Breaking bad on the border

A large contingent of American protestors has gathered at the Murrieta station of U.S. Customs and Border Protection (CBP). Their intent is to prevent CBP from bussing illegal immigrants into the station. Their effect is to disrupt CBP from processing the illegal immigrants for deportation. Why would the protestors do something that has the effect of being an obstacle to what they’d like to see happen?

One person actually said that Obama is bussing illegal Mexicans into the USA so they can vote Democrat in the next election. He might be more ignorant of the US Constitution than most of the protestors in Murrieta but some of them actually have the idea that the busses picked up the illegal immigrants in Mexico and are bussing them to Murrieta so CBP can grant them some status that would allow them to stay there legally. Some of the protestors want CBP to bus the illegal immigrants back across the border into Mexico and the rest want them deported.

The reason CBP is actually bussing illegal aliens to its Murrieta station is because of a humanitarian crisis that has developed in recent months. Since October 2013, CBP has apprehended more than 52,000 unaccompanied minors entering this country without documentation — double the number apprehended in the same period the prior year. Many of the children are trafficked here by criminal syndicates. A great concentration of these children are apprehended in the Rio Grande Valley sector of CBP.

The cause of this influx is a rumor that spread throughout Latin America, especially in Central America, that unaccompanied minors who make it into the USA will be issued a permit to stay here. This is a false rumor — there are no immigration status deferrals for unaccompanied minors. They are subject to the same deportation criteria that adults are. So one of the things CBP has done is to conduct a Spanish-language awareness campaign and run public service announcements in Central America saying that unaccompanied minors apprehended in the US will be subject to deportation.

While unaccompanied minors receive no special immigration status that adults and minors with adults do not get, they do have to be processed very differently. The CBP cannot simply transfer the unaccompanied minors to U.S. Immigration and Customs Enforcement (ICE) like they do with other undocumented aliens. They have to be sure the children have food, shelter, and safety because ICE has a backlog on deportation proceedings. In fact, George W. Bush passed a law in 2008 that requires ICE to have all unaccompanied minors appear in immigration court regarding their status rather than simply processing them administratively (ostensibly to help reduce child trafficking).

Therefore, CBP has to shelter the children in their detention centers until they can find a family member in this country or a non-governmental organization that can take custody of them before transferring the unaccompanied minors to ICE. This takes time, so that’s why the detention centers in Texas are getting overcrowded. Presumably, Americans don’t want the U.S. Department of Homeland Security (DHS) to build housing for the children or have to feed them while they go through their extended deportation proceedings and I hope they don’t want the administration to detain them in prisons.

So CBP is transporting the detainees to other less crowded detention centers, such as in its Murrieta and San Ysidro stations. In the meantime, President Obama has requested $3.7-billion from congress to help ease the surge in illegal aliens apprehended here, with the bulk of the money to help process the unaccompanied minors. One failure by the administration is to not also try to get funding to increase border security. After all, the DHS would not have to process and deport them at all if the illegal aliens didn’t make it across the border in the first place.

Getting back to the concerns of the protestors in Murrieta, CBP is not bussing the aliens in from Mexico. All of these aliens are apprehended inside the USA. And CBP cannot bus them back into Mexico because the majority of the aliens are not Mexican. Even if they were, Mexico would not permit it unless the aliens were processed first (to verify that they actually came across the Mexican border in the first place, that they are Mexican, that they do not qualify for asylum, and that they are not in the USA for a legitimate reason, etc.). The protestors in Murrieta demand that the president deport the aliens and that’s exactly what the DHS is doing. CBP is sending them to a detention center where they can be more expeditiously processed for transfer to ICE, which is the agency that conducts deportation proceedings.

The protestors in Murrieta need to stop causing trouble with Customs and Border Protection. It’s just trying to do what the protestors ultimately want done. But by obstructing a federal agency from doing its duty, the protestors are breaking as bad as the illegal aliens crossing the border.

Not how to create jobs

I was watching a guest on the Nightly Business Report tonight speak about employment not increasing in America the last couple years. He went on to say that the way to increase employment is to make it easy for job creators to get credit and to reduce regulation. You would think that being a business show, the guest would not be so wrong.

Let's break this claim down to see how wrong it is, starting with the idea that extending credit to employers would make them hire more employees. It's possible that it would in some economic environments but not in this one. Right now, businesses are flush with cash, so credit is not what they need. If they really wanted to hire employees, they would just dip into their retained earnings. But they're not because there's not enough demand to make businesses confident about hiring. And the businesses that do need credit don't have retained earnings for the same reason -- there's insufficient demand for their products. So extending credit to them would not make them hire more employees either.

Reducing regulation isn't going to create jobs either, and for pretty much the same reason -- reducing regulation doesn't have any impact on demand. It might make it easier for a company to operate or make more profit but that's not why businesses hire more employees. They hire more employees because sales are going up and they need more staff to make more widgets or provide more service. Again, regulation does not fit into that equation but, again, demand does.

So, even though the guest was on a business show, he was wrong -- making it easy for job creators to get credit and reducing regulation is not how to create jobs. To increase employment, there needs to be an increase in demand, which is accomplished by stimulus in this economic environment.

Newt-land: the mirror image of reality

Newt Gingrich was on the stump today and I saw an excerpt of his speech. He was echoing the same claims he has been making for months now. He was essentially telling the crowd that President Barack Obama has:

• raised taxes
• increased regulation
• is anti-American energy
• wages class warfare

Of course, the crowd probably believed every one of these claims, even though they are all blatant lies.

In fact, Obama has ratified every extension of tax rates brought to his desk on taxes that would have otherwise increased according to law from before he was in office. He requested authority to consolidate federal agencies, which reduces regulation, and has consistently stated support for eliminating obsolete regulations that unnecessarily stifle business. His official energy policy is to develop more energy here at home and reduce our dependency on foreign oil. And he's bailed out bankers and forced millions of Americans to buy health insurance from private corporations, which heavily favors the wealthy.

Basically, Newt is 180-degrees wrong on every count.

Occupational hazard

Today was the deadline the city of Los Angeles gave for the Occupy L.A. protesters to clear out their encampment at City Hall. Well take a look around: they're still there. By now, the turf is worn out and tents are still pitched everywhere. Any taxpayers wanting to quietly relax at this public property they pay for are out of luck. They'll need to share it with hundreds of other people -- most unbathed and unkempt after camping out there for days.

I'm as big of a supporter of the Occupy movement as anyone else. I hate seeing the socio-economic divide growing in our society year by year. I despise the grip Wall Street and corporate America have over our government. The 99% of us have the right to peacefully protest this inequity. But I disagree with the tactics the Occupy movement is using.

Yes, the 99% are raising awareness of the issue by being on the streets but too many of them are doing it unlawfully. All the city of Los Angeles asks is for the protesters to apply for a permit so that it can appropriately protect the health and safety of all at city hall. Yet no one has bothered to apply for one, even though they've been there at city hall for days.

Worse yet, they've picked the wrong place to protest in the first place. The city of Los Angeles has little -- if any -- power to put a stop to the growing power and wealth of the One Percent. The 99% should be occupying Capital Hill because that's the only place where there is the power to end the inequity.

The other tactical error the Occupy movement is making is to not come up with solutions. No matter how many Americans acknowledge the socio-economic divide, it won't stop it from growing. The Occupy movement needs to lay out tangible actions for the powers that be to take to put an end to Wall Street's stranglehold over our economy and government. Until they do so, the 99% have no one to blame for the status quo but themselves.

I have a better idea. The 99% should occupy their respective congressmen's mailboxes and their precinct's ballot boxes. If every one of us wrote to our federal representatives and told them what we want them to do, then threatened to elect someone else next term if our congressman doesn't do what we say, we would get some action out of them. But we'd also have to follow through on our threats instead of continuing to be the same ignorant, apathetic Americans so many of us are.

The best thing about it is that we wouldn't have to brave the hazards of an urban campground to get things done. We could mobilize an occupation from the safety of our own homes and only need to venture out on election day.

Doomsday!

The federal government is rapidly approaching the limit of the amount of debt congress permits it to have. Meanwhile, politicians and the media alike are blustering about a debt ceiling doomsday scenario. They base this assertion on the premise that hitting the debt ceiling means that the federal government goes into default.

I believe this is a non sequitur. What I don't understand is why hitting the debt ceiling necessarily means the federal government goes into default. It has almost $200-billion in monthly revenues -- as I understand it, that's more than enough to service our current debt obligations.

Wouldn't hitting the debt ceiling just mean that the Fed would have to stop issuing new bonds and the government would have to operate without a deficit? As I recall, America was in pretty good fiscal shape the last time we ran a budget surplus -- much better than it is now. I see no problem with spending the same as the federal government did then.

The irony is that the GOP claims federal spending is the least productive application of savings. Yet many of those same Republicans support increasing the debt ceiling. There is a finite amount of savings in the financial markets. If the federal government takes on more debt, it takes the amount of that increase away from private investment. You can't have it both ways.

The most obvious question about this issue is, if congress raises the debt ceiling every time we hit it, what is the point of having a debt ceiling in the first place? If I'm missing something in this equation, please post a comment and explain.

Congress needs to eat humble pie...

...because neither the Democrats nor the GOP are taking much of a bite out of the deficit.

Click the image above to view full-size.

Are home buyers exempt from personal responsibility?

While the Obama administration struggles to prevent foreclosures, Americans with responsible mortgages are left asking, "Where's relief for homeowners who played by rules?" In the middle of the decade, many people were watching their friends' and neighbors' homes wildly appreciate. They determined that they needed to get in on the 'easy money,' blithely ignoring the adage they were taught from childhood: what goes up, must come down.

In the meantime, a few others watched the mayhem in the market and decided not to mortgage their future on what was clearly overpriced housing. They lived in their modest apartments until valuations fell back to a reasonable level, then bought their homes with a fixed mortgage payment they could manage.

No sooner did they buy them, when the feds began creating programs to bail out those other homeowners. Remember those buyers with mortgages so big that they eat up every penny of what would be their discretionary income? How about the ones who got mortgages they could afford in 2006 knowing they might adjust to a level they couldn't afford in a few years but just assumed they'd refinance when that happened? Those were the only ones the Obama administration wanted to fix the game for, baking a moral hazard right into the last market that needs it.

What the housing market needs in its current condition is for the government to keep its hands off of it. Distressed homeowners who have to become renters would have been much better off had they instead been renters all along anyway. If the feds create any incentives in this market, they should benefit responsible home buyers, who will stabilize the housing market.

At least Fannie Mae is going to try and make people take personal responsibility for a "strategic default." Now Fannie Mae gets tough on homeowners who walk away from a mortgage they can afford to pay. Instead of letting them off with the difference, Fannie now gets a court order requiring a defaulting borrower to pay any remaining unpaid portion of the loan after a seized home is sold. To put further pressure on them, Fannie Mae said it would not buy or guarantee another home loan for those abandoning a home to foreclosure for seven years.

But it's not just the homeowners who should take personal responsibility for their commitments. Banks that made the high risk loans should suffer the consequences when the mortgages fail and not be bailed out by the government. Not until all the inflation has left the bubble will the housing market become healthy again.

Too stupid to fail?

Today's Sunday comics had a surprising synchronicity. Although I'm sure they didn't plan it that way, This Modern World segues seamlessly into Doonesbury. Read them both (click the comic strip to zoom in) -- it's as if they were one strip today.

(Read the rest of my post below the jump)




There might just be something to this too-stupid-to-fail concept. The small banks have proven to be smarter than the big banks. These smaller players mostly avoided the risky predatory lending schemes that wrecked larger institutions. Yet it's the big banks that we bail out. I'm with Rahm -- it doesn't make sense to me either.

Economic stimulus is just warming up

The Right rails against the stimulus package President Obama signed into law, citing indicators like the high unemployment rate as evidence that the stimulus did not work. Liberals cite the same indicator as evidence that the stimulus bill was inadequate and that we need another jolt of stimulus. The Left fails to recognize that over half of the funds in the $787-billion stimulus package remain to be spent when calling for a new stimulus bill. Conservatives fail to acknowledge the same when they already declare the stimulus bill a failure.

In the face of the evidence that economists have begun to recognize, there is a new consensus that sees the stimulus as a worthy step.



The truth of the matter probably lies somewhere between the two extremes. The stimulus bill has not yet had the full effect it will have had after all of the funding in it has been spent. Nonetheless, we probably do not need another stimulus bill at this time. The American people need to be patient and let the stimulus play out. Looking back in two years, they will see a substantial impact from the initial stimulus bill and decide we do not need the additional debt more stimulus would bring.

In fact, much of the benefit of the stimulus bill will not be realized until well after the last dollar is spent. The stimulus bill funded America's infrastructures with billions of dollars. Although the economy will get an immediate boost from that investment, the full return will be realized over the life of those infrastructures, which will be measured in decades. Furthermore, substantial portions of the stimulus are dedicated to emerging technologies that will require significant research and development before they become profitable sectors. But these are the sectors America will need to lead for her to continue to have a competitive economy.

America was once an agrarian society sustained economically almost entirely on agriculture. But then came the Industrial Age and America changed into an industrial society, leveraging it to become the most powerful nation in the world. When leadership in industry went offshore to Asia, America didn't lose her dominance. Instead she led the world into the Information Age and enjoyed economic prosperity from doing so.

Now America needs to leverage the stimulus package to help her lead the way into entirely new sectors where the competition is still minimal. For example, the US electrical grid gets a $3.4-billion jolt of stimulus funding. Modernizing our electrical grid will not only rebuild one of America's critical infrastructures and make her less dependent on foreign energy but it will also allow her to develop new 'smart' grid technologies that she will be able to sell to the world. Already California is the number one job-creating state for wind, solar, PV, and geothermal energy.

There are other emerging sectors that are bound to see the same long-term benefits from the stimulus package. It funds technologies like electronic health records and broadband with billions of dollars. If America turns these sectors into new markets of which she is the dominant supplier and technology leader, Americans will see returns on the stimulus funding for many years to come.

The "secret process" for economic recovery

The Associated Press released a 'news story' in which it claims that a "secret process" benefits pet projects. Yet when you scrutinize the story closer, you'll find that it's not so much 'news' as it is a distortion clearly biased against the American Recovery and Reinvestment Act of 2009 (13.4 MB PDF) (the Act).

The story claims that "a process that is both secretive and susceptible to political influence" is being used for allocating economic stimulus funds. It gives examples of certain border checkpoints getting funds before other checkpoints of a higher priority for improvements do. However, if you read the article with a critical eye, you discover that it concedes there was justification for the order of allocation which was not so secretive after all. A simple Google search shows that there are millions of pages published about how "shovel-ready projects" would get the highest priority. This was a condition established in the Act that was widely publicized long before it was passed.

The story fails to report that there are numerous factors that must be considered when allocating funds to federal projects besides the single five-year-old report (which pre-dated the Act by years) the author cherry-picked to ground her distortion. While the author concedes that federal officials could similarly justify every decision they've made, she clouds her concession with the provocative and deceitful comment that, "they would not provide those justifications to the AP," as if the Feds were intentionally withholding the information from her. The Feds obviously could not give a laundry list of their justifications for every one of their countless projects to a random journalist. Yet her article makes it clear that they did provide her with information on every project she specifically inquired about.

The author is probably one of those poeple who claim that the economic stimulus funds are not getting into the economy quickly enough. Yet she decries the Administration spending stimulus funds on shovel-ready projects first. She's probably also one of those people who complains that the Act didn't result in economic recovery without acknowledging that it was enacted only six months ago and that the bulk of the $787-billion remains to be disbursed into the economy. Like most critics of the Act, she wants to have it both ways.

As far as the "secret process" is concerned, a visit to Recovery.gov shows that there is more transparency over spending under the Act than there has ever been for any other bill. But that's a fact that the AP apparently doesn't want you to know.

Maybe the sky really is falling

When Secretary Hank Paulson started running around like Chicken Little telling everyone the sky is falling, I thought it was just hyperbole. After all, former president Bush had been employing scare tactics to control the American people for years. So when the Fed came to the rescue with a $700-billion economic rescue plan, I questioned if it really was necessary.

Then I saw the video of Representative Paul Kanjorski, a Democrat from Pennsylvania, talking about the events that led up to Paulson's histrionics (below). It made me think twice about just how bad things might really have been. Kanjorski said of the day that Paulson visited congress with his dark news:

On Thursday, at about eleven o'clock in the morning, the Federal Reserve noticed a tremendous draw-down of money market accounts in the United States to the tune of $550-billion being drawn out in a matter of an hour or two ... We were having an electronic run on the banks. They decided to ... close down the money accounts, and announce a guarantee of $250,000 per account so there wouldn't be further panic ... If they had not done that, their estimation was that by two o'clock that afternoon, $5.5-trillion would have been drawn out of the money market system of the United States, would have collapsed the entire economy of the United States, and within 24 hours the world economy would have collapsed.

Why didn't Paulson tell us about this activity then? Well, obviously because it probably would've scared investors even worse than they already were right in the middle of what turns out was a significant run on the investment banks. But what were these people thinking? Didn't they realize that money market funds don't evaporate in value like the bank securities were doing and that their investment accounts were insured by the feds in the event of a bankruptcy like Lehman Brothers?

Apparently, they didn't. Just watch this video, listening up sharp at 2:10 in, to hear a little told story about what was happening during those days:
Go to source web page>>

California steals from its taxpayers

I visited the Franchise Tax Board's website to check on the status of my state income tax return today. Imagine my surprise to see their reply was "your refund cannot be issued at this time." How would they respond if I owed them money but instead of paying, I told them that their payment cannot be issued at this time? They would charge me penalties and interest.

The Franchise Tax Board passed the buck. They went on to say:

Due to the state's persistent cash and budget problems, the State Controller has directed FTB to stop sending refund requests to the State Controller's Office for payment. Refund payments will resume when the State Controller indicates there is enough cash available to make refund payments.

That excuse is not good enough. If I owed it taxes, the state wouldn't accept a claim by me that I don't have enough cash available to pay them as an excuse. I shouldn't have to accept it from them.

My refund (and I don't call it a "tax" refund because it's not taxes -- it's my earnings) is not the state's money and it never was. I didn't want the state to have my money in the first place. The only reason they have it is because they forced my employer to withhold it from my paychecks.

Since it's not the state's money, the controller shouldn't have spent it. They should have secured it in a trust fund or some kind of escrow account. After all, that's what the state requires of businesses that hold their clients' monies. Apparently, the state does not believe that 'what's good for the goose is good for the gander.' So I won't bother charging the state a penalty for not refunding my money in a timely manner.

The role of the government in an economic recovery

I've mentioned that I take my cue from Peter Schiff when it comes to forecasting the economy. It turns out that he was not the only one who many years ago forecasted the economic problems we're experiencing now. Martin Weiss also saw the housing bust coming back in 2005.

So last week, Esquire magazine asked Weiss what he forecast for the housing market over the next few years. In his response, Weiss had some insights regarding the role the government should play in the economy. I agree with him that "the debt problem is far too big for the government to be able to address with its limited resources, so they should back off and let the marketplace resolve the two big problems our economy faces -- too much debt, and prices that are too high." As we all know, the government has instead chosen to do the opposite by trying to fix the economic decline through increasing the debt load on our nation. Weiss said:

I believe we should give up the war we can't win, which is the war against the economic decline. Instead we should fight the battle we must not lose, and that's the battle to protect the health and well-being of the citizens of the country. Right now, for example, hospitals are going broke and the states are running out of money to pay unemployment benefits -- we have already 19 states that are in the red with respect to their unemployment benefit funds, and it could grow to 30 or 40 states very quickly. That's where the government's role has always traditionally been since the New Deal, and that's where our resources need to go.

This viewpoint is not far off from president-elect Obama's position on the right way to recover the economy.

Remortgage America

Yes, I know I've been blogging about the folly of the bailouts lately. I haven't stopped being a free market economist. But I recently discovered a bailout proposal that actually makes a lot of sense. In a nutshell, the plan is that the US government offers every US citizen a 30-year mortgage at a 1½% fixed rate of interest. How this works and why it makes sense I'll leave up to the author to explain.

Given a choice between no federal intervention in private business or this plan, I'd choose no intervention. But our government is hell bent on spending trillions of taxpayer dollars on financial bailouts in spite of the fact that most Americans oppose it. So if secretary Paulson is going to empty our treasury on bailouts whether we like it or not, I think the Remortgage America plan is far superior to any of Paulson's hair-brained "economic recovery" schemes. Plus, the treasury would get paid back the outlay for the plan with interest.

Congress folds on yet another wasteful bailout

Congress is abdicating its authority to president Bush again. As always, they are laying down the law then looking the other way when Bush ignores their legislation. This time it's the Emergency Economic Stabilization Act, the bill that established the $700-billion Troubled Assets Relief Program (TARP). The terms are very specific that "the program will be available to qualifying U.S. controlled banks, savings associations, and certain bank and savings and loan holding companies engaged only in financial activities that elect to participate before 5:00 pm (EDT) on November 14, 2008." Note that there's no mention of automobile manufacturers in that qualifier and that it's now almost a month past the application deadline.

Congress has already betrayed its constituents' trust by authorizing the Emergency Economic Stabilization Act in the first place. Americans overwhelmingly -- almost to unanimity -- opposed a bailout of the financial services sector. Yet congress passed the bill anyway. If congress doesn't rescind the bill, then congress is obligated to ensure that the TARP funds are used as designated in the bill. There is no way that the Act could be construed as to permit TARP funds to be allocated to automobile manufacturers or that it is now before November 14, 2008.

Secretary Paulson insisted that the funds are needed to provide liquidity to financial services firms when he first requested them. He claimed that if the TARP were not immediately implemented, the economy would precipitously collapse. His logic was that the TARP funds would increase availability of credit. But now the Bush administration is talking about bailing out General Motors and Chrysler with TARP funds.

Detroit's Big Three are claiming that a big part of their problem is that potential car buyers are not receiving the credit they need to buy automobiles. If the Bush administration redirects TARP funds from financial institutions to automobile manufacturers, then according to Secretary Paulson's logic, there will be even less credit available for banks to loan to car buyers. That would not only exacerbate the Big Three's problem but it would also enable them to perpetuate their failed business models, thereby only delaying their inevitable position in the market (and risking the collapse of the economy, according to Secretary Paulson's original position).

The Department of the Treasury has already been an abysmal failure at managing the TARP, vacillating wildly from one ineffectual tactic to another. Now it will continue to do so in direct contradiction to what congress has authorized the Treasury to do. No one in congress has voiced any recognition that the Bush administration is yet again acting in contempt of congress.

Letter to the leadership

I've become convinced that the Fed is going about this "rescue" of our economy all wrong. So I decided to send the following message to the Senate Leader, the Speaker of the House, and the chairmen of the Joint Economic Committee and the Banking, Housing, and Urban Affairs committee, as well as my own senators and congressman:

I am writing to express my opposition to the $700-billion bailout of the financial services firms. All it would do is postpone the inevitable by artificially sustaining the valuations of real estate and mortgage-backed securities above their intrinsic values.

If we didn't bailout the financial services sector, there would be economic repercussions. But it would be mostly localized to those sectors with values that are currently artificially inflated. It would not lead to the collapse of the entire economy.

It seems that secretaries Paulson and Cox forgot everything they learned in economics class. Otherwise, they'd realize that what would actually happen in the economy without the bailout is a redistribution of assets and debt to where they would be put to their highest and best use. This is what we should want to happen in our economy because it would actually lead to the strengthening of our economy in the long run, not the destruction of it.

If you want to put $700-billion dollars to use stimulating our economy, do it from the bottom up. Imagine the boost the economy would realize if we suddenly injected $700-billion dollars into it for things like rebuilding our infrastructure, developing alternative forms of energy, and providing healthcare to the uninsured. With that amount of money being injected into social good, the advancements and benefits the American society and economy would realize would far outweigh and counterbalance the drag that would be created on them from the retraction of the financial services sector.

Even the financial services sector would end up healthier in the long run. Sure, fiscally irresponsible firms would go under if we didn't bail them out. But there are plenty of firms that have put their assets to good use and neither greedily provided subprime loans nor loaded up their balance sheet with mortgage-backed securities. These are the firms that would end up dominating the financial services sector when the others go bankrupt, and Wall Street would be better off for it in the long run.

I ask that, if you must support some kind of economic rescue package, don't make it the one that secretary Paulson and president Bush have presented to you. It simply creates a moral hazard and encourages future irresponsible behavior by Wall Street fat cats. Make it one that will create long-run benefits to the future of the American people.

The media has been reporting that they're being deluged with such messages, with those opposing the bailout ten times as many as those supporting it. It seems the American people are dead-set against bailing out the greedy financial services firms. I hope congress listens to us when it comes time for them to vote. Unfortunately, as of now, it seems the congressional leadership has their collective foot on the gas and they're headed straight at the cliff of this bailout.

Putting out fire with gasoline

The US treasury secretary, Henry Paulson, was on FOX News Sunday today. He was trying to justify his proposed $700-billion bailout of financial institutions. His justification was anything but comforting.

For example, he said that the intent of the bailout is to "minimize risk" to the American taxpayer. Yet his approach to doing so is to purchase only what he called "illiquid assets" from the financial institutions who hold them. "Illiquid assets" is just another way of saying "worthless securities." How could there be anything of higher risk from a fiscal perspective than this?

He went on to say that he's taking this action to "avoid failure." Yet Paulson's approach to avoiding failure is to buy $700-billion worth of failed mortgages. That doesn't sound like avoiding failure. It sounds more like charting a course directly to failure and turning up the screws to full speed.

If Paulson wants to instill confidence in the American people about how he's handling this financial situation, he's going about it all wrong.

Super-Fed to the rescue?

In the wake of the recent upheavals in the financial sector, president Bush has come to the rescue. He and his economic advisors have come up with a Legislative Proposal for Treasury Authority to Purchase Mortgage-Related Assets. Not willing to rely on the media's descriptions of it, I read the complete text of the actual proposal myself. It strikes me as a unidimensional, monolithic solution to a complex, multidimensional problem.

It's clear to me how this proposal would artificially inflate the valuations of mortgage-backed securities that otherwise lack a foundation of intrinsic value. I can see how this would benefit institutions and investors who own these securities. However, I fail to understand how the proposal rescues the two remaining members of the investment banking oligopoly or how it helps distressed homeowners who purchased homes they could not afford.

This Progressive is no economist but I do grasp economic concepts well enough to understand explanations about the economy. So I invite you to post comments to help me out. Please explain to me how bailing out AIG prevents the collapse of our financial system. I've heard a lot of economists claim that the bankruptcy of AIG would have led to the downfall of the financial system but none of them says why or how.

Bush's proposal permits the purchase of mortgage-related assets only from financial institutions. I understand how this benefits the fat cats on Wall Street who manage firms like AIG that irresponsibly speculated on such securities and how it pays off individual speculators who can now divest their REITs which would otherwise be worthless. But can you explain to me how it alleviates the pain felt by homeowners who irresponsibly obligated themselves to trust deeds that they knew they couldn't possibly afford to pay off when their interest rates reset?

It seems to me that the proposal does nothing for those responsible homeowners who only purchased a home when they knew they could afford to service the loan rather than betting on perpetual appreciation. It does nothing for those renters who recognize that they cannot afford to purchase their own home with an ARM and a leg. It does nothing for middle-class Americans who diversified their retirement accounts rather than investing them purely in REITs, even though they paid substantial returns early in this century. And it does nothing for the small businesses on Main Street that responsibly plow their retained earnings back into assets that they use in operations rather than in risky securities.

When I pull back and take a broad look at this proposal, I simply don't understand the positive macroeconomic impact it would have. I can see an elite cohort that will make out from it but I only see the proposal wreaking further damage on the economy at large. Somehow I can't see how piling an additional $700-billion onto our national debt will rescue us from economic collapse.

The real milestone of Paterson's inauguration

All the buzz in the press lately has been about David Paterson becoming the first black governor of New York. That is somewhat significant since there have only been a handful of black governors in US history, although the first one was way back in 1872.

However, I don't think that is the most significant milestone of Paterson's ascension to the governor's office. The real milestone is that Paterson is the first blind governor in US history (actually, there was one other, but he only held the office for eleven days).

Paterson's accomplishment is inspirational to those of us with substantial disabilities. It raises awareness of the capabilities of persons with disabilities to be vocationally successful. If the press were to more widely acknowledge this milestone, it would likely cause more employers to think favorably about hiring persons with disabilities in the future.

Granted, racism is still widespread in America. However, the high unemployment rate of persons with disabilities indicate that they face more discrimination than African Americans do.

A hearing without a crime

President Bush is waging a war in Iraq that some say will cost our treasury $2-trillion when all is said and done. Meanwhile the economy is tanking here at home. Yet our congress can find nothing better to do than to stifle free enterprise.

The oversight and government committee from the House called a hearing on CEO compensation packages Friday. The chairman of the committee, Henry Waxman (D), clearly appeared convinced that he had a criminal lineup in front of him: Angelo Mozilo, founder and CEO of Countrywide Financial; Stan O'Neal, the former CEO of Merrill Lynch; and Chuck Prince, former CEO of Citigroup. Waxman's problem was that it is not unlawful for a CEO to be compensated with an income many times greater than that of their lowest paid employees.

Nonetheless, that did not stop him from asking questions like, "When companies fail to perform, should they give millions of dollars to their senior executives?" Stan O'Neal easily explained this away with assertions like "The reality is that I received no severance package. I received no bonus for 2007, no severance pay, no golden parachute. The amount discussed in the press consisted mainly of deferred compensation, stock and options that I earned during the years prior to 2007."

The committee also wanted to know why Angelo Mozilo sold many of his shares in Countrywide shortly before their values plummeted. Mozilo responded that, "The goal was to reduce my holdings because of my retirement ... almost all my net worth was in Countrywide." He was following the most basic rule of investing: diversify your portfolio. Mozilo made it clear that he was completely transparent about his divestiture so shareholders new that he was selling Countrywide stock -- they were free to use that information as a warning that they should be selling theirs at the same time if they wanted to.

As would be expected in this political environment, the hearing was partisan in that it was the Democrats trying to find something to pin on the CEOs. But there was no allegation of predatory lending practices by any of their firms. In fact, in all of the acts that the left side of the committee claimed the CEOs had perpetrated to try and shame them, not one was illegal.

At least the GOP members of the committee showed some sense. Representative Darryl Issa from California wrapped up the hearings nicely when he stated to chairman Waxman, "Mr. chairman, I look forward to finding if something is wrong here. So far you haven't found it."