Free Markets, Free People

Michael Wade

Free Market Bashing

Since the inception of the current downturn, free market capitalism has taken quite the bashing. Supporters of significant government involvement in the economy deride the horrors of “unfettered capitalism” and a “free market run amuck.” Frequently, deregulation of capital markets is singled out as the most dastardly culprit, to which Pres. Obama seems to be alluding when he blames “relying on the worn-out dogmas of the past,” and “too little regulatory scrutiny.” Yet, after the last eight years in which we witnessed Sarbanes-Oxley, No Child Left Behind, Medicare Part D, and numerous attempts to reign in Fannie Mae and Freddie Mac shoved aside by legislators, evidence of unregulated economic activity being the source of our crisis seems rather scant.

The idea that “deregulation” was somehow responsible for the mortgage meltdown is a particularly shaky proposition. Shannon Love explains why:

Leftists have to answer a question: if greedy, irresponsible, unregulated etc. capitalism caused the housing bubble, why didn’t we see a similar bubble in commercial real-estate markets which operate under even less regulation than the residential markets? Why does the politically neglected and unregulated commercial real-estate market exhibit much milder swings?

[...]

The differences between residential and commercial real estate provide the means to test the hypothesis that government intervention or the lack thereof caused the housing bubble and subsequent collapse of the financial system. We can compare the two markets because the same institutions ultimately make residential and commercial loans. They make loans in the same communities and regions. Changes in the economy affect both types of real estate at the same time and to the same rough degree. The only major difference between the two markets lies in the degree of government intervention.

After dispensing with some obvious questions about the comparison, Love highlights how the residential market was essentially turned into a Lemon’s Market:

More than any other policy, the creation of Freddie Mac and Fanny May distorted the residential mortgage market in a way that the commercial market escaped. The FMs exist solely to induce lenders to make residential loans that the free market judged too risky. The FMs buy up residential mortgages from primary lenders and bundle them together in securities. They do so precisely in order to short-circuit the free-market feedback system that communicates to banks when the financial system as a whole has lent out as much money as it safely can. That feedback system worked like a governor on an engine. It kept the system from running away and lending more money than it could recoup, but also prevented people with poorer credit from getting loans.

Politicians who wanted the engine to run faster created the FMs to bypass the governor in order to get higher performance in the short run. Since the FMs would buy up almost any mortgage, lenders could make riskier and riskier loans without suffering any negative consequence. The FMs replaced the self-interested secondary-market buyers with people playing with government money and a mandate to induce more and more lending. Special dodgy accounting rules allowed the FMs to hide the risk behind the securitized mortgages they sold.

Deregulation caused the residential mortgage meltdown?

Deregulation caused the residential mortgage meltdown?

As Love points out, the commercial real estate market has no such mechanism muddying its waters, and information is comparatively less asymmetric. Without the government interference, commercial mortgage lenders let the potential for bad outcomes drive their decision making:

Tellingly, no such intervention occurred in commercial markets. The FMs’ charters expressly prevented them from buying commercial mortgages. As a result, the commercial mortgage market functioned with a free-market governor. When lenders made too many risky loans, free-market secondary buyers stopped buying their mortgages and the system cooled down. As a result, commercial markets saw no runaway boom and subsequent colossal bust.

Although I think that laying the crisis solely at the feet of the residential mortgage market is overly simplistic (for example, what was up with the ratings agencies?), Love does point to a very apt comparison as to how government intervention in the market changes incentives and behavior. If you guarantee risks against bad loans, and subsidize the debtors, then more of such loans will be made. Remove such a guarantees and subsidies and market forces will severely punish improperly compensated risk taking.

The trade off, of course, is that free markets do not allow much opportunity for rent-seeking. Which is why Love’s final lament is so true:

Sadly, experience suggests that mere empiricism has no place in political economics.

That’s because empiricism does not buy votes.

Poll Battle

Do Americans support the stimulus bill proposed by Congress, or hate it? The only way to glean a credible answer is by looking to reliable polls. Bruce did that earlier with respect to the ATI-News/Zogby poll which found that:

Amidst all the rhetoric surrounding President Barack Obama’s first signature piece of legislation, a massive $800 billion economic “stimulus” bill, one thing is clear: a majority of Americans reject the President’s handiwork. A just-released ATI-News/Zogby International poll shows that clear majorities of Republicans and Independents are against it.

On the other hand, a USA Today/Gallup poll found that support for the bill has dramatically risen [HT: Hot Air]:

Public support for an $800 billion economic stimulus package has increased to 59% in a USA Today/Gallup poll conducted Tuesday night, up from 52% in Gallup polling a week ago, as well as in late January.

So which is it? Is support up or down? Frankly, I don’t think we can really tell. Here’s why.

Both polls reveal the number of people questioned, and break down the results by party affiliation (although the ATI-News commissioned poll did not provide any numbers for Democrats). However, neither poll details how many participants of each party were polled, and/or whether the results were weighted. In short, if the ATI-News poll included substantially more Republicans and Republican leaning people among the 7,010 voters questioned, then the results should predictably skew towards the Republican side of the issue. Similarly, if there were significant number of Democrats and Democratic leaning independents among those 1,021 national adults polled by the USA Today poll, then we should expect that poll to favor the Democratic side.

Because we aren’t informed as to the breakdown of the total by party affiliation, we really can’t say how reflective the polls are of the country as a whole. Seeing as how the polls contradict one another, it’s safe to say that neither one accomplishes that task.

It’s tempting to conclude that, since the ATI-News poll was conducted over 5 days, as opposed to one, and interviewed almost 7 times as many people as the USA Today poll, the larger sample provides a more accurate picture. Moreover, the poll showing that the public is against the stimulus bill claims a margin of error (+/- 1.2%) that is far lower than the other poll (+/- 3.5%). Yet, the confidence interval for the latter poll is 95% and none is given for the ATI-News offering. If it was only 90%, I think (but could be wrong) that makes the USA Today poll slightly more accurate. In addition, without knowing how many answers came from each party (D/R/I), it’s impossible to say just how representative the poll actually is.

By the same token, the USA Today poll appears to offer a more comprehensive look at those questioned, and the questions asked seem less likely to evoke biased answers. For example, the main USA Today poll question was this:

As you may know, Congress is considering a new economic stimulus package of at least $800 billion. Do you favor or oppose Congress passing this legislation?

Compare that question to the following:

Most Republicans oppose the currently proposed stimulus bill supported by President Obama because they say there is too much money being spent for non-stimulus items. Do you agree or disagree that too much money is being spent on items that won’t improve the economy?

The first question above is simple, straightforward, and doesn’t present any potential bias words with respect to the issue. The second, however, sets up a premise, attaches “Republican” to it, and then asks for agree or disagree. Not surprisingly, the second question elicited a much stronger response from Republicans (93% agreed) and Independents (66%) than the first (56% Independents; 28% Republicans). Perhaps then the USA Today poll, despite its small sample, is the more accurate?

Once again, we don’t know how many of each party were questioned. If it was overwhelmingly Democratic Party leaners, then the results would have to be expected. In addition, the USA Today poll questioned all adults, while the ATI-News poll only queried voters, whom one might assume are somewhat better informed. Finally, the fact that any poll of voters could find a string correlation between the words “agree” and “Republicans” suggests that the wording was not causing any undue bias (unless, of course, it was mostly Republicans interviewed, which is pretty unlikely).

In the end, I don’t know how to view these two contradictory polls in a way that sheds any light on how the populace is actually feeling about the stimulus bill. Other than the glaring fact that Democrats overwhelmingly favor its passage, while Republicans do not, there is nothing definitive to be learned. I do agree with Bruce’s assessment that Independents are the best to look for answers, however the poll numbers we have don’t seem to match up.

I guess its possible that the a majority of people are ambivalent about the stimulus bill — yeah it’ll probably be a big screw up, but we have to do something, don’t we? — which would explain some of the apparent contradiction. And maybe Obama’s sales job made the difference in the numbers (the ATI-News poll ended on the 9th, while the USA Today poll was taken on the 10th).

Whatever the reason for the contradiction, I think it’s interesting that each day we have a different poll telling us that the public loves/hates the stimulus package, yet we never see any polls testing the public’s knowledge of what’s in the bill (much less anyone in Congress). Maybe if people were better informed about the contents of the legislation we see more consistent polling. Instead of constantly reading polls asking if the Republicans are right or wrong, or if $800 billion is a good number to spend, perhaps we’d learn more about what the public really thinks if we asked them how stimulated they would be by $4.2 billion for “neighborhood stabilization activities,” or $34 million to renovate the Department of Commerce headquarters, or $88 million to help move the Public Health Service into a new building, or $55 million for Historic Preservation Fund, or $6.2 billion for the Weatherization Assistance Program, or $2.4 billion for carbon-capture demonstration projects. Now there’s a poll I’d like to see.

Newspeak: Bi-Partisan Redefined

I won’t go into the whole kit’n kaboodle about how “bi-partisan” has recently come to mean “all of one party plus 3 of the other,” but instead point to this (supposedly) journalistic effort to shore up the new definition:

Harry Reid spokesman Jim Manley on Heath Shuler’s comment that Reid and Nancy Pelosi “failed” on bipartisanship.

It’s a good one

Quite the set up, eh? It must be something awfully devastating. The way that Glenn Thrush, the Politico “reporter” detailing Shuler’s walk into the wilderness, leads into the allegedly withering comments with little more than a snarky swipe at the Congressman’s dubious NFL career (“Manley sacks Shuler”)

Sacked

Sacked

one would think that Manley had something important to say. One would be wrong.

Before getting to Manley’s “sack” (in Thrush’s words), let’s take a look at the sole account of Shuler’s misdeed, which incidentally is from Glenn Thrush:

“In order for us to get the confidence of America, it has to be done in a bipartisan way,” Shuler said in Raleigh following an economic forum, according to the AP.

“We have to have everyone — Democrats and Republicans standing on the stage with the administration — saying, ‘We got something done that was efficient, stimulative and timely … I truly feel that’s where maybe House leadership and Senate leadership have really failed.”

Shuler, rumored to be mulling a ’10 Senate run, was one of 11 House Democrats to vote “no” on the stimulus and was already deep in Pelosi’s doghouse. Now he’ll have to build a Harry Reid wing.

Apostasy! How dare a Democrat call the incompetent leaders of the House and Senate incompetent. What is he, a Republican? It’s almost as if Shuler really bought into all that post-partisan claptrap that Obama spouted on the campaign trail. Well, Earth to Shuler. The campaign’s over. Time to get in line and do what your told like the rest of America.

But I kid.

According to Thrush, Manley had a much better takedown of Shuler’s insubordination:

Let me get this straight – this is coming from a guy who threw more than twice as many interceptions than touchdowns?

Maybe Someone should tell congressman Shuler that under the leadership of President Obama we have put together a bipartisan bill that will create or save 3 to 4 million jobs, and that We have been more than willing to work with our republican friends. We have accepted some of their ideas and will continue to do so. But not at the expense of creating jobs, investing in our future of helping the middle class. He can stand on a stage if he wants, but senate democrats are busy trying to pass legislation that will provide essential investments designed to create and save jobs.

Hmmm. I didn’t realize that Shuler’s career as an NFL quarterback was somehow relevant. Didn’t get that memo. But Thrush sure did:

In four years as an NFL QB — three with the Redskins, one with the Saints — Shuler threw 32 INTs while tallying only 15 TDs. Shuler was the third overall pick in the 1994 NFL draft and held out for a seven-year $19 million contract, but completed fewer than half his passes — with a rock-bottom 54.3 lifetime passer rating.

In 2008, ESPN rated him the 4th biggest draft bust in league history.

Ummm … OK. So, that’s it? That’s the “good one”? Cracking on Shuler’s life before becoming a Congressman? I mean, I see that Shuler’s point concerning the lack of bi-partisanship is roundly countered by Manley’s response to the effect of “Nuh’uh.” But is that really so devastating? Does that have anything to do with Shuler’s point about the failure to include Republican’s in the Mother of All Spending Bills? Judging from Thrush’s reporting, the “good one” was little more than a schoolyard taunt.

Toady in the Wilderness

Toady in the Wilderness

Perhaps the larger point was that Thrush simply wanted to generate some controversy so that he’d have something to write about. Take a critical remark from a supposed friendly and use it to elicit a stinging retort. That’s the world of lazy journalism and tabloid reports.

But Thrush misses the real story here in a spectacular fashion. Where Schuler takes a political risk in challenging the leaders of his own party by pointing to the actual lack of any Republicans signing onto the bill, Thrush instead focuses on the sarcastic response, completely ignoring the glaring fact that only three out of 219 have been brought on board. Manley’s retort may generate guffaws in the Democratic lunchrooms, but it’s hardly the caliber of a “good one” even for a sophomore in high school. Thrush has reduced himself to little more than a gossiping sycophant, content with relaying the latest insults delivered by the cool kids in order to ingratiate himself with the in-crowd. And in the process, he has perpetuated the myth that the stimulus bill is any way bi-partisan.

One would think there was a good story in there somewhere. That is, if one were really a journalist.

$9.7 Trillion

That’s “trillion” with a capital “T“. And that’s the amount of money being spent by Congress to right our approximately $14.58 Trillion economy (source).

The stimulus package the U.S. Congress is completing would raise the government’s commitment to solving the financial crisis to $9.7

Capitol Spending

Capitol Spending

trillion, enough to pay off more than 90 percent of the nation’s home mortgages.

The Federal Reserve, Treasury Department and Federal Deposit Insurance Corporation have lent or spent almost $3 trillion over the past two years and pledged up to $5.7 trillion more. The Senate is to vote this week on an economic-stimulus measure of at least $780 billion. It would need to be reconciled with an $819 billion plan the House approved last month.

Again, that’s “trillion” with a “T”. In order to grasp the magnitude of that much spending, understand that you can reasonably round the number to $10 Trillion and thereby assume an extra $300 Billion, which is about the amount of TARP funds already pushed out the front doors of Congress. It’s also about one third of the amount being debated in Congress right now. In other words, the stimulus funds are pennies compared to amount of money already spent and/or promised.

Here’s another way to look at it (my emphasis):

The $9.7 trillion in pledges would be enough to send a $1,430 check to every man, woman and child alive in the world. It’s 13 times what the U.S. has spent so far on wars in Iraq and Afghanistan, according to Congressional Budget Office data, and is almost enough to pay off every home mortgage loan in the U.S., calculated at $10.5 trillion by the Federal Reserve.

It’s a lot of money. So why is it that we’re only privy to the debate (if it can be called that) over a measly 10% of the spending?

“We’ve seen money go out the back door of this government unlike any time in the history of our country,” Senator Byron Dorgan, a North Dakota Democrat, said on the Senate floor Feb. 3. “Nobody knows what went out of the Federal Reserve Board, to whom and for what purpose. How much from the FDIC? How much from TARP? When? Why?”

Financial Rescue

The pledges, amounting to almost two-thirds of the value of everything produced in the U.S. last year, are intended to rescue the financial system after the credit markets seized up about 18 months ago. The promises are composed of about $1 trillion in stimulus packages, around $3 trillion in lending and spending and $5.7 trillion in agreements to provide aid.

Many of us were disappointed with the spending habits of “compassionate conservativism” and lamented how it merely approximated socialist government policies with a friendly face. Of course, the alternative to Bush was real-deal socialist spending and a weakening of our national security.

Now we’re getting the full-on brunt of a dour-visaged collectivist government, employing a magician’s sleight of hand, and it makes the compassionate conservatism look positively stingy in comparison. While we argue over $800 Billion, another $9 Trillion is quietly being shoveled out the backdoor with little to no accountability.

When Congress approved the TARP on Oct. 3, Fed Chairman Ben S. Bernanke and then Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight. The Federal Reserve so far is refusing to disclose loan recipients or reveal the collateral they are taking in return.

There’s no doubt that the Bush administration greased the skids, but Obama is running a rocket sled of spending, and there does not appear to be any end in sight.

One has to wonder when Atlas will finally shrug.

Podcast for 08 Feb 09

In this podcast, Bruce, Michael, and Dale talk about the stimulus bill, and President Obama’s unforced errors.

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.

Executive Pay Capped

Many progressives thought that Pres. Obama had abandoned them after the election, but I’ll bet they’re singing a different tune today:

President Barack Obama on Wednesday imposed a $500,000 cap on senior executive pay for the most distressed financial institutions receiving taxpayer bailout money and promised new steps to end a system of “executives being rewarded for failure.”

[...]

The limit would apply to top-paid executives at the most distressed financial institutions that are negotiating bailout agreements with the federal government.

Obama in Scold Finger III - From Stalinist Russia With Love

Obama in Scold Finger III - From Stalinist Russia With Love

It also would apply to other banks that receive aid, but they could get around the limits by publicizing to shareholders plans to exceed the salary cap.

The “most distressed financial institutions” will not include those which have already received TARP funds, such as AIG and Citigroup. However, those firms are already subject to caps on executive pay under the statute authorizing the bailout last Fall. And because these companies have all come to the government “with hat in hand,” in Obama’s words, not too many people outside of Wall Street are upset. Yet, Obama does not seem content to stop with these “distressed” companies:

The administration also will propose long-term compensation restrictions even for companies that don’t receive government assistance, Obama said.

Those proposals include:

• Requiring top executives at financial institutions to hold stock for several years before they can cash out.

• Requiring nonbinding “say on pay” resolutions — that is, giving shareholders more say on executive compensation.

• A Treasury-sponsored conference on a long-term overhaul of executive compensation.

This is exactly the sort of creeping socialism that many of us were worried about with Obama’s election. Mind you, McCain would not have been much better, but this sort of heavy handed government interventionism would not have been proposed by his administration, much less tolerated by most Republicans in Congress.

Obama’s proposals are somewhat tolerable with respect to the bailed out companies since they are being funded with tax payer dollars. If these companies are going take the money, then they should have to abide by whatever rules are attached to the funding no matter how onerous. But trying to impose such draconian restrictions on companies that are not being bailed out is nothing more than a direct assault on freedom.

Even if you think that no executive should be paid more than $X more than the lowest paid employee of a firm, or are just angry at the seemingly wasteful and lavish life styles of Wall Street bankers, you still have to find this sort of proposed legislation abominable. Why? Because no matter what you think about executive compensation, the owners and operators of these companies think otherwise. It’s their decision to make about how their companies are run and how well their employees are paid. Unless, of course, you would just fine and dandy with some government bureaucrat deciding that you are overpaid for your position, and that no matter how hard you work you can never make more than $Y.

The only people who would ever agree to such slavery are those who have no ambition and little, if anything, to offer the world in terms of work product. They are not the people who invent the items, create the ideas, or provide the services that make our lives better over time. That is not to say that their efforts are not appreciated, nor that they shouldn’t be rewarded. But neither should we base the engine of wealth creation on their hopes and dreams of sinecure.

Beyond the egregious assault on freedom these proposals represent, there is also a huge question as to their efficacy, regardless of whether the firms are troubled or not (my emphasis):

Compensation experts in the private sector have warned that intrusions into the internal decisions of financial institutions could discourage participation in the rescue program and slow down the financial sector’s recovery. They also argue that it could set a precedent for government regulation that undermines performance-based pay.

“One of the big questions is whether it will make it more difficult to recruit and retain executives at these companies,” said Claudia Allen, chair of corporate governance at the Chicago-based law firm of Neal, Gerber & Eisenberg.

The $500,000 cap “is a very tight limit,” she said.

Timothy J. Bartl, vice president and general counsel for the Center On Executive Compensation, said the president’s actions are a unique situation given the government’s role bailing out troubled institutions.

“We do not view it as something that ought to be extended beyond this circumstance,” he said.

I don’t think there’s any legitimate doubt that these will be the effects. Indeed, here are some of the reactions to Obama’s proposals:

Goldman Sachs said yesterday it wants to repay $10 billion it got from Treasury under the TARP to signal the firm is healthy and to escape limitations that came with that infusion of money. “Our financial condition is sound and, subject to approval from regulators, we hope to repay TARP money as soon as practicable,” said Lucas van Praag, a spokesman for New York- based Goldman Sachs.

JPMorgan CEO Jamie Dimon said Feb. 3 that the firm didn’t need capital and didn’t ask for TARP funding. The lender accepted the $25 billion it received from the first capital injection at the request of the government and to help stabilize the banking system, he said.

Goldman has to get permission to repay the government? Does that make sense? Only if the reason the funds were distributed in the first place was to give the federal government control over the market place. I think that’s exactly what Bush (“I’ve abandoned free-market principles to save the free-market system”) and Paulsen had in mind with TARP, and I think Obama is prepared to carry the ball even further into socialist territory.

As far as retaining talented executives, why would any of them stay? If you were making $10 Million per year including your bonuses (not uncommon), why would you stay somewhere that’s forcing you take a 95% pay cut? Of course, many will say good riddance to bad rubbish, and perhaps their right. It’s not like a firm that goes crawling for a federal handout was performing all that well. Except that (a) it’s far from clear that bad management led to the current crisis (although, surely that had something to do with it), and (b) even if it were clear, not every executive or potential executive was responsible. If you are a rising star in your investment bank who has put in exhaustingly long hours to get ahead in hopes of a big payday in the future, why would you stick around where you know your options are limited? These are very smart, industrious and capable people. There are plenty of places where they can go and not be subject to such pay strictures, and that is where they will end up.

Moreover, a part of the proposed regulations practically eliminates the fabled “golden parachutes” for executives:

Obama said that massive severance packages for executives who leave failing firms are also going to be eliminated. “We’re taking the air out of golden parachutes,” he said.

This displays a fundamental misunderstanding of what golden parachutes are. Contrary to popular belief, they are not generous giveaways to failed executives, but instead incentives for failed executives to get out of the way and allow new management. Without these sorts of incentives, management becomes entrenched and complacent. If a proposed takeover threatens to take away the goodies they can vote themselves, then they will forego such proposals and keep cashing in. In order to align management’s interests with the shareholders, golden parachutes were introduced to incentivize firm managers to sacrifice their jobs when the best interests of the company warrant it. Since one of the major problems that everyone seems to have with Wall Street is the failure of effective management, one would think the new rules would make it easier to bring in new blood, not harder.

But none of that matters to Obama:

Mr. Obama said the cap strikes the right “balance” between fair compensation and proper stewardship of taxpayer funds. “This is America. We don’t disparage wealth. We don’t begrudge anybody for achieving success. And we believe that success should be rewarded. But what gets people upset –and rightfully so–are executives being rewarded for failure, especially when those rewards are subsidized by U. S. taxpayers.

“For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis is not only in bad taste, it’s a bad strategy — and I will not tolerate it as President.”

Again, it’s hard to generate much sympathy for executives who’ve come begging to Washington. But at the same time, what point is there to heavy handed measures that don’t do anything more than satisfy some people’s jealousy and outrage? Shouldn’t these proposals be designed to put people back to work?

Rangel to Be Cleared?

Given the vaunted status of tax cheats amongst the Democrats, you’re all shocked, I’m sure:

Charles Rangel in "Scold Finger II: The Speaker Who Loved Me"

Charles Rangel in Scold Finger II: The Speaker Who Loved Me

House Ways and Means Chairman Charles B. Rangel predicted, on C-SPAN’s Newsmakers program that aired Sunday, Feb. 1, 2009, that his multitude of ethics woes would soon disappear. “I think that next Tuesday you will see a break in this and as soon as the Ethics Committee organizes they ought to be able to dismiss this,” National Journal’s CongressDaily quoted the Rangel as saying.

If so, it’s hard to imagine that the Select Committee on Ethics will have devoted anything more than a cursory glance at the various issues raised. Consider just one aspect, for which documents are in the public record: Rangel’s financial disclosure forms. We took a look at his filings going all the way back to 1978, the first year members were required to disclose information on their personal finances, and found 28 instances in which he failed to report acquiring, owning or disposing of assets. Assets worth between $239,026 and $831,000 appear or disappear with no disclosure of when they were acquired, how long they were held, or when they were sold, as the operative House rules at the time required.

This is all according to Charlie, of course. Much like the Obama team clearing itself of any inappropriate behavior in the Blagojevich troubles, taking Charlie’s word here would not be advisable. However, he seems to know that something is coming, and considering that Speaker Pelosi made little to no effort to support the investigation, we shouldn’t be surprised if Rangel walks away from this with his Chairmanship still intact.

Most ethical Congress ever!

Pushing the AGW Agenda

Despite the increasing amount of skepticism about Anthropogenic Global Warming (AGW) openly expressed by climate scientists, apparently nothing is going to dissuade the Obama administration from its alarmism on the topic:

California’s farms and vineyards could vanish by the end of the century, and its major cities could be in jeopardy, if Americans do not act to slow the advance of global warming, Secretary of Energy Steven Chu said Tuesday.

In his first interview since taking office last month, the Nobel-prize-winning physicist offered some of the starkest comments yet on how seriously President Obama’s cabinet views the threat of climate change, along with a detailed assessment of the administration’s plans to combat it.

Steven Chu as "Scold Finger"

Steven Chu as "Scold Finger"

Chu warned of water shortages plaguing the West and Upper Midwest and particularly dire consequences for California, his home state, the nation’s leading agricultural producer.

In a worst case, Chu said, up to 90% of the Sierra snowpack could disappear, all but eliminating a natural storage system for water vital to agriculture.

“I don’t think the American public has gripped in its gut what could happen,” he said. “We’re looking at a scenario where there’s no more agriculture in California.” And, he added, “I don’t actually see how they can keep their cities going” either.

What the Obama team has not gripped yet is that there is no scientific proof (much less a “consensus”) that humans have anything beyond a negligible effect on the climate. As McQ alerted us to yesterday, there is not even a scientific basis for the claims being made by Chu:

We [Keston C. Green and J. Scott Armstrong] have concluded that the forecasting process reported on by the Intergovernmental Panel on Climate Change (IPCC) lacks a scientific basis….

Since the publication of our paper, no one has provided evidence to refute our claim that there are no scientific forecasts to support global warming.

The lack of any scientific foundation isn’t about to stop political maneuvering, however:

He stressed the threat of climate change in his Senate confirmation hearings and in a video clip posted on Obama’s transition website, but not as bluntly, nor in as dire terms, as he did Tuesday.

In the course of a half-hour interview, Chu made clear that he sees public education as a key part of the administration’s strategy to fight global warming — along with billions of dollars for alternative energy research and infrastructure, a national standard for electricity from renewable sources and cap-and-trade legislation to limit greenhouse gas emissions.

He said the threat of warming is keeping policymakers focused on alternatives to fossil fuel, even though gasoline prices have fallen over the last six months from historic highs. But he said public awareness needs to catch up. He compared the situation to a family buying an old house and being told by an inspector that it must pay a hefty sum to rewire it or risk an electrical fire that could burn everything down.

“I’m hoping that the American people will wake up,” Chu said, and pay the cost of rewiring.

Chu, who is not a climate scientist, seems to working from the same playbook as our (former) car mechanic. He too was hoping we’d pay him the cost of some expensive repairs that could potentially cause serious problems if left untended. And just like with the AGW scare, a second opinion revealed that there wasn’t anything actually broken. Unfortunately, while we opted not to pay for the unnecessary repairs to our car, when it comes to the federal government we don’t get that choice. Chu’s “hoping” for us to pay for the Obama administration’s alarmism is pretty much the same thing as telling us the bill is in the mail.

Note also that while the L.A. Times story managed to find studies supporting Chu’s theories, and to quote parties in favor of his prescriptions, no mention was made of skeptics until the last paragraph, and that was reserved for a politician:

Global warming skeptics were not swayed. “I am hopeful Secretary Chu will take note of the real-world data, new studies and the growing chorus of international scientists that question his climate claims,” Sen. James Inhofe (R-Okla.), the top Republican on the Environment and Public Works Committee, said in a statement. “Computer model predictions of the year 2100 are simply not evidence of a looming climate catastrophe.”

It’s a shame that the best the LAT could do for a view contrary to that of Chu and AGW scientists was to get a quote from a statement put out to the public by Sen. Inhofe. Maybe if they had had some basic research skills, they could have located and quoted from the publicly available Green & Armstrong Report. Or perhaps, they might have employed their vaunted J-School talents such as picking up a phone and calling a source.

The funny thing is, I distinctly recall being told over and over again how the Bush administration had politicized science, much to the detriment of us all. Why even the LAT reported such grave concerns. Whatever happened to that concern anyway?

Plus ça (hope and) change, plus c’est la même chose.

TARP News: Wells Fargo to Pay Back U.S.

money
According to this report, Wells Fargo is prepared to put some money back into the federal coffers:

Good news out of the failing financial sector, finally. Wells Fargo Bank reports it will pay back the federal government $371.5 million in its first quarterly bailout installment.

Wells Fargo is believed to be the first major bank receiving TARP (Troubled Assets Relief Program) to do so.

In an internal memo obtained by The Remmers Report, Wells Fargo said the quarterly dividend of $14,861.11 per share is payable Feb. 15. The feds purchased 25,000 shares of Fixed Rate Cumulative Perpetual Preferred Stock last September and is the only holder of record of the Series D preferred stock.

“Since credit began contracting 18 months ago, Wells Fargo has made almost half a trillion dollars in new loan commitments and mortgage originations,” said Chief Financial Officer Howard Atkins. “Last quarter alone, we made $22 billion in loan commitments and $50 billion in mortgage originations. That’s more than $70 billion or almost three times the amount of the U.S. Treasury’s investment in Wells Fargo. We believe we’re leading our industry in lending to creditworthy customers during this difficult economy.”

It is ironic that initially Wells Fargo signalled (sic) Treasury it did not want TARP funds and when it did, negotiated the takeover of financial giant competitor Wachovia.

The payment would represent only about 1.5% of the TARP funds given to Wells Fargo, but it’s a start I guess.