What's $8.8 billion Among Friends?

GMAC was supposed to raise $30 billion in order to be considered as a bank holding company and thus eligible to receive our money. Well, they extended the deadline four times and still were able to raise only $21.2 billion. Yet, our representative in Washington felt that this was pretty close to $30 billion so they bought $5 billion of preferred stock and lent GMAC another billion.

A billion here, a billion there. It's only paper. And we have tons more of that.

Incompetence or Reality

The Governor of South Carolina, Mark Sanford, claims that the state's unemployment commission does not know how to calculate the unemployment rate in the state. The director of the commission says he has no money to pay the 77,000 unemployed people in the state and has asked the governor to get the money from the federal government, which is a fairly standard way these things are handled. Sanford had refused to do so a couple of times. Finally, Sanford has decided to do so as he does not want to "punish the unemployed for this agency’s incompetence."

Could the agency be that incompetent or is the governor one of those people who believes that everyone must conform to his idea of reality.

Rowing Down the Emory River

A Story of Corruption

That's the subtitle of an article by Marcia Angell, long-time editor of the New England Journal of Medicine, in the current NY Review of Books. Basically, Angell documents the corruption that has arisen in the relationship of pharmaceutical companies, medical schools and doctors. It is a very sad article in that it documents bribery, an abandonment of ethics and the willing sacrifice of what had come to be accepted standards of practicing medicine.

I've written about the bribery, but Angell claims that the drug manufacturers subsidize "most meetings of professional organizations and most of the continuing medical education needed by doctors to maintain their state licenses". Furthermore, the companies exert a strong influence on the guidelines issued by medical organizations and they are able to get the FDA to approve drugs based on what are essentially rigged tests.

Let me talk a little about drug testing. The FDA's approval is usually based on the success of a relatively few trials; it's possible that the FDA would approve a drug in cases where there was one successful trial and several unsuccessful trials. Tests typically compare new drugs to placebos rather than to older drugs that do essentially the same job. It is not always the case that the comparison between placebos and the new drug is that favorable; one study of the major antidepressant drugs found that placebos were 80% as effective as the new drugs. And, as Angell reports, "the sponsor's drug may be compared with another drug administered at a dose so low that the sponsor's drug looks more powerful. Or a drug that is likely to be used by older people will be tested in young people, so that side effects are less likely to emerge."

And then there is the whole question of "off label" use, i.e., using the drug for something for which it was not approved by the FDA. Such use relies on doctors who have supposedly done some serious testing; reality is a reliance on the word of the drug company or its shills at famous medical schools.

Reporting on tests is even worse. Only good results are printed and, if the results are bad, it is not unheard of to slant the results. Political spin doctors would come in second to drug spin doctors.

Anyone who watches television soon becomes aware that almost any feeling one has can be diagnosed as something that can and should be treated by a drug. A marketer for a drug company is quoted, "Neurontin for pain. Neurontin for monotherapy. Neurontin for bipolar. Neurontin for everything." This for a drug that was approved to treat epilepsy.

The 'everybody needs drugs' syndrome is especially prevalent with regard to mental illness. The medical handbook defining mental illnesses has grown from a few pages in 1952 to 943 pages today. The past fifty years have been unsurpassed in diagnosing new illnesses. And, with a long title, "Diagnostic and Statistical Manual of Mental Disorders", one would assume that this is truly a scholarly, well-researched, sound document. Guess again.

Angell appears to be thoroughly disgusted, "It is simply no longer possible to believe much of the clinical research that is published, or to rely on the judgment of trusted physicians or authoritative medical guidelines. I take no pleasure in this conclusion, which I reached slowly and reluctantly over my two decades as an editor of TheNew England Journal of Medicine."

A Palestinian Perspective

The Washington Note has a commentary by Mustafa Barghouthi, Secretary General of the Palestinian National Initiative and a strong advocate of non-violent responses to Israeli occupation.

Here are some excerpts from the commentary:

Once and for all it is time to expose the myths that they have created.

1. Israelis have claimed to have ended the occupation of the Gaza Strip in 2005.

2. Israel claims that Hamas violated the cease-fire and pulled out of it unilaterally.

3. Israel claims to be pursuing peace with 'peaceful Palestinians'.

4. Israel is acting in self-defense.

5. Israel claims to have struck military targets only.

6. Israel claims that it is attacking Hamas and not the Palestinian people.

7. Israel claims that Palestinians are the source of violence.

.....................................................................................................................................................................

We all know the truth: the suspension of the electioneering is exactly that - electioneering.

Like John McCain's suspension of his presidential campaign to return to Washington to 'deal with' the financial crisis, this act is little more than a publicity stunt.

The candidates have to appear 'tough enough to lead', and there is seemingly no better way of doing that than bathing in Palestinian blood.

In the end, this will in no way improve the security of the average Israeli; in fact it can be expected to get much worse in the coming days as the massacre could presumably provoke a new generation of suicide bombers.

It will not undermine Hamas either, and it will not result in the three fools, Barack, Livni and Olmert, looking 'tough'. Their misguided political venture will likely blow up in their faces as did the brutally similar 2006 invasion of Lebanon.

In closing, there is another reason - beyond the internal politics of Israel - why this attack has been allowed to occur: the complicity and silence of the international community.

Israel cannot and would not act against the will of its economic allies in Europe or its military allies in the US. Israel may be pulling the trigger ending hundreds, perhaps even thousands of lives this week, but it is the apathy of the world and the inhumane tolerance of Palestinian suffering which allows this to occur.

'The evil only exists because the good remain silent'

From Occupied Palestine. . .

-- Dr. Mustafa Barghouthi

Judging by what's been happening to the people of Gaza over the last few years since Israel "left" Gaza, I think that many of Barghouti's claims hold a lot of water.

A Non-U.S. View of the Situation

Bruce Miller of The Blue Voice summarizes a number of articles about the current Israeli attack on Gaza. A key point he makes is that most of these articles are from non-U.S. sources and they express a far wider variety of opinion than we get in the U.S. media.

You'll find that most of the articles do not look favorably on Israel's action. The one that hit home with me was

Disinformation, secrecy and lies: How the Gaza offensive came about by Barak Ravid 12/28/08:

Sources in the defense establishment said Defense Minister Ehud Barak instructed the Israel Defense Forces to prepare for the operation over six months ago, even as Israel was beginning to negotiate a ceasefire agreement with Hamas. According to the sources, Barak maintained that although the lull would allow Hamas to prepare for a showdown with Israel, the Israeli army needed time to prepare, as well.

Barak gave orders to carry out a comprehensive intelligence-gathering drive which sought to map out Hamas' security infrastructure, along with that of other militant organizations operating in the Strip. ...

The plan of action that was implemented in Operation Cast Lead remained only a blueprint until a month ago, when tensions soared after the IDF carried out an incursion into Gaza during the ceasefire to take out a tunnel which the army said was intended to facilitate an attack by Palestinian militants on IDF troops. [my emphasis]

An Eye for an Eye

Like most observers of the disaster that is the relationship of Israel and Gaza, Helen Cobban is worried where the current confrontation will wind up. She does not believe that Israel's retaliation for the rocket attacks by Hamas makes sense if the goal of the Israeli attacks is to get Hamas to surrender.

Cobban also points out that since September 2005 9 Israeli civilians have been killed by the rockets. In that same period, 1,400 Palestinian civilians in Gaza have been killed by Israeli attacks.

Of course, Bush blames only Hamas.

Update: If Obama approves of the "special relationship" with Israel of which Axelrod spoke yesterday on Face the Nation, one has to wonder just how much our MidEast policies will change.

He Said, She Said

He, the TVA, says the recent spill of coal ash near Knoxville "has some heavy metals within but it's not toxic or anything".

There are several shes. The EPA had a draft report last year which says that coal ash does have a large amount of carcinogens and retains heavy metal. The National Research Council in a 2006 study found that coal ash "may pose public health and environmental concerns if improperly managed." In 2000 the EPA's attempt to impose stricter control of coal ash was defeated by the power industry because it would cost too much.

The current spill is the largest recorded thus far, 300,000,000 gallons of sludge and water. Only fifteen houses were affected by the flood, the TVA says. But environmentalists are also worried of the effects when the muck dries and the ash starts flying around and into people's lungs.

Here's a question for you: After municipal solid waste what is the next largest waste stream? Answer: Coal ash and other postcombustion material.

Update: Now rhe estimate has been revised upward to 1 billion gallons.

Too Much Testing?

Yes, the arguments about the best way to educate our kids will go on forever. But, two teachers from Lowell High argue that an over-emphasis on testing is not the way to teach our kids. They may have a point as I was surprised to learn that 15% of the school year is devoted to taking state-mandated tests, or so the Department of Education dictates. How much more of the school year is taken up with preparing for these tests? I think the teachers have a point.

Something Good By Bush

Yes, I did write the title without being coerced.

Under Bush something good has been done in the area of medical treatment for the poor. 60% more patients are being served in 1297 new or expanded non-profit community health centers. This is good for the uninsured and underinsured as well as for hospital's emergency rooms. The centers not only treat emergency csses but they also provide dental and mental care and many have pharmacies.

A Christmas Visitor

Eli brought his bearded dragon to share Christmas with us.

His treat was worms, instead of his usual crickets.

He Was Here

He wishes you a Peaceful Christmas.

Another Bank Holding Company

It didn't take GMAC too long to become a bank holding company. Now they're entitled to be nourished by us, just like GM is.

More Money for the Military?

Well, at least Martin Feldstein agrees that a fairly large stimulus is necessary. That's a good sign. And spending some of it on the military is not a bad idea. The question is how much spending and on what.

It sounds to me as though Feldstein wants to give the Defense establishment carte blanche without regard to the fact that the establishment is pissing away our money on systems that will be outmoded when ready, supply manageent that deserves a grade of D or less, failure to make reasoned, prioritized, timely decisions.

Would money spent on guns be more productive than money spent on bridges, healthcare, the environment, education? I don't think so.

"We have betrayed our legacy."

Archbishop Desmond Tutu has come out strongly against Mr. Mugabe to the point where he feels that violence to remove Mugabe would be justified. However, much of his anger was directed at the leaders and ex-leaders of his own country, who have abandoned the high moral ground necessary for their long struggle.

Opening the Door

Several European countries have talked about helping us close Guantanamo by taking some of the prisoners who cannot go home as they run the risk of torture. Bush asked them, they said no. But it looks like they have hope in Obama. Of course, the Europeans would like to see us open our doors to some of the prisoners first, before we ship anyone overseas.

Too Much Data, Little Information

Among all the various issues to be addressed in trying to dig out of the current crisis, Mark Thoma argues for the importance of information you can trust. And trust in information - whether from a credit rating agency or a CPA's audit - is in short supply today. He argues "even if we recapitalise every bank that is in trouble, remove every existing toxic asset on every bank balance sheet, and refinance every mortgage so that it is not in danger of default, we still will not have fully repaired financial markets. We will still be left with a lack of trust—for good reason—in the informational architecture people use to make financial decisions." He has a point.

His solution is "to provide insurance against the risks caused by the lack of information during the time period when the information flows are being restored". Whether its government or private insurance is immaterial to him. The important issue is to restore trust.

It's time for a return to integrity.

From a piece by Courtney Martin in The American Prospect.

We have lost our moral way in this country. We have let the hype of humanitarian intervention -- the view of Americans as caped crusaders swooping in to save tyrannized foreigners -- drown out our commitment to helping others humbly and pragmatically. We have let the mystique of big markets and fast money woo us into looking the other way when corporate execs invented their bottom line. And we have let the American dream put us to sleep when we should have been wide awake about too-good-to-be-true mortgages.

Too many of us have stood by as our government has sent mostly young, low-income people to fight a "war on terror" -- as if terror were a definable target in a discrete location. As if this weren't bad enough, we've also stood by as those same people returned -- psychologically and physically maimed -- and pretended that we were providing them with enough resources to heal, just as we pretend that the mission is accomplished or the war winnable or evil extinguishable.

We have lost a sense of reality. The era of smoke and mirrors may have been most egregiously symbolized by President Bush in a flight suit, but the delusion has worn so many other guises: CEOs of the 500 biggest U.S. corporations who made an average of $12.8 million each last year, shady mortgage brokers who preyed on women craving a home of their own, bureaucrats at the United States Agency for International Development who basically invented budgets without talking to experts or doing any on-the-ground research for the rebuilding of Iraq's infrastructure. After years of living in fantasy land, reality has rained down.

We have lost a system of accountability.

Common Sense

Here's how the GAO begins its report entitled "Auto Industry: A Framework for Considering Financial Assistance"

From our previous work on federal financial assistance to large firms and municipalities, we have identified three fundamental principles that can serve as a framework for considering future assistance.These principles are (1) identifying and defining the problem, (2) determining the national interests and setting clear goals and objectives that address the problem, and (3) protecting the government’s interests.

Has the administration's proposal followed these principles?

A Chicken with His Head Cut Off

That's not quite how Alan Blinder describes Henry Paulson. His characterization is worse, although not actually specified. As we know, Paulson has changed direction on a dime and actually you can understand why he has done some of this since we are in uncharted waters. However, Blinder reminds us that the FDIC is doing more for the mortgage market than Treasury is. Although the TARP was passed with the intent that it would buy up both troubled mortgages and troubled mortgage-backed securities, it has not done so as it has switched to recapitalizing banks. But Paulson has given most of the first tranche to the banks while retaining very little control over how the money is spent and also getting a lower dividend than Buffet.

Blinder is not alone in his concern. See this GAO report. Maybe the Congressional Oversight Panel will have some answers as to where the money went.

Lighter Fare

The British Medical Journal debunks some common beliefs, such as:

• sugar makes kids hyperactive
• holidays bring on more suicides
• poinsettias are poisonous
• you lose more heat from your head than from other body parts
• eating at night makes you fat
• there is no panacea for curing a hangover.

It Doesn't Sound Like Tawana Brawley

In the late 1980s the Tawana Brawley case was national news. She, a 15-year-old African-American, accused six white men, including at least one police officer, of sexually abusing and/or raping her. Despite having the support of some African-American leaders, Al Sharpton being one, Brawley's case was eventually shown to be a hoax.

Today we have another young African-American girl claiming injustice by the police. This one does not seem to be a hoax. Dymond Milburn, age 12 at the time, was in her front yard in Galveston when a van pulled up, three men got out, one shouted, "You're a prostitute. You're coming with me" and proceeded to begin to arrest her. Like any rational being confronted by unknown violent people, Dymond did not go readily; she called for her father as she hung on to a tree. It seems that the three men were members of the Galveston Police Department who were in plainclothes and looking for a white prostitute who lived a couple of blocks away. They did not arrest Milburn that night but she was taken to a hospital for injuries sustained in the incident. Bad enough?

It gets worse. Three weeks later the police go to Milburn's school and in front of her classmates arrest her for assaulting a public servant. Trial is set for February.

It sure sounds as though the cops went off the deep end. For more on this see The Agitator.

Viability? Net Present value? Compensation limits?

These three key components of Bush's plan to save the auto industry are not defined any place that I can see in the bailout fact sheet. There is an attempt made to define viability as having a positive net present value. But what this is I cannot fathom. There is an attempt to rein in executive compensation, but it's a mealy-mouthed "limits on executive compensation and eliminate perks".

If a firm is not viable by March 31, they have to give the money back. How will this be possible if the company is not viable?

Most importantly, Paulson still has the exclusive right to change any of these terms.

I see this as just another delaying tactic of a lame duck.

Exercising Soft Power

There's a lot of talk about the value of soft power in today's world, but in the current issue of Foreign Affairs J. Anthony Holmes demonstrates that we don't have the people we need to exercise the soft power of diplomacy. We have tasked our military with many of the non-defense responsibilities.

Consider the following:

• There are more lawyers in DOD than U.S. diplomats.
• There are more people in military bands than in the diplomatic corps.
• DOD's budget is 24 times that of State and USAID combined.
• Of each dollar we spend on national security and foreign affairs, one cent goes to diplomacy and foreign aid.

Part of the problem can be assigned to Congress, which has refused to allocate the funds needed to get the diplomatic job done. But it is also true that the Bush administration has had a major role in gutting our Foreign Service.

Holmes, a former ambassador, urges Obama to spend the money that is needed to restore the diplomatic corps to a position where soft power can truly be exercised.

Why Should It Take 18 Months?

Finally, the government is taking some steps to rein in the power of credit card companies. Three agencies, the Fed, the Treasury and the National Credit Union Administration, have issued rules to allow you at least 21 days to make a payment and also make it a tad more difficult for the companies to raise their interest rates. However, these rules will not go into effect until June 2010. There was no explanation for the delay.

They Need Lessons in PR

One really has to wonder about the arrogance of people in the financial world. Today, Goldman Sachs reported that they made $2.3 billion in 2008; this was after paying almost $11 billion in compensation and benefits. This is the same Goldman to whom we gave $10 billion in October.

What really frosts the cake is that they paid the princely sum of $14,000,000 in taxes. Last year they paid $6 billion. In 2007 they were in the 30+% tax bracket; this year they movced down to the 1% bracket.

I wonder when they'll be asking us for more money. I wonder also when we'll know what they have done with the $10 billion.

FedEx's lesson in marketing

Next year the CEO will take a pay cut of 20%, senior executives of 7.5-10%, salaried employee a cut of 5% and hourly employees 0%. Sounds pretty fair. Right?

Look behind the facade and you'll see that the hourly employees are also taking a cut, maybe one larger than the bosses. For the hourly people, there will be no bonuses in 2009 nor will FedEx continue to match the employee's pension contribution.

The CEO, Fred Smith, will not starve. Only 13% of his compensation comes from salary, the rest is from options, more than half of which are not tied to any performance goals. And he still has $27,500,000 in his pension fund.

Then, there is the question as to whether Fedex drivers are independent contractors or employees. The courts seem to go back and forth on the question.

Green Living

20,000,000 Chinese live a life very close to nature. They live in caves. Many families have had a cave as their home for generations. Caves stay cool in summer and warm in winter, so they are very efficient. And you don't have to sacrifice modern conveniences to live in a cave in China. 80% of them have indoor plumbing. Most are wired so that modern conveniences abound. Plus, there is a certain cachet to live as Mao did when he was a revolutionary.

Immigration to the U.S. Since 1820

Immigration to the US, 1820-2007 v2 from Ian Stevenson on Vimeo.

ASOP

That stands for Afghan Social Outreach Program. It is an attempt to create in Afghanistan a variant of Sons Of Iraq. While we will be paying - i.e, bribing - people to join ASOP, it will be different from Sons in that the elders, not warlords, will select the members of ASOP.

Bribery is one way to minimize the conflict in the short term. But what will the long term bring?

Mother and Child

Mother weighs 2 tons, Daughter 40 pounds.

Courtesy of Der Spiegel.

He doesn't think we went too far with the detainees

Here's an excerpt from an interview with our Vice President.

KARL: Did you authorize the tactics that were used against Khalid Sheikh Mohammed?

CHENEY: I was aware of the program, certainly, and involved in helping get the process cleared, as the agency, in effect, came in and wanted to know what they could and couldn't do. And they talked to me, as well as others, to explain what they wanted to do. And I supported it.

KARL: In hindsight, do you think any of those tactics that were used against Khalid Sheikh Mohammed and others went too far?

CHENEY: I don't.

Can he do any wrong?

Okay, the World Has Passed Me By

The local NPR station broadcasts brief moments with locals from the Cape and Islands. There is a wide variety of people living here. Some of us are strange. However, usually these snippets of local lives are interesting and give one a view into the way others live, even if the subject is one of we strange beings.

Today, the subject was a fellow from Provincetown who runs a salon there. He spoke of two new attractions he had recently installed in his shop. One was a stripper's pole, i.e., a pole that is used by performers as they dance and strip. Any of the salon's clientele can use the pole as long as they weigh less than 200 pounds and don't dance for longer than 5 minutes. While I would not be one who uses the pole, I can understand that some people might really enjoy it.

The other attraction was a kissing booth. This is available only on Saturdays and costs $2 per kiss. Strange? Yes, but the booth can only be used if you cover your lips with SaranWrap. Granted that sexually transmitted diseases are a risk in today's world and may be a greater risk in the gay world. However, I find it hard to understand how one can enjoy kissing through Saran Wrap.

Bush is no Truman

The following is from today's Boston Globe. It was written by Timothy Gay.

THE PRESIDENT was so down in the dumps that aides decided to surprise him with a party. With the economy sputtering and his foreign policy under siege, the president's pals thought a light-hearted evening away from the White House would buoy the boss's spirits.

Cabinet officers and cronies took turns toasting the chief executive, their playful gibes drawing cathartic laughter. Finally, the administration's gray eminence, the architect of its national security structure, rose to speak. The old warrior was as feared as he was admired. Chatter came to an abrupt halt.

"The full stature of this [president] will only be proven by history," he said, "but I want to say here and now that there has never been a decision made under this man's administration, affecting policies beyond our shores, which has not been in the best interest of this country. It is not the courage of these decisions that will live, but the integrity of the man."

Guests were stifling tears as the president stood to respond. But words wouldn't come; he was too moved.

In the sweetest fantasies of today's Republicans, George W. Bush and Dick Cheney would be the stars of this scenario. Alas, the president to whom the poignant toast was directed was Democrat Harry Truman. And as documented by David McCullough's "Truman," the encomium was delivered by Truman's secretary of state (and later defense) George Marshall.

Watch, their apologists argue, history will vindicate Bush and Cheney just as it exonerated Truman and Marshall. It may take a couple of decades, but future McCulloughs will come to recognize that the Bush-Cheney invasion of Iraq was transformative - and that torturing suspects was the only real way to fight terrorism.

Neo-cons can stop fantasizing now. Bush is no Truman, Iraq is no Cold War, and Dick Cheney is no George Marshall. The rehabilitation of Bush and Cheney is not going to happen in any foreseeable lifetime.

Why not? Well, for starters, look at the attributes Marshall ascribed to Truman.

"The best interest of this country." Like it or not - and many liberals, to their detriment, did not - the Cold War against the Soviet Union had to be waged and won. After four years of fighting fascism, the last thing Americans in the late 1940s wanted was another war. But Truman and Marshall understood that the United States had no choice but to respond to Soviet aggression.

Bush and Cheney, on the other hand, had choices in prosecuting the war on terror - and invariably made the wrong ones. Instead of finishing the job in Afghanistan against the enemy who attacked us on 9/11, they chose to settle an old score in Iraq against a despot with no connection to al Qaeda. Diverting resources away from the real war on terror and getting us foursquare into an ancient tribal rivalry were antithetical to US interests.

"The courage of these decisions." It took guts for Truman to ask Americans to make further sacrifices. He made it plain that a stirring military victory to end the Cold War was unlikely, that diplomacy would continue to be paramount, and that the United States had a moral obligation to rebuild the war-torn world.

What sacrifice did W. ask of Americans after 9/11? Sadly, Bush began emphasizing diplomacy only after his shoot-first, aim-later foreign policy went off the rails. Which is a shame, since on Iran and North Korea, the administration has begun to make at least some headway.

"The integrity of the man." The Cold War was a brutish enterprise. But Truman conducted it within the mores of civilization. Come Inauguration Day 2009, when military and intelligence officers are free to speak their conscience, Americans will find out just how unseemly the past eight years have been. Habeas corpus wasn't the only thing suspended during Bush's presidency. So was America's moral bearing.

Ironically, in Secretary of State Colin Powell, George W. Bush had a close facsimile to George Marshall. But Bush and Cheney undercut Powell, publicly exploiting his reputation while privately ignoring his caveats on Iraq.

Students of history looking for a "toast" to George W. Bush's foreign policy can find it in Colin Powell's endorsement of Barack Obama.

Timothy M. Gay is a writer and historian.

Advice for the Defense Department

Lawrence Korb and others have advice for President-Elect Obama with regard to our military forces. As readers will know, I've quoted Korb often as, despite his being Reagan's Assistant Secretary of Defense, he makes a lot of sense to me.

Looking at the Defense Department alone, why Obama wants this job is beyond me - two wars going on, real difficulties maintaining a volunteer army, unbelievable cost overruns, accusations of torture, etc. But Korb etal have great faith in the second level command and assert that the major problem may be the retention of these officers.

Korb argues that, despite the fact that we are spending more money on defense than at any time since WWII, we do not have a better military. Moreover, this largesse has enabled DOD to avoid having to make choices; they can have it all. "Sound strategy and military policy requires choices about organizational structure, resources, training, and other important issues."

Somewhat surprisingly, Korb is not recommending cuts in the budget overall. He does think that we have to spend our money on 21st century issues and, by cutting back on weapons designed for 20th century warfare, we can save enough money to pay for new capabilities.

Korb really pushes the idea of 'people, not hardware' being the sine qua non of the 21st century military. He wants to increase the size of the force but without the lowering of standards we have seen over the past few years. And, of course, we need people who can actually manage DOD.

Summarizing the Mess

Today the NY Times published a draft copy of a five-year report by Stewart Bowen, the Special Inspector General for Iraq Reconstruction. It is appropriately titled "Hard Lessons: the Iraq Reconstruction Experience". It's over 500 pages long and, if the Times is correct, it documents a mess:

Among the overarching conclusions of the history is that five years after embarking on its largest foreign reconstruction project since the Marshall Plan in Europe after World War II, the United States government has in place neither the policies and technical capacity nor the organizational structure that would be needed to undertake such a program on anything approaching this scale.

The bitterest message of all for the reconstruction program may be the way the history ends. The hard figures on basic services and industrial production compiled for the report reveal that for all the money spent and promises made, the rebuilding effort never did much more than restore what was destroyed during the invasion and the convulsive looting that followed.

Another Reason for the Rise in Foreclosures

The NY Federal Reserve bulletin for this month contends that the bankruptcy reform act of 2005 helped increase the number of foreclosures. There are two basic options for personal bankruptcy - Chapter 7 and Chapter 13.

Chapter 7 allows you to keep all of your income while freeing you from having to pay unsecured creditors (such as credit card companies); however, you lose your house or the equity you have in it that exceeds a certain amount. The result is that you usually have more cash to pay your mortgage as your other loans are forgiven.

Chapter 13 allows you to keep your home but directs you to pay off all creditors over a period of three - five year. Thus, you do not have any extra cash.

The act forced more people into Chapter 13 as it has a means test. If you have at least $167 of free cash per month, then you must go into Chapter 13 rather than Chapter 7 where you would have extra cash to pay off the mortgage.

Interesting theory.

Truly , We Live in Crazy Times

Most supplies to the troops in Afghanistan are driven in from Pakistan. The Taliban control most of the roads outside Kabul. Guess what? The trucking companies bribe the Taliban to allow their vehicles to go through safely. The Taliban is making good money as the typical bribe is around 25% of the security contract value. Millions and millions of dollars have already been paid.

Stiglitz Says Let Them Go to Chapter 11

Joe Stiglitz is certainly a prolific writer. His latest article pushes for the Big 3 to enter bankruptcy. Doing so will force the companies to restructure and perhaps start producing cars people will want to buy.

Stiglitz recognizes the likelihood that the companies will need some money from us. Bankruptcy will make the money go further as it would also very likely lower costs - retiree obligations and interest payments - and we shoukd be able to get a better deal.

21st Century Ponzi

Charles Ponzi was neither the first nor the last to defraud investors, but he has succeeded in attaching his name to many frauds since he practiced his in the 1920s. The technique used in a Ponzi scheme is to pay older investors with the money received from newer investors while always keeping a portion for yourself.

Bernard Madoff is the latest guru who appears to have emulated Mr. Ponzi. His investment management firm has been able to generate a 10% return every year, irrespective of what the market does. Last month he claimed his portfolio was up 5.6%, although the S&P was down 37.5%.

There have been people who have questioned Madoff's genius over the past few years. Some have contacted the SEC. But nothing was done. Madoff kept collecting money and 'investing' it. He must have been a hell of a salesman as estimate are that the losses will total $50 billion.

The really sad part about this whole matter is that his sons turned him in.

Update

Madoff bilked many prominent people (the owners of the NY Mets and Philadelphia Eagles, the head of GMAC, the former owners of Stop & Shop, major donors to Boston institutions such as the Museum of Fine Arts), supposedly sophisticated investors (BNP Paribas, Nomura Holdings, Neue Privat Bank) and hedge funds (Faifield Greenwich Group, Tremont Capital Management and Maxim Capital Management).

His basic selling points were exclusivity and a steady return.

Summarizing 8 Years

Dear Fellow Constituent:

The George W. Bush Presidential Library is now in the planning stages and accepting donations. The Library will include:

• The Hurricane Katrina Room, which is still under construction.
• The Alberto Gonzales Room, where you won't be able to remember anything.
• The Texas Air National Guard Room, where you don't even have to show up.
• The Walter Reed Hospital Room, where they don't let you in.
• The Guantanamo Bay Room, where they don't let you out.
• The Weapons of Mass Destruction Room, which no one has been able to find.
• The National Debt Room, which is huge and has no ceiling.
• The Tax Cut Room, with entry only to the wealthy.
• The Economy Room, which is in the toilet.
• The Iraq War Room. (After you complete your first visit, you are required to make a second, third, fourth, and sometimes fifth visit.)
• The Dick Cheney Room, in the famous undisclosed location, complete with shotgun gallery.
• The Environmental Conservation Room, still empty.
• The Supreme Court Gift Shop, where you can buy an election.
• The Airport Men's Room, where you can meet some of your favorite Republican Senators.
• The Decider Room, complete with dart board, magic 8-ball, Ouija board, dice, coins, and straws.
• Note: The library will feature an electron microscope to help you locate and view the President's accomplishments.

The library walls will be engraved with quotes by George W. Bush:

• "The vast majority of our imports come from outside the country."
• "If we don't succeed, we run the risk of failure."
• "Republicans understand the importance of bondage between a mother and child."
• "No senior citizen should ever have to choose between prescription drugs and medicine."
• "I believe we are on an irreversible trend toward more freedom and democracy - but that could change."
• "One word sums up probably the responsibility of any Governor, and that one word is "to be prepared."
• "Verbosity leads to unclear, inarticulate things."
• "I have made good judgments in the past. I have made good judgments in the future."
• "The future will be better tomorrow."
• "We're going to have the best educated American people in the world."
• "One of the great things about books is sometimes there are some fantastic pictures." (Said during an education photo-op.)
• "Illegitimacy is something we should talk about in terms of not having it."
• "We are ready for any unforeseen event that may or may not occur."
• "It isn't pollution that's harming the environment. It's the impurities in our air and water that are doing it."
• "I stand by all the misstatements that I've made."...George W. Bush to Sam Donaldson

PLEASE GIVE GENEROUSLY!

Sincerely,

Jack Abramoff,

Co-Chair, G.W. Bush Library Board of Directors

War Criminals

The report of the Senate's Armed Services Committee into the treatment of detainees at Guantanamo and elsewhere does not call anyone a war criminal. I guess conventions prevented them from doing so. But reading the report certainly raises the question of why we have tolerated such people to run our country.

Start with the quote from General Petraeus that leads off the report.

“What sets us apart from our enemies in this fight… is how we behave. In everything we do, we must observe the standards and values that dictate that we treat noncombatants and detainees with dignity and respect. While we are warriors, we are also all human beings.”

Then, listen to former Navy General Counsel Mora.

“there are serving U.S. flag-rank officers who maintain that the first and second identifiable causes of U.S. combat deaths in Iraq – as judged by their effectiveness in recruiting insurgent fighters into combat – are, respectively the symbols of Abu Ghraib and Guantanamo.”

And the basic conclusion in the executive summary.

The abuse of detainees in U.S. custody cannot simply be attributed to the actions of “a few bad apples” acting on their own. The fact is that senior officials in the United States government solicited information on how to use aggressive techniques, redefined the law to create the appearance of their legality, and authorized their use against detainees. Those efforts damaged our ability to collect accurate intelligence that could save lives, strengthened the hand of our enemies, and compromised our moral authority.

Leila Fadel on the Surge

Leila Fadel is the Baghdad Bureau Chief for McClatchy. She's a young woman who has been quietly and intelligently reporting from Iraq for a couple of years now. Read her blog for some of the best writing on Iraq.

What is this?

It's a 25-pound potato, grown in Lebanon.

Playing to the Media

Morgan Stanley has decided to withhold part of this year's bonus for three years. If the employee screws up during the three years he will lose part of the bonus.

While this sounds nice, it does raise questions, the most basic of which is why is anybody getting a bonus for 2008. Further, it does not mention how much is being withheld. 5%, 90%? Couple this with Thain's asking for a $10,000,000 bonus, AIG having parties on our dollar and who knows what other embarrassments will arise and you have a financial industry that does not yet seem to have learned that their world is changing.

Massachusetts Students Score Well in TIMSS

Every four years a test called Trends in International Mathematics and Science Study (TIMSS) is given to students around the world. This year it was given to 425,000 students. The test is an attempt to measure the performance of fourth and eighth grade students in math and science. Massachusetts Grade 4 science students were really in the game and finished second to Singapore.

While the grades of U.S. students improved since the 2003 tests, we still have a way to go to register better performances than Asian students.

System Failure

In Vanity Fair, of all places, Joe Stiglitz diagnoses the system failure that he feels led to the current economic crisis.

• The system started to go haywire more than twenty years ago when Reagan replaced Volcker as head of the Fed with Greenspan; this ushered in the decline of regulation.
• Deregulation was codified in 1999 with the repeal of Glass-Steagall, which had built a wall between commercial and investment banking.
• Next was an SEC decision in 2004 to bump the debt-to-capital ratio of investment banks from 12:1 to 30:1.
• Then we had a failure of the accounting profession and credit rating firms to do their jobs properly.
• And the October bailout added to the problem because it did not address the fundamental causes.

While there have been several decision points that went awry, Stiglitz feels that the basic problem was an inordinate belief in the power of the market to self-adjust and a disbelief that government intervention is ever necessary.

It's Up, It's Down, It's Up, It's Down

Talk about yo-yos! I can't remember a time when the stock market has been as volatile as these past few months. The last time may have been during the depression.

Yes, the idea of the stock market acting rationally had been debunked even before 2008. But the current experience is beyond one's weirdest idea of rationality. It is symbolic of the nuttiness into which we have descended. We seem to be in a period where everyone is thinking short term and only short term. Today we see the recession ending, tomorrow we're convinced it will go on forever.

A lot of our problems are due to a loss of some basic values that have served us well - responsibility, loyalty, compassion, perseverance, hard work, recognizing a problem - and to the growing belief that democracy means we are all equal and are entitled to be top dog, for each of us is so far above average as to be off the charts.

What is being modified

The Wall Street Journal reports on a government study of mortgages that were modified. The study seems to show that modification did not help many of the borrowers. Within 6 months, more than half (53%) of them were 60 days late in making payments. But no one has said what modifications were made and what the modifications were for the 47% who were not 60 days behind.

Sound and fury signifying nothing.

The Reformer Needs Reformation

There has to be something about the governor's mansion in Springfield, Il. The last governor, George Ryan, a Republican, is now in prison on racketeering and fraud charges. Today, the current governor, Rod Blagojevich, a Democrat who campaigned as a reformer, was arrested on corruption charges. It seems, according to the indictment, Mr. Blagojevich was peddling the appointment to Obama's Senate seat, in addition to wanting money in exchange for state contracts and jobs with the state. He is also accused of withholding state help to the Chicago Tribune until they fired an editor who had the temerity to criticize the governor in print.

This is a somewhat different picture of the governor supporting the working men against the big, bad bank.

An Interesting Question

Mark Thoma asks if we had good enough social insurance so that people could maintain their health and welfare despite the failure of the Big 3 would we still need a bailout. I ask what would be more costly in the long run.

A Reasonable Guy?

Gao Xiqing certainly sounds so. He's the president of China Investment Corporation. In the current The Atlantic James Fallows summarizes an interview he had with Gao in October.

I suppose why I think Gao is reasonable is because I agree with most of what he says:

People, especially Americans, started believing that they can live on other people’s money. And more and more so. First other people’s money in your own country. And then the savings rate comes down, and you start living on other people’s money from outside. At first it was the Japanese. Now the Chinese and the Middle Easterners.

We—the Chinese, the Middle Easterners, the Japanese—we can see this too. Okay, we’d love to support you guys—if it’s sustainable. But if it’s not, why should we be doing this? After we are gone, you cannot just go to the moon to get more money. So, forget it. Let’s change the way of living. [By which he meant: less debt, lower rewards for financial wizardry, more attention to the “real economy,” etc.]

___________________________________________________________________

I have to say it: you have to do something about pay in the financial system. People in this field have way too much money. And this is not right.

___________________________________________________________________

But I think at the end of the day, the American government needs to talk with people and say: “Why don’t we get together and think about this? If China has $2 trillion, Japan has almost $2 trillion, and Russia has some, and all the others, then—let’s throw away the ideological differences and think about what’s good for everyone.” We can get all the relevant people together and think up what people are calling a second Bretton Woods system, like the first Bretton Woods convention did.

___________________________________________________________________

Americans are not sensitive in that regard. I mean, as a whole. The simple truth today is that your economy is built on the global economy. And it’s built on the support, the gratuitous support, of a lot of countries. So why don’t you come over and … I won’t say kowtow [with a laugh], but at least, be nice to the countries that lend you money.

Talk to the Chinese! Talk to the Middle Easterners! And pull your troops back! Take the troops back, demobilize many of the troops, so that you can save some money rather than spending $2 billion every day on them. And then tell your people that you need to save, and come out with a long-term, sustainable financial policy.

___________________________________________________________________

The current conditions can’t go on. It is time for the new government, under Obama or even McCain, to really tell people: “Look, this is wartime, this is about the survival of our nation. It’s not about our supremacy in the world. Let’s not even talk about that any more. Let’s get down to the very basics of our livelihood.”

I have great admiration of American people. Creative, hard-working, trusting, and freedom-loving. But you have to have someone to tell you the truth. And then, start realizing it. And if you do it, just like what you did in the Second World War, then you’ll be great again!

If that happens, then of course—American power would still be there for at least as long as I am living. But many people are betting on the other side.

A Gun Is A Medical Device

At least in the eyes of Matthew Carmel, president of Constitution Arms, which has a patent on what he calls a medical device, the Palm Pistol. That's right - a gun in Mr. Carmel's view is a tool to improve people's health. He hopes to get Medicare to pay for the pistol so that we old farts with weak fingers can now shoot someone.

In Mr. Carmel's view,"It's something that they need to assist them in daily living. " He adds, "The justification for this would be no more or less for a [walking aid] or wheelchair, or any number of things that are medical devices."

He claims the FDA has approved it, but methinks Mr. Carmel is more interested in getting stupid investors than in reading the boilerplate he got from the FDA.

The Mahdi Army

They have been very quiet. I can't remember the last time I saw something about them in the media. But Nir Rosen says they are very much alive. Take a tour with him.

Another Reason Why Things Are Going Badly in Afghanistan

The lack of 'unity of command' is the reason for Col. Ian Hope. Hope contends that we have too many 'leaders' there. To me, a non-military man, he makes a lot of sense. In most organizations there has to be one person with ultimate authority. He closes with a quote from Eisenhower:

Alliances in the past have often done no more than to name the common foe, and “unity of command” has been a pious aspiration thinly disguising the national jealousies, ambitions and recriminations of high ranking officers, unwilling to subordinate themselves or their forces to a command of different nationality or different service. . . . I was determined, from the first, to do all in my power to make this a truly Allied Force, with real unity of command and centralization of administrative responsibility.

It passed a test for the first time

Well, we shot down a ballistic missile that was coming from Alaska. The Pentagon is all atwitter about it and maybe they should be. But how good a test was it? In an August post questions were raised as to the utility of these tests, as the missile's target and track are known. And we have yet to test for cruise missiles, which are more likely to be used.

Was it a good return for the $100,000,000 spent on the test?This will surely escalate the return of the arms race with Russia.

A Reporter's View of Iraq

From Corinne Reilly of McClatchy:

Has violence dropped dramatically across Iraq? Yes, by at least 75 percent since the height of the bloodshed in 2007, according to most estimates. Is the U.S. moving closer to a time when it can safely exit Iraq? Most agree that it is. But is Iraq a stable democracy? Or stable at all? No. Will it be someday? Maybe.

And within those battles, there are other struggles to consider. Roughly half of Iraqis who want to work can't find jobs. About as many don't have reliable access to safe drinking water. Millions of children don't attend school.

Millions of families who fled their neighborhoods because of violence still haven't gone home; much of Iraq remains segregated, with Sunni and Shiite Muslims still hesitant to mix. Poverty and electricity shortages are widespread, health care is out of reach for many, and corruption and incompetence are rampant in the government ministries that are supposed to be remedying all these problems.

One Iraqi lawmaker, Mahdi al Hafedh, explained it to me this way: "With many of the problems facing our people, we don't even know how bad they are because the government lacks the capacity to properly assess and measure them. So it's hard to imagine how we will begin to fix it all."

As much as anything, these struggles will determine Iraq's future. They complicate armed fights and aggravate the political instability, and all of that makes it hard for me to imagine a time in the near future when Iraqi families won't be called to bombing sites to cry.

Rising Faster Than Medical Costs

That's college costs. In the past 25 years medical costs have increased 251%, college costs have increased 439%. median family income has increased 140%. Were college costs that far out of whack in the early 1980s? I don't think so. On the other hand how many college presidents were making $500,000 a year? Not many. Now, however, over a third of public college presidents do. And we recently learned that the president of Suffolk, a local college, made $2,800,000 last year. Of course, most college football coaches are the highest paid employees.

Costs have not increased because colleges are giving more money to less wealthy students. If your family's income is $100,000 or more, you're likely to get $6,200 in grants and aid. If your family's income is less than $20,000, you get $4,700.

The world continues to change.

Civil War 2

So, after the Israeli Police removed settlers from an illegally occupied house in the West Bank, friends of the settlers went berserk. They burned the homes of Palestinians and set fire to their fields; they threw rocks at the police; they shot and wounded a few Palestinians and police.

More democracy in action.

Wasserman Again

The GM Plan

The GM plan makes the same assumption that many of us do: people want to buy green cars. Thus, if the company can produce green cars, they can sell tons of them. That may or may not be true but talking about their wonderful cars is a small part of the plan, yet business success is a function of costs and sales. GM can cut costs until the cows come home, but it's all in vain if they can't sell their cars and selling cars has been a declining skill of GM for decades.

I was pleasantly surprised that the plan calls for the creation of an Oversight Board run by the government, but the definition of benchmarks will, I suspect, not be an easy task. If earnings is one benchmark, GM has two mealy-mouthed definitions - EBIT (earnings before interest and taxes) and EBITDA (earnings before interest, taxes, depreciation and amortization).

To read the plan is to see that GM has drunk the Kool-Aid and is convinced that they have been working on making their cars more fuel-efficient for decades. This is the same company that has been one of the leaders in the fight against increasing CAFE standards. They have also been transforming their business for the years their market share has decreased from 50% to 20%.

The plan bases its argument against bankruptcy on a survey of potential buyers wherein 30% of those looking at GM cars said they would not buy because of a possible bankruptcy. Why wouldn't the other 70% buy might be a good question to ask.

Not only is GM looking for $18 billion from us today. They also intend to make GMAC a bank holding company so that that arm of the company can suckle at the Federal Reserve trough.

And Wagoner and company will make sacrifices if we give them the money. Wagoner will work for $1 for one year. What happens after that? He made $1,600,000 million last year. How much has he made overseeing the decline of what once was America's company?

The Big Three simply assume that they are the auto industry. Well, the non-Big Three sell 54% of the cars we buy and will still be here after GM and friends are gone. Again the question - what is wrong with the Big Three declaring bankruptcy? It will be messy, but who said life is always neat.

Where is the market?

Jane Hamsher at Firedog Lake makes an interesting point - The Big Three contend that their marketing problems will be solved with greener vehicles. Hamsher asks where are the sales of green vehicles to date. And, now that the price of oil has dropped by almost $100 a barrel, where will the sales of green vehicles be tomorrow? We went through the last oil crisis pledging to wean ourselves from oil. Did we do it once gas was available and the price was cheap? Have we really learned anything?

Civil War in Israel?

The settlers have decided the time has come to fight the government with more than words. If the government tries to forcibly remove a settler from the West Bank, settlers should not take this lying down. Pipe bombs are okay. Vandalizing the graves of Muslims is okay. Offering rewards for murdering liberals is okay. Forced occupation of buildings is okay.

Democracy in action.

Sicker and Sicker

The latest report of the American Public Health Association does not give high marks to the citizens of America and its health system. We have made no progress in the past few years; we're still fat (25% of the population), smoke too much (1 in 5 deaths is attributable to smoking) and are uninsured (46,000,000 of us). People in Japan have the longest life expectancy at 75; we rank 27th at 69. We're second to last in child health. The list goes on.

Not a Good Day for KBR

McClatchy reports on a protest by workers for Najlaa International Catering Services, a subcontractor to KBR. Raw Story reports on a suit filed by soldiers against KBR. The Army Times reports of another lawsuit, this one alleging exposure to unsafe food and water.

The protest was by about 1000 Asians who were hired by Najlaa. According to the company the work did not materialize. The workers claim that they were housed in sub-human conditions: the thousand men were housed in three warehouses, shared twelve toilets, were given 1.5 pints of water a day and had not been paid. One really sad aspect of the case is that some of the men borrowed up to $2,000 to give to an agent who promised them lucrative jobs in Iraq. KBR says they didn't know of the situation but will straighten it out.

The suit by soldiers harges KBR with knowingly exposing the soldiers to a carcinogenic chemical while they were working at a water treatment plant KBR was repairing in Iraq. KBR denies the claim.

The unsafe food and water suit alleges that they were the result of using an unprotected burn pit; a dog was able to remove a man's arm which had been dumped in the pit by KBR. The Army Times has received more than 100 letters making similar charges. KBR says we haven't seen the charges yet.

Here's several billion dollars...

we can take from spending on nuclear weapons and apply it to the efforts to save our economy. Joe Cirincione spells out the various programs that can be cut, consolidated or revamped. One area highlighted is our anti-missile defense which has had a great deal of difficulty passing tests to demonstrate that it actually works. Spending on this effort has gone from $4 billion a year in 2000 to $13 billion today. And, of course, Cirincione reminds us that our annual spending on military matters has gone from $305 billion in FY2001 to $716 billion planned for FY2009.

Cutting the military budget has not been made easier by the events at Mumbai or the recent report that the likelihood of our being hit by WMD is greater now than it has ever been.

GM = British Leyland?

This article certainly makes the case that the companies are/were very similar - market leaders with a heck of a lot of models, poor management, a belief that they were God's chosen people. Leyland went down the tubes after the British government ponied up many, many, many pounds.

Of the three of them - GM, Ford and Chrysler - GM seems to be most at sea. They have little idea of what they should be doing beyond keeping Wagoner in office. Ford is asking for a line of credit, rather than dollars today; true, this may be just a come-on. GM needs dollars in its coffers before Christmas. Chrysler is hiding behind its status as a private company.

I keep coming back to the question of why in a capitalist society we should save failing companies in industries where there are many successful companies. The Big Three have been unwilling or unaware of the need to revamp their operations for at least twenty years. Why should this behavior be rewarded?

It's up, It's down

You have to go back to the 1930s to witness the kind of volatility we have seen in the past month or two. Will the economy tank as much now as it did then?

Fear and uncertainty seem to be the dominating forces in the economy; reason clearly has left the room.

We shortened the length of the interregnum after Hoover, and went from a March to a January presidential inauguration. Should we cut it back even more? Maybe to January 1? There is a great deal of confusion now as people are looking to Obama but Bush still has the power.

Gaza in pictures

This video from the McClatchy site should be watched by those who believe in sanctions.