Geitner’s Flawed Assumptions: TARP & TALF Funds Enrich Investors At Taxpayer Expense – Report By Harvard Business School & Princeton University Center For Finance

The Pricing of Investment Grade Credit Risk 

Joshua D. Coval, Jakub W. Jurek, and Erik Stafford

March 30, 2009

Our analysis suggests that the dramatic recent widening of credit spreads is highly consistent with the decline in the equity market, the increase in its long-term volatility, and an improved investor appreciation of the risks embedded in structured products.

In contrast to the main argument in favor of using government funds to help purchase structured credit securities, we find little evidence that suggests these markets are experiencing fire sales.

[McAuley’s World: This finding directly challenges the veracity of Treasury Secretary Geitner’s claims and the necessity for additional Government intervention – later the report confirms that investors are being unjustly enriched at taxpayor expense]

On March 23, 2009, the Treasury announced that the TALF plan will commit up to $1 trillion to purchase legacy structured credit products. The government’s view is that a disappearance of liquidity has caused credit market prices to no longer reflect fundamentals: Many analysts appear to be looking at large recent price changes and concluding that we must be witnessing distressed pricing and widespread market failure. This conclusion is based on intuition. Our analysis suggests that the dramatic recent widening of credit spreads is highly consistent with the decline in the equity market, the increase in its volatility, and an improved investor appreciation of the risks embedded in these securities.

Our results suggest changes in fundamentals, as reflected in the equity market, account for a large portion of the repricing of credit that has occurred. In particular, the dramatic increase in the price of low cash flow states can account for most, if not all, of the rise in credit spreads for cash bonds. The spreads on credit default swaps, which currently trade at a large and negative basis relative to the underlying bonds, appear too low relative to risk-matched alternatives in the equity market.

We also find that the repricing of the investment grade structured credit securities suggests a correction of an ex ante failure of investors to appropriately charge for systematic risk.“An initial fundamental shock associated with the bursting of the housing bubble and deteriorating economic conditions generated losses for leveraged investors including banks … The resulting need to reduce risk triggered a wide-scale deleveraging in these markets and led to fire sales … [The Public-Private Investment Program] should facilitate price discovery and should help, over time, to reduce the excessive liquidity discounts embedded in current legacy asset prices.”

Policymakers are rapidly moving towards using TARP money to purchase toxic assets primarily tranches of collateralized debt obligations (CDOs) from banks, with the aim of supporting secondary markets and increasing bank lending. The key premise of current policies is that the prices for these assets have become artificially depressed by banks and other investors trying to unload their holdings in an illiquid market, such that they no longer reflect their true hold-to-maturity value. By purchasing or insuring a large quantity of bank assets, the government can restore liquidity to credit markets and solvency to the banking sector.

The analysis of this paper suggests that recent credit market prices are actually highly consistent with fundamentals. A structural framework confrms that bonds and credit derivatives should have experienced a significant repricing in 2008 as the economic outlook darkened and volatility increased.

The analysis also confirms that severe mispricing existed in the structured credit tranches prior to the crisis and that a large part of the dramatic rise in spreads has been the elimination of this mispricing.

If prices currently coming out of credit markets are actually correct, and not reflecting fire sales,this has several important implications. First, correct prices in the secondary market for these assets essentially imply that many major US banks are now legitimately insolvent. This insolvency can no longer be viewed as an artifact of bank assets being marked to artificially depressed prices coming out of an illiquid market. It means that bank assets are being fairly priced at valuations that sum to less than bank liabilities. In turn, any positive valuation assigned by shareholders to their equity claim arises solely from their anticipation of value transfer from firm debtholders or resource transfers from US taxpayers.

Similarly, using government resources to support these markets by insuring assets against furtherl osses amounts to providing insurance at premia that are significantly below what is fair for the risks that the US taxpayer will now bear.

Third, while the pricing of these securities is dramatically different from the way it was a year or two ago, this is because it was wrong then, not now. Efforts to restart this market are focused on resuming the flawed pricing of the past, when there was no charge for risk and investors relied on the accuracy of ratings. Investors have learned from their mistakes and now seem to be pricing these securities in accordance with their true risks.

Conclusion

Second, if current market prices are fair, any taxpayer dollars allocated to supporting these markets will simply transfer wealth to the current owners of these securities. To the extent that these assets reside in banks that are now insolvent, the owners are essentially the bondholders of these banks. The reason their bonds are currently trading far below par is that the assets backing up their claim are just not worth enough (nor expected to become worth enough when their bonds mature) to repay them. And so while they will be cheered by any government overpayment for the toxic assets backing up their claims, their happiness will be at the taxpayer’s expense since – to the extent that current prices are fair – they will be receiving more than fair value for their investments.

The main objective of this paper is to determine whether fire sales are required to explain prices currently observed in credit markets.

Other potential sources of repricing include a correction of  ex ante mispricing due to incorrect forecasts of expected losses (i.e. incorrect ratings – earnings expectation), a correction of ex ante mispricing arising from a failure of investors to charge for systematic risk, and rational change in prices reflective of a change in fundamentals.

A key distinction between the fire sale view and the other possibilities is that only the fire sale view requires that current prices are incorrect. (If the current prices are correct – massive Government spending will only serve to manipulate the market to reward investors at taxpayer expense – the market manipulation will create temporary gain – then the market will seek equilibrium again)

And given that fundamentals have changed dramatically during the past 2 years, and that ex ante mispricing was likely present in many of the structured credit markets, the conclusion that the large spread changes are evidence of fire sales is, at best, a premature one.

From this perspective, policies that attempt to prevent a widespread mark-down in the value of credit-sensitive assets are likely to only delay – and perhaps even worsen  – the day of reckoning.

Read the full paper (with formulas & footnotes) here: http://www.anderson.ucla.edu/Documents/areas/fac/finance/CJS_2009_v1.pdf

Coval: Harvard Business School; jcoval@hbs.edu. Jurek: Bendheim Center for Finance, Princeton University ;jjurek@princeton.edu. Sta¤ord: Harvard Business School; esta¤ord@hbs.edu. We thank Stephen Blythe, Ken Froot,

WHAT FORMULA IS GEITNER USING FOR HIS “STRESS TESTS”? WHY IS IT A SECRET FORMULA? WHY DOES THE FORMULA CHANGE FROM BANK TO BANK?

Ask your Congressperson if they know the answer. Ask them if they have read this report: http://www.usa.gov/Contact.shtml  

TARP & TALF Based On Faulty Assumptions: Report By Harvard Business School/Princeton University Center For Finance

The Pricing of Investment Grade Credit Risk 

 

Joshua D. Coval, Jakub W. Jurek, and Erik Stafford

March 30, 2009

Our analysis suggests that the dramatic recent widening of credits preads is highly consistent with the decline in the equity market, the increase in its long-term volatility, and an improved investor appreciation of the risks embedded in structured products.

In contrast to the main argument in favor of using government funds to help purchase structured credit securities, we find little evidence that suggests these markets are experiencing fire sales.

[McAuley’s World: This finding directly challenges the veracity of Treasury Secretary Geitner’s claims and the necessity for additional Government intervention – later the report confirms that investors are being unjustly enriched at taxpayer expense]

On March 23, 2009, the Treasury announced that the TALF plan will commit up to $1 trillion to purchase legacy structured credit products. The government’s view is that a disappearance of liquidity has caused credit market prices to no longer reflect fundamentals: Many analysts appear to be looking at large recent price changes and concluding that we must be witnessing distressed pricing and widespread market failure. This conclusion is based on intuition. Our analysis suggests that the dramatic recent widening of credit spreads is highly consistent with the decline in the equity market, the increase in its volatility, and an improved investor appreciation of the risks embedded in these securities.

Our results suggest changes in fundamentals, as reflected in the equity market, account for a large portion of the repricing of credit that has occurred. In particular, the dramatic increase in the price of low cash flow states can account for most, if not all, of the rise in credit spreads for cash bonds. The spreads on credit default swaps, which currently trade at a large and negative basis relative to the underlying bonds, appear too low relative to risk-matched alternatives in the equity market.

We also find that the repricing of the investment grade structured credit securities suggests a correction of an ex ante failure of investors to appropriately charge for systematic risk.“An initial fundamental shock associated with the bursting of the housing bubble and deteriorating economic conditions generated losses for leveraged investors including banks … The resulting need to reduce risk triggered a wide-scale deleveraging in these markets and led to fire sales … [The Public-Private Investment Program] should facilitate price discovery and should help, over time, to reduce the excessive liquidity discounts embedded in current legacy asset prices.”

Policymakers are rapidly moving towards using TARP money to purchase toxic assets primarily tranches of collateralized debt obligations (CDOs) from banks, with the aim of supporting secondary markets and increasing bank lending. The key premise of current policies is that the prices for these assets have become artificially depressed by banks and other investors trying to unload their holdings in an illiquid market, such that they no longer reflect their true hold-to-maturity value. By purchasing or insuring a large quantity of bank assets, the government can restore liquidity to credit markets and solvency to the banking sector.

The analysis of this paper suggests that recent credit market prices are actually highly consistent with fundamentals. A structural framework confrms that bonds and credit derivatives should have experienced a significant repricing in 2008 as the economic outlook darkened and volatility increased.

The analysis also confirms that severe mispricing existed in the structured credit tranches prior to the crisis and that a large part of the dramatic rise in spreads has been the elimination of this mispricing.

If prices currently coming out of credit markets are actually correct, and not reflecting fire sales,this has several important implications. First, correct prices in the secondary market for these assets essentially imply that many major US banks are now legitimately insolvent. This insolvency can no longer be viewed as an artifact of bank assets being marked to artificially depressed prices coming out of an illiquid market. It means that bank assets are being fairly priced at valuations that sum to less than bank liabilities. In turn, any positive valuation assigned by shareholders to their equity claim arises solely from their anticipation of value transfer from firm debtholders or resource transfers from US taxpayers.

Similarly, using government resources to support these markets by insuring assets against furtherl osses amounts to providing insurance at premia that are significantly below what is fair for the risks that the US taxpayer will now bear.

Third, while the pricing of these securities is dramatically different from the way it was a year or two ago, this is because it was wrong then, not now. Efforts to restart this market are focused on resuming the flawed pricing of the past, when there was no charge for risk and investors relied on the accuracy of ratings. Investors have learned from their mistakes and now seem to be pricing these securities in accordance with their true risks.

Conclusion

Second, if current market prices are fair, any taxpayer dollars allocated to supporting these markets will simply transfer wealth to the current owners of these securities. To the extent that these assets reside in banks that are now insolvent, the owners are essentially the bondholders of these banks. The reason their bonds are currently trading far below par is that the assets backing up their claim are just not worth enough (nor expected to become worth enough when their bonds mature) to repay them. And so while they will be cheered by any government overpayment for the toxic assets backing up their claims, their happiness will be at the taxpayer’s expense since – to the extent that current prices are fair – they will be receiving more than fair value for their investments.

The main objective of this paper is to determine whether fire sales are required to explain prices currently observed in credit markets.

Other potential sources of repricing include a correction of  ex ante mispricing due to incorrect forecasts of expected losses (i.e. incorrect ratings – earnings expectation), a correction of ex ante mispricing arising from a failure of investors to charge for systematic risk, and rational change in prices reflective of a change in fundamentals.

A key distinction between the fire sale view and the other possibilities is that only the fire sale view requires that current prices are incorrect. (If the current prices are correct – massive Government spending will only serve to manipulate the market to reward investors at taxpayer expense – the market manipulation will create temporary gain – then the market will seek equilibrium again)

And given that fundamentals have changed dramatically during the past 2 years, and that ex ante mispricing was likely present in many of the structured credit markets, the conclusion that the large spread changes are evidence of fire sales is, at best, a premature one.

From this perspective, policies that attempt to prevent a widespread mark-down in the value of credit-sensitive assets are likely to only delay – and perhaps even worsen  – the day of reckoning.

Read the full paper (with formulas & footnotes) here: http://www.anderson.ucla.edu/Documents/areas/fac/finance/CJS_2009_v1.pdf

Coval: Harvard Business School; jcoval@hbs.edu. Jurek: Bendheim Center for Finance, Princeton University ;jjurek@princeton.edu. Sta¤ord: Harvard Business School; esta¤ord@hbs.edu. We thank Stephen Blythe, Ken Froot,

WHAT FORMULA IS GEITNER USING FOR HIS “STRESS TESTS”? WHY IS IT A SECRET FORMULA? WHY DOES THE FORMULA CHANGE FROM BANK TO BANK?

Ask your Congressperson if they know the answer. Ask them if they have read this report: http://www.usa.gov/Contact.shtml  

Associated Press Reports: Economy Still In Decline

The economy is still in decline but results from a new economic survey show evidence the recession is abating as more companies see rising demand for their products, taper plans for job cuts and report profit margins on the uptick.

The latest quarterly survey by the National Association for Business Economics, set to be released Monday, indicates that the economy is at an inflection point, but not quite a turning point, said Sara Johnson, NABE’s lead analyst on the survey and an economist at IHS Global Insight.

Still, the NABE survey of companies and trade associations showed that pessimism about U.S. economic growth is rising, as 93 percent of respondents expected real GDP to decline this year. That was worse than 78 percent in the previous survey in January.

Employment prospects are still down, too, and wages are at their lowest point since the survey began 27 years ago.

The number of companies reporting lower employment totaled 39 percent, down from 44 percent. Goods-producing industries fared the worst, with 83 percent reporting job losses, and none reporting growth.

The outlook for jobs remains grim, with losses expected to continue in the next six months. Only 16 percent of companies predicted an increase in hiring at their firms, slightly worse than the 17 percent in January. But the number of companies predicting job losses improved to 33 percent from 39 percent.

http://news.yahoo.com/s/ap/20090420/ap_on_bi_ge/nabe_survey

The straight talk translation: The ship is still sinking,  just not as fast.

Homeland Security’s Secret Report on Right Wing Extremists – Full Report

Original Report Can Be Viewed Here: http://wnd.com/images/dhs-rightwing-extremism.pdf – Until it is removed

The WORD PRESS editing function stinks – I’ll try to correct this again later today …………

(U//FOUO) Rightwing Extremism: Current Economic and Political Climate Fueling Resurgence in Radicalization and Recruitment

UNCLASSIFIED//FOR OFFICIAL USE ONLY

 

(U)

 

This product contains Law Enforcement Sensitive (LES) information. No portion of the LES information

 

 

should be released to the media, the general public, or over non-secure Internet servers. Release of this information could adversely affect or jeopardize

investigative activities. (U)

 

This document is UNCLASSIFIED//FOR OFFICIAL USE ONLY (U//FOUO). It contains information that may be exempt from public release under the

 

 

Freedom of Information Act (5 U.S.C. 552). It is to be controlled, stored, handled, transmitted, distributed, and disposed of in accordance with DHS policy relating to

FOUO information and is not to be released to the public, the media, or other personnel who do not have a valid need-to-know without prior approval of an authorized

DHS official. State and local homeland security officials may share this document with authorized security personnel without further approval from DHS.

(U) All U.S. person information has been minimized. Should you require the minimized U.S. person information, please contact the DHS/I&A Production Branch at

IA.PM@hq.dhs.gov, IA.PM@dhs.sgov.gov, or IA.PM@dhs.ic.gov.

 

 

Economic and Political Climate Fueling

Resurgence in Radicalization and Recruitment

 

 

 

7 April 2009

 

 

 

Warning: LAW ENFORCEMENT INFORMATION NOTICE: (U//FOUO) Rightwing Extremism: Current

(U) Prepared by the Extremism and Radicalization Branch, Homeland Environment Threat Analysis

Division. Coordinated with the FBI.

 

 

 

(U) Scope

 

 

 

(U//FOUO) This product is one of a series of intelligence assessments published by the

Extremism and Radicalization Branch to facilitate a greater understanding of the

phenomenon of violent radicalization in the United States. The information is

provided to federal, state, local, and tribal counterterrorism and law enforcement

officials so they may effectively deter, prevent, preempt, or respond to terrorist attacks

against the United States. Federal efforts to influence domestic public opinion must be

conducted in an overt and transparent manner, clearly identifying United States

Government sponsorship.

 

UNCLASSIFIED//FOR OFFICIAL USE ONLY

 

 

 

 information that domestic rightwing

terrorists are currently planning acts of violence,

 

 

but rightwing extremists may be gaining new recruits by playing on their fears about

several emergent issues. The economic downturn and the election of the first

African American president present unique drivers for rightwing radicalization and

recruitment.

 

 

 

during 2009 have been largely rhetorical and have not indicated plans to carry

out violent acts. Nevertheless, the consequences of a prolonged economic

downturn—including real estate foreclosures, unemployment, and an inability

to obtain credit—could create a fertile recruiting environment for rightwing

extremists and even result in confrontations between such groups and

government authorities similar to those in the past.

 

 

 

African American president, and are focusing their efforts to recruit new

members, mobilize existing supporters, and broaden their scope and appeal

through propaganda, but they have not yet turned to attack planning.

(U//FOUO) The current economic and political climate has some similarities to the

1990s when rightwing extremism experienced a resurgence fueled largely by an

economic recession, criticism about the outsourcing of jobs, and the perceived threat to

U.S. power and sovereignty by other foreign powers.

 

 

 

number of domestic rightwing terrorist and extremist groups and an increase in

violent acts targeting government facilities, law enforcement officers, banks,

and infrastructure sectors.

 

 

 

government scrutiny as a result of the 1995 Oklahoma City bombing and

disrupted plots, improvements in the economy, and the continued U.S. standing

as the preeminent world power.

(U//FOUO) The possible passage of new restrictions on firearms and the return of

military veterans facing significant challenges reintegrating into their communities

could lead to the potential emergence of terrorist groups or lone wolf extremists

capable of carrying out violent attacks.

 

 

 

adherents that are primarily hate-oriented (based on hatred of particular religious, racial or ethnic groups),

and those that are mainly antigovernment, rejecting federal authority in favor of state or local authority, or

rejecting government authority entirely. It may include groups and individuals that are dedicated to a

single issue, such as opposition to abortion or immigration.

 

UNCLASSIFIED//FOR OFFICIAL USE ONLY

 

 

 

 

likely would attract new members into the ranks of rightwing extremist groups,

as well as potentially spur some of them to begin planning and training for

violence against the government. The high volume of purchases and

stockpiling of weapons and ammunition by rightwing extremists in anticipation

of restrictions and bans in some parts of the country continue to be a primary

concern to law enforcement.

 

 

 

attractive to rightwing extremists. DHS/I&A is concerned that rightwing

extremists will attempt to recruit and radicalize returning veterans in order to

boost their violent capabilities.

 

 

driving a resurgence in rightwing extremist recruitment and radicalization activity.

Despite similarities to the climate of the 1990s, the threat posed by lone wolves and small

terrorist cells is more pronounced than in past years. In addition, the historical election of

an African American president and the prospect of policy changes are proving to be a

driving force for rightwing extremist recruitment and radicalization.

— (U) A recent example of the potential violence associated with a rise in rightwing

extremism may be found in the shooting deaths of three police officers in

Pittsburgh, Pennsylvania, on 4 April 2009. The alleged gunman’s reaction

reportedly was influenced by his racist ideology and belief in antigovernment

conspiracy theories related to gun confiscations, citizen detention camps, and a

Jewish-controlled “one world government.”

 

 

economy, the perceived loss of U.S. jobs in the manufacturing and construction sectors,

and home foreclosures. Anti-Semitic extremists attribute these losses to a deliberate

conspiracy conducted by a cabal of Jewish “financial elites.” These “accusatory” tactics

are employed to draw new recruits into rightwing extremist groups and further radicalize

those already subscribing to extremist beliefs. DHS/I&A assesses this trend is likely to

accelerate if the economy is perceived to worsen.

 

 

tool. Many rightwing extremists are antagonistic toward the new presidential

administration and its perceived stance on a range of issues, including immigration and

citizenship, the expansion of social programs to minorities, and restrictions on firearms

 

UNCLASSIFIED//FOR OFFICIAL USE ONLY

 

 

(U//FOUO) Scholars and experts disagree over poverty’s role in motivating violent radicalization orownership and use. Rightwing extremists are increasingly galvanized by these concerns(U) Revisiting the 1990s(U//FOUO) Paralleling the current national climate, rightwing extremists during the(U) Economic Hardship and Extremism(U//FOUO) Historically, domestic rightwing extremists have feared, predicted, andUNCLASSIFIED//FOR OFFICIAL USE ONLYPage 5 of 9(U) Illegal Immigration(U//FOUO) Rightwing extremists were concerned during the 1990s with the perception(U//FOUO) Many rightwing extremist groups perceive recent gun control legislation as aUNCLASSIFIED//FOR OFFICIAL USE ONLYPage 6 of 9District of  Columbia v. Hellerin which the Court reaffirmed an individual’s right to keep and bear

(U) Legislative and Judicial Drivers

 

threat to their right to bear arms and in response have increased weapons and ammunition

stockpiling, as well as renewed participation in paramilitary training exercises. Such

activity, combined with a heightened level of extremist paranoia, has the potential to

facilitate criminal activity and violence.

— (U//FOUO) During the 1990s, rightwing extremist hostility toward government

was fueled by the implementation of restrictive gun laws—such as the Brady Law

that established a 5-day waiting period prior to purchasing a handgun and the

1994 Violent Crime Control and Law Enforcement Act that limited the sale of

various types of assault rifles—and federal law enforcement’s handling of the

confrontations at Waco, Texas and Ruby Ridge, Idaho.

 

UNCLASSIFIED//FOR OFFICIAL USE ONLY

 

— (U//FOUO) On the current front, legislation has been proposed this year

requiring mandatory registration of all firearms in the United States. Similar

legislation was introduced in 2008 in several states proposing mandatory tagging

and registration of ammunition. It is unclear if either bill will be passed into law;

nonetheless, a correlation may exist between the potential passage of gun control

legislation and increased hoarding of ammunition, weapons stockpiling, and

paramilitary training activities among rightwing extremists.

(U//FOUO) Open source reporting of wartime ammunition shortages has likely spurred

rightwing extremists—as well as law-abiding Americans—to make bulk purchases of

ammunition. These shortages have increased the cost of ammunition, further

exacerbating rightwing extremist paranoia and leading to further stockpiling activity.

Both rightwing extremists and law-abiding citizens share a belief that rising crime rates

attributed to a slumping economy make the purchase of legitimate firearms a wise move

at this time.

(U//FOUO) Weapons rights and gun-control legislation are likely to be hotly contested

subjects of political debate in light of the 2008 Supreme Court’s decision in

 

 

 

 

arms under the Second Amendment to the U.S. Constitution, but left open to debate the

precise contours of that right. Because debates over constitutional rights are intense, and

parties on all sides have deeply held, sincere, but vastly divergent beliefs, violent

extremists may attempt to co-opt the debate and use the controversy as a radicalization

tool.

 

 

magnified in the event of an economic crisis or military confrontation, harkening back to

the “New World Order” conspiracy theories of the 1990s. The dissolution of Communist

countries in Eastern Europe and the end of the Soviet Union in the 1990s led some

rightwing extremists to believe that a “New World Order” would bring about a world

government that would usurp the sovereignty of the United States and its Constitution,

thus infringing upon their liberty. The dynamics in 2009 are somewhat similar, as other

countries, including China, India, and Russia, as well as some smaller, oil-producing

states, are experiencing a rise in economic power and influence.

— (U//FOUO) Fear of Communist regimes and related conspiracy theories

characterizing the U.S. Government’s role as either complicit in a foreign

invasion or acquiescing as part of a “One World Government” plan inspired

extremist members of the militia movement to target government and military

facilities in past years.

— (U//FOUO) Law enforcement in 1996 arrested three rightwing militia members

in Battle Creek, Michigan with pipe bombs, automatic weapons, and military

 

UNCLASSIFIED//FOR OFFICIAL USE ONLY

 

 

small terrorist cells embracing violent rightwingordnance that they planned to use in attacks on nearby military and federal(U) Disgruntled Military Veterans(U//FOUO) DHS/I&A assesses that rightwing extremists will attempt to recruit andUNCLASSIFIED//FOR OFFICIAL USE ONLYPage 8 of 9(U) Outlook(U//FOUO) DHS/I&A assesses that the combination of environmental factors that echoUNCLASSIFIED//FOR OFFICIAL USE ONLYFOR OFFICIAL USE ONLY

extremist ideology are the most dangerous domestic terrorism threat in the United States. Information

from law enforcement and nongovernmental organizations indicates lone wolves and small terrorist

cells have shown intent—and, in some cases, the capability—to commit violent acts.

— (U//LES) DHS/I&A has concluded that white supremacist lone wolves pose the most

significant domestic terrorist threat because of their low profile and autonomy—separate from

any formalized group—which hampers warning efforts.

— (U//FOUO) Similarly, recent state and municipal law enforcement reporting has warned of the

dangers of rightwing extremists embracing the tactics of “leaderless resistance” and of lone

wolves carrying out acts of violence.

— (U//FOUO) Arrests in the past several years of radical militia members in Alabama, Arkansas,

and Pennsylvania on firearms, explosives, and other related violations indicates the emergence

of small, well-armed extremist groups in some rural areas.

 

facilities and infrastructure targets.

— (U//FOUO) Rightwing extremist views bemoan the decline of U.S. stature and

have recently focused on themes such as the loss of U.S. manufacturing capability

to China and India, Russia’s control of energy resources and use of these to

pressure other countries, and China’s investment in U.S. real estate and

corporations as a part of subversion strategy.

 

 

radicalize returning veterans in order to exploit their skills and knowledge derived from

military training and combat. These skills and knowledge have the potential to boost the

capabilities of extremists—including lone wolves or small terrorist cells—to carry out

violence. The willingness of a small percentage of military personnel to join extremist

groups during the 1990s because they were disgruntled, disillusioned, or suffering from

the psychological effects of war is being replicated today.

— (U) After Operation Desert Shield/Storm in 1990-1991, some returning military

veterans—including Timothy McVeigh—joined or associated with rightwing

extremist groups.

— (U) A prominent civil rights organization reported in 2006 that “large numbers

of potentially violent neo-Nazis, skinheads, and other white supremacists are now

learning the art of warfare in the [U.S.] armed forces.”

— (U//LES) The FBI noted in a 2008 report on the white supremacist movement

that some returning military veterans from the wars in Iraq and Afghanistan have

joined extremist groups.

 

UNCLASSIFIED//FOR OFFICIAL USE ONLY

 

 

 

the 1990s, including heightened interest in legislation for tighter firearms restrictions and

returning military veterans, as well as several new trends, including an uncertain

economy and a perceived rising influence of other countries, may be invigorating

rightwing extremist activity, specifically the white supremacist and militia movements.

To the extent that these factors persist, rightwing extremism is likely to grow in strength.

(U//FOUO) Unlike the earlier period, the advent of the Internet and other informationage

technologies since the 1990s has given domestic extremists greater access to

information related to bomb-making, weapons training, and tactics, as well as targeting of

individuals, organizations, and facilities, potentially making extremist individuals and

groups more dangerous and the consequences of their violence more severe. New

technologies also permit domestic extremists to send and receive encrypted

communications and to network with other extremists throughout the country and abroad,

making it much more difficult for law enforcement to deter, prevent, or preempt a violent

extremist attack.

(U//FOUO) A number of law enforcement actions and external factors were effective in

limiting the militia movement during the 1990s and could be utilized in today’s climate.

— (U//FOUO) Following the 1995 bombing of the Alfred P. Murrah federal

building in Oklahoma City, the militia movement declined in total membership

and in the number of organized groups because many members distanced

themselves from the movement as a result of the intense scrutiny militias received

after the bombing.

— (U//FOUO) Militia membership continued to decline after the turn of the

millennium as a result of law enforcement disruptions of multiple terrorist plots

linked to violent rightwing extremists, new legislation banning paramilitary

training, and militia frustration that the “revolution” never materialized.

— (U//FOUO) Although the U.S. economy experienced a significant recovery and

many perceived a concomitant rise in U.S. standing in the world, white

supremacist groups continued to experience slight growth.

(U//FOUO) DHS/I&A will be working with its state and local partners over the next

several months to ascertain with greater regional specificity the rise in rightwing

extremist activity in the United States, with a particular emphasis on the political,

economic, and social factors that drive rightwing extremist radicalization.

 

UNCLASSIFIED//FOR OFFICIAL USE ONLY

Page 9 of 9

 

 

terrorist activity. High unemployment, however, has the potential to lead to alienation, thus increasing

an individual’s susceptibility to extremist ideas. According to a 2007 study from the German Institute

for Economic Research, there appears to be a strong association between a parent’s unemployment

status and the formation of rightwing extremist beliefs in their children—specifically xenophobia and

antidemocratic ideals.

and leverage them as drivers for recruitment. From the 2008 election timeframe to the

present, rightwing extremists have capitalized on related racial and political prejudices in

expanded propaganda campaigns, thereby reaching out to a wider audience of potential

sympathizers.

— (U//LES) Most statements by rightwing extremists have been rhetorical,

expressing concerns about the election of the first African American president,

but stopping short of calls for violent action. In two instances in the run-up to the

election, extremists appeared to be in the early planning stages of some

threatening activity targeting the Democratic nominee, but law enforcement

interceded.

 

 

1990s exploited a variety of social issues and political themes to increase group visibility

and recruit new members. Prominent among these themes were the militia movement’s

opposition to gun control efforts, criticism of free trade agreements (particularly those

with Mexico), and highlighting perceived government infringement on civil liberties as

well as white supremacists’ longstanding exploitation of social issues such as abortion,

inter-racial crimes, and same-sex marriage. During the 1990s, these issues contributed to

the growth in the number of domestic rightwing terrorist and extremist groups and an

increase in violent acts targeting government facilities, law enforcement officers, banks,

and infrastructure sectors.

 

 

anticipated a cataclysmic economic collapse in the United States. Prominent

antigovernment conspiracy theorists have incorporated aspects of an impending

economic collapse to intensify fear and paranoia among like-minded individuals and to

attract recruits during times of economic uncertainty. Conspiracy theories involving

declarations of martial law, impending civil strife or racial conflict, suspension of the

U.S. Constitution, and the creation of citizen detention camps often incorporate aspects of

a failed economy. Antigovernment conspiracy theories and “end times” prophecies could

motivate extremist individuals and groups to stockpile food, ammunition, and weapons.

These teachings also have been linked with the radicalization of domestic extremist

individuals and groups in the past, such as violent Christian Identity organizations and

extremist members of the militia movement.

 

UNCLASSIFIED//FOR OFFICIAL USE ONLY

 

 

 

that illegal immigrants were taking away American jobs through their willingness to

work at significantly lower wages. They also opposed free trade agreements, arguing that

these arrangements resulted in Americans losing jobs to countries such as Mexico.

(U//FOUO) Over the past five years, various rightwing extremists, including militias and

white supremacists, have adopted the immigration issue as a call to action, rallying point,

and recruiting tool. Debates over appropriate immigration levels and enforcement policy

generally fall within the realm of protected political speech under the First Amendment,

but in some cases, anti-immigration or strident pro-enforcement fervor has been directed

against specific groups and has the potential to turn violent.

(U//FOUO) DHS/I&A assesses that rightwing extremist groups’ frustration over a

perceived lack of government action on illegal immigration has the potential to incite

individuals or small groups toward violence. If such violence were to occur, it likely

would be isolated, small-scale, and directed at specific immigration-related targets.

— (U//FOUO) DHS/I&A notes that prominent civil rights organizations have

observed an increase in anti-Hispanic crimes over the past five years.

— (U) In April 2007, six militia members were arrested for various weapons and

explosives violations. Open source reporting alleged that those arrested had

discussed and conducted surveillance for a machinegun attack on Hispanics.

— (U) A militia member in Wyoming was arrested in February 2007 after

communicating his plans to travel to the Mexican border to kill immigrants

crossing into the United States 

 

 

 

 

 

 

 

 

 

(U) Perceived Threat from Rise of Other Countries(U//FOUO) Rightwing extremist paranoia of foreign regimes could escalate or beUNCLASSIFIED//FOR OFFICIAL USE ONLYPage 7 of 9(U//FOUO) Lone Wolves and Small Terrorist Cells(U//FOUO) DHS/I&A assesses that lone wolves and (U) Current Economic and Political Climate(U//FOUO) DHS/I&A assesses that a number of economic and political factors are(U) Exploiting Economic Downturn(U//FOUO) Rightwing extremist chatter on the Internet continues to focus on the(U) Historical Presidential Election(U//LES) Rightwing extremists are harnessing this historical election as a recruitmentUNCLASSIFIED//FOR OFFICIAL USE ONLYPage 4 of 9(U//FOUO) Perceptions on Poverty and Radicalizat(U//FOUO) Returning veterans possess combat skills and experience that areUNCLASSIFIED//FOR OFFICIAL USE ONLYPage 3 of 9 (U//FOUO) Proposed imposition of firearms restrictions and weapons bans*(U) Rightwing extremism in the United States can be broadly divided into those groups, movements, and(U//FOUO) Growth of these groups subsided in reaction to increased(U//FOUO) During the 1990s, these issues contributed to the growth in the(U//LES) Rightwing extremists have capitalized on the election of the firstUNCLASSIFIED//FOR OFFICIAL USE ONLYPage 2 of 9(U) Key Findings(U//LES) The DHS/Office of Intelligence and Analysis (I&A) has no specific* (U//LES) Threats from white supremacist and violent antigovernment groups

Dow ends best 6 weeks since 1938: 1938 – “The Rest Of The Story”

Dow ends best 6 weeks since 1938

Stocks rose on Friday, with the Dow scoring its biggest six-week gain since July 1938, helped by a reassuring report on the mood of consumers and stabilization in General Electric (GE.N) and Citigroup’s (C.N) quarterly results.

The Dow is up 22.7 percent over the past six weeks, making this the largest six-week gain since July 29, 1938.

http://www.nyse.tv/dow-jones-industrial-average-history-djia.htm

As famed commentator Paul Harvey would have said, “and now for the rest of the story”.

The year 1938 was a year during the “Great Depression”. 1938 did not signal the end of the “Great Depression”. The “Great Depression” lasted ” 4 more years” after 1938, not ending until 1942.

How did the ”stock market” fare during the Great Depression? In 6 of the 11+ years of the Great Depression the “Stock Market” closed up despite the fact that unemployment continued to rise, home foreclosures hit all time highs and thousands of businesses and farms were lost.

Following the 1938 “bounce” in the DJIA, the “stock market” closed down for 4 straight years. The Market was down in 1938 – 1939, 1939 – 1940, 1940 – 1941 and 1941 – 1942. During that time period the DJIA lost nearly 25% of its value. In fact, the DJIA closed lower in 1942 than it did in 1937. http://www.nyse.tv/dow-jones-industrial-average-history-djia.htm

Economists note that these years of the “Great Depression”, 1939 -1942, followed the implementation of FDR’s “New Deal” and that the “New Deal” may have, in fact, caused this, the second half, of the Great Depression”. (New Deal or Raw Deal?: How FDR’s Economic Legacy Has Damaged America,  by Burton W., Jr. Folsom, http://www.amazon.com/New-Deal-Raw-Economic-Damaged/dp/1416592229 )

This writer is hoping an economic recovery is underway, however, that is not what the data suggests. As you can see, the DJIA, does not necessarily reflect the direction of  economic activity – the DJIA can register gains while the “economy” slips futher into a “Great Depression” or, in other words, Government bailout programs can make the politically connected extremely rich while the Country, as a whole, slips below water.

April 2009 unemployment continues to climb at 600,000 + per week. Unemployment, with the addition of the newly unemployed in April 2009,  is now above 9%, nearly one full percentage point above the Obama Administration’s “worse case estimate” for a “maximum unemployment figure” of 8.1% in 2009. Economists are now examining whether unemployment will top 11% before year end, 40% higher than the Administration’s forecast.  http://www.bls.gov/news.release/pdf/empsit.pdf  Between January of 2004 and January of 2008 unemployment in the US averaged 4.5%. 1/2 the current rate. Twice that number of people are currently unemployed and the fact that the unemployment number will continue to rise is undisputed. There are no (zero) projections that the US unemployment rate will return to a 4.5% rate prior to 2017, a full 8 years from now.  

Despite the moratorium on “Mortgage Foreclosures”, March 2009 foreclosures were 46% above March 2008 figures. Fannie & Freddie’s moratorium on foreclosures ended on March 31st 2009, so this increase occurred prior to the moratorium’s expiration. A huge backlog of foreclosures were placed on “hold” and will now move forward.  In many parts of the Country “housing surpluses” will take 4 to 7 years to be absorbed. Reaching a floor in the housing market is years off. Maybe 5 years off, if we pursue the correct policies and restore confidence in  American mortgage backed securities and the international investment community commits to investing in those “derivatives” once again.   http://www.mlive.com/business/index.ssf/2009/04/us_foreclosures_up_24_percent.html http://www.idahobusiness.net/archive.htm/2009/04/08/Foreclosures-up-again-in-March

New home starts are way down. New single family home starts for March 2009 are 45% lower than March 2008. http://redfishemergingmarkets.com/blog/2009/04/16/housing-starts-are-still-anemic-anybody-surprised-at-the-data/

March 2008 was a very bad year in it’s own right. Housing starts will need to increase 500% before reaching the levels seen in 2005. http://www.reedconstructiondata.com/news/2008/08/residential-construction-near-bottom-but-still-declining/

In March 2009 there was nearly 1 home foreclosure for every new home start. http://redfishemergingmarkets.com/blog/2009/04/16/housing-starts-are-still-anemic-anybody-surprised-at-the-data/

Auto sales remain down, despite dishonest claims to the contrary. March 2008 to March 2009 auto sales are down an additional 40%. http://money.cnn.com/2009/03/26/autos/jd_power_march_sales/index.htm . February 2008 to February 2009 auto sales were also down, almost 50%. http://www.thegreenmotorist.com/index.php/february-2009-auto-sales-down-yet-again/ . March 2008 auto sales figures were no reason for optimism. Even if sales figures should suddenly leap “up to” 2008 sales levels, one needs to recall that 2008 sales figures were dismal in there own right and were down 20% from 2007 sales levels. GM’s sales volumes in 2007 were 40% less than in 2006. Current auto sales levels will need to triple to catch back up with the “profitable” levels of 2006. After “special items” GM only lost $2 Billion in 2006. http://jalopnik.com/cars/breaking-gm-finally-releases-2006-financial-results-showing-profits-and-notsomuch-profits-244072.php

The current cause for “economic optimism”?  Two banks reported “profits” at the end of the first quarter. What do the bank’s financial numbers mean? Where did the profits come from? Who really knows?

Both “banks” received Billions in bailout funds that have not been repaid. Despite promises of “transparency” the Government’s Stress tests formulas are a secret and the “formula” applied changes from bank to bank. The “stress test” results are also being kept secret. Who passed? Who failed? Who knows? What transparency!

The recent “mark to market” accounting changes are a sham. There is no way for the public to know exactly what a banks exposure to toxic mortgages are, nor can the public determine how the bank is evaluting those assets or exposures. Isn’t this is exactly how we got into this mess in the first place, financial institutions overstating the value of their investments in Mortgage backed securities?

See: http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/a-bear-rally-in-bulls-clothing.aspx   “Money printing plus imagination are potent forces that can’t solve our problems but can affect the stock market in such a way as to make it appear that the worst has passed.”

The recent accounting changes allow banks to evaluate the same piece of property differently, depending on how the bank chooses to classify the property. If a property or asset is to be put up for sale in the near future, the expected sale price is to be used. If the property is to be held for a longer period of time, the anticipated value at the time of sale can be used. How can the public discern whether a piece of property or asset currently valued at $1,000,000, doesn’t in fact have a “real” current value of $10,000. The bank, when it cannot sell the property for $1 Million, simply changes the “asset classification” to a long term hold rather than calling the property what it is, an overvalued piece of realestate with a $1 Million asking price and a current $10,000 value.

Is TALF responsible for the Bank’s stated profits, profits made at taxpayer expense? Who knows? http://www.businessinsider.com/how-banks-and-hedge-funds-will-scam-the-talf-2009-3 Are these profits a sign of economic improvement or a sign of the fleecing of America?

Had the Government allowed this sham, the change in accounting practices,  months ago, the Financial Institutions bailout would not have been necessary.

Nothing has changed in terms of the availability of “zero down” mortgages or the “Liar” or “Ninja” loans. The actions of Congress and the Boston Federal Reserve still stand, nothing has been repealed or revoked. Now those without a “down payment” can acquire their “down payment” through the use of a “second mortgage” where the “downpayment” is funded through a “second mortgage” or other “give away programs” intended to create the illusion that a purchaser has a “down payment”. http://www.mhdc.com/homes/down_payment_assistance/index.htm , http://www.ehow.com/how_4492950_through-zero-down-payment-loophole.html (An ACORN Scam),  http://www.collinsdevelopment.com/home-buying/mortgage-down-payment.php .

The “leveraging” in the US banking system remains unchanged. Certain US banks are still permitted to “leverage” up to 40%. http://www.startribune.com/business/41611927.html?elr=KArks:DCiU1OiP:DiiUiD3aPc:_Yyc:aUU  The “dangers” of leveraging, another lesson that went “unlearned” from the “Great Depression”.

The Government TALF Program even encourages the Hedge Funds and Banks to “leverage up” at taxpayer expense. http://www.businessinsider.com/how-banks-and-hedge-funds-will-scam-the-talf-2009-3  Do these Bank and Hedge Fund profits signal economic recovery or are they simply derived from looting “taxpayer” provided funds.

Beware the “false recovery”. Many things can be learned from the 1938 “bounce” in the DJIA. One of those things is that the “1938 Bounce” did not signal an economic recovery. That recovery was 4 long years away.

Signs of a pending economic recovery in 2009 are few and far between. Next to nothing has been done to prevent a repeat of the current crisis. The Government, Regulatory Agencies and Financial Institutions are busy cooking with the old recipe.  

Don’t delude yourself, when clear thinking is needed.

The ship may be sinking at a slower rate, but the ship is still sinking. The time to call the orchestra on deck and dance has not arrived. It is time to man the buckets and bail like crazy.

For a technical analysis of the Market Recovery in 1929 – 1930 and how Federal Reserve Interest Rate moves affected the Great Depresssion see:  http://www.ameinfo.com/16529.html

BEAR MARKET RALLY – Definition and Chart Examples: http://www.mysmp.com/stocks/bear-market-rally.html ; “After a move up of 20% to 35% off the bottom, the market begins to stall out”.

Beware The False Economic Recovery – 1938, The Rest Of The Story: Dow ends best 6 weeks since 1938

You may have seen the following headline and story:

Dow ends best 6 weeks since 1938 on econ hopes

Stocks rose on Friday, with the Dow scoring its biggest six-week gain since July 1938, helped by a reassuring report on the mood of consumers and stabilization in General Electric (GE.N) and Citigroup’s (C.N) quarterly results.

The Dow is up 22.7 percent over the past six weeks, making this the largest six-week gain since July 29, 1938.

http://www.nyse.tv/dow-jones-industrial-average-history-djia.htm

As famed commentator Paul Harvey would have said, “and now for the rest of the story”.

The year 1938 was a year during the “Great Depression”. 1938 did not signal the end of the “Great Depression”. The “Great Depression” lasted ” 4 more years” after 1938, not ending until 1942.

How did the “stock market” fare during the Great Depression? In 6 of the 11+ years of the Great Depression the “Stock Market” closed up despite the fact that unemployment continued to rise, home foreclosures hit all time highs and thousands of businesses and farms were lost.

Following the 1938 “bounce” in the DJIA, the “stock market” closed down for 4 straight years. The Market was down in 1938 – 1939, 1939 – 1940, 1940 – 1941 and 1941 – 1942. During that time period the DJIA lost nearly 25% of its value. In fact, the DJIA closed lower in 1942 than it did in 1937. http://www.nyse.tv/dow-jones-industrial-average-history-djia.htm

Economists note that these years of the “Great Depression”, 1939 -1942, followed the implementation of FDR’s “New Deal” and that the “New Deal” may have, in fact, caused this, the second half, of the Great Depression”. (New Deal or Raw Deal?: How FDR’s Economic Legacy Has Damaged America,  by Burton W., Jr. Folsom, http://www.amazon.com/New-Deal-Raw-Economic-Damaged/dp/1416592229 )

This writer is hoping an economic recovery is underway, however, that is not what the data suggests. As you can see, the DJIA, does not necessarily reflect the direction of  economic activity – the DJIA can register gains while the “economy” slips futher into a “Great Depression” or, in other words, Government bailout programs can make the politically connected extremely rich while the Country, as a whole, slips below water.

April 2009 unemployment continues to climb at 600,000 + per week. Unemployment, with the addition of the newly unemployed in April 2009,  is now above 9%, nearly one full percentage point above the Obama Administration’s “worse case estimate” for a “maximum unemployment figure” of 8.1% in 2009. Economists are now examining whether unemployment will top 11% before year end, 40% higher than the Administration’s forecast.  http://www.bls.gov/news.release/pdf/empsit.pdf  Between January of 2004 and January of 2008 unemployment in the US averaged 4.5%. 1/2 the current rate. Twice that number of people are currently unemployed and the fact that the unemployment number will continue to rise is undisputed. There are no (zero) projections that the US unemployment rate will return to a 4.5% rate prior to 2017, a full 8 years from now.  

Despite the moratorium on “Mortgage Foreclosures”, March 2009 foreclosures were 46% above March 2008 figures. Fannie & Freddie’s moratorium on foreclosures ended on March 31st 2009, so this increase occurred prior to the moratorium’s expiration. A huge backlog of foreclosures were placed on “hold” and will now move forward.  In many parts of the Country “housing surpluses” will take 4 to 7 years to be absorbed. Reaching a floor in the housing market is years off. Maybe 5 years off, if we pursue the correct policies and restore confidence in  American mortgage backed securities and the international investment community commits to investing in those “derivatives” once again.   http://www.mlive.com/business/index.ssf/2009/04/us_foreclosures_up_24_percent.html http://www.idahobusiness.net/archive.htm/2009/04/08/Foreclosures-up-again-in-March

New home starts are way down. New single family home starts for March 2009 are 45% lower than March 2008. http://redfishemergingmarkets.com/blog/2009/04/16/housing-starts-are-still-anemic-anybody-surprised-at-the-data/

March 2008 was a very bad year in it’s own right. Housing starts will need to increase 500% before reaching the levels seen in 2005. http://www.reedconstructiondata.com/news/2008/08/residential-construction-near-bottom-but-still-declining/

In March 2009 there was nearly 1 home foreclosure for every new home start. http://redfishemergingmarkets.com/blog/2009/04/16/housing-starts-are-still-anemic-anybody-surprised-at-the-data/

Auto sales remain down, despite dishonest claims to the contrary. March 2008 to March 2009 auto sales are down an additional 40%. http://money.cnn.com/2009/03/26/autos/jd_power_march_sales/index.htm . February 2008 to February 2009 auto sales were also down, almost 50%. http://www.thegreenmotorist.com/index.php/february-2009-auto-sales-down-yet-again/ . March 2008 auto sales figures were no reason for optimism. Even if sales figures should suddenly leap “up to” 2008 sales levels, one needs to recall that 2008 sales figures were dismal in there own right and were down 20% from 2007 sales levels. GM’s sales volumes in 2007 were 40% less than in 2006. Current auto sales levels will need to triple to catch back up with the “profitable” levels of 2006. After “special items” GM only lost $2 Billion in 2006. http://jalopnik.com/cars/breaking-gm-finally-releases-2006-financial-results-showing-profits-and-notsomuch-profits-244072.php

The current cause for “economic optimism”?  Two banks reported “profits” at the end of the first quarter. What do the bank’s financial numbers mean? Where did the profits come from? Who really knows?

Both “banks” received Billions in bailout funds that have not been repaid. Despite promises of “transparency” the Government’s Stress tests formulas are a secret and the “formula” applied changes from bank to bank. The “stress test” results are also being kept secret. Who passed? Who failed? Who knows? What transparency!

The recent “mark to market” accounting changes are a sham. There is no way for the public to know exactly what a banks exposure to toxic mortgages are, nor can the public determine how the bank is evaluting those assets or exposures. Isn’t this is exactly how we got into this mess in the first place, financial institutions overstating the value of their investments in Mortgage backed securities?

The recent accounting changes allow banks to evaluate the same piece of property differently, depending on how the bank chooses to classify the property. If a property or asset is to be put up for sale in the near future, the expected sale price is to be used. If the property is to be held for a longer period of time, the anticipated value at the time of sale can be used. How can the public discern whether a piece of property or asset currently valued at $1,000,000, doesn’t in fact have a “real” current value of $10,000. The bank, when it cannot sell the property for $1 Million, simply changes the “asset classification” to a long term hold rather than calling the property what it is, an overvalued piece of realestate with a $1 Million asking price and a current $10,000 value.

Is TALF responsible for the Bank’s stated profits, profits made at taxpayer expense? Who knows? http://www.businessinsider.com/how-banks-and-hedge-funds-will-scam-the-talf-2009-3 Are these profits a sign of economic improvement or a sign of the fleecing of America?

Had the Government allowed this sham, the change in accounting practices,  months ago, the Financial Institutions bailout would not have been necessary.

Nothing has changed in terms of the availability of “zero down” mortgages or the “Liar” or “Ninja” loans. The actions of Congress and the Boston Federal Reserve still stand, nothing has been repealed or revoked. Now those without a “down payment” can acquire their “down payment” through the use of a “second mortgage” where the “downpayment” is funded through a “second mortgage” or other “give away programs” intended to create the illusion that a purchaser has a “down payment”. http://www.mhdc.com/homes/down_payment_assistance/index.htm , http://www.ehow.com/how_4492950_through-zero-down-payment-loophole.html (An ACORN Scam),  http://www.collinsdevelopment.com/home-buying/mortgage-down-payment.php .

The “leveraging” in the US banking system remains unchanged. Certain US banks are still permitted to “leverage” up to 40%. http://www.startribune.com/business/41611927.html?elr=KArks:DCiU1OiP:DiiUiD3aPc:_Yyc:aUU  The “dangers” of leveraging, another lesson that went “unlearned” from the “Great Depression”.

The Government TALF Program even encourages the Hedge Funds and Banks to “leverage up” at taxpayer expense. http://www.businessinsider.com/how-banks-and-hedge-funds-will-scam-the-talf-2009-3  Do these Bank and Hedge Fund profits signal economic recovery or are they simply derived from looting “taxpayer” provided funds.

Beware the “false recovery”. Many things can be learned from the 1938 “bounce” in the DJIA. One of those things is that the “1938 Bounce” did not signal an economic recovery. That recovery was 4 long years away.

Signs of a pending economic recovery in 2009 are few and far between. Next to nothing has been done to prevent a repeat of the current crisis. The Government, Regulatory Agencies and Financial Institutions are busy cooking with the old recipe.  

Don’t delude yourself, when clear thinking is needed.

The ship may be sinking at a slower rate, but the ship is still sinking. The time to call the orchestra on deck and dance has not arrived. It is time to man the buckets and bail like crazy.

Top Democrat Hammers Homeland Security’s Napolitano; Cites Freedom of Speech, Freedom of Association

Top Democrat ‘dumbfounded’ by ‘extremism’ report

The top House Democrat overseeing the Department of Homeland Security is demanding that officials there explain how and why they wrote and released a controversial report identifying veterans as potential terrorist threats.

Rep. Bennie G. Thompson of Mississippi, chairman of the House Homeland Security Committee, said in a letter to DHS Secretary Janet Napolitano that he was “dumbfounded” such a report would be issued.

“This report appears to raise significant issues involving the privacy and civil liberties of many Americans — including war veterans,” Mr. Thompson said in the letter sent Tuesday.

As I am certain you agree, freedom of association and freedom of speech are guaranteed to all Americans — whether a person’s beliefs, whatever their political orientation, are ‘extremist’ or not,” Mr. Thompson said.

The report “blurred the line,” and Mr. Thompson said he is “disappointed and surprised that the department would allow this report to be disseminated” to law enforcement officials nationwide.

Also Wednesday, Ms. Napolitano issued a statement standing by the report, which she personally had reviewed before it was issued.

The Washington Times reported Tuesday that the department’s Office of Intelligence and Analysis (I&A) released a report titled Rightwing Extremism: Current Economic and Political Climate Fueling Resurgence in Radicalization and Recruitment on April 7. It identified as potential terrorist threats people who collect guns, veterans, supporters of border control, and pro-life advocates.

“I am particularly struck by the report’s conclusion which states that I&A ‘will be working with its state and local partners over the next several months to ascertain with greater regional specificity the rise in rightwing extremist activity in the United States with a particular emphasis on the political, economic, and social factors that drive rightwing extremist radicalization,'” Mr. Thompson said, demanding to know what types of activities DHS had planned for “the next several months.”

http://www.washingtontimes.com/news/2009/apr/15/top-dem-dumbfounded-extremism-report/

McAuleys World: Contact your Representatives In Washington and demand Napolitano’s resignation now: http://www.usa.gov/Contact.shtml

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