Obama Heads the Largest Criminal Enterprise in History

Submitted by Stephen Lendman

Since taking office, Obama, wittingly or otherwise, has headed the largest criminal enterprise in history - the mass looting of national wealth to enrich his Wall Street benefactors. He assembled a rogue economic team of Clinton/Robert Rubin retreads - to fix the current crisis they engineered.

In a March 13 article, (author and former Republican strategist) Kevin Phillips called them "recycled senior (Clinton administration) Democrats (responsible for the) tech mania, deregulation binge and (1997 - 2000) stock market bubble and crash. (Obama) extend(ed) the (disastrous) mismanagement and pro-Wall Street bias of the 2008 Bush regime bailout."

He called Geithner and Bernanke "hapless," the result of their ruinous misjudgments (and, along with Alan Greenspan, complicit) with finance-sector malfeasance."

He said Summers will be "remembered for helping to block federal regulation of financial derivatives and orchestrat(ing) the 1999" Glass-Steagall repeal, among his other "achievements." He went down the list of key economic officials and trashed them all as the very types to be avoided, not appointed.

He noted that Bernanke was chairman of George Bush's Council of Economic Advisers and added: "Imagine if FDR had retained Herbert Hoover's chief economic advisor and loyal Republican Fed Chairman in 1933....To think that the pussycat Fed (would become) a saber-toothed tiger is a deception." Worse still, ruinous economic policies "could prove fatal" if White House policies favor "Wall Street but not the national economy or American people" - the very direction they've now taken.

In a follow-up April 7 article, Phillips highlighted "The Disaster Stage of US Financialization....a much grander-scale disaster than anything that happened in 1929 - 1933. Worse, it dwarfs the abuses of debt, finance and financialization that brought down previous leading world economic powers like Britain and Holland."

Today's crisis represents "the bursting of the huge 25-year, almost $50 trillion debt bubble that helped underwrite the hijacking of the US economy by a rabid financial sector...." It's realigning global power with America losing its economic leadership won in WW II.

"The ignominy deserved by Wall Street after 1929-1933 is peanuts compared with the opprobrium the US financial sector and its political and regulatory allies deserve this time." Financialized America radically transformed the country, now "doubly staggering because of the crushing burden of its collapse."

Yet major media pundits and reporters barely noticed and now claim relief is just a few quarters away - ignoring a metastasizing cancer, a national disaster, while policy makers heap fuel on a raging blaze now consuming us, yet too little public rage confronts them.

A Former Insider Speaks Out

Economics Professor William Black is a former senior bank regulator and Savings and Loan prosecutor, currently teaching economics and law at the University of Missouri. In an April 13 Barrons interview, he referred to "failed bankers (advising) failed regulators on how to deal with failed assets" they all had a hand in creating and proliferating.

His conclusion: "How can it result in anything but failure." He called the scale of financial fraud "immense," and said "Unless the current administration changes course pretty drastically, the scandal will destroy Barack Obama's presidency," besides what it's doing to the country, global economies, and many millions of people here and abroad.

He scathed Summers and Geithner, both "important architects of (today's) problems," and the latter as a failed and dishonest regulator, yet "numbering himself among those who convey tough medicine when he's really pandering to the interests of a select group of banks." No need to mention which ones.

The law mandates corrective action, the kind FDR took in the 1930s. He, Bernanke and Summers flout the law, "in naked violation, in order to pursue the kind of favoritism that the law was designed to prevent." They've turned taxpayers into "suckers" who'll pay dearly for decades, maybe generations.

His refusal to put insolvent banks into receivership, resorting to deceptive language like "legacy assets," and pursuing the worst of Chicago School economics "is positively Orwellian....If cheaters prosper, (they'll) dominate. It's like Gresham's law: Bad money drives out the good. Well, bad behavior" does the same thing "without good enforcement."

His bailout plans are disastrous. They prop up zombie banks by "mispricing toxic assets....The last thing we need is a further drain on our resources....by promoting this toxic asset market (and notions of) too-big-to-fail."

With most, perhaps all, the big banks insolvent (a polite term for bankrupt), what's going on is "a multi-trillion dollar cover-up by publicly traded (enterprises), which amounts to felony securities fraud on a massive scale."

Ultimately, these firms will be forced into receivership, their "managements and boards stripped of office, title, and compensation." What's needed is a 1930s-style Pecora investigation to get to the bottom of their fraud, deceit, and cover-up, along with government complicity to hide it. More on that below.

Black cited billions to AIG as the single worst abuse so far - to bail out their counterparties like Switzerland's UBS at the same time we were prosecuting it for tax fraud. As bad was following Goldman Sachs' advice to direct a $13 billion counterparty windfall to itself.

The whole process reeks of corruption. It must be stopped, and a new direction instituted under a reformist economic team - one that will admit the nature and depth of the problem, cut the tie to Wall Street, and take corrective action the law mandates. That's "precisely what isn't happening."

Washington is "wedded to the bad idea of bigness" and power of Wall Street. In today's America, financialization is predominant. It's a cancer eating away at the fabric of the nation and many millions affected, the result of the grandest of grand thefts.

A good start would be to break up the financial giants into more effectively managed and less powerful units - maybe the way Standard Oil was dismantled through a simple share spinoff. In addition, "a new seriousness must be put into regulation," and a new resolve to enforce it.

Today, the whole system encourages fraud, one based on results at any cost, so "fudging the numbers" becomes de rigueur and global bigness the holy grail. It sends the wrong message - play or pay with your job and future on Wall Street. "The basis for all regulation and white-collar crime is to take the competitive advantage away from the cheats, so the good guys can prevail. We need to get back to that." It's been decades since we've been there and high time we took it seriously. Job one is a thorough housecleaning and new direction, much like what's described below.

On April 3, Black appeared on Bill Moyers Journal on PBS and explained what's briefly enumerated below. From his experience as a regulator and prosecutor, he said:

-- fraud is initiated in boardrooms and CEO offices by making "really bad loans, because they pay better;"

-- then grow them like a Ponzi scheme multiplied through leverage; it's hugely profitable early on, then inevitably creates "disaster down the road;"

-- dismantling regulation makes it possible;

-- one scheme was subprime, Alt-A , and even prime "liars' loans" - meaning no checks are made on income, jobs, ability to repay, and the more they're inflated the more profitable they are; the amount of them was enormous - for one company alone, they generated as many losses as the entire S & L scandal;

-- toxic products were willfully created to scam borrowers for big profits;

-- rating agencies went along by appraising junk as AAA instead of doing it honestly;

-- in September 2004, the FBI warned about a mortgage fraud epidemic, but nothing was done to stop it; so now we have a crisis hundreds of times greater than the S & L one and bad policy in play to address it;

-- as in Barrons, he accused top Bush and Obama officials of a cover-up - to conceal the insolvency of all major banks and by so doing broke the law established after the S & L crisis, the Prompt Corrective Action Law that mandates insolvent banks be shut down and/or placed in receivership; and

-- this is the greatest financial scandal in history - swept under the rug by top government officials of both parties; it's legally and morally indefensible, and it's wrecking the country.

In an April 6 article, Black calls ongoing "stress tests a complete sham....to fool people....make us chumps" and essentially say 'If we lie and they believe us, all will be well" when, in fact, it's not. It's part of the giant cover-up and greatest ever criminal fraud - by bankers and complicit government officials.

On April 13, Nouriel Roubini shared Black's view. He cited the stress test "spin machine" leaking stories to the press that all 19 banks in question will pass. None will fail. If more "exceptional assistance" is needed, Washington will provide it.

However, Q 1 macro data tells another story as growth, unemployment, and falling home prices alone "are worse than those in FDIC's baseline scenario for 2009 AND even worse than those for the more adverse stressed scenario for 2009. Thus, the stress test results are meaningless" as worsening data are outdistancing "the worst case scenario."

In other words, test results "are not worth the paper (they'll be) written on" as their assumptions are fraudulently based. They're "fudge tests....blatantly rigged" to put a brave face on a very bleak economic picture.

They're in addition to other changes, including the recent Financial Accounting Standards Board (FASB) ruling. It's responsible for developing "generally accepted accounting principles" known as GAAP. On April 3, it changed so-called "mark-to-market" standards to "mark-to-make believe" ones. It also voted to allow banks to book smaller impaired asset losses to paint a brighter profits picture. It let Wells Fargo, for example, claim a Q 1 profit when it's drowning in losses, ones it can hide and not take.

Also likely coming is restoration of the "uptick rule" that prohibited short-selling in a down market. Established in 1938 to prevent disorderly selling, it allows shorts only when shares trade up. In June 2007, it was removed. Re-introductory proposals are now being considered to artificially boost prices.

Roubini calls it "a form of legalized manipulation of the stock market by regulators....to prevent short-sellers (from doing) their job, i.e. make stock prices reflect fundamentals and prevent bubbles."

Overall, alarm bells should be warning about reckless monetary and fiscal policies, but perverse market reaction was relief that's wildly premature according to some like Roubini. Others see a protracted downturn, a prolonged winter, and if conditions deteriorate enough perhaps a nuclear one, unlike anything before seen, and why not:

-- world economies are plummeting at depression-level speed by all key measures - production, consumption, trade, profits, asset values, capital flows, and more;

-- unemployment is soaring; in America close to 20% with all excluded and understated categories included;

-- pensions have been lost along with benefits;

-- homelessness is rising sharply, the result of over six million foreclosures; tent cities are appearing across the country;

-- recent data shows soaring foreclosures up 24% in Q 1 2009; in March alone, 46% higher than a year earlier - alone providing clear evidence of serious trouble; and

-- desperation is fueling anger and despair as conditions keep deteriorating absent sound policies to address them.

On April 6, Professor Vernon Smith (a 2002 economics Nobel laureate) and research associate Steven Gjerstad headlined a Wall Street Journal op-ed: "From Bubble to Depression?" They asked:

-- what creates bubbles?

-- why does a large one, like the dot.com bubble, do no damage to the financial system while another (housing) caused collapse?

They believe "events of the past 10 years have an eerie similarity to the period leading up to the Great Depression," including rising mortgage debt and speculation, then asked:

Had banking system difficulties "been caused by losses on brokers loans for margin purchases in 1929, the results should have been felt in the banks immediately after the stock market crash." But they weren't apparent until fall 1930, a year later.

Further, if money supply contraction caused bank failures, why haven't massive infusions today prevented the crisis? They conclude that conventional wisdom needs reassessing and believe "excessive consumer debt - especially mortgage debt - was transmitted into the financial sector" causing the Great Depression.

Their hypothesis "is that a financial crisis (originating) in consumer debt, concentrated at the low end of the wealth and income distribution (affecting so many households), can be transmitted quickly and forcefully into the financial system....we're witnessing the second great consumer debt crash, the end of a massive consumption binge," but want more study to prove it.

However, much more than that is needed - real reform, a complete reversal from current policy of the kind addressed below. Also, Smith and Gjerstad omitted a crucial fact - how misdirected today's massive infusions have been. Instead of helping beleaguered households, they've gone mostly to bankers for purposes other than economic recovery; namely, recapitalizations, for acquisitions, and big bonuses at the same time they fire thousands of lower level staff.

The 1930s Pecora Commission

On March 4, 1932 (one year to the day before FDR took office), a majority-Republican Senate Banking, Housing, and Urban Affairs Committee established it to investigate the causes of the 1929 crash. It was little more than a fig leaf until Democrats took over, appointed Ferdinand Pecora as special counsel, and made a real effort for banking and regulatory reform.

Straightaway, Pecora looked into Wall Street's seamy underside by placing powerful bankers in the dock, holding them accountable for their actions, and doing through hearings what would have been impossible in open court given their ability to "buy" justice.

He confronted Wall Street's biggest names:

-- Richard Whitney, president of the New York Stock Exchange;

-- noted investment bankers, including Thomas Lamont, Otto Kahn, Charles E. Mitchell, Albert Wiggin, and JP Morgan, Jr., scion of the man who dominated the Street for decades as its boss and de facto Fed chairman before the central bank was established; and

-- market speculators like Arthur Cutten.

He got Morgan to admit that he and his 20 partners paid no income taxes in 1931 and 1932. Neither did its Philadelphia operation, Drexel and Co., in the same years and way underpaid them in previous ones. It made headlines, was stunning, and galvanized critics to demand reform.

Pecora went further. He questioned Morgan and others on various matters, including sweetheart deals for political figures and insider ones for Wall Street cronies, similar shenanigans to today but not on the same scale, and under a president then who cared once Roosevelt took office. He directed "pitiless publicity" on Street corruption, what they easily got away with under Republicans.

Pecora was a former New York district attorney, an Eliot Spitzer-type with a reputation for toughness and fearlessness, but one serving at the behest of the President. He established straightaway that some of Wall Street's most powerful lied to their shareholders, manipulated stocks to their advantage, and profited hugely through malfeasance.

Roosevelt encouraged him in his March 4, 1933 inaugural address saying:

"there must be a strict supervision of all banking and credits and investments; there must be an end to speculation with other people's money, and there must be provision for an adequate but sound currency....the rulers of the exchange of mankind's goods have failed through their own stubbornness and their own incompetence, have admitted their failure and abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men...."

"They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish. The money changers have fled their high seats in the temple of our civilization. We must now restore that temple to the ancient truths. (Doing it requires) apply(ing) social values more noble than mere monetary profit."

Imagine Obama saying this, followed by strong policies for enforcement under Roosevelt-style officials. Men like Pecora who asked tough questions and demanded answers, including on the House of Morgan's operations, something unimaginable today under any leadership. Morgan's counsel, John W. Davis, called Pecora's questions outrageous, but Morgan had to answer in detail enough to shake the "secret government's" foundations.

Pecora's staff examined company records that revealed financial manipulations among the Street's powerful to reap enormous profits - enough for Morgan to gain control of most US industry, buy politicians and diplomats, and effectively control the most powerful banks in the country.

Years later in his book, Wall Street Under Fire, Pecora wrote:

"Undoubtedly, this small group of highly placed financiers, controlling the very springs of economic activity, holds more real power than any similar group in the United States." Morgan called it performing a "service" and exercising no more control than through "argument and persuasion."

His managing partner, Thomas Lamont, told the committee that the firm only offered advice that clients could accept or reject. Pecora learned otherwise as he peeled away the layers of company power and influence. He discovered "preferred clients" and friends of the bank lists in two tiers - special allies, operatives, and cronies and a "fishing list" from which new ones were recruited. In total, it showed Morgan was more powerful than Washington - that the firm effectively controlled a network of companies that made US financial policy for over three decades plus leading politicians and much of the federal bench.

Pecora discovered what's as true today - that a select group of giant banks run things. They set policy, rig the game to their advantage, buy politicians the way Morgan did, and pretty much run the country and the world.

Again Pecora from his book:

Morgan's power was "a stark fact. It was a great stream that was fed by many sources; by its deposits, by its loans, by its promotions, by its directorships, by its pre-eminent position as investment bankers, by its control of holding companies which, in turn, controlled scores of subsidiaries, and by its silken bonds of gratitude in which it skillfully enmeshed the chosen ranks of the 'preferred lists.' It reached into every corner of the nation and penetrated in public, as well as business affairs. The problems raised by such an institution go far beyond banking regulation in the narrow sense. It might be a formidable rival to the government itself."

Pecora proceeded from Morgan to others, powerful bankers in their own right like Kuhn, Loeb's Otto Kahn. Roosevelt championed the hearings and from them came legislative reforms, the kinds so desperately needed now but nowhere in sight by an administration totally subservient to money and power and thoroughly corrupted by them - after a scant three months in office.

Congressional Oversight Panel (COP) Calls for Sweeping Changes

Its head, Elizabeth Warren, called on the Treasury to get tough on TARP recipients, including:

-- questioning the "dangers inherent" in its strategy; the idea of "open-ended subsidies (to giant institutions) without adequately weighing potential pitfalls;"

-- acknowledging that it has no historical precedent and faint hope of succeeding;

-- leveraging the $700 billion in TARP funds well beyond what Congress appropriated - to an amount exceeding $4 trillion and smacking of high-level corruption;

-- firing top executives of failed institutions like Citigroup, Bank of America and AIG; "the very notion that anyone would infuse money into a financially troubled entity without demanding (management) changes is preposterous;"

-- shareholders to be wiped out; "it is crucial (for this) to happen;"

-- choosing among three alternatives for insolvent banks: "liquidation, receivership, or subsidization;" Geithner's plan is none of the above and essentially unworkable; it fails to acknowledge the decline's depth and degree to which troubled assets low valuations accurately reflect their worth;

-- if the downturn gets greater than forecast, "very different actions" will be needed "to restore financial stability."

Given the extent and long-term nature of today's crisis, it's shocking that bad policy practically assures the worst outcome. Maybe a government/Wall Street cabal prefers it to capitalize on the wreckage at fire sale prices, at home and globally, as part of a long-term process of sucking wealth to the top while ignoring its fallout, both human and economic. Those calculations don't enter their sophisticated models, only bottom line ones they can bank on.

Other Bank Bailout Critics

Willem Buiter was a former member of the Bank of England's Monetary Policy Committee (1997 - 2000). He's now has a Maverecon blog and is a Financial Times (FT) regular. He's also a fierce critic of bank bailouts, a policy he says wastes good time and money and is destined to fail.

"The good bank solution and slaughter of the unsecured creditors should have been pursued actively as soon as it became clear that most (US international banks were) insolvent." Soon enough it will be apparent anyway, before year end. "At that point, (their) de facto insolvency will be so self-evident that even the joint and several obfuscation of banks and Treasury will be unable to deny the obvious." And they'll be no fiscal resources to the rescue. "The likelihood of Congress voting even a nickel in additional financial support for the banks is zero."

Joseph Stiglitz was even blunter in an April 17 Bloomberg interview headlined: "Stiglitz Says White House Ties to Wall Street Doom Bank Rescue." He accused the administration of bailing out bankers at the expense of the economy. "All the ingredients they have so far are weak, and there are several missing" ones. The people who created this monster are "either in the pocket of the banks or they're incompetent."

"We don't have enough money, they don't want to go back to Congress, they don't want to do it in an open way, and they" won't act responsibly and place the banks in receivership where they belong and let shareholders, not taxpayers take the pain. This policy guarantees failure. It's "an absolute mess." It's a strategy to re-inflate a bubble that will do nothing to speed recovery. "It's a recipe for Japanese-style malaise."

Financial expert and investor safety advocate Martin Weiss is most critical of all. He calls bank stress tests "FLIM-FLAM" in accusing Washington of hiding the true condition of the nation's 19 largest banks.

Key economic indicators like GDP contraction and unemployment are far worse than stress test parameters. "Our own government is clearly cooking the books - using (false) criteria to deceive you; hoping you'll trust banks that are clearly hanging by a thread."

On May 4, they'll announce the results - jerry-rigged to present an illusion of solvency, but clearly a deceptive lie. The economy is sinking, not stabilizing, let alone recovering. The administration is bailing out bankers while wrecking the economy and millions of households. Why isn't Washington addressing the tough questions, he asks. Because the answers have them "terrified," so they play for time while home foreclosures are exploding, factories are sitting idle, consumption keeps falling, yet they hope conditions will improve.

No one asks:

-- what if states and cities can't provide vital services;

-- hospitals have to close down "due to disruptions in insurance payments;"

-- "supermarket shelves are emptied because trucking companies can't get short-term loans to stay in business;"

-- utilities "are crippled as the crisis kills the revenues they count on from corporations;" and

-- "soaring deficits drive interest rates sky-high and gut the dollar, driving the cost of living through the roof."

What if one day we discover America is no longer America. What if we realize that day is today.

Another Day, Another Scheme

The latest one lets ordinary people participate in Geithner's Public-Private Partnership Program (PPIP) that sounds suspiciously like "liars' loan" fraud, except this time "investments" in worthless junk are involved that will separate fools from their money.

The New York Times headlined the plan by comparing it to WW I Liberty Bonds that helped the country win the war. Now it's "to come to the aid of their banks - with the added inducement of possibly making some money...." The idea is for "large investment companies to create the financial-crisis equivalent of war bonds: bailout funds" to sucker the unwary to "invest" and, simultaneously, quiet opposition to the handouts.

According to money management firm BlackRock director Steven Baffico: "It's giving the guy on Main Street an equal seat at the table next to the big guys." Pimco's Bill Gross called it a "win-win-win policy." Absolutely for him so he loves it.

Plans are still being discussed. They won't likely be announced for several months, but already the scheme is apparent. It's to offload toxic junk on the public, let unwary investors take losses, relieve troubled banks of more of them, and arrange for investment fund issuers (like Pimco and BlackRock) to reap healthy fees if enough suckers can be enlisted to go along.

As troublesome is FDIC's role in the scam - through its transformation from insuring depositors to a much greater one guaranteeing over $1 trillion in junk assets, way over its charter $30 billion limit by twisting the rules to arrange it.

Its charter allows extraordinary steps to be taken when an "emergency determination by secretary of the Treasury" is made to mitigate "systemic risk." However, its Section 14 Borrowing Authority states:

"The Corporation is authorized to borrow from the Treasury....for insurance purposes (not speculation, bailouts, or other schemes, an amount) not exceeding in the aggregate $30,000,000,000 outstanding at any one time....Any such loan shall be used by the Corporation solely in carrying out its functions with respect to such insurance (of bank deposits, then up to $5000, now temporarily at $250,000)...."

"Before issuing an obligation or making a guarantee, the Corporation shall estimate the cost of such obligations (as well as market value)....the Corporation may not issue or incur any obligation, if, after (so doing) the aggregate amount of obligations of the Deposit Insurance Fund (exceeds) the total of the amounts authorized ($30 billion under) section 14(a)."

PPIP violates FDIC rules. If it's opened to the public, greater fraud will result with ordinary people hit hardest as usual, the best reason to avoid this and alert others to be as prudent. It's another dubious scheme to separate the unwary from their money and redirect it to the top - to the same fraudsters responsible for the crisis and their investment company partners going along with the scam.

The Treasury extended the deadline for PPIP participants (to April 24) and loosened some of its guidelines - suggesting that investor support has been less than expected.

However, on April 2, the Financial Times (FT) headlined: "Bailed-out banks eye toxic asset buys." Giants like JP Morgan Chase, Citigroup, Bank of America, and Goldman Sachs "are considering buying (each other's) toxic assets," and why not when it's a win-win way to offload each other's junk, do it at inflated prices, and stick taxpayers with the risk. New York University's Stern School of Business Professor Lawrence White put it this way:

"I'm worried about the following scenario: You and I have troubled assets, I buy assets from you, you buy them them from me, and at the end of the day it (looks) suspiciously like you bought assets from yourself" with Treasury funds.

PPIP prohibits banks from buying their own assets but lets them do it from other firms, either directly or through investment funds set up for that purpose, and according to Treasury: "It's an open program designed to get markets going."

On April 3, Reuters reported that "US regulators may be open to letting TARP recipients participate in the new program," and already Goldman Sachs and Morgan Stanley suggested they'll do it. Others expressed interest in what some observers call a giant money laundering scheme compounding the colossal flimflam that in the end most likely won't work - except to extract multi-trillions from the public to banksters with Washington acting complicitly as transfer agent.

Meanwhile economic fundamentals are deteriorating at depression-level speed and depth while Obama remains in denial. On April 2 at the G 20, he cited "a very productive summit that will be, I believe, a turning point in our pursuit of global economic recovery" when, in fact, it produced nothing beyond the usual hype - plus this time the quadrupling of the IMF's budget to inflict debt bondage on its willing partakers.

We're clearly in early stage unchartered waters of what Michel Chossudovsky calls "The Great Depression of the 21st Century" heading America for "fiscal collapse" because of policies amounting to "the most drastic curtailment in public spending in American history" - directing most of it for militarism and foreign wars, Wall Street bailouts, and half a trillion for public debt service.

In an April 12 commentary, longtime, well-respected Chicago financial journalist Terry Savage headlined "Social Security Myth" in reporting on some of the fallout. Someone has to pay for "fixes" and militarism, that someone is us, and target one is Social Security. According to Savage:

"Most likely, Social Security will become a "needs-based" payout to low income, elderly recipients - not a return of the 'investments' you made with all those FICA deductions from your pay check every month over your working career." In other words, Washington intends to renege on the 74-year old promise FDR announced to the nation on August 14, 1935:

"Today a hope of many years' standing is in large part fulfilled....This social security measure gives at least some protection to thirty millions of our citizens (now over 56 million, including Supplement Security Income recipients) who will reap direct benefits....This law represents a cornerstone in a structure....by no means complete. (It) will take care of human needs and at the same time provide the United States an economic structure of vastly greater soundness. (The passage of this bill marks) a historic (achievement) for all time."

It's now in jeopardy, so here's what Savage advises. Prepare. "Save more money, (and) start from an honest assessment" of what's coming. What FDR gave will be taken away. "And that's The Savage Truth." A disturbing and outrageous one as well as all the other ways we've been betrayed.

Source: MarketOracle

The Year of Cockeyed Economic Optimism Amidst a Fake Recovery

"The foundations of our economy are strong" - Retail sales fell in March as soaring job losses and tighter credit conditions forced consumers to cut back sharply on discretionary spending. Nearly every sector saw declines including electronics, restaurants, furniture, sporting goods and building materials. Auto sales continued their historic nosedive despite aggressive promotions on new vehicles and $13 billion of aid from the federal government.

The crash in housing, which began in July 2006, accelerated on the downside in March, falling 19 percent year-over-year, signaling more pain ahead. Mortgage defaults are rising and foreclosures in 2009 are estimated to be in the 2.1 million range, an uptick of 400,000 from 2008. Consumer spending is down, housing is in a shambles, and industrial output dropped at an annual rate of 20 percent, the largest quarterly decrease since VE Day. The systemwide contraction continues unabated with with no sign of letting up.

Conditions in the broader economy are now vastly different than those on Wall Street, where the S&P 500 and the Dow Jones Industrials have rallied for 5 weeks straight regaining more than 25 percent of earlier losses. Fed chief Ben Bernanke's $13 trillion in monetary stimulus has triggered a rebound in the stock market while Main Street continues to languish on life-support waiting for Obama's $787 billion fiscal stimulus to kick in and compensate for falling demand and rising unemployment. The rally on Wall Street indicates that Bernanke's flood of liquidity is creating a bubble in stocks since present values do not reflect underlying conditions in the economy. The fundamentals haven't been this bad since the 1930s.

The financial media is abuzz with talk of a recovery as equities inch their way higher every week. CNBC's Jim Cramer, the hyperventilating ringleader of "Fast Money", announced last week, "I am pronouncing the depression is over." Cramer and his clatter of media cheerleaders ignore the fact that every sector of the financial system is now propped up with Fed loans and T-Bills without which the fictive free market would collapse in a heap. For 19 months, Bernanke has kept a steady stream of liquidity flowing from the vault at the US Treasury to the NYSE in downtown Manhattan. The Fed has recapitalized financial institutions via its low interest rates, its multi-trillion dollar lending facilities, and its direct purchase of US sovereign debt and Fannie Mae mortgage-backed securities. (Monetization) The Fed's balance sheet has become a dumping ground for all manner of toxic waste and putrid debt-instruments for which there is no active market. When foreign central banks and investors realize that US currency is backed by dodgy subprime collateral; there will be a run on the dollar followed by a stampede out of US equities. Even so, Bernanke assures his critics that "the foundations of our economy are strong".

As for the recovery, market analyst Edward Harrison sums it up like this:

"This is a fake recovery because the underlying systemic issues in the financial sector are being papered over through various mechanisms designed to surreptitiously recapitalize banks while monetary and fiscal stimulus induces a rebound before many banks' inherent insolvency becomes a problem. This means the banking system will remain weak even after recovery takes hold. The likely result of the weak system will be a relapse into a depression-like circumstances once the temporary salve of stimulus has worn off. Note that this does not preclude stocks from large rallies or a new bull market from forming because as unsustainable as the recovery may be, it will be a recovery nonetheless." (Edward Harrison, "The Fake Recovery", Credit Writedowns)

The rally in the stock market will not fix the banking system, slow the crash in housing, patch-together tattered household balance sheets, repair failing industries or reverse the precipitous decline in consumer confidence. The rising stock market merely indicates that profit-driven speculators are back in business taking advantage of the Fed's lavish capital injections which are propelling equities into the stratosphere. Meanwhile, the unemployment lines continue to swell, the food banks continue to run dry and the homeless shelters continue to burst at the seams. So far, $12 trillion has been pumped into the financial system while less than $450 billion fiscal stimulus has gone to the "real" economy where workers are struggling just to keep food on the table. The Fed's priorities are directed at the investor class not the average working Joe. Bernanke is trying to keep Wall Street happy by goosing asset values with cheap capital, but the increases to the money supply are putting more downward pressure on the dollar. The Fed chief has also begun purchasing US Treasuries, which is the equivalent of writing a check to oneself to cover an overdraft in one's own account. This is the kind of gibberish that passes as sound economic policy. The Fed is incapable if fixing the problem because the Fed is the problem.

Last week, the market shot up on news that Wells Fargo's first quarter net income rose 50 percent to $3 billion pushing the stock up 30 percent in one session. The financial media celebrated the triumph in typical manner by congratulating everyone on set and announcing that a market "bottom" had been reached . The news on Wells Fargo was repeated ad nauseam for two days even though everyone knows that the big banks are holding hundreds of billions in mortgage-backed assets which are marked way above their true value and that gigantic losses are forthcoming. Naturally, the skeptics were kept off-camera or lambasted by toothy anchors as doomsayers and Cassandras. Regretably, creative accounting and media spin can only work for so long. Eventually the banks will have to write down their losses and raise more capital. Wells Fargo slipped the noose this time, but next time might not be so lucky. Here's how Bloomberg sums up wells situation:

"Wells Fargo & Co., the second biggest U.S. home lender, may need $50 billion to pay back the federal government and cover loan losses as the economic slump deepens, according to KBW Inc.’s Frederick Cannon.

KBW expects $120 billion of “stress” losses at Wells Fargo, assuming the recession continues through the first quarter of 2010 and unemployment reaches 12 percent, Cannon wrote today in a report. The San Francisco-based bank may need to raise $25 billion on top of the $25 billion it owes the U.S. Treasury for the industry bailout plan, he wrote.

“Details were scarce and we believe that much of the positive news in the preliminary results had to do with merger accounting, revised accounting standards and mortgage default moratoriums, rather than underlying trends,” wrote Cannon, who downgraded the shares to “underperform” from “market perform.” “We expect earnings and capital to be under pressure due to continued economic weakness.”

What happened to all those nonperforming loans and garbage MBS? Did they simply vanish into the New York ether? Could Wells sudden good fortune have something to do with the recent FASB changes to accounting guidelines on "mark to market" which allow banks greater flexibility in assigning a value to their assets? Also, Judging by the charts on the Internet, Wells appears to have the smallest "ratio of loan loss reserves" of the four biggest banks. That's hardly reassuring.

Paul Krugman takes an equally skeptical view of the Wells report:

"About those great numbers from Wells Fargo....remember, reported profits aren’t a hard number; they involve a lot of assumptions. And at least some analysts are saying that the Wells assumptions about loan losses look, um, odd. Maybe, maybe not; but you do have to say that it would be awfully convenient for banks to sound the all clear right now, just when the question of how tough the Obama administration will really get is hanging in the balance."

The banks are all playing the same game of hide-n-seek, trying to hoodwink the public into thinking they are in a stronger capital position than they really are. It's just more Wall Street chicanery papered over with vapid media propaganda. The giant brokerage houses and the financial media are two spokes on the same wheel gliding along in perfect harmony. Unfortunately, media fanfare and massaging the numbers won't pull the economy out of its downward spiral or bring about a long-term recovery. That will take fiscal policy, jobs programs, debt relief, mortgage writedowns and a progressive plan to rebuild the nation's economy on a solid foundation of productivity and regular wage increases. So far, the Obama administration has focused all its attention and resources on the financial system rather than working people. That won't fix the problem.

Deflation has latched on to the economy like a pitbull on a porkchop. Food and fuel prices fell in March by 0.1 percent while unemployment continued its slide towards 10 percent. Wholesale prices fell by the most in the last 12 months since 1950. According to MarketWatch, "Industrial production is down 13.3% since the recession began in December 2007, the largest percentage decline since the end of World War II"....The capacity utilization rate for total industry fell further to 69.3 percent, a historical low for this series, which begins in 1967." (Federal Reserve) The persistent fall in housing prices (30 percent) and losses in home equity only add to deflationary pressures. The wind is exiting the humongous credit bubble in one great gust.

Obama's $787 billion stimulus is too small to take up the slack in a $14 trillion per year economy where manufacturing and industrial capacity have slipped to record lows and unemployment is rising at 650,000 per month. High unemployment is lethal to an economy where consumer spending is 72 percent of GDP. Without debt relief and mortgage cram-downs, consumption will sputter and corporate profits will continue to shrink. S&P 500 companies have already seen a 37 percent drop in corporate profits. Unless the underlying issues of debt relief and wages are dealt with, the present trends will persist. Growth is impossible when workers are broke and can't afford to buy the things the make.

The stimulus must be increased to a size where it can do boost economic activity and create enough jobs to get over the hump. Yale economics professor Robert Schiller makes the case for more stimulus in his Bloomberg commentary on Tuesday:

"In the Great Depression ... the U.S. government had a great deal of trouble maintaining its commitment to economic stimulus. 'Pump- priming' was talked about and tried, but not consistently. The Depression could have been mostly prevented, but wasn’t.... In the face of a similar Depression-era psychology today, we are in need of massive pump-priming again.

It would be a shame if we are so overwhelmed by anger at the unfairness of it all that we do not take the positive measures needed to restore us to full employment. That would not just be unfair to the U.S. taxpayer. That would be unfair to those who are living in Hoovervilles...; it would be unfair to those who are being evicted from their homes, and can’t find new ones because they can’t find jobs. That would be unfair to those who have to drop out of school because they, or their parents, can’t find jobs.

It is time to face up to what needs to be done. The sticker shock involved will be large, but the costs in terms of lost output of not meeting either the credit target or the aggregate demand target will be yet larger." (Robert Schiller, Depression Lurks unless there's more Stimulus, Bloomberg)

A Year of Cockeyed Optimism

"We are starting to see glimmers of hope across the economy." President Barack Obama, April press conference

Even though industrial production, manufacturing, retail and housing are in freefall, the talk on Wall Street still focuses on the elusive recovery. The S&P 500 touched bottom at 666 on March 6 and has since retraced its steps to 852. Clearly, Bernanke's market-distorting capital injections have played a major role in the turnabout. Former Secretary of Labor under Bill Clinton and economics professor at University of Cal. Berekley, Robert Reich, explains it like this on his blog-site:

"All of these pieces of upbeat news are connected by one fact: the flood of money the Fed has been releasing into the economy. ... So much money is sloshing around the economy that its price is bound to drop. And cheap money is bound to induce some borrowing. The real question is whether this means an economic turnaround. The answer is it doesn't.

Cheap money, you may remember, got us into this mess. Six years ago, the Fed (Alan Greenspan et al) lowered interest rates to 1 percent.... The large lenders did exactly what they could be expected to do with free money -- get as much of it as possible and then lent it out to anyone who could stand up straight (and many who couldn't). With no regulators looking over their shoulders, they got away with the financial equivalent of murder.

The only economic fundamental that's changed since then is that so many people got so badly burned that the trust necessary for consumers, investors, and businesses to repeat what they did then has vanished.... yes, some consumers will refinance and use the extra money they extract from their homes to spend again. But most will use the extra money to pay off debt and start saving again, as they did years ago....

I admire cockeyed optimism, and I understand why Wall Street and its spokespeople want to see a return of the bull market. Hell, everyone with a stock portfolio wants to see it grow again. But wishing for something is different from getting it. And cockeyed optimism can wreak enormous damage on an economy. Haven't we already learned this? (Robert Reich's Blog, "Why We're Not at the Beginning of the End, and Probably Not Even At the End of the Beginning")

If the purpose of Bernanke's grand economics experiment was to create uneven inflation in the equities markets and, thus, widen the chasm between the financials and the real economy; he seems to have succeeded. But for how long? How long will it be before foreign banks and investors realize that the Fed's innocuous-sounding "lending facilities" have released a wave of low interest speculative liquidity into the capital markets? How else does one explain soaring stocks when industrial capacity, manufacturing, exports, corporate profits, retail and every other sector have been pounded into rubble? Liquidity is never inert. It navigates the financial system like mercury in water darting elusively to the area which offers the greatest opportunity for profit. That's why the surge popped up first in the stock market. (so far) When it spills into commodities--and oil and food prices rise--Bernanke will realize his plan has backfired..

Bernanke's financial rescue plan is a disaster. He should have spent a little less time with Milton Friedman and a little more with Karl Marx. It was Marx who uncovered the root of all financial crises. He summed it up like this:

"The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power of society constituted their limit." (Karl Marx, Capital, vol. 3, New York International publishers, 1967; Thanks to Monthly review, John Bellamy Foster)

Bingo. Message to Bernanke: Workers need debt-relief and a raise in pay not bigger bailouts for chiseling fatcat banksters.

Source: Mike Whitney

Mike is a well respected freelance writer living in Washington state, interested in politics and economics from a libertarian perspective.

William K. Black Criticizes the Bailout Plan

William K. Black, professor of Law and Economics at the University of Missouri and author of "The Best Way to Rob a Bank is to Own One" discusses his criticism of Tim Geithner's bank rescue plan.

US Senator: "This Country Will Go Bankrupt"

Even though he was almost a member of the new Obama administration, New Hampshire Republican Judd Gregg Sunday slammed President Obama’s approach to handling the country’s fiscal outlook.



“The practical implications of this is bankruptcy for the United States,” Gregg said of the Obama’s administration’s recently released budget blueprint. “There’s no other way around it. If we maintain the proposals that are in this budget over the ten-year period that this budget covers, this country will go bankrupt. People will not buy our debt, our dollar will become devalued. It is a very severe situation."

Geithner's Five Big Misconceptions

Tim Geithner has finally revealed his plan to fix the banking system and economy. Paul Krugman, James Galbraith, and others have already trashed it.

Why?

In short, because the plan is yet another massive, ineffective gift to banks and Wall Street. Taxpayers, of course, will take the hit.

Why does Tim Geithner keep repackaging the same trash-asset-removal plan that he has been trying to get approved since last fall?

In our opinion, because Tim Geithner formed his view of this crisis last fall, while sitting across the table from his constituents at the New York Fed: The CEOs of the big Wall Street firms. He views the crisis the same way Wall Street does--as a temporary liquidity problem--and his plans to fix it are designed with the best interests of Wall Street in mind.

If Geithner's plan to fix the banks would also fix the economy, this would be tolerable. But no smart economist we know of thinks that it will.

We think Geithner is suffering from five fundamental misconceptions about what is wrong with the economy. Here they are:

The trouble with the economy is that the banks aren't lending. The reality: The economy is in trouble because American consumers and businesses took on way too much debt and are now collapsing under the weight of it. As consumers retrench, companies that sell to them are retrenching, thus exacerbating the problem. The banks, meanwhile, are lending. They just aren't lending as much as they used to. Also the shadow banking system (securitization markets), which actually provided more funding to the economy than the banks, has collapsed.

The banks aren't lending because their balance sheets are loaded with "bad assets" that the market has temporarily mispriced. The reality: The banks aren't lending (much) because they have decided to stop making loans to people and companies who can't pay them back. And because the banks are scared that future writedowns on their old loans will lead to future losses that will wipe out their equity.

Bad assets are "bad" because the market doesn't understand how much they are really worth. The reality: The bad assets are bad because they are worth less than the banks say they are. House prices have dropped by nearly 30% nationwide. That has created something in the neighborhood of $5+ trillion of losses in residential real estate alone (off a peak market value of housing about $20+ trillion). The banks don't want to take their share of those losses because doing so will wipe them out. So they, and Geithner, are doing everything they can to pawn the losses off on the taxpayer.

Once we get the "bad assets" off bank balance sheets, the banks will start lending again. The reality: The banks will remain cautious about lending, because the housing market and economy are still deteriorating. So they'll sit there and say they are lending while waiting for the economy to bottom.

Once the banks start lending, the economy will recover. The reality: American consumers still have debt coming out of their ears, and they'll be working it off for years. House prices are still falling. Retirement savings have been crushed. Americans need to increase their savings rate from today's 5% (a vast improvement from the 0% rate of two years ago) to the 10% long-term average. Consumers don't have room to take on more debt, even if the banks are willing to give it to them.

In Geithner's plan, this debt won't disappear. It will just be passed from banks to taxpayers, where it will sit until the government finally admits that a major portion of it will never be paid back.

Source: BusinessInsider

Krugman Trashes Geithner's Bank Plan

Over the weekend The Times and other newspapers reported leaked details about the Obama administration’s bank rescue plan, which is to be officially released this week. If the reports are correct, Tim Geithner, the Treasury secretary, has persuaded President Obama to recycle Bush administration policy — specifically, the “cash for trash” plan proposed, then abandoned, six months ago by then-Treasury Secretary Henry Paulson.

This is more than disappointing. In fact, it fills me with a sense of despair.
After all, we’ve just been through the firestorm over the A.I.G. bonuses, during which administration officials claimed that they knew nothing, couldn’t do anything, and anyway it was someone else’s fault. Meanwhile, the administration has failed to quell the public’s doubts about what banks are doing with taxpayer money.

And now Mr. Obama has apparently settled on a financial plan that, in essence, assumes that banks are fundamentally sound and that bankers know what they’re doing.
It’s as if the president were determined to confirm the growing perception that he and his economic team are out of touch, that their economic vision is clouded by excessively close ties to Wall Street. And by the time Mr. Obama realizes that he needs to change course, his political capital may be gone.

Let’s talk for a moment about the economics of the situation.

Right now, our economy is being dragged down by our dysfunctional financial system, which has been crippled by huge losses on mortgage-backed securities and other assets.

As economic historians can tell you, this is an old story, not that different from dozens of similar crises over the centuries. And there’s a time-honored procedure for dealing with the aftermath of widespread financial failure. It goes like this: the government secures confidence in the system by guaranteeing many (though not necessarily all) bank debts. At the same time, it takes temporary control of truly insolvent banks, in order to clean up their books.

That’s what Sweden did in the early 1990s. It’s also what we ourselves did after the savings and loan debacle of the Reagan years. And there’s no reason we can’t do the same thing now.

But the Obama administration, like the Bush administration, apparently wants an easier way out. The common element to the Paulson and Geithner plans is the insistence that the bad assets on banks’ books are really worth much, much more than anyone is currently willing to pay for them. In fact, their true value is so high that if they were properly priced, banks wouldn’t be in trouble.

And so the plan is to use taxpayer funds to drive the prices of bad assets up to “fair” levels. Mr. Paulson proposed having the government buy the assets directly. Mr. Geithner instead proposes a complicated scheme in which the government lends money to private investors, who then use the money to buy the stuff. The idea, says Mr. Obama’s top economic adviser, is to use “the expertise of the market” to set the value of toxic assets.

But the Geithner scheme would offer a one-way bet: if asset values go up, the investors profit, but if they go down, the investors can walk away from their debt. So this isn’t really about letting markets work. It’s just an indirect, disguised way to subsidize purchases of bad assets.

The likely cost to taxpayers aside, there’s something strange going on here. By my count, this is the third time Obama administration officials have floated a scheme that is essentially a rehash of the Paulson plan, each time adding a new set of bells and whistles and claiming that they’re doing something completely different. This is starting to look obsessive.

But the real problem with this plan is that it won’t work. Yes, troubled assets may be somewhat undervalued. But the fact is that financial executives literally bet their banks on the belief that there was no housing bubble, and the related belief that unprecedented levels of household debt were no problem. They lost that bet. And no amount of financial hocus-pocus — for that is what the Geithner plan amounts to — will change that fact.

You might say, why not try the plan and see what happens? One answer is that time is wasting: every month that we fail to come to grips with the economic crisis another 600,000 jobs are lost.
Even more important, however, is the way Mr. Obama is squandering his credibility. If this plan fails — as it almost surely will — it’s unlikely that he’ll be able to persuade Congress to come up with more funds to do what he should have done in the first place.

All is not lost: the public wants Mr. Obama to succeed, which means that he can still rescue his bank rescue plan. But time is running out.

Source: New York Times

The Geithner Plan FAQ

Q: What is the Geithner Plan?
A: The Geithner Plan is a trillion-dollar operation by which the U.S. acts as the world's largest hedge fund investor, committing its money to funds to buy up risky and distressed but probably fundamentally undervalued assets and, as patient capital, holding them either until maturity or until markets recover so that risk discounts are normal and it can sell them off--in either case at an immense profit.

Q: What if markets never recover, the assets are not fundamentally undervalued, and even when held to maturity the government doesn't make back its money?
A: Then we have worse things to worry about than government losses on TARP-program money--for we are then in a world in which the only things that have value are bottled water, sewing needles, and ammunition.

Q: Where does the trillion dollars come from?
A: $150 billion comes from the TARP in the form of equity, $820 billion from the FDIC in the form of debt, and $30 billion from the hedge fund and pension fund managers who will be hired to make the investments and run the program's operations.

Q: Why is the government making hedge and pension fund managers kick in $30 billion?
A: So that they have skin in the game, and so do not take excessive risks with the taxpayers' money because their own money is on the line as well.

Q: Why then should hedge and pension fund managers agree to run this?
A: Because they stand to make a fortune when markets recover or when the acquired toxic assets are held to maturity: they make the full equity returns on their $30 billion invested--which is leveraged up to $1 trillion with government money.

Q: Why isn't this just a massive giveaway to yet another set of financiers?
A: The private managers put in $30 billion and the government puts in $970 billion. If we were investing in a normal hedge fund, we would have to pay the managers 2% of the capital and 20% of the profits every year. In this case, the private managers' returns can be thought of as (a) a share of the portfolio's total return proportional to their 3% contribution, plus (b) a "management incentive fee" of (i) 0% of the capital value and (ii) between 0% (if the portfolio returns 3% per year) and 9% (if the portfolio returns 10% per year)--much less than hedge-fund managers typically charge. the Treasury is only paying 0% of the capital value and 17% of the profits every year.

Q: Why do we think that the government will get value from its hiring these hedge and pension fund managers to operate this program?
A: They do get 17% of the equity return. 17% of the return on equity on a $1 trillion portfolio that is leveraged 5-1 is incentive.

Q: So the Treasury is doing this to make money?
A: No: making money is a sidelight. The Treasury is doing this to reduce unemployment.

Q: How does having the U.S. government invest $1 trillion in the world's largest hedge fund operations reduce unemployment?
A: At the moment, those businesses that ought to be expanding and hiring cannot profitably expand and hire because the terms on which they can finance expansion are so lousy. The terms on which they can finance expansion are so lazy because existing financial asset prices are so low. Existing financial asset prices are so low because risk and information discounts have soared. Risk and information discounts have collapsed because the supply of assets is high and the tolerance of financial intermediaries for holding assets that are risky or that might have information-revelation problems are low.

Q: So?
A: So if we are going to boost asset prices to levels at which those firms that ought to be expanding can get finance, we are going to have to shrink the supply of risky assets that our private-sector financial intermediaries have to hold. The government buys up $1 trillion of financial assets, and lo and behold the private sector has to hold $1 trillion less of risky and information-impacted assets. Their price goes up. Supply and demand.

Q: And firms that ought to be expanding can then get financing on good terms again, and so they hire, and unemployment drops?
A: No. Our guess is that we would need to take $4 trillion out of the market and off the supply that private financial intermediaries must hold in order to move financial asset prices to where they need to be in order to unfreeze credit markets, and make it profitable for those businesses that should be hiring and expanding to actually hire and expand.

Q: Oh.
A: But all is not lost. This is not all the administration is doing. This plan consumes $150 billion of second-tranche TARP money and leverages it to take $1 trillion in risky assets off the private sector's books. And the Federal Reserve is taking an additional $1 trillion of risky debt off the private sector's books and replacing it with cash through its program of quantitative easing. And there is the fiscal boost program. And there is a potential second-round stimulus in September. And there is still $200 billion more left in the TARP to be used in other ways.
Think of it this way: the Fed's and the Treasury's announcements in the past week are what we think will be half of what we need to do the job. And if it turns out that we are right, more programs and plans will be on the way.

Q: This sounds very different from the headline of the Andrews, Dash, and Bowley article in the New York Times this morning: "Toxic Asset Plan Foresees Big Subsidies for Investors."
A: You are surprised, after the past decade, to see a New York Times story with a misleading headline?

Q: No.
A: The plan I have just described to you is the plan that was described to Andrews, Dash, and Bowley. They write of "coax[ing] investors to form partnerships with the government" and "taxpayers... would pay for the bulk of the purchases..."--that's the $30 billion from the private managers and the $150 billion from the TARP that makes up the equity tranche of the program. They write of "the Federal Deposit Insurance Corporation will set up special-purpose investment partnerships and lend about 85 percent of the money..."--that's the debt slice of the program. They write that "the government will provide the overwhelming bulk of the money — possibly more than 95 percent..."--that is true, but they don't say that the government gets 80% of the equity profits and what it is owed the FDIC on the debt tranche. That what Andrews, Dash, and Bowley say sounds different is a big problem: they did not explain the plan very well. Deborah Solomon in the Wall Street Journal does, I think, much better. David Cho in tomorrow morning's Washington Post is in the middle.

The Obama Deception

The Obama Deception is the latest documentary film from talk-show host anti-Globalist activist Alex Jones. Watch in full high quality video.

Obama Deficits To Be Much Higher Than Expected

The White House has estimated that the Obama budget will produce deficits of about $6.9 trillion over 10 years. But a powerful congressional office that is due to file its budgetary estimate on Friday will report a uch larger deficit.

The Congressional Budget Office has warned the White House in advance of Friday's estimate that the deficit projections will outpace the White House estimate, perhaps by as much as 20%, Politico reports. Democrats expect that the CBO projections will add around $1.5 trillion more to the Obama deficit.

One of the things pushing up the deficit is a lowered baseline for economic performance over the next few years. In addition, some spending programs may be viewed as more costly than earlier anticipated.

"In 2014, at which point the White House projects a deficit of $570 billion, it’s now expected that CBO will show a number in excess of $700 billion," Politico reports. "Five years later, in 2019, Obama’s budget concedes that the deficit will have widened to $712 billion; Democrats expect CBO to put the number over $1 trillion."

Source: John Carney @ Business Insider

Can Brown Afford to “hang” with Obama?

For the Prime Minister, yesterday`s comments from President Obama in Washington may be a case of Be careful what you wish for! President Obama stated that countries must take concerted action to revive the global economy and spur on new economic growth. Prior to his trip to the US last week, these are the kind of comments that Gordon Brown had been eager to hear from the US President.

The question Brown now faces, as he heads into the upcoming G20 meeting in April, is can the UK actually afford to take a leading role alongside Obama. As Brown headed to Washington he must have relished the opportunity to be seen by the world as Obama`s partner in saving the global economy! Brown and his top advisors must have thought this would be their ticket to a bump in the polls which would spur the PM and Labour onto a great election victory next year.

The hitch in this plan is that Obama believes the way to save the global economy is to spend, spend, spend – and then spend some more! For us in the UK the cupboard is already bare. Yesterday Alistair Darling started to lay the ground work to prepare us for next month’s budget. Darling signalled that we would not be seeing any new fiscal stimulus plans in the budget and called for restraint. Restraint is something that is in very short supply in Washington these days. On the day that President Obama signed another $420 billion of new spending in law - and before the ink had even dried - there was already talk in Congress of Stimulus 2.0.

This lays the backdrop for the coming G20 amid growing reports of a rift between the US and Europe. There`s no doubt that Brown wants to “hang” with Obama and the cool kids but in the end his pockets will just not be deep enough.

Special Relationship Not So Special

I think someone forgot to tell President Obama about this "special relationship" between the US and UK!

Here`s a Selection of Headlines From the Last Couple of Days.

***Obama's Blockbuster Gift for Brown: 25 DVDs

While the British prime minister presented Obama with uniquely historic gifts symbolizing America's relationship with England, the president gave Brown a set of movies.

***Obama's DVD gift to Brown - it's the thought that counts

The British press are appalled by Barack Obama's present of 25 DVDs for Gordon Brown. But could there be a message in the president's selection?

***President Obama Raids His DVD Collection For British Prime Minister

In the world of international politics, ceremonial gifts representing the host nation are often the drug of choice for visiting dignitaries. From ornamental swords to antique furniture, a US president can rake in dozens of items over the course of their administration.

***President Obama returns bust of Sir Winston Churchill back to Britain

***Barack Obama sends bust of Winston Churchill on its way back to Britain