$840 Million Of $1 Billion In “Green Stimulus” Spending Sent Overseas – 3000 Jobs Created in China – 300 In US

Note the following from Liberal Democratic Senator Charles E Schumer

November 05, 2009

Schumer takes aim at Texas wind farm

 

Sen. Charles E. Schumer on Thursday moved to block the federal government from doling economic stimulus dollars to a $1.5 billion dollar wind farm planned for west Texas because it will rely on turbines manufactured in China.

Under the $787 billion economic stimulus package enacted in February, the group is eligible to seek a federal grant paying for 30 percent of certain costs on the planned 648-megawatt wind farm. Although the project is expected to involve 2,000 to 3,000 manufacturing jobs in China, Schumer said it would create just a little over 300 in the U.S.

Although Schumer singled out the Texas wind project Thursday, he said he was concerned that about 84 percent of the more than $1 billion in stimulus grants doled out by the Energy Department has gone to foreign companies. (or 84 cents out of every dollar)

Schumer said the spending pattern is helping create jobs overseas, therefore running counter to the stimulus package’s goals of spurring an economic recovery within the U.S. And, he said, when the grant money flows outside U.S. borders that undercuts Congress’ goals of spurring domestic manufacturing jobs and plants for emerging alternative energy technologies.

http://blogs.chron.com/txpotomac/energy/

McAuleys World: Did the Administration take credit for these 3000 jobs “saved or created”?

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  

Bailout Lies – How Americans Were Misled & Why The Bailout Isn’t Working

On September 29, 2008 the original “Bailout Bill” was defeated in the House of Representatives. After adding an amazing amount of additional spending  the revised “bailout bill” passed four days later.

http://www.thestreet.com/story/10440683/1/sweetened-bailout-bill-sails-through-house.html

The Bailout was passed without “Congressional Hearings” because it was said that a “dire emergency” confronted the Nation and that Congress needed to purchase the “illiquid assets from the financial system” or as they were later called “The Toxic Mortgages” that may destroy the economy.

Now forgotten is the fact that a group of 400 internationally respected Economists warned the “Bailout” wouldn’t work. 

https://mcauleysworld.wordpress.com/2008/09/29/200-world-reknown-economists-speakout-against-bailout/  http://faculty.chicagogsb.edu/john.cochrane/research/Papers/mortgage_protest.htm http://www.npr.org/templates/story/story.php?storyId=95215972 

These economists warned that an entirely different approach was needed to truly free up the credit markets. ‘At this point I cannot identify a single good reason to do the bailout,’ said Dean Baker, co-director of the Centre for Economic and Policy Research. ‘Much of the country’s political and economic leadership has been running around raising the prospect of the Great Depression and a breakdown in the banking system,’ Baker said. ‘These stories are absolutely not true,’ he added. http://ipsnorthamerica.net/news.php?idnews=1729

Current “Bailout” activities maybe having the same affect as “pouring gasoline on a fire”.

What few American’s know, not all Banks supported the Bailout, “Nine of the largest U.S. banks were essentially arm-twisted last week into signing on for the first $125 billion in capital infusions.” http://news.yahoo.com/s/nm/20081024/bs_nm/us_financial_usa_banks 

Note that “Capital Infusions” were forced on these Banks, the Banks did not sell “toxic mortgage debts” to the FED as advertised.

The Bailout has failed. Between October 4, 2008 and November 12, 2008 the Stock market has dropped 2000 of the 5000 points lost since November 2007. Forty percent of the economic dive has occurred in the 5 weeks since the “Bailout” was approved. (From 13,300 on 12/7/07 to 8,300 on 11/12/08)  

http://www.mahalo.com/Dow_Jones_Industrial_Average     http://www.nyse.tv/stocks/archive/2007_11_01_archive.htm                    http://money.cnn.com/data/premarket/  (DJIA 8313 at 7:15 Am  11/13/08)            

http://cyberlaw.stanford.edu/node/5882

You might recall a promise by Congress that the ‘Bailout” spending would be posted on-line, providing the Taxpaying Public complete transparency and the ability to track where our tax dollars were being spent. Not only have we not received “complete transparency”, but the American public is being denied even the most basic information on where the money is being spent.

http://www.openthegovernment.org/article/articleview/342/1/115/?TopicID=  

One article noted, “The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral. Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn’t require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.”                                                                        

http://josh-of-arc.newsvine.com/_news/2008/11/12/2104122-fed-loans-2-trillion-but-wont-say-to-who

In other words, the Congress and the Administration are not implementing any of the “protections” they promised the public for their tax dollars.

BLOOMBERG.COM describes it this way, “Fed Defies Transparency Aim in Refusal to Disclose”,  The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral. Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn’t require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.                                                    http://www.bloomberg.com/apps/news?pid=20601087&sid=ahdVHk_Ccoeg&refer=home 

 

In addition, few in the American Public realize the “Bailout” money is being used to pay for items never approved by Congress and vehemently opposed by nearly all of the American public during the pre-vote debate. A recent article titled, “Bail-Outrage: Misuse of Funds, Lack of Transparency a National Disgrace”, noted, “Many Americans are understandably outraged by the bailout fever that has gripped Washington this year. But even those who believe the bailouts are a “necessary evil” would have a hard time defending some of the bailout-related items that have come to light in recent days, including:

  • Financial institutions using TARP bailout money to pay executive bonuses. The firms, of course, say it’s “different” money and bonuses are key to retaining top employees. But if you need to come to the government for a handout, shouldn’t your executives forgo a bonus? Or shouldn’t the government make canceling bonuses a condition of getting aid, as is the case in Europe?
  • The Fed refusing to reveal who received almost $2 trillion in non-TARP loans, or what collateral it has accepted from “emergency” loans made to struggling firms, as Bloomberg reports.
  • The Treasury Department providing a tax break to banks involved in acquisitions that could amount to $140 billion. The Washington Post reveals the change to the tax code was issued on Sept. 30, while Congress was debating the $700 billion TARP bill.

The bailouts are bad enough. But this kind of chicanery and lack of transparency makes me recall a line from another time when fear and deceit dominated Washington: Have they no shame, at long last?

http://finance.yahoo.com/tech-ticker/article/125352/Bail-Outrage-Misuse-of-Funds-Lack-of-Transparency-a-National-Disgrace?tickers=GS,MS,JPM,BAC,C,WFC,XLF             

http://www.dailyherald.com/story/?id=249779

The only relief seen by the American public has come from private efforts made by the Mortgage Companies. An example is the recent announcements made by Citigroup, “Citigroup to Modify Terms for U.S. Mortgages” as reported by the Wall Street Journal. http://online.wsj.com/article/SB122636776229916053.html 

Citigroup’s actions are unrelated to any bailout activity. Why is Citigroup doing this? Because it makes good business sense for Citigroup, that is why. “The push by the New York Company’s Citi-Mortgage unit marks the latest effort by a financial institution to help ailing homeowners, which also can help lenders reduce loan losses.” [In other words, Citigroup doesn’t lose money when homeowners can stay in their homes and make payments]. “The company ultimately expects to reach 500,000 customers whose mortgages it owns. Roughly 130,000 of those borrowers are likely to see a reduction in their monthly loan payments, Citi-Mortgage said.” Citigroup’s efforts have been matched by J.P. Morgan Chase & Bank of America. http://online.wsj.com/article/SB122636776229916053.html

This is being done without the sale of “toxic debt” or “cash infusions”, it is being done by having the bank simply renegotiate its outstanding mortgages – it costs the taxpayer nothing

Contrary to what the public has been told, a very significant portion of Citigroup’s “bad mortgages” involve investment properties and not family residences. “Citi-Mortgage also is halting foreclosures for about 16,000 borrowers who are behind on their loan payments but are working with the company on a loan modification. About 10,000 of those borrowers live in their homes and are likely to get their mortgage terms reworked, while about 6,000 are investors, according to the company.” [Almost 40% of the mortgages in foreclosure are investment properties]. http://online.wsj.com/article/SB122636776229916053.html

Treasury Secretary Henry Paulson said Wednesday the $700 billion government rescue program will not be used to purchase troubled assets as originally planned …. He announced a new goal for the program to support financial markets, which supply consumer credit in such areas as credit card debt, auto loans and student loans……. The administration decided that using billions of dollars to buy troubled assets of financial institutions at the current time was “not the most effective way” to use the $700 billion bailout package, he said. ……. The announcement marked a major shift for the Administration which had talked only about purchasing troubled assets as it lobbied Congress to pass the massive bailout bill.”  http://news.yahoo.com/s/ap/financial_meltdown

The Author of this article is showing their political bias when the fail to mention the roll of the Democratic Congress in this mess.  

The Democratic Congress is “leading the charge” for making the modifications.

The fact that the original legislation only allowed for, “H. R. 1424 As Amended; A bill to provide authority for the Federal Government to purchase and insure certain types of troubled assets” is not being discussed. The current change in direction was not authorized by the “Bailout Vote”.

The Washington Post was just one of the publications to confirm these facts, “Urgently shifting course …….  abandoning the centerpiece of its massive $700 billion economic rescue plan and exploring new ways to shore up not only banks but credit-card, auto-loan and other huge nonbank businesses. Democrats are pressing hard to include a multibillion-dollar bailout for faltering automakers, too, over Administration objections. Unimpressed by any of the talk on Wednesday, Wall Street dove ever lower.” http://washingtontimes.com/news/2008/nov/12/paulson-says-troubled-assets-will-not-be-purchased/

So now the “Bailout” money will go to pay bonuses not just for Wall Street Executives but for overpaid UAW & Auto Industry Executives too. Whether “credit card”, “auto loans” or “student loans” should be included in the “original bailout” was discussed by Congress and the Senate just 5 weeks ago. After consideration, the Congress and the Senate rejected proposals to include those items, after being added to the Administrations original “Bailout Proposal” by Democrats in Congress, the items were deleted in an attempt to obtain the necessary Republican support in the House.  The items were added back in by the Democratic Senate. They were not authorized in the original legislation.      

The proposed bailouts to what the Wall Street Journal refers to as “The Old American Industry” will cost taxpayers $375,000 per employee. A $75 Billion Dollar “Bailout” of the “Old” American auto industry will not save it. Chrysler LLC is not even a publicly owned company. It is a privately owned company. So how do we know who will really get the money the Government is being asked to give to Chrysler?

https://mcauleysworld.wordpress.com/2008/11/11/stop-the-detroit-3-bailout-375000-cost-per-employee-to-taxpayers/ 

https://mcauleysworld.wordpress.com/2008/11/07/obama-granholm-pelosi-waxman-dingell-the-death-of-american-automobile-manufacturing/

Given all the falsehoods about the first “Bailout” package, how can anyone be sure that the money will get to where they say they will spend it.

As to GM, Duetsche Bank stated a “bailout” would be needed to avert a collapse of GM and that even if GM received “bailout funds” and  “… GM succeeds in averting a bankruptcy, we believe that the company’s future path is likely to be bankruptcy-like,” analyst Rod Lache said in a research note, essentially calling the company’s shares worthless with a price target of $0, reduced from $4.”  

http://www.marketwatch.com/news/story/Deutsche-Bank-cuts-GM-sell/story.aspx?guid={CAFEF63F-017D-42E2-874A-14146A6D20A5}

As to Chrysler, it has been reported that, “In the Chrysler-like approach, potentially 98% of the  company’s equity would be transferred to the UAW, VEBA, existing GM debt holders and the government,” Barclays’ analysts noted. VEBA is short for Voluntary Employees Beneficiary Association, a trust set up for managing health-care benefits to be overseen by the United Auto Workers of America. That would leave little for shareholders.” http://www.marketwatch.com/news/story/Deutsche-Bank-cuts-GM-sell/story.aspx?guid={CAFEF63F-017D-42E2-874A-14146A6D20A5}

 

Without private investment, how many more “cash infusions” will taxpayers be asked to make to reward bad business management? 

 

According to the U.S. Bureau of Economic Analysis motor vehicles, bodies, trailers, and parts represented less than 1% of the country’s entire gross domestic production in 2007. One half of that total is attributable to the “New Auto Industry” that isn’t asking for a “Bailout” nor is the “New Auto Industry” part of “Bailout” discussions.

http://www.marketwatch.com/news/story/Deutsche-Bank-cuts-GM-sell/story.aspx?guid={CAFEF63F-017D-42E2-874A-14146A6D20A5} .  

 

We are talking about Billions in bailouts for the “Old Auto Industry” that is responsible for less than 1/2 a percent of the Country’s Gross National Production. That is simply a bad bet for American consumers and the taxpaying public.

   

How many billions more will Congress throw at a problem they don’t know how to fix. Isn’t it time to stop “throwing good money after bad”. 

Is it time for the American taxpayer to say NO. Contact your Congressperson and Senator and demand that they schedule the hearings we should have had in the first place. CONGRESS IS NOT KEEPING THEIR PROMISES ABOUT THE BAILOUT. WHAT THEY ARE DOING IS NOT WORKING. WHAT THEY ARE DOING IS MAKING THINGS WORSE WHILE RUNNING UP YOUR TAX BILL.

Contact Your Congressperson & Senators here: http://www.congress.org/congressorg/home

One Click Access –you only need your “Zip Code” in the “Find Your Officials Tab”

Why isn’t the bailout working? Because the Government has done nothing to correct what caused the financial collapse. What caused the financial collapse? A change in lending rules that gave money to people who could not pay it back. The loans (car, credit card and home mortgages) were then packaged and sold as securities in America and around the world. Mortgages were written at 140% of the “inflated value” of the homes. Individuals were encouraged to “roll over” credit card debt, auto and student loans into their “mortgages”. Now that the “pyramid scheme” has collapsed the Government has done nothing to prevent it from happening again. NINJA & LIAR Loans are still the “law of the land”. Why won’t banks loan, why won’t investors buy the securities? They don’t want to get stuck with another group of “bad loans” or “bad investments”. The bailouts are simply rewarding the bad actors and preventing the tough but necessary changes we need to get the Country back on the right track.

 

WHERE WILL THESE BAILOUTS END – CONSIDER THIS:

AIG’S NEW BAILOUT – November 10, 2008

The U.S. government reached a deal Sunday night to scrap its original $123 billion bailout of American International Group Inc. and replace it with a new $150 billion package, according to people familiar with the matter. Under the terms ironed out late Sunday, the government would give AIG more money, including $40 billion from the U.S. Treasury’s $700 billion Troubled Asset Relief Program. The $150 billion in government aid consists of a $60 billion loan, a $40 billion preferred-stock investment and $50 billion in capital.   

http://online.wsj.com/article/SB122627437470412029.html

This is a 20% increase after only 5 weeks.

 

WHERE WILL THIS ALL END – CONSIDER THIS

AIG’S NEW BAILOUT – November 10, 2008

The U.S. government reached a deal Sunday night to scrap its original $123 billion bailout of American International Group Inc. and replace it with a new $150 billion package, according to people familiar with the matter. Under the terms ironed out late Sunday, the government would give AIG more money, including $40 billion from the U.S. Treasury’s $700 billion Troubled Asset Relief Program. The $150 billion in government aid consists of a $60 billion loan, a $40 billion preferred-stock investment and $50 billion in capital.  

http://online.wsj.com/article/SB122627437470412029.html 

AND THIS

City Council: Detroit needs $10-billion bailout

The Detroit City Council passed a resolution today calling for a $10-billion bailout for the city of Detroit. Council President Pro Tem JoAnn Watson sponsored the resolution to use the money for public service employment, to fund mass transit plans and to place a moratorium on home foreclosures for two years. The resolution specifically requests the council meet with Mayor Ken Cockrel Jr., Gov. Jennifer Granholm, the state’s congressional delegation, U.S. House Speaker Nancy Pelosi and officials from President George W. Bush’s office and President-Elect Barack Obama’s transition team. 

Mayors want part of auto bailout

The mayors of four large Metro Detroit communities on Monday called for a share of the federal bailout sought by Detroit’s Big Three automakers to help redevelop shuttered facilities and factories.

The mayors of Warren, Sterling Heights, Livonia and Dearborn met at the Sterling Heights Public Library for about an hour to discuss the proposal. The mayors were joined by representatives from Gov. Jennifer Granholm’s office, Michigan’s congressional delegation, the Michigan Economic Development Corp., the Southeast Michigan Council of Governments and the Michigan Municipal League.

VIDEO: ACORN To Get Bailout Money – Starting The Next Mortgage Crisis Today

THE WALL STREET JOURNAL

Re-Seeding the Housing Mess – Bailout Money To ACORN 

Money Won’t Go To Repay Taxpayors 

Taxpayers are naturally suspicious that political insiders and contributors on Wall Street are going to make out like bandits once Washington starts spending the $700 billion in the financial market rescue. But Democrats have already decided to spin off potentially billions of taxpayer dollars from the bailout fund to their own political buddies — not on Wall Street but on nearby K Street.

The House and Senate Democratic drafts contain an indefensible and well-hidden provision. It would mandate that at least 20% (MY READING OF THE LANGUAGE INDCIATES THAT ALL OF THE MONEY WILL GO TO THESE ORGANIZATIONS) of any profit realized from the sale of each troubled asset purchased under the Paulson plan be deposited in either the Housing Trust Fund or the Capital Magnet Fund. Only after these funds get their cut of the profits are “all amounts remaining . . . paid into the Treasury for reduction of the public debt.”

Here’s the exact, amazing language from the Democratic proposal, breaking out how the money would be divided and dispensed:

“Deposits. Not less than 20% of any profit realized on the sale of each troubled asset purchased under this Act shall be deposited as provided in paragraph (2).  (This poorly drafted language does not provide a cap – just “not less than 20%” – this is what you get when you “rush” and “cobble” legislation together you get “crap” like this.) 

Use of Deposits. 65% shall be deposited into the Housing Trust Fund established under section 1338 of the Federal Housing Enterprises Regulatory Reform Act . . . ; and 35% shall be deposited into the Capital Magnet Fund . . . (EXCUSE ME BUT 35% + 65% = 100%, and with no “cap” specified above there could well be nothing left to deposit into the Treasury under the paragraph below. 

“Remainder Deposited in the Treasury. All amounts remaining after payments under paragraph (1) shall be paid into the General Fund of the Treasury for reduction of the public debt.”

What we have here essentially are a pair of government slush funds created in July as part of the Economic Recovery Act that pump tax dollars into the coffers of low-income housing advocacy groups, such as Acorn.

Acorn, one of America’s most militant left-wing “community activist groups,” is spending $16 million this year to register Democrats to vote in November. In the past several years, Acorn’s voter registration programs have come under investigation in Ohio, Colorado, Michigan, Missouri and Washington, while several of their employees have been convicted of voter fraud.

Along with other potential recipients of these funds, including the National Council of La Raza and the Urban League, Acorn has promoted laws like the Community Reinvestment Act, which laid the foundation for the house of cards built out of subprime loans. Thus, we’d be funneling more cash to the groups that helped create the lending mess in the first place.

This isn’t the first time this year that Democrats have tried to route money for fixing the housing crisis into the bank accounts of these community activist groups. The housing bill passed by Congress in July also included a tax on Fannie Mae and Freddie Mac to raise an estimated $600 million annually in grants for these lobbying groups. When Fannie and Freddie went under, the Democrats had to find a new way to fill the pipeline flowing tax dollars into the groups’ coffers.

This is a crude power grab in a time of economic crisis. Congress should insist that every penny recaptured from the sale of distressed assets be dedicated to retiring the hundreds of billions of dollars in public debt that will be incurred, or passed back to taxpayers who will ultimately underwrite the cost of the bailout.

The idea that special-interest groups on the left or right should get a royalty payment for monies that are repaid to the Treasury is a violation of the public trust. We’re told the White House and House Republicans are insisting that the Acorn fund be purged from the bailout bill. The Paulson plan is supposed to get us out of this problem, not start it over again.

http://online.wsj.com/article/SB122247015469280723.html?mod=rss_opinion_main

Contact your Congressperson And Senators NOW – Tell them to vote NO.

Contact Your Senators Here:  http://www.emailyoursenator.com/senators.html  Click on your Senators, Select the Contact Folder and then  click on the email address.

Contact Congresspeople: http://www.house.gov/zip/ZIP2Rep.html You’ll need your zip  code

McCauleysweblog: The following Articles describe the role of “political ideology” in the Financial Crisis – How Politics fueled the crisis:

Professor Stan Liebowitz: The Real Scandal – http://www.nypost.com/seven/02052008/postopinion/opedcolumnists/the_real_scandal_243911.htm?page=0

Professor Thomas J DiLorenzo: The CRA Scam and its Defenders: http://www.mises.org/story/2963

John R Lott, Jr : Analysis – Reckless Mortgages Brought Financial Market To Its Knees http://www.foxnews.com/story/0,2933,424945,00.html

Infamous Video of Committee Meeting on Fannie Reformhttp://www.youtube.com/watch?v=_MGT_cSi7Rs&eurl=http://gatewaypundit.blogspot.com/2008/09/devastating-dems-refuse-to-reform.html

Obama Renews Pledge – $50 Billion To Foreign Poverty – During Address To Clinton Group In NY

Speaking to the Clinton Global Initiative, Obama renewed his pledge below.

Obama Pledges $50 Billion to “International Poverty” – Why Not America First

By Bill Sammon

Barack Obama, who lamented Friday that “we have not managed our federal budget with any kind of discipline,” is nonetheless promising to spend $50 billion on a United Nations anti-poverty program that critics say will drive up American debt.

“The short-term weakness in the capital market is a reflection of long-term problems that we have in our economy,” Obama told reporters in Florida. “We have been loading up enormous amounts of debt.”

Yet Obama and his running mate, Joe Biden, have pledged tens of billions in new spending on a U.N. program that promises cash to poor countries. The program is one of eight sweeping “Millennium Development Goals” the U.N. adopted in 2000.

“Obama and Biden will embrace the Millennium Development Goal of cutting extreme poverty around the world in half by 2015, and they will double our foreign assistance to $50 billion to achieve that goal,” the candidates vow in their campaign platform.

Johns Hopkins professor Steve Hanke said such spending would merely drive up American debt, while doing almost nothing for the world’s poor.

“It goes down a bureaucratic rat-hole, lining the pockets of people who are connected to the power structure,” said Hanke, a senior fellow at the Cato Institute. “It’s basically a system to redistribute income from middle class people in the United States to rich people in poor countries. It never reaches those people who are living on a dollar a day.”

Hanke said such expenditures are especially unwise in the wake of significant expansions of government and spending during President Bush’s tenure.

“We’ve been spending like drunken sailors and making obligations into the future like drunken sailors,” he said. “We’re on an unsustainable path in terms of the fiscal situation in the United States because of massive spending growth and commitments.”

Obama said he wants to curtain at least one of those costly commitments.

“We have spent well over half a trillion dollars — soon to be a trillion dollars — on a war in Iraq, despite the fact that Iraqis are now running surpluses,” the Illinois senator said Friday. “We’re still spending $10 billion a month there.”

But in December, Obama also sponsored the Global Poverty Act which, if passed, would require the president to commit to cutting global poverty in half by 2015. Critics say that would cost American taxpayers $845 billion.

Susan Rice, one of Obama’s top foreign policy advisers, says the U.S. should give 0.7 percent of its Gross Domestic Product to developing nations.

Bill Sammon is Washington deputy managing editor for FOX News Channel.

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