so, we're told, will get banks lending again because the burdensome assets won't weigh them down. Unfortunately, the incentives the Treasury Department is offering to get private investors to participate are so generous that the government--and, by extension, American taxpayers--are left with all the downside.

Joseph Stiglitz, the Nobel-prize winning economist, described the PPIP program in a New York Times op-ed this way:

Consider an asset that has a 50-50 chance of being worth either zero or $200 in a year's time. The average "value" of the asset is $100. Ignoring interest, this is what the asset would sell for in a competitive market. It is what the asset is 'worth.' Under the plan by Treasury Secretary Timothy Geithner, the government would provide about 92 percent of the money to buy the asset but would stand to receive only 50 percent of any gains, and would absorb almost all of the losses. Some partnership!

Assume that one of the public-private partnerships the Treasury has promised to create is willing to pay $150 for the asset. That's 50 percent more than its true value, and the bank is more than happy to sell. So the private partner puts up $12, and the government supplies the rest--$12 in "equity" plus $126 in the form of a guaranteed loan.

If, in a year's time, it turns out that the true value of the asset is zero, the private partner loses the $12, and the government loses $138. If the true value is $200, the government and the private partner split the $74 that's left over after paying back the $126 loan. In that rosy scenario, the private partner more than triples his $12 investment. But the taxpayer, having risked $138, gains a mere $37."

Worse still, the PPIP can be easily manipulated for private gain. As economist Jeffrey Sachs has described it, a bank with worthless toxic assets on its books could actually set up its own public-private fund to bid on those assets. Since no true bidder would pay for a worthless asset, the bank's public-private fund would win the bid, essentially using government money for the purchase. All the public-private fund would then have to do is quietly declare bankruptcy and disappear, leaving the bank to make off with the government money it received. With the PPIP deals set to begin in the coming months, time will tell whether private investors actually take advantage of the program's flaws in this fashion.

The Treasury Department's TALF program offers equally enticing possibilities for potential bailout profiteers, providing investors with a chance to double, triple or even quadruple their investments. And like the PPIP, if the deal goes bad, taxpayers absorb most of the losses. "It beats any financing that the private sector could ever come up with," a Wall Street trader commented in a recent Fortune magazine story. "I almost want to say it is irresponsible."

4. The government has no coherent plan for returning failing financial institutions to profitability and maximizing returns on taxpayers' investments.

Compare the treatment of the auto industry and the financial sector, and a troubling double standard emerges. As a condition for taking bailout aid, the government required Chrysler and General Motors to present detailed plans on how the companies would return to profitability. Yet the Treasury Department attached minimal conditions to the billions injected into the largest bailed-out financial institutions. Moreover, neither Geithner nor Lawrence Summers, one of President Barack Obama's top economic advisors, nor the president himself has articulated any substantive plan or vision for how the bailout will help these institutions recover and, hopefully, maximize taxpayers' investment returns.

The Congressional Oversight Panel highlighted the absence of such a comprehensive plan in its January report. Three months into the bailout, the Treasury Department "has not yet explained its strategy," the report stated. "Treasury has identified its goals and announced its programs, but it has not yet explained how the programs chosen constitute a coherent plan to achieve those goals."

Today, the department's endgame for the bailout still remains vague. Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, wrote in the Financial Times in May that the government's response to the financial meltdown has been "ad hoc, resulting in inequitable outcomes among firms, creditors, and investors." Rather than perpetually prop up banks with endless taxpayer funds, Hoenig suggests, the government should allow banks to fail. Only then, he believes, can crippled financial institutions and systems be fixed. "Because we still have far to go in this crisis, there remains time to define a clear process for resolving large institutional failure. Without one, the consequences will involve a series of short-term events and far more uncertainty for the global economy in the long run."

The healthier and more profitable bailout recipients are once financial markets rebound, the more taxpayers will earn on their investments. Without a plan, however, banks may limp back to viability while taxpayers lose their investments or even absorb further losses.

5. The bailout's focus on Wall Street mega-banks ignores smaller banks serving millions of American taxpayers that face an equally uncertain future.

The government may not have a long-term strategy for its trillion-dollar bailout, but its guiding principle, however misguided, is clear: what's good for Wall Street will be best for the rest of the country.

On the day the mega-bank stress tests were officially released, another set of stress-test results came out to much less fanfare. In its quarterly report on the health of individual banks and the banking industry as a whole, Institutional Risk Analytics (IRA), a respected financial services organization, found that the stress levels among more than 7,500 FDIC-reporting banks nationwide had risen dramatically. For 1,575 of the banks, net incomes had turned negative due to decreased lending and less risk-taking.

The conclusion IRA drew was telling: "Our overall observation is that US policy makers may very well have been distracted by focusing on 19 large stress test banks designed to save Wall Street and the world's central bank bondholders, this while a trend is emerging of a going concern viability crash taking shape under the radar." The report concluded with a question: "Has the time come to shift the policy focus away from the things that we love, namely big zombie banks, to tackle things that are truly hurting us?"

6. The bailout encourages the very behaviors that created the economic crisis in the first place instead of overhauling our broken financial system and helping the individuals most affected by the crisis.

As Joseph Stiglitz explained in the New York Times, one major cause of the economic crisis was bank overleveraging. "Using relatively little capital of their own," he wrote, banks "borrowed heavily to buy extremely risky real estate assets. In the process, they used overly complex instruments like collateralized debt obligations." Financial institutions engaged in overleveraging in pursuit of the lucrative profits such deals promised--even if those profits came with staggering levels of risk.

Sound familiar? It should, because in the PPIP and TALF bailout programs the Treasury Department has essentially replicated the very over-leveraged, risky, complex system that got us into this mess in the first place: in other words, the government hopes to repair our financial system by using the flawed practices that caused this crisis.

Then there are the institutions deemed "too big to fail." These financial giants--among them AIG, Citigroup and Bank of America-- have been kept afloat by billions of dollars in bottomless bailout aid. Yet reinforcing the notion that any institution is "too big to fail" is dangerous to the economy. When a company like AIG grows so large that it becomes "too big to fail," the risk it carries is systemic, meaning failure could drag down the entire economy. The government should force "too big to fail" institutions to slim down to a safer, more modest size; instead, the Treasury Department continues to subsidize these financial giants, reinforcing their place in our economy.

Of even greater concern is the message the bailout sends to banks and lenders--namely, that the risky investments that crippled the economy are fair game in the future. After all, if banks fail and teeter at the edge of collapse, the government promises to be there with a taxpayer-funded, potentially profitable safety net.

The handling of the bailout makes at least one thing clear, however. It's not your health that the government is focused on, it's theirs-- the very banks and lenders whose convoluted financial systems provided the underpinnings for staggering salaries and bonuses, while bringing our economy to the brink of another Great Depression.

 Keynes: The Rise, Fall, and Return of the 20th Century's Most Influential Economist by Peter Clarke (Bloomsbury; 2009,  211 pages; $20). Examines the life and legacy of the British economist (1883-1946).

"Lack of Candor and the AIG Bailout:  If AIG wasn't too big to fail, why did the government rescue it? And why do we need to turn the financial system upside down?" by Peter J. Wallison, The Wall Street Journal, November 27, 2009 ---

Since last September, the government's case for bailing out AIG has rested on the notion that the company was too big to fail. If AIG hadn't been rescued, the argument goes, its credit default swap (CDS) obligations would have caused huge losses to its counterparties—and thus provoked a financial collapse.

Last week's news that this was not in fact the motive for AIG's rescue has implications that go well beyond the Obama administration's efforts to regulate CDSs and other derivatives. It's one more example that the administration may be using the financial crisis as a pretext to extend Washington's control of the financial sector.

The truth about the credit default swaps came out last week in a report by TARP Special Inspector General Neil Barofsky. It says that Treasury Secretary Tim Geithner, then president of the New York Federal Reserve Bank, did not believe that the financial condition of AIG's credit default swap counterparties was "a relevant factor" in the decision to bail out the company. This contradicts the conventional assumption, never denied by the Federal Reserve or the Treasury, that AIG's failure would have had a devastating effect.

So why did the government rescue AIG? This has never been clear.

The Obama administration has consistently argued that the "interconnections" among financial companies made it necessary to save AIG and Bear Stearns. Focusing on interconnections implies that the failure of one large financial firm will cause debilitating losses at others, and eventually a systemic breakdown. Apparently this was not true in the case of AIG and its credit default swaps—which leaves open the question of why the Fed, with the support of the Treasury, poured $180 billion into AIG.

The broader question is whether the entire regulatory regime proposed by the administration, and now being pushed through Congress by Rep. Barney Frank and Sen. Chris Dodd, is based on a faulty premise. The administration has consistently used the term "large, complex and interconnected" to describe the nonbank financial institutions it wants to regulate. The prospect that the failure of one of these firms might pose a systemic risk is the foundation of the administration's comprehensive regulatory regime for the financial industry.

Up to now, very few pundits or reporters have questioned this logic. They have apparently been satisfied with the explanation that the "interconnectedness" created by those mysterious credit default swaps was the culprit.

But the New York Fed is the regulatory body most familiar with the CDS market. If that agency did not believe AIG's failure would have actually brought down its counterparties—and ultimately the financial system itself—it raises serious questions about the administration's credibility, and about the need for its regulatory proposals. If "interconnections" among financial institutions are indeed the source of the financial crisis, the administration should be far more forthcoming than it has been about exactly what these interconnections are, and how exactly a broad new system of regulation and resolution would eliminate or reduce them.

The administration's unwillingness or inability to clearly define the problem of interconnectedness is not the only weakness in its rationale for imposing a whole new regulatory regime on the financial system. Another example is the claim—made by Mr. Geithner and President Obama himself—that predatory lending by mortgage brokers was one of the causes of the financial crisis.

No doubt some deceptive practices occurred in mortgage origination. But the facts suggest that the government's own housing policies—and not weak regulation—were the source of these bad loans.

At the end of 2008, there were about 26 million subprime and other nonprime mortgages in our financial system. Two-thirds of these mortgages were on the balance sheets of the Federal Housing Administration, Fannie Mae and Freddie Mac, and the four largest U.S. banks. The banks were required to make these loans in order to gain approval from the Fed and other regulators for mergers and expansions.

The fact that the government itself either bought these bad loans or required them to be made shows that the most plausible explanation for the large number of subprime loans in our economy is not a lack of regulation at the mortgage origination level, but government-created demand for these loans.

Finally, although there may be a good policy argument for a new consumer protection agency for financial services and products, the scope of what the administration has proposed goes far beyond lending, or even deposit-taking. In the administration's proposed legislation, the Consumer Financial Protection Agency would cover any business that provides consumer credit of any kind, including the common layaway plans and Christmas clubs that small retailers offer their customers.

Under the guise of addressing the causes of a global financial crisis, the Obama administration's bill would have regulated credit counseling, educational courses on finance, financial-data processing, money transmission and custodial services, and dozens more small businesses that could not possibly cause a financial crisis. Even Chairmen Frank and Dodd balked at this overreach. Their bills exempt retailers if their financial activity is incidental to their other business. Still, many vestiges of this excess remain in the legislation that is now being pushed toward a vote.

The lack of candor about credit default swaps, the effort to blame lack of regulation for the subprime crisis and the excessive reach of the proposed consumer protection agency are all of a piece. The administration seems to be using the specter of another financial crisis to bring more and more of the economy under Washington's control.

With the help of large Democratic majorities in Congress, this train has had considerable momentum. But perhaps—with the disclosure about credit default swaps and the AIG crisis—the wheels are finally coming off.

Bob Jensen's threads on the Greatest Swindle in the World are at

Bob Jensen's threads on why the infamous "Bailout" won't work --- http://www.trinity.edu/rjensen/2008Bailout.htm#BailoutStupidity

Is this fraud in the name of good?
A win (Bankers) - Win (Homeowners) - Lose (Taxpayers) New Gimmick on Wall Street?
If government wants to help the homeowners, why not cut out the middlemen bankers?

"Wall St. Finds Profits Again, Now by Reducing Mortgages," by Louise Story, The New York Times, November 21, 2009 --- http://www.nytimes.com/2009/11/22/business/22loans.html?hp

As millions of Americans struggle to hold on to their homes, Wall Street has found a way to make money from the mortgage mess.

Investment funds are buying billions of dollars’ worth of home loans, discounted from the loans’ original value. Then, in what might seem an act of charity, the funds are helping homeowners by reducing the size of the loans.

But as part of these deals, the mortgages are being refinanced through lenders that work with government agencies like the Federal Housing Administration. This enables the funds to pocket sizable profits by reselling new, government-insured loans to other federal agencies, which then bundle the mortgages into securities for sale to investors.

While homeowners save money, the arrangement shifts nearly all the risk for the loans to the federal government — and, ultimately, taxpayers — at a time when Americans are falling behind on their mortgage payments in record numbers.

For instance, a fund might offer to pay $40 million for a $100 million block of mortgages from a bank in distress. Then the fund could arrange to have some of those loans refinanced into mortgages backed by an agency like the F.H.A. and then sold to an agency like Ginnie Mae. The trick is to persuade the homeowners to refinance those mortgages, by offering to reduce the amounts the homeowners owe.

The profit comes when the refinancings reach more than the $40 million that the fund paid for the block of loans.

The strategy has created an unusual alliance between Wall Street funds that specialize in troubled investments — the industry calls them “vulture” funds — and American homeowners.

But the transactions also add to the potential burden on government agencies, particularly the F.H.A., which has lately taken on an outsize role in the housing market and, some fear, may eventually need to be bailed out at taxpayer expense.

These new mortgage investors thrive in the shadows. Typically, the funds employ intermediaries to contact homeowners and arrange for mortgages to be refinanced.

Homeowners often have no idea who their Wall Street benefactors are. Federal housing officials, too, are in the dark.

Policymakers have encouraged investors and banks to put more consumers into government-backed loans. The total value of these transactions from hedge funds is small compared with the overall housing market.

Housing experts warn that the financial players involved — the investment funds, their intermediaries and certain F.H.A. approved lenders — have a financial incentive to put as many loans as possible into the government’s hands.

“From the borrower’s point of view, landing in a hedge fund or private equity fund that’s willing to write down principal is a gift,” said Howard Glaser, a financial industry consultant and former official at the Department of Housing and Urban Development.

He went on: “From the systemic point of view, there is something disturbing about investors that had substantial short-term profit in backing toxic loans now swooping down to make another profit on cleaning up that mess.”

Steven and Marisela Alva say they do not know who helped them with their mortgage. All they know is that they feel blessed.

Last December, the couple got a letter saying that a firm had purchased the mortgage on their home in Pico Rivera, Calif., from Chase Home Finance for less than its original value. “We want to share this discount with you,” the letter said.

“I couldn’t believe it,” said Mr. Alva, a 62-year-old janitor and father of three. “I kept thinking to myself, ‘Something is wrong, something is wrong. This sounds too good.’ ”

But it was true. The balance on the Alvas’ mortgage was ultimately reduced to $314,000 from $440,000.

The firm behind the reduction remains a mystery. The Alvas’ new loan, backed by the F.H.A., was made by Primary Residential Mortgage, a lender based in Utah. But the letter came from a company called MCM Capital Partners.

In the letter, MCM said the couple’s loan was owned by something called MCMCap Homeowners’ Advantage Trust III. But MCM’s co-founders said in an interview that MCM does not own any mortgages. They would not reveal the investor that owned the Alvas’ loan because they had agreed to keep that client’s identity confidential.

Michael Niccolini, an MCM founder, said, “We are changing people’s lives.”

Continued in article

Bob Jensen's Rotten to the Core threads are at

"When Big Labor Bullies and Volunteers Collide," by Michelle Malkin, Townhall, November 20, 2009 ---

The Boy Scouts' motto is: Be prepared. Who knew it meant preparing to defend themselves against purple-shirted union thuggery over community service? Kids, pay attention. This is a teachable moment for all of you on power, politics and Big Labor's culture of corruption.

Last week at a city council meeting in Allentown, Pa., a top official of the local Service Employees International Union chapter ranted about 17-year-old Scout Kevin Anderson's park cleanup work. Anderson devoted some 200 hours to the job in order to earn an Eagle Scout badge. He picked up trash and helped clear a 1,000-foot walking path with fellow members of Boy Scouts Troop 301 of Center Valley.

But SEIU's Nick Balzano gave them hell instead of thanks.

Balzano disparaged altruistic efforts in city parks and asserted that "there is (sic) to be no volunteers" since his union members were laid off. He then issued a witch hunt threat: "We'll also be looking into the Cub Scout or Boy Scout who did the trails. We may file another grievance on that." Citing union rules, he gave the Allentown city council, the Boy Scouts and all potential volunteers an iron-fisted ultimatum: "None of them can pick up a hoe. They can't pick up a shovel. They can't plant a flower. They can't clear a bicycle path. They can't do anything. Our people do that."

That's right. Balzano was ready to bludgeon the Boy Scout because his gung-ho volunteerism posed a threat to the SEIU labor monopoly. The outrageous display of Boss Balzano's union protectionism provoked a national furor. SEIU headquarters in Washington immediately blamed "the disreputable Fox News and other right-wing outlets like Michelle Malkin's accuracy challenged blog" for the backlash. While decrying their critics' "fiction," SEIU distanced itself from Balzano, denying that he was a top union leader and dismissing his remarks as "unauthorized."

Fact: U.S. Department of Labor records from 2008 (their most recent filing) show that Balzano is no rogue rank-and-file member. He currently serves on the SEIU local's executive board and previously served as president.

Fact: The union tried to minimize Balzano's grievance threat as "inappropriate." But the dirty open secret is that public-sector unions have routinely attacked volunteer workers who threaten their stranglehold.

Last June, union officials in Baraboo, Wis., filed a complaint against volunteer firefighters who built sandbag barricades to protect the city from record flooding. They whined that city Department of Public Works employees should have been called first and demanded overtime pay (for work they didn't do) to compensate them.

Continued in article

"A Minority View: Voluntarism or Self-Interest?" by Walter E. Williams, Townhall, November 24, 2009 ---

How many things in our lives would we like to depend upon the generosity and selflessness of our fellow man, and do you think we would like the outcome? You say, "Williams, are you now putting down generosity and selflessness?" No, I'm not. Let me ask the question in a more direct way. Say you want a nice three-bedroom house. Which human motivation do you think would get you the house sooner: the generosity of builders or the builders' desire to earn some money? What about a nice car? Which motivation of auto companies and their workers do you trust will get you a car sooner: the generosity of owners and workers, or owner desire for profits and worker desire for wages? As for me, I put my faith in people's self-interest as the most reliable way to get them to do what I want and believe most other people share my faith. What would your prediction be about the supply of housing, cars and most other things if Congress enacted a law mandating that a house or car could only be donated, not sold? If you said there would be a shortage of houses and cars, go to the head of the class.

Bone marrow transplantation is a relatively new medical procedure that is used to treat diseases once thought incurable such as leukemia, aplastic anemia, Hodgkin's disease, immune deficiency disorders and some solid tumors such as breast and ovarian cancer. Every year, at least 1,000 Americans die and others suffer because they cannot find a matching bone marrow donor. The reason why there is a shortage of donors is the National Organ Transplant Act (NOTA), enacted by Congress in 1984. NOTA makes it illegal to give anything of value in exchange for bone marrow and that includes, for example, giving a college student a scholarship or a new homeowner a mortgage payment. Everyone involved in such a transaction -- doctors, nurses, donors and patients -- risks up to five years in a federal penitentiary.

There might be light at the end of the tunnel because the Washington-based Institute for Justice (ij.org), one of my very favorite liberty-oriented organizations, has brought suit against this inhumane practice of the U.S. Congress. The suit, Flynn v. Holder, was filed in the Los Angeles Division of the U.S. District Court for the Central District of California on Oct. 26, 2009. Doreen Flynn, the plaintiff, is the mother of five children, three of whom have Fanconi anemia, a serious genetic disorder affecting the blood whose sufferers often need a bone marrow transplant during their teen years.

The Institute for Justice is not challenging Congress' ban on compensation for solid organs such as hearts, kidneys and livers. Instead, the lawsuit challenges only the provision of National Organ Transplant Act that bans compensation for bone marrow. The premise of the Institute for Justice's legal challenge is that there is a fundamental biological distinction between renewable marrow cells and nonrenewable solid organs. In the case of bone marrow, the donor's bone marrow is completely replenished in a few weeks. That's less time than it takes for the human body to fully replenish a pint of donated blood that is often sold to blood banks.

Just about everyone would agree that there would be massive shortages and discontent if there were a congressional mandate that we must depend on our fellow man's generosity for our home, our car, our food and thousands of other items that we use. Why then must a person depend on his fellow man's generosity for an item like bone marrow that might mean the difference between life and death? There is no rhyme or reason for the congressional prohibition of bone marrow other than arbitrary unconstitutional abuse of power that far too many Americans tolerate and would like to see extended to other areas of our lives.

Give a gift that lasts almost a week, including the latest iGadgets
"Gift Guide: High-tech happiness for $100 or less," MIT's Technology Review, November 23, 2009 ---

"Hacked Emails Reveal: "Scientists" Faking Data to Establish Global Warming They Know Isn't There,"
by Ed Morrissey, Hot Air, November 20, 2009 ---

Controversy has exploded onto the Internet after a major global-warming advocacy center in the UK had its e-mail system hacked and the data published on line.  The director of the University of East Anglia Climate Research Unit confirmed that the e-mails are genuine — and Australian publication Investigate and the Australian Herald-Sun report that those e-mails expose a conspiracy to hide detrimental information from the public that argues against global warming (via Watt’s Up With That):

Copies of the email messages are provided!

"Obama's Radical Rogues Gallery," by Phyllis Schlafly, by Townhall, November 17, 2009 ---

Another kooky Barack Obama appointee became publicly known this month and quickly was thrown or voluntarily threw herself under the bus. Anita Dunn, the White House communications director (who led Obama's war on Fox News), said that Mao Zedong was one of her two favorite "political philosophers" whom "I turn to most" for answers to important questions.

History identifies Mao as a ruthless savage, not as a philosopher. He probably holds the record for ordering the mass murder of more people (50 million to 100 million) than anyone else in history.

Dunn tried to claim that her statement was a joke, but anyone can look at her actual statement on Youtube and see that she spoke in deadly earnest. Dunn was part of Obama's inner circle and a senior media adviser during the 2008 presidential campaign.

Dunn's husband, Bob Bauer, an expert on campaign financing, fundraising and voter mobilization, is Obama's personal lawyer. He has just been appointed White House counsel, where he will be in charge of vetting Obama's appointees.

Obama's green jobs czar, Van Jones, had to exit in disgrace after he admitted that "I was a Communist." We can thank Glenn Beck for exposing him.

Obama's regulatory czar, Cass Sunstein, wrote a book in 2008 in which he declared that the government "owns the rights to body parts of people who are dead or in certain hopeless conditions, and it can remove their organs without asking anyone's permission." So, after the death consultants authorized in Nancy Pelosi's health care bill convince you to reject life-saving procedures, the organ-transplant team can remove your body's organs immediately.

Czar Sunstein also argues that animals are entitled to have lawyers to sue humans in court. Bow, wow -- more business for trial lawyers. His wife, Samantha Power, is now on Obama's National Security Council. She is famous for writing a Pulitzer Prize-winning book about genocide, which she defined so narrowly that it excluded Joseph Stalin and Mao.

Obama's nominee for the Equal Employment Opportunity Commission, Chai R. Feldblum, signed a 2006 manifesto endorsing polygamous households. This lengthy document, called "Beyond Same-Sex Marriage," argues that traditional marriage should not be "privileged above all others."

Obama's education appointments, who came out of the Chicago political machine right along with Rahm Emanuel and David Axelrod, will have nearly $100 billion in new money to indoctrinate America's youth. Obama Secretary of Education Arne Duncan is notorious for trying to start a gay high school in Chicago.

Obama's safe schools czar, Kevin Jennings, founded the Gay, Lesbian, Straight Education Network (GLSEN), a homosexual activist group that now has thousands of chapters at high schools across the nation.

GLSEN chapters and materials have promoted sex between young teens and adults and sponsored "field trips" to gay pride parades. Jennings was the keynote speaker at a notorious GLSEN conference at Tufts University in 2000 at which HIV-AIDS coordinators discussed in detail, before an audience including area high school students, how to perform various homosexual acts.

Obama's science czar wrote in a college textbook that compulsory "green abortions" are an acceptable way to control population growth. We assume that what makes an abortion green is when the motive for the killing is population control to serve environmentalist dogma.

Affirmative action is in vogue in Obama's administration: His diversity czar has spoken publicly of getting white media executives to "step down" in favor of minorities. Obama's first appointment to the U.S. Supreme Court is a woman who said repeatedly that a "Latina woman" would make better judicial decisions than "a white male."

Obama's top lawyer at the State Department, Harold Hongju Koh, calls himself a transnationalist. That means wanting U.S. courts to "domesticate" foreign and international law -- i.e., integrate it into U.S. domestic law binding on U.S. citizens.

Koh is eager to put us under a global legal system that would diminish our "distinctive rights culture" such as due process, trial by jury and our First Amendment "protections for speech and religion" that give "far greater emphasis and judicial protection in America than in Europe or Asia." Under global governance, the United States will be forbidden to allow more freedom and constitutional rights than other countries.

When Obama's appointee for the Seventh Circuit Court of Appeals, David Hamilton, was a district court judge, he prohibited the Indiana State Legislature from giving an invocation that mentioned Jesus, while mention of Allah was allowed. Hamilton worked for ACORN and the ACLU, and even the liberal American Bar Association rated him "not qualified."

And we thought the Rev. Jeremiah Wright was an embarrassment to Barack Obama when he was running for president! We never dreamed Obama would actually appoint such a collection of weirdos.

It will come as no surprise that that virulently anti-Semitic British media has crossed yet another line with its delusional, Goebbels-inspired propaganda "documentary" called: "“Inside Britain’s Israel Lobby" on Channel 4, the same station that invited Holocaust-denier Mahmoud Ahmadinejad to deliver its annual Christmas message last December. As journalist Tom Gross pointed out before the program aired, there is no Israel lobby in Britain funded by powerful Jewish millionaires - that's just a classic anti-Semitic stereotype. As Tom Gross explains, that is why "some of the coverage of Israel in the British media is among the worst in the world, and sometimes rivals the Iranian and Egyptian media for its sheer nastiness.
November 18, 2009 message from Israel's Naomi Ragen [nragen@netvision.net.il]

Harvard Study (with tongue in cheek) Predicts Wall Street and Dow Recovery
However, according to an only half-joking report released last week, the low numbers of Harvard MBAs landing Wall Street jobs could point to something else – an impending recovery. The “Harvard MBA Indicator” is a market predictor designed by HBS alum Ray Soifer. According to his somewhat facetious theory, the percentage of Harvard MBAs each year who take market-sensitive jobs, generally those closely tied to investing, is inversely related to the health of the stock market. In other words, the fewer HBS grads that take jobs in banking, venture capital, leveraged buyouts, etc., the better the Dow will do.
"Harvard MBA Indicator: Good Times Ahead for Finance Jobs?" by Geoff Gloeckler, Business Week, November 11, 2009 --- Click Here

Jensen Comment
I'm more inclined to attribute the rise in the Dow to the plunge in the value of the U.S. dollar, which of course does not bode well for real economic recovery. Menwhile the Fed continues to print free money for the big banks.

The Obamacare entitlement program may well add $40 trillion (anybody's guess not mentioned in Congress) or more to unfunded entitlements obligations even if politicians are claiming it will add much less than a ten-year trillion to the booked U.S. National Debt standing above $12 trillion ---
- http://www.usdebtclock.org/

Here's the Doomsday Graphic being shown around the U.S. by David Walker (former Chief Accountant of the United States)
The Real National Debt (booked + unbooked entitlements without Obamacare) 2008
Source --- http://www.pgpf.org/about/nationaldebt/


IOUSA (the most frightening movie in American history) ---
(see a 30-minute version of the documentary at www.iousathemovie.com )

More on David Walker’s warnings of impending entitlements disasters ---

How does this compare with the value of your house?
"Detroit's Famous Pontiac Silverdome Sells For Just $583,000 (less than 1% of cost) ---

The New York Times Timeline History of Health Care Reform in the United States ---
Click the arrow button on the right side of the NYT timeline.

What went so wrong in the health care system of the United States?
Mostly what went wrong is our ill-conceived and underfunded attempts to reform the system!

Bob Jensen's threads on health care are at

"[Oh No!] Five Myths About Our Land of Opportunity," Simoleon Sense, November 3, 2009 ---

I wonder what Buffett would think about this….Makes me think of the Ovarian Lottery

Click Here For An Expanded Version of 5 Myths About Our Land Of Opportunity

Introduction (Via Brookings)
Americans have always believed that their country is unique in providing the opportunity to get ahead. Just combine hard work with a bit of talent and you’ll climb the ladder—or so we’ve told ourselves for generations. But rising unemployment and financial turmoil are puncturing that self-image. The reality of this “land of opportunity” is considerably more complex than the myths would suggest:

Excerpt (Via Brookings)

1. Americans enjoy more economic opportunity than people in other countries.

Actually, some other advanced economies offer more opportunity than ours does. For example, recent research shows that in the Nordic countries and in the United Kingdom, children born into a lower-income family have a greater chance than those in the United States of forming a substantially higher-income family by the time they’re adults.

2. In the United States, each generation does better than the past one.

As a result of economic growth, each generation can usually count on having a higher income, in inflation-adjusted dollars, than the previous one. For example, men born in the 1960s were earning more in the 1990s than their fathers’ generation did at a similar age, and their families’ incomes were higher as well. But that kind of steady progress appears to have stalled. Today, men in their 30s earn 12 percent less than the previous generation did at the same age.

3. Immigrant workers and the offshoring of jobs drive poverty and inequality in the United States.

Although immigration and trade are often blamed, a more important reason for our lack of progress against poverty and our growing inequality is a dramatic change in American family life. Almost 30 percent of children now live in single-parent families, up from 12 percent in 1968. Since poverty rates in single-parent households are roughly five times as high as in two-parent households, this shift has helped keep the poverty rate up; it climbed to 13.2 percent last year. If we had the same fraction of single-parent families today as we had in 1970, the child poverty rate would probably be about 30 percent lower than it is today.

4. If we want to increase opportunities for children, we should give their families more income.

Of course money is a factor in upward mobility, but it isn’t the only one; it may not even be the most important. Our research shows that if you want to avoid poverty and join the middle class in the United States, you need to complete high school (at a minimum), work full time and marry before you have children. If you do all three, your chances of being poor fall from 12 percent to 2 percent, and your chances of joining the middle class or above rise from 56 to 74 percent. (We define middle class as having an income of at least $50,000 a year for a family of three.)

5. We can fund new programs to boost opportunity by cutting waste and abuse in the federal budget.

Can we cut enough ineffective programs or impose enough new taxes to put better teachers in classrooms, expand child-care assistance for working families and provide more financial aid to disadvantaged students while reducing projected deficits? The answer is a resounding no. Certainly, we should eliminate fraud, waste and abuse; raise new revenues; and scrub the budget for additional savings. But these alone won’t get the job done. Just three rapidly growing programs - Medicare, Social Security and Medicaid - along with interest on the debt threaten to crowd out all other spending in a few decades.

Click Here For An Expanded Version of 5 Myths About Our Land Of Opportunity

Entitlements Crisis in the United States --- http://www.trinity.edu/rjensen/entitlements.htm

Obama's Malpractice: Why the health-care bill isn't reform," Rober J. Samuelson (economist), Newsweek Magazine, November 23, 2009 --- http://commons.aaahq.org/posts/570fd14ba7

There is an air of absurdity to what is mistakenly called "health-care reform." Everyone knows that the United States faces massive governmental budget deficits as far as calculators can project, driven heavily by an aging population and uncontrolled health costs. Recovering slowly from a devastating recession, it's widely agreed that, though deficits should not be cut abruptly (lest the economy resume its slump), a prudent society would embark on long-term policies to control health costs, reduce government spending, and curb massive future deficits. The president and his top economic advisers all say this. (Click here to follow Robert J. Samuelson ).

So, what do they do? Just the opposite. Their sweeping overhaul of the health-care system—which Congress is halfway toward enacting—would almost certainly make matters worse. It would create new, open-ended medical entitlements that would probably expand deficits and do little to suppress surging health costs. The disconnect between what Obama says and what he's doing is so glaring that most people could not abide it. The president and his allies have no trouble. But reconciling blatantly contradictory objectives requires them to engage in willful self-deception, public dishonesty, or both.

The campaign to pass Obama's health-care plan has assumed a false, though understandable, cloak of moral superiority. It's understandable because almost everyone thinks that people in need of essential medical care should get it; ideally, everyone would have health insurance. The pursuit of these worthy goals can easily be projected as a high-minded exercise in the public good.

It is false for two reasons. First, the country has other goals—including preventing future financial crises and minimizing the crushing effects of high deficits or taxes on the economy and younger Americans—that "health-care reform" would jeopardize. And second, the benefits of "reform" are exaggerated. Sure, many Americans would feel less fearful about losing insurance; but there are cheaper ways to limit insecurity. Meanwhile, improvements in health for today's uninsured would be modest. They already receive substantial medical care; insurance would help some individuals enormously, but studies find that, on average, gains are moderate.

The pretense of moral superiority dissolves before all the expedient deceptions used to sell the health-care agenda. Obama says he won't sign legislation that adds to the deficit. One way to do this is to put costs outside the legislation. So: doctors have long complained that their Medicare reimbursements are too low; the fix for replacing the present formula would cost $210 billion over a decade, says the Congressional Budget Office. That cost was originally in the legislation. Now it's been moved to another bill, but because there are no means to pay for it, deficits would increase.

Another way to disguise the costs is to count savings that, though they exist on paper, would probably never be realized in practice. The House bill claims reductions in Medicare reimbursements of $228 billion over a decade for hospitals and other providers. But Congress has often prescribed reimbursement cuts that, under pressure from providers, it's later rescinded. Claims of "fiscal responsibility" for the health-care proposals reflect "assumptions that are totally unrealistic based on past history," says David Walker, former U.S. comptroller general and now head of the Peter G. Peterson Foundation.

Equally misleading, Obama's advisers assert that the present proposals would slow the growth of overall national health spending. Outside studies disagree. Three studies (two by the consulting firm the Lewin Group and one by the Centers for Medicare & Medicaid Services, a federal agency) conclude that various congressional plans would increase national health spending compared with no legislation. The studies estimate the extra spending, over the next decade, at $750 billion, $525 billion, and $114 billion, respectively. The reasoning: greater use of the health-care system by the newly insured would overwhelm cost-saving measures ("bundled payments," "comparative effectiveness research," tort reform), which are weak or experimental.

Though these estimates could prove wrong, they are more plausible than the administration's self-serving claims. Its health-care plan is not "comprehensive" because it slights cost control; and if its spending commitments worsened some future budget crisis, it wouldn't qualify as "reform." It would be a self-inflicted wound.

"Where Are the Doctors to Implement ObamaCare? A University of California chancellor warns that America could soon look like Massachusetts (Mitt Care)," by Timothy P. White, The Wall Street Journal, November 18, 2009 --- Click Here

Health care reform will fail to achieve its promise of affordable access to medical care unless the nation's physician workforce is substantially expanded to meet the demand that newly insured patients will place on an already over-burdened system.

A comprehensive strategy for growing the physician workforce – as well as other allied health professionals such as nurses and physicians' assistants – should be developed and supported with a federal investment at the same time health insurance is expanded to cover millions of additional people.

Without this, gaining access to prompt medical care for all patients will become even more difficult. There will be longer wait times for appointments, less face time with a physician and, in all likelihood, delayed diagnoses leading to more expensive treatment and increased risk of complications. One need only look at the experience of Massachusetts, where the adoption of universal health coverage has intensified the physician shortage.

Nationally, the physician shortage will persist for the foreseeable future, even without adding tens of millions of people to the ranks of insured. The Association of American Medical Colleges (AAMC) forecasts a national physician shortage by 2025 of between 124,000 and 159,300, adding that universal health coverage could increase the shortage by another 31,000 physicians.

Many regions of the U.S. already experience severe physician shortages. Riverside County – located in the diverse and rapidly growing Inland Southern California region – is the only county in the state with a population greater than 1 million to have fewer than 100 M.D.s per 100,000 people, according to a recent report prepared for the California HealthCare Foundation.

Furthermore, the physician workforce does not reflect the ethnicity of the population, underscoring health disparities that result in a higher incidence of chronic diseases and higher mortality in minority and low-income populations. Because minority physicians are more likely than non-minority physicians to practice in ethnically diverse communities, it is vital for medical schools to train a diverse workforce of physicians to practice with a clear emphasis on prevention, and with cultural competency and sensitivity.

The AAMC has called for a 30 percent increase in medical school enrollments by 2015, and higher education institutions are responding, both by increasing enrollment at existing medical schools and by establishing new schools of medicine, such as the one under development at the University of California, Riverside, in the heart of one of the most medically underserved regions in the state.

In the current recession, it is important to note that these new enterprises will also bring new economic stimuli to their regions for many decades to come. New medical schools, of course, bring new jobs and new construction. But they are also generators of new funding in the form of federal grants for biomedical research and clinical studies, the most promising of which will complete the innovation pipeline to new business formation. So, too, are they magnets for high tech industry in fields such as biotechnology and pharmaceuticals.

In reaching consensus on how best to enact health care reform, President Obama and Congress should be mindful and attentive to the workforce impact of expanding health care coverage. Additional scholarship funds and debt relief for aspiring physicians who choose primary care fields and practice in medically underserved areas are a good start, as is lifting the cap on Medicare-funded residency positions. Federal policy should also reflect the need to develop a reimbursement structure that will emphasize preventive care and entice physicians to practice primary care medicine.

But it will take a much greater investment to expand medical education opportunities. Economic stimulus funds directed at this national crisis will reap both short- and long-term economic impetus, in addition to the vast social benefits of a healthy and productive U.S. populace.

Because it takes at least seven years to train an independent practicing physician, the urgency is acute. We must start training future physicians now. Only by producing more physicians and health care practitioners and encouraging them to practice in the primary care disciplines can this nation achieve the promise of affordable access to high-quality health care for all.

Mr. White is chancellor of the University of California, Riverside.

TIAA-CREF Goes Political:  Is it spending on political causes without informing its own members?
Message from my friend Larry

I ran across this entry in the Center for Public Integrity's investigation of the climate lobby. I fail to see why TIAA-CREF should be using participant's retirement funds to lobby Congress on climate change? Course, TIAA-CREF's CEO Roger Ferguson is on Obama's economic advisory committee. Maybe it's a payback?


Jensen Comment
Cap and Trade will create high costs and profit losses to many companies. Is this good for the CREF portfolio value in your lifetime?

TIAA-CREF offers "socially responsible" portfolio investing as an option, but this is entirely a different matter than spending member money on lobbying for political causes.

Nowhere in the TIAA-CREF Website could I find where your funds were being spent for the climate lobby.

A Grant Thornton LLP Study: A Wake-up Call for America

"Steep decline in U.S. listings attributed to existing market structure,"  Grant Thornton, November 2009 ---

Call for reform to stimulate the economy and spur job creation

NEW YORK, November 9, 2009 - A study released today by Grant Thornton LLP, A Wake-Up Call for America, demonstrates that market structure changes implemented beginning in the late 1990s are leading to a dramatic long-term decline in the number of publicly listed companies in the United States.  According to the study, SEC actions over recent decades have encouraged the development of markets that favor the most technologically sophisticated traders.  The rise of high-frequency trading is the natural consequence of regulations designed to increase efficiency, but those same regulations have tended to undermine market support for small, innovative companies.  

"Our 'one-size-fits-all' market structure has added liquidity to large cap stocks, but has created a black hole for small cap listed companies," said David Weild, Capital Markets Advisor at Grant Thornton LLP and former vice chairman of NASDAQ.  "Wall Street's very nature has been substantially transformed." 

"This important study demonstrates convincingly further cause for concern about rules that encourage high-frequency trading to thrive, but perhaps have undermined one of Wall Street's most important purposes:  to provide the infrastructure for smaller, growing companies in the United States to gain access to the public markets to facilitate further growth and innovation," said Senator Ted Kaufman (D-Del.).  "The Grant Thornton study is a call to action.  U.S. innovation policy must include an intelligent review of our U.S. equity markets, so that Wall Street once again helps innovative small companies to succeed."

Known in the 1990s as the "Four Horsemen," the investment banks that once catered to emerging-growth companies are gone. Today the market is dominated by firms that buy and sell in milliseconds, using automated algorithms that have no interest in the fundamental valuations underlying stocks.  They include proprietary trading, statistical arbitrage hedge funds, and automated market makers.

The result? Investors, issuers and the economy have all been harmed.  Wall Street is now fixated on trading profits and has abandoned investments in quality sell-side analysis, underwriting and sales support - the infrastructure necessary to support and create value in small cap stocks.  Policymakers must recognize that the structure and regulatory framework guiding U.S. equity markets has become not only an important issue for investors due to fairness concerns, but also a critical component of U.S. economic policy that is affecting our economy's ability to innovate, create jobs and grow.  

The decline in the number of new listings began before the technology bubble burst a decade ago - before the enactment of Sarbanes-Oxley in 2002 - and has continued through bull and bear markets.  The number of U.S. listed companies has fallen by more than 22 percent since 1991, or 53 percent when calculating in inflation-adjusted GDP growth.  In contrast, exchanges in Asia are adding new listings faster than GDP growth rates.

According to the study, 360 new listings per year - a number not approached since 2000 - are required by the United States simply to replace the number of listed companies that are lost every year. Moreover, 520 new listings per year are needed to grow the U.S. listed markets roughly in line with GDP growth.  In reality, the U.S. has averaged fewer than 166 IPOs per year since 2001, with only 54 in 2008. 

Believed to be the first of its kind, the study was conducted by David Weild and Edward Kim, Capital Markets Advisors at Grant Thornton LLP, using data from a number of sources, including the World Federation of Exchanges, and from direct interaction with major stock exchanges. 

"This study confirms that America's slipping global competitiveness in the capital markets is rooted in long-term structural problems, with devastating consequences for growth capital formation in the U.S.," said Pascal Levensohn, Founder and Managing Partner of Levensohn Venture Partners, Board Member of the National Venture Capital Association (NVCA), and member of the Council on Foreign Relations.  "The inability for emerging growth companies to access U.S. public equity capital by completing IPOs below $50 million inhibits job creation and hurts American entrepreneurs more than any other group.  If we can't repair the bridge into public markets, the next generation of innovative private enterprises - starved for long-term risk capital in the U.S. - will continue to move to non-U.S. emerging innovation hotspots, where startups are nurtured through attractive capital incentives."

Barry Silbert, Founder and CEO of SecondMarket, the industry leader in private company stock transactions, said "The growth and development of a robust private market is critical to creating a better alternative and viable bridge to the public market.  The time from company formation to IPO is now so long - nearly 10 years - that it undermines the development of small businesses, entrepreneurship and American global competitiveness."

"Today, our stock markets are increasingly structured to favor computer-driven trading interests at the expense of long-term investors and the U.S. taxpayer," said Grant Thornton's Kim. "We need a regulatory framework that guides Wall Street to help small companies with their capital formation needs, not just build faster and more powerful trading algorithms."  



Number of listings  

Percent change

Number of listings  

Percent change
Peak Year - 2008




Actual GDP




Actual GDP






































Source: Capital Markets Advisory Partners, World Federation of Exchanges, individual stock exchanges, USDA Economic Research Service (GDP in 2005 US$). Excluding funds.


Recommended Changes
The Grant Thornton study calls for immediate action and includes recommendations on how to improve both public and private stock markets in ways that provide investors and issuers with more choice.  It argues that the opportunity cost of poor primary capital formation is so extreme that the U.S. needs significant improvements to both the public and private markets to restore U.S. competitiveness.  Recommendations include:

Grant Thornton urges Congress and the SEC to hold immediate hearings to understand why the U.S. markets have failed to keep up with foreign markets and to craft solutions quickly - solutions that, together with thoughtful oversight, will advance the U.S. economy, create high-quality jobs, improve U.S. competitiveness, increase the tax base and decrease the U.S. budget deficit, all without major expenditures by the U.S. government. 

View the full study at: www.GrantThornton.com/WakeupCall and urge Congress to act.  Sign up for future updates and studies at www.GrantThornton.com/subscribe and select the Capital Markets Series.
For a chart showing the number of listed companies from global exchanges, indexed to 1997, go to

About Grant Thornton LLP
Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd, one of the six leading global accounting, tax and business advisory organizations.  Through member firms in more than 80 countries, including 50 offices in the United States, the partners and employees of Grant Thornton member firms provide personalized attention and the highest quality service to public and private clients around the globe.  Visit Grant Thornton LLP at www.GrantThornton.com.

Bob Jensen's threads on the recovery are at

You maybe did not buy a GM or Chrysler car in 2009,
but you're going to pay for a big chunk of somebody else's new car.
According to the report, every American taxpayer has put up $12,200 for every General Motors car sold through the beginning of 2011 and $7,600 for every Chrysler sold.

"Study: Every GM Vehicle Sold Costs Taxpayers $12,200," National Taxpayers Union, November 18, 2009 ---

The American taxpayer has put up $12,200 for every General Motors vehicle sold through the beginning of 2011, and $7,600 for every Chrysler vehicle sold as well, according to a new report issued by the 362,000-member National Taxpayers Union (NTU).

The report, The Auto Bailout – A Taxpayer Quagmire, authored by NTU Adjunct Scholar Thomas D. Hopkins, Professor of Economics at the Rochester Institute of Technology, does the math on what the government bailout of the auto industry – including General Motors, Chrysler, and GMAC – actually means to American taxpayers, including how much each taxpayer has contributed to the auto industry since December 2008 and how much each vehicle is costing us.

Every time someone in your neighborhood drives home in a shiny new Chevy Silverado, remember that it cost American taxpayers more than $12,000,” said Pete Sepp, NTU Vice President for Policy and Communications. “Between this and GM's plan to payback their bailout debt with other taxpayer funds, I wonder if all those Americans without work right now could think of any better ways to spend that money. This is a play out of the Bernie Madoff ponzi scheme playbook, and would be the equivalent of paying your Master Card bill with your Visa.”

The study found that the average American taxpaying family has invested roughly $800 in the auto bailouts so far. Moreover, the study found, the government support poured into General Motors, Chrysler, and GMAC – the financing subsidiary that supports sales at both – now stands at a towering $78.9 billion. Given that figure, and an estimate of how many vehicles GM and Chrysler will sell through the end of 2010, the study finds that each vehicle one of the bailed-out companies sells costs taxpayers $10,700.

Finally, breaking down the costs by company, the study reports that every Chrysler vehicle sold costs taxpayers $7,600, and every GM vehicle sold costs taxpayers $12,200.

The research is based upon a November study released by the Government Accountability Office (GAO), entitled Continued Stewardship Needed as Treasury Develops Strategies for Monitoring and Divesting Financial Interests in Chrysler and GM,a follow-up report on the “Troubled Asset Relief Program,” as well as statements and reports released from the U.S. Treasury. Additional Findings Include:

“[T]he bailout has created moral hazard problems, inadvertently handicapping the progress of stronger, non-subsidized producers,” Professor Hopkins concluded. “The problems extend beyond just the auto industry, as favored status for one financial company and its bank necessarily complicates prospects for non-subsidized rivals. The time has come to stop such bailouts, and in an orderly way, to seek at least some recovery for taxpayers.”

Note: To view the complete issue brief, The Auto Bailout – A Taxpayer Quagmire, click here.

About the Author

Thomas D. Hopkins is Professor of Economics at Rochester Institute of Technology. He served as Dean of the College of Business 1998-2005 and as President, U.S. Business School in Prague, Czech Republic, an RIT MBA program where he taught 1992-98. He was the Arthur J. Gosnell Professor of Economics in RIT's College of Liberal Arts, 1988-98. Hopkins held senior management positions in two White House agencies during the Ford, Carter and Reagan Administrations; in 1979 President Carter appointed him a charter member of the federal government’s Senior Executive Service. In the early 1980s, he served as Deputy Administrator, Office of Information & Regulatory Affairs, in the Office of Management & Budget. His research on business burdens of government regulation has been sponsored by the Organization for Economic Cooperation & Development (OECD) in Paris and the U.S. Small Business Administration (SBA) in Washington. He has testified on regulatory policy issues before committees of the U.S. Senate and House, and Canada’s House of Commons. He co-authored a 2001 SBA report, “The Impact of Regulatory Costs on Small Firms,” as well as National Research Council reports on marine transportation, the Exxon Valdez oil spill, and trucking/rail/barge transportation. He previously was on the faculty of American University, University of Maryland, and Bowdoin College.


The Auto Bailout – A Taxpayer Quagmire is based on data obtained from the Government Accountability Office and Treasury reports on the Troubled Asset Relief Program. The study was sponsored by the National Taxpayers Union (NTU), a nonpartisan, nonprofit citizen organization founded in 1969 to work for lower taxes, smaller government, accountability from public officials, and economic freedom at all levels. For further information, visit www.ntu.org .

Jensen Comment
Some of the money spent on GM and Chrysler to date might be returned, but then again more might be lost. Certainly if the GM and Chrysler experiments fail, the government will be paying the pension costs of tens of thousands of retirees.

The government is also guaranteeing the warranty coverage of both GM and Chrysler cars. In the case of Chrysler this includes the ridiculous lifetime warranty on power trains such that if a twenty year old kid buys a Chrysler, the power train is fully guaranteed for 80 or more years. How dumb can you get?

Bob Jensen's threads on the disastrous bailout are at

The Mother of Future Lawsuits Directly Against Credit Rating Agencies and Indirectly Against Auditing Firms

It has been shown how Moody's and some other credit rating agencies sold AAA ratings for securities and tranches that did not deserve such ratings --- http://www.trinity.edu/rjensen/FraudRotten.htm#CreditRatingAgencies
Also see http://www.trinity.edu/rjensen/2008Bailout.htm#Sleaze

My friend Larry sent me the following link indicating that a lawsuit in Ohio may shake up the credit rating fraudsters.
Will 49 other states and thousands of pension funds follow suit?
Already facing a spate of private lawsuits, the legal troubles of the country’s largest credit rating agencies deepened on Friday when the attorney general of Ohio sued Moody’s Investors Service, Standard & Poor’s and Fitch, claiming that they had cost state retirement and pension funds some $457 million by approving high-risk Wall Street securities that went bust in the financial collapse.

Jensen Comment
The credit raters will rely heavily on the claim that they relied on the external auditors who, in turn, are being sued for playing along with fraudulent banks that grossly underestimated loan loss reserves on poisoned subprime loan portfolios and poisoned tranches sold to investors --- http://www.trinity.edu/rjensen/2008Bailout.htm#AuditFirms
Bad things happen in court where three or more parties start blaming each other for billions of dollars of losses that in many cases led to total bank failures and the wiping out of all the shareholders in those banks, including the pension funds that invested in those banks. A real test is the massive lawsuit against Deloitte's auditors in the huge Washington Mutual (WaMu) shareholder lawsuit.

"Ohio Sues Rating Firms for Losses in Funds," by David Segal, The New York Times, November

Already facing a spate of private lawsuits, the legal troubles of the country’s largest credit rating agencies deepened on Friday when the attorney general of Ohio sued Moody’s Investors Service, Standard & Poor’s and Fitch, claiming that they had cost state retirement and pension funds some $457 million by approving high-risk Wall Street securities that went bust in the financial collapse.

Already facing a spate of private lawsuits, the legal troubles of the country’s largest credit rating agencies deepened on Friday when the attorney general of Ohio sued Moody’s Investors Service, Standard & Poor’s and Fitch, claiming that they had cost state retirement and pension funds some $457 million by approving high-risk Wall Street securities that went bust in the financial collapse.

The case could test whether the agencies’ ratings are constitutionally protected as a form of free speech.

The lawsuit asserts that Moody’s, Standard & Poor’s and Fitch were in league with the banks and other issuers, helping to create an assortment of exotic financial instruments that led to a disastrous bubble in the housing market.

“We believe that the credit rating agencies, in exchange for fees, departed from their objective, neutral role as arbiters,” the attorney general, Richard Cordray, said at a news conference. “At minimum, they were aiding and abetting misconduct by issuers.”

He accused the companies of selling their integrity to the highest bidder.

Steven Weiss, a spokesman for McGraw-Hill, which owns S.& P., said that the lawsuit had no merit and that the company would vigorously defend itself.

“A recent Securities and Exchange Commission examination of our business practices found no evidence that decisions about rating methodologies or models were based on attracting market share,” he said.

Michael Adler, a spokesman for Moody’s, also disputed the claims. “It is unfortunate that the state attorney general, rather than engaging in an objective review and constructive dialogue regarding credit ratings, instead appears to be seeking new scapegoats for investment losses incurred during an unprecedented global market disruption,” he said.

A spokesman for Fitch said the company would not comment because it had not seen the lawsuit.

The litigation adds to a growing stack of lawsuits against the three largest credit rating agencies, which together command an 85 percent share of the market. Since the credit crisis began last year, dozens of investors have sought to recover billions of dollars from worthless or nearly worthless bonds on which the rating agencies had conferred their highest grades.

One of those groups is largest pension fund in the country, the California Public Employees Retirement System, which filed a lawsuit in state court in California in July, claiming that “wildly inaccurate ratings” had led to roughly $1 billion in losses.

And more litigation is likely. As part of a broader financial reform, Congress is considering provisions that make it easier for plaintiffs to sue rating agencies. And the Ohio attorney general’s action raises the possibility of similar filings from other states. California’s attorney general, Jerry Brown, said in September that his office was investigating the rating agencies, with an eye toward determining “how these agencies could get it so wrong and whether they violated California law in the process.”

As a group, the attorneys general have proved formidable opponents, most notably in the landmark litigation and multibillion-dollar settlement against tobacco makers in 1998.

To date, however, the rating agencies are undefeated in court, and aside from one modest settlement in a case 10 years ago, no one has forced them to hand over any money. Moody’s, S.& P. and Fitch have successfully argued that their ratings are essentially opinions about the future, and therefore subject to First Amendment protections identical to those of journalists.

But that was before billions of dollars in triple-A rated bonds went bad in the financial crisis that started last year, and before Congress extracted a number of internal e-mail messages from the companies, suggesting that employees were aware they were giving their blessing to bonds that were all but doomed. In one of those messages, an S.& P. analyst said that a deal “could be structured by cows and we’d rate it.”

Recent cases, like the suit filed Friday, are founded on the premise that the companies were aware that investments they said were sturdy were dangerously unsafe. And if analysts knew that they were overstating the quality of the products they rated, and did so because it was a path to profits, the ratings could forfeit First Amendment protections, legal experts say.

“If they hold themselves out to the marketplace as objective when in fact they are influenced by the fees they are receiving, then they are perpetrating a falsehood on the marketplace,” said Rodney A. Smolla, dean of the Washington and Lee University School of Law. “The First Amendment doesn’t extend to the deliberate manipulation of financial markets.”

The 73-page complaint, filed on behalf of Ohio Police and Fire Pension Fund, the Ohio Public Employees Retirement System and other groups, claims that in recent years the rating agencies abandoned their role as impartial referees as they began binging on fees from deals involving mortgage-backed securities.

At the root of the problem, according to the complaint, is the business model of rating agencies, which are paid by the issuers of the securities they are paid to appraise. The lawsuit, and many critics of the companies, have described that arrangement as a glaring conflict of interest.

“Given that the rating agencies did not receive their full fees for a deal unless the deal was completed and the requested rating was provided,” the attorney general’s suit maintains, “they had an acute financial incentive to relax their stated standards of ‘integrity’ and ‘objectivity’ to placate their clients.”

To complicate problems in the system of incentives, the lawsuit states, the methodologies used by the rating agencies were outdated and flawed. By the time those flaws were obvious, nearly half a billion dollars in pension and retirement funds had evaporated in Ohio, revealing the bonds to be “high-risk securities that both issuers and rating agencies knew to be little more than a house of cards,” the complaint states.

"Rating agencies lose free-speech claim," by Jonathon Stempel, Reuters, September 3, 2009 ---

There are two superpowers in the world today in my opinion. There’s the United States and there’s Moody’s Bond Rating Service. The United States can destroy you by dropping bombs, and Moody’s can destroy you by down grading your bonds. And believe me, it’s not clear sometimes who’s more powerful.  The most that we can safely assert about the evolutionary process underlying market equilibrium is that harmful heuristics, like harmful mutations in nature, will die out.
Martin Miller, Debt and Taxes as quoted by Frank Partnoy, "The Siskel and Ebert of Financial Matters:  Two Thumbs Down for Credit Reporting Agencies," Washington University Law Quarterly, Volume 77, No. 3, 1999 --- http://www.trinity.edu/rjensen/FraudCongressPartnoyWULawReview.htm 

Credit rating agencies gave AAA ratings to mortgage-backed securities that didn't deserve them. "These ratings not only gave false comfort to investors, but also skewed the computer risk models and regulatory capital computations," Cox said in written testimony.
SEC Chairman Christopher Cox as quoted on October 23, 2008 at http://www.nytimes.com/external/idg/2008/10/23/23idg-Greenspan-Bad.html

"How Moody's sold its ratings - and sold out investors," by Kevin G. Hall, McClatchy Newspapers, October 18, 2009 --- http://www.mcclatchydc.com/homepage/story/77244.html







Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm

Return to the Tidbits Archives ---


Bob Jensen's economic crisis messaging http://www.trinity.edu/rjensen/2008Bailout.htm

Bob Jensen's threads --- http://www.trinity.edu/rjensen/threads.htm

Bob Jensen's Home Page --- http://www.trinity.edu/rjensen/