The Simple Life: White House Edition
The scuffles with the press, the awol twins, the "Awkward Moments on the Tarmac"—it's a wonder no one has pitched the White House as reality TV. James Wolcott explores the potential ratings bonanza of the Prez Channel.

Billions over Baghdad
In April 2003, the Coalition Provisional Authority in Iraq began distributing planeloads of cash. To date, $9 billion is unaccounted for. Donald L. Barlett and James B. Steele uncover evidence of a feeding frenzy.

Going After Gore
When he ran for president, Al Gore took a bashing from the media, often for things he never said. Now, Gore and his family open up, to Evgenia Peretz, about a bias that may have tipped the scales.

Rare Scenes from 9/11
Watching the World Change, by V.F.'s David Friend, is now available in paperback. Here's the portfolio we ran upon its publication last year. Visit Friend's website to purchase the book.

The 2007 New Establishment
Guess which newly endowed media baron once again tops V.F.'s annual list of the world's most powerful people.

<h3 id="post-308">Only Iran Can End U.S. Iraq Nightmare</h3> Monday, September 17th, 2007 The U.S. cannot stabilize Iraq without cooperation from Iran; the price of such cooperation is normalizing relations with the Tehran regime; the Bush Administration has no intention of doing that, clinging instead to fantasies of regime-change; Iraq remains a nightmare. And it gets worse if Bush attacks Iran

Guns, not roses, for Iraq
The U.S. is selling billions in weapons to Iraq. Is the Pentagon's plan making the country secure or arming it to the teeth for civil war?

By Mark Benjamin

When contractors kill Iraqis
By Alex Koppelman and Mark Benjamin

Bush has run out of tricks, troops and time
By Gary Kamiya

Hillary Clinton Offers Health Plan
Democratic presidential candidate Hillary Rodham Clinton unveiled a sweeping health care proposal Monday that would require everyone to carry health insurance and offer federal subsidies to help reduce the cost of coverage. Cato scholar Michael D. Tanner responds: "Here we go again. HillaryCare is back, and its apparent that Sen. Clinton has learned little since the American people overwhelmingly rejected her last attempt to overhaul the U.S. health care system. Once again her plan, which would cost $110 billion per year in new taxes, calls for greater government control over American health care. If her plan were to pass this time, it would mean higher taxes, lost jobs, less patient choice, and poorer quality health care."

• Michael D. Tanner's full statement
• Son of HillaryCare, featuring Michael D. Tanner, 09/17/2007 (MP3 )
• "Hazards of the Individual Health Care Mandate," by Glen Whitman

Cato Supreme Court Review Dissects the First Term of the Roberts Court
In tandem with Cato's sixth annual Constitution Day Symposium, the Cato Institute released on September 17 the latest edition of the Cato Supreme Court Review, an annual journal critiquing the Supreme Court's most important cases. Now in its sixth edition, the Review is the first law journal to appear after the term's end and the only one to critique the Court from a Madisonian perspective -- favoring federalism, limited government, and individual liberty.

• A Year with the Roberts Court, featuring Roger Pilon, 09/17/2007 (MP3 )

oday's Public Channel Feature
American Realism and Engaging Syria

Thompson Joins Giuliani, McCain And Romney
In Snubbing Black Voter Debate
AP


Cornel West: GOP At A Crossroads With Blacks And Hispanics

• Quick Read |
• Related

Nothing Petraeus Said Will Change How Americans View the War Rep. John Murtha, 09.17.2007

When letters go unanswered, when suggestions go ignored, when the pleas of the public fall on deaf ears, how are the American people expected to continue to support flawed policies and undefined missions?

The Surge, the Shiites and Nation Building in Iraq


Sep. 14, 2007 - By Reidar Visser (from Terrorism Monitor, September 13) - For some time, analysts have been suggesting that the Bush administration's "surge" strategy may have achieved a measure of success in certain parts of Iraq. Many highlight the tendency on the part of local tribes in the Sunni-dominated areas to stand up against al-Qaeda, in that way emphasizing their own "Iraqiness" as well as their unwillingness to join in an all-out war against Western civilization. The number of attacks against U.S. forces has declined in many of these areas, and there are signs that al-Qaeda has been forced to relocate to new areas and to choose new targets. Perhaps the most convincing indicator of a degree of "surge" success is one that has gone largely unnoticed. Reports out of Baghdad suggest that the Sunni politicians who for the past two years or so have worked with the Americans through participating in government and parliament are now becoming increasingly nervous about internal Sunni competition from the newly emerged anti-jihadist tribal leaders of their "own" community, for example in places like the Anbar governorate [1]. In terms of Iraqi nation-building, this is a healthy sign. There was always a degree of doubt with regard to the true representativeness of the Sunni parties that emerged as "winners" in their fields in the heavily boycotted 2005 parliamentary elections. The fact that these parties are now worried about internal competition means that more Sunnis are interested in participating in the system, and that a group of politicians firmly attached to the vision of a unified Iraq but also enjoying solid popular backing in their core constituencies may be on the way up, assisted by the "surge." At the same time, foreign-sponsored groups, such as al-Qaeda, and office seekers whose popular legitimacy is in doubt (for instance, some members of the Tawafuq bloc) are coming under pressure or are even being weeded out.

Democrats Sizzle

Ari Berman | It felt a bit like Election Day in Iowa this weekend, as Democratic candidates at Senator Tom Harkin's Steak Fry served up appetizers of the campaign to come.

The Lies of Alan Greenspan

William Greider | He comes back from the tomb of history to absolve himself of responsibility for the mess he made. Talk about your inconvenient truth.

Through a Lens, Darkly

Eric Alterman | Once again, bigfoot media are crafting bogus narratives--the costly haircuts, the sexuality questions and manhood issues--that will distort the candidates and the entire presidential campaign.

Clinton's Prescription for Another Heath Care Reform Failure John Nichols | The senator has not learned a thing about how to cure what ails America.

Capital Games Post-Petraeus, Obama & Clinton Jockey for Antiwar Position David Corn | As soon as Petraeus was done, the leading Democratic '08 contenders competed for the antiwar vote. But do the policy differences among them matter?

Inside Track: Don't Get Fooled Again by Ted Galen Carpenter The new talk about troop reductions will only bring us back to pre-surge numbers, so what's the big deal? Inside Track: The Gift That Keeps on Giving by Morton Abramowitz and Heather Hurlburt The United States is unprepared for nation-building and keeps paying the price in Iraq.

Wary of Past, Clinton Unveils a Health Plan
By PATRICK HEALY and ROBIN TONER Senator Hillary Rodham Clinton released a plan for universal health coverage designed to avoid the political flaws of her failed proposal in 1993-94.

• The Caucus: Parsing the Plan
• Times Topics: Senator Clinton
• The Candidates on Health Care

U.S. Contractor Banned by Iraq Over Shooting
By SABRINA TAVERNISE The Iraqi government’s authority to bar Blackwater USA, a security company that was involved in the deaths of eight Iraqis, appeared to be in question.

• Times Topics: Blackwater USA

Beyond the Usual Campaign Stupidity

We take it for granted that Presidential candidates say dumb things during campaigns. Sure. That's a given.

Mitt Romney's taking it a step farther with a letter to the United Nations he released today.

The part I take for granted is that conservatives running for the Presidency follow two main rules for campaigning on foreign policy issues. First, you've gotta hit the bad guys harder than your opponents do, no matter whether or not the attacks make sense. After all, the candidate with the toughest rhetoric is the toughest. The second rule is you always hit the folks who can't hit back.

Romney's latest letter follows both rules, but it's way dumber than the average posturing. Romney first demands that the UN revoke its invitation to Mahmoud Ahmadinejad for the upcoming General Assembly. These calls were first made last year and were properly met with guffaws.

Romney also includes in his letter veiled threats at the UN. If you don't listen to us, he says, we'll pull your funding and support. It's standard campaign behavior, but given where the American public is on international institutions and foreign policy, it won't get him very far in the general election. Either way, it's a textbook application of rule 2, since the UN has no capacity or mandate to respond. Forget hitting back, it can't even block.

But Romney really loses his footing when he calls for Ahmadinejad to be indicted under the Genocide Convention. I'm not a laywer, but my understanding of the Convention is that it makes genocidal intent very, very difficult to prove. So the idea is a non-starter already.

It gets more interesting than that, though. John Bolton and others have suggested that Ahmadinejad is guilty of genocide, but they have never suggested that he be indicted for that crime. That's mostly because such a move would put imply support for the International Criminal Court -- an ideologically untenable position.

I'll elaborate. The U.S. can't prosecute anyone for genocide because current U.S. criminal code doesn't allow for it. The Iranian courts might be able to prosecute the crime, but I hardly believe that Romney wants to indict Ahmadinejad for genocide here in the U.S. only to send him home to be prosecuted in Iran. A new international tribunal would take years and millions of dollars to set up, and it would be a non-starter with the international community.

The only other option would be prosecution at the International Criminal Court. Neither Iran nor the U.S. is a member of the ICC, but the U.S. could refer the "situation" to the ICC Prosecutor's office for investigation.

The ICC would never prosecute -- first, because there is no case, and second, since Iranian courts likely exceed the requirements for independence under the Rome Statute, the ICC still would have no jurisdiction.

Nevertheless, Governor Romney should give us details. Does he support the ICC? If not, where should Mr. Ahmadinejad be tried?

When we're done with all that, we can come back to the importance of a universal international dialogue absent of veiled threats between countries and against international institutions. But given what's coming out of the Romney campaign right now, that seems like way too much to ask.

-- Scott Paul

<h2 class="twt-hr-reverse-fp">Hillary revisits health care</h2>By Christina Bellantoni
Sen. Hillary Rodham Clinton yesterday announced a $110 billion annual plan to provide all Americans with health insurance, saying she learned valuable lessons on the issue during her attempt to do the same as a first lady.

French remarks outrage Iranians
By Elizabeth Bryant
On the eve of his first trip to Washington, French Foreign Minister Bernard Kouchner has sparked an international furor with a warning that the West should prepare for war as a last resort to stop Iran from obtaining a nuclear bomb.

<h2 class="twt-hr-reverse-fp">Security firm banned by Iraq after deaths</h2>By Nicholas Kralev
The Iraqi government yesterday banned a U.S. security firm that protects U.S. civilian and military personnel over its involvement in a Sunday incident that left eight persons dead, forcing the embassy to either ignore the order or severely limit the movements of its officials.

AP Photo / Pablo Martinez Monsivais
<h4 class="home_dig_blog_hed">‘Giving’ and Taking</h4> By Chris Hedges — Bill Clinton has written a new book about charity, a fitting subject for a president who betrayed the poor and led his party into the arms of corporate America.

Letting Our Veterans Down
Aaron Glantz — The sorry state of care of American veterans who served in Iraq and Afghanistan is not accidental. It’s on purpose. Since the invasion of Iraq in 2003, the Bush administration has fought every effort to improve care for wounded and disabled veterans.

Hagel Calls Bush’s Use of Petraeus Dishonest Retiring Sen. Chuck Hagel tells Bill Maher why the president’s exploitation of Gen. Petraeus is “not only a dirty trick, but it’s dishonest, it’s hypocritical, it’s dangerous and irresponsible. The fact is, this is not Petraeus’ policy, it’s Bush’s policy.”

Iraq Bans Blackwater, Launches Investigation
The Iraqi government has ordered employees of the North Carolina-based security firm Blackwater USA to leave the country and is opening a criminal investigation following Sunday’s deadly shootout in Mansour, during which a group of Blackwater contractors escorting a convoy of U.S. officials opened fire on nearby civilians.

Outside View: Vacuum-bomb warning
Moscow (UPI) Sep 17, 2007 - Russia has tested the world's most powerful vacuum bomb on the eve of the sixth anniversary of the horrendous Sept. 11, 2001, terrorist attacks on New York and Washington. Famous Russian author Anton Chekhov once wrote: "If you say in the first chapter that there is a rifle hanging on the wall, in the second or third chapter it absolutely must go off." The latest vacuum-bomb ... more

US pledges to reduce plutonium weapons stockpiles
Vienna (AFP) Sept 17, 2007 - The United States is removing nine tonnes of plutonium, enough to make over 1,000 nuclear weapons, from its weapons stockpiles in a nonproliferation effort, US Energy Secretary Samuel Bodman said Monday. But the plutonium, which is currently a bomb component, will sit for a while before being converted into nuclear reactor fuel, as it "will be removed in the coming decades from retired ... more

NKorea bought materials used to build centrifuges: report
Tokyo (AFP) Sept 17, 2007 - North Korea has told the United States that it procured aluminum pipes, which can be used to build uranium-enriching centrifuges, from a third country, a report said Monday. But Pyongyang stopped short of admitting that it had begun the process of uranium enrichment, Japan's Kyodo News said quoting unnamed diplomatic sources. The revelation was made by Kim Kye-Gwan, North Korea's chief ... more

Bush's 9/13 Speech to the Nation: Zunes/Leaver

Bull in the China Shop: L. Reichard White

Petraeus Nixes Bush 'Proxy War' Claim: G. Porter

Blackwater Banned After Iraqi Deaths: Daniel Luban

Chaos in the Great Game: Sascha Matuszak

A debacle by any other name
http://archive.gulfnews.com/articles/07/09/15/10153644.html 09/15/2007 07:53 PM | By Fawaz Turki, Special to Gulf News

If it looks like a debacle, plays out like a debacle and declares its own form of being as a debacle, then surely it must be one, and no amount of spin will make it otherwise. A debacle by any other name is still a debacle.

The testimony before a congressional committee last week by General David H. Petraeus, the top US commander in Iraq, and Ambassador Ryan C. Crocker, the most eagerly awaited since General Westmoreland's testimony on the "progress" of the war in Vietnam, yielded little beyond the kind of spin that even the most ardent Republican supporters of the American intervention in Iraq will not buy.

To be sure, these two men are qualified, well-meaning professionals. Petraeus is a Princeton PhD who finished at the top of his class at the Army's Command and General Staff College, and Crocker, considered among the "best and the brightest" at the State Department, is a career Foreign Service officer with high-level experience in the Middle East. So when they testify on the Hill, we have to listen. We did.

What we heard was testimony designed to echo the cheerful White House assessment of what is happening in Iraq: Iraq's armed forces are improving, violence is down, Baghdad is more peaceful, the surge is working, Sunnis are turning against foreign insurgents, Iraqi political leaders, including Prime Minister Nouri Al Maliki (leaders long written off as relentlessly sectarian even by administration officials) have, according to Crocker, "a deep sense of commitment and patriotism ... and the will to tackle the country's pressing problems" - and the rest of it. In short, there is a light at the end of the tunnel.

All of this flies in the face of facts on the ground. You can manipulate figures any way you want but you cannot hide the fact that Iraqis are dying in the thousands. Ethnic cleansing has been so extensive, indeed so brutal, that mixed neighbourhoods, for generation a way of life in Baghdad and elsewhere in the country, is now history. Roughly 80,000 people a month are being uprooted.

The notion of de-Baathification has become a disguise for an anti-Sunni purge by Shiite factions who feel that under the old regime they had been cheated out of their rightful political role in the government. Iraqi police forces are no more than militias, who often double as death squads, pursuing sectarian goals. And a report released last week by the US Government Accountability Office said that Iraq had fully met only three out of 18 benchmarks for political, economic and military progress. And so it goes. Hardly the time, Petraeus and Crocker nothwithstanding, to bring out the cheerleaders.

If there is light at the end of the tunnel, neither man offered a clear pathway to reach that end. The fact that America's top commander in Iraq backed an initial, albeit modest, pullout of troops by next summer, and that its top diplomat there claimed that "substantial US resolve and commitment" will ultimately win the day, does not provide reason to believe that Washington has an effective, coherent or well-defined strategy.

Hell-raising neocons

The debacle in that ancient land between the Tigris and the Euphrates (for debacle it is) has been the consequence of a policy devised by hell-raising neocons in the Pentagon who clearly knew little about the region's complex history and political culture, and by bunglers in the White House who, on the eve of war, would give credence only to those intelligence reports that reinforced their own biases, a policy so murky as to be beyond redemption.

Even at the best of times, planning the violent overthrow of a regime in a major country, in a volatile region of the world, is a dicey business. But when the planning is done by irredeemably incompetent policy makers, intoxicated by the lure of exercising power and regrouping the political destiny of another people, the end result is unspeakable suffering and massive social dislocation.

Which is what Iraqis have been made to endure over the last four years: a miasma of parochial sectarianism and uncontrolled hatred. Moreover, by virtue of history and culture, language and tradition, religious faith and political values, Iraq is very much a part of the Arab world, and the retrenchment of any such part to barbarism and ethnic vituperation is a threat to the vitality of the whole.

One by one, the lights, as it were, have gone out in Iraq. General Petraeus and Ambassador Crocker did not evince the slightest hint in their admittedly poised, calm testimony early this week that they knew, much less cared about, what their government has wrought in that sad land. Instead they had us believe that all is well that ends well, at the end of the tunnel, right there, where the light is.

Tell that to the five million pauperised Iraqi refugees deracinated in the surrounding countries since this ill-conceived, unnecessary and, yes, immoral war started.

Fawaz Turki is a veteran journalist, lecturer and author of several books, including The Disinherited: Journal of a Palestinian Exile. He lives in Washington D.C.

Mukasey is drawn into an old fight
By Richard B. Schmitt
The Senate-White House dispute over executive privilege may become central in
confirming the nominee for attorney general.
http://email.latimes.com/cgi-bin1/DM/y/eBY...Io30G2B0IwlU0EH

Clinton unveils new healthcare plan
By Peter G. Gosselin and Peter Nicholas
The senator who was unable to enact an overhaul as first lady is trying again as
a presidential hopeful. Her rivals are critical.
http://email.latimes.com/cgi-bin1/DM/y/eBY...Io30G2B0IwlV0EI

U.S. rushes to smooth Iraq's anger over Blackwater
By Ned Parker
The country cancels the American security firm's license after its workers are
accused of fatally shooting 8 civilians.
http://email.latimes.com/cgi-bin1/DM/y/eBY...Io30G2B0IwlW0EJ

'The Nine' by Jeffrey Toobin
By David J. Garrow
An opinion-based look at the justices of the U.S. Supreme Court
http://email.latimes.com/cgi-bin1/DM/y/eBY...Io30G2B0Iwlq0Ej

Bashing Bush with Greenspan
By Jonah Goldberg
The pedantic economist speaks plainly about his support for the Iraq war -- and
liberals misquote him.
http://email.latimes.com/cgi-bin1/DM/y/eBY...Io30G2B0Iwlv0Eo

Iran Brags: “We Have 600 Missiles Pointed At Israel” - US Iraq Bases Also Targeted

Iran’s claim to have 600 Shehab-3 missiles pointed at Israel and US targets in Iraq is bluff

Iran: “We Can Blow Any Ship Out Of The Gulf We Want”

Iran condemns French statement on war threat: France's Foreign Minister

French PM warns 'avoid war with Iran': Tries to reverse statement by his FM

ElBaradei warns against striking Iran

Tensions rise amid war of words

Growing need for US-Iran confidence steps: Harsh public rhetoric could lead to war

Escalation in the Positions of Iranian President Ahmadinejad– Special Report

Iran's President Ahmadinejad appeals to Americans: Urges US to leave Iraq, "because the Bush Administration could not prove claims that Saddam Hussain was secretly storing weapons of mass destruction

French-kissing the war on Iran

Mohamed ElBaradei, the chief of the United Nations' nuclear watchdog, has dropped his diplomatic demeanor in an attempt to defuse French comments over "preparing for the worst" - war on Iran. ElBaradei has already upset Western powers led by the United States by brokering an agreement with Iran over its nuclear program. Now he is up against a France playing messenger to big (energy) business. - Pepe Escobar (Sep 18, '07)

[b]Bush's 'proxy war' claim over Iran exposed[/b]
The charge that Tehran is using Iran's elite Quds Force to fight a proxy war in Iraq does not ring true, as even the United States' top man in Iraq, General David Petraeus, has conceded. All the same, it's part of a process of raising tensions by suggesting a potential reason for a US attack on Iran. - Gareth Porter (Sep 18, '07)

Korea unhappy over Syria 'links'
Most likely unhappy at being accused of aiding a purported Syrian nuclear weapons program, North Korea has postponed the six-nation talks that were due to begin on Wednesday. The Syrian revelation - true or not - comes at an awkward moment; the US is already reverting to hardline positions on Pyongyang. - Donald Kirk (Sep 18, '07)


Blackwater pays price for Iraqi firefight
Iraq has pulled the license of prominent private US security firm Blackwater USA, following a firefight that left eight civilians dead. With US$800 million in government contracts, it's a heavy blow for Blackwater and will further complicate both the legal no-man's zone of military contractors and US security problems in Iraq. (Sep 18, '07)


India takes glacier tussle to new heights
Both India and Pakistan would like to end their conflict on the Siachen Glacier. Yet an agreement remains illusory. Now New Delhi has come up with a new tack, opening the forbidding region to international trekkers. Islamabad thinks it is a mean trick to demonstrate India's commanding position. - Sudha Ramachandran
(Sep 18, '07)

U.S. Is Paying Off Iraq's Worst War Criminals in Attempt to Ward Off Attacks

Katie Halper, AlterNet

War on Iraq: The insurgents who were shooting at U.S. troops six months ago are now on the payroll [includes video].

America's Addiction to Debt Finally Crashes the System

John F. Ince, AlterNet

WorkPlace: Market evangelists created the wreckage, but ordinary working people will bear the greatest burden.

U.S. Banks Brace for Storm Surge as Dollar and Credit System Reel
By MIKE WHITNEY

By now, you’ve probably seen the photos of the angry customers queued up outside of Northern Rock Bank waiting to withdraw their money. This is the first big run on a British bank in over a century. It’s lost an eighth of its deposits in three days. The pictures are headline news in the U.K. but have been stuck on the back pages of U.S. newspapers. The reason for this is obvious. The same Force 5 economic-hurricane that just touched ground in Great Britain is headed for America and gaining strength on the way.

On Monday night, desperately trying to stave off a wider panic, the British government issued an emergency pledge to Northern Rock savers that their money was safe. The government is trying to find a buyer for Northern Rock.

This is what a good old fashioned bank run looks like. And, as in 1929, the bank owners and the government are frantically trying to calm down their customers by reassuring them that their money is safe. But human nature being what it is, people are not so easily pacified when they think their savings are at risk. The bottom line is this: The people want their money, not excuses.

But Northern Rock doesn’t have their money and, surprisingly, it is not because the bank was dabbling in risky subprime loans. Rather, NR had unwisely adopted the model of “borrowing short to go long” in financing their mortgages just like many of the major banks in the U.S. In other words, they depended on wholesale financing of their mortgages from eager investors in the market, instead of the traditional method of maintaining sufficient capital to back up the loans on their books.

It seemed like a nifty idea at the time and most of the big banks in the US were doing the same thing. It was a great way to avoid bothersome reserve requirements and the loan origination fees were profitable as well. Northern Rock’s business soared. Now they carry a mortgage book totaling $200 billion dollars.

$200 billion! So why can’t they pay out a paltry $4 or $5 billion to their customers without a government bailout?

It’s because they don’t have the reserves and because the bank’s business model is hopelessly flawed and no longer viable. Their assets are illiquid and (presumably) “marked to model”, which means they have no discernible market value. They might as well have been “marked to fantasy”,it amounts to the same thing. Investors don’t want them. So Northern Rock is stuck with a $200 billion albatross that’s dragging them under.

A more powerful tsunami is about to descend on the United States where many of the banks have been engaged in the same practices and are using the same business model as Northern Rock. Investors are no longer buying CDOs, MBSs, or anything else related to real estate. No one wants them, whether they’re subprime or not. That means that US banks will soon undergo the same type of economic gale that is battering the U.K right now. The only difference is that the U.S. economy is already listing from the downturn in housing and an increasingly jittery stock market.
That’s why Treasury Secretary Henry Paulson rushed off to England yesterday to see if he could figure out a way to keep the contagion from spreading.

Good luck, Hank.

It would interesting to know if Paulson still believes that “This is far and away the strongest global economy I’ve seen in my business lifetime”, or if he has adjusted his thinking as troubles in subprime, commercial paper, private equity, and credit continue to mount?

For weeks we’ve been saying that the banks are in trouble and do not have the reserves to cover their losses. This notion was originally pooh-poohed by nearly everyone. But it’s becoming more and more apparent that it is true. We expect to see many bank failures in the months to come. Prepare yourself. The banking system is mired in fraud and chicanery. Now the schemes and swindles are unwinding and the bodies will soon be floating to the surface.

“Structured finance” is touted as the “new architecture of financial markets”. It is designed to distribute capital more efficiently by allowing other market participants to fill a role which used to be left exclusively to the banks. In practice, however, structured finance is a hoax; and undoubtedly the most expensive hoax of all time. The transformation of liabilities (dodgy mortgage loans) into assets (securities) through the magic of securitization is the biggest boondoggle of all time. It is the moral equivalent of mortgage laundering. The system relies on the variable support of investors to provide the funding for pools of mortgage loans that are chopped-up into tranches and duct-taped together as CDOs (collateralized debt obligations). It’s madness; but no one seemed to realize how crazy it was until Bear Stearns blew up and they couldn’t find bidders for their remaining CDOs. It’s been downhill ever since.
The problems with structured finance are not simply the result of shabby lending and low interest rates. The model itself is defective.

John R. Ing provides a great synopsis of structured finance in his article, “Gold: The Collapse of the Vanities”:

"The origin of the debt crisis lies with the evolution of America's financial markets using financial engineering and leverage to finance the credit expansion…. Financial institutions created a Frankenstein with the change from simply lending money and taking fees to securitizing and selling trillions of loans in every market from Iowa to Germany. Credit risk was replaced by the "slicing and dicing" of risk, enabling the banks to act as principals, spreading that risk among various financial institutions….. Securitization allowed a vast array of long term liabilities once parked away with collateral to be resold along side more traditional forms of short term assets. Wall Street created an illusion that risk was somehow disseminated among the masses. Private equity too used piles of this debt to launch ever bigger buyouts. And, awash in liquidity and very sophisticated algorithms, investment bankers found willing hedge funds around the world seeking higher yielding assets. Risk was piled upon risk. We believe that the subprime crisis is not a one off event but the beginning of a significant sea change in the modern-day financial markets.”

The investment sharks who conjured up “structured finance” knew exactly what they were doing. They were in bed with the ratings agencies----off-loading trillions of dollars of garbage-bonds to pension funds, hedge funds, insurance companies and foreign financial giants. It’s a swindle of epic proportions and it never would have taken place in a sufficiently regulated market.

When crowds of angry people are huddled outside the banks to get their money, the system is in real peril. Credibility must be restored quickly. This is no time for Bush’s “free market” nostrums or Paulson’s soothing bromides (he thinks the problem is “contained”) or Bernanke’s feeble rate cuts. This requires real leadership.

The first thing to do is take charge, alert the public to what is going on and get Congress to work on substantive changes to the system. Concrete steps must be taken to build public confidence in the markets. And there must be a presidential announcement that all bank deposits will be fully covered by government insurance.

The lights should be blinking red at all the related government agencies including the Fed, the SEC, and the Treasury Dept. They need to get ahead of the curve and stop thinking they can minimize a potential catastrophe with their usual public relations mumbo jumbo.
Last week, an article appeared in the Wall Street Journal, “Banks Flock to Discount Window”. (9-14-07) The article chronicled the sudden up-tick in borrowing by the struggling banks via the Fed’s emergency bailout program, the “Discount Window”:

“Discount borrowing under the Fed’s primary credit program for banks surged to more than $7.1 billion outstanding as of Wednesday, up from $1 billion a week before.”
Again we see the same pattern developing; the banks borrowing money from the Fed because they cannot meet their minimum reserve requirements.
WSJ: “The Fed in its weekly release said average daily borrowing through Wednesday rose to $2.93 billion.”
$3 billion.

Traditionally, the “Discount Window” has only been used by banks in distress, but the Fed is trying to convince people that it’s really not a sign of distress at all. It’s “a sign of strength”. Baloney. Banks don’t borrow $3 billio unless they need it. They don’t have the reserves. Period.

The real condition of the banks will be revealed sometime in the next few weeks when they report earnings and account for their massive losses in “down-graded” CDOs and MBSs.
Market analyst Jon Markman offered these words of advice to the financial giants

"Before they (the financial industry) take down the entire market this fall by shocking Wall Street with unexpected losses, I suggest that they brush aside their attorneys and media handlers and come clean. They need to tell the world about the reality of their home lending and loan securitization teams' failures of the past four years -- and the truth about the toxic paper that they've flushed into the world economic system, or stuffed into Enron-like off-balance sheet entities -- before the markets make them walk the plank.”….” Since government regulators and Congress have flinched from their responsibility to administer "tough love" with rules forcing financial institutions to detail the creation, securitization and disposition of every ill-conceived subprime loan, off-balance sheet "structured investment vehicle," secretive money-market "conduit" and commercial-paper-financing vehicle, the market will do it with a vengeance."

Good advice. We’ll have to wait and see if anyone is listening. The investment banks may be waiting until Tuesday hoping that Fed-chief Ken Bernanke announces a cut to the Fed’s fund rate that could send the stock market roaring back into positive territory.
But interest rate cuts do not address the underlying problems of insolvency among homeowners, mortgage lenders, hedge funds and (potentially) banks. As market-analyst John R. Ing said, “A cut in rates will not solve the problem. This crisis was caused by excess liquidity and a deterioration of credit standards….A cut in the Fed Fund rate is simply heroin for credit junkies.”

The cuts merely add more cheap credit to a market that that is already over-inflated from the ocean of liquidity produced by former-Fed chief Alan Greenspan. The housing bubble and the credit bubble are largely the result of Greenspan’s misguided monetary policies. (For which he now blames Bush!) The Fed’s job is to ensure price stability and the smooth operation of the markets, not to reflate equity bubbles and reward over-exposed market participants.

It’s better to let cash-strapped borrowers default than slash interest rates and trigger a global run on the dollar. Financial analyst Richard Bove says that lower interest rates will do nothing to bring money back into the markets. Instead, lower interest rates will send the dollar into a tailspin and wreak havoc on the job market.
“There is no liquidity problem, but a serious crisis of confidence," Bove said:

"In a financial system where there is ample liquidity and a desire for higher rates to compensate for risk, the solution is not to create more liquidity and lower the rates that are available to compensate for risk. ... (The Fed) cannot reduce fear by stimulating inflation…

"It is illogical to assume that holders of cash will have a strong desire to lend money at low rates in a currency that is declining in value when they can take these same funds and lend them at high rates in a currency that is gaining in value. By lowering interest rates the Federal Reserve will not stimulate economic growth or create jobs. It will crash the currency, stimulate inflation, and weaken the economy and the job markets".

Bove is right. The people and businesses that cannot repay their debts should be allowed to fail. Further weakening the dollar only adds to our collective risk by feeding inflation and increasing the likelihood of capital flight from American markets. If that happens; we’re toast.

Consider this: In 2000, when Bush took office, gold was $273 per ounce, oil was $22 per barrel and the euro was worth $.87 per dollar. Currently, gold is over $700 per ounce, oil is over $80 per barrel, and the euro is nearly $1.40 per dollar. If Bernanke cuts rates, we’re likely to see oil at $125 per barrel by next spring.

Inflation is soaring. The government statistics are thoroughly bogus. Gold, oil and the euro don’t lie. According to economist Martin Feldstein, “The falling dollar and rising food prices caused market-based consumer prices to rise by 4.6 per cent in the most recent quarter.” (WSJ)

That’s 18.4 per cent a year, and yet Bernanke is still considering cutting interest rates and further fueling inflation.

What about the American worker whose wages have stagnated for the last six years? Inflation is the same as a pay-cut for him. And how about the pensioner on a fixed income? Same thing. Inflation is just a hidden tax progressively eroding his standard of living. .
Bernanke’s rate cut may be boon to the “cheap credit” addicts on Wall Street, but it’s the death-knell for the average worker who is already struggling just to make ends meet.

No bailouts. No rate cuts. Let the banks and hedge funds sink or swim like everyone else. The message to Bernanke is simple: “It’s time to take away the punch bowl”.
The inflation in the stock market is just as evident as it is in the price of gold, oil or real estate. Economist and author Henry Liu demonstrates this in his article “Liquidity Boom and the Looming Crisis”:

"The conventional value paradigm is unable to explain why the market capitalization of all US stocks grew from $5.3 trillion at the end of 1994 to $17.7 trillion at the end of 1999 to $35 trillion at the end of 2006, generating a geometric increase in price earnings ratios and the like. Liquidity analysis provides a ready answer".(Asia Times)

Market capitalization zoomed from $5.3 trillion to $35 trillion in 12 years? Why?Was it due to growth in market-share, business expansion or productivity?
No. It was because there were more dollars chasing the same number of securities; hence, inflation.

If that is the case, then we can expect the stock market to fall sharply before it reaches a sustainable level. As Liu says, “It is not possible to preserve the abnormal market prices of assets driven up by a liquidity boom if normal liquidity is to be restored.” Eventually, stock prices will return to a normal range.

Bernanke should not even be contemplating a rate cut. The market needs more discipline not less. And workers need a stable dollar. Besides, another rate cut would further jeopardize the greenback’s increasingly shaky position as the world’s “reserve currency”. That could destabilize the global economy by rapidly unwinding the U.S. massive current account deficit.

The International Herald Tribune summed up the dollar’s problems in a recent article, "Dollar's Retreat Raises Fear of Collapse."

"Finance ministers and central bankers have long fretted that at some point, the rest of the world would lose its willingness to finance the United States' proclivity to consume far more than it produces - and that a potentially disastrous free-fall in the dollar's value would result.

"The latest turmoil in mortgage markets has, in a single stroke, shaken faith in the resilience of American finance to a greater degree than even the bursting of the technology bubble in 2000 or the terror attacks of Sept. 11, 2001, analysts said. It has also raised prospect of a recession in the wider economy.

"This is all pointing to a greatly increased risk of a fast unwinding of the U.S. current account deficit and a serious decline of the dollar".

Other experts and currency traders have expressed similar sentiments. The dollar is at historic lows in relation to the basket of currencies against which it is weighted. Bernanke can’t take a chance that his effort to rescue the markets will cause a sudden sell-off of the dollar.

The Fed chief’s hands are tied. Bernanke simply doesn’t have the tools to fix the problems before him. Insolvency cannot be fixed with liquidity injections nor can the deeply-rooted “systemic” problems in “structured finance” be corrected by slashing interest rates. These require fiscal solutions, congressional involvement, and fundamental economic policy changes.

Rate cuts won’t help to rekindle the spending spree in the housing market either. That charade is over. The banks have already tightened lending standards and inventory is larger than anytime since they began keeping records. The slowdown in housing is irreversible as is the steady decline in real estate prices. Trillions in market capitalization will be wiped out. Home equity is already shrinking as is consumer spending connected to home-equity withdrawals.

The bubble has popped regardless of what Bernanke does. The same is true in the clogged Commercial Paper market where hundreds of billions of dollars in short-term debt is due to expire in the next few weeks. The banks and corporate borrowers are expected to struggle to refinance their debts but, of course, much of the debt will not roll over. There will be substantial losses and, very likely, more defaults.

Bernanke can either be a statesman---and tell the country the truth about our dysfunctional financial system which is breaking down from years of corruption, deregulation and manipulation---or he can take the cowards-route and buy some time by flooding the system with liquidity, stimulating more destructive consumerism, and condemning the nation to an avoidable cycle of double-digit inflation.

We’ll know his decision soon enough.

Mike Whitney lives in Washington state. He can be reached at: fergiewhitney@msn.com

Hillary's Heath Care Sham Won't Cure What Ails Us
TRex: To proclaim that her plan provides, "Universal Health Care" is a decided misnomer. "Universal Health Insurance" is more like it.

Osirak 2? by Chuck Freilich

Poll: Almost one third of the US population do not accept official explanation of 911 - 2007-09-18

White House Hosts Pro-Vets Groups
President Bush hosted an event on the White House lawn this morning honoring a number of veterans orgnaizations and support groups <a href="http://ap.google.com/article/ALeqM5j057jBReERcsF-FcZRSWe0h1gaXQ" target="_blank">including Families United for Our Troops and Their Mission, Vets for Freedom, the American Legion, and Veterans of Foreign Wars.

Here's the transcript:

It's important people hear from you. It's important people hear your voice. And I want to thank you for organizing. I want to thank you not only for the grassroots support of our families, I want to thank you for going up to Capitol Hill. And here's a message I hope you deliver: The Commander-in-Chief wants to succeed -- (applause) -- and the Commander-in-Chief takes seriously the recommendations of our military commanders. General Petraeus came back to the United States to deliver the recommendations he made to me. Inherent in his recommendations is, one, his belief we're succeeding, his belief we will succeed, and I ask the United States Congress to support the troop levels and the strategies I have embraced. (Applause.)

AUDIENCE: USA! USA! USA!

THE PRESIDENT: Thank you all. When the history books are finally written about this chapter in the war against extremists and radicals, they will recognize certain truths: one, that we recognize that if we were to retreat from the Middle East the enemy would not be content to remain where they are, but they would follow us here. We recognize that the best way to protect our homeland is to defeat an enemy overseas so we do not have to face them here on the streets of America. And we recognize that liberty is powerful, that liberty will yield the peace that we want for generations to come; that will recognize that this generation of Americans did the hard work now, so that future generations could live in security and peace.

And so on this beautiful morning we thank you for your steadfast resolve, we appreciate your support of those brave souls who have volunteered in the face of the danger. We ask for God's blessings on the families and our troop in harm's way. And we thank you from the bottom of our collective hearts. God bless you all.