Category Archives: Nation/World

Nation/World

Is the Fed too powerful?

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Is the Fed too powerful? I’m not smart enough to know the answer to that question. But it does seem to be concerning others, as this AP article reports:

Dusting off Depression-era emergency powers, the Federal Reserve is extending its reach over the economy as never before, pushing the limits of its authority, if not exceeding them.

Now the nation’s central bank is even becoming a source of loans for companies other than banks.

Radical steps by the Fed under chairman Ben Bernanke — all in the name of seeking to halt the panic sweeping financial markets — are turning it into a financial colossus. They’re also putting the government deeper in debt and taxpayers further at risk if the various moves fail.

And it’s being done with little direct interaction with Capitol Hill. The Fed does not depend on Congress for its budget, including its payroll, and is as much a creature of the nation’s banking system as part of the federal government.

[…] The Bernanke Fed has its critics. Former Chairman Paul Volcker has said its been acting “at the limits” of it’s legal authority. Rep. Ron Paul, R-Texas, made abolishing it a central part of his GOP presidential candidacy. And Sen. Jim Bunning, R-Ky., an opponent of Fed and Treasury bailouts, said recently, “The greed on Wall Street is only exceeded by the stupidity of the Treasury secretary and the chairman of the Federal Reserve.”

And the Populist Party website says the Fed isn’t even constitutional:

[The Fed] is illegal according to Article 1, Section 8 of the Constitution which happens to be the inviolable law of the land. The article states that Congress shall have the power to coin (create) money and regulate the value thereof. In 1935, the US Supreme Court ruled the Congress cannot constitutionally delegate its power to another group or body. The Congress thus acted in violation of the Constitution it’s sworn to uphold and in so doing created the Federal Reserve System that…is a private for-profit corporation operating at the expense of the public welfare.

Maybe that sounds too much like a conspiracy theory. But in light of the $700 billion bailout rescue package that was recently approved by Congress, and the additional steps being taken by the Fed as the Dow continues to plummet, it does make one wonder. Any financial wizards or constitutional/history scholars out there have some insight into this issue?

Nation/World

House begins debate on Senate bailout package

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For those of you in the 18th Congressional District, here’s the telephone number for Ray LaHood: (202) 225-6201. (If you live in a different district, you can find your representative’s phone number on the Clerk of the House of Representatives’ page.)

I would encourage you to do what I’ve done: call and urge Rep. LaHood to vote against the Senate’s bailout package. I know LaHood voted for the first one, and he believes a bailout package is needed. But this bill is even worse than the last one, including all kinds of indefensible pork that squanders more taxpayer money.

There are $6 million in tax breaks for the manufacturers of wooden arrows.

Another $33 million in tax relief for corporations operating in American Samoa territory.

And don’t forget the $192 million break for Puerto Rican and Virgin Islands rum producers.

U.S. senators on Wednesday tacked these incentives and nearly $150 billion in other unrelated tax breaks on to the $700 billion emergency rescue bill for the nation’s troubled financial institutions.

Besides the added pork, many economists have been saying that this bill simply won’t work to solve our credit crisis. You don’t hear these voices, unfortunately, because the media by and large hasn’t covered them, as this article from the Chicago Tribune points out:

If you’ve spent much time listening to cable news lately, you would think there is universal agreement among economists that an immediate, enormous government intervention in the markets is the only way to stave off a recession, and perhaps even a depression. This is simply false. Many economists reject the notion that something must be done immediately and have called for more careful consideration of a wider range of options. Some even reject the premise that any bailout action will make much of a difference.

This bill needs to be voted down and a serious deliberation needs to take place. Congress should stop this rush to do “something,” and focus on doing what is best.

Nation/World

Senate passes bailout bill 74-25

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Well, everyone in Washington was just deflated after the “Emergency Economic Stabilization” bill failed in the U. S. House. But fortunately, we have the Senate to come up with the most obvious solution to the impasse: more spending!

The new bill — much bigger and more costly than the original for its addition of tax breaks — has been crafted in a way to overcome objections in a resistant House.

What’s new, since a sharply divided House voted 228-205 to scuttle the first plan on Monday:

— A dramatically higher cap on insurance that the federal government provides for individual bank depositors – lifting Federal Deposit Insurance Corp. protection to $250,000 per account.

— Also: Tax breaks for individuals and businesses alike, including relief for more than 20 million middle-income taxpayers subjected to an Alternative Minimum Tax that boosts their tax bills.

How much in tax breaks, you ask? A pittance: $150 billion. Because that’s what Americans were really concerned about — that the government wasn’t spending enough.

The more I read, the more I’m swayed that this bailout plan isn’t such a great idea.

Nation/World

Can 200 economists be wrong?

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Here’s something that’s been little covered in the media: 200 economists signed a petition against the $700 billion bailout and sent it to the Congress on Sept. 24, 2008. It now merits a disclaimer: “This letter was sent to Congress on Wed Sept 24 2008 regarding the Treasury plan as outlined on that date. It does not reflect all signatories views on subesquent [sic] plans or modifications of the bill.” Nevertheless, it’s worth noting, especially now that the media is actively trying to convince the general public that Secretary Paulson’s plan is absolutely necessary:

To the Speaker of the House of Representatives and the President pro tempore of the Senate:

As economists, we want to express to Congress our great concern for the plan proposed by Treasury Secretary Paulson to deal with the financial crisis. We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function. We see three fatal pitfalls in the currently proposed plan:

1) Its fairness. The plan is a subsidy to investors at taxpayers’ expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.

2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.

3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America’s dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.

For these reasons we ask Congress not to rush, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come.

(Click the “Read the rest of this entry” link for signatures)
Continue reading Can 200 economists be wrong? →

Nation/World

Beijing, not Beizhing

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The hosts on a couple different NPR shows have been making fun of NBC commentators for mispronouncing China’s capital city and the host city of the 2008 Olympics, Beijing. You see, on NBC, they’re constantly pronouncing the “j” in Beijing as a “zh” sound, as in “Jacque” or “Zhivago.” It’s actually supposed to be pronounced like a “j” (go figure), as in “jump” or “Jo Jo Dancer.” Anyway, it’s funny to hear one network criticize another. You can hear it at the end of this story from NPR’s “All Things Considered” program today.

Also, if you want to see a funny little video on how to pronounce Beijing, look no further:

Amtrak, Dick Durbin, Nation/World

Durbin introduces Amtrak fleet improvement bill

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U. S. Senator Dick Durbin (D-IL) introduced the “Train Cars Act” (S.3360) on Tuesday in the Senate. The State Journal-Register explains what the bill proposes:

Durbin’s bill provides funding to encourage manufacturers currently supplying passenger rail cars overseas to open modern facilities here. And it provides a tax incentive for private domestic businesses to re-enter the passenger rail equipment business and rebuild facilities and train cars in the United States.

The legislation also would create a trust fund to replace the nation’s train cars by transferring one-quarter cent of the per-gallon motor fuel tax into the trust fund for three years. That would generate about $400 million a year, Durbin said.

It’s good to see more funding being proposed for passenger rail service. Whereas the federal government provides tens of billions of dollars for highways and airports, Amtrak has been treated as the redheaded stepchild, getting a mere $1 billion each year, even as they stave off annual efforts from the White House to cut off funding altogether. With gas prices on the rise, rail ridership is rising dramatically, and more funding is being proposed both in Congress and at the state level.

Amtrak and IDOT are currently studying the feasibility of Peoria-Chicago passenger service.

Nation/World

Baby steps to a police state

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I suppose I shouldn’t be surprised, considering we already have warrantless wiretaps, but I could hardly believe my ears this morning as I listened to the news-reader on NPR talk about this (from the Associated Press):

The Justice Department is considering letting the FBI investigate Americans without any evidence of wrongdoing, relying instead on a terrorist profile that could single out Muslims, Arabs or other racial and ethnic groups.

Law enforcement officials say the proposed policy would help them do exactly what Congress demanded after the Sept. 11, 2001, attacks: root out terrorists before they strike. […]

Currently, FBI agents need specific reasons — like evidence or allegations that a law probably has been violated — to investigate U.S. citizens and legal residents. The new policy, law enforcement officials told The Associated Press, would let agents open preliminary terrorism investigations after mining public records and intelligence to build a profile of traits that, taken together, were deemed suspicious.

And our civil liberties continue to erode. Now they want to start investigating U.S. citizens based on their ethnicity, religion, and travel patterns. Fantastic. Now I suppose this will also open the door to investigating all pro-life Christians who take part in peaceful anti-abortion demonstrations because their “profile” shows they could be a clinic bomber. Or if Arab Americans decide to visit their families in the Middle East, they’re possible terrorists, naturally.

I hope the irony isn’t lost on anyone that this news comes out the day before we celebrate “Independence Day.” I wonder if people working with fireworks can be investigated; that would be a good front for a terrorist, right? Why, there’s a terrorist around every corner if you look hard enough.