Undernews For September 29, 2008

28 SEP 2008

WORD

Hell, Vance, I didn't want to be governor; I just wanted to be elected governor -- Indiana Governor Brannigan to Sen. Vance Hartke

SWAMPOODLE REPORT: WHERE WILL THE MONEY GO?

Sam Smith

In Washington, for officials and media alike, numbers are treated like adjectives - created, inflated or diminished to serve the purpose of the moment. So instead of saying "awesome," one declares "$700 billion," as confirmed by the Treasury official who admitted to Forbes that the figure had been pulled out of the air.

Everyone just says it's a crisis and goes about their business resolving it with the same disinterest in solid information that got them into the mess in the first place.

Having been taught by Miss Darnell in high school that you can't add apples and pianos, I have been looking futilely for some hint of a budget for the $700 billion, some sign that the hard working negotiators had actually seen some hard spreadsheets and what was on them, some moderately detailed information on who will get the money and what it will be used for. It's what simpler folk call a budget.

I'm not questioning the existence of the crisis, only it's shape. For example, it is widely assumed that housing foreclosures are the central problem. Good, let's see the figures. How much of the $700 billion will go to cover bad housing loans and how much will go for things such as losses that multi-millionaire speculators experienced in wild business ventures or sneaky fiscal manipulations? How much is funny money, created out of leveraging by hedge funds and others? How much of the loss involves foreign speculators or foreign investments by American speculators?

Finally, how much involves the fiscal cleansing of criminal cash, such as from an illegal drug industry estimated to be as large as legal pharmaceutical trade? Bear in mind, for example, that last year the Coast Guard seized nearly $5 billion worth of cocaine. Yet, together, all of law enforcement grabs but a small percentage of the drugs that are out there, the rest generating huge amounts of cash yearning to be laundered.

Now let's take a closer look at those housing foreclosures. Consider this tale of a home's woe from the Washington Post:

"The most recent owner, Phyllis High Jones, refinanced the house through Countrywide Home Loans in 2006, taking out a $208,000 mortgage that would gradually inflate to $226,000. That same year, Fannie Mae bought the loan from Countrywide. Then the housing market collapsed in Prince William County. Jones defaulted this year. The townhouse went up for auction, but there were no takers. Fannie Mae had no choice but to become the buyer of record -- sale price $226,000. This summer, Fannie Mae tried to sell the townhouse for $149,000. Still no reasonable offers. The price has now been lowered to $69,900."

By current bookkeeping, that is a $226,000 loss added to the federal books. But did it have to be? Unless she was trying to sell her home, the fact that the housing market collapsed doesn't explain Jones' default. More likely the increase in the mortgage and/or some personal problems made it impossible for her to cover it. Thus what appears to be a $266,000 loss may in reality only have been one as small as $18,000 (the change in her mortgage) or the $266,000 minus whatever she still able to pay.

Instead of buying the mortgage for $226,000, Fannnie Mae could have become a passive equity partner with Jones in the amount of whatever Jones couldn't handled. Let's say Jones could have supported all but $69,900 of her mortgage; Fannie Mae would assume that portion. Today, Jones would still have her house, Fannie Mae would have saved itself $156,100 plus whatever profit it makes on its equity when the house is sold down the road, and there would be no fire sale going on - lowering other house prices in the neighborhood.

Multiply this approach by the 54,000 foreclosed homes Fannnie Mae had last June, and the national story changes dramatically.

But Washington doesn't deal with numbers that way. Here are a few examples of how numbers are really handled in the capital, with one of the most important facts being that you probably rightly don't recall the media making much of them.

For example, this from the Christian Science Monitor last April:

|||||| The Pentagon has gone hundreds of billions of dollars over budget in recent years on key weapons systems, including aircraft, ships, and satellite, said a government audit. The Government Accountability Office said for the sixth year in a row that the Pentagon had significantly gone over budget, but according to a report presented to Congress this week, the problem is getting worse.

The Washington Post reports: 'The Government Accountability Office found that 95 major systems have exceeded their original budgets by a total of $295 billion, bringing their total cost to $1.6 trillion, and are delivered almost two years late on average. . . Auditors said the Defense Department showed few signs of improvement since the GAO began issuing its annual assessments of selected weapons systems six years ago.

"Every dollar spent inefficiently in developing and procuring weapon systems is less money available for many other internal and external budget priorities – such as the global war on terror and growing entitlement programs (such as social security)," Gene Dodaro, the GAO's acting comptroller general, said in the report." ||||||

$1.6 trillion - double the amount of the current proposed bailout - and it's one day's news in a few papers and then forgotten.

And it's not a new problem. Back in 2002, CBS reported:

|||||||| According to some estimates we cannot track $2.3 trillion in transactions," [Defense Secretary] Rumsfeld admitted. $2.3 trillion - that's $8,000 for every man, woman and child in America. To understand how the Pentagon can lose track of trillions, consider the case of one military accountant who tried to find out what happened to a mere $300 million.

"We know it's gone. But we don't know what they spent it on," said Jim Minnery, Defense Finance and Accounting Service.

Minnery, a former Marine turned whistle-blower, is risking his job by speaking out for the first time about the millions he noticed were missing from one defense agency's balance sheets. Minnery tried to follow the money trail, even crisscrossing the country looking for records.

"The director looked at me and said 'Why do you care about this stuff?' It took me aback, you know? My supervisor asking me why I care about doing a good job," said Minnery.

He was reassigned and says officials then covered up the problem by just writing it off.

Twenty years ago, Department of Defense Analyst Franklin C. Spinney made headlines exposing what he calls the 'accounting games.' He's still there, and although he does not speak for the Pentagon, he believes the problem has gotten worse. 'Those numbers are pie in the sky. The books are cooked routinely year after year,' he said. |||||||||

Closer to the topic at hand, you probably also didn't know that $59 billion (twice what is expected to be needed to bail out Fannie Mae) couldn't even be accounted for when Andrew Cuomo left as head of Housing & Urban Development in 2001. Said a spokesman for the HUD inspector general: "There is no audit of the financial statements for 1999. The department said they decided not to reissue any of the stuff we mentioned that was problematic - they’re not going to give us what we went through. They simply said, ‘Fine, thanks.’ They said, ‘Okay that was 1999 - what a mess now - let’s move on.'"

There recently has been a lot of talk about earmarks - which used to be called pork barrel until the hog industry apparently sent its metaphor police to Washington. In fact, all the earmarks currently in the budget amount to less than one third of the money you didn't even know had been missing over at HUD.

Why are earmarks so important, then? In part because we know exactly how the money is being spent, whether to help fund needed medical research or build bridges to nowhere in Alaska. They are an odd sum in the national budget that everyone can understand. They are, in that sense, a rare virtue: an oasis of specificity in a desert of uncertainty.

In a sense, the mysterious $700 billion is completely in sync with Washington accounting. No one knows what's it is for, how it will be spent and, when it's gone, who will have gotten what and who will have benefited the most. So don't be surprised at all the surprises they forgot to tell you.

CRASH TALK

Portland Press Herald - The state of Maine could not float a $50 million transportation bond this week because traders told officials there was "no market" at all for large financial transactions such as this one. . . "In 34 years I have never had a trader say, 'I can't give you a sale price. There is no market,' " said Maine Municipal Bond Bank Executive Director Robert Lenna, describing his efforts to sell the bond on Wall Street. A week ago, Lenna said, the interest rate for the AA-rated revenue bond would have been about 3.8 percent or 3.9 percent. But on Tuesday, short-term interest rates, a factor used to calculate interest rates for municipal bonds, soared as high as 9 percent and 10 percent, effectively shutting down market activity.

Our Future - Representatives from top progressive and labor groups-- including the Campaign for America's Future, AFL-CIO, SEIU, AFSCME, AFT, NEA, ACORN, Alliance for Justice, Center for American Progress and Center for Community Change -- met at an emergency closed-door meeting yesterday to develop a statement of principles for bailing the American economy out of its financial woes:

1. Public Oversight. This kind of power can never be centralized in a single individual - much less one who did not even stand for election. Any funds must be controlled by an independent entity, with consumers and workers given seats on its board. Congress should be empowered to name independent monitors and to approve all board members.

2. Protect the Taxpayer. The Treasury bill would have taxpayers buying paper that nobody else wants at prices far above its current value. If a firm wants to auction off its toxic paper to the US Government, taxpayers should get equity in that firm equal to any amount paid in excess of the paper's value. This will deter profitable firms from using the government as a dumpster for their toxic paper. And it will insure that if the bailout works and the firms become profitable, taxpayers, not simply bankers, benefit from the upside.

3. Curb the casino. This crisis was caused because sensible regulations of the banking system that worked for dozens of years were dismantled or went unenforced. No bailout can go forward without requiring the necessary regulation to insure this does not happen again. Any institution, which receives assistance, should agree to come under a microscope going forward in terms of disclosure requirements, and it should have stringent capital requirement imposed upon it.

4. Invest in the real economy. Ending the bankers' strike is not sufficient enough to avoid the recession into which we have been driven. Major public investment in new energy and conservation, rebuilding schools and infrastructure, extending unemployment and food stamps, helping states avoid crippling cuts in police and health services - is vital to get the real economy moving and put people back to work. No bailout should proceed without being linked to support for a major public investment plan to get the economy going.

5. Hold CEOs and Boards of Directors Accountable. Wall Street CEOs shouldn't be pocketing millions while taxpayers are forced to bail them out. Any firm that applies for relief must agree to cancel all stock option programs and CEOs should have stringent limits placed on their compensation until the Company has repaid all taxpayer assistance.

6. Aid the victims, not just the predators. Both bankers and home owners made foolish bets that home prices would keep rising. Many homeowners, however, were misled by predatory lenders into taking mortgages that they didn't understand and couldn't afford. It would be simply obscene to help the predators and not those that they preyed upon. No bail out of the banks should take place without measures to help people in trouble stay in their homes. Explicit provisions should ensure use of the full array of financial and legal tools available to the government to stop foreclosures and restructure home mortgage loans for ordinary Americans, including amending the bankruptcy code to allow judges to modify mortgages. Where workouts are not feasible, people should be allowed to stay in their homes as renters.

Joseph E. Stiglitz, Nation - There are four fundamental problems with our financial system, and the Paulson proposal addresses only one. The first is that the financial institutions have all these toxic products--which they created--and since no one trusts anyone about their value, no one is willing to lend to anyone else. The Paulson approach solves this by passing the risk to us, the taxpayer--and for no return. The second problem is that there is a big and increasing hole in bank balance sheets--banks lent money to people beyond their ability to repay--and no financial alchemy will fix that. If, as Paulson claims, banks get paid fairly for their lousy mortgages and the complex products in which they are embedded, the hole in their balance sheet will remain. What is needed is a transparent equity injection, not the non-transparent ruse that the administration is proposing.

The third problem is that our economy has been supercharged by a housing bubble which has now burst. The best experts believe that prices still have a way to fall before the return to normal, and that means there will be more foreclosures. No amount of talking up the market is going to change that. The hidden agenda here may be taking large amounts of real estate off the market--and letting it deteriorate at taxpayers' expense.

The fourth problem is a lack of trust, a credibility gap. Regrettably, the way the entire financial crisis has been handled has only made that gap larger.

Michael Hudson, Counterpunch - These bad loans are toxic because they can only be sold at a loss - if at all, because foreign investors no longer trust the U.S. investment bankers or money managers to be honest. That is the problem that Congress is not willing to come out and face. Many of these loans are outright fraudulent. And they are being sold by crooks. Crooks who work for banks. Crooks who use accounting fraud - such as the fraud that led to the firing of Maurice Greenberg at A.I.G. and his counterparts at Fannie Mae, Freddie Mac and other companies engaging in Enron-type accounting.

This is not what the magic of compound interest promised. But it is where it had to end up, with mathematical inevitability. It was an advertising come-on for Wall Street money managers and promoters of "pension-fund capitalism" (or "peoples' capitalism" as it was called in Chile by the Chicago Boys working for General Pinochet's murderous regime, and Margaret Thatcher's Conservatives in England). The promise is that if people consign these funds to individuals who make much, much more than they do but have the survival-of-the-fittest advantage of being much, much more greedy, they will receive a perpetual doubling of interest. That is how retirements for American workers are still supposed to be paid - by magic, not by direct investment. Prospective retirees are supposed to ensure a good life by investing savings in loans to corporate raiders who fire, lay off, downsize and outsource these very workers. The trick is to persuade employees to hand retirement funding over to financial managers whose idea was to make money off the economy by extracting interest and dividends off workers, homeowners and companies being bought on debt leverage. In the final analysis it is debt leverage by itself that is supposed to fuel capital gains.

This has led to madness. The maddest solution of all would be for the government to give the extractive financial sector even more money - funds that no private lenders have been willing to provide, not even vulture funds. No private firm has been able to discover what Mr. Paulson and the unfortunate Mr. Bernanke are sanctimoniously promising: that a viable deal, even an almost money-making one, can be made by buying junk now and waiting for "the economy" to make it good. . .

Promises that "taxpayers" will be able to recover a large part of this money are a fiction. If there were a hope of recovering this money, then investors abroad - foreign buyout funds, foreign banks, foreign sovereign wealth funds - would have been willing to buy Bear Stearns, Lehman Brothers, A.I.G. and other companies at some price. But they wouldn't touch this at any price. . .

Here's why the government giveaway logic is fallacious: It's a giveaway, not a bailout. A bailout is designed to keep the boat afloat. But the existing Wall Street boat crafted by the investment bankers seeking to unload their junk must sink. The question as it sinks is simply who will be able to grab the lifeboats, and who drowns.

There is a reason why the banks won't lend: Housing and commercial real estate already are so heavily mortgaged that there is no rental value available (over and above operating expenses, current taxes and debt service) to pledge to the banks. It still costs more to buy a house than to rent it. No increase in the amount of credit, short of hyper-inflation can cure this. No lowering of interest rate, will lead banks to risk making a bad new loan - that is, a loan that probably will go bad and end up with the bank taking a loss after the borrower walks away or defaults. .

Here's the problem with following Mr. Paulson's orders and lending yet more: Every major real estate advisor on record has forecast a further drop of between 20 to 30 percent in property prices over the coming twelve months. This is now the standard forecast. It means that over and above the five million arrears and foreclosures that Mr. Paulson acknowledged already are on the books, yet more families are to give up the fight by this time next year. Is the $700 billion giveaway fund to try and recoup by evicting them too from their houses - to pay the "taxpayer" enough to bail out Countrywide, Washington Mutual and other predatory lenders for loans that state Attorneys General have accused of being fraudulent?

For the government to even begin to recover some of the value of the $700 billion in junk mortgages it has bought would force new homebuyers to pay even more of their income to the banks. And if they do that, they will have less income to spend on goods and services. The domestic market will shrink, and tax revenues will fall at the state, local and federal levels. The debt overhead will deflate the economy, causing shrinkage all down the line.

It is necessary, even inevitable, for the volume of debt to come down - not up - to restore equilibrium. The economy was well on its way to preparing the ground for this last week. As Alan Meltzer of the American Enterprise Institute (of all places) explained on McNeill-Lehrer, Merrill Lynch was able to be sold at 22 cents on the dollar; and the economy survived Lehman Brothers and Bear Stearns being wiped out.

Such debt writes-offs are a precondition for writing down America's mortgage debts to levels that are affordable. But Mr. Paulson's plan is to fight against this tide. He wants the Wall Street to keep on raking in money at the expense of the economy at large. These are the big banks who lobbied Congress to appoint de-regulators, the banks whose officers paid themselves enormous bonuses and gave themselves enormous golden parachutes. They were the leaders in the great disinformation campaign about the magic of compound interest. And now they are to get their payoff. . .

It gets worse. If Congress should be so destructive as to buy out $700 billion of bad loans (for starters), the sellers will do just what Russia's kleptocrats did. They will take their money and move it abroad to a "hard" currency country. This will help collapse the dollar. Up will go gasoline costs and prices for other imports. America will be turned into a Russian-style post-Soviet economy, having endowed a new domestic kleptocracy of insiders, who use some of their gains to finance the campaigns of American Yeltsins such as McCain.

So let us admit that the economy has been taking a wrong track for a number of decades now. As John Kay noted : "When the dust settles, many banks and hedge funds will have lost more money on their trading activities in the past year or so than they had made in their entire history . . . The pursuit of shareholder value damaged both shareholder value and the business."

Peter J. Solomon & Anders J. Maxwell - Secretary Paulson has united the country - in opposition to the bill to bail out the global credit markets and, as usual, the country's got it right. . . Simply stated, the $3.5 trillion commercial paper market - which finances the short-term credit of U.S. corporations - is on the brink of drying up, the result of which would be a run on the already illiquid banking system. . .

The markets need funding - but like Warren Buffet just provided to Goldman Sachs and the Treasury provided AIG. The Treasury's plan may provide instant liquidity, but it fails to address the underlying issue; namely, the markets need the funding necessary to support refinancings. Paulson's plan fails to address this instant requirement. Ironically, it risks another round of misvaluation of assets at the expense of the U.S. taxpayer, usurps the market's role of price setting, and removes accountability and prospects for eventual loss or gain from the managements and investors who placed these bets in the first place.

The Depression era Reconstruction Finance Corporation was a successful model from 1929 through WWII. It accomplished funding of illiquid and under capitalized private companies such as banks by investing in preferred stocks. The RFC invested $3 billion and got back $3 billion. It was an independent agency with legislative over-sight. It was run professionally.

The Administration has chosen as its model the Resolution Trust created in the 1980's to handle the savings and loan crisis. It was run by the Treasury. Taxpayers lost almost $300 billion. The market was too smart for even the best of our politicians and bureaucrats. Private sector sharpies picked the Treasury's and taxpayers' pockets. . .

Alternatively, follow Buffet's example. Invest the $700 billion in viable financial institutions deemed beneficial to the public interest. Delegate decisions to experienced and disinterested professionals - not politicians.

This and subsequent Administrations and Treasury Secretaries have no business setting the values of securities. The magnitude and risk of the undertaking demand an equity return for taxpayers. Neither of these prerequisites is respected by the current Plan. It's bad politics and it's bad business.

Michael Lewis, Bloomberg - One of the things they say is that, in leaving Goldman for government service, Paulson made the greatest trade of his life. Not only was he required to sell his half-billion dollars in Goldman stock near the high, but also, as Treasury Secretary, he was exempt from capital-gains taxes. By getting out of Goldman while the getting was good, the guy may have doubled his net worth. . .

Think of Wall Street as a poker game and Goldman as the smartest player. It's sad when you think about it this way that so much of the dumb money on Wall Street has been forced out of the game. There's no one left to play with. Just as Goldman was about to rake in its winnings and head home, the U.S. government stumbles in, fat and happy and looking for some action. I imagine the best and the brightest inside Goldman are right this moment trying to figure out how it uses the Treasury not only to sell their own crappy assets dear but also to buy other people's crappy assets cheap.

At any rate, it won't take long for Goldman Sachs to figure out how to make that $700 billion work for Goldman Sachs. This you can trust them to do. After all, Warren Buffett just did.

SF Chronicle - A year ago, as The Chronicle began portraying the strange world of subprime and explaining why people suddenly were so worried about foreclosures, it profiled four Bay Area families facing the loss of their homes, telling their personal stories and tracing the history of their loans. All had subprime mortgages that were clearly unaffordable, with monthly payments that ate up almost their entire income, leaving next to nothing for food, gas or utilities. . .

One homeowner, Johnny Pitts, was a Muni bus driver who had bought an Oakland home for $429,950 in 2005. His mortgage payment, which had started at $2,880, was about to reset to $3,730 a month - plus $750 more for taxes and insurance. Home payments are supposed to be no more than 40 percent of income. By that formula, the necessary income would have been $11,200 a month or $134,400 a year. . . In fact, Pitts's take-home pay was just $4,000 a month. Loans both 100 percent.

The other homeowners, Jeff and Vanessa Hahn of Fairfield, were on the hook for monthly payments of $5,000 - exactly the amount they earned together as a self-employed businessman and teacher.

As for loan to value, in both cases it was 100 percent - hardly a desirable ratio. Pitts had a piggyback second loan; together the two loans accounted for the full purchase price. The Hahns had done a cash-out refinance for their home's full assessed value of $570,000 in March 2007, a few months before the article was written. . . Both borrowers had tarnished credit. Presumably, that high risk was why they both received "low introductory rate" mortgages that started at just above 10 percent.

Letter from a large group of economists - As economists, we want to express to Congress our great concern for the plan proposed by Treasury Secretary Paulson to deal with the financial crisis. . .

1) Its fairness. The plan is a subsidy to investors at taxpayers' expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.

2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.

3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America's dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.

For these reasons we ask Congress not to rush, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come.

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BUSH NIXED ISRAEL'S PLAN FOR STRIKE ON IRAN

Guardian - UK Israel gave serious thought this spring to launching a military strike on Iran's nuclear sites but was told by President George W Bush that he would not support it and did not expect to revise that view for the rest of his presidency, senior European diplomatic sources have told the Guardian.

The then prime minister, Ehud Olmert, used the occasion of Bush's trip to Israel for the 60th anniversary of the state's founding to raise the issue in a one-on-one meeting on May 14, the sources said. . .

Bush's decision to refuse to offer any support for a strike on Iran appeared to be based on two factors, the sources said. One was US concern over Iran's likely retaliation, which would probably include a wave of attacks on US military and other personnel in Iraq and Afghanistan, as well as on shipping in the Persian Gulf.

The other was US anxiety that Israel would not succeed in disabling Iran's nuclear facilities in a single assault even with the use of dozens of aircraft. It could not mount a series of attacks over several days without risking full-scale war. So the benefits would not outweigh the costs.

PASSINGS: PAUL NEWMAN

CNN - [Paul Newman] He stumped for liberal causes, including Eugene McCarthy's 1968 presidential candidacy, and earned a spot on Richard Nixon's enemies list -- "the highest single honor I've ever received," he said. In 1982, Newman and his friend A.E. Hotchner founded Newman's Own, a food company that produced food ranging from pasta sauces to salad dressing to chocolate chip cookies. "The embarrassing thing is that the salad dressing is outgrossing my films," Newman once wryly noted.

Paul Leonard Newman was born on January 26, 1925, in Shaker Heights, Ohio, a suburb of Cleveland. His father owned a successful sporting goods store, but young Paul was taken with his mother's and uncle's interest in the arts and started acting while still in grade school. "I wasn't running toward the theater but running away from the sporting goods store," he said later.

After being kicked out of Ohio University for unruly behavior, he joined the Navy and served for three years during World War II. After the war he attended Kenyon College in Gambier, Ohio, where his unruly ways led him to theater. . .

In 2007, Newman said he was retiring from acting, saying he'd lost confidence in his abilities. Still, he marveled at his own resilience.

"You can't be as old as I am without waking up with a surprised look on your face every morning: 'Holy Christ, whaddya know - I'm still around!' It's absolutely amazing that I survived all the booze and smoking and the cars and the career."

PRESIDENTIAL DEBATE DRINKING GAME

From the Seminal. Sorry we didn't find this in time for the first debate, but there's still time for fun.

Every time John McCain mentions his POW experience, praise his courage and drink a kamikaze. This one is only for the heavy drinkers.

Every time Obama says change everyone has to switch seats and drink the other person’s drink of choice.

Every time John McCain tries to associate Barack Obama with an unsavory character, take a sip of your dirty martini.

Every time someone says bailout you have to finish your drink and pour another.

Every time John McCain says "my friends", spit out your drink and shout "I am not your friend" at the television.

Every time "evil", "evil doers", or anything with evil is mentioned, drink a sip of French red wine.

Every time John McCain threatens Iran, drink a savage car bomb or cherry bomb.

Every time Barack Obama ties John McCain to George W. Bush, drink a sloe gin fizz and wish for better days. . .

When Georgia is mentioned, drink a fuzzy navel.

Every time John McCain mentions Sarah Palin, drink a white russian. After all, if Sarah Palin is around there must be a Russian nearby somewhere.

Every time John McCain smiles creepily, drink a roofie-colada.

If anyone mentions a golden parachute, pound some goldschlager.

Every time John McCain makes an appeal to states rights, lean back and take a sip of that sweet southern comfort. . .

Every time John McCain says anything, take a drink from the oldest, crappiest bottle you have-that skunked beer in the back of the fridge, the two-dollar wine someone gave you for your birthday five years ago, the dregs from that bottle of Popov vodka left over from a party you had in February-because you’ve heard it all before, and you didn’t much like it the first time.

Regardless of what either candidate says, at the end of the debate, drink something that must be lit on fire first, then hit yourself in the face with a shovel.

PAKISTAN FIRES ON NATO AIRCRAFT

BBC - Pakistan says its troops fired warning shots at two NATO helicopters as they crossed the border from Afghanistan. It is the first time the Pakistan army has admitted opening fire near US or NATO forces, as tension grows over cross border military action. NATO said its aircraft were not in Pakistani airspace when shots were fired over Khost province. . .

Chief Pakistani military spokesman Major General Athar Abbas said that the helicopters had "crossed into our territory in Ghulam Khan area. . They passed over our checkpost so our troops fired warning shots."

However, Pakistan's new president, Asif Ali Zardari, appeared to contradict his military spokesman, insisting that his troops had only fired "flares" to warn the helicopters they were near the Pakistan border.

ARMY'S OCCUPATION FORCE IN U.S.

We have previously noted that the Army is bringing back an occupation force in Iraq to engage in similar activities in the United States in case of an emergency. While this may not be a first it is precisely what the Posse Commitas Act was designed to prevent

Infowars - Section 1385 of the Posse Comitatus Act states, "Whoever, except in cases and under circumstances expressly authorized by the Constitution or Act of Congress, willfully uses any part of the Army or the Air Force as a posse comitatus or otherwise to execute the laws shall be fined under this title or imprisoned not more than two years, or both."

Under the John Warner Defense Authorization Act, signed by President Bush on October 17, 2006, the law was changed to state, "The President may employ the armed forces to restore public order in any State of the United States the President determines hinders the execution of laws or deprives people of a right, privilege, immunity, or protection named in the Constitution and secured by law or opposes or obstructs the execution of the laws of the United States or impedes the course of justice under those laws."

However, these changes were repealed in their entirety by HR 4986: National Defense Authorization Act for Fiscal Year 2008, reverting back to the original state of the Insurrection Act of 1807.

The original text of the Insurrection Act severely limits the power of the President to deploy troops within the United States.

For troops to be deployed, a condition has to exist that, "(1) So hinders the execution of the laws of that State, and of the United States within the State, that any part or class of its people is deprived of a right, privilege, immunity, or protection named in the Constitution and secured by law, and the constituted authorities of that State are unable, fail, or refuse to protect that right, privilege, or immunity, or to give that protection; or (2) opposes or obstructs the execution of the laws of the United States or impedes the course of justice under those laws. In any situation covered by clause (1), the State shall be considered to have denied the equal protection of the laws secured by the Constitution."

STATES PREPARE FOR HOME HEATING CRISIS

Stateline - With home heating costs rising, jobless rates up and temperatures dropping, states are bracing for a widespread public health emergency this winter. Even if they get a boost in federal aid to help low-income citizens pay their home energy bills, state officials say a record number of poor people will be at risk of suffering hunger and hypothermia and many will need temporary shelter. The situation is expected to be most severe in cold northeastern states where more people rely on home heating oil, which has risen in price much faster than other energy sources. Governors in those states warned President Bush in an August letter that without more federal money, "an unprecedented crisis is waiting to unfold." Since then, the economy has worsened and energy costs have remained high.

ATHEISTS IN THE FOXHOLE SUE OVER ABUSE BY MILITARY RELIGIONISTS

Jeremy Hall (second from right) & Dustin Chalker (far right)

Jason Leopold, The Public Record - The U.S. Army has been subjecting soldiers to fundamentalist Christian prayer ceremonies against their will during mandatory military events in violation of their basic constitutional rights, according to a new lawsuit filed against Secretary of Defense Robert Gates by a U.S. Army soldier.

On at least three occasions beginning in December 2007, Army Spc. Dustin Chalker claims he was directed to attend military events, one of which was a barbecue, where an Army battalion chaplain led a Christian prayer ceremony for military personnel. Chalker, who said he is an atheist, asked his superiors for permission to leave the prayer sessions and on each occasion his request to be excused was denied, according to the lawsuit.

Despite Chalker's objections to being subjected to fundamentalist Christian prayer sessions, his Army superiors continuously forced him to attend other military events where the prayer ceremonies continued. . .

Chalker, 23, who has served in Iraq and Korea since February 2002 and was awarded a Purple Heart and a Combat Medic Badge, is the second Fort Riley solider to file a lawsuit against Gates alleging civil rights violations.

Spc. Jeremy Hall, who is also an atheist, sued the defense secretary and his supervising officer last year for allegedly trying to force him to embrace fundamentalist Christianity and then retaliating against him when he refused. . .

FINNISH KILLER WAS ON ANTI-DEPRESSANTS

Progressive Review - Like many mass killers before him, Finnish murder Pekka-Eric Auvisen was on anti-depressants. And like many mass killers before him, the American media is not talking about this. The Finnish journal Itellehti, however, reports that Auvisen's girlfriend had an online exchange days before the killings:

Auvisen: Are we okay? Our relationship and friendship means a lot.

Girlfriend: All okay

And later. . . .

Auvisen: Sorry I have behaved in this way. Medication makes me frustrated and aggressive.

As we have noted in the past, while the percent of anti-depressant users who turn violent may be quite small, it does no one any good to ignore the issue the way the media and health profession have.

EVEN THE RIGHT IS FINDING CHARTERS & VOUCHERS TO BE SUBPRIME

Frederick M Hess, American Enterprise Institute - Milwaukee's voucher program initially allowed a few hundred students to attend local private schools with public scholarships. When it was launched, advocates voiced expansive claims on behalf of "choice." In 1990, scholars John Chubb and Terry Moe argued in their seminal volume Politics, Markets, and America's Schools, "Without being too literal about it, we think reformers would do well to entertain the notion that choice is a panacea. . . . It has the capacity all by itself to bring about the kind of transformation that, for years, reformers have been seeking to engineer in myriad other ways."

The record of markets in advancing prosperity, opportunity, and innovation is compelling. It seemed almost axiomatic that market reforms would deliver similar results in schooling, spurring the emergence of good schools and pushing traditional districts to improve.

Yet things have not worked out as intended. Chester E. Finn Jr., president of the Thomas B. Fordham Institute and a champion of choice-based reform since the 1980s, has voiced "growing sympathy" with choice skeptics and warned against "too much trust in market forces. . .

Even staunch proponents of school choice are conceding disappointment. Earlier this year, Weekly Standard contributor Daniel Casse reported, "The two most recent studies show that, since the implementation of the voucher program, reading scores across all Milwaukee schools are falling." Howard Fuller, patron saint of the voucher program, has wryly acknowledged, "I think that any honest assessment would have to say that there hasn't been the deep, wholesale improvement in MPS [Milwaukee Public Schools] that we would have thought." Manhattan Institute scholar Sol Stern, one-time choice enthusiast and author of Breaking Free: Public School Lessons and the Imperative of School Choice, brought the concerns to a boiling point earlier this year when he declared, "Fifteen years into the most expansive school choice program tried in any urban school district [there is] . . . no ‘Milwaukee miracle,' no transformation of the public schools has taken place.". .

Today, the Milwaukee voucher program enrolls nearly twenty thousand students in more than one hundred schools, yet this growing marketplace has yielded little innovation or excellence. The Milwaukee Journal Sentinel recently described 10 percent of voucher schools as having "alarming deficiencies." These include Alex's Academics of Excellence, which was launched by a convicted rapist, and the Mandella School of Science and Math, whose director overreported its voucher enrollment and used the funds to purchase two Mercedes-Benzes. Veteran Journal Sentinel writer Alan Borsuk has opined, "[The Milwaukee Parental Choice Program] has preserved the status quo in terms of schooling options in the city more than it has offered a range of new, innovative, or distinctive schools."

Wisconsin headline writers have had a field day, with the Capital Times and Milwaukee Magazine featuring the likes of "The Failure of School Choice," and "Whoops, We Goofed: School Choice Doesn't Work Like Its Supporters Promised. Gulp. Now What?" . . .

While research suggests that some participating students benefit from private school vouchers, these results may largely reflect the ability of students in places like New York City or Washington, D.C., to find empty seats in established parochial schools. There is little evidence that voucher or choice programs have succeeded in fostering the emergence or expansion of high-quality options.

Similar concerns plague the charter movement nationally, even as the number of charter schools has surged above four thousand and charter enrollment has passed the one million mark. The U.S. Department of Education's National Center for Education Statistics has compared the performance of students in district and charter schools, reporting, "After adjusting for student characteristics, charter school mean scores in reading and mathematics were lower, on average, than those for public noncharter schools." . . .

Stig Leschly, executive director of the Newark Charter School Fund, has observed that only about two hundred of the thousands of existing charter schools "really close the achievement gap." . . .

Among the eight cities where charter schools enroll 20 percent or more of students are Detroit, Michigan; Youngstown, Ohio; and Washington, D.C. In 2007, Education Week reported that, despite a substantial charter presence, Detroit had the highest dropout rate among the nation's large school systems. A 2007 analysis found that just 57 percent of Youngstown's charter schools, and just 38 percent of its district schools, met Ohio's growth targets for student improvement in reading and math.

In a study of Washington, D.C., which has one of the nation's highest rates of charter school enrollment, researchers Margaret Sullivan, Dean Campbell, and Brian Kisida found no evidence of improvement in D.C. public schools even as they lost nearly a third of their students to charter school competition. They traced inaction to a district "hampered by political dynamics and burdensome regulations." . .

NO 3 AM PHONE CALLS TONIGHT, GOVERNOR PALIN HAS RUSSIA UNDER CONTROL

KATIE COURIC: You've cited Alaska's proximity to Russia as part of your foreign policy experience. What did you mean by that?

SARAH PALIN: That Alaska has a very narrow maritime border between a foreign country, Russia, and on our other side, the land-- boundary that we have with-- Canada. It-- it's funny that a comment like that was-- kind of made to-- cari-- I don't know, you know? Reporters--

COURIC: Mock?

PALIN: Yeah, mocked, I guess that's the word, yeah.

COURIC: Explain to me why that enhances your foreign policy credentials.

PALIN: Well, it certainly does because our-- our next door neighbors are foreign countries. They're in the state that I am the executive of. And there in Russia--

COURIC: Have you ever been involved with any negotiations, for example, with the Russians?

PALIN: We have trade missions back and forth. We-- we do-- it's very important when you consider even national security issues with Russia as Putin rears his head and comes into the air space of the United States of America, where-- where do they go? It's Alaska. It's just right over the border. It is-- from Alaska that we send those out to make sure that an eye is being kept on this very powerful nation, Russia, because they are right there. They are right next to-- to our state.

BREVITAS

OUTLYING PRECINCTS

Washington Post - Alaska Gov. Sarah Palin, who has made a crackdown on gift-giving to state officials a centerpiece of her ethics reform agenda, has accepted gifts valued at $25,367 from industry executives, municipalities and a cultural center whose board includes officials from some of the largest mining interests in the state, a review of state records shows. The 41 gifts Palin accepted during her 20 months as governor include honorific tributes, expensive artwork and free travel for a family member. They also include more than $2,500 in personal items from Calista, a large Alaska native corporation with a variety of pending state regulatory and budgetary issues, and a gold-nugget pin valued at $1,200 from the city of Nome, which lobbies on municipal, local and capital budget matters, documents show.

Enter your 2008 personal tax information in the form below and then press calculate to see how the candidates' promised tax plans will affect your taxes over the next four years based on "McCain and Obama Tax Plan for Individuals". For more information about an input item,

Mercury News, CA - With strong support from Latinos, a slim majority of California voters favor a statewide ballot initiative that would require doctors to notify parents before teenagers have abortions, according to a Field Poll. Similar parental notification measures have failed twice in California in the past four years. But the new poll found a slightly stronger base of support for Proposition 4 than the measures in 2005 and 2006, which also showed early leads in polls. Forty-nine percent of likely California voters favor Proposition 4, while 41 percent oppose it and 10 percent are undecided, according to the Field Poll. Undecided voters who tend to oppose new initiatives could make a crucial difference on Election Day, but Field Poll director Mark DiCamillo sees a significant factor at play this year. "If there's a shift going on, it's coming from the Latino voters," DiCamillo said. "Because this is a presidential election, Latino voters will constitute a larger proportion of the turnout than was true two years ago." Latino voters, who are overwhelmingly Catholic, are expected to be 17 percent of the electorate in November. They appear to be favoring the measure 62 percent to 31 percent - a 31-point margin. In 2006, the margin among Latinos was 22 percentage points, DiCamillo said.

Daniel De Groot, Open Left - More than one person has witnessed Palin asking the librarian about "removing" books from the library. What books did she want to ban? Turns out she was incensed about some gay-positive books. So what do conservatives think about this idea of banning pro-gay books from libraries? Well, if we asked them today, it would be hard to trust the answer given the incentive they have to support Palin. Fortunately, it turns out the GSS has been askin:g this for many years, so conservatives are on record. Survey says [on removing gay books from libraries]

In short, 62% of convervatives are more enlightened on this subject than Palin

WATCHING THE COUNT

Technology Review - California's secretary of state, Debra Bowen, believes that open-source software should be used in elections involving electronic voting machines, to protect against error and fraud. Speaking in Cambridge, MA, at the Emtech organized by Technology Review, Bowen noted that individual counties are currently responsible for purchasing voting machines. Often the choice is left up to an IT professional who may lack detailed knowledge of cryptography and computer security. But the biggest concern, according to Bowen, is a lack of access to the machines' underlying code. "Many times, a person has no legal right to review the software, even if they could," she said. . . Under Bowen's stewardship, San Francisco will experiment with new software in November. It's one of the few cities already using instant-runoff voting, a system that lets voters rank candidates in order of preference instead of choosing just one. The rankings data can be used to determine a winner if no candidate receives a majority of the vote.

As the election nears, and when it's over, you'll be hearing more about vote counting fraud. Here are some good sources for background on how elections are being stolen.

FUN WAYS TO STEAL ELECTIONS
BRAD BLOG
SCOOP ARCHIVES
REVIEW ARCHIVES

DRUG BUSTS

Daily Camera, CO - Outside the University of Colorado Police Department, cheers erupted from a crowd of marijuana advocates - some of whom were dressed as giant pot leaves - when a student was given back medical marijuana that police took from him in May. "I wish I had a chance to talk to the officers who said I'd never get this back," said CU sophomore Edward Nicholson, 20, who's a medical-marijuana cardholder in Colorado. CU police confiscated about two ounces of marijuana from Nicholson in his residence hall last spring, even though the then-freshman has a card legally certifying him to hold and administer the drug to his brother. Nicholson said his brother suffers from chronic, debilitating pain from football injuries and has been prescribed marijuana to help deal with the discomfort. Nicholson faced criminal charges for drug possession and was suspended from CU over the summer. But, after he hired an attorney and threatened to sue CU, the school has dropped its case against him and changed its rules. CU hasn't changed its policy against campus drug possession, but students living on campus who hold medical-marijuana cards can now request to move off campus to avoid school punishment if they are found with the drug. Someone with a card who is living on campus still will be held to the no-drugs policy at CU.

FURTHERMORE. . . .

WSAZ, WV - As if getting a DUI wasn't enough, a man arrested for driving under the influence got in a lot more trouble at the police station. Police stopped Jose Cruz on Route 60 in South Charleston for driving with his headlights off. Then, he failed sobriety tests and was arrested. When police were trying to get fingerprints, police say Cruz moved closer to the officer and passed gas on him. The investigating officer remarked in the criminal complaint that the odor was very strong. Cruz is now charged with battery on a police officer, as well as DUI and obstruction.

Telegraph, UK - Research by the University of Iowa found applicants - especially women - with a firm handshake are far more likely to get the job than candidates with a limp grip. A solid handshake was found to be more important than dress or physical appearance as it set off the interviewer's impression of that person. . . The study, to be published in the Journal of Applied Psychology, was conducted with 98 students at a business school participating in mock job interviews with local business representatives. The interviewers graded each student's overall performance and employability while five trained handshake experts also scored students on their handshake. The scores were then compared. Mr Stewart said the researchers found that those students who scored high with the handshake experts were also considered to be the most employable by the interviewers and seen as having more extroverted personalities and greater social skills. . . The key to a good handshake? A complete, firm grip, eye contact and a vigorous up-and-down movement, said Stewart.

READER COMMENTS

NOTE: You can post your comments on any of the above stories by going to our Undernews site and searching for the headline. Once posted, a copy is immediately mailed to the Review and we pick some of the most interesting to publish here. http://prorev.com/indexa.htm

NO 3 AM PHONE CALLS TONIGHT, GOVERNOR PALIN HAS RUSSIA UNDER CONTROL

I could vote for her. We need a comic presence in the vice president's office. I guess that I miss Dan Quayle.

CRASH TALK

David Falkner - I am an accounting student in Ohio. I have a question about the bailout for the financial industry. Would it make more sense for the government to buy the mortgages that are causing the problems in the mortgage-backed securities at the root of the mess than to give the money to the other end of the economic spectrum?

It seems to me that if they bought these houses, and worked out a financial payment plan for the owners, it would not only spend less tax money, but the securities they are tied up in would no longer be devaluing because of those mortgages paid off by the government. If, after the government restructures the mortgage, the homeowner is still in default, the government could repossess the house and auction it at a loss that would miss the financial markets.

The numbers I could find in between my normal day-to-day obligations today are that 1 in 501 homes are in foreclosure (national average), and that there is a total of $6.3 trillion in mortgage debt. This led to a rough estimate of $12 billion in total mortgage default. ([1/501]*$6.3tril)

This is well under the $700 billion that the financial sector seems to need for a bailout. Putting the money at the top of the debt-leveraging system seems to be a waste of money to me. This also leaves quite a bit of room for the houses that would be auctioned at a loss.

I know there must be more recent data, but my studies, children, and job do not allow for the time to find out what they are. Do you know?

Thank you for your true and honest opinions. Question, I haven't seen a proposal anywhere for using let's say the 700 Bill to buy the banks which are failing, a la Morgan/Chase. If the government can take over a WAMU for a cheap 1.9 Bill, how many banks we could buy with 700 Bill? My idea would be to pay them for the book value once the toxic assets are priced at their real value, which contrary to the experts opinion, can be determined real easy... After buying the banks, the government could renegotiate every mortgage in default to make them viable, then sell the whole business back to honest bidders... Perhaps it would require a law to ban lobbying activity at the Federal and State levels as detrimental to interstate commerce

OBAMA'S MANY VIEWS ON MARIJUANA

Alcohol poisons and destroys your body functions far worse than marijuana ever can or will. Marijuana is grown, naturally, and isn't near as bad as tobacco. I, smoking quite often, am capable of doing many things while high. Nowhere near incoherent. Ever. Make it legal. Stop being idiots.

THE GREEN VIEW ON THE CRISIS

Essentially, the Republicans and their Wall Street cronies have betrayed those of us who work hard and are honest about it, do everything the right way. What the Greens are proposing will happen naturally, due to an incredible tide of resentment that is sure to follow in the wake of a crash being placed on the backs of hard working Americans.

EVEN THE RIGHT IS FINDING CHARTERS & VOUCHERS TO BE NOT SO HOT

The efficacy of voucher or other private schools is irrelevant. What matters is what the parents want to do. If they don't want to send their kids to public schools then they have the right to send them where they want. It's called freedom, a concept that those educated in public schools seem to have difficulty grasping. Not surprising, since government controlled schools are notorious for brainwashing people into thinking the government always knows best.

WILIAM BRAHAM AND LATTER RAIN

Regarding the quote which links William Branham to the Latter Rain revival, there are many sources from which one may pull information about the tent revivals of the forties, fifties and sixties and some of them might support the idea that William Branham was a leader of the Latter Rain revival. However, William Branham authored several books on theology and recorded over 1,100 of his sermons. Neither the books nor anything he said on the tapes supports his involvement in the Latter Rain movement or Christian domination or church restructuring under the authority of prophets and apostles and certainly nothing about a young "Joel's Army."

Having listened to some of his tapes and watched a few short films that were taken of him, I'd say that you have the wrong man.

I'm just taking the time to write because I think your intentions are to print the truth but your sources contain a lot of error on this subject.

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