December 1, 2009, 6:47 pm
Live Blogging Obama’s Afghan Speech
By JEFF ZELENY
Ruth Fremson/
The New York Times West Point cadets waited for President Obama to speak on Tuesday.
Setting the Scene | 7:11 p.m. Sheryl Gay Stolberg, who is on site at West Point, reports:
Many speeches have been delivered at the military academy, but never before have cadets heard orders directly from a commander-in-chief who could send them into a war zone.
There is a sense of anticipation in the air. A West Point official brought a handful of carefully selected cadets – seniors with impressive resumes – to speak to reporters.
Alexandra Rosenberg, 22, of Manhattan, is a Rhodes and Truman Scholar with plans of becoming a doctor. Eric Bernau, 21, of Rochester Minn., is the cadet public affairs officer, who spent a semester studying in China. And Tyler Gordy, 26, came to West Point after serving as an infantryman and getting wounded in Iraq. He is First Captain, supervising 4,000 cadets.
The New York Times One cadet was reading “The Kite Runner,” a novel set in Afghanistan, while he waited for the president to speak.
The three will be among those seated behind the secretary of state and secretary of defense for Mr. Obama’s speech, which Mr. Bernau described as “the most momentous day in our four years of the academy.”
“I mean, he’s the commander in chief, he’s our boss,” Mr. Bernau said. “It’s kind of like a shareholders meeting where you hear the strategy of the company.”
These cadets will graduate as second lieutenants and platoon leaders.
While Ms. Rosenberg will go to Oxford in the fall, the other two fully expect to be deployed, and have chosen the infantry as where they want to serve.
“This doesn’t make me nervous, it doesn’t scare me or anything,” Mr. Gordy said. “I have known this for five years now. What it does is give me a sense of direction.”
Speech Preparations | 6:47 p.m. President Obama’s address to the nation from the United States Military Academy at West Point will begin at 8 p.m. He left the White House after a daylong series of calls to foreign leaders, followed by a late-afternoon briefing to Congressional leaders.
By now, broad outlines of the speech are known: 30,000 more American troops will be sent to Afghanistan; the goal for beginning to withdraw the first wave of forces will be July 2011; the strategy is aimed at preventing Al Qaeda from returning to Afghanistan, where the Sept. 11 attacks were planned.
It is the president’s burden, of course, to explain why he believes the war in Afghanistan should be escalated.(...)"
It's been a while that I watched BMJ. When I began watching tonight in the middle of the program I entered into President Johnson's conversation in 1965 with McNamara on escalation of the war, when the troops there were in the range of 45 thousands. I sat pinned down to my chair till the end of the program.
That "while" wiyhout BMJ was a wasted while. God bless Bill Moyers of the USA! fib
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This week on the JOURNAL, Bill Moyers looked back some four decades to his experience as a member of President Lyndon Johnson’s administration. At the time, Johnson made a series of fateful decisions to escalate the war in Vietnam, where eventually over two million American military personnel would serve. Estimates indicate that nearly 60,000 U.S. troops – and more than a million Vietnamese – were killed during the course of the conflict.
With an eye on President Obama’s deliberations on whether to deploy more U.S. troops in addition to the 68,000 already in Afghanistan, Moyers presented a montage of recorded conversations and his personal memories of President Lyndon Johnson’s decisions to escalate the war in Vietnam. He said:
“Our country wonders this weekend what is on President Obama’s mind. He is apparently about to bring months of deliberation to a close and answer General Stanley McChrystal’s request for more troops in Afghanistan. When he finally announces how many, why, and at what cost, he will most likely have defined his presidency, for the consequences will be far-reaching and unpredictable. As I read and listen and wait with all of you for answers, I have been thinking about the mind of another President – Lyndon B. Johnson. I was 30 years old, a White House assistant, working on politics and domestic policy. I watched and listened as LBJ made his fateful decisions about Vietnam... Barack Obama is not Lyndon Johnson, Afghanistan is not Vietnam and this is now, not then. The situation is different. But listen – and you will hear echoes and refrains that resonate today.”
The nation is divided about America’s mission in Afghanistan. In a new WASHINGTON POST – ABC News poll, 55% of respondents expressed confidence that President Obama will pick a strategy that will work, but 52% said that the war in Afghanistan has not been worth fighting given the costs versus the benefits.
What do you think?
Some time ago we said good bye to Duston who told us he would be going back to Kabul. So he went. Usually when incidents like the most recent Kabul bombing happen, one thinks of one's friends that could be there, in danger. And so I did as well, thinking he must be well anyway, most likely. Kabul is big (I thought). Not so. It is a small world after all. This is what came yesterday. fib
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Hibiscus Tea and Honey in Berlin
"Dear Friends,
At first, I should offer a quick explanation of this letter: I have not yet read any email replies you may have sent me since my last correspondence back around mid October or so. I am currently drinking Hibiscus Tea sweetened with a little honey in an Army Hospital in Berlin Germany. My Laptop Computer has not had internet for two weeks:
October 28th, 2009 began with a loud bang at exactly 6 AM Kabul time. Actually an explosion at the front gate to the Guesthouse where I was living. I don’t know if it was an RPG or Suicide Bomber, and will truly never know for a fact which one it was. The first explosion was followed by machine gun firing and then an RPG hit the front of the building. The Taleban killed the exterior gate residence guards, entered the front house and proceeded to kill as many UN Election Employees as possible before the Police arrived. A long and intense gun-battle ensued over the next hour and a half and the attackers were eventually killed around 7:30 AM. Some of my friends, and some employees, of the Guesthouse were also killed and many wounded during this incident.
I escaped physically unharmed within 90 seconds of the first sound of the attack.
The media incorrectly portrayed the building as the “UN Guesthouse” whereas technically it was a privately run guesthouse, and I referred to it in earlier email to you as the “Zoo”, because it had lots of animals and birds on the property. I do not know who survived other than I have a “story” of the massacre as I experienced it. I ended up with a large group of UN Election Employees who also survived as we hid together in the neighboring courtyard while the Taleban shot it out with the surviving guards, burned down the place and then shot it out again with the Police.
Around 7:40 AM , I was transferred by the Police to a temporary safe location, and then the Bank security man found me and I was taken to the big famous Hotel ( The Serena ) which is heavily guarded in downtown Kabul. Immediately after I arrived, I was standing in the Hotel Lobby , on the cell phone, calling the Germans who I work for, when a mortar round or RPG hit the Lobby. The glass exploded , and once again, I was not injured and everyone ran to the Hotel bunker to wait for the All Clear sign. The Hotel suffered nothing but broken glass and some jittered nerves, but for me, it was the second attack in less than two hours and I withdrew into my own little brain…..telling myself that no place was safe as it seemed like the terror was following me around that morning in Kabul.
Since then, I have stayed in German Army Hospitals except for the plane rides to Germany where I am now. I am receiving treatment for Psychological Trauma and am getting better quickly. I hope to be released to Outpatient within about 4 days. And then about a month more of Outpatient therapy and then final release back into the employment world when I will be able to totally navigate on my own. The goal is to prevent and reduce the long term possibility or impact of Post Traumatic Stress Disorder ( “PTSB”) which we all heard of with the Korean and Vietnam War Veterans and other traumatic incident survivors.
I shall not assign my survival that day to my training, skills, experience and quick thinking ( although I am told by many that it was a critical part of my actions and movement within the first minute of the attack ). I have been given yet another chance on the Planet by my Higher Power. I am no more “religious” today than I was a minute before 6 AM on October 28th; however I have grown substantially. My spirituality is stronger now than ever; and I am convinced that God has a Plan for me, I just need to follow the Steps and listen for His guidance on a daily basis.
Only once since then have I wanted or seriously thought of taking a drink, and I asked to be relieved of that notion, and it was granted. I take some light weight sleeping medication and hope to reduce the strength soon, then be totally free of it within two more weeks or so depending on what the Doctors say. I am receiving excellent medical care here in Germany, with three Doctors and a bevy of Nurses. I see a Trauma Specialist MD every other day and I am recuperating well.
My employment contracts ends in February so money is temporarily not a problem, and I have good insurance for the hospital expenses. So, for today, all I ask for is another chance to be free of my Weaknesses and Character Defects and look for the next path I am to take.
I totally and unconditionally TRUST.
Work the Steps. Turn it over to God. Clean House. Help Others.
With ALL my Love,
Duston"
As predicted, Barbara Lee D-CA had already signed the letter. I have this telepathic Rep.
How about yours? fib
ps. Honduras needs your opinion! Put your e-pen where your mind and heart is.
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Rep. Grijalva is asking fellow members of Congress to sign a letter to President Obama urging him to increase the pressure on the coup regime in Honduras.
Ask your Representative to sign Rep. Grijalva's letter »
Action Spotlight
Urge Your Rep to Sign Grijalva Letter for More US Pressure on Coup Regime in Honduras
Talks between President Zelaya and the coup regime in Honduras broke down over the coup regime's refusal to accept the international demand for President Zelaya's return. The U.S. has so far failed to sufficiently pressure the coup regime.
Rep. Raul Grijalva is circulating a letter to President Obama, calling on him to denounce the repression in Honduras by the coup regime, and to freeze U.S. assets and suspend U.S. visas of coup leaders. Signers of the letter include Reps. McGovern, Conyers, and Serrano.
Urge your Representative to sign the Grijalva letter calling for more U.S. pressure on the coup regime.
I have just thanked my Rep. Barbara Lee, CA. She is precious to have. I don't even have to call her. She knows what people want. fib
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57 progressive leaders stood up for a real public health insurance option. Sign the card to say thanks! Lynn Woolsey, Raul Grijalva, Carolyn Kilpatrick, Jerry Nadler, Phil Hare, Lucille Roybal-Allard, Keith Ellison, Earl Blumenauer, Mel Watt, Donna Edwards, John Olver, Dennis Kucinich, Laura Richardson, Maxine Waters, John Conyers, Judy Chu, Maurice Hinchey, Hank Johnson, Diane Watson, Jackie Speier, Bill Pascrell, Lloyd Doggett, Marcy Kaptur, Mazie Hirono, Bob Filner, Linda Sanchez, Marcia Fudge, Barbara Lee, Andre Carson, Sheila Jackson Lee, Michael Honda, Jim McDermott, William Lacy Clay, Jim McGovern, Yvette Clarke, Eric Massa, Chellie Pingree, Jesse Jackson, Jr., Elijah Cummings, Bennie Thompson, Gwen Moore, Donald Payne, Fortney "Pete" Stark, Ed Towns, Corrine Brown, Alcee Hastings, Nydia Valezquez, Luis Gutierrez, Grace Napolitano, Albio Sires, John Tierney, Mike Capuano, Chaka Fattah, Jose Serrano, Sam Farr, Bill Delahunt, and Eddie Bernice Johnson.
discussion and sharing of unexpectedly positive experience with the police by the public and particularly by minorities. This is because we believe that the existence of static stereotypes and mistrust between members of the public and the police may be a factor in creating its reality in a few cases. We do not believe that cases of abuse no longer exist but a continued acknowedgement of the positive and definite improvement between our relationships can only be a positive thing for law abiding citizens.
Obviously, the recent events in the Gates-Crowley case contributed to this site. However, I myself just noticed that a slightly greater number of my interaction with the police in the past two years has been positive and contrasts significantly with about a decade ago. If anyone has a similar observation, or a positive experience to recount please go ahead or simply share your thoughts on existing postings. Here's my summary over the past two years...
maddowVery proud to have been on the jury that honored this 6 min. film at Tribeca: http://tinyurl.com/cg487c Very very very.about 2 hours ago
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At the Summit of Americas Hugo Chavez came with a gift for President Obama: The Spanish original signed by himself of this book:
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Receive a 20% discount
ISBN: 0-85345-991-6 $18.00 paper ISBN: 0-85345-990-8 $34.00 cloth 360 pp.
also by Eduardo Galeano: DAYS AND NIGHTS OF LOVE AND WAR
Five Centuries of the Pillage of a Continent by Eduardo Galeano Translated by Cedric Belfrage New Introduction by Isabel Allende
“A superbly written, excellently translated, and powerfully persuasive expose which all students of Latin American and U.S. history must read.” —CHOICE, American Library Association
“I cannot recommend this book highly enough. Galeano’s vision is unswerving, surgical and yet immensely generous and humane. This book, written more than thirty years ago, contains profound lessons for contemporary [? Americas]. Eduardo Galeano ought to be a household name in this country.” —Arundhati Roy
Since its U.S. debut a quarter-century ago, this brilliant text has set a new standard for historical scholarship of Latin America. It is also an outstanding political economy, a social and cultural narrative of the highest quality, and perhaps the finest description of primitive capital accumulation since Marx.
Rather than chronology, geography, or political successions, Eduardo Galeano has organized the various facets of Latin American history according to the patterns of five centuries of exploitation. Thus he is concerned with gold and silver, cacao and cotton, rubber and coffee, fruit, hides and wool, petroleum, iron, nickel, manganese, copper, aluminum ore, nitrates, and tin. These are the veins which he traces through the body of the entire continent, up to the Rio Grande and throughout the Caribbean, and all the way to their open ends where they empty into the coffers of wealth in the United States and Europe.
Weaving fact and imagery into a rich tapestry, Galeano fuses scientific analysis with the passions of a plundered and suffering people. An immense gathering of materials is framed with a vigorous style that never falters in its command of themes. All readers interested in great historical, economic, political, and social writing will find a singular analytical achievement, and an overwhelming narrative that makes history speak, unforgettably.
This classic is now further honored by Isabel Allende's inspiring introduction. Universally recognized as one of the most important writers of our time, Allende once again contributes her talents to literature, to political principles, and to enlightenment.
About the Author EDUARDO GALEANO is the author of Days and Nights of Love and War (winner of the 1978 Casa de las Americas Prize), The Book of Embraces, and the highly acclaimed Memory of Fire trilogy. ISABEL ALLENDE is the author of several bestselling titles including In the House of the Spirits; The Infinite Plan, and Paula.
If you have any technical comments or suggestions, about this web site, please send e-mail to Our Webmaster.
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Eduardo Hughes Galeano, Wiki:
http://en.wikipedia.org/wiki/Eduardo_Galeano
some quotes from Galeano:
http://en.wikiquote.org/wiki/Eduardo_Galeano
FOR IMMEDIATE RELEASE April 7, 2009 1:37 PM
CONTACT: Media MattersBrandon Hersh (202) 471-3205 bhersh@mediamatters.org
"Media conservatives have made a sport of vilifying ACORN and immigrants. In lieu of engaging in substantive policy debates, they simply point fingers at the poor and disenfranchised. It is both dishonest and irresponsible," said Media Matters spokesperson Erikka Knuti.
Media Matters' study documents numerous examples of media conservatives returning to their favorite scapegoats, including:
EXPANSION OF THE STATE CHILDREN'S HEALTH INSURANCE PROGRAM
In reporting on or discussing the 2009 expansion of the State Children's Health Insurance Program (SCHIP), many in the media asserted or uncritically repeated the claim that the bill would provide health benefits to undocumented immigrants. In fact, the legislation includes a citizenship verification process and explicitly states that "[n]othing in this Act allows Federal payment for individuals who are not lawfully residing in the United States."
2008 FINANCIAL CRISIS
Several conservative media figures have claimed or suggested that excessive lending to undocumented immigrants was responsible for the financial crisis, but have failed to cite any credible evidence to support that claim. They also advanced the idea that ACORN contributed to the housing crisis by "bullying" banks into lending irresponsibly to minorities, and in many instances, asserted that the group used the Community Reinvestment Act (CRA) to intimidate banks into making risky loans. But as Media Matters has documented, the assertion that the CRA had anything to do with the financial crisis has been widely discredited.
2009 AMERICAN RECOVERY AND REINVESTMENT ACT
In their coverage of the American Recovery and Reinvestment Act, many in the media falsely asserted or uncritically reported accusations that the legislation would provide tax credits to undocumented immigrants. In fact, the bill limited the Making Work Pay tax credit to individuals with Social Security numbers, thereby excluding undocumented immigrants. Numerous media figures have also claimed that ACORN would benefit from the legislation -- to the tune of $4.19 billion. In fact, the act does not mention ACORN or otherwise single it out for funding; ACORN itself has said that it is ineligible for the funds. The false claim was based on a misrepresentation of a provision in the House version of the bill that would have appropriated $4.19 billion "for neighborhood stabilization activities related to emergency assistance for the redevelopment of abandoned and foreclosed homes authorized under division B, title III of the Housing and Economic Recovery Act of 2008."
U.S. CENSUS
Reporting on the 2010 U.S. Census, many in the media have focused on ACORN's reported role as a national partner with the Census Bureau in its effort to recruit more than 1 million temporary workers to knock on doors and baselessly suggested that the group will fraudulently influence the count in favor of Democrats or that the Obama administration is politicizing the process. In fact, ACORN is reportedly one of "more than 250" groups that are partnering with the Census Bureau to recruit workers.
2008-2009 MINNESOTA SENATE RECOUNT
In covering the Minnesota Senate recount, many in the media seized on a Republican talking point that Minnesota Secretary of State Mark Ritchie has "ties" to ACORN, in many instances using it to suggest that he would be biased toward Democratic challenger Al Franken over Republican incumbent Norm Coleman.
Full Research Item HERE.
Media Matters for America is a Web-based, not-for-profit, 501(c)(3) progressive research and information center dedicated to comprehensively monitoring, analyzing, and correcting conservative misinformation in the U.S. media.
MR. PRESIDENT!
YOU CANNOT FIX THE ECONOMY WITHOUT FIXING THE DRUGS. AND I AIN'T TALKING ONLY POT.
FIB
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Why We Must Fix Our Prisons
By Senator Jim Webb
Publication Date: 03/29/2009
Inmates at a facility in California, a state that spent almost $10 billion on corrections last year. America's criminal justice system has deteriorated to the point that it is a national disgrace. Its irregularities and inequities cut against the notion that we are a society founded on fundamental fairness. Our failure to address this problem has caused the nation's prisons to burst their seams with massive overcrowding, even as our neighborhoods have become more dangerous. We are wasting billions of dollars and diminishing millions of lives. We need to fix the system. Doing so will require a major nationwide recalculation of who goes to prison and for how long and of how we address the long-term consequences of incarceration. Twenty-five years ago, I went to Japan on assignment for PARADE to write a story on that country's prison system. In 1984, Japan had a population half the size of ours and was incarcerating 40,000 sentenced offenders, compared with 580,000 in the United States. As shocking as that disparity was, the difference between the countries now is even more astounding--and profoundly disturbing. Since then, Japan's prison population has not quite doubled to 71,000, while ours has quadrupled to 2.3 million. The United States has by far the world's highest incarceration rate. With 5% of the world's population, our country now houses nearly 25% of the world's reported prisoners. We currently incarcerate 756 inmates per 100,000 residents, a rate nearly five times the average worldwide of 158 for every 100,000. In addition, more than 5 million people who recently left jail remain under "correctional supervision," which includes parole, probation, and other community sanctions. All told, about one in every 31 adults in the United States is in prison, in jail, or on supervised release. This all comes at a very high price to taxpayers: Local, state, and federal spending on corrections adds up to about $68 billion a year. How would you change the prison system? » Our overcrowded, ill-managed prison systems are places of violence, physical abuse, and hate, making them breeding grounds that perpetuate and magnify the same types of behavior we purport to fear. Post-incarceration re-entry programs are haphazard or, in some places, nonexistent, making it more difficult for former offenders who wish to overcome the stigma of having done prison time and become full, contributing members of society. And, in the face of the movement toward mass incarceration, law-enforcement officials in many parts of the U.S. have been overwhelmed and unable to address a dangerous wave of organized, frequently violent gang activity, much of it run by leaders who are based in other countries. With so many of our citizens in prison compared with the rest of the world, there are only two possibilities: Either we are home to the most evil people on earth or we are doing something different--and vastly counterproductive. Obviously, the answer is the latter. Over the past two decades, we have been incarcerating more and more people for nonviolent crimes and for acts that are driven by mental illness or drug dependence. The U.S. Department of Justice estimates that 16% of the adult inmates in American prisons and jails--which means more than 350,000 of those locked up--suffer from mental illness, and the percentage in juvenile custody is even higher. Our correctional institutions are also heavily populated by the "criminally ill," including inmates who suffer from HIV/AIDS, tuberculosis, and hepatitis. 1 of 2
paradecom202:http://www.parade.com/news/2009/03/why-we-must-fix-our-prisons.html; Buzz up!
Home > Blogs > deepak.chopra's blog > View Content What to Do About "Mad as Hell"
By deepak.chopra Created 03/17/2009 - 12:55
"People are incredibly angry these days. The governing class in America fears a "populist backlash," as the New York Times dubbed it. They are worried that if ordinary Americans get mad enough, they will derail recovery plans. But this isn't only a Joe Six-Pack phenomenon. Anyone with a decent sense of morality knows that the bad guys are being rewarded. Fat cats earning bonuses for demolishing the economy seem like thieves being paid to rob banks. Only in this case the bankers were the ones who robbed the bank. Morality is founded upon taking responsibility. In the normal course of things, wrongdoers don't get to celebrate over champagne for ruining other people's lives. Much less does the ruined party have to pay taxes toward buying the champagne. But the financial elite shows no sign of contrition. Top executives at some companies like General Motors and AIG have renounced or greatly reduced their bonuses. Still, countless bonuses are being paid out at lower levels of these companies. Rationally, for AIG to hand out $165 million in bonuses is less than a thousandth of the bailout money they received from the government. But it's still an outrage. Anger isn't rational, and neither is morality. Morality is intuitive. You know in your bones what's right and what's wrong. Yet morality is also learned, and it has a huge social component. No two people and no two cultures agree all the time on touchy moral issues. Relativism has to stop somewhere, however. Bernie Madoff's last-minute contrition doesn't remotely ease his massive immorality. Wall Street types sneaking their bonuses in under the wire are part of a general moral collapse. The social element counts for a lot in this case, because the ethos of Wall Street gleefully permitted runaway greed, reckless disregard of other people's risks, and general anarchy in the pursuit of profits. In the crude lingo of trading, customers were mooks who existed for one purpose only: to be promoted out of their hard-earned money. This is a roundabout way of saying that populist anger is moral and right. It's not simply a glitch that needs to be smoothed out. A system of morality cannot exist without accountability. In this case, Wall Street needs to be pulled back into the social contract. Traders pride themselves on being gunslingers, but when there are too many gunslingers, they outnumber the law. That is still the prevalent situation. (The fired-up CNBC reporter who ranted against Obama's plan to rescue distressed homeowners turned to traders on the floor and screamed, "Any of you guys want to bail out your neighbors?" The frightening part wasn't the arrant selfishness on display. The frightening part was that he and his kind feel righteous.) The financial elite don't want to change their ways. After grudgingly accepting a slap on the wrist, they fully intend to go back to business as usual. What would it take to change a whole subculture that has escaped all ethical boundaries? The Obama administration needs to face this question head on. Sad to say, the brilliant minds that were recruited to make up the President's economic team all come from the same financial elite that wants to escape responsibility. No reckless CEOs have been fired. No ill-gotten gains have been confiscated (except for Madoff's). No financial "truth commissions" are in the offing. It's a blessed turn of events that adults are now in charge of the government. Officials from Obama on down offer one sensible, confident policy after another. The change from the feckless Bushies is like night and day. But being an adult has its limits, and we are in danger that technocrats will solve the meltdown with bland expertise. The human element needs to count for more, much more. I'm not talking about anger run amok and show trials to destroy scapegoats. But people need to have their anger addressed straight on, not sideways, and issues of healing, justice, and truth-telling must be given high priority. Being irrational, anger doesn't compute for techies. It's not a variable they can punch into an algorithm. No matter. The claims of morality hold a society together. There will be no trust until we have somebody to trust in, and whoever that may be, they must rise to moral leadership on the order of a Lincoln or FDR. The main problem isn't economic collapse, it's a warping of values -- not just on Wall Street but among right wingers, militarists, rigid Christian fundamentalists, and the apathetic majority. Obama gives every appearance of being immune to this warping. Now he needs to straighten out millions of other people who feel betrayed and abandoned. "
Published in the Washington Post [1]
Arianna appeared on "Larry King Live" tonight to discuss the national outrage over the bonuses distributed by AIG and the Obama administration's handling of the situation. Co-panelists included Ben Stein, GOP Congresswoman Michele Bachmann and Democratic Congresswoman Jackie Speier.
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http://www.huffingtonpost.com/huff-tv/arianna-discusses-outrage_b_176130.html
Arianna says Geitner and Summers must go, the sooner the better!
"Banks and financial systems are inherently fragile, beset by a natural tendency to careen from fear to greed and back. We're deep in the fear part of the cycle right now. So what should government do?"...
Find more in the links below.
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AIG is to date the most expensive corporate bailout in American history, requiring $180 billion of government funds. But it may soon have competition. Last week, mortgage giant Freddie Mac said that it had lost $50 billion in 2008 alone. A look at the company's books suggests the government will have to spend at least triple that much to save the financial firm from collapse. If the housing market worsens, the tab could even be larger.
"Freddie's portfolio of [mortgage] insurance is more risky than the market was led to believe," says Paul Miller, an analysts at FBR Capital Markets. Sister company Fannie Mae lost even more last year, with $58.7 billion of red ink. But Fannie was better capitalized than Freddie going into the credit crunch. So even though Freddie by many measures is smaller than Fannie, the problems at Freddie will probably end up costing more.
Citigroup and other banks have also lost money, and will need more capital to survive. But in those cases it's not clear who will take the hit - shareholders, bondholders or the government. In the case of AIG, Freddie Mac and Fannie Mae, however, there is no question where the money will come from. Freddie and Fannie were taken over by the government and put into conservatorship last fall. AIG is now 80% owned by the government. The losses at those companies are now taxpayer losses. (See 25 people to blame for the financial crisis.)
And like AIG, Freddie has had to come back to the government a number of times with cup in hand. The mortgage giant has already received $14 billion in government aid. After the fourth quarter loss of $24 billion, the company said it needs an additional $31 billion from the government to keep the lights on.
Freddie's business, which in part comes from a government mandate, is insuring mortgages. So when borrowers lose their jobs, as many now are, Freddie is going to lose money. But only a quarter of Freddie's red ink, or about $13 billion, comes from mortgage insurance woes. The firm took a larger hit from its investment in mortgage-backed securities tied to subprime, adjustable-rate or jumbo mortgages. By law, Freddie isn't allowed to insure against losses on those types of mortgages, in part because they are riskier. But it bought securities tied to those home loans anyway - which it is allowed to do - in order to capture the higher rates of return that those mortgage bonds offered. Unfortunately, the bets didn't pay off. Freddie lost $16 billion on those investments. (See pictures of Americans in their homes.)
Another bet that didn't pay off for Freddie was on interest rates. The firm's managers bought derivatives that would pay out if interest rates rose. Instead, a global financial meltdown has caused interest rates to plummet. That resulted is a $15 billion loss for Freddie from its hedges.
Freddie lost another $1 billion on bonds tied to short-term loans made to Lehman Brothers. Like Lehman, that investment went belly up. Then there are all the houses it now has to repossess as people stop paying their mortgages. The company now owns about 30,000 homes. Maintaining these houses cost about $3,300 a month each, and that comes on top of the loan loss, which is typically about one-third of the size of the mortgage. Wave goodbye to another billion.
When will the red ink at Freddie stop? It's hard to say. In its most recent annual report, the company said that if it had to mark all of its assets to the price similar bonds are trading for in the market, the company's net worth would sink by another $65 billion. But Freddie's bottom line woes may run deeper even than that. Freddie has $38 billion in losses it has yet to acknowledge in its investment portfolio. The firm also has additional $48 billion in non-performing loans that it either holds or has guaranteed against. In a painful stroke of irony, there is a $15.4 billion line item on the asset side of Freddie's balance sheet for deferred taxes. That means Freddie is still hoping to claim $15 billion in write-offs against future profits. But since Freddie continues to lose money, and because it is now part of the government, the likelihood that the company will have to pay taxes anytime soon is probably nil. Add all those items up, and it becomes apparent that the government will likely spend more than $100 billion in additional funds cleaning up the mess at Freddie.
"The losses at Freddie show the pressure the banking system as a whole is under," says Fred Cannon, chief equity strategist at Keefe, Bruyette & Woods. "Freddie is going to need more capital, but they are not alone."
See pictures of TIME's Wall Street covers.
See pictures of the global financial crisis.
View this article on Time.com
Related articles on Time.com:
Sorry for the totally unrelated topic. This is an appeal to the community.
I run a small non-profit community organizing group that we started after the Presidential election. The project was inspired by our grassroots participation in electing President Obama. Now, we've decided to have our own website that would help us connect more effectively and I specifically desire the social networking features on MyBO (Groups, Friends, Messages, Blog, Events, Fundraising).
There are a number of public social networking websites out there, but I'm not interested in relying entirely on them. This is quite ambitious, considering we're a small group with a small budget. But I've seen enough "impossible" things become possible.
If there are any programmers in the community or if anyone knows any programmers out there that can do a website with the above features and user-friendliness, pease leave a comment on my blog.
Thanks for your help.
Regulatory solutions for CDS:* A company cannot be covered more than 80% by CDS (as opposed to 500%)* Full disclosure for all publicly traded companies to investors (and the CEO)* If a CDS is not used as legitimate insurance to hedge against failure (i.e. a naked CDS), it cannot be bought using leveraged assets by a FDIC insured entity. It's the government's money you're risking.* If any ratings AAA for a company which is gambling on naked CDS, have the SEC prosecute
Now why 80%? It's worth noting this dilemma existed before the stock market. A boxer might be paid $100 to win a fight, but $500 by bookies to throw a fight. So actually, the boxer is better off losing and collecting the bets!
80% is about the limit to make sure it is at least better not to fail. We do have to balance between stopping ridiculous 500% coverages (i.e 5 fire insurances on one house, where it's better to burn down the house), with the legitimate uses of a CDS as insurance (how novel!). In any case, this kills the vast majority of the problem because there is a huge gap between the risks of 80% and 500%.
Background info on CDSWith a credit default swap you can own insurance on someone else's property. More significantly, you can take out multiple insurances on the same property. So you can have five parties all hoping for your house to burn down, because they will be paid on that gamble!
Traditional insurance is legitimate - health insurance for example pays out plenty when you get real sick, and everybody pays into the premium to cover the one person who is unlucky enough to need hospitalization. CDS on the other hand are pure gambles on someone else's fortunes. Several people are betting on (and hoping for) one individual to get sick.
Someone else had an excellent explanation using a Fantasy Football analogy:It's like a fantasy football league or fantasy finance. For every MBS, there was a CDS that bet on that security. Instead of there only being one Peyton Manning allowed, there could be as many as you could sell.That's why the US RMBS market is 10 trillion, but the CDS market tied to it is 28 trillion. There are 18 trillion fantasy CDS out there that aren't tied to the performance of a real mortgage. It's just paper. That's why the banks, pension funds, states, insurance companies and everyone else are failing. And the Federal government doesn't have enough money to plug the hole and they have yet to even admit the problem.
So you see, everybody could be betting on Peyton Manning, even though there is only one in real life. And for that reason, a market can be filled with trillions of dollars of bets by companies who don't have that much money to begin with. These are "naked bets" as some would say.
The only legitimate use of a CDS is to insure yourself. Or, perhaps to gamble with your own money.
Lax regulations allowed companies to hide these liabilities from even their own CEOs and investors.
Excerpts:"Top General Motors Corp. executives are more open to a speedy bankruptcy reorganization financed by the government""a reversal from GM's position late last year, when it sought a federal bailout.""the disclosure Thursday that GM's auditor has raised substantial doubt about the car maker's ability to keep going" (and recommended chaper 11 just like myself)"A bankruptcy of any sort could be far more effective than the type of out-of-court restructuring GM is undergoing" (no duh, politicians are incompetent at these decisions)"[bankruptcy] could circumvent state franchise laws that have long protected its dealers from GM's restructuring knife"Other points paraphrased* GM's executives conceded their primary objections to bankruptcy as unfounded, after "months of research"* Bankruptcy is one effective way to reduce GM's debt by effectively forgiving some of it in bankruptcy court (all using existing laws)* GM is still hoping for prepackaged bankruptcy (dictated mainly by GM), than chapter 11 (dictated by a judge). The reason is GM is still not willing to make certain tough decisions.Let's review three of the options GM has. First, GM can go through out-of-court restructuring, which is what they're still holding out hope for. While this could easily work for a healthier distressed company like Toyota or Ford, or a company willing to make deeper consessions, it will fail for GM. The basic reason why it will fail for GM is that it is cutting costs far slower than it is losing income, and this gap is widening at a staggering rate every month. They admitted today that they are about to go bankrupt again without another bailout. Of course, it doesn't help that they were already teetering before the credit crisis, and did nothing about it for years unlike Ford.Even GM's auditor's agree with me that GM should file chapter 11 bankruptcy. Why is that? First, the cost of bailing out GM at the current rate is at least $60 Billion a year, even assuming they make all the cuts they legally can. This is a generous estimate assuming GM's own financial statements haven't been cooked. Now all of the cuts GM is making come at a cost to GM's revenue, its employees, and business partners. Its investors may choose to write down some debt, but only voluntarily in a mutual agreement of compromise.By comparison, bankruptcy opens up the possiblility of seriously writing down debt and charging the costs to investors. Unlike all the other proposals that have been made by politicians, this is already the law. It's established and legitimate, and isn't theft (imagine that!). We don't invent some new law for one company or change the rules. The rules have always been that if you invest in a company that fails, you take a loss. If that company goes into bankruptcy, you will lose some or all of it. That's the risk and reward of investment and most importantly investors knew about bankruptcy when they invested so it doesn't shake market confidence. A judge decides this through due process with the utmost attention to legality and fairness.Now a compromise form of bankruptcy is prepackaged bankruptcy. GM has allowed that they may have to take that route, because they've finally conceded that out-of-court will probably fail. What a surprise. Now prepackaged bankruptcy might work for GM, but I'm highly skeptical because the one requirement is that GM and all parties agree to deep and realistic concessions. So far GM has lied, mismanaged, and outright cooked their financial forecasts to show they need far less concessions than they really need. It's not even close, and the proof is they're asking for another bailout and a new plan months after their first. Some of the other parties are even less realistic in what they think they need to concede.For those reason alone, prepackaged bankruptcy might do some good, but will lead to a second bankruptcy. When you think of it that way, maybe that's a great idea. Then GM and their parties can blame everybody else for their second failure, except themselves. Nobody leaves feeling guilty and we can all have a good laugh together five years later. Unfortunately, the main cost in that scenario is all the money GM will burn in the interim, and the fact that the second bankruptcy will shrink GM to the smallest size possible under all scenarios and end up cost more tax dollars than every other plan.Why are politicians afraid of chapter 11? The short answer is we have an election every 2 years, so short term solutions of delaying the problem are highly valued. Compared to prepackaged bankruptcy, chapter 11 will in the very short term cost more in the form of loans and court costs. The main reason for that is because prepackaged bankruptcy defers and hides true losses until later, which are always going to exceed chapter 11 by definition of containing fewer real concessions. And since prepackaged bankruptcy is a wishful thinking form of compromise, it won't solve half the deep problems possible with chapter 11. This is because Chapter 11 is the only action which keeps GM alive at the same time that it forces GM to be profitable, and it forces debt holders to write down as much as necessary! Prepackaged bankruptcy actually won't - concessions are voluntary and it will simply delay until a second failure.By analogy, it's worth noting that chapter 11 may cost more jobs in the very short term, and save a lot more jobs in the long term. The Unions won't like that, because their duty is not to save jobs in the long term. Their duty is to look busy like they're saving jobs, which always means saving jobs in the short term. I get it.The auditors also had their say, and they agree chapter 11 is the best and possibly only eventual route. It's worth noting the auditors are the only third party which is objective, has access to all of GM's inner data, and is professional trained to make this very assessment.Bottom line, chapter 11 is short term pain for longterm gain. Prepackaged bankruptcy is a first bankruptcy, followed by another. And even GM concedes out-of-court restructuring isn't working, and they have a conflict of interest in what route we take. Listen to the auditors and the experts, bankruptcy is necessary and the longer you wait the harder the cuts will be.
Now in the case that we're going to throw billions at them again, at least make them agree in writing that this is the last time and it's up to them or they've failed. Then next time, Obama can pretend to be real sorry and say to GM, Chrysler, and everyone else (AIG cough): "Aw shucks, I know you guys have it bad and I'd love to help but like we agreed last time we've bailed you out twice and it has to be up to you to turn yourself around." With it in writing, this won't even have to be a "tough decision".
If saving the industry was our priority, the best course is Chapter 11 bankruptcy. GM and Chrysler would stay in business and actually be more likely to survive from that point on compared to now. The longer they wait for bankruptcy, the harder it will be to turn them around through any means.
It's worth noting that GM and Chrysler's decline is accelerating.
Right now, the two are bleeding money and idling, unable to make necessary changes that would be trivially easy under Chapter 11. For example GM is bleeding money because of too many dealerships (i.e. salesmen) but can't scale them back for a number of reasons including state franchising laws. Chrysler is in worse shape than GM, and it's either bankruptcy or disappearing off the face of this earth. I prefer the former.
Of course, politicians and people who aren't familiar with bankruptcy hate the B word, especially because it means GM and Chrysler can more easily close unprofitable businesses (i.e. some job losses) and cut through red tape in state laws (i.e. some loss of state income). There's plenty of other objections hardcore Democrats will have too. Of course, the biggest factor stopping chapter 11 is we have to admit GM and Chrysler have failed - the same dilemma with Iraq!
But that's okay since it will happen anyways. The only thing politicians might influence is whether GM and Chrysler go bankrupt now, or later when it may be too late. So far they've been influencing for the latter.
Now about the stimulus, even Obama knows 3 million is not accurate accounting. This is a marketing slogan that tries to count almost everyone who gets paid anything as a job saved. Every President does this, and I understand where he's coming from.
For that same reason, 1 million jobs are not being saved by the auto bailout. In fact, jobs are being permanently lost because we're letting GM and Chrysler bleed money and ambition rather than save them through bankruptcy. We're only holding out for the false hope that they won't need bankruptcy at all. That's the only scenario where even a single job would be saved by periodic bailouts.
Now chapter 11 does cost billions of dollars in backing, but it's ironically cheaper than bailouts every three to six months. I predicted at the end of last year that GM and Chrysler would be back every three to six months for more money, and so far that's been true. Over the years if we keep handing them money, the bill will come out to at least $100 Billion because of their massive debt and money burn.
Now the fact that we may have to go chapter 11 is certainly awful. But a lot better than the notion of handing out money until it runs out and these two companies are beyond hope.
This is a "tough decision", but what would you choose? Without bankruptcy these two companies are not going to survive the Obama administration anyways.
This is a graph of the current bear market vs. the First Great Depression, 73 oil crash, Dot-Com crash:
http://dshort.com/charts/bears/four-bears-large.gif
As we currently stand, we are at the same level as the First Great Depression was 16 1/2 months into its crash - a drop of 55%. Notice how at exactly this time during the FGD, the stock market rallied by 10% (5% relative to peak). Then it continued to crash for the the next 17 months, making it a 34 month stock market crash. These peaks are known as false rallies and don't change the final result.
People have plenty of money to invest. They are choosing to uninvest and there is nothing anyone can do about it because this is a bubble pop. What the government could do, is burn money trying. Good luck!
Speaking of burning money, I noted just before the election last year that AIG, GM, and Chrysler will be back for billions more. To update that, I repeat that prediction for 3-6 months from now if the government follows through with their demands. They'll be asking for money a third time. That is why I urge Obama not to follow through, because with two handouts he'll end up looking worse than Bush and have no excuse next time. I'm hopeful but doubtful.
Another easy prediction is that Citi and Bank of America will be exposed as insolvent within the next few months. They'll either get new infusions turning them into zombie banks (insolvent banks with de facto government backing), be seized by the FDIC, or be bought up by another bank in a government brokered transaction. BAC's biggest mistake was buying Countrywide, which was worth at least negative $30 Billion. Notice that Bank of America's market cap is $18 Billion and dropping about $3 Billion a day.
All I ask is that Obama give Warren Buffet a call and get his opinion on the future. He'll simply tell Obama exactly what he already wrote in his recent address, because the longterm solutions are pretty clear. You cannot spend your way out of this mess, and the worst thing you can do is get failed banks addicted to bailouts.
The original graphs are not meant to predict the S&P future. Rather, they refute the significance of a 2% rally like today, or even a 10% or 20% rally next month. The comparison to the FGD is only to emphasize the severity of declines for those who aren't aware.
You may not be aware, but last week billions in Citi preferred share were converted into common shares at a steep discount. That makes it a bailout. When you give someone a multi-billion dollar loan and then forgive most of it months later, that's free money. This is now a realized loss, not a paper loss or a loan we might recoup. I know this is a recent development, so I understand many people may not be aware of this.
AIG is insolvent, and their chance of further default exceeds the yield we've charged them. That's also a bailout, though at a smaller margin. Recent developments show they will default about every three to six months without a new infusion of cash.
Telling banks they will be nationalized if they don't turn around isn't a threat. That's like saying if you don't pay your rent we'll replace your landlord.
TARP is a reward for failure as Buffet's letter spelled out. More significantly, if used longterm (as opposed to short term), it undermines the economy by making all other businesses less profitable or unprofitable. You may disagree with Buffet's conventional wisdom, but this is plainly obvious to fiscal conservatives. What matters is if this is a one time short term solution, or long term policy. Bush was lucky he didn't have to stick around for that test.
For a laymen example, right before Wamu failed they were offering CDs at 5% when everyone else offered 4% and under. They knew FDIC would bail them out if they spent their way to death, so they weren't even risking their own money anymore. As a result, they could outcompete all other banks for a brief period of time. That was just a 1% spread over a few months on one narrow market. Imagine a 2% or higher spread over years by several mega banks against the rest of the economy. They're borrowing at about .5% right now, can you compete with that?
Bottom line, the solution is simple. To save face, Obama can pretend to be real sorry and say to AIG, GM, Chrysler "Aw shucks, I know you guys have it bad and I'd love to help but like we agreed last time we've bailed you out twice and it has to be up to you to turn yourself around." If we're going to throw billions at them again, at least make them agree in writing that this is the last time and it's up to them or they've failed. But Obama has shown he's not yet ready to make "tough decisions", maybe later. I can't blame him.
Obama has done so much right in so little time. The economy however is a giant elephant we're still working on, until the day we make "tough decisions". I'm sure over time Obama will recognize what isn't working, and that's why we voted for him instead of "stay the course" McCain.
