Plenty of Beef but Short on Common Sense!

Just heard Obama's speech and it was a fine effort to rally the nation - more hope and less doom and gloom. My problem is that it does not add up from a financial standpoint. It is full of spending and it talked about waste but to accomplish this means goring a lot of his party's oxen.

Obama must now begin wearing a matador's cape because 2% of the wealthy will not pay for all of Obama's spending.

The public may currently be turned off by and disappointed with the private sector but believing greater government control and intrusion, outlandish spending and Rube Goldberg bureaucratic policies and programs is the solution are going to be even more disappointed down the road.

Obama has set forth an aggressive agenda and to bring it about will cost trillions more, so let the fun begin.

Personally I would prefer the Republican response not have been immediate because no matter what the Gov. of La. says it can only sound like raining on Obama's parade. In fact he flopped.

Republicans have been boxed in by Obama's spending plans, star speech making quality and exciting agenda . They can either go along , which some will, or stand aside and let Obama and the Demwits fight it out amongst themselves, which they surely will, because Obama's agenda and that of Reid and Pelosi are not totally in synch.

Should things not eventually pan out the public's mood could become surly because of all the spending and waste that will certainly occur.

Are Wall Street Wolves taking advantage of the Adminstration's confused policies and playing off the fear and concern this has produced for investors or are investors justified in their concerns? Suspect both. Today Bernanke filled the vacuum Obama's leadership, to date, or lack of it has created but how long will that last?

This from a long time friend, fellow memo reader who owns a bail bonding business. Tongue in cheek but probably makes more sense than what is happening. (See 1 below.)

Another tongue in cheek piece that explains everything and this from a long standing friend, former president of a biotech company and also a memo reader. I e-mailed him back that I drink to the explanation (See 2 below.)

A third comment about how the economy was lost from a very dear friend and one of my tennis nemesis. (See 3 below.)

David Sanger asks whether Obama is repackaging the old and selling it as new - if so not much change. (See 4 below.)

Plenty of beef but where's the common sense. They don't teach common sense at Harvard. You must acquire that along the way or be born with it. (See 5 below.)

Heather Higgins suggests our Messiah has no clothes but most did not care to look. (See 6 below.)

Strassel discusses the Republican philosophical divide as represented by two governors. I vote for Sanford. (See 7 below.)

Newt scored Obama's speech tonight and says start adding atop $3.6 trillion. More spending to come. (See 8 below.)


Dick

1)IF OBAMA REALLY WANTED TO STIMULI THIS COUNTRY, HERE'S WHAT HE NEED'S TO DO:

IF I GAVE YOU ONE DOLLAR PER SECOND, HOW LONG WOULD IT TAKE BEFORE YOU BECAME A "MILLIONAIRE".. ANSWER 12 DAY'S... NOW, IF YOU GAVE ALL THE PEOPLE THAT ACTUALLY FILE INCOME TAXES IN THIS GREAT COUNTRY THEIR PART OF $757 BILLION DOLLARS, THAT WOULD EQUATE TO AROUND 291 THOUSAND DOLLARS EACH. NOW IF YOU GOT A CHECK FOR 291 K , YOU WOULD PROBABLY, PAY YOUR MORTGAGE OFF OR DOWN, THEREIN HELPING THE HOUSING INDUSTRY, BUY A NEW CAR, WHICH WOULD HELP THE AUTO BUSINESS AND THE BANKING INDUSTRY "BOTH", TAXES WOULD HAVE TO BE PAID ON THIS INCOME ALSO, HELPING THE GOVT, OPEN YOUR OWN BUSINESS WHICH WOULD CREATE JOBS AND LAST OF ALL GO OUT AND FIND SOME GOOD LOOKING TROPHY AND BLOW IT ON HER AND EVERYBODY WOULD BE HAPPY, NOT TO MENTION FAMILIES WOULD HAVE MONEY TO GET THEIR LOVED ONE'S OUT OF JAIL, WHICH WOULD SURE AS HELL HELP ME !!!

2)HI EVERYONE: Thought you you might like the financial crisis explained in simple
terms.............................

Heidi is the proprietor of a bar in Berlin. In order to increase sales, she decides to allow her loyal customers - most of whom are unemployed alcoholics - to drink now but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans.)

Word gets around and as a result increasing numbers of customers flood into Heidi's bar.

Taking advantage of her customers' freedom from immediate payment constraints, Heidi increases her prices for wine and beer, the most-consumed beverages. Her sales volume increases massively.

A young and dynamic customer service consultant at the local bank recognizes these customer debts as valuable future assets and increases Heidi's borrowing limit.

He sees no reason for undue concern since he has the debts of alcoholics as collateral.

At the bank's corporate headquarters, expert bankers transform these customer assets into DRINKBONDS, ALKBONDS and PUKEBONDS. These securities are then traded on markets worldwide. No one really understands what these abbreviations mean and how the securities are guaranteed. Nevertheless, as their prices continuously climb, the
securities become top-selling items.

One day, although the prices are still climbing, a risk manager (subsequently of course fired due to his negativity) of the bank decides that slowly the time has come to demand payment of the debts incurred by the drinkers at Heidi's bar.

However they cannot pay back the debts.

Heidi cannot fulfill her loan obligations and claims bankruptcy.

DRINKBOND and ALKBOND drop in price by 95%. PUKEBOND performs better, stabilizing in price after dropping by 80%.

The suppliers of Heidi's bar, having granted her generous payment due dates and having invested in the securities are faced with a new situation. Her wine supplier claims bankruptcy, her beer supplier is taken over by a competitor.

The bank is saved by the Government following dramatic round-the-clock consultations by leaders from the governing political parties.

The funds required for this purpose are obtained by a tax levied on the non-drinkers.

Finally an explanation we can all understand...

3) Doomed by the Myths of Free Trade:How the Economy was Lost
By PAUL CRAIG ROBERTS

The American economy has gone away. It is not coming back until free trade myths are buried six feet under.America’s 20th century economic success was based on two things. Free trade was not one of them. America’s economic success was based on protectionism, which was ensured by the union victory in the Civil War, and on British indebtedness, which destroyed the British pound as world reserve currency. Following World War II, the US dollar took the role as reserve currency, a privilege that allows the US to pay its international bills in its own currency.World War II and socialism together ensured that the US economy dominated the world at the mid 20th century. The economies of the rest of the world had been destroyed by war or were stifled by socialism.The ascendant position of the US economy caused the US government to be relaxed about giving away American industries, such as textiles, as bribes to other countries for cooperating with America’s cold war and foreign policies. For example, Turkey’s US textile quotas were increased in exchange for over-flight rights in the Gulf War, making lost US textile jobs an off-budget war expense.In contrast, countries such as Japan and Germany used industrial policy to plot their comebacks. By the late 1970s, Japanese auto makers had the once dominant American auto industry on the ropes. The first economic act of the “free market” Reagan administration in 1981 was to put quotas on the import of Japanese cars in order to protect Detroit and the United Auto Workers.Eamonn Fingleton, Pat Choate, and others have described how negligence in Washington DC aided and abetted the erosion of America’s economic position. What we didn’t give away, the United States let be taken away while preaching a “free trade” doctrine at which the rest of the world scoffed.Fortunately, the U.S.’s adversaries at the time, the Soviet Union and China, had unworkable economic systems that posed no threat to America’s diminishing economic prowess.This furlough from reality ended when Soviet, Chinese, and Indian socialism surrendered around 1990, to be followed shortly thereafter by the rise of the high speed Internet. Suddenly, American and other first world corporations discovered that a massive supply of foreign labor was available at practically free wages.To get Wall Street analysts and shareholder advocacy groups off their backs, and to boost shareholder returns and management bonuses, American corporations began moving their production for American markets offshore. Products that were made in Peoria are now made in China.As offshoring spread, American cities and states lost tax base, and families and communities lost jobs. The replacement jobs, such as selling the offshored products at Wal-Mart, brought home less pay.“Free market economists” covered up the damage done to the US economy by preaching a New Economy based on services and innovation. But it wasn’t long before corporations discovered that the high speed Internet let them offshore a wide range of professional service jobs. In America, the hardest hit have been software engineers and information technology (IT) workers.The American corporations quickly learned that by declaring “shortages” of skilled Americans, they could get from Congress H-1b work visas for lower paid foreigners with whom to replace their American work force. Many US corporations are known for forcing their US employees to train their foreign replacements in exchange for severance pay.Chasing after shareholder return and “performance bonuses,” US corporations deserted their American workforce. The consequences can be seen everywhere. The loss of tax base has threatened the municipal bonds of cities and states and reduced the wealth of individuals who purchased the bonds. The lost jobs with good pay resulted in the expansion of consumer debt in order to maintain consumption. As the offshored goods and services are brought back to America to sell, the US trade deficit has exploded to unimaginable heights, calling into question the US dollar as reserve currency and America’s ability to finance its trade deficit.As the American economy eroded away bit by bit, “free market” ideologues produced endless reassurances that America had pulled a fast one on China, sending China dirty and grimy manufacturing jobs. Free of these “old economy” jobs, Americans were lulled with promises of riches. In place of dirty fingernails, American efforts would flow into innovation and entrepreneurship. In the meantime, the “service economy” of software and communications would provide a leg up for the work force.Education was the answer to all challenges. This appeased the academics, and they produced no studies that would contradict the propaganda and, thus, curtail the flow of federal government and corporate grants.The “free market” economists, who provided the propaganda and disinformation to hide the act of destroying the US economy, were well paid. And as Business Week noted, “outsourcing’s inner circle has deep roots in GE (General Electric) and McKinsey,” a consulting firm. Indeed, one of McKinsey’s main apologists for offshoring of US jobs, Diana Farrell, is now a member of Obama’s White House National Economic Council.The pressure of jobs offshoring, together with vast imports, has destroyed the economic prospects for all Americans, except the CEOs who receive “performance” bonuses for moving American jobs offshore or giving them to H-1b work visa holders. Lowly paid offshored employees, together with H-1b visas, have curtailed employment for older and more experienced American workers. Older workers traditionally receive higher pay. However, when the determining factor is minimizing labor costs for the sake of shareholder returns and management bonuses, older workers are unaffordable. Doing a good job, providing a good service, is no longer the corporation’s function. Instead, the goal is to minimize labor costs at all cost.Thus, “free trade” has also destroyed the employment prospects of older workers. Forced out of their careers, they seek employment as shelf stockers for Wal-Mart.I have read endless tributes to Wal-Mart from “libertarian economists,” who sing Wal-Mart’s praises for bringing low price goods, 70 per cent of which are made in China, to the American consumer. What these “economists” do not factor into their analysis is the diminution of American family incomes and government tax base from the loss of the goods producing jobs to China. Ladders of upward mobility are being dismantled by offshoring, while California issues IOUs to pay its bills. The shift of production offshore reduces US GDP. When the goods and services are brought back to America to be sold, they increase the trade deficit. As the trade deficit is financed by foreigners acquiring ownership of US assets, this means that profits, dividends, capital gains, interest, rents, and tolls leave American pockets for foreign ones.The demise of America’s productive economy left the US economy dependent on finance, in which the US remained dominant because the dollar is the reserve currency. With the departure of factories, finance went in new directions. Mortgages, which were once held in the portfolios of the issuer, were securitized. Individual mortgage debts were combined into a “security.” The next step was to strip out the interest payments to the mortgages and sell them as derivatives, thus creating a third debt instrument based on the original mortgages.In pursuit of ever more profits, financial institutions began betting on the success and failure of various debt instruments and by implication on firms. They bought and sold collateral debt swaps. A buyer pays a premium to a seller for a swap to guarantee an asset’s value. If an asset “insured” by a swap falls in value, the seller of the swap is supposed to make the owner of the swap whole. The purchaser of a swap is not required to own the asset in order to contract for a guarantee of its value. Therefore, as many people could purchase as many swaps as they wished on the same asset. Thus, the total value of the swaps greatly exceeds the value of the assets.*The next step is for holders of the swaps to short the asset in order to drive down its value and collect the guarantee. As the issuers of swaps were not required to reserve against them, and as there is no limit to the number of swaps, the payouts could easily exceed the net worth of the issuer.This was the most shameful and most mindless form of speculation. Gamblers were betting hands that they could not cover. The US regulators fled their posts. The American financial institutions abandoned all integrity. As a consequence, American financial institutions and rating agencies are trusted nowhere on earth.The US government should never have used billions of taxpayers’ dollars to pay off swap bets as it did when it bailed out the insurance company AIG. This was a stunning waste of a vast sum of money. The federal government should declare all swap agreements to be fraudulent contracts, except for a single swap held by the owner of the asset. Simply wiping out these fraudulent contracts would remove the bulk of the vast overhang of “troubled” assets that threaten financial markets.The billions of taxpayers’ dollars spent buying up subprime derivatives were also wasted. The government did not need to spend one dime. All government needed to do was to suspend the mark-to-market rule. This simple act would have removed the solvency threat to financial institutions by allowing them to keep the derivatives at book value until financial institutions could ascertain their true values and write them down over time.Taxpayers, equity owners, and the credit standing of the US government are being ruined by financial shysters who are manipulating to their own advantage the government’s commitment to mark-to-market and to the “sanctity of contracts.” Multi-trillion dollar “bailouts” and bank nationalization are the result of the government’s inability to respond intelligently.Two more simple acts would have completed the rescue without costing the taxpayers one dollar: an announcement from the Federal Reserve that it will be lender of last resort to all depository institutions including money market funds, and an announcement reinstating the uptick rule.The uptick rule was suspended or repealed a couple of years ago in order to permit hedge funds and shyster speculators to rip-off American equity owners. The rule prevented short-selling any stock that did not move up in price during the previous day. In other words, speculators could not make money at others’ expense by ganging up on a stock and short-selling it day after day.As a former Treasury official, I am amazed that the US government, in the midst of the worst financial crises ever, is content for short-selling to drive down the asset prices that the government is trying to support. No bailout or stimulus plan has any hope until the uptick rule is reinstated.The bald fact is that the combination of ignorance, negligence, and ideology that permitted the crisis to happen still prevails and is blocking any remedy. Either the people in power in Washington and the financial community are total dimwits or they are manipulating an opportunity to redistribute wealth from taxpayers, equity owners and pension funds to the financial sector.The Bush and Obama plans total 1.6 trillion dollars, every one of which will have to be borrowed, and no one knows from where. This huge sum will compromise the value of the US dollar, its role as reserve currency, the ability of the US government to service its debt, and the price level. These staggering costs are pointless and are to no avail, as not one step has been taken that would alleviate the crisis.If we add to my simple menu of remedies a ban, punishable by instant death, for short selling any national currency, the world can be rescued from the current crisis without years of suffering, violent upheavals and, perhaps, wars.According to its hopeful but economically ignorant proponents, globalism was supposed to balance risks across national economies and to offset downturns in one part of the world with upturns in other parts. A global portfolio was a protection against loss, claimed globalism’s purveyors. In fact, globalism has concentrated the risks, resulting in Wall Street’s greed endangering all the economies of the world. The greed of Wall Street and the negligence of the US government have wrecked the prospects of many nations. Street riots are already occurring in parts of the world. On Sunday February 22, the right-wing TV station, Fox “News,” presented a program that predicted riots and disarray in the United States by 2014.How long will Americans permit “their” government to rip them off for the sake of the financial interests that caused the problem? Obama’s cabinet and National Economic Council are filled with representatives of the interest groups that caused the problem. The Obama administration is not a government capable of preventing a catastrophe.If truth be known, the “banking problem” is the least of our worries. Our economy faces two much more serious problems. One is that offshoring and H-1b visas have stopped the growth of family incomes, except, of course, for the super rich. To keep the economy going, consumers have gone deeper into debt, maxing out their credit cards and refinancing their homes and spending the equity. Consumers are now so indebted that they cannot increase their spending by taking on more debt. Thus, whether or not the banks resume lending is beside the point.The other serious problem is the status of the US dollar as reserve currency. This status has allowed the US, now a country heavily dependent on imports just like a third world or lesser-developed country, to pay its international bills in its own currency. We are able to import $800 billion annually more than we produce, because the foreign countries from whom we import are willing to accept paper for their goods and services.If the dollar loses its reserve currency role, foreigners will not accept dollars in exchange for real things. This event would be immensely disruptive to an economy dependent on imports for its energy, its clothes, its shoes, its manufactured products, and its advanced technology products.If incompetence in Washington, the type of incompetence that produced the current economic crisis, destroys the dollar as reserve currency, the “unipower” will overnight become a third world country, unable to pay for its imports or to sustain its standard of living.How long can the US government protect the dollar’s value by leasing its gold to bullion dealers who sell it, thereby holding down the gold price? Given the incompetence in Washington and on Wall Street, our best hope is that the rest of the world is even less competent and even in deeper trouble. In this event, the US dollar might survive as the least valueless of the world’s fiat currencies.*(An excellent explanation of swaps can be found here.)

4) Obama Selling a New Deal, but Promising It Will Be Brief
By David Sanger

It was only 13 years ago that Bill Clinton declared before a joint session of Congress that “the era of big government is over.” President Obama’s challenge on Tuesday night is to declare that, out of ugly necessity, big government is back — and then to make a persuasive case, with a specificity he has avoided until now, that if done right, this era will not last for long.

His aides say this is no moment for the lofty idealism of the inaugural address, 35 long days and roughly a thousand Dow Jones points ago. His task is to be at once reassuring and realistic, or, as one of Mr. Obama’s economic advisers said over the weekend, “to convince the country we’ve finally pulled the ripcord on the parachute, even if we can’t tell you how long we fall or where we land.”

The hardest part will be convincing his countrymen that they cannot save themselves without first saving the banks that let greed blot out prudence, the carmakers who ignored competitive reality for a quarter-century, and the homeowners who somehow persuaded themselves that housing prices only move up.

Yet here is the paradox the president faces: The same New York Times/CBS News poll that found that Mr. Obama instills a remarkable sense of confidence — 76 percent of Americans say they think he will make the right economic decisions — also found that Americans dislike many of the choices he has made thus far.

Fifty-nine percent said that the bank bailout would help bankers far more than it would help the country. More than two-thirds had no stomach for bailing out G.M. and Chrysler, even if the alternative is liquidating the companies.

So here is a guide to what to look for in the speech to Congress, as the new president tries to emit the reassuring warble of an F.D.R. New Dealer while convincing the country he will soon fly like a deficit hawk.

The Banks: It Just Looks Like Nationalization

By the time Mr. Obama speaks, taxpayers may already own 40 percent of Citigroup. As Senator Charles Grassley, Republican of Iowa, asked yesterday in a letter to Treasury Secretary Timothy Geithner, wouldn’t that “give the government effective control of the bank, and therefore, be a de facto nationalization of the bank?”

Yes, of course it would. Fannie Mae, Freddie Mac and the insurer AIG all report to the Treasury these days. The “stress test” on major banks starts on Wednesday, and some of them could be wheeled into the operating room, where their shares will be diluted by new government holdings in common stock, as the Treasury all but said on Monday.

So in Mr. Obama’s speech, look for the code words that open the way to brief nationalization — he’ll steer clear of that term — on the way to cleaning up balance sheets and putting the banks back in private hands. Also look for any signs that Mr. Obama might decide to wipe out the current shareholders’ stakes — not that those holdings are worth very much anymore — and dump current bank managements.

His argument will probably come down to this: We’re not bailing out a bunch of clueless bankers, we’re making sure that the world’s biggest economy has a viable banking system.

A Detour to Detroit

The banks are positively popular compared with General Motors and Chrysler (which is mostly owned by a private-equity firm that says it cannot put any more of its own equity into the company). Perhaps that is because few Americans seem to believe that the companies have now seen the light, after ignoring decades of market signals.

On this subject, listen for the national security argument: That Americans cannot live without a vibrant industrial base that makes the country’s own wheels, in America. Mr. Obama’s case will be that the network of suppliers surrounding America’s auto makers cannot be destroyed. Don’t expect to hear much about the “transplants,” the subsidiaries of Japanese, German, Korean and other companies that, until the bottom fell out of the new-car market, were actually building new auto plants in the United States while the Big Three were closing old ones. Those carmakers think of themselves as American. Congress doesn’t.

The Bailout Next Door

It was a little mystifying why the White House chose, late last week, to get into a direct shouting match with Rick Santelli, a CNBC reporter and former derivatives trader whose on-air tirade against Mr. Obama’s plan to stop foreclosures went viral on the Web. “The government is promoting bad behavior,” Mr. Santelli said. The White House press secretary shot back that “Mr. Santelli doesn’t know what he’s talking about.”

Maybe he does, and maybe he doesn’t, but he tapped into genuine anger. Mr. Obama is likely to nod to the fact that many people who pay their mortgages are rightly upset that the government is rewarding some of those who overextended themselves. But he’ll argue that until the foreclosures stop, the downward cycle — ever more houses on the market, ever lower market values — cannot be stopped. On this point, the White House knows he has to sound more convincing than he did last week.

About Our Good Friends, the Chinese

Mr. Obama’s audience isn’t just domestic. His words will be translated into many languages, none more important than Mandarin.

As China’s leaders made clear to Secretary of State Hillary Rodham Clinton in Beijing over the weekend, the Chinese leadership needs to be persuaded that America remains a safe and liquid investment. She assured him that it was, of course, but what else could she say? The White House is acutely aware that its entire plan hinges on the willingness of other nations to keep lending to the United States, and that means he must make a convincing case that he’s seen the path out of deficits.

Americans and foreigners alike have heard that before; George W. Bush spent eight years churning out projections of how he would move the United States back toward balanced budgets. The financial responsibility summit on Monday at the White House — if you can call a four-hour meeting a “summit” — was supposed to signal that Mr. Obama has a plan of his own. But he has been a little vague about how he would square the goal with everything in the offing — or how he would address the toughest long-term problem, fixing Social Security and Medicare.

Look for any sign that he is now willing to kick those cans down the road, maybe by creating a commission to study the problem. (There have already been several, and on Monday the chairman of the House Appropriations Committee, Representative David Obey, Democrat of Wisconsin, declared that a commission would “thrill policy wonks and not get a damned thing accomplished.”)

But mostly, look for whether Mr. Obama puts together that elusive combination of inspiration and specificity that creates confidence. That’s what’s been lacking in the markets, and in the country. And until it is restored — until Americans have as much faith in the message as in the messenger — it’s going to be hard to break the cycle.

5) Common sense missing in Obama bailout
By GLENN GARVIN

There's a reason that English is the most widely spoken language on the planet: It's the most highly adaptable, capable of evolving to meet new needs in the blink of an eye. For example: Just last year, offering mortgages at a cheaper-than-market teaser interest rate with little or no money down was known as ''predatory lending.'' But conditions changed -- specifically, the party occupying the White House -- and now we call that style of lending ``national policy.''

The new definition was provided by Predator-in-Chief Barack Obama last week while making his daily announcement of a new bailout plan, this one for homeowners who took on mortgages they can't afford during banking's go-go days earlier this decade. Offering them cheaper new terms on their loans -- at taxpayer expense, of course -- will help us bolster ''those core values of common sense and responsibility, those are the values that have defined this nation,'' Obama said.

Only churlish Language Nazis would quibble with those bold new definitions of common sense and responsibility, much less note the extraordinary resemblance between Obama's mortgage-lending practices and those of the reptilian bankers he denounced so often during his presidential campaign:

• Down payments? We don't need no stinking down payments! Just like the bankers, who lured customers with deals that required no money upfront (at the height of the mortgage boom in 2005, 43 percent of first-time buyers didn't put down a single penny), Obama's plan doesn't call for the traditional 20 percent down. Instead, homeowners will be allowed to borrow more than their houses are actually worth. Just a week ago, being upside down -- owing more on your loan than the market value of your house -- was considered economically debilitating; now it makes you a prime customer.

• Hey kid, wanna smoke some mortgage crack? The first rock is free! Through a combination of government subsidies and arm-twisting of banks, the Obama plan will slash interest rates -- in some cases, probably to less than 3 percent -- until a borrower's payments are no more than 31 percent of his gross income . . . for the first five years. Then the interest rate jumps to market levels. A week ago, that was known as an ''exploding adjustable-rate mortgage,'' because so many of the people who took them got financially blown up.

To be perfectly fair, there's a big difference between Obama's ARMs and the ones the banks offered -- instead of the banks being on the hook when the hapless borrower goes delinquent on his payments, you will. Obama's plan calls for the government to spend $200 billon buying up these loans through its mortgage zombies, Fannie Mae and Freddie Mac. You may recall that Fannie and Freddie went broke in September because they held so many worthless mortgages and had to be propped up with $200 billion in taxpayer money. But what's another bailout among friends?

I hope Obama keeps his checkbook handy, because it's almost certain he'll be needing it again soon. We already know that trying to raise delinquent borrowers from the dead doesn't work, because banks have been trying like crazy to do it, with practically no success.

Contrary to what you see in old Frank Capra movies like It's a Wonderful Life, banks don't like to foreclose on homeowners. It's messy, expensive and time-consuming, and they almost always lose money when they re-sell the house. In 2007, when the mortgage crisis began, banks immediately began trying to keep their customers from defaulting, offering better interest rates, lower payments over a longer period, and sometimes even reducing the principals of loans.

Result: The government's own statistics show that, of the borrowers whose loans were adjusted in the first six months of 2008, half were delinquent again within six months. By eight months, the figure was up to 58 percent.

Obama, in announcing his mortgage program last week, argued that the defaults were brought on by rising unemployment. To some extent, that's certainly true, though it's hard to see how his new E-Z Payment Plan is going to help that problem -- surely the president isn't planning to give loans to people who are jobless?

No act of kindness

But the harsh truth is that most foreclosures are directed against people who should never have gotten loans in the first place. A study unveiled earlier this month by Federal Reserve economist Sean Chu and two University of Minnesota colleagues, Patrick Bajari and Minjung Park, shows that fully half the increase in defaults since 2006 is among borrowers with lousy credit scores who wouldn't have been eligible for mortgages before the credit binge began.

When people have too little salary and too much debt to pay for their homes, lending them more money is no act of kindness, either to them or the taxpayers who will foot the bill. It's more like waking up with a hangover and trying to cure it with a shot of Jack Daniel's -- you're just postponing the pain. And that's true no matter how many new pages you add to your dictionary.

6) Obama's Schadenfreude
By Heather Higgins

The seeming indifference of this Administration to the steady and precipitous decline of the market since President Obama's election should surprise no one. One has only to look at the President's past to gauge the prism through which he sees the present... and the future.

Many on Wall Street and Main Street voted for Obama hoping that he would be bipartisan, above politics, and, for many, rein in spending and deficits. They thought his left-wing associations and votes were purely the artifact of necessity and political ambition. When the credit and liquidity crunch hit, they thought Obama would be smart enough to fix it (which presumes, of course, that it can be "fixed").

But this was a triumph of hope over observation. We have elected a president who has no real business or investment experience. His only notable for-profit venture was selling his book; as a law professor, community organizer, and legislator, he operated in redistributionist worlds where wealth, garnered from contributions or taxes, is received and redistributed. In those spheres there's a seemingly bottomless well of funds, but unlike the for-profit world there can be a disjunction between your customers and your funding. At a non-profit, revenue comes from cajoling funders (who care about students or community residents, but who are not themselves the users of the non-profit's services); in government, revenue is derived by forcing taxpayers - many of whom are not that legislator's voters - to pay more.

In those worlds, wealth isn't created; it's seen as a fixed pie, and some slice is taken from those who have and given to those who haven't.

The mentality inherent in "social justice" activism is also revealing. Created by radical leftist and union organizer Saul Alinsky, community organizing tends to eschew the hard work of helping individual lives with such boring bourgeois approaches as better education, development of job skills, encouragement of marriage, and the engagement of fathers in their children's lives. Instead, social justice is about co-opting existing institutions and instilling collective grievance and victimhood. Practitioners of "social justice" encourage beliefs as that if the utility bills are too high it's because "the system" is deliberately oppressive, or if there's not more employment of members of the community it's because employers are racist.

That's the same mentality that doesn't care "what some derivatives trader" on the Chicago Mercantile Exchange worries about - which was the response of the White House to CNBC's Rick Santelli calling out the unfairness and moral hazard in the Administration's mortgage plain. To the social justice mindset, this is not viewed as fellow American's suffering, but with schadenfreude: traders are part of the system that is to be blamed, and if they suffer, it's due and owing.

There's another Alinsky principle that many of his adherents appreciate: issues and events are not so much important in and of themselves, but for the way they allow you to grow and strengthen your organization, broaden your membership, and leave you better positioned for the next fight.

That is exactly what the Democrat's recent, rushed, massive, partisan, unread, and barely stimulating "stimulus" bill accomplished: they gained more money for their organization, expanded their dependent constituencies, and used the "crisis" to push through proposals that with daylight would have slunk back under the rocks from whence they came.

Continuing that crisis will allow them to do more of the same. It may be that President Obama is talking down any recovery and loving that word "crisis" to buy himself lowered expectations and time. But it may also be that the more people are told that markets (rather than congressional interference in mandating the making of bad loans) are to blame for the mortgage mess, and experience continued uncertainty, the better positioned those with activist agendas will be. As Alinsky wrote in Rules for Radicals, for revolutionary change to take place:

"There's another reason for working inside the system... Any revolutionary change must be preceded by a passive, affirmative, non-challenging attitude toward change among the mass of our people. They must feel so frustrated, so defeated, so lost, so futureless in the prevailing system that they are willing to let go of the past and change the future. This acceptance is the reformation essential to any revolution."

We don't have a credit problem or a liquidity problem - those are only symptoms. We have a severe confidence problem, one which is being exacerbated into a crisis by every move Washington makes. Confidence will only be restored and the recession bottom when the market is allowed to value those bad debts which are unknowns, but the current powers that be on Wall Street and Washington, each have their own reasons for not going there. Those who thought they were electing a savior may soon realize that not only is President Obama no messiah for the American economy, but he wouldn't want to be a savior even if he could be. It's time to prepare for a long and ugly ride.

7)Two Governors and the GOP Future Republicans are faced with a dilemma.
By KIMBERLEY A. STRASSEL

South Carolina Gov. Mark Sanford is mooted as a GOP presidential contender. During the stimulus debate he told President Barack Obama, to his face, that the Palmetto State wanted no part of a spending blowout that would be harmful to the economy, to taxpayers, and to the dollar. He even traveled to Capitol Hill to stiffen Senate Republicans against the plan.


Florida Gov. Charlie Crist is mooted as a GOP presidential contender. During the stimulus debate, he made clear the Sunshine State couldn't wait to get its hands on the stimulus booty and joined Democratic governors to push the bill. He even campaigned with Mr. Obama in support of the $787 billion extravaganza.

As contrasts go, it doesn't get better than this. The Republican Party is locked in a debate over how it ever fell so low and what it needs to become in the future. Mr. Sanford and Mr. Crist vividly capture the divide. They also capture how the economic downturn is already forcing Republicans to choose a side.

The 48-year-old South Carolina governor is of the party wing that believes it failed in its core promise of fiscal responsibility, and in tackling the bread-and-butter issues (education, health care) that worry voters today. He's made his name partly by confronting his own party, which runs the legislature.

Nearly every year since he was elected in 2002, Mr. Sanford has proposed to cap spending at state population growth plus inflation. His state senate has ignored him. He's used his line-item veto more than 500 times, usually on pork projects. The legislature routinely overrides. Far from diminishing his standing, these lost battles have made him popular in the state.

His policies have made South Carolina more competitive. In 2005, the state passed its first-ever cut in marginal tax rates for businesses, and in 2007 broader tax relief. He's shepherded tort reform, and crafted incentives to encourage property insurers to remain in the state after a spate of hurricanes. South Carolina still has problems (in particular, education), though since 2003 it has had the 16th fastest job growth in the nation. Its unemployment rate -- the third highest in the country -- has been exacerbated by record growth in the state's labor force.

South Carolina is hurting, but Mr. Sanford argues a stimulus primarily designed to grow government will only cause sustained economic pain. He blames much of his state's budget deficit on the fact that his legislature grew spending 40% from 2004 to 2008, and he rejects a bailout that would facilitate those excesses. That thinking outraged the state's Democratic Congressman Jim Clyburn, who responded with a provision in the House version of the stimulus giving legislatures the right to circumvent fiscally responsible governors.

Mr. Crist comes from the GOP wing that believes it needs to reach new voters with "centrist" solutions. Praised by the media as a "new breed" of GOP governor (think Arnold Schwarzenegger), Mr. Crist has reached out to Democrats, and frets over such issues as global warming. His tenure has been defined by a certain economic populism, and big approval ratings (at least for now).

Elected in 2005, Mr. Crist inherited a growing state from predecessor Jeb Bush. Florida was the job-creation story of this decade, in part because of Bush policies that cut taxes and spending, unleashing private industry. One of Mr. Crist's first acts was nonetheless to demonize private insurers in the wake of Hurricane Katrina, which has caused many to flee and left the state as the primary home insurer. That's earned him love from Floridians who've enjoyed artificially low premiums, though at some point (say, when the next big one hits) the bill will come due.

To Mr. Crist's credit, he has not raised taxes, while the downturn (which hit Florida early) has forced some budget cuts. Then again, Mr. Crist's growing problem is that while government programs might sound good, they cost money and hurt business. The governor recently crafted a high-profile deal to lay out $1.3 billion to buy out a sugar company -- part of a popular commitment to restore the Everglades. It could cost thousands of jobs.

This governor, too, is having problems with his GOP legislature -- just a different sort. Last month he vetoed $365 million in spending cuts it had sent him, as it struggled to close a budget gap. Mr. Crist delayed his own budget request so he'd have time to factor in federal stimulus dollars, which will allow him to keep funding his favored programs and to avoid tax increases he had been considering.

Congressional Republicans appear to have registered an early vote in this divide, when all but three voted against the stimulus. California, where Mr. Schwarzenegger is feeling the consequences of spending and overregulation, has got many in the GOP wondering if Florida is embarking down a similar road.

Meanwhile, don't think the two governors haven't themselves noted the differences, and responded in form. Faced with GOP criticism for his support of the stimulus, Mr. Crist explained he was just trying to help "the most vulnerable in our society." Asked about Mr. Crist, Mr. Sanford was more direct. "I don't think that a lot of people down here would call him a fiscal conservative."

8) Scoring Obama's First Address to Congress
By Newt Gingrich
For those of us planning on keeping track of the big government, big spending proposals in President Obama's first address to Congress tonight, here's the key: Start with $3.6 trillion. Add from there.

$3.6 trillion is the total amount of new debt that Washington politicians have made taxpayers responsible for thanks to the Bush-Obama big spending, big government, big politician approach to fixing the economy.

Add up all the Bush and Obama spending and stimulus bills of the last year, plus the interest on the debt that they create and that's (conservatively) what you come up with.

$3.6 trillion. That's real money, even in Washington.


Sen. Daniel Inouye (D-Hawaii), the chairman of the powerful Senate Appropriations Committee, calls last week's mammoth $787 billion spending bill "stimulus No. 1."

In other words, there are more politician-engineered, Washington-centered power grabs yet to come.

Of course, President Obama has been talking a lot about "fiscal responsibility" lately.

But talk is just talk if it is not matched by deeds. Tonight we will find out if the mountain of debt our children and grandchildren are inheriting will get even higher. Every American who's concerned about the jobs and prosperity that we are in the process of robbing from future generations of Americans should tune in. And pay close attention.


Tonight, Watch For How Many Times the President Calls For
Even More Spending

The most important thing you can do tonight is to watch the speech and keep track of how many times President Obama calls for even more spending and even bigger government.

Remember, start with recently added $3.6 trillion debt as your baseline, and then add from there.

I will be keeping count, and I urge you to keep count also. We'll be live-blogging the speech at newt.org tonight starting at 8:45pm ET. You can join in by pre-registering at newt.org.

Next week I'll report on the list. For now, what follows are some other critical areas to watch in the speech tonight.


Where's the Accountability?

President Obama has promised a "level of transparency and accountability never before seen in Washington." He's even lectured the nation's governors and mayors on being "responsible" in spending the billions that the federal taxpayers are sending them.

But who really believes that politicians and bureaucrats in Washington, Sacramento and Detroit will spend all this money wisely and responsibly? And who's really keeping track? If you find examples of waste, fraud and abuse in spending the taxpayers' stimulus money, let us know at AmericanSolutions.com.


Does Obama Call For Healthcare Change That Will Save Lives and Money?
President Obama is right-we need real change in our healthcare system. But will he call for change that's government-centric or patient-centric? Will he have the courage to reform government programs that are wasting healthcare dollars?

For instance, outright fraud - criminal activity - accounts for as much as 10 percent of all healthcare spending, more than $200 billion every year. Medicare alone could account for as much as $40 billion a year. The Center for Health Transformation is actively working with government and industry officials so that this level of theft and crime can be detected, eliminated, and then prevented with the right kind of electronic resources.


Will Obama Increase the Cost of Energy?

President Obama apparently vetoed his Transportation Secretary's proposal to tax Americans on the miles they drive, but will he propose another way - directly or indirectly - to increase the price of energy?

The Obama Environmental Protection Agency (EPA) has signaled its intention to regulate carbon dioxide as a pollutant, a move which will dramatically increase the costs of driving your car, heating your home, and manufacturing products - anything, in other words, that produces carbon dioxide.

Americans profoundly disagree with this approach to protecting our environment. According to American Solutions, by a margin of 79 to 15 we believe that we can solve our environmental challenges faster and cheaper with innovation and new technology rather than more government regulation. Tonight, be on the watch for big government coercion disguised as environmentalism.


Does Obama Talk About Creating Jobs, Rewarding Work and Encouraging Savings and Investment?

President Obama has promised to devote much of his remarks this evening to the economy. But will it be more talk of more government, more power for politicians and more make-work for bureaucrats?

Or will he propose real measures to let Americans keep more of what they earn and encourage small businesses to be created and grow? Will President Obama continue to reward irresponsible economic activity, or will he propose ways to incentivize the hard work and individual responsibility that built America?