Letter to Congress

I just sent this letter to Congress:

To: Sen. Evan Bayh, Sen. Richard Lugar, Rep. Dan Burton, Sen. Harry Reid, Sen. Chris Dodd, Rep. Nancy Pelosi, Rep. Barney Frank

Respected Members of Congress:

This week has already been, and will no doubt continue to be, an important week in American history. As we have been told, our financial system, the backbone of both the American and world economy, is on the brink of collapse. The true magnitude of the issue on the horizon cannot be predicted or understood by anyone. However, there are certainly indicators that the crisis is real. Credit is tight. The markets are unstable. Institutions are on the verge of collapse. Despite these troubling times, we encourage you to be thoughtful, prudent, and careful in your decisions.

Wall Street is a funny place. Markets act and react thousands of times a day - even on days with one-hundredth of the frenzy we have witnessed in the last two days. For you, our elected representatives, to react too quickly to those movements alone is both unwise and unjust. Action may be required. We urge you to put aside political fear, partisan loyalties, upcoming elections, and personal bias. There is a process which has developed over the last two hundred years to enact effective legislation. Please do not put aside all wisdom which has been gained in order to appease anyone. The world is not going to end tomorrow.

So, we urge you to hold hearings. Go through the legislative process. Take advantage of the collective wisdom of expert witnesses, administration officials, and other members of Congress both young and old. Give the American people a plan which addresses the true issues we face. We recognize and appreciate your efforts over the last two weeks. However, hearings have been limited. Negotiations have also been limited. Open up the process.

But, if you must act this week, please be judicious. The bill which failed the House vote earlier this week deserved to fail. It granted unprecedented power to the Secretary of Treasury with limited oversight. It failed to protect the taxpayers adequately. We ask you if you would risk your own money and wealth, and that of your children and grandchildren, on the bets of the Secretary. Please do not make these bets with our money. The basic economic principle of "no free lunch" must be observed in any action taken. We understand the fact that this is not about bailing out Wall Street, but helping "Main Street". But, consider the cost of investment. Consider what it is that we are attempting to solve.

Consider the following. We are to assume that a lack of credit is at the heart of the issue. Indeed LIBOR reached very high levels earlier today. Money is not cheap - why is that? We all know that lending is based on confidence and collateral. These "toxic assets" are difficult to value and, in some cases, do not have a true market to determine value. So, we believe we must reform our accounting to improve regulation and disclosure regarding the value of these and other assets. Instead of merely suspending or reforming "mark-to-market" accounting, we should pursue a revised balance sheet which reports both book value and fair value. This will allow potential creditors and investors an opportunity to better understand a company's assets in both value and risk. This cannot happen overnight. Institutions will require time (perhaps 60 days) to appropriately disclose these valuations. In the meantime, we can take steps to both prevent a market meltdown and protect those who may be most vulnerable in this period of uncertainty.

Since this reform will not remove short-term volatility or improve liquidity, we can consider the following actions. First, we can suspend regulatory requirements placed on financial institutions which place limits on borrowing relative to their capital. In close coordination with the SEC and/or a Congressional oversight board, institutions with assets which are perceived to be far undervalued via mark-to-market, should be allowed to borrow. This, in conjunction with prudent actions by the FED, should help with liquidity. Second, we must look at potential impacts of a market downturn. Wall Street traders and long-term, value investors do not need protection. However, those Americans who are close to retirement age and rely on pensions, 401(k)s or other investments could be given protection via some sort of investment insurance. Additionally, jobs may be impacted. This can be countered with temporarily enhanced unemployment benefits and tax incentives for businesses which create jobs during a troubled time.

We know that we cannot solve this problem on our own. We don't know if any of you will actually read this. But, we also know that none of you can solve it on your own in closed door negotiations with select individuals. We are on the precipice of rough times. But, rough times are natural. The government cannot stop all bad things from happening to everyone. In fact, attempts to do that are dangerous steps towards socialism. We fear that we have tread down this path too far already. Stop. Re-evaluate. Remember the principles upon which this country was founded. Rough times will lead to better times because, like you, we believe in the American people and the American system.

Best regards,
Matthew and Nicole Wittlief, residents of the 5th Congressional District of Indiana

The Vote Heard 'Round the World

I am shocked. HR 3997, the Emergency Economic Stabilization Act of 2008, has failed. I was at home with my sick daughter today and watched the events unfold in real time. I watched as 228 brave members of Congress voted against President Bush, Henry Paulson, Nancy Pelosi (D-CA) and the rest of the Congressional leadership. They voted against the calls from the media pundits and Wall Street advocates. They voted against the fear that was being brought against them.

And the Dow Jones plunged 777 points. The Nasdaq dropped over 9%. Tomorrow could get ugly.

There's a lot more drama to unfold here. But, despite the reactions or over-reactions we'll see from the markets, they voted for the taxpayers today. I applaud them.

Loose Ends... Vol. X

Well, I'm way too tired to do anything of substance here tonight.

The bailout/rescue bill is available at the House Financial Services website. Looks like the voting will be done quickly.

Fannie & Freddie - Part II

The Winners and the Losers...

Wow. So, much has happened since Part I after the Fannie/Freddie bailout. Lehman Brothers failed; AIG was bailed out; we witnessed the largest bank failure in history with the collapse of Washington Mutual; and Hank Paulson, George Bush, Congressional leaders, and the media have been warning us that if further action is not taken, then we are all doomed. There's so much to comment on regarding these latest developments; however, I'm going to focus back on the winners and losers of the Fannie/Freddie bailout and finish that series of articles first.

In the context of the world of the financial industry, money and power define the winners and losers. So, I've scoured some articles from the days after the bailout where this subject has been discussed. I'll summarize here.

Winners:

The Federal Government: Their power has increased. The Treasury Department and the FED are more powerful than ever. Congress is complicit.

Mutual funds holding Fannie/Freddie debt: Mutual fund holdings such as Bill Gross's PIMCO now have bonds whose implicit guarantees are explicit guarantees.

People's Bank of China: China's central bank, along with other major foreign investors, also hold large quantities of MBS and Fannie/Freddie bonds which have their values guaranteed.

Former Fannie/Freddie executives and board members: These guys made big money during the real estate boom over the last decade which led to big salaries, bigger bonuses, and healthy stock performance (provided they got out in time!).

Those who got out: Besides the executives mentioned above, thousands, if not millions of Americans made good money in the real estate boom. Real estate agents, residential and commercial speculators, and those lucky enough to benefit from home equity loans all made gains on the bubble. Provided they got out while they were ahead, they are certainly winners.

Losers:

Taxpayers: Yes, this one is obvious. No matter how you slice it, the taxpayers lose. It will come to us by either higher taxes, higher debt, and higher inflation. Actually, probably all three. This action alone is not the straw that will break the camel's back, but it brings us ever closer to the day of reckoning.

Shareholders of Fannie/Freddie: All those who held on to Fannie and Freddie stock until the end lost big. This includes rank and file employees, and those who hold pension funds heavy in Fannie and Freddie stock. In particular, Bill Miller, fund manager at Legg Mason, poured $150M into stock purchases not too long before they completely crashed.

There are few other possible losers as well, but it remains to be seen. Lobbyists in Washington have enjoyed tens of millions from Fannie and Freddie over the years. While they will lose that business, chances are there are plenty of others who will pay for their services. The housing industry will have mixed benefits. Probably ok in the short run, but the bubble has not yet burst. Their pain is just delayed. Theoretically, congressmen may lose out in their re-election campaigns, particularly those who were complicit in this such as Barney Frank (D-MA) and Chris Dodd (D-CT), but I'm not going to bet on that.

In the next installment, we'll take a closer look at the winners - in particular, the executives and board members of Fannie and Freddie and their connections to Washington.

If you are interested in further reading, here are a few news articles that I reviewed in looking at the winners and losers.

Fierce Finance
Reuters
Fox Business
New York Times
Wall Street Journal
Blogging Stocks

The Silence of Anger

I haven't been posting as much in the last week or so. I have been quite angry at all that is going on in Washington. It has left me both with so much to say, and so little patience to sit down and say it. It hasn't helped that our laptop has been in repair leaving us with less computer time.

Our country and values are slipping away. It's been on this course for a long time, but the ways in which this manifests become more and more obvious - even to those not watching. Action is required and I struggle to define that action.

I will write to my congressmen today. I will post the letter(s) here.

In the words of the Dude, "this aggression cannot stand, man."

Loose Ends... Vol. IX

This has been quite a week. We are still down a computer here at the Wittlief household and battled colds all week. So, it's been a slow week for posting. But, it was a busy week on Wall Street! I will continue with my discussions on Fannie and Freddie, but not tonight as I want to be sure to give the subject the attention it deserves. That aside, we touch on a few other subjects...

This week, we had the first in a series of three debates for the race for Governor of Indiana. The debate saw incumbent Mitch Daniels (R) face off against Jill Long Thompson (D) and Andy Horning (L). I will cover this race in more detail before the election, but this was a nice introduction to the candidates. There are two other candidates who are official write-in candidates (both independents): Timothy Lee Frye, for whom I cannot find a webpage, and Christopher Stried, who is not constitutionally eligible at the age of twenty-one.

In the debate, I thought Mitch Daniels represented his case very well by sticking to facts and accomplishments of his administration. He acknowledged areas which needed improvement and roughly outlined some plans towards those subjects - specifically, education and the economy. Jill Long Thompson spent the entire night attacking Daniels and offered no concrete ideas or solutions. She stuck to her attacks and political rhetoric such as "I'll fix the economy", "I'll fix health care", etc. All of this was offered with no specifics. Horning stuck to a classic Libertarian playbook. I thought he was the most entertaining speaker by mixing in a bit of humor. His message was basically that "politicians are bad" and the government should "leave you alone." I can buy that. As I said before, we'll dive deeper into this race and provide an endorsement before November 4.

On the national scene, Wall Street was down, down some more, up again, and then back to where it started earlier in the week. In the midst of the roller coaster ride, Lehman Brothers, one of the oldest investment banks in the U.S. went bankrupt, billions of dollars were injected into the global economy by the world's major central banks, and the world's largest insurance company, AIG, was saved by the U.S. Government as it teetered on the edge of collapse. We have become quite the little socialist country this week. This whole subject will get more treatment over the coming weeks and months here on this blog. U.S. CFO Paulson is busy working up his plan to push through Congress this weekend. We'll follow that too.

Stories I Was Too Tired To Write About Last Night

These two topics should have been covered in last night's post, but I was tired. I have a cold. Ugh.

Did you know we've now moved our military into Pakistan? Yep. On September 3rd, an attack was performed in a Pakistani town across the border from Afghanistan. The Pakistani National Assembly immediately passed a resolution condemning the attacks. They do not call out the U.S. specifically as we are one of the nations representing the International Security Assistance Force (ISAF). The White House has yet to comment on the operation. However, President Bush did have this to say at a speech on September 9th:

"Defeating these terrorist and extremists is in Pakistan's interest -- they pose a mortal threat to Pakistan's future as a free and democratic nation. Defeating these terrorist and extremists is also Pakistan's responsibility -- because every nation has an obligation to govern its own territory and make certain that it does not become a safe haven for terror. America and our NATO allies will continue helping Pakistan in its efforts to defeat the extremists. The same terrorists who murdered innocent civilians in Karachi and Islamabad are plotting new attacks against the United States and Europe."
Link here to the full speech.

In other news of international relations, Russia has sent two bombers to Venezuela to conduct "routine patrols" over Caribbean waters. Venezuelan President, Hugo Chavez, welcomed the actions stating it was a sign of the end of "Yankee hegemony" and a move towards a "pluri-polar" world. In other words, the dominance of the U.S. is about to be over. Chavez really likes to be a thorn in the side of the U.S., doesn't he? Full story here from CBS/AP.

Loose Ends... Vol. VIII

Congressman Dan Burton (R-IN) of Indiana's 5th District, home of people such as myself, launched his new blog strategy this week with recurring features such as Energy Jolt, Pork Platter, and Weekly Roundup. This was the inaugural edition of Weekly Roundup. In it, Burton bragged about how YouTube "finally yanked" material from its site which Congress felt was inappropriate. Now granted, I am not sure it is the best interest of Google/YouTube to be a hub of recruitment for terrorists. However, there is something called free speech in this country and the fact that policies were changed at the behest of government is a bit sad. Actually, it'd be a bit scary to see what would happen next if the State Department deemed that Google was aiding terrorist activity. Could we wage war against them? After all, it was George Bush who said, "Every nation, in every region, now has a decision to make. Either you are with us, or you are with the terrorists. From this day forward, any nation that continues to harbor or support terrorism will be regarded by the United States as a hostile regime. "

YouTube had been initially resistant to the call from Congress, led by Sen. Joe Lieberman (I-CT). They changed their community guidelines earlier this week.

Fannie & Freddie - Part I

I've been wanting to do a bit of a write-up on the Fannie Mae/Freddie Mac debacle. There is a lot to this issue, so I am going to break this up into a series of posts. First, what do the companies do and why are they so important? Second, who are the winners and losers of the latest bailout? Third, what connections exist between the winners and the government? And fourth, my opinions on the whole situation.

Fannie/Freddie Overview:

Fannie Mae (the Federal National Mortgage Association) was established by the U.S. Government during the Franklin D. Roosevelt administration as part of the New Deal in 1938. Their stated goal is to "provide[s] stability, liquidity, and affordability to the nation's housing finance system under all economic conditions... [We] exist to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market." Freddie Mac (the Federal Home Loan Mortgage Corporation) was established in 1970, two years after Fannie Mae became a private corporation, to provide competition in the secondary mortgage market. Both companies enjoyed government sponsorship which came with specialized regulation, special access to funds, and the implicit backing of its risk by the Treasury.

The secondary mortgage market was established to help banks maintain liquidity (cash flow) so that they can continue to make housing loans. This allows people to more easily attain the "American Dream" of owning a house. Let's consider a simple example:

ABC Bank serves its local community. Let's say that 10,000 local customers deposit an average of $5,000 in savings with the bank. That gives ABC Bank $50M of bank deposits. In modern banking, a system known as fractional-reserve banking is universally accepted. In this system, banks do not have to keep this $50M on reserve. They can use this money to make loans and other investments. This is allowed since people deposit their money with the bank because they do not require immediate access to the funds. Banks use this opportunity to make money. In return, the depositors receive an interest rate on their savings. Let's say the interest rate paid by ABC Bank in this example is 4%.

ABC Bank now has $50M on hand. Let's say that they decide to always keep $10M on reserve for their customers who decide to make withdrawals. (Note: under U.S. banking regulations, banks are required to keep 10% on reserve for "transaction deposits" like checking accounts, and 0% reserve for "time deposits" like certificates of deposit.) With this $40M, ABC Bank works with local residents to provide mortgage loans. Let's say that ABC Bank provides 200 mortgages at $200,000 each. These are all 30-year fixed loans at 6.5% interest.

Now, every month, ABC Bank has to pay interest to its depositors. They also receive mortgage payments from their loan customers. A mortgage as described above would typically require a monthly payment of $1264.14. Using simple interest, the bank pays each of its depositors $16.67 each month. So, the bank receives $252,828, pays $166,700, and as a result increases its cash flow by $86,128 each month. This is a good business. But, at this rate it would take approximately 70 days for ABC Bank to increase its cash flow enough to loan out more money on additional mortgages. That also assumes that they reinvest all cash flow to additional investments leaving no money to pay the bills (including salaries) or give back to the owners and investors in the bank. This also means that residents in our community are limited in their ability to secure a loan to buy new houses. Enter Fannie Mae...

Fannie Mae offers to buy the debt associated to the mortgages from ABC Bank. So, ABC Bank packages the mortgages together and sells them to Fannie Mae. ABC Bank will receive cash from Fannie Mae which replenishes their cash flow. ABC Bank continues to collect the mortgage payment from its loan customers, but that money is passed on to Fannie Mae. Over the course of the 30 years of each loan, ABC Bank would have received $455,090 per loan for a total of just over $91M. However, the bank is willing to sell these mortgages as a package to Fannie Mae for far less than $91M because they'd rather have the money now so that they can conduct more loans. I have not been able to find exactly how much Fannie Mae would typically pay in such a scenario, but I would assume it is close to the net present value of the future cash flows. For the sake of argument, let's just say Fannie Mae pays ABC Bank $40M for the package of mortgages. Now, ABC Bank has $40M in fresh cash flow which can be used to make another 200 loans of $200,000 apiece available to the community. This cycle can continue as long as Fannie Mae has the money to buy the mortgages from ABC Bank.

So, where does Fannie Mae get its money from? A few different ways. First off, they make money on the process described above. As noted earlier, the total amount of repayment expected from one of the $200,000 loans above is over $450,000. By assuming the risk of the underlying mortgages and providing banks with much needed cash flow, Fannie Mae receives the benefit of the interest that homeowners pay. Generally, this is quite lucrative. Second, Fannie Mae repackages groups of mortgages which they have bought from banks all over the country and sells them as new financial securities call mortgage-backed securities or MBS. These MBS are bought by investors who seek a steady return on their investment; this includes many foreign central banks. Fannie Mae charges fees on these investments because they guarantee that payments will be made regardless of whether or not the underlying mortgages are being paid. In other words, they charge fees because they take on the risk. Finally, Fannie Mae has access to low interest government loans to raise capital.

As you can imagine, with the desire of banks to make money and for the government to see home ownership increase, Fannie Mae and Freddie Mac (they do the exact same thing as described above for Fannie Mae) have grown to be absolute behemoths. Between the two of them, they either own or guarantee about 40% of all mortgages in the U.S. Further, they are the key source of liquidity in the housing market allowing banks to keep making loans with fresh money. And that money comes from investors seeking stable returns such as Wall Street giants, foreign banks, mutual funds, and average investors.

When people start falling behind on their mortgage payments, it starts to throw a wrench in this massive cycle. Mortgage delinquency causes the payments which Fannie and Freddie rely upon to slow down. It should be noted that Fannie and Freddie's actions specifically do not cause delinquency. People lose their jobs, mismanage their money, enter into mortgages with variable interest rates, and buy houses that they can't afford in the long term. All of these factors can lead to delinquency. However, it should be noted that the business model of Fannie and Freddie exists to make it easier for banks to loan. The easier it is for banks to loan, the more risk they can be willing to take along with lower interest rates. This isn't the fault of Fannie and Freddie, but it is the nature of the system itself. They are just in the middle of it.

Going back to our example... if Fannie Mae repackaged the first set of mortgages and sold them as an MBS, they would need those monthly mortgage payments to flow in to ensure they can pay their investors. But, if there are delinquencies, then they have to make up the difference. This cuts into their ability to purchase other mortgages and their profitability. This is a big part of what has happened over the last couple of years which has led to the situation we are in now. They engaged in more and more risk, and some of that risk is beginning to rear its ugly head in the form of delinquencies and foreclosures. This reduces their cash flow as described above. Also, it makes investors less likely to want to purchase MBS. So, Fannie and Freddie have had to pay a higher interest rate on the MBS which dilutes their own capital and profits. The reason the U.S. Treasury "had" to step in was because the fear became too great that these two companies would not be able to continue to buy up more mortgages and pay their existing obligations. That means that a) investors would not get paid and b) banks would have much more trouble making loans.

In our next installment, we will look at the winners and losers of the bailout.

Palin Update

In a previous post entitled I Spy... Oh No, I was unsure whether or not Republican VP candidate, Gov. Sarah Palin, was wearing an Israeli flag pin. After further review, and seeing her speak a few more times, I am 99.9% sure that it is not. It does appear to be a service pin.

However, in her interview with Charles Gibson earlier this week, she did pledge unwavering support for Israel and yielded unquestioned authority to the decisions of their government.

GIBSON: What if Israel decided it felt threatened and needed to take out the Iranian nuclear facilities?
PALIN: Well, first, we are friends with Israel and I don't think that we should second guess the measures that Israel has to take to defend themselves and for their security.
GIBSON: So if we wouldn't second guess it and they decided they needed to do it because Iran was an existential threat, we would cooperative or agree with that.
PALIN: I don't think we can second guess what Israel has to do to secure its nation.
GIBSON: So if it felt necessary, if it felt the need to defend itself by taking out Iranian nuclear facilities, that would be all right.
PALIN: We cannot second guess the steps that Israel has to take to defend itself.
(credit: ABC News)

Seems like Israel is the only country whose foreign and domestic policies we do not question.

Third Party Showdown

As I said in my last Loose Ends post, I was looking forward to the Ron Paul (R-TX) press conference. As of Sunday night, it was looking like both Chuck Baldwin and Bob Barr would be joining Dr. Paul at the press conference. These are the three leading, liberty-loving politicians out there with Paul having done what he did in the Republican primaries and the other two receiving nominations from parties which espouse similar values to Dr. Paul's philosophy. Many people hoped for, or perhaps expected, an endorsement. Other, more dreamy Ron Paul-o-philes, were hoping that Baldwin and Barr would step aside and let the good doctor step in for November. What did happen was probably not expected by anyone...

First, it was reported that Cynthia McKinney and Ralph Nader also received invitations. Then on Wednesday morning, Ron Paul's Campaign for Liberty (his newly formed political action committee a.k.a. PAC), released the statement found here.

I did not have the opportunity to watch the press conference live, but tried to keep an eye on the reports which followed online. Dr. Paul's basic message was to shun the two-party duopoly and encourage everyone to vote for a third party. There would be no endorsement from him for any candidate (including his public rejection of McCain... again...), but a unifying message that these four candidates, all of whom have enough ballot access to win an electoral majority, stand united on four major issues which are opposing viewpoints of the establishment candidates: McCain and Obama. Except for one thing...

Bob Barr was a no show.

Ron Paul was visibly angry. It's unclear whether this was due to the "snub" by Barr, or just him being fed up with the games and nonsense that is the current system, or that he is a grumpy old man from time to time. Who knows for sure? What is certain is that Barr was a no-show. Where was he? In the same building preparing for his own press conference! Huh?

Bob Barr was holding a press conference on the same day, at the same place (the National Press Club) to announce, among other things, that he has formally asked Ron Paul to serve as his Vice Presidential running mate with Wayne Allyn Root graciously willing to step down. It is unclear to me after some bit of research as to who scheduled which press conference first. It is clear that the VP offer came on Tuesday (or earlier), and I do recall seeing an event on Barr's calendar of events on his website - however, I and others speculated that this was just evidence that Barr would be at Dr. Paul's event.

So, the Ron Paul people are pissed at the Barr people.
The Bob Barr people seem to be equally pissed at the Paul people.

Barr has certainly lost a good deal of potential Paulites by his snub. There is certainly a faction of Paul supporters who are rabid loyalists. Barr has also come off as a bit arrogant in his statements, but I can see the angle he is playing. In fact, to a degree, I felt Nader was trying to play the same angle in the Paul press conference. At one point, a spokesman from ThirdPartyWatch.com asked if the candidates would be wiling to participate in a series of fifty debates in fifty days. Nader basically expressed that he wants in on the major debates - no minor league stuff. I think Barr's no-show was his way of saying that he wants no part of this minor league stuff and that he's competing with the big boys (well, and Palin).

1. Here is statement of agreement on the four important issues which the third party candidates and Ron Paul agreed upon (Barr is not listed, however did express his support).
2. Here is a LONG list of reactions and comments from everyday people on Campaign for Liberty (you can find my comment from Sep. 10 at 12:26pm).
3. Here is an example of the reaction from prominent, anarcho-capitalist, Ron Paul supporters. (There is a lot of heated, anti-Barr opinion here.)
4. Here is Bob Barr's press release from his news conference.
5. Here is an open letter from Barr's campaign staff to his (would-be) supporters.
6. Here are two statements from the Libertarian Party website.
7. Here is a link to (Part 1 of 9) the Ron Paul press conference.

There is a lot to read and digest. I'll summarize my thoughts briefly...

Ron Paul energized tens of thousands of people to his message of freedom and change. I am one of them. I'm not sure if I'd be typing this today without his inspiration. But, he ran a lousy campaign. He is not a great leader. He is a great voice, a great man, a great congressman, a great thinker, and a great inspiration. But, for a variety of reasons, most people who have heard of him still think he is a great big kook. If Paul somehow entered the race (which, at this point is nearly impossible due to ballot access laws) as his supporters dream, he would still lose. He would get, at best, and I mean with a complete alignment of the stars and certainly a new campaign staff, 10-15% of the popular vote.

There is a old-guard, libertarian friendly, anarcho-capitalist and paleoconservative movement who respect Ron Paul dearly. They, for a variety of reasons, seem to really hate Bob Barr. Barr, in return, probably doesn't like them very much either. I happen to believe that Barr is truly out there to be a voice of change and to push libertarian principles. He's not even close to being an anarchist. Many of the Ron Paul folks who are (not that there is anything wrong with that!) see Barr as a statist.

The events of the last two days seem to be a culmination of an underground war between the Barr camp and factions of the Ron Paul camp. I'm not sure whether there is true animosity between Barr and Paul, but it really doesn't matter to me either. Thousands of Ron Paul supporters - those who are new to the movement - will be dejected because their man did not tell them what to do. They might just stay at home, or maybe vote for Baldwin... or maybe write-in Ron Paul as an act of loyalty (and futility). I'm not sure these are the people who really have what it takes to really change the system - not now.

I will be voting for Barr. He is the candidate who I believe will be the best next President based on his platform, ideals, and his ability to get stuff done in Washington. And no... I don't really think he'll win. But, if Dr. Paul got anything right yesterday (which I happen to think he got a lot of things right), it is that voting for a third party candidate is NOT throwing your vote away. It's a principled decision. Quoting Chuck Baldwin from the press conference: "it's not the lesser of two evils; it's the evil of two lessers." That is wasting your vote.

In closing, I hope this was more interesting than the ridiculous media coverage of lipstick and swine.

Loose Ends... Vol. VII

Tonight we look at three guarantees...

Earlier this week, President Bush issued a statement which guaranteed aid to the troubled nation of Georgia. In case you hadn't heard, we will be providing $1 billion to the Georgian government to assist mostly with reconstruction and humanitarian aid. In doing this, we continue to challenge the manhood of Russia with President Medvedev and Prime Minister Putin. They have and will continue to call the bluffs of the U.S. and the European Union as they control a large volume of the energy supply - particularly for Europe. We've discussed this issue before, and I still have not reached my conclusions. But, at what point do we say that we don't care. At what point do we say that it is OK that South Ossetia and Abkhazia wish to become independent. We recognized Kosovo. I'm currently reading up on my history of the first half of the 1900's, and, not to be an alarmist, but there are some similarities to this situation and the events which led to two world wars.

Earlier today, the U.S. Treasury with its Federal Housing Finance Agency bailed out troubled mortgage giants Fannie Mae and Freddie Mac. This made good on their earlier guarantee that the two GSEs were too big to fail. I plan to write a lot more about this as the week progresses. This will cost taxpayers billions of dollars. The big question is whether or not this was the best choice available.

Finally, Ron Paul (R-TX) announced a press conference in Washington which is scheduled this week. This comes on the heels of the Rally for the Republic which celebrated the "Ron Paul Revolution". His Campaign for Liberty sponsored the event which coincided with the Republican National Convention in Minneapolis. It appears that both Chuck Baldwin and Bob Barr will be joining him for the press conference. There has been no guarantee made regarding the announcement; however, I guarantee that I am interested!

Go Bears... way to beat the Colts.
Goodnight.

Forget the Body Armor...How About a Banjo?

Last night while searching for a basic list of websites in the .gov domain (a top-level domain restricted for use by U.S. governmental entities only), I ran into a roadblock when the only really relevant site I could find was the official "dotGov" domain registration website. Once you get past the home page of this site, it seems that the only other pages a normal browser are allowed to access are the registration procedure overview and eligibility requirements. Upon clicking on any other links, you are directed to a page with the following message:


Warning! Use of this site is restricted!

This computer system is for the use of the United States Government. Unauthorized access, or access which exceeds authorized access is punishable under 18 USC 1030.


Below this warning is a radio button that simply says "Agree." Since I had no desire to have my front door broken down by special intelligence police or something, I chose not to click the button and was forced to abandon this particular line of research. Instead, I turned to searching for budget figures for federal spending on website maintenance, etc. This led me to an extremely fascinating website--USAspending.gov. According to the "About This Site" page, the Federal Funding Accountabililty and Transparency Act of 2006 "requires a single searchable website, accessible by the public for free" that includes detailed information on all Federal awards (both contracts and "assistance" type awards)--the name of the company/entity receiving the award, amount of award. The data can be drilled down all the way to the individual transaction level! The page also indicates that most of the data found on the website comes from the Federal Procurement Data System and the Federal Assistance Award Data System.

I only had enough time to poke around a bit on the site, but did so for long enough to realize that one could spend years looking through all the data here, even though it only appears to go back as far as 2000. You can sort data by agency initiating the award, contractor/entity receiving the award, awards by state, awards by congressional district, etc. I concentrated on the federal contract awards data and didn't spend much time on the assistance side; for reference, the site's Glossary defines a contract as "an agreement between the federal government and a private entity, for-profit or non-profit, to execute mandated services for a fee for the federal government." Since "Assistance" is a wholly separate categorization of data here, I take "Contracts" to mean "stuff the government buys," whether it be furniture, professional services, office supplies, etc. that are (supposedly) necessary for operation.

Here's just a sampling of the interesting stuff you can find on the site...according to the "Awards by cong. district of contractor" page, Rep. James P. Moran of Virginia's 8th District wins the award for dollars awarded to contractors in his district by far--$136.770 billion total from FY 2004-2008 (second place, for reference, is also from Virginia--Frank R. Wolf of the 10th District--with $49.333 billion). I suppose this isn't particularly surprising given that Virginia's 8th District encompasses a large portion of the northern suburbs of Washington, D.C., most notably the city of Alexandria.

Anyway, what caught my attention on this particular initial visit was the search "By product or service provided" functionality. The overview page for this data sort shows a chart of federal contracts awarded by product or service category (professional/admin services, utilities, motor vehicles, etc.) individually by FY from 2000-3Q of 2008 and also includes a combined total over this period. So how much of our hard-earned taxpayer money does the federal government feel it necessary to spend on purchases of items or services required for its operation (remember--this doesn't include any money the federal government awards as "assistance"--loans, grants, etc.)? Well, according to the chart, the federal government spent $436.363 BILLION on federal contract awards alone in FY 2007.

As I read this for the first time, I horrified my poor little dog with the strange noises I made as I half-choked on the drink of water I had just taken. $436 billion dollars!!!??? Sure, I understand that the federal government needs to spend money in order to conduct daily "office" business--office supplies, computers, janitorial supplies, utility bills, maintenance, furniture, etc.--just like any other business. Still, $436 billion dollars seemed like an awful lot and as I scrolled down the page, I became a bit more suspicious of some of these figures.

As a shining example of the federal government's inability to show restraint on spending despite our $162 billion budget deficit in FY 2007 (projected to increase to $410 billion in FY 2008) and total federal debt of $9.5 trillion, I will highlight just one category of contracts awarded (there are 103 categories total)--"Musical instruments, phonographs, and home-type radios." According to the chart, this category ranks 99th out of the 103 categories in total contract dollars awarded but, nonetheless, in FY 2007 alone $23,107,106 was awarded for contracts in this category. I paused for a moment to attempt and come up with what I thought could be legitimate federal government purchases that would fit under this category--perhaps radios or audio recording equipment?

By drilling down further, I was able to obtain a list of every single transaction for FY 2007 in this category and discovered the biggest awards were given to companies with names like Electronic Data Systems Corporation and Reecom Electronics Inc. I thought "ok"--radios, etc. (actually EDS was contracted to perform "Record Scanning Services"). Once again, though, as I continued to scroll, I saw contracts awarded to businesses such as Washington Music Sales Center Inc. ($2.87 million awarded in FY 2007), Vintage Instruments Inc. ($14,000), Music Melody Manor Inc. ($48,585). These are only a small few--1,353 total transactions were awarded to 487 different contractors in this category in FY 2007. My dismay was deepened upon further examination of some of the transactions awarded to the businesses above. For example, 182 total transactions were awarded to Washington Music Center--$289,468 on 9/18/07 for a French Horn, $112,385 on 9/24/07 for tubas, $62,682 on 6/7/07 for a tenor saxophone. And what government agency was it that was purchasing these?? The Department of Defense, of course! Yep, that's right...out of the 182 total transactions in FY 2007 to Washington Music alone, 166 were awarded by the DoD for a total of $2.82 million.

My favorite, though, was a contract awarded on 9/24/07 by the DoD (Dept. of the Army) for $14,000 to a company called Vintage Instruments for a "J.B. Vuillaume Violin Bow." Wow, a $14,000 violin bow...from taxpayer money. While I found this quite disheartening, I couldn't help but be amused by the website for the company which touts itself as "America's largest and most eclectic shop specializing in old and antique acoustic musical instruments" and as specializing in "vintage Martin and Gibson guitars, banjos and mandolins." They also sell "historical" instruments such as lutes, hurdy gurdys, melodeons and zithers. I'm sure the Army will be needing one of these sometime soon...

Now, before you go chastizing me for making fun of the DoD for purchasing musical instruments, I realize that the Army, Navy, etc. each have a band and that's what the instruments (hopefully) are for. It's fine if one of their violin players broke their bow and needed a replacement--but a $14,000 replacement?! And yes, these transactions individually constitute only a "drop in the bucket" of what the federal government spends in total; indeed, such expenditures are surely often overlooked because of their relatively small nature. But when one sees that $23 billion TOTAL has been spent on what could legitimately be classified as purchases of a largely "frivolous" nature in only one of 103 purchase categories (and remember that this category ranks 99th out of 103), it's nearly impossible to believe that there weren't billions more dollars spent on similar things--billions more dollars that probably could have added up to nearly wipe out the $162 billion deficit in FY 2007. Why isn't more scrutiny and research devoted to this particular aspect of (wasteful) government spending? There certainly should be...

I Spy - Oh No

Last night I got home from the airport in time to rewind the DVR to watch Sarah Palin's premature acceptance speech (she wasn't yet officially nominated). I was pretty eager to see how it would all play out. Overall: good speech. I enjoyed the not-so-subtle sarcasm and jabs directed at the opposition. I'd prefer a political system without all the games, but that's not a realistic wish. So, observing shrewd tactics is enjoyable to me. Anyhow, she seemed real - like that co-worker in senior management or friend of your parents that is just sharp, witty, good-looking, family-oriented... and seemingly sincere. But, as I was watching, I couldn't help to notice her lapel.

I was in bed in the dark. What was that on her lapel? It was a pin of sorts. It was not an American flag... no, it was... Oh no... Was she wearing a lapel pin of the Israeli flag. Now, I'm going to try to keep this short. I could write on and on and on with this subject. We can save some of that for later.

Note: Some people think this may have been a Blue Star Service Pin for those with family in the military; it doesn't look like that to me at all. After further review, I think this might be the case. This thread shows some pretty good pictures - you make the call. But, this lead to some good discussion anyways.

With a little bit of research, I learned a few things. First, she spent a good deal of Tuesday with Sen. Joe Lieberman (I-CT) meeting with AIPAC. If you've never heard of AIPAC, then first go visit Wikipedia and then their own website. In short, they are the most powerful pro-Israel lobby in the U.S., if not the most powerful lobby in the U.S. period. Second, she apparently already had an Israeli flag in her office in Alaska. Third, some news articles have surfaced quoting her with some Christian rhetoric in regards to the war in Iraq. Fourth, Rep. Robert Wexler (D-FL) had already come out and attacked her in regards to her support for Israel due in large part to her alleged support and association with Pat Buchanan. As some elements of the Left will tell you, Buchanan is an anti-Semitic Nazi sympathizer (I do not subscribe to this opinion).

So, there is a lot of problems with this situation. I don't want to get into why it is problematic to be unabashedly pro-Israel, nor do I want to explore the deep hold on Washington which AIPAC holds. But, taken those as givens for a moment... was she already staunchly pro-Israel? If so, why? Does she feel it is her Christian duty as some do? Or, have (will) the lobbyists from AIPAC (whom, by the way, should maybe be called something other than lobbyists since Obama and McCain are pretty friendly with them, but they'd have you believe that lobbyists are evil) swooped in like vultures to ensure that this green young VP candidate will capitulate to them like the rest of Washington? I thought she was supposed to be different... (No, I'm not that naive.)

By the way, wasn't Obama ridiculed for not wearing an American flag pin? Is an Israeli flag pin a reasonable substitute? What if Obama wore a French flag pin... I bet that would cause quite a stir.

In case you are wondering... I am not an anti-Semite.

Loose Ends... Vol. VI

This week, John McCain named his VP choice and Hurricane Gustav approached New Orleans.

John McCain shocked the country by selecting the little-known Governor of Alaska, Sarah Palin. I actually like this choice, but I see two key flaws with the decision. First, if the McCain campaign actually thinks they can capture the disaffected "Hillary" vote, then I would suspect they are underestimating the intelligence of that electorate. I (really) hope that voters don't vote based on gender (or race for that matter). Palin's stance on issues differs quite widely from those espoused by the former First Lady. Second, this choice limits McCain's ability to attack Obama on his lack of experience. This is exacerbated by McCain's age.

But, as I said, I do like this choice. She brings youth, good looks and the element of surprise to the campaign which can and will offset the charismatic aura of Barack Obama. Her back story fits nicely with McCain as well. I think this signals an opportunity for McCain to focus on his government reform message which I believe is where he's at his best (other than the glorification of the military). She also has a very strong conservative message which will help appeal to the Republican base with whom McCain has had difficulties. She is pro-life, pro-guns, and wants to reduce wasteful spending. She rejected the money for the "Bridge to Nowhere", fought the oil companies, and her husband is a member of the steelworkers union.

While her inexperience makes Obama less vulnerable, she should be fairly insulated from attacks. In fact, if I were the McCain campaign, I'd welcome the attack. She has executive experience; he does not. She has been Governor almost as long as Obama has been Senator. She was the Mayor of Wassila for about as long as he was in the General Assembly. She held elected office as a city-councilwoman for four years prior to that. So, she's held elected office longer than Obama. Is serving as Mayor of Wassila relevant experience for the President of Vice President of the U.S.? Well, maybe not. It is something. It is arguably better than serving as a member of a state legislature. I think they can fight back on this. As I mentioned in my review of the candidates, I'm not concerned that Obama is too inexperienced. And, despite liking the choice of Palin, I'm still not voting for McCain.

As I type this, Hurricane Gustav is pummelling the Louisiana coast. This is a big, bad hurricane. The Federal Government with Bush, Chertoff and FEMA are not going to sit idly by and let things get as screwed up as they did with Katrina - well, they are at least going to try. Local governments have also been gearing up for the disaster calling for mandatory evacuations, imposing curfews, and declaring states of emergency. Meanwhile, news crews are going straight to the action so that we can watch the events unfold. What's wrong with this picture? First, I have a bit of a problem with the government treating the residents of the gulf coast like five year-olds. Mandatory curfews? C'mon. Second, we get to witness the hypocrisy of the media while they tell everyone to get the heck out of dodge and split-screen to their on-the-scene reporter fighting off the wind and rain posing as a journalistic hero. Really?

This is what we get. The news media is going to exploit this and they should do so. That's what the people want to watch. If people turned the channel, rating would go down, advertisers would look to other programming, revenues would decrease, and the news would learn to cover other stories. That's not going to happen anytime soon. Why? Because people want to watch the news coverage of the hurricane, and that is ok. Further, at this point, I have to side with the government in their actions as babysitters-in-chief since they will be blamed for inaction if they do otherwise. The government will end up paying the bill for cleanup, and the bill would be higher if people didn't evacuate. So, as long as my money is being stolen from me to pay for the mess... ugh... I guess I want them to make sure they minimize their costs. There is so much that is broken with this mess that I can't say anymore without this becoming too long of a post!

Later...