Free Markets, Free People

Michael Wade

TARP as Shakespearean Tragedy

Does it strike anyone else as funny that TARP is a poor anagram for “trap”? If Shakespeare had written this play the name would have been much more clever, of course, but I think he would delight in the barely concealed irony of the federal government drawing banks into its lair with the pretense of saving their hides, only to use the money intended to do so as the means of yoking the industry. I’ll bet the banks who took TARP funds don’t find it so humorous.

Since last October when Hank Paulsen forced nine of the largest banks to take an initial injection of $125 billion in TARP funds (among other bullying), the federal government has committed about $12.2 trillion dollars to bailouts and spent about $2.5 trillion on such efforts (er, among other, other bullying). Aside from an increasing assertion of control over the financial and automotive sectors of our economy (among other, other, other bullying), there is very little to show for all this money. Which leaves the rather stark impression that government control was the goal all along — i.e. the method within the madness.

I must be naive. I really thought the administration would welcome the return of bank bailout money. Some $340 million in TARP cash flowed back this week from four small banks in Louisiana, New York, Indiana and California. This isn’t much when we routinely talk in trillions, but clearly that money has not been wasted or otherwise sunk down Wall Street’s black hole. So why no cheering as the cash comes back?

My answer: The government wants to control the banks, just as it now controls GM and Chrysler, and will surely control the health industry in the not-too-distant future. Keeping them TARP-stuffed is the key to control. And for this intensely political president, mere influence is not enough. The White House wants to tell ‘em what to do. Control. Direct. Command.

[...]

Here’s a true story first reported by my Fox News colleague Andrew Napolitano (with the names and some details obscured to prevent retaliation). Under the Bush team a prominent and profitable bank, under threat of a damaging public audit, was forced to accept less than $1 billion of TARP money. The government insisted on buying a new class of preferred stock which gave it a tiny, minority position. The money flowed to the bank. Arguably, back then, the Bush administration was acting for purely economic reasons [ed.: That's a highly charitable argument]. It wanted to recapitalize the banks to halt a financial panic.

Fast forward to today, and that same bank is begging to give the money back. The chairman offers to write a check, now, with interest. He’s been sitting on the cash for months and has felt the dead hand of government threatening to run his business and dictate pay scales. He sees the writing on the wall and he wants out. But the Obama team says no, since unlike the smaller banks that gave their TARP money back, this bank is far more prominent. The bank has also been threatened with “adverse” consequences if its chairman persists. That’s politics talking, not economics.

Think about it: If Rick Wagoner can be fired and compact cars can be mandated, why can’t a bank with a vault full of TARP money be told where to lend? And since politics drives this administration, why can’t special loans and terms be offered to favored constituents, favored industries, or even favored regions? Our prosperity has never been based on the political allocation of credit — until now.

Despite the government’s bullying, it is difficult to feel much pity for the institutions who accepted TARP funds. Surely they must have at least suspected an iron hand inside that velvet glove attempting to feed them. However, if they truly don’t need the money, and have the means to pay it back, then onerous seems too slight a word to express how gripping the government’s control has become:

Financial firms eager to return infusions from the $700 billion Troubled Asset Relief Program will have to demonstrate that they can operate without debt guarantees provided by the Federal Deposit Insurance Corp., a senior government official said Tuesday. The FDIC program allows financial institutions to borrow money at lower costs.

The new requirement will make it harder for some institutions to get out from under government rules attached to the bailouts, another shift in a changing landscape for banks. It also illustrates the government’s desire not to have banks abandon the bailout program if they are not financially prepared to do so.

The government’s desire? I don’t recall exactly where that is accounted for in the Constitution. Is it buried somewhere in the penumbras and emanations of the commerce clause? Clearly the “government’s desire” must have some force of law that it can unilaterally decide to allow banks to sink or swim on their own. Otherwise, such desire is wholly irrelevant.

Nonetheless, banks did take the money, and so the government gets to call the tune. Institutions who would have collapsed absent the bailout have little to grouse about in such circumstances. But other firms, who didn’t need the money in the first place, rightfully bristled at the demands being placed upon them and the opprobrium casually tossed their way by the government.

Kim Price’s Gastonia bank accepted $20 million from the Troubled Asset Relief Program to help keep credit flowing as the economy faltered.

Now the Citizens South Banking Corp. chief executive and other community bankers feel that Congress is treating them like villains.

Proposed new TARP rules that could limit bankers’ pay have upset many bank executives here. And the congressional effort has prompted some banks in other states to give the money back.

Paying back the government (although coming at a pretty price) not only seems like a right the banks should have, it just makes good business sense for the healthy ones:

TCF Financial Corp, a Minnesota lender, said it repaid a $361.2 million capital infusion that it took from the U.S. government’s bank bailout program, becoming the largest recipient to repay its funds.

[...]

Regulators, banks and investors once viewed participation in the program as a positive, figuring that it would help healthy banks lend more and perhaps buy struggling rivals.

But participation is now often viewed as an albatross, subjecting recipients to restrictions on such things as executive pay and dividends.

Investors now consider some banks that hold onto their aid as being too weak to return it. Large banks such as Goldman Sachs Group Inc ( GS – news – people ) and JPMorgan Chase ( JPM – news – people ) & Co have said they want to repay their aid soon.

TCF Chief Executive William Cooper this week said holding TARP money put the bank at a “competitive disadvantage.”

He said repaying the aid and eliminating the associated dividend payments will boost earnings by more than 14 cents per share annually.

By inducing banks to take TARP money, whether through tactics or intimidation, the government has neatly cornered the capital flow of the country. Much like Hamlet surreptitiously forced his uncle to publicly face scorn for his act of regicide (by having performed the “Murder of Gonzago,” aka the “Mouse-Trap”), the government has successfully lured failing banks into the public square for ridicule. Whereas Hamlet sought to elicit a sign of guilt in order to justify his vengeance, however, the government seems intent on effusing guilt throughout the banking industry so as to justify its controlling moves. By tainting the public view of the financial sector, the government seeks to undermine public confidence and build a chorus calling for its heavy-handed involvement. As mentioned above, protestations by the beggars for such action protest too much, methinks, but those who truly have no need of the interference have much cause to cry foul.

Hamlet ends with nearly every character dead, and the country being turned over to its greatest enemy. Unfortunately, the financial sector seems destined for a similar result as the government has made clear it will not allow certain institutions to fail, and is callously indifferent to fate of the unchosen. No matter how well those banks who managed to avoid TARP altogether do, the government is now the major mover in game, and the only one with the power to force its will on all the other players. It can, and will, pass laws that favor the winners its chosen, thus leaving the non-assisted banks out in the cold. In the end, firms who conform to market forces (i.e. respond to the desires of its customers), will be supplanted by those which conform to will of the government’s agenda. The trap was set, the mice did enter, and thus their fates were sealed.

Comment Of The Day

It’s rare that I quit reading through a comment section because I happen upon what’s surely the best comment. However, this comment to Capt. Ed’s post about the Obama administration’s thuggish tactics in the Chrysler negotiations sums everything up perfectly:
obama-scold-finger1

“I did not have knowledgeable relations with it, that Constitution.”

Heh.

Podcast for 03 May 09

In this podcast, Michael, and Dale discuss the resignation of Justice Souter, California’s Ballot Propositions, and the events in Pakistan.

The direct link to the podcast can be found here.

Observations

The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2007, they can be accessed through the RSS Archive Feed.

Newspeak Update

Remember: billions in earmarks are insignificant but, millions in bonuses are outrageous; “bi-partisan” actually means “one-party rule”; and now “bankruptcy” means “strong.” From Jake Tapper’s Twitter feed:

POTUS says bankruptcy “not a sign of weakness”…

Can’t you just see the White House Press Corps (excepting Tapper, of course) looking like the bunch of lapdogs that they are in response to that statement?

Ruh?

Ruh?

What's he talking about?  And where's Bo?  Less econo-stuff, more water dog hotness!

What's he talking about? And where's Bo? Less econo-stuff, more water dog hotness!

Bankrupt = strength? R'okay!

Bankrupt = strength? R'okay!

MORE: Tom Maguire is less than impressed with the President’s reasoning about shared sacrifice with respect to the Chrysler bankruptcy:

Uh, hello, how about the US taxpayer? Any props, exhortations, or acknowledgment of their role here? Sorry, MY role?

The Congress – yeah, they have to sacrifice an endless stream of donations from the UAW.

Operation Blame GOP in Full Force

Swine flu, the topic du jour, was in need of a villain (per the usual MSM narrative), and right on cue, John Nichols delivers in the Nation:

GOP Know-Nothings Fought Pandemic Preparedness

posted by John Nichols on 04/27/2009 @ 08:00am

When House Appropriations Committee chairman David Obey, the Wisconsin Democrat who has long championed investment in pandemic preparation, included roughly $900 million for that purpose in this year’s emergency stimulus bill, he was ridiculed by conservative operatives and congressional Republicans.

Obey and other advocates for the spending argued, correctly, that a pandemic hitting in the midst of an economic downturn could turn a recession into something far worse — with workers ordered to remain in their homes, workplaces shuttered to avoid the spread of disease, transportation systems grinding to a halt and demand for emergency services and public health interventions skyrocketing. Indeed, they suggested, pandemic preparation was essential to any responsible plan for renewing the U.S. economy.

But former White House political czar Karl Rove and key congressional Republicans — led by Maine Senator Susan Collins — aggressively attacked the notion that there was a connection between pandemic preparation and economic recovery.

Now, as the World Health Organization says a deadly swine flu outbreak that apparently began in Mexico but has spread to the United States has the potential to develop into a pandemic, Obey’s attempt to secure the money seems eerily prescient.

And his partisan attacks on his efforts seem not just creepy, but dangerous.

According to this theory, if not for GOP opposition to one particular line item in the stimulus bill, everything would be perfectly hunky-dory right now. The leftosphere, having received their marching orders, responded dutifully:

Daily Kos: Collins, Republicans, Killed Off Enhanced Pandemic Preparedness

Think Progress: In Attempt To Placate The Right Wing, Collins and Specter Endorsed Pandemic Flu Funding Cut

Christy Hardin Smith: “Pandemic preparedness? Another GOP casualty. Dude, where’s my planning?”

Washington Monthly: GREAT MOMENTS IN POLITICAL INSIGHT (“On Feb. 5, the same as Collins unfortunate remarks, Karl Rove had an op-ed in the Wall Street Journal complaining about stimulus package, in part because it included money for ‘pandemic flu preparations.’

Sometimes, these folks just don’t think ahead.”)

It’s hard to know where to begin with this sort of nonsense. Competing for most ridiculous premise is the idea that a couple of remarks from Susan Collins and Karl Rove (who does not vote in Congress) were able to back off the entire Democratic Party. You know, the ones who control the House and Senate? I mean, how spineless do you have to be if you control the House, the Senate, and the White House, but you can’t stand up to one little old lady from Maine and a former politico? Pretty wimpy I’d say.

We’re also apparently expected to believe that pandemic flu was a big issue during the days of stimulus debate, instead of the impending financial collapse unless Congress did something (anything!). My recollection of those heady days in January and February conjures up much back-and-forth about whether the bill would save jobs, but nothing about whether we should do more to prevent a flu pandemic. Come to think of it, isn’t that why it was called the “stimulus bill” in the first place, as in to stimulate the economy? And wasn’t there a bunch of hullabaloo about so much pork being in the bill? Yes, I’m sure I read about that somewhere. Indeed, even Chuck Schumer was calling appropriations for pandemic preparations “porky”:

He [Chuck Schumer] said the compromise hammered out between Senate Democrats and moderate Republicans – which has enough support to get it past any threat of a filibuster – was far better than that passed by the House on Jan. 29.

All those little porky things that the House put in, the money for the [National] Mall or the sexually transmitted diseases or the flu pandemic, they’re all out,” Schumer said.

Clearly, beefing up the federal government’s response to a flu outbreak was not the priority during the stimulus debate.

The “GOP did it” analysis also seems to suffer from that problem of time beginning on the day Obama was elected. It’s further complicated by the fact that, even if Obey’s appropriation had been included in the stimulus bill, it wouldn’t have the government in any better of a position than it is now (a fact which the legislators seem to understand since they had exempted Obey’s provision from the requirements that the money appropriated be used within 30 to 90 days (i.e. section 1103)). Regardless, the idea that the money appropriated less than two months ago would save our bacon today is unrealistic at best.

But doesn’t that just beg the question: what preparations have been made for a flu pandemic? Seeing as it’s so frightfully important that we are ready and eager to blame an entire political party for potential ill health, why is it that we’re only hearing about it now? What took Congress so long? Well, nothing actually:

What’s scarier in Washington, the prospect of a flu virus that could kill millions or the possibility that voters will toss out any politician who fails to prepare the nation for such a disaster? A pandemic could be a true global catastrophe, of course. But along the Potomac the second threat is also very real. That’s a big reason why both the White House and Congress are rushing to boost America’s capacity to produce vaccines and drugs against flu and other diseases.

On Oct. 18 the Senate Health, Education, Labor & Pensions Committee hurriedly passed a bill that would offer vaccine makers new liability protections and incentives for research. And the Administration is about to issue a flu pandemic plan expected to be extremely aggressive. “There is a sense of urgency on both sides of Pennsylvania Avenue,” says Senate Budget Committee Chairman Judd Gregg (R-N.H.).

That would be an article from October 2005 when the “White House” referred to President Bush, and “Congress” referred to the Republican controlled body. Seems like the Republicans were worried about a flu outbreak after all. How worried? Enough to spend gobs of money on it which, although comparatively paltry in these post-bailout days, completely dwarfs the proposal from Rep. Obey:

In 2004, Congress approved Project BioShield, a plan that would spend $5.6 billion over 10 years to jump-start production of vaccines and drugs to counter bioterror threats.

Again, that would be a GOP-controlled Congress. Of course, the GOP hasn’t always been in control. Many will recall that the Democrats swept into power in 2006. This was heralded as the harbinger of great change, and the first wave of the Democratic majority. What fun! Seeing as how important legislating against a flu pandemic is to the Democrats, surely they did something to improve upon the meager sum approved under the reign of the hated Republicans:

The fiscal 2008 Consolidated Appropriations Act working its way through Congress this week allocates only $76 million for pandemic influenza preparedness funding for the Health and Human Services Department, though the Bush administration requested a budget of $870 million for it.

The bill also chopped in half requested funding for the HHS office managing efforts to develop a national electronic health record system.

While House and Senate appropriations committees said they continue to support HHS pandemic flu preparation efforts, they indicated in the bill that they decided to cut the 2008 pandemic preparation budget because approximately $1.2 billion remains available from funds provided in previous appropriations.

Oops … I wonder how much of that $76 million is still left? It kinda makes you think that preventing and/or preparing for a flu pandemic wasn’t really such a big priority for the Dems, now doesn’t it? Yet somehow, in the heat of the debate over whether it was a good idea to mortgage the future of a few generations of Americans, it’s Susan Collins’ and the GOP’s fault that a swine flu outbreak has occurred, and the federal government may not be prepared for it. Yeah, that makes sense.

Well, I guess we should just chalk it all up to another crisis that Rahm doesn’t want to go to waste. Nothing like the good ole game of playing politics with people’s fears of becoming deathly ill. Not that any of the leftosphere would ever approve of such tactics, seeing as how moral and sanctimonious they seem to get. [/eyeroll]

MORE: I wonder which would be more effective in dealing with the swine flu outbreak — appropriating hundreds of millions more dollars on pandemic preparations, or staffing the HHS that would be in charge of actually spending the money? I know how John Nichols and the Nation (and, therefore, the leftosphere) would answer. For them, this must just be an inconvenient distraction:

The Obama administration declared a “public health emergency” Sunday to confront the swine flu — but is heading into its first medical outbreak without a secretary of Health and Human Services or appointees in any of the department’s 19 key posts.

President Barack Obama has not yet chosen a surgeon general or the head of the Centers for Disease Control and Prevention. His choice to run the Food and Drug Administration awaits confirmation.

Smoothest transition EVAH!

EVEN MORE: I’m guessing that the fact-checkers at the Nation have been sacked:

(1) It’s a good point to make that Collins somehow thought pandemic preparation money was not an economic issue deserving of inclusion in the stimulus package. But Collins was for the money being included in some other form. Now, I think her reasoning is stupid — pandemic prevention is part of a recovery plan. But it’s not like she was against the very idea of it.

In fact she has voted for a number of bills that included pandemic prevention in the past, including the war funding bill of 2007. This undermines her point about which basket the funding is in, but also proves that she’s not against the idea of it.

(2) Relatedly, this money is actually the tail end of money ($7.1 billion worth) that President George W. Bush pushed for in 2005. So this is actually Bush money! To pin all this on the GOP is, thus, a little silly.

[...]

(4) Importantly, the vast majority of the pandemic prevention money was passed in March’s omnibus bill, which passed the Senate by (uncounted) voice vote.

And that’s from a Kosmonaut [via: MM].

Podcast for 26 Apr 09

In this podcast, Michael, and Dale discuss the torture memos and their possible legal consequences, and the possible securities law violations that the treasury committed in administering the TARP program.

The direct link to the podcast can be found here.

Observations

The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2007, they can be accessed through the RSS Archive Feed.

Cap & Trade: Even More Expensive Than Thought

Sometimes math is actually pretty easy. For example, when someone, say some MIT professors, writes a report claiming that a tax on certain businesses will raise a specific amount of revenue for the government ($366 Billion to be exact), and that revenue is divided by an estimated number of American households (117 Million), there isn’t any doubt about how much money per household that tax represents ($366 b./117 m. = $3,128.21). Unless, that is, there are politics involved. Then the math becomes Bistromathic, which allows one of the progenitors of the original numbers to declare “you’re doing it wrong!” and almost everyone will believe him. Unfortunately for them, real math operates on real facts, and thus reality is destined to intrude upon their fantasy.

That, in a nutshell, is basically how the argument over costs of the Obama Administration’s cap and trade policy has unfolded. MIT’s John Reilly co-authored the original study, Republicans used the numbers to derive a cost per taxpayer, Reilly balked, and the media/leftosphere went into paroxysms of outrage about how the GOP were all a bunch of liars. But that was just the main course. For dessert, there will be crow (my emphasis):

During a lengthy email exchange last week with THE WEEKLY STANDARD, MIT professor John Reilly admitted that his original estimate of cap and trade’s cost was inaccurate. The annual cost would be “$800 per household”, he wrote. “I made a boneheaded mistake in an excel spread sheet. I have sent a new letter to Republicans correcting my error (and to others).”

While $800 is significantly more than Reilly’s original estimate of $215 (not to mention more than Obama’s middle-class tax cut), it turns out that Reilly is still low-balling the cost of cap and trade by using some fuzzy logic. In reality, cap and trade could cost the average household more than $3,900 per year.

The $800 paid annually per household is merely the “cost to the economy [that] involves all those actions people have to take to reduce their use of fossil fuels or find ways to use them without releasing [Green House Gases],” Reilly wrote. “So that might involve spending money on insulating your home, or buying a more expensive hybrid vehicle to drive, or electric utilities substituting gas (or wind, nuclear, or solar) instead of coal in power generation, or industry investing in more efficient motors or production processes, etc. with all of these things ending up reflected in the costs of good and services in the economy.”

In other words, Reilly estimates that “the amount of tax collected” through companies would equal $3,128 per household–and “Those costs do get passed to consumers and income earners in one way or another”–but those costs have “nothing to do with the real cost” to the economy. Reilly assumes that the $3,128 will be “returned” to each household. Without that assumption, Reilly wrote, “the cost would then be the Republican estimate [$3,128] plus the cost I estimate [$800].”

In Reilly’s view, the $3,128 taken through taxes will be “returned” to each household whether or not the government cuts a $3,128 rebate check to each household.

In short, Reilly’s claim of “you’re doing it wrong!” amounts to parsing of direct vs. indirect costs. Yes, the cap and trade taxes will be passed onto the consumers in some way, but those aren’t the “real costs” to the economy. Only those direct expenditures made necessary by the policy (the “but for” costs) are “real costs.” As long as the federal government provides a benefit to the taxpayers with the cap and trade taxes, then those higher utility bills are a wash:

In Reilly’s view, the $3,128 taken through taxes will be “returned” to each household whether or not the government cuts a $3,128 rebate check to each household.

He wrote in an email:

It is not really a matter of returning it or not, no matter what happens this revenue gets recycled into the economy some way. In that regard, whether the money is specifically returned to households with a check that says “your share of GHG auction revenue”, used to cut someone’s taxes, used to pay for some government services that provide benefit to the public, or simply used to offset the deficit (therefore meaning lower Government debt and lower taxes sometime in the future when that debt comes due) is largely irrelevant in the calculation of the “average” household. Each of those ways of using the revenue has different implications for specific households but the “average” affect is still the same. [...] The only way that money does not get recycled to the “average” household is if it is spent on something that provides no useful service for anyone–that it is true government waste.

He added later: “I am simply saying that once [the tax funds are] collected they are not worthless, they have value.”

Essentially, Reilly is making the pernicious claim that a dollar in the taxpayer’s hand is the same as one in the government treasury. But we all know that’s not true, including (I’ll bet) Mr. Reilly.

No matter how efficient the government is, it will never be able to take $X from me and return exactly $X of benefit. Indeed, at least some portion of that $X will be needed just to support the system of taking the money and providing the benefit. Already the taxpayer is at a loss.

Moreover, there is an implicit assumption in Reilly’s explanation that, in exchange for this de facto tax, the government benefits provided would be returned in proportion to their costs. But that would defy all historical precedence when it comes to the federal government which, once the money is received, tends to dole it back out to suit its own purposes. As Merv aptly states:

I really doubt the government will return any cost of cap and trade dollar for dollar. If they did it would be just an expensive money swap. To the extent the government does return any money you can bet that it will be based on conduct they want from people and not unconditionally. They will be imposing their choices on American families and their lifestyles.

To be fair, Reilly tacitly acknowledges this fact when he explains what use of his numbers would be acceptable to him:

“If the Republicans were to focus on that revenue, and their message was to rally the public to make sure all this money was returned in a check to each household rather than spent on other public services then I would have no problem with their use of our number.”

The fact is, cap and trade is going to cost taxpayers significantly more than the measly $13/week tax cut that the Democrats and the left are so excited about. While the $3,900 cost cited by John McCormack above is an accurate accounting of what Reilly’s study portends, even that is probably an unrealistically low estimate. Consider how the same policy has affected Europe:

Europe’s experiment with cap and trade has turned into a bureaucratic mess that has failed to live up to its initial expectations. A report by the GAO reveals that the supply of carbon permits has exceeded the demand causing allowance prices to fall substantially. This policy failure has caused the European economy to suffer and expectations to reduce CO2 emissions have been lowered.

Additionally, Europe’s cap and trade experiment has led to decreased employment opportunities and higher energy prices across the continent. In France manufacturers have packed up and left for Morocco. In the Netherlands factories are forced to close early to meet emissions standards. In Germany energy prices have risen 5% each year sparking widespread outrage. All across Europe evidence shows that cap and trade has hurt the economy. If the United States implements a European style cap and trade system, estimates show that it could wipe out between 1.2-1.8 million American jobs by 2020.

So the 95% of you who received a “tax cut” from Obama had better start saving that extra money up. You’re going to need every penny to service the debt required to pay for your costs of cap and trade.

NYT: Spectacularly Wrong … Yet Again

Will someone please buy these people a subscription to Google or something? In trying to compare TANF and TARP spending, Nancy Folbre makes a rather glaringly error:

Robert Rector and Katharine Bradley of the Heritage Foundation, a conservative research organization, estimate that federal welfare spending amounted to $491 billion in fiscal 2008. (They don’t explain what specific programs they included in this estimate, and I’ll try to unpack it in a future post.) Even their extremely high estimate remains far below estimates of the total of $2.5 trillion spent on financial bailouts this year. The libertarian Cato Institute often emphasizes the issue of corporate welfare, but it’s remained remarkably quiet so far on the topic of bailouts.

David Boaz begs to differ:

Excuse me?

Since she linked to one of our papers on corporate welfare, we assume she’s visited our site. How, then, could she get such an impression? Cato scholars have been deploring bailouts since last September. (Actually, since the Chrysler bailout of 1979, but we’ll skip forward to the recent avalanche of Bush-Obama bailouts.) Just recently, for instance, in — ahem — the New York Times, senior fellow William Poole implored, “Stop the Bailouts.” I wonder if our commentaries started with my blog post “Bailout Nation?” last September 8? Or maybe with Thomas Humphrey and Richard Timberlake’s “The Imperial Fed,” deploring the Federal Reserve’s help for Bear Stearns, on April 14 of last year?

Boaz goes onto reproduce a video compilation of Cato scholars denouncing bailouts on “more than 90 radio and television programs.” He also produces an impressive list of papers, articles and media appearances which seriously challenge Folbre’s notion of “remarkably quiet.”

Folbre doubles down here:

You’re right. The Cato Institute website has not been silent. It just didn’t meet my expectations of adequate noise.

Yeah. Too bad her post didn’t meet reality’s expectations for factual.

North Dakota’s “Secessionist” Resolution

What to make of this trend? I think Oklahoma got the 10th Amendment push-back ball 10th-amendmentrolling, Montana advanced the ball several yards, Texas got into the game recently (albeit, too glibly), several other states are getting their shots in, and now North Dakota takes it’s turn.

The resolution in the North Dakota legislature asking the federal government to begin recognizing the 10th amendment and to stop overreach into state matters, the one the Fargo Forum wrote off as being part of a “secessionist movement, has passed in the Senate. By a strictly party-line vote, unfortunately, meaning not one Democrat in the legislature had enough respect for the sovereignty of North Dakota to vote for it.

[...]

The resolution now goes to the House, where I expect it will also pass. Also, I’m guessing, by a strictly party-line vote. Which, if it happens, would be a small bright spot in an otherwise dim legislative session. It takes a certain level of conviction for politicians to vote for a resolution like this one. Would that the Republicans voting for it now had the courage of those convictions when faced with legislation that grows spending and government in the state.

At Say Anything, Rob Port has a copy of a state Senator Joe Miller‘s speech in support of the resolution from the Senate floor. I recommend you go there and read it.

Does it limit the feds, or not?

Does it limit the feds, or not?


Combined with some Governors rejecting portions of the stimulus funds, and the Tea Parties breaking out all over the country, I’d say it’s a good sign that people are finally telling Washington to take a hike. Personally, I would say that both Porkbusters and the Sunlight Foundation are owed some credit as well, but either way it’s about time that the federal government was reminded of its place. Granted, it’s a fairly small reminder, but maybe one that can be built upon.

So where does all of this lead anyway. Is there any hope that all of this momentum will lead to less federal government interference? How about some support for repealing the 17th Amendment? I’d like to think that it will end up reducing the size of government (i.e. electing fiscally conservative representatives who will cut taxes and greatly slash spending), but once that horse left the barn, the barn was burned to the ground and a giant spending dance was done on the smoldering ashes. Nevertheless, is there some small ray of hope that the states will rein in our profligate Congress?

The AIPAC and Harman Scandal

The blogosphere is abuzz after this Jeff Stein piece in CQ Politics, essentially regurgitating old news:

Influence Peddler?

Influence Peddler?

Rep. Jane Harman , the California Democrat with a longtime involvement in intelligence issues, was overheard on an NSA wiretap telling a suspected Israeli agent that she would lobby the Justice Department reduce espionage-related charges against two officials of the American Israeli Public Affairs Committee, the most powerful pro-Israel organization in Washington.

Harman was recorded saying she would “waddle into” the AIPAC case “if you think it’ll make a difference,” according to two former senior national security officials familiar with the NSA transcript … In exchange for Harman’s help, the sources said, the suspected Israeli agent pledged to help lobby Nancy Pelosi , D-Calif., then-House minority leader, to appoint Harman chair of the Intelligence Committee after the 2006 elections, which the Democrats were heavily favored to win.

Seemingly wary of what she had just agreed to, according to an official who read the NSA transcript, Harman hung up after saying, “This conversation doesn’t exist.”

The fact that Harman was recorded via an NSA wiretap has some in the blogosphere declaring a victory for irony:

There’s a large poetic justice factor here in that Harman has been a big defender of potentially abusive surveillance so she doesn’t, personally, have much to stand on as an opponent of abusive surveillance when applied to her.

[...]

Thinking about that further reenforces (sic) the point that selective, unaccountable surveillance is very dangerous. A president could do a great deal to gin up pretexts to wiretap members of congress and blackmail them even without the members doing anything unusually egregious. But it’s also a reminder that we have a political system that’s substantially powered by a kind of systematic, quasi-legalized bribery.

Matthew Yglesias’ self-righteousness is supposedly justified by the fact that Rep. Harman backed the Bush Administration’s terrorist surveillance program, fondly remembered by the left as the inappropriately named “domestic warrantless wiretapping” program. However, Harman was not caught on tape by that program, but instead via a regular, old court-approved wiretap:

It’s true that allegations of pro-Israel lobbyists trying to help Harman get the chairmanship of the intelligence panel by lobbying and raising money for Pelosi aren’t new.

They were widely reported in 2006, along with allegations that the FBI launched an investigation of Harman that was eventually dropped for a “lack of evidence.”

What is new is that Harman is said to have been picked up on a court-approved NSA tap directed at alleged Israel covert action operations in Washington.

Nevertheless, thanks to Harman’s transgressions against the anti-war/anti-Bush left, in the form of her support of anti-terrorism activities, she is not getting any sympathy from Democrats. Which is a shame because it doesn’t necessarily appear that she’s done anything wrong here.

Because the article provides a paucity of specific information, I’m hard-pressed to figure out what Harman’s illegal action could have been. All the allegations are to unnamed sources, and there is no indication of what the supposed illegal activity was. The insinuation is that, based on earlier reports, Harman would help out AIPAC in return for the lobbying group raising money for Pelosi, who would then show her appreciation by promoting Harman to the Chairmanship of the Senate Intelligence Committee. Yet the facts as alleged don’t even support that theory.

First of all, there is nothing wrong with Harman “waddling into” the AIPAC case merely to advocate for a lighter sentence for the Israeli defendant accused of spying. It may not have been smart, nor exactly savory, but it would not have been illegal as far as I know. If instead Harman had tried to use her official powers to alter the outcome someway (which is not alleged), I could see wher there may some problems. Merely making a case for a lighter sentence does not even begin to rise to that level, however.

Furthermore, I’m not so sure that there is any real quid pro quo here. If after Harman “waddled into” the spy case, AIPAC went to Nancy Pelosi and said “that Harman chick is one swell gal! You should promote to the head of Senate intelligence panel, or something,” what would be the problem? Does AIPAC not have the freedom of speech to say they like one congressman over another? Some might think that AIPAC is a foreign lobbyist firm (it’s not), and thus should be restricted from certain activities with respect to supporting political appointments, but that’s not true. Foreign lobbyists are more restricted when it comes to elections, but no lobbyist is prevented from advocating for the appointment of an already elected official to committee assignment or the like. So, again, based on the information provided, I’m just not sure what the charge is here.

Interestingly enough, if there is anyone who should be worried about this latest report (assuming any of it is true), it is Alberto Gonzales. According to Stein’s article, other than the fact that Harman was caught on tape, the only other new news here is that “contrary to reports that the Harman investigation was dropped for ‘lack of evidence,’ it was Alberto R. Gonzales, President Bush’s top counsel and then attorney general, who intervened to stop the Harman probe.”

Why? Because, according to three top former national security officials, Gonzales wanted Harman to be able to help defend the administration’s warrantless wiretapping program, which was about break in The New York Times and engulf the White House.

As for there being “no evidence” to support the FBI probe, a source with first-hand knowledge of the wiretaps called that “bull****.”

[...]

The identity of the “suspected Israeli agent” could not be determined with certainty, and officials were extremely skittish about going beyond Harman’s involvement to discuss other aspects of the NSA eavesdropping operation against Israeli targets, which remain highly classified.

But according to the former officials familiar with the transcripts, the alleged Israeli agent asked Harman if she could use any influence she had with Gonzales, who became attorney general in 2005, to get the charges against the AIPAC officials reduced to lesser felonies.

[...]

Harman responded that Gonzales would be a difficult task, because he “just follows White House orders,” but that she might be able to influence lesser officials, according to an official who read the transcript.

According to the rest of the story, the Justice Department and the CIA were ready to conduct a full scale investigation of Harman because of the transcripts, but Gonzales stepped in and stopped it because he needed her help:

According to two officials privy to the events, Gonzales said he “needed Jane” to help support the administration’s warrantless wiretapping program, which was about to be exposed by the New York Times.

Harman, he told Goss, had helped persuade the newspaper to hold the wiretap story before, on the eve of the 2004 elections. And although it was too late to stop the Times from publishing now, she could be counted on again to help defend the program

He was right.

On Dec. 21, 2005, in the midst of a firestorm of criticism about the wiretaps, Harman issued a statement defending the operation and slamming the Times, saying, “I believe it essential to U.S. national security, and that its disclosure has damaged critical intelligence capabilities.”

Pelosi and Hastert never did get the briefing.

And thanks to grateful Bush administration officials, the investigation of Harman was effectively dead.

The problem with this version of the story is that it fails to allege what wrongdoing Harman was being accused of. Lots of “sources familiar with the transcript” are quoted, although none are named, and not a single person identified which statute or regulation Harman allegedly violated. Why is that?

Of course, regardless of whether Harman had actually committed any crime, if Gonzales called the dogs off for political reasons (as the story asserts), then he has a problem. I don’t think it would be obstruction of justice per se since, after all, he was head of the DoJ. Short-circuiting a criminal investigation for political gain, however, is exactly the sort of use of public office that Harman appears to be accused of in the Stein story.

At this point it is difficult, if not impossible, to tell exactly what happened. There are tiny whiffs of spice conjured up here there, but no real meat on any of the bones. Stein even admits at the end of his story that none of the supposed gains bargained for were actually realized:

Ironically, however, nothing much was gained by it.

The Justice Department did not back away from charging AIPAC officials Steve Rosen and Keith Weissman for trafficking in classified information.

Gonzales was engulfed by the NSA warrantless wiretapping scandal.

And Jane Harman was relegated to chairing a House Homeland Security subcommittee.

All of which calls the veracity of the story into question. I don’t know what actually went down, and apparently neither does anyone else whose willing to be named. Until there are some solid facts produced and names put behind them, this whole “scandal” looks pretty contrived in my opinion. Which really just leaves two questions: (1) Why this old story now, and (2) Cui bono? Your guess is as good as mine.