July 31, 2012

Judicial Watch Sues Federal Reserve Board of Governors for Records Detailing Justification for AIG Bailout

Judicial Watch announced today that on July 18, 2012, it filed a Freedom of Information Act (FOIA) lawsuit (judicial watch v. board of governors of the federal reserve system (no. 1:12-cv-01175)) against the Board of Governors of the Federal Reserve System (the Board) seeking records related to the government bailout of American International Group, Inc. (AIG). Judicial Watch filed its lawsuit on behalf of Vern McKinley, a former employee of the Board of Governors of the Federal Reserve and the Federal Deposit Insurance Corporation and author of Financing Failure: A Century of Bailouts.

Judicial Watch seeks the following records pursuant to its original May 15, 2012, FOIA request: "Copies of any and all records of the Board located at the [Federal Reserve Bank of New York] concerning, regarding, or relating to the proposition that 'the disorderly failure of AIG was likely to have a systemic effect on financial markets that were already experiencing a significant level of fragility.' Such records include, but are not limited to... detailed meeting minutes, meeting notes, supporting memoranda, communications, and electronic messages and attachments."

The Board acknowledged receiving Judicial Watch's request on May 15, 2012, and requested a 10-day extension to respond. A response was due by June 27, 2012. However, as of the date of Judicial Watch's lawsuit, the Board failed to respond in accordance with FOIA law.

On September 16, 2008, the Board decided to extend an initial $85 billion loan to insurance giant AIG, which it claimed "faced the imminent prospect of declaring bankruptcy." According to minutes from the September 16, 2008, meeting: "Board members agreed that the disorderly failure of AIG was likely to have a systemic effect on financial markets that were already experiencing a significant level of fragility and that the best alternative available was to lend to AIG to assist it in meeting its obligations in an orderly manner as they came due... " According to CNN, the total cost committed to AIG was $182 billion.

The Board's contention -- that the failure of major corporations would spread a contagion throughout the financial system -- has been used repeatedly to justify the bailouts. However, to date, the government has no evidence to support this contention. Judicial Watch, meanwhile, has launched a comprehensive investigation to determine under what legal authorities and lawful rationales the federal government initiated the Wall Street bailouts and has filed a number of lawsuits on behalf of Mr. McKinley.

"We are now trillions of taxpayer dollars into these financial bailouts and the government refuses to answer basic questions about the government's radically intrusive response to the financial crisis," said Judicial Watch President Tom Fitton. "The American people are tired of the Obama administration's stonewalling and they want answers. The Fed should obey Freedom of Information Act law and respond immediately."

With respect to the AIG bailout, Judicial Watch previously uncovered documents showing that the government did not expect taxpayers to recover their "investment" in AIG. For example, Judicial Watch uncovered a series of presentation slides detailing the terms of the AIG bailout. Included among the items is a slide entitled "Investment Considerations." On the slide the words, "The prospects of recovery of capital and a return on the equity investment to the taxpayer are highly speculative" are crossed out by hand.

On February 25, 2010, Judicial Watch also filed a FOIA lawsuit against the Obama Treasury Department to obtain documents regarding meetings involving Kenneth Feinberg, special master for executive compensation under the Troubled Asset Relief Program (TARP); AIG Chairman Robert Benmosche; and New York Federal Reserve Bank President William Dudley. Feinberg, also known as the Obama administration's "pay czar," is the federal official responsible for setting compensation guidelines for the seven largest firms, including AIG, using funds from TARP.

In March 2009, AIG disbursed $165 million in taxpayer-funded TARP funds to its top executives, prompting a massive public backlash. Obama officials reportedly lobbied Congress to insert legislative language allowing the AIG bonus payments and then apparently lied about their knowledge of the payment scheme. As then-head of the New York Federal Reserve, current Treasury Secretary Timothy Geithner helped craft the original AIG deal.

July 30, 2012

Obama Makes Good on Promise to Bankrupt the Coal Industry

In January 2008, when Barack Obama was trying to put some distance between himself and other Democrats seeking the party's nomination, he touted his green policies. In particular, he talked about his intentions to put regulations in place that would shut down coal plants around the country.
Speaking in San Francisco, candidate Obama said: "If somebody wants to build a coal-powered plant, they can, it's just that it will bankrupt them."

Enter 2012, and a record number of coal-fired generators are set to be shut down. As the Daily Caller reported, because of the "stiff federal environmental regulations" the Obama administration has put in place, 175 generators are scheduled to be phased out. That represents "8.5 percent of the total coal-fired capacity in the United States."

Of these 175 generators, 57 are scheduled to be taken offline in 2012.

In other words, the "cost of compliance" with Obama-era regulations is simply too high, thus coal-fired plant owners find themselves right where Obama said they would were he elected. Now they can either shut the generators down or keep them online and inch ever closer to bankruptcy.

How's that for "hope and change"?

July 27, 2012

Eight co-sponsors of ‘audit the Fed’ bill vote against it without explanation

The House of Representatives approved Texas Republican Rep. Ron Paul’s “Federal Reserve Transparency Act of 2012″ by a wide margin in a 327-98 vote Wednesday. But lost in the bipartisan revelry was the fact that eight co-sponsors of the legislation actually voted against it.

Spokesmen for each of these congressmen were contacted by The Daily Caller on Thursday, and none were keen on providing an explanation.

The bill would allow the Government Accountability Office to conduct a thorough audit of the Federal Reserve System, tremendously increasing transparency and accountability, in theory.

All House Republicans voted in favor of the bill, except for New York Rep. Bob Turner. Ninety-seven Democrats — notably including the party’s House leadership — voted against the bill, and 89 Democrats voted in favor.

The eight co-sponsors, all Democrats, that voted against their own legislation not only sponsored the 2012 bill, but each also co-sponsored its 2009 incarnation.

A spokesman for California Democratic Rep. Pete Stark merely informed TheDC, “He did not release a statement,” and declined to explain his about-face.

Spokesmen for the other seven flip-floppers — Lynn Woolsey of California, John Conyers of Michigan, Maurice Hinchey of New York, Jim McDermott of Washington, Marcy Kaptur of Ohio, Steven Rothman of New Jersey and Silvestre Reyes of Texas — did not respond at all.

Woolsey, Hinchey, Reyes and Rothman are not running for re-election. Woolsey was one of eleven original co-sponsors of the 2009 version.

House opponents of the bill argued that it could result in the politicization of the Federal Reserve’s policymaking. “Congress has rightly insulated the Fed from short-term political pressures,” said House Minority Whip Steny Hoyer, a Maryland Democrat. (SEE ALSO: Kucinich: Federal Reserve ‘acts like it’s some kind of high exalted priesthood’)

The eight House Democrats who switched their stance on the issue without an explanation find themselves in good company, with Senate Majority Leader Harry Reid also pulling off a mystifying pivot.

In 2010 and 1995, Reid boasted that he had tried in vain to pass legislation to audit the Fed. The Nevada senator, however, is now refusing to bring the bill, which would fulfill his self-professed yearning, to a Senate vote.

Like the eight congressmen, Reid has ignored requests for comment.

The 2012 Senate bill is sponsored by Ron Paul’s son, Kentucky Republican Sen. Rand Paul, and is co-sponsored by 23 Republicans. The 2009 Senate version was introduced by Vermont independent Sen. Bernie Sanders and was co-sponsored by several Democrats, including still-serving Democratic Sens. Barbara Boxer of California, Ben Cardin of Maryland, Tom Harkin of Iowa, Mary Landrieu of Louisiana, Patrick Leahy of Vermont, Jim Webb of Virginia and Ron Wyden of Oregon.

July 26, 2012

I Know the Congressional Culture of Corruption

Congressmen accept donations and solemnly recite their oath of office: My vote is not for sale for a mere contribution. They are wrong.

Though democracy is not perfect, it is certainly the most effective polity; as Winston Churchill averred, democracy is the worst form of government except for all the rest. Human social systems usually last but a few generations before collapsing into the abyss of entropy. It is, therefore, quite remarkable that our republic just celebrated its 236th anniversary.

Nevertheless, corruption has dulled the luster of the American political experiment and left our citizenry confused and irascible. And nothing has provoked outrage across the fruited plain as has the chicanery of the special interests and their emissaries, the lobbyists.

Our system allows interested parties to provide public servants with remuneration even as they badger those same officeholders to intercede in the parties' private affairs. This use of money to buy outcomes is most striking in the legislative branch of our government and only slightly less pervasive in the executive branch. It is in the judiciary that law and public consensus are better aligned to forbid the use of financial inducement.

No one would seriously propose visiting a judge before a trial and offering a financial gratuity, or choice tickets to an athletic event, in exchange for special consideration from the bench. Yet no inside-the-Beltway hackles are raised when a legislative jurist -- also known as a congressman -- receives a campaign contribution even as he contemplates action on an issue of vital importance to the donor.

During the years I was lobbying, I purveyed millions of my own and clients' dollars to congressmen, especially at such decisive moments. I never contemplated that these payments were really just bribes, but they were. Like most dissembling Washington hacks, I viewed these payments as legitimate political contributions, expressions of my admiration of and fealty to the venerable statesman I needed to influence.

Outside our capital city (and its ever-prosperous contiguous counties), the campaign contributions of special interests are rightly seen as nothing but bribes. The purposeful dissonance of the political class enables congressmen to accept donations and solemnly recite their real oath of office: My vote is not for sale for a mere contribution. They are wrong. Their votes are very much for sale, only they don't wish to admit it. The reason they don't feel they are being bought is that the interaction seems so normal. In fact, were they not public servants, it would be very normal.

In polite society, we want to create indebtedness and gratitude. These are the sensations that build great civilizations. When I do something nice for you, unless you are a jerk, you feel some gratitude and try, in some way, to reciprocate. One kindness breeds another. That's what we should all desire.

The human soul does not permit us to leave our debts unpaid, and gratitude is the minimal sensation of repayment a normal person can provide. This is all fine for normal society, but when the recipient of kindness and administrator of gratitude is a public servant, the otherwise positive relationship dynamic becomes negative and venal.

When a public servant has a debt to someone seeking a favor from the government, the foundation of our government is at risk. Each time a lobbyist or special interest makes a political contribution to a public servant, a debt is created. Lobbyists are very adept at collecting these debts. Unfortunately, the true debtor on these obligations is the American people. In a very real way, congressmen who take contributions from lobbyists and special interests are selling our nation to repay their debts of gratitude. That is the price of their votes and offices -- and it must stop.

Working with United Republic and legal experts such as Trevor Potter, I am engaged in a mighty effort to reverse the special interest tide in Washington. We are now drafting legislation that will make real, systemic changes to the campaign finance system, virtually eliminating the use of contributions and financial gratuities by lobbyists, their clients, and all who besiege Congress looking for special grants, loans, tax breaks, contracts, and favors.

The effort will require several election cycles to break the stranglehold of the powerful corporations, unions, and individuals who extract lucre from the federal government with the skill employed by the most capable milking machine. But after traveling throughout our nation and participating in more than 300 television and radio programs since the publication of my book dealing with these matters, I am convinced that the vast majority of our fellow citizens want an end to the bribery and corruption that pervade our federal political system.

For too long, Americans have despaired and surrendered to the powerful special interests in Washington. I know; I used to be one of those special interests. The time has come for real change in our nation's capital. That change will come not through politicians but rather through the determination and activism of American patriots. Let's just hope the process is less arduous than the last time our citizens felt the need to throw off a corrupt tyranny. We celebrate that victory annually -- on July 4.

July 25, 2012

Feinstein walks back claim that White House is behind national security leaks

California Democratic Sen. Dianne Feinstein accused the White House of being behind national security information leaks on Monday, but then walked back her accusation on Tuesday after former Massachusetts Gov. Mitt Romney used her comments against President Barack Obama.

“I stated that I did not believe the president leaked classified information,” Feinstein said in a statement on her website Tuesday. “I shouldn’t have speculated beyond that, because the fact of the matter is I don’t know the source of the leaks.”

“I’m on record as being disturbed by these leaks, and I regret my remarks are being used to impugn President Obama or his commitment to protecting national security secrets,” Feinstein added. “I know for a fact the president is extremely troubled by these leaks. His administration has moved aggressively to appoint two independent U.S. attorneys. There is an investigation under way, and it is moving forward quickly.”

The Republican National Committee said that Feinstein got “Cory Bookered,” a reference to how Newark Mayor Cory Booker criticized Obama’s attacks on Romney’s work at Bain Capital as “nauseating,” than walked back his critique.

Feinstein, the chairwoman of the Senate Intelligence Committee, said at a Monday event, “I think the White House has to understand that some of this is coming from its ranks. I don’t know specifically where, but I think they have to begin to understand that and do something about it.”

After quoting Feinstein in a speech before the Veterans of Foreign Wars convention in Reno, Nevada, Romney called the White House’s conduct during this leaks scandal “contemptible.”

“It betrays our national interest,” Romney said. “It compromises our men and women in the field. And it demands a full and prompt investigation by a special counsel, with explanation and consequence. Obama appointees, who are accountable to President Obama’s Attorney General, should not be responsible for investigating the leaks coming from the Obama White House.”

July 24, 2012

Spies in the sky signal new age of surveillance

LAKOTA, N.D. - The use of unmanned aerial drones, whose deadly accuracy helped revolutionize modern warfare high above the battlefields of Iraq and Afghanistan, is now spreading intrigue and worry across the plains of North Dakota.

Amid 3,000 acres of corn and soybeans and miles from the closest town, a Predator drone led to the arrests of farmer Rodney Brossart and five members of his family last year after a dispute over a neighbor's six lost cows on his property escalated into a 16-hour standoff with police.

It is one of the first reported cases in the nation where an unmanned drone was used to assist in the arrest of a U.S. citizen on his own property; and a controversial sign of how drones, in all shapes, sizes and missions, are beginning to hover over American skies.

Far from just the menacing aircraft bearing Hellfire Missiles and infrared cameras from combat, Unmanned Aerial Systems, the preferred term in the industry, now include products so small they fit in the palm of your hand and can look as innocent as remote-controlled hobby airplanes.

They can quickly scout rural areas for lost children, identify hot spots in forest fires before they get out of control, monitor field crops before they wither or allow paparazzi new ways to target celebrities. The government has predicted that as many as 30,000 drones will be flying over U.S. skies by the end of the decade.

But can drones fly in domestic airspace without crashing into an airplane? Can they be used in a way that doesn't invade privacy? Who's watching the drone operators -- and how closely?

"All the pieces appear to be lining up for the eventual introduction of routine aerial surveillance in American life -- a development that would profoundly change the character of public life in the United States," the American Civil Liberties Union warned in a policy paper on drones last year titled, "Protecting Privacy From Aerial Surveillance."

In the North Dakota case, fearing that the Brossarts had armed themselves, local law enforcement asked for the assist from the Predator -- unarmed but otherwise identical to the ones used in combat -- that's stationed at Grand Forks Air Force Base as a SWAT team converged on the property.

It put Rodney Brossart front and center in the debate over the burgeoning use of domestic drones, and the threat they may represent when authorities are given the ability to watch everything from above.

"I'm not going to sit back and do nothing," Brossart said recently, sitting in the shade outside his small house where farm equipment, trailers and the top half of a school bus sit in the yard in various states of disrepair. As drone use expands nationwide, he's worried. "I don't know what to expect because of what we've seen."

Groups from the Electronic Privacy Information Center to the American Library Association have joined to raise concerns with the Federal Aviation Administration about the implications of opening up U.S. air space to drones, as have Reps. Edward Markey and Joe Barton, co-chairs of the Congressional Bi-Partisan Privacy Caucus.

But the federal government already has been quietly expanding their use in U.S. air space. Even as the wars abroad wind to an end, the military has been pleading for funding for more pilots. Drones cannot be flown now in the United States without FAA approval. But with little public scrutiny, the FAA already has issued at least 266 active testing permits for domestic drone operations, amid safety concerns. Statistics show unmanned aircraft have an accident rate seven times higher than general aviation and 353 times higher than commercial aviation.

Under political and commercial pressure, the Obama administration has ordered the FAA to develop new rules for expanding the use of small drones domestically. By 2015, drones will have access to U.S. airspace currently reserved for piloted aircraft.

"Think about it; they are inscrutable, flying, intelligent," said Ryan Calo, the director of privacy and robotics for the Center for Internet and Society at Stanford Law School. "They are really very difficult for the human mind to cleanly characterize."

While drone use in the rest of the country has been largely theoretical, here in eastern North Dakota it is becoming a way of life.

Drivers on Hwy. 2 near the Grand Forks base say they often see the U.S. Customs Predator B (the B indicates it is unarmed) practicing "touch and go" landings in the morning. A local sheriff's deputy talked of looking up from writing reports in his patrol car one night to see a drone quietly hovering over him. Don "Bama" Nance, who spent 20 years in the Air Force before retiring to Emerado, now cuts the grass on the base golf course.

"They're always overhead on the third hole," he said.

The Grand Forks base has been flying drones sine 2005, when it switched missions from flying tankers to unmanned aerial systems. So, too, have the storied Happy Hooligans of the North Dakota Air National Guard, which has flown drone missions in Iraq and Afghanistan from its base in Fargo.

And use is growing. Predators operated by Customs and Border Patrol completed more than 30 hours of flight in 2009 and more than 55 hours in 2010, mapping the flooded Red River Valley areas of North Dakota and Minnesota. In 2011, the Predator B flew close to 250 hours in disaster relief support along the northern border.

The Grand Forks base, which now has two Predators flying, expects to have as many as 15 Northrop Grumman Global Hawks and six to eight General Atomics Predators/Reapers. That will add an additional 907 Air Force personnel to the base.

For this wide swath of eastern North Dakota, that is part of the appeal: jobs. The University of North Dakota has eagerly partnered with the military and defense contractors, and often operating behind locked doors and secrecy, university officials are working to make the area a hub of unmanned aircraft activity. The state has invested an estimated $12.5 million to make it happen. The local Economic Development Corporation has added a drone coordinator in charge of recruiting more companies to join the 16 drone-related ones that have already set up shop.

"Where aviation was in 1925, that's where we are today with unmanned aerial vehicles," said Al Palmer, director of UND's Center for Unmanned Aircraft Systems Research, Education and Training. "The possibilities are endless."

A new major

The University of North Dakota operates a fleet of seven different types of unmanned aircraft. In 2009, it became the first college in the country to offer a four-year degree in unmanned aircraft piloting. It now has 23 graduates and 84 students majoring in the program, which is open only to U.S. citizens.

It works with Northland Community College in Thief River Falls, Minn., which developed the first drone maintenance training center in the country and proudly shows off its own full-size Global Hawk.

The university also serves as an incubator for companies that might want to expand the industry. In five days, Unmanned Applications Institute International, which provides training in operating drones, can teach a cop how to use a drone the size of a bathtub toy.

"If you're concerned about it, maybe there's a reason we should be flying over you, right?" said Douglas McDonald, the company's director of special operations and president of a local chapter of the unmanned vehicle trade group. "But as soon as you lose your kid, get your car stolen or have marijuana growing out at your lake place that's not yours, you'd probably want one of those flying overhead."

Earlier this year, the Grand Forks Sheriff's Department was provided its own drone by the university for $1 as part of a project to develop policies and procedures for law enforcement.

"We are not out there to abuse people's rights, but at the same time we're out there to protect public safety," said Grand Forks Sheriff Robert Rost. "The public perception is that Big Brother is going to be snooping on them and that is not the case at all. It will not be misused."

Still, not everyone is enthusiastic about drones. The Air Force has proposed expanding seven additional nautical miles of restricted air space near Devils Lake to conduct laser training with drones. Of the 43 public comments on the proposal, 42 opposed it, largely out of safety concerns and fears that it would interfere with commercial and general aviation. Nevertheless, the FAA approved the airspace expansion late last month.

Between the base and Grand Forks, Arnie Sevigny flies his own silent drone protest: a raggedy kite shaped like a jet fighter whipping in the wind 100 feet in the air and tied down with a stake on his property a few miles from the base. "No camera. No invasion of privacy," Sevigny joked. "What do you need a drone for anyhow? They use the satellites they already have to see the head of a dime in your hand."

And for all the assurances, there is much that isn't said or revealed. Some of the equipment used by the university can't be seen by the public because of federal privacy rules. Although legal, anyone photographing outside the base can find themselves being questioned by county, state and Air Force law enforcement. When asked how many times U.S. Border Protection has dispatched drones at the request of local police, a spokeswoman for the agency said it does not keep those figures.

Even Brossart doesn't know what the drone that led to his family's arrests saw. Despite demands made in court, the Predator's footage has not been produced to his attorneys. "They don't want to show what happened," he said, "because it will show exactly what they did."

A judge is expected to rule within days on whether the charges against Brossart, who has had a number of run-ins with authorities over the years, should be dismissed, in part, because the warrantless use of the "spy plane" was part of a pattern of outrageous government conduct that violated Brossart's Fourth Amendment rights.

With case law murky on the domestic use of drones, Brossart's attorney, Bruce Quick, said the courts, Congress and state legislatures will likely have to address the issue. "It's not just criminal defense attorneys. It's just people concerned about civil liberties in general," he said. "I don't think a lot of us like the idea of our privacy being given away."

July 23, 2012

'You Didn’t Build It' Illustrates the Liberal Collective’s Dreams and Tactics

The “You didn’t build that” fiasco, including the incoherent spinning Obama’s minions around the mainstream media have been doing ever since, provides us not only a wonderful opportunity to peek inside the liberal hive mind but a chance to dissect and examine their damage control tactics as well.
First, the notorious statement itself:

“If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business -- you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.”

Let’s be really clear what Obama is saying. He’s saying that entrepreneurs and small business people do nothing special, that they are parasites just like his own constituents. We know he’s saying it. He knows he’s saying it and, further, that he believes it. It’s profoundly disrespectful, and purposely so.

It’s aimed at Obama’s core constituencies of trust fund/showbiz liberals, lay-about welfare sponges and unwashed occupiers – none of whom ever built anything and few of whom pay income taxes – with the short term goal of building a false moral case for stealing more money from the productive and using it for the benefit of his loser voters. Over the long term, delegitimizing hard work and personal initiative independent of government supports the progressive dream of a nation of serfs begging for handouts from their elite overlords.

So, he said what he said, he meant what he said, and he had a specific reason for saying it. And, as many folks have pointed out, it’s substantively ridiculous.

What Obama seeks to do is eliminate the significance of the variable in the equation by treating the constant as the variable. One frequent refrain of the lefty cover-up crew is observations along the line of “Well, you wouldn’t have been successful if you were in Somalia!” Perhaps true, but irrelevant, as we are not talking about enterprising Somalis.

We’re talking about the United States, where everyone has access to the vaunted infrastructure that taxpayers in the past built. Let’s leave aside, for a moment, the fact that most of the lay-abouts Obama is trying to sucker with his rhetoric are not federal income tax payers, much less federal income tax payers “in the past.” Let’s just assume the kind of underachievers who respond to this envy-fueled nonsense were writing the same kind of checks to Uncle Sam as the people running businesses have been writing all along. If you want to, you can believe in unicorns too.

So, everyone has the same ability to use this awesome infrastructure that Obama was pointing to as the key to success. So, the infrastructure is a constant – it’s present on both sides of the equation.

Gee, what’s different that makes two people with access to the same infrastructure that makes success possible? What’s the variable?

Could it be the very things that Obama wants to delegitimize, that for his progressive vision to prevail must be delegitimized – hard work and personal initiative?

Let’s put it in math terms:

(Roads + Bridges +Internet) x (Hard Work + Initiative) =/= (Roads + Bridges +Internet) x Zero Effort

There’s why we have unequal results – and thank God for it.

All those roads, bridges and the system of tubes that is the Internet, all that awesome infrastructure, mean nothing without hard work and initiative. Multiply the opportunity America provides by hard work and initiative and you get iPhones, 747s andThe Dark Knight Rises. Multiply it by zero effort and you get signs reading “EBT Cards Welcome,” Womyn’s Studies majors and downtown Detroit.

Now, the media spin is highly amusing on its own because all the liberals screaming that Obama is being taken out of context and that it is hideously unfair and evil and (probably) racist to actually attribute to him what he said are really just admitting that his whole thesis is political poison to the majority of Americans who don’t want their country fundamentally transformed into the United States of Welfare.

So, liberals, the question is not whether Obama said what we conservatives think he said. We can just disagree on that point. The question is whether Obama disagrees with what the conservatives think he said.

From all this wailing and gnashing of teeth, it seems like the liberals are saying that “Oh no, Obama does not think that entrepreneurship and small business owners are nothing special, nor does he think that they did not get where they are through hard work and sacrifice, and he certainly does not think that freeloading bums have a moral claim to the fruits of hardworking business owners’ labors because long ago other people paid federal income taxes!” In public, they’re keeping as far away from the real messages as swing state candidates are for the Democratic Convention.

If Obama really doesn’t think those things – and we all know he does to the core of his socialist-born being – then he should get up and say it loudly and proudly, that he believes what Mitt Romney, all of us conservatives, and all real Americans believe: That small business and entrepreneurship are what makes America great, and that these are people to be respected and admired, not hated, envied and stolen from to subsidize deadbeats.

If Obama really doesn’t think those things, he should stand up and say, “Gosh, I was misunderstood! I love small businesspeople and even though they represent something intolerable to progressives, a center of power we cannot control like we can big corporations such as GM and GE, I do not think anyone has any moral claim to what they earn! I wholeheartedly and unequivocally reject any notion to the contrary, including the nonsense spewed in that ridiculous video by noted Cherokee Elizabeth Warren!”

Don’t hold your breath. Obama’s got quite a balancing act, dog whistling to his constituents that he sure as hell does mean what he said while denying to normal, productive Americans that he does.

A note to the mainstream media and other liberal enablers: It’s really a poor argument technique to assert that “Obama was totally and unfairly taken out of context even though he believes precisely what you are asserting he believes!”

The “You didn’t build that” fiasco is one of those special moments where not only do we get a chance to see the reality behind the Potemkin Village of liberal propaganda but also to watch liberal media enablers scramble to cobble together a spin that will pull the covers back over the truth.

Our job is to not let that happen, to point out their faulty premises, flimsy arguments and outright incoherence, and to enjoy the hell out of watching our opponents clumsily tap dance in the unwelcome spotlight.

And most satisfying of all is that when it comes to the mess Obama and his liberal pals have found themselves in, they truly did do it all by themselves.

July 20, 2012

US: Scandal 'Abounds' in Obama administration

On the back of Abound’s bankruptcy announcement, the U.S. House Committee on Oversight and Government Reform has held a hearing, during which former executives testified. While the process has been branded an "Obama bashing" exercise by some, it was reported that the aggressive price cutting from Chinese manufacturers played a pivotal role in Abound’s demise.

On July 18, nearly three weeks to the day after Abound Solar announced it would file for protection under the U.S. Bankruptcy Code, the Republican-dominated House Committee on Oversight and Government Reform held a hearing to determine whether the firm’s "rags to riches to ruins" narrative would create more reservations about the Obama Administration’s green energy investment choices and oversight procedures. They were looking for another Solyndra – and there were some obvious similarities.

During the three hour hearing, which the Examiner described as more about "bashing Obama and creating an excuse to eliminate renewable energy programs this year" than oversight, witness after witness testified that a number of convergent factors in the global solar industry – including falling costs, government subsidy cutbacks and Chinese competition – have combined to turn 2012 into a tough year for manufacturing in the United States, and not just for startups.

"We never expected [module] prices to fall that fast, and so far," said Craig Witsoe, former CEO of Abound Solar, at the three-hour hearing. Referring to the U.S. Commerce Department’s anti-dumping (AD) and countervailing duty (CVD) complaints against China’s solar manufacturers, and the punitive imposition of tariffs on those goods, he commented, "Abound supports recent initiatives to enforce fair trade with import tariffs, but this action is unfortunately too late for the company."

Thomas Tiller, Abound's former chairman, agreed, adding, "Abound’s technology and business made solid progress until the second half of 2011, when panel prices dropped by 50 percent in a year, due to aggressive price-cutting from Chinese competitors using older crystalline-silicon technology. With over US$30 billion in reported government subsidies, Chinese panel makers were able to sell below cost and put Abound out of business before we were big enough to pose a real competitive threat to China’s rapidly growing market share."

Prior to the hearing, Representative Cliff Stearns (R-Florida), the chairman of the House Energy and Commerce Committee’s oversight panel, which has held several hearings and collected thousands of administration emails relating to Solyndra’s Department of Energy loan guarantee, said he didn’t think Abound’s closure warranted its own investigation. "We know why they went bankrupt. We warned them they would go bankrupt," Stearns told reporters. "The larger question is why the Administration was pursuing a green-energy policy in which companies are going bankrupt and wasting taxpayer money."

"Incompetence, carelessness and cronyism"

While the competitive issues in the industry were clear during an election year, the Republicans on the committee wanted to ensure that the buck stopped where they thought it should – at the Oval Office. The Chairman of the House Oversight and Government Reform Committee, Representative Darrell Issa (R-California), went on the offensive, hitting the Obama Administration with accusations of causing what he characterized as a "scandal".

Issa stated, "After Solyndra went bankrupt … major questions arose about the nature of the decision-making process at the Department of Energy and how safe American taxpayers were in light of the risk associated with the decisions made by political appointees at the department. It is becoming abundantly clear that billions of dollars of the public’s money were put at undue risk.

"The investigation has revealed a pattern of incompetence, carelessness, and cronyism at Obama’s Department of Energy. The DOE Inspector General has testified that the money given to the department via the stimulus was akin to attaching a garden hose to a fire hydrant. The DOE was flooded with cash and did not have the infrastructure to spend it in a sound fashion." (See video)

However, Representative Dennis Kucinich (D-Ohio), questioned Issa’s use of the word scandal, suggesting that an inquiry should be completed before accusations are made, not the other way around. Ranking Member Representative Elijah Cummings (D-Maryland), agreed, characterizing the Abound Solar investigation as “an alleged conspiracy in search of the facts.”

Lower risks

Cummings positioned the Democrats for a strong defense. "Today," he said, "we will hear from an industry expert who will explain why, despite the failure of some projects like Abound, the risks in the department's loan guarantee program are substantially lower than Congress expected when it created the program."

Jonathan Silver, former executive director of the DOE Loan Programs Office, who resigned shortly after the Solyndra bankruptcy, said, "On the whole, this is a successful portfolio … The funds represented by investments that have failed represent less than three percent of the total portfolio. This is a record the private sector would consider remarkable, but it is particularly impressive for a portfolio of technologically innovative projects being built at commercial scale for the first time anywhere. The expected loss on the Abound transaction, which we are here to discuss today, represents less than four one-thousandths of one percent of the total financings."

Noting that, "The Department takes our responsibility to U.S. taxpayers seriously and… strives to be an active manager – continuously monitoring projects, their market environments, and other identified risks to seize all opportunities to minimize exposure to loss," David G. Frantz, acting executive director of the Loan Programs Office, went on to remind the committee of the reasons for greentech investments.

Taking his cue from President Obama’s stump speeches, Frantz said, "Securing America’s economic leadership in the future requires that we support innovation and deployment today. The troubles of some segments in the solar manufacturing market should not overshadow the great work that the department’s loan programs have done to date, or the need to continue to find ways to support clean energy deployment in this country."

Cautionary move

In 2010, Abound Solar was awarded a $400 million Department of Energy (DOE) loan guarantee to build two factories to make thin film panels using cadmium telluride (CdTe). It completed one plant, in Longmont, Colorado, and never began construction on the second, which was planned for Tipton, Indiana.

The company obtained $300 million in private investment, and $70 million from the DOE loan guarantee program, before it was cut off by the federal agency in a cautionary move. The loan guarantee was structured so that Abound had to meet certain targets and, when it failed to do so, it was prohibited from receiving additional payments. The solar firm last received money from the Energy Department in August 2011, before Solyndra’s collapse on September 1. Thus, its total government take was not peanuts – but, in context, not a prolific amount.

And, as aforementioned, a number of solar companies, both established and in the start-up phase, and in the U.S. and globally, have fallen on tough times recently.

Just days after the Abound Solar failure, GE Solar, a well-funded company, announced that it had stopped construction on what would have been the largest solar factory in the United States, a CdTe thin film solar plant planned for Aurora, Colorado. Plans for the 400 MW factory had been announced after GE purchased Primestar Solar in April 2011. Now, the project will be delayed for at least 18 months, according to company spokesmen. Following a 50 percent drop in module prices, GE has returned to the lab to develop an improved CdTE product that can compete more successfully against such contenders as First Solar.

Meanwhile, Tempe, Arizona-based First Solar, ranked among the top ten producers worldwide last year, is experiencing its own difficulties. The U.S.-based thin film manufacturer posted a non-GAAP loss for the first quarter (Q1) of 2012 of US$449 million or US$5.20 per share. It is further closing its manufacturing facilities down in Germany’s Frankfurt (Oder).

And just yesterday, it was announced that U.S.-based concentrated photovoltaic (CPV) company, Amonix has closed its manufacturing plant down in North Las Vegas. The company was said to have been subsidized by more than US$20 million in federal tax credits and grants.

Among the factors contributing to the bankruptcies, consolidations, and management changes in the United States (as well as in Europe) this year are:
Competition from China, which has been accused of both dumping its products on U.S. shores at below-market prices and opening the floodgates on an oversupply of modules;
The decline in the cost of a key solar component, polysilicon, which has put even more pressure on manufacturers to cut their margins; and
Cutbacks in the availability of government subsidies.

The solar industry response

Rhone Resch, president and CEO of the Solar Energy Industries Association urged the U.S. not to abandon its solar sector, particularly given the amount of jobs that have been created over the past two years. "The closure of any American factory is troubling," he said. "However, it is important to remember that the U.S. solar industry is a bright spot in an otherwise sluggish economy. Over 100,000 Americans have jobs in solar, more than double the amount from two years ago. Costs of solar products to consumers continue to drop, while the deployment of solar systems across the U.S. increased by 85 percent over the last year."

He went on to refer to the history of solar in the U.S, and to underpin the future the industry could enjoy in the country: "We hope as the subcommittee conducts its oversight, they take an even-handed approach and do not kill a program that is delivering results… America invented solar technology, and I have every conviction that our companies can and will continue to thrive in the global marketplace. It would be short-sighted to cede this ground to our competitors in Asia and Europe and let a $10 billion, high-tech industry slip away as the U.S. did with flat screen televisions. Let’s keep the leadership, the jobs, and the industry here in America."

July 19, 2012

Labor Department study shows disappointing 'green jobs' creation

The U.S. Department of Labor promised Americans it would train close to 125,000 Americans for new "green jobs," but less than half that number actually received any training. Of those, about 8,000 were placed in jobs, yet only 1,300 workers had jobs lasting more than six months, according to the Obama Labor Department's own internal study that's been all but ignored during the current election cycle.

The Solyndra scandal ignited a firestorm on Capitol Hill among congressional leaders who chastised President Barack Obama for responding to an economic recession with a failed “green energy subsidy experiment.”

But the firestorm seems to have been extinguished by Democrat Party operatives and their allies who've infiltrated the news media in order to prop up a failed president, claims a political strategist and attorney, Michael S. Baker.

"While the Obama campaign smear -- and jeer at -- GOP presidential candidate Mitt Romney's background, Romney's camp has failed to tell the American people about the billions and billions of their dollars thrown into the 'black hole' of green-job creation. It's Chicago crony-capitalism gone national thanks to the likes of Obama and his Windy City gang," said Baker.

In addition, House Oversight and Government Reform Committee Chairman Darrell Issa (R-CA) released a special report blasting the president for wasting nearly $100 billion to create “green jobs.” Undue political influence has determined how much of the money has been disbursed, investigators found.

Rep. Issa expressed his views regarding a newly-released Department of Labor Inspector General report that documents costs and missed objectives of the Labor Department's "green jobs" program.

President Obama touted green jobs as a way to improve the environment and as a central pillar of his stimulus program. The Inspector General's report paints a starkly different picture than what the Obama Administration told the American people.

He also appointed an avowed Marxist, Van Jones, as his "green jobs czar, and Jones would still be in the Obama White House had the "alternative news media" not exposed him and his ideas, according to talk show host Glenn Beck.

Once exposed beyond the protection of the mainstream press, Van Jones resigned, according to Baker

"President Obama should move quickly to redirect these funds to deficit reduction and focus on broad-based job creation and economic recovery, not just a niche program that has fallen far short of expectations," said Congressman Issa.

As President Barack Obama’s disastrous and costly green energy agenda became the focus of a congressional investigation, the administration celebrated the multimillion-dollar “green makeover” of a public housing facility in Washington State.

The festivities came on the heels of a major scandal involving a California solar panel company that folded after receiving more than half a billion dollars from the government. The White House helped the bankrupt manufacturer (Solyndra) get the money over the objections of federal budget analysts and news reports have identified one of the company’s major investors as an Obama fundraiser, according to Baker.

July 18, 2012

New evidence shows Hillary a mastermind behind Gunwalker

Last week it was reported that the State Department and Secretary of State Hillary Clinton were deeply involved in the scandal known as Operation Fast and Furious, or Project Gunwalker. Today, however, new evidence has surfaced indicating that not only was Hillary deeply involved in the scandal but was one of the masterminds behind it.

According to investigative citizen journalist Mike Vanderboegh, sources close to the development of the Gunwalker scheme state that early on, Hillary and her trusted associated at State, Andrew J. Shapiro, devised at least part of the framework of what would later become Operation Fast and Furious. It was Shapiro who first described the details of the proposed scheme early in 2009 just after the Obama Administration took office.

Vanderboegh relates the following:

My sources say that as Hillary's trusted subordinate, it was Shapiro who first described to the Secretary of State the details of what has become the Gunwalker Scandal.

The precise extent to which Hillary Clinton's knowledge of, and responsibility for, the Gunwalker Plot, lies within the memories of these two men, Shapiro and Steinberg, sources say.

The sources also express dismay that the Issa committee is apparently restricting itself to the Department of Justice and not venturing further afield. The House Foreign Affairs Committee, they say, needs to summon these two men and their subordinates -- especially at the Mexico Desk at State -- and question them under oath as to what Hillary Clinton knew about the origins of the Gunwalker Scandal and when she knew it.

There is one other thing those sources agree upon. The CIA, they say, knows "everything" about the "Mexican hat dance" that became the Gunwalker Scandal.

The 'Steinberg' mentioned in the quote above is Hillary Clinton's former Deputy Secretary of State, who was appointed directly by Barack Obama and was considered from the start to be an 'Obama man' whose objective was to carry out the wishes of the President in the State Department.

Hillary had said of Steinberg,

Clinton said Steinberg had been a “fixture” at meetings with the National Security Council (NSC) and frequently represented the US State Department at the White House.

That statement is key. Hillary herself stayed out of all meetings dealing with strategy concerning the euphemism the Administration used to designate Gunwalker, 'strategy meetings on Mexico and the problem of drug and gun trafficking.' Hillary's absence would give the impression that she had no connection to the scheme while making sure that her views were represented by Steinberg and Shapiro, both of whom were fully complicit with the details that developed concerning how to pad statistics on U.S. guns in Mexico.

According to sources, Hillary was obsessed with gun statistics that would prove that '90% of the firearms used by Mexican criminals come from the United States.' As previouly reported, that meme, repeated incessantly by Democratic Senators, Barack Obama, certan members of the ATF, Janet Napolitano, and Hillary Clinton was patently and blatantly false. The fact that they all knew it was false is borne out by the lengths to which each of the above named co-conspirators went to attempt to 'prove' that the 90% figure was true.

Again, Vanderboegh relates the following:

My sources say that this battle of the "statistics" was taken very seriously by all players -- the White House, State and Justice. Yet, WHY was this game of statistics so important to the players? If some weapons from the American civilian market were making it to Mexico into the hand of drug gang killers that was bad enough. What was the importance of insisting that it was 90 percent, 80 percent, or finally 70 percent? Would such statistics make any difference to the law enforcement tactics necessary to curtail them? No.

This statistics mania is similar to the focus on "body counts" in Vietnam. Yet if Vietnam body counts were supposed to be a measure of how we were winning that war, the focus on the 90 percent meme was certainly not designed to be a measure of how we were winning the war against arming the cartels, but rather by what overwhelming standard we were LOSING. Why?

Recall what the whistleblower ATF agents told us right after this scandal broke in the wake of the death of Brian Terry: "ATF source confirms ‘walking’ guns to Mexico to ‘pad’ statistics."

Thus, from the beginning the scheme was to pad statistics on U.S. guns in Mexico in order to be in a strengthened position to call for gun bans and strict gun control at a time when it was politically unpopular. Further, the scheme would involve a made-up statistic, out of thin air--90%--which then had to be proved by using civilian gun retailers along the southern border as unsuspecting pawns to walk U.S. guns into Mexico by ATF agents, straw purchasers, and others with connections to Mexican drug cartels.

And the evidence points to the fact that Hillary Clinton was one of the original Administration officials who was 'in the loop' on the scheme from the very beginning.

July 17, 2012

States owe $30 billion in outstanding loans to feds

Already struggling to cut budgets and pay for services like health care and education, nearly half of the 50 states owe Uncle Sam millions or even billions in outstanding loans.

Twenty-two states and the U.S. Virgin Islands owe the federal government more than $30 billion after borrowing to pay out unemployment benefits.

Over the past three years, states have exhausted their unemployment insurance trust funds as they paid out benefits to the large number of unemployed Americans, who can get up to 99 weeks of unemployment benefits in some states.

“Between 2008 and 2011, $174 billion was paid in unemployment taxes while $450 billion was paid out in benefits, a gap of $276 billion,” according to an article by Joe Henchman, a vice president at Tax Foundation, a nonprofit and nonpartisan tax research organization based in Washington, D.C.

Unemployment insurance is jointly run by the federal government and the states, and employers and employees pay taxes to both federal and state governments. The program is administered by the states while the federal government reimburses the states for administrative expenses. When unemployment is high, benefits are extended, and states unable to pay benefits out of their reserves may borrow from the federal government to do so.

States aren’t expected to pay back these loans for several years, but businesses and employees in many states now face increases in their federal unemployment insurance tax rates because of them.

“This tax is ostensibly levied at a 6.0 percent rate on the first $7,000 of each worker’s earnings, but if a state’s program meets federal guidelines, state UI [unemployment insurance] taxes are credited against up to 90 percent of the federal tax,” Henchman wrote.

July 16, 2012

EPA Refuses to Release Seismic Data on Proposed Inergy Finger Lakes Liquid Gas Cavern with a History of Earthquakes

Rubble 200 feet deep covers the floor of a former brine cavern now slated to hold up to 600,000 barrels of highly pressurized liquid butane near this Finger Lakes tourist village.

The company that seeks regulatory permission to use the cavern and several others like it for hydrocarbon storage argues that they are ideal repositories for explosive material, immune to collapse or leakage due to a protective layer of stable, impervious salt.

But the presence of rubble at the base of each proposed storage cavity raises questions that neither the company nor environmental regulators are willing to air in public.

The U.S. Environmental Protection Agency claims to hold documentation showing that the roof of the cavern now earmarked for liquid butane storage once collapsed in an earthquake, causing a previous owner of the well to abandon plans to store natural gas there. However, the EPA refused last month to disclose the date of that earthquake and roof collapse or the identity of the company that abandoned its hydrocarbon storage plans, denying DCBureau’s requests under the Freedom of Information Act. An appeal is pending.

Inergy L.P. of Kansas City needs formal approvals from the EPA and the New York State Department of Environmental Conservation to reuse the salt caverns as underground warehouses for liquid petroleum gas, or LPG.

Like the EPA, the DEC has construed Inergy’s right to confidentiality broadly.

In November 2010, the state environmental agency upheld the company’s assertion that the history of the caverns is a “trade secret.” Denying DCBureau’s formal requests and legal appeals, the DEC withheld as confidential sections of an Inergy report entitled, “Well construction and well history,” and, “Suitability of caverns to store LPG,” among others.

In denying public access, a DEC attorney said the “great majority” of the report consists of “a compilation of information developed by the applicant’s study of its own premises, together with its plans for the future use of its premises, and I find that such content is entitled to confidentiality…”

Richard Young, a geology professor at the State University of New York at Geneseo, disagrees. “That’s ridiculous. What’s confidential about it? The fact that they won’t discuss (geologic) events is ridiculous.”

Meanwhile, Inergy, free from fear of contradiction by evidence hidden under a confidentiality edict, has publicly dismissed threats posed to the caverns by earthquakes or significant faults in overlying rock formations.

“Based on company experience, site data and public data, no cavern has ever failed due to geological movements within the salt,” the company says in one 2011 filing.

In a public relations “Fact Sheet” distributed locally, Inergy scripted a hypothetical “Fiction” and provided a “Fact” response:

“Fiction: There are lots of small faults around, many of which aren’t even mapped. And we’re not seismically clean. We are in an area that does have a 3 or 4 (on the Richter Scale) earthquake on occasion.

“Fact: Based on data compiled by the National Geophysical Data Center and updated using USGS data, there are no risks involved at the site with earthquakes within 1/2 mile of the subject (caverns). In addition, an Earthquake Database Search was conducted as well as a base map complied by the National Geophysical Data Center using USGS data. The results indicated that the area continues to be a low-seismicity area.”

Part of that Fact/Fiction PR script is true. Watkins Glen does lie in a low-seismicity area. But it sidesteps mention of the following relevant events:

•A 3.2-magnitude earthquake in February 2001 that geologists say was triggered by salt mining activity 26 miles southwest of Watkins Glen.
•An apparent 3.6-magnitude earthquake in March 1994 that was triggered by the catastrophic collapse of the Retsof Salt Mine in Cuylerville, N.Y., about 60 miles west of Watkins Glen.
•A 3.4-magnitude earthquake in 1984 in Dresden about 20 miles north of Watkins Glen.
•The earthquake of unspecified size, date and location that the EPA identified as the cause the roof collapse in “Well 58″ just north of Watkins Glen.
The EPA’s knowledge of the Well 58 event was revealed in a December 6, 2011, letter from Nicole Foley Kraft, chief of the Ground Water Compliance Section of EPA’s Region 2 office in New York City, to Brody D. Smith, a Syracuse attorney representing Inergy. That letter included the following statement: “…EPA file records indicate that Well 58 was drilled for natural gas storage but that an earthquake caused a cavern roof collapse that led to the well’s abandonment.”

DEC records show that Akzo Nobel drilled Well 58 in 1992 and that the well was plugged and abandoned in 2003. An Inergy affiliate known as Finger Lakes LPG Storage reopened the well in 2009.

According to Inergy’s regulatory filings, Well 58, also known as Gallery 2, is being redesigned to store up to 600,000 barrels of liquid butane, or possibly, liquid propane. Company filings note that the gallery’s total capacity is actually 827,000 barrels, but “rubble” on the cavern floor occupies much of that space. The original depth of the well in 1992 was 2642 feet, well records show. The depth in 2009 was 2425 feet.

Four other wells are being redesigned to make up Gallery 1, the space Inergy proposes to use to store up to 1.5 million barrels of liquid propane. Those wells also have rubble on their floors, Inergy says.

Both the EPA and the DEC have quizzed Inergy at considerable length about the integrity and stability of its caverns. In her December 2011 letter to Inergy’s lawyer, the EPA’s Kraft demanded company documentation that Well 58 “has integrity and that the cavern roof is stable.”

The agencies appear concerned about at least two significant dangers: potential cavern collapse and potential cavern leakage through faults in cavern walls, roofs or floors. But the process the agencies use to decide whether or not to grant necessary permits remains a black box to the public.

Yvonne Taylor and Joseph Campbell, co-founders of a local citizens’ group formed to try to block Inergy’s LPG project, said members of Gas Free Seneca feel “stonewalled” by Inergy and its regulators. More than 140 local businesses and 5,000 individuals have signed on to support their campaign. “The DEC and the EPA are not in place to protect the environment or care for individuals and small businesses so much as they are there to promote heavy industry and protect large corporations,” Taylor and Campbell said in a statement to DCBureau. “If something goes horribly wrong, it will be those of us who call this beautiful place home who will be the victims left holding the bag, not Inergy or the DEC/EPA.”

And things have gone horribly wrong at salt caverns near and far from Watkins Glen.

The Retsof Salt Mine, 60 miles to the west, was the largest salt mine in North America before its roof collapsed in 1994. Initially, the event was presumed to be an earthquake, but geologists, including Young at neighboring SUNY-Geneseo, later concluded that the collapse itself caused the tremor. Fresh groundwater rushed into the gigantic cavity – roughly the size of the island of Manhattan – compromising drinking water supplies throughout the region. The Retsof mine was owned by Akzo Nobel, the same company that drilled the far smaller Well 58 in Watkins Glen.

If the Retsof calamity is the most notorious example of the dangers of salt cavern collapse, the accident that best underscores the dangerous potential of salt cavern leakage occurred in Hutchinson, Kansas, in 2001.

A series of fires, explosions and brine geysers at seemingly random locations in Hutchinson killed two people and injured several more. Entire neighborhoods were evacuated, and some people were not able to return home for months.

Investigators traced the gas leaks to the Yaggy Storage Field about seven miles northwest of Hutchinson. The Yaggy caverns were created by drilling wells in salt formations and then expanding the cavities by dissolving their salt walls, much the way Well 58 in Watkins Glen was developed.

At Yaggy, gas seeped out of one or more overfilled storage caverns and flowed along various rock faults to accumulate in unpredictable and highly flammable pockets, according to the British Geological Survey’s landmark 2008 study of salt cavern safety worldwide.

In the case of the Watkins Glen salt caverns, evidence of extensive faulting began piling up in the 1970s. In a pair of reports in 1973 and 1974, geologist Charles H. Jacoby focused specifically on faulting in and around the Watkins Glen caverns. Jacoby, who worked for International Salt, which owned the caverns at the time, died in 2004. His partner in the 1974 report, L.F. Dellwig, a geology professor from the University of Kansas, died in April.

Jacoby and Dellwig concluded the following: “In the Watkins Glen brine field a major north-south strike-slip fault extends down at least to a bedding (step) thrust along which the block to the west of the tear fault has moved north a minimum of 1200 feet in the southern portion of the brine field.”

The 1974 Jacoby-Dellwig study also noted that leakage from a nearby well or cavern caused brine to flow along a fault to the surface a half-mile away: “During fracturing, a flow of brine at the surface 0.5 miles to the north must certainly be interpreted as the result of movement of brine from the well along the tear fault.”

If such a leak were to occur at a cavern holding pressurized liquid propane or butane, Young of SUNY-Geneseo said, the LPG could be expected to travel at least as efficiently as brine along established faults. And it could turn into gas, making its escape even more unpredictable.

Several years after Jacoby and Dellwig published their report on faulting at the Watkins Glen caverns, the National Waste Terminal Storage Program began scouting potential sites for the storage of high-level nuclear waste.

The NWTSP hired Stone and Webster Engineering Corp. to review the siting options.

In an extensive 1979 report to the U.S. Department of Energy, Stone and Webster concluded that no sites within the Salina Basin in New York were suitable for storing nuclear waste – at least without further study on faulting. “Faulting in the New York study area is more widespread than previously thought,” Stone and Webster reported. “Thrust faults, both within and above the salt section, have been well documented previously. Nearly vertical faults in the Finger Lakes region have been proposed to explain a number of subsurface anomalies.”

The report included a chart of suspected strike-slip faults in New York. It labeled the suspected Watkins Glen fault that Jacoby and Dellwig had identified as the longest (about 70 miles) and as the one that caused the greatest displacement (1200 feet).

Since then numerous academic studies have detailed a complex web of suspected faults, some of which could affect Inergy’s site in Watkins Glen. But the New York State Geological Society has failed to follow up on these findings, according to Young at SUNY-Geneseo. “They’re probably behind every other state I’m aware of,” Young said of the NYSGS. “Many states have very active fault surveying and mapping. It just doesn’t happen here.”

That information gap may explain why the DEC’s recent efforts to describe faulting in upstate New York have been so conspicuously out of date. In its latest Draft Supplemental Generic Environmental Impact Statement for high-volume hydraulic fracturing, a document that exceeds 1000 pages, the DEC uses a fault map that omits the findings of Jacoby and Dellwig, Stone and Webster and several other cited academic studies on New York faulting that have appeared over the past 40 years.

That omission has triggered criticism that the agency often fails to be sufficiently rigorous – a charge that has been leveled in the past.

In the wake of the 1994 Retsof Salt Mine collapse, the DEC was criticized for its alleged lax supervision of conditions and practices at the facility. Akzo Nobel had been allowed to test a controversial pillar system at Retsof. It failed, just as its detractors had predicted.

More recently, opponents of Inergy’s LPG project in Watkins Glen have noted that the agency waffled for nine months in 2010 over whether to require the company to complete a formal environmental impact statement. The agency’s decision followed shortly after a local official called the delay “ludicrous.”

Months earlier, the DEC had faced little or no public pressure when Inergy sought to significantly expand its LPG storage facility near Bath, N.Y. Ruling that the project “will not have a significant effect on the environment,” the DEC waived an environmental impact statement despite the fact that Inergy was allowed to discharge brine into the Cohocton River.

During most of 2010, the DEC worked outside the public eye in reviewing Inergy’s plans for LPG storage near Watkins Glen. That year, the company prepared a “Reservoir Suitability Report,” which considered cavern integrity, faults analysis and a host of other safety issues. When DCBureau.org attempted to obtain a copy, an attorney for Inergy asked the DEC to classify most of the report as a “trade secret.” The DEC complied.

One of the sections deemed confidential was entitled, “Faults analysis and Jacoby.”

After the DEC ordered Inergy in November 2010 to enter the much more public process of preparing an environmental impact statement, the company worked for months to deliver one that met the agency’s requirements. It accepted Inergy’s Draft Supplemental Environmental Impact Statement (DSEIS) in August 2011.

In the DSEIS, a public document, Inergy acknowledges Jacoby’s findings but insists there is no evidence that any of the faults he identified run deep enough to matter.

Galleries 1 and 2, the salt caverns that would hold the liquid propane and butane, are between 2000 and 3000 feet deep. Inergy argues that the salt and rock formations that overlie the galleries are completely free of faults. “There is no indication the faults extend into overlying confining beds,” the DSEIS reports. But the same report states that the overlying bed is the Camillus Shale, and Stone and Webster did find indications that faults ran into that layer. The structure contour maps of the Camillus and other formations “do show structural influence in the area where the strike-slip fault is thought to exist,” Stone and Webster said.

Young, the SUNY-Geneseo geologist, was more blunt. “For anybody to say it’s fault-free is a joke,” he said.

As the EPA and DEC continue to review the project and edge toward a ruling on the company’s permit applications, Inergy has been actively working the site in preparation for its role as an LPG storage hub for the northeastern United States.

Meanwhile, last month Inergy LP sold its Watkins Glen salt mining and storage subsidiary to Inergy Midstream LP, an affiliated company with its own publicly traded stock.

Debbie Hagen, a spokesperson for Inergy LP, did not return several telephone messages or acknowledge receipt of emailed questions.

Epa i Nergy Letter 12062011

July 13, 2012

Crooked Bankers Are Corrupting Government: The Real LIBOR Story

A new survey showing the extent of bankers' criminal inclinations, together with the "LIBOR" scandal, gives us more insight into how deeply corrupt the banking industry has become.

Big banks have metastasized into a kind of "Financial/Industrial Complex" which is distorting and engulfing our economy. And they've captured the critical government functions designed to stem the corruption and keep them in check.

Washington, we have a problem.

Scandalous Survey

The survey, sponsored by whistleblower defense firm Labaton Sucharow, is a revelation: Almost half of the senior-level bankers in a recent poll refused to say they wouldn't break the law. One in four said they "had observed or had firsthand knowledge of wrongdoing in the workplace." Only 41 percent of them said that colleagues in their own firm had "definitely not" committed crimes to get ahead.

And nearly one-fourth "... believed that financial services professionals may need to engage in unethical or illegal conduct in order to be successful."

I discussed the survey with a few other people familiar with the banking industry, and they had the same reaction I did: If anything, those numbers sound low. That makes sense. Admitting your criminal inclinations to a total stranger isn't as easy as telling a them your favorite color or what kind of music you like.

But even if taken at face value, the poll's an eye-opener: One in six bankers said they were "fairly likely" to commit a banking crime if they could get away with it. 45 percent refused to rule it out if the payoff were big enough.

And it's not just a matter of personal morality: "Nearly one-third of all financial services professionals reported feeling pressured by bonus or compensation plans to violate the law or engage in unethical conduct,. Nearly one-quarter of the respondents felt similar pressure from other sources." (Presumably including their bosses.)

In other words, the system is designed to encourage lawbreaking in critical banking functions. The survey's sample size was fairly small -- only 500 people -- but that's still a decent-sized group. Even if you don't think they're understated, the answers are devastating.


LIBOR -- the London Interbank Offer Rate -- determines borrowing costs for trillions of dollars in loans. It's based on each bank's own reporting of the interest rates it expects to be charged from other banks. Barclays admitted it lied about the number and agreed to pay a half-billion-dollar fine. Its Board Chair and CEO resigned.

But the real story isn't about Barclays. Reuters now reports that "More than a dozen banks... including Citigroup, JPMorgan Chase & Co, Deutsche Bank, HSBC Holdings Plc, UBS and Royal Bank of Scotland" have been implicated in the LIBOR scandal.

Of course they have. Banks were allowed to report their own borrowing costs without outside auditing. How many were likely to tell the truth with so much at stake? LIBOR lying was one of the worst-kept secrets on Wall Street.

The LIBOR scandal is also the story of politicians, regulators and journalists who actively collaborated in banking's descent into lawlessness and amorality.

Fallen Fed

Take the Federal Reserve, which was created by Congress to serve the public interest. Reports say that the Fed knew about Barclays' deception back in 2007 and did nothing. No, scratch that: It rescued Barclays and its executives with nearly a trillion dollars in publicly-backed loans.

Thanks to the GAO audit of the Fed -- an audit which it vigorously resisted -- we know that Barclays was the fifth largest recipient of emergency loans. Bailout loans for Barclays came to $868 billion. That means that Barclays probably made billions off the reduced interest rate alone, courtesy of the American people.

Those loans were granted between December 2007 and July 2010. That means the Fed was doling out billions to Barclays after it learned that the bank was lying about its LIBOR rates.

How much did the Fed know about the other banks under investigation, which it was also propping up?

Self-Policing Perps

Self-reported LIBOR figures aren't the exception, they're the rule. Deregulation and political decision-making let the banks "police themselves" in a number of areas. The Bush/Ashcroft Justice Department reduced oversight efforts and began "trusting" banks to report their own illegal behavior. The Obama/Holder DoJ has continued that practice.

Banks only "self-report" when, as seems to be the case with Barclays, the evidence is about to come out in other ways. Then, like Barclays, they "volunteer" limited evidence to the Justice Department in return for a promise they won't be prosecuted.

That's right: The Obama Justice Department promised not to prosecute anyone in the Barclays case.

When commentators say that there's no evidence of criminal wrongdoing in the LIBOR case, that just means the banks haven't volunteered any. But then, why would they?

Barclays just paid nearly half a billion dollars in fines, and its CEO and Board Chair stepped down. But nobody knows the real extent of their wrongdoing, because they're still relying on Barclays to tell the truth.

Imagine what its executives must know to agree to a deal like that.


The moral decay extends to the Republican Party, whose servility toward dishonest bankers would make a Tammany Hall boss blush. (Remember "Washington exists to serve the banks, not the other way around"?)

It also extends to the many officials in administrations of both parties who keep trading their Washington authority -- and the way they use it -- for the riches they know they'll earn on Wall Street once they leave. And there's increasing suspicion that it extends to the Justice Department, which has refused to prosecute bankers for fraud in the face of overwhelming evidence.

The White House's opportunity to convince a skeptical public otherwise won't last much longer.

Money Talks

Sure, bankers know the Democrats will regulate them somewhat more than the Republicans will. That annoys them to no end. But they also expect top Administration officials to work for them someday (see "Orzsag, Peter" or "Summers, Larry"). They'll be joking and smiling with golf partners they've enriched -- partners like Bill Clinton -- this weekend.

The President and the Treasury Secretary have been signalling to bankers that they're off the hook for criminal charges. In fact, the President described Jamie Dimon as "one of our smartest bankers" even as Dimon came perilously close to admitting investor fraud in Senate testimony -- close enough to trigger an immediate SEC investigation.

But then, politicians depend on campaign cash from big Wall Street donors. And the biggest donors of all run the mega-banks.

The Gulfstream Gang

Leading bank executives gather each year for the Davos conference on international finance. A government committed to enforcing its laws would have posted agents at executive airports to arrest a few as their private Gulfstream and Lear jets arrived from Switzerland.

Each and every major bank CEO presides over an organization whose employees have engaged in repeated criminal acts, even as they signed legally-binding documents saying they had personally implemented effective anti-fraud procedures.

SEC documents used in multi-billion-dollar settlements document a massive Wall Street crime wave which includes bribery, forgery, investor fraud, and stock fraud. It's all on paper, right there in black and white.

It's true that bank CEOs, like everyone else, are innocent until proven guilty. But if they weren't encouraging criminal behavior, which the survey also seems to suggest, then they're utterly incompetent as managers. Unethical, or incompetent?

To be clear: The two aren't mutually exclusive.

Excuses: The Golden Oldies

As the evidence of Wall Street lawbreaking grows, the excuses for government inaction keep changing. It's hard to keep track of them all, so here's a walk down memory lane:

First the authorities and pundits said that bankers wouldn't cheat the rest of us because "Wall Street and Main Street rise and fall together."

Then they allowed that, well, yes, perhaps they did lie and cheat a lot, but in ways that weren't illegal.

Then, as the settlements and fines for illegal activity grew -- from hundreds of millions to billions, and then to tens of billions of dollars -- they reluctantly allowed that, yeah, laws probably did get broken here and there. But, they said, getting a jury to convict bankers on finance-based charges was just too hard.

Then, when a recent case showed that it's not any harder to convict bankers than it is to convict mobsters (if there's still a difference), they said ... well, they didn't say anything at all.

The Financial/Industrial Complex

Bankers used their wealth to purchase deregulation from the political system, then used deregulation to seize an ever-increasing percentage of our wealth. Banking profits grew from their traditional levels -- in the low 20s as a percentage of total corporate profits -- to 40 percent of profits before the 2008 financial crisis.

Then we bailed them out, rescuing their industry and saving executives who were as inept at their profession as they were lax in their morals. Did we use that as an opportunity to slow the growth of the Financial/Industrial Complex?

No. Financial institutions take up a larger percentage of our country's GDP than they did before the crisis they created, and before we bailed them out. (We're still bailing them out -- and pumping up their profits -- through a variety of Treasury and Federal Reserve actions.)

A new Working Paper for the International Monetary Fund provides rigorous analysis to back up what many have long suspected: "(A)t high levels of financial depth, more finance is associated with less growth."

In other words, once you get past a reasonable size a simple principle takes effect: The richer they get, the poorer we get. And they keep getting richer.

Honorable Gentlemen and Ladies

Although the Financial/Industrial Complex remains untouchable, smaller players aren't immune. That's led to indictments and/or investigations for Bernie Madoff, MF Global, and now PFGBest. But the tragic suicide attempt of PFGBest's Chairman only underscores how times have changed. In Olde England the "right people" knew what to do when there was a scandal: Friends led a "gentleman" into his study, where his pistol hung on the wall or lay in a desk drawer, and "expected him to do the honorable thing."

But nobody expects honor from the men and women of Wall Street anymore -- not even that misplaced sense of honor that leads a person to the devastation of suicide rather than the healing process of punishment, amends and restitution.

Nowadays, bankers frustrated by their profession's justly tarnished reputation merely wait for the next journalist to write a flattering profile of them. (I'm talking to you, Roger Lowenstein.) And even as they conceal their latest hapless (and possibly illegal) blunder, bankers shamelessly appear on television to pontificate about why the poor and elderly must sacrifice to pay for their misdeeds. Then they schedule their next golf date with an ex-President or two.

That's how the Financial/Industrial Complex works. Until the public demands prosecutions, bankers never have to worry paying the price for their crimes. They don't even have to worry about being revealed for what they really are:

Corrupt to the core.

July 12, 2012

Hidden Government Scanners Will Instantly Know Everything About You From 164 Feet Away

Within the next year or two, the U.S. Department of Homeland Security will instantly know everything about your body, clothes, and luggage with a new laser-based molecular scanner fired from 164 feet (50 meters) away. From traces of drugs or gun powder on your clothes to what you had for breakfast to the adrenaline level in your body—agents will be able to get any information they want without even touching you.

And without you knowing it.
The technology is so incredibly effective that, in November 2011, its inventors were subcontracted by In-Q-Tel to work with the US Department of Homeland Security. In-Q-Tel is a company founded "in February 1999 by a group of private citizens at the request of the Director of the CIA and with the support of the U.S. Congress." According to In-Q-Tel, they are the bridge between the Agency and new technology companies.

Their plan is to install this molecular-level scanning in airports and border crossings all across the United States. The official, stated goal of this arrangement is to be able to quickly identify explosives, dangerous chemicals, or bioweapons at a distance.

The machine is ten million times faster—and one million times more sensitive—than any currently available system. That means that it can be used systematically on everyone passing through airport security, not just suspect or randomly sampled people.

Analyzing everything in real time
But the machine can sniff out a lot more than just explosives, chemicals and bioweapons. The company that invented it, Genia Photonics, says that its laser scanner technology is able to "penetrate clothing and many other organic materials and offers spectroscopic information, especially for materials that impact safety such as explosives and pharmacological substances." [PDF]

Formed in Montreal in 2009 by PhDs with specialties in lasers and fiber optics, Genia Photonics has 30 patents on this technology, claiming incredible biomedical and industrial applications—from identifying individual cancer cells in a real-time scan of a patient, to detecting trace amounts of harmful chemicals in sensitive manufacturing processes.

Above: The Genia Photonics' Picosecond Programmable Laser scanner is capable of detecting every tiny trace of any substance on your body, from specks of gunpowder to your adrenaline levels to a sugar-sized grain of cannabis to what you had for breakfast.

Meanwhile, In-Q-Tel states that "an important benefit of Genia Photonics' implementation as compared to existing solutions is that the entire synchronized laser system is comprised in a single, robust and alignment-free unit that may be easily transported for use in many environments… This compact and robust laser has the ability to rapidly sweep wavelengths in any pattern and sequence." [PDF]

So not only can they scan everyone. They would be able to do it everywhere: the subway, a traffic light, sports events... everywhere.

How does it work?
The machine is a mobile, rack-mountable system. It fires a laser to provide molecular-level feedback at distances of up to 50 meters in just picoseconds. For all intents and purposes, that means instantly.

The small, inconspicuous machine is attached to a computer running a program that will show the information in real time, from trace amounts of cocaine on your dollar bills to gunpowder residue on your shoes. Forget trying to sneak a bottle of water past security—they will be able to tell what you had for breakfast in an instant while you're walking down the hallway.

The technology is not new, it's just millions times faster and more convenient than ever before. Back in 2008, a team at George Washington University developed a similar laser spectrometer using a different process. It could sense drug metabolites in urine in less than a second, trace amounts of explosive residue on a dollar bill, and even certain chemical changes happening in a plant leaf.

And the Russians also have a similar technology: announced last April, their "laser sensor can pick up on a single molecule in a million from up to 50 meters away."

So if Genia Photonics' claims pan out, this will be an incredible leap forward in terms of speed, portability, and convenience. One with staggering implications.

Observation without limits
There has so far been no discussion about the personal rights and privacy issues involved. Which "molecular tags" will they be scanning for? Who determines them? What are the threshold levels of this scanning? If you unknowingly stepped on the butt of someone's joint and are carrying a sugar-sized grain of cannabis like that unfortunate traveler currently in jail in Dubai, will you be arrested?

And, since it's extremely portable, will this technology extend beyone the airport or border crossings and into police cars, with officers looking for people on the street with increased levels of adrenaline in their system to detain in order to prevent potential violent outbursts? And will your car be scanned at stoplights for any trace amounts of suspicious substances? Would all this information be recorded anywhere?

Above: A page from a Genia Photonics paper describing its ability to even penetrate through clothing.

There are a lot of questions with no answer yet, but it's obvious that the potential level of personal invasion of this technology goes far beyond that of body scans, wiretaps, and GPS tracking.

The end of privacy coming soon
According to the undersecretary for science and technology of the Department of Homeland Security, this scanning technology will be ready within one to two years, which means you might start seeing them in airports as soon as 2013.

In other words, these portable, incredibly precise molecular-level scanning devices will be cascading lasers across your body as you walk from the bathroom to the soda machine at the airport and instantly reporting and storing a detailed breakdown of your person, in search of certain "molecular tags".

Going well beyond eavesdropping, it seems quite possible that U.S. government plans on recording molecular data on travelers without their consent, or even knowledge that it's possible—a scary thought. While the medical uses could revolutionize the way doctors diagnose illness, and any technology that could replace an aggressive pat-down is tempting, there's a potential dark side to this implementation, and we need to shine some light on it before it's implemented.

July 11, 2012

Homeland Security gains more power through new Obama executive order

Should disaster strike the U.S., the secretary of Homeland Security will be in charge of re-establishing and prioritizing communications to ensure the continuation of the federal government, according to a new executive order from President Barack Obama.

The executive order, signed on Friday, once again expands the powers of the Department of Homeland Security — this time to include the handling of communications during a national security event or natural disaster. The order also allows for DHS to re-establish communications “through the use of commercial, government, and privately owned communications resources, when appropriate.”

The secretary of homeland security, in coordination with the secretary of defense, would also “serve as the federal lead for the prioritized restoration of communications infrastructure and coordinate the prioritization and restoration of communications, including resolution of any conflicts in or among priorities.”

In addition to further empowering DHS’ role in the federal government, the order also establishes several new committees and outlines the roles of various major executive branch agencies and offices, including the White House Office of Science and Technology Policy, the Department of State, the Department of Commerce, the Department of Justice, the Department of Defense, DHS, the Office of the Director of National Intelligence, General Services Administration and the Federal Communications Commission.

The federal government already has its own emergency communications network — the National Communications System (NCS). First established by executive order during the Reagan administration, the NCS allows members of the federal government to communicate during emergencies by piggy backing off of private networks such as AT&T, Verizon, Sprint and various regional carriers. In 2003, the executive order that established NCS was extended to include cell phones.

The recent executive order also came days before public safety agencies across the country were to begin interoperability testing of equipment for the new national public safety LTE network (a high-speed mobile network), which will allow public safety officials to communicate over a national modern broadband network in the event of a crisis. The network will allow public safety officials to send and receive high-quality mobile data, such as video.

A knock-down, drag-out battle ensued for several years over the reallocation of prized spectrum for the development of the network as part of a result of the 9/11 Commission. A majority of the funding for the $7 billion network was established by Congress in February, with the network rollout estimated to begin next year.

DHS did not return The Daily Caller’s request for comment by the time of publication.

July 10, 2012

Five Charged With The Murder Of Border Patrol Agent Brian Terry

Five people have been charged with the murder of Border Patrol Agent Brian Terry. The Department of Justice is offering a $1 million reward for any information that leads to the arrest of four of them.
Agent Terry was shot on December 14, 2010 and passed away the following day. Guns found at the crime scene were linked to Operation Fast & Furious, which armed the already dangerous Mexican drug cartels.

Manuel Osorio-Arellanes, Jesus Rosario Favela-Astorga, Ivan Soto-Barraza, Heraclio Osorio-Arellanes, and Lionel Portillo-Meza have been charged with first degree murder, second degree murder, conspiracy to interfere with commerce by robbery, attempted interference with commerce by robbery, use and carrying a firearm during a crime of violence, assault on a federal officer and possession of a firearm by a prohibited person.

“The 11-count third superseding indictment, which was handed up by a federal grand jury in the District of Arizona on Nov. 7, 2011, alleges that on Dec. 14, 2010, five of the defendants engaged in a firefight with Border Patrol agents. During the exchange of gunfire, Agent Terry was shot and killed. The indictment alleges that the defendants had illegally entered the United States from Mexico for the purpose of robbing drug traffickers of their contraband. In addition to the murder of Agent Terry, the indictment also alleges that the five defendants assaulted Border Patrol Agents William Castano, Gabriel Fragoza and Timothy Keller, who were with Agent Terry during the firefight. “

Attorney General Eric Holder, who was voted in contempt of Congress last week because he wouldn’t hand over relevant Fast & Furious documents, said this is proof of the DOJ’s commitment to bring those who killed Agent Terry to justice. However, Agent Terry’s family still deserves to know who in the DOJ thought up Fast & Furious, who approved it, and how far up it went on the command chain.

Why now? Manuel Osorio-Arellanos was arrested the night of the murder. This indictment “was handed up by a federal grand jury in the District of Arizona on November 7, 2011.” Oversight Committee Chairman Darrell Issa finds the timing to be suspicious as well.

“It’s clear the timing has to do with the House of Representatives holding Eric Holder in contempt for not turning over information,” said Chairman Issa. “The Terry family should have seen this attempt to go public and try to get the murderers of Brian Terry [before now]. For 18 months they have known and haven’t done everything they could do to capture these individuals. This is another example of using politics over good policy. Again, I applaud the fact that we are going public and we are trying to make it clear that these people are among the USA’s and Mexico’s most wanted. But at the same time, the timing is very dubious.”

July 9, 2012

Darrell Issa Takes on Countrywide Financial's Crony Capitalism

Though technically not in a recession, the U.S. economy is still in the dumps.

The recovery, if you can really call it that, is the most anemic in decades. The official unemployment rate is still above 8 percent and, if you factor in the number of people who have given up looking for work and are no longer officially counted, the number may be almost twice that.

President Barack Obama continues to place the blame on the previous administration but people aren't buying it. Pollster Scott Rasmussen's latest figures show just 31 percent of likely voters giving him positive marks for the way he handles economic issues.

[Check out a roundup of editorial cartoons on the economy.]

As the campaign gets underway and the voters begin to focus on the future, they are even more likely to find fault with Obama's handling of the economy. The "crony capitalism" that has been the hallmark of his economic program will not stand up to close scrutiny, if it gets it that is. Worse for Obama, it's a reminder of how the whole crisis came to be in the first place.

Most people don't talk about it anymore, but the current economic crisis is rooted in the corruption of the mortgage market, particularly in instruments known as "sub-prime loans" and in the Democrats stonewalling of Republican efforts to force reform on the lending giants Freddie Mac and Fannie Mae. The whole business stinks like fish left out too long in the hot sun, not that anything has really been done about it.

Hopefully that may change now that the House Oversight and Government Reform Committee released a new report following the committee's three year investigation into the activities of Countrywide Financial Corporation—which was acquired by Bank of America in 2008. It's a frightening account, documenting the company's use of what the committee called "discounted mortgages to influential Washington policy figures" to win friends and influence people.

[See a slide show of 6 ways to fix the housing market.]

"Countrywide used its VIP Program to aid its lobbying efforts as well as to strengthen its relationship with taxpayer backed Fannie Mae. Countrywide partnered with Fannie Mae in a strategic business alliance that also included joint lobbying efforts," said a committee release.

According to committee chair Darrell Issa, the investigation determined that "Countrywide lobbyists and CEO Angelo Mozilo used discounted loans as a tool to ingratiate itself with policymakers in an effort to benefit the company's business interests."

"A former lobbyist for Countrywide testified that Members of Congress, staff, and other government officials were directed to the company's VIP program as part of an effort to create a favorable impression of the company on Capitol Hill. This preferential treatment—that varied depending on the influence of the borrower—was not routinely offered to the public," Issa said in a release.

These relationships, the committee concluded, helped Countrywide and its CEO increase company profits "while dumping the risk of bad loans on taxpayers." The favoritism shown to insiders, the "crony capitalist" nature of what the committee found Countrywide to have been doing, is emblematic of what is wrong with the way Washington works today—or, more accurately, doesn't.

•Economy Adds 80k Jobs, Unemployment Rate Holds at 8.2 Percent
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•Check out U.S. News Weekly: an insider's guide to politics and policy.

July 6, 2012

House reveals broad mortgage corruption involving Congress

Before anyone had heard of a subprime mortgage crisis, one of the nation’s largest mortgage companies, Countrywide Financial Corp., was using discount loans to members of Congress and congressional staff to buy influence in what may turn out to be the biggest influence-peddling scandal in American history.

A House report obtained by The Associated Press identified discounts given from January 1996 to June 2008, targeted to gain influence for the company and mortgage giant Fannie Mae. Countrywide's business model was dependent upon Fannie Mae that was fiercely fighting to avoid government regulations intended to reign in Fannie’s mortgage writing practices.

During the period leading up to the subprime collapse, Fannie purchased a large volume of Countrywide's subprime mortgages. Bank of America was pressured by the Bush Administration to purchase Countrywide in January 2008, in an effort to reduce the stress on the financial services industry that might have buckled under the load of the bankruptcy of a company servicing nine million U.S. home loans worth $1.5 trillion.

"Documents and testimony obtained by the committee show the VIP loan program was a tool used by Countrywide to build goodwill with lawmakers and other individuals positioned to benefit the company," the report said. "In the years that led up to the 2007 housing market decline, Countrywide VIPs were positioned to affect dozens of pieces of legislation that would have reformed Fannie" and its rival Freddie Mac, the committee said.

Some of the discounts were ordered personally by former Countrywide chief executive Angelo Mozilo; these beneficiaries were collectively known as "Friends of Angelo."

The Justice Department has not prosecuted a single Countrywide official, but the House committee's report said documents and testimony show that Mozilo and company lobbyists "may have skirted the federal bribery statute by keeping conversations about discounts and other forms of preferential treatment internal. Rather than making quid pro quo arrangements with lawmakers and staff, Countrywide used the VIP loan program to cast a wide net of influence."

In October 2010 the Securities and Exchange Commission fined Mozilo $22.5 million to settle charges he and two other former Countrywide executives lied to investors when the subprime mortgage crisis was exposed and banned Mozilo from ever serving as an officer or director of a publicly traded company.

Mozilo agreed to pay another $45 million to settle other violations that was to be returned to investors who were harmed; the status of those payments remains unknown.

The report said that until the housing market became swamped with foreclosures, "Countrywide's effort to build goodwill on Capitol Hill worked."

Countrywide served as an adviser to Congress, consulted with the House Financial Services Committee and Senate Banking Committee as they considered reform of Fannie and Freddie and unfair lending practices, all while using discount loans to members of Congress to buy influence.

"If Countrywide's lobbyists, and Mozilo himself, were more strictly prohibited from arranging preferential treatment for members of Congress and congressional staff, it is possible that efforts to reform (Fannie and Freddie) would have been met with less resistance," the report said.

The report said Fannie assigned as many as 70 lobbyists to the Financial Services Committee while it considered legislation to reform the company from 2000 to 2005; four reform bills were introduced in the House during this period, but none made it out of the committee.

Fannie and Freddie came under government control in September 2008 as their staggering losses portended a likely failure of both organizations. Just this past December the Treasury Department up the government’s commitment to $183 billion to prop up the two companies, but additional financial support will be required for the foreseeable future.

Identified in the report as having participated in the discount loans were:
•Former Senate Banking Committee Chairman Christopher Dodd, D-Conn.
•Senate Budget Committee Chairman Kent Conrad, D-N.D.
•Mary Jane Collipriest, who was communications director for former Sen. Robert Bennett, R-Utah, then a member of the Banking Committee. The report said Dodd referred Collipriest to Countrywide's VIP unit. Dodd, when commenting on his own loans, has said he was unaware of the discount program.
•Rep. Howard "Buck" McKeon, R-Calif., chairman of the House Armed Services Committee.
•Rep. Edolphus Towns, D-N.Y., former chairman of the Oversight Committee. Towns issued the first subpoena to Bank of America for Countrywide documents, and current Chairman Darrell Issa, R-Calif., subpoenaed more documents. The committee said that in responding to the Towns subpoena, Bank of America left out documents related to his Towns' loan.
•Rep. Elton Gallegly, R-Calif.
•Top staff members of the House Financial Services Committee.
•A staff member of Rep. Ruben Hinojosa, D-Texas, a member of the Financial Services Committee.
•Former Rep. Tom Campbell, R-Calif.
•Former Housing and Urban Development Secretaries Alphonso Jackson and Henry Cisneros; former Health and Human Services Secretary Donna Shalala. The VIP unit processed Cisneros's loan after he joined Fannie's board of directors.
•Former heads of Fannie Mae James Johnson, Daniel Mudd and Franklin Raines. Countrywide took a loss on Mudd's loan. Fannie employees were the most frequent recipients of VIP loans. Johnson received a discount after Mozilo waived problems with his credit rating.

The report said Mozilo "ordered the loan approved, and gave Johnson a break. He instructed the VIP unit: `Charge him 1/2 under prime. Don't worry about (the credit score). He is constantly on the road and therefore pays his bills on an irregular basis but he ultimately pays them." Johnson in 2008 resigned as a leader of then-candidate Barack Obama's vice presidential search committee after The Wall Street Journal reported he had received $7 million in Countrywide discounted loans.

•Rep. Pete Sessions, R-Texas, was identified as having been offered a discount loan through the VIP program, but instructed Countrywide not to give him a discount and did not receive one.

The report said those who received the discounts knew the loans were handled by a special VIP unit.

"The documents produced by the bank show that VIP borrowers received paperwork from Countrywide that clearly identified the VIP unit as the point of contact," the committee said.

The standard discount was half of a point in interest or loan origination fees as well as waiving of other fees ranging from $350 to $400. The half point reduction in Mr. Johnson's case represented a $35,000 pay-off to the then executive of Fannie Mae.

As of this date nothing from the report has been referred to the Justice Department for prosecution when clearly members of Congress willingly participated in selling influence by accepting beneficial loan terms from Countrywide; a clear violation of federal law. Regardless of party affiliation there appears to have been a concerted effort to look the other way even though the “Friends of Angelo” program has been widely publicized over the past three years.

Today millions of American citizens are saddled by mortgages in excess of their home’s value. Companies like Countrywide dealt out mortgages beyond people’s ability to repay because they knew they could profit by reselling the loans to Fannie Mae. How nauseating is it to know that those we’ve entrusted to defend our Constitution and enforce our laws were selling that trust for personal gain?

Will this report be the start of Congress coming clean with the American people and insure that “justice for all” is more than just the last three words of the Pledge of Allegiance? Don’t hold your breath.