Financial system is melting - Fed is trying to throw water on the fire

This is going to be a difficult day for the financial markets. From BBC News :

Markets from New York to Tokyo have recorded heavy losses in reaction to the emergency bailout of US investment bank Bear Stearns over the weekend.

In New York the Dow Jones Industrials tumbled 194 points, more than 1.5%, in early trading before recovering.

London's FTSE 100 index was down 2.7%, in Paris the Cac 40 slumped 2.9% and Frankfurt's Dax fell 4.1%.

European banks have been hit. UBS plunged 13.1%, Societe Generale fell 9.1% and Commerzbank was down 7.9%.

US banks were hammered in pre-market trading, with Lehman Brothers down 30%.

What happened? Also from BBC News:

JPMorgan Chase is to buy Wall Street's fifth-largest investment bank, Bear Stearns, for $2 a share - a fraction of its previous value.

The news has rattled investors worldwide, who fear that the credit crisis is deepening.

The bank got into trouble over its sub-prime mortgage debts, and other banks had stopped lending to it.

The rescue has been backed by the US Federal Reserve, who will lend $30bn and lower its discount rate to 3.25%.

But Bear Stearns' disappearance is just the top story in a series of bad news financial stories.

• BBC News :

  US banking giant Citigroup has reported a $9.83bn (£5bn) net loss for the last three months of 2007.
  
  Chief executive Vikram Pandit said the loss had been caused by a $18.1bn exposure to bad mortgage debt and was "clearly unacceptable".
  
  The company, the largest banking group in the US, said revenues during the fourth quarter fell 70% from a year earlier to $7.2bn.

• BBC News

  Merrill Lynch posts $7.8bn loss
  Wall Street banking giant Merrill Lynch has unveiled a huge loss for 2007, crippled by exposure to risky investments in the US housing market.
  
  It made a net loss of $7.8bn (£3.9bn) in the 12 months to the end of December from a net profit of $7.5bn in 2006.
  
  The loss includes a massive $14.1bn write-down on failed investments related to sub-prime mortgages.
  
  Merrill Lynch is the latest big bank to reveal losses related to the crisis in the US mortgage market.
  
  Earlier this week, Citigroup and JP Morgan also announced write-downs because of their exposure to the crisis in the sub-prime loan sector, which focused on consumers with poor or non-existent credit histories.
  
  JP Morgan Chase said its earnings for the last three months of 2007 fell 34%, while Citigroup reported a $9.83bn net loss for the last three months of 2007.

• BBC News

  HSBC in $17bn credit crisis loss
  HSBC, the UK's largest bank, has said it has made a $17.2bn (£8.7bn) loss after the decline in the US housing market hit the value of its loans.
  
  But its annual profits still rose 10% to $24.2bn (£12.2bn), up from $22.08bn the year before.
  
  The write-down is the largest of the big-five UK banks because HSBC has large operations in the US.
  
  The bank said the global financial system had come under "extraordinary strain" in 2007.
  
  "The outlook for the rest of 2008 is uncertain," said HSBC chairman Stephen Green.
  
  "The economic slowdown and the credit outlook in the US may well get worse before they get better," he added.

• Bloomberg financial news

  March 16 (Bloomberg) -- The Federal Reserve, in emergency decisions aimed at containing a crisis of confidence in the U.S. financial system, cut the rate on direct loans to commercial banks and opened up borrowing at the rate to securities firms.
  
  The moves, coming in an announcement timed for the start of trading on the Tokyo Stock Exchange, included commitments to encourage JPMorgan Chase & Co. to buy Bear Stearns Cos. after a run on the firm threatened the stability of global markets. The Fed also extended the maximum term of loans to commercial banks to 90 days from 30 days.
  
  The Fed's first weekend change in borrowing costs since 1979 is Chairman Ben S. Bernanke's latest step to alleviate a credit squeeze that's exacerbating the U.S. economic slowdown. The dollar tumbled to a 12-year low against the yen and Treasury notes rallied as traders increased bets that officials will reduce their main rate by 1 percentage point when they meet on March 18.
  
  ``Clearly, the Fed is trying to provide more liquidity to prevent a more vicious cycle and race to the bottom,'' said Gary Schlossberg, senior economist at Wells Capital Management in San Francisco, which oversees $200 billion. ``The problem is there's so much concern about credit quality that now there are solvency issues, and it's something the Fed has a more difficult time dealing with.''

So what is happening? Krugman told us last Friday:

Four years ago, an academic economist named Ben Bernanke co-authored a technical paper that could have been titled “Things the Federal Reserve Might Try if It’s Desperate” — although that may not have been obvious from its actual title, “Monetary Policy Alternatives at the Zero Bound: An Empirical Investigation.”

Today, the Fed is indeed desperate, and Mr. Bernanke, as its chairman, is putting some of the paper’s suggestions into effect. Unfortunately, however, the Bernanke Fed’s actions — even though they’re unprecedented in their scope — probably won’t be enough to halt the economy’s downward spiral. [Snip]

These days, it’s rare to get through a week without hearing about another financial disaster. Some of this is unavoidable: there’s nothing Mr. Bernanke can or should do to prevent people who bet on ever-rising house prices from losing money. But the Fed is trying to contain the damage from the collapse of the housing bubble, keeping it from causing a deep recession or wrecking financial markets that had nothing to do with housing.

So Mr. Bernanke and his colleagues have been doing the usual thing: printing up green paper and using it to buy bonds. Unfortunately, the policy isn’t having much effect on the things that matter. Interest rates on government bonds are down — but financial chaos has made banks unwilling to take risks, and it’s getting harder, not easier, for businesses to borrow money.

As a result, the Fed’s attempt to avert a recession has almost certainly failed. And each new piece of economic data — like the news that retail sales fell last month — adds to fears that the recession will be both deep and long.

So now the Fed is following one of the options suggested in that 2004 paper, which was about things to do when conventional monetary policy isn’t getting any traction. Instead of following its usual practice of buying only safe U.S. government debt, the Fed announced this week that it would put $400 billion — almost half its available funds — into other stuff, including bonds backed by, yes, home mortgages. The hope is that this will stabilize markets and end the panic.

Officially, the Fed won’t be buying mortgage-backed securities outright: it’s only accepting them as collateral in return for loans. But it’s definitely taking on some mortgage risk. Is this, to some extent, a bailout for banks? Yes.

Still, that’s not what has me worried. I’m more concerned that despite the extraordinary scale of Mr. Bernanke’s action — to my knowledge, no advanced-country’s central bank has ever exposed itself to this much market risk — the Fed still won’t manage to get a grip on the economy. You see, $400 billion sounds like a lot, but it’s still small compared with the problem. [Snip]

...there’s only so much the Fed — whose resources are limited, and whose mandate doesn’t extend to rescuing the whole financial system — can do when faced with what looks increasingly like one of history’s great financial crises.

The next steps will be up to the politicians.

The most certain predictor of which party wins the Presidency over the last half century has been the economy. An economic downturn has been sufficient to change the incumbent party to the outside one. We are now clearly in a recession, and it is getting worse.

The Republican Party in Congress has shown remarkable discipline in being totally obstructionist, using House and especially Senate rules over the last year to prevent any useful Congressional actions. They show no evidence of changing their ways. As a result, any significant political response to the economic conditions is unlikely to come from Congress before the election in November 2008.

Meanwhile, George Bush is performing a reprise of Herbert Hoover speeches as he stated

WASHINGTON -- President Bush said Saturday that the government must guard against going too far in trying to fix the troubled economy and that "one of the worst things you can do is overcorrect." Democrats said Bush is relying on inaction to solve the problem.

Bush said in his weekly radio address that the recently adopted program of tax rebates for families and businesses should begin to lift the economy in the second quarter and have a stronger impact in the third quarter. But he urged caution about doing more, particularly about the crisis in the housing market, where prices are tumbling and home foreclosures have soared to an all-time high.

"If we were to pursue some of the sweeping government solutions that we hear about in Washington, we would make a complicated problem even worse -- and end up hurting far more homeowners than we help," the president said.

So the problem has gone beyond what can be handled by purely economic means and become one that requires political changes. Bush, being conservative, is going to apply the Herbert Hoover solution and Congressional Republicans are working hard towards the same goal of government inaction. In 1929 the Republican solution to economic distress was to leave the problem to the economy and not take any political actions. They are at it again. They aren't called "conservatives" for nothing. The policies that failed in the past during the Depression are good enough for them again today.

So that's where the economic problems stand this morning. The set of problems has gotten sufficiently severe so that radical action is needed just to keep them from getting a lot worse, yet the Republican Party thinks they can make political gains (or stem their losses in November) by preventing any political actions from being used.

In the meantime, BBC News reports this morning that

At one stage on Monday morning it took $1.5904 to buy a euro.

and also from BBC News

The prices of oil and gold have hit records as investors have switched money into commodities to escape turmoil in other financial markets.

The main contract for US light sweet crude hit $111.80 a barrel on Monday, before slipping back.

The spot price for gold also briefly hit a record above $1,030 an ounce.

Commodity prices have been boosted by the falling dollar which hit a record low against the euro and fell to a 12-year low against the yen.

Oil prices have risen about 16% this year, gold is up 23%.

That's where things stand. America - and the world - is in the worst financial situation since the Depression, and the Republican Party is committed to preventing any effective reaction to keep things from getting worse. Even if the Republicans were not on an obstructionist binge, there isn't a lot that can be done to provide short term improvement. We're just going to have to ride this out wearing conservative shackles, like trying to swim in a flood while carrying lead weights.

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Addendum 3:17 PM CDT
If you want a sense of how severe the financial crisis is from the point of view of the professionals, go read Total BS on Wall Street by Jared Bernstein, then read the comments to his post.

Samples:

The Carlyle Capitals calls scared the sh*t out of me and now BS... . I just heard a rumor that my firm has(d) $500M in BS stock.

I thought we could lose a big bank this year. I didn't think it would be this soon, and I didn't think it would be Bear. But there you have it, and now the markets are only betting on who's next.

the subprime infection has spread to AAA instruments. So now even safe mortgage-backs are no longer safe. It's no longer the case that we can let bad-loans burn off without impacting good ones

Hate to join today's chorus, but we're screwed. Not even cheap Fed money is satisfying this beast.

A novel with Spitzer as the main character?

Like most avid readers of fiction, I have dreams of writing a novel. So I am always on the lookout for advice on what makes a novel interesting. The answer, as I normally am told, is character. But what is it that makes a character in a novel interesting?

Richard Russo, using Eliot Spitzer as an example, explains. It's complexity of character.

My fictional Eliot would be complex, would contain paradoxes. He would not be a hypocrite. My Eliot would believe with his whole heart in his crusades against the corrupt and the powerful and the privileged, even as he worked studiously to undermine his legacy. Fiction can accommodate such paradoxes, provided they're explained.

But I don't mean to jigger the facts; fictive Eliot will do exactly what the real Eliot has done, only my guy almost never imagines getting caught. And when he does occasionally consider the possibility, he trusts that there will be ample warning that disaster is imminent. For the most part, things in his life have happened slowly, especially the good things, and he trusts that bad things will evolve similarly. He will swerve at the last moment. The possibility of a head-on collision, swift and devastating, simply never occurs to him.

Even worse, though he knows that the world doesn't work this way, he convinces himself that if he's caught, people will treat him fairly. Sure, he has shamed himself, but he's done a lot of good things, too, and people will remember that. He has always employed a kind of moral arithmetic, and he'll expect that same math to be applied to him -- all his virtues set up on one side of the ledger, his one weakness on the other. People will understand that he's mostly good. By the time my Eliot realizes that he's wrong about all this, it's too late. The damage is done. He has betrayed his wife, his children, his best self, and it's all his fault.

Okay, that's my thumbnail fictional Eliot; a little thin, and maybe I like him too much. Not giving his nasty, righteous streak enough play. It's possible I'm giving him more credit than God would, but then God has the advantage of knowing what Eliot and I are still trying to figure out. I'll learn more as I write, but there are other characters to consider.

First, Eliot's wife -- and here I sense a mystery even deeper than the mystery of Eliot himself. Why does she stand there beside him at the podium when he confesses? Why do they all? I feel uniquely unqualified to look inside her heart, to ferret out her motives. I make a list of what I know (not much) and what I suspect (not much more) and wonder whether imagination will fill in all those blanks. I'm relatively certain of one thing: It's not this woman's fault. I won't portray her as frigid or otherwise complicit in what has transpired. She hasn't driven Eliot to any of this. I don't believe in perfection, but I've decided for the time being that she's been a good wife, a good mother.

What I know about marriage is that identities over time tend to merge. Eliot's wife was once her own person, but down the years she's lost some of that individuality, surrendered it willingly, never suspecting she might have further use for it. If she's not this man's wife, then who is she? Worse, can she abandon her husband without implying that her daughters should do the same to their father? And what was that promise that she made? For better or for worse? Did she mean that or just say it? How could it be that she was able to imagine the better so vividly, the worse not at all? Was that his fault for leaving so few clues, or hers for ignoring the few there were? The facts of her situation are simple and clear. Why aren't her emotions? Why won't they stand still so she can examine them?

And what of those daughters? This is the hardest part for my Eliot. What really tears him apart is that when the news breaks, these girls are going to have to go to school. He sees them in his mind's eye now and can think of little else. Sees them alone and isolated, all the other kids talking about them, growing silent when his girls walk into the room. This won't go on forever, but to them it will seem like forever. Eliot also fears that he's done them long-term damage. Some of it can be repaired. They're good, smart girls, and they won't grow up hating all men. But their innocence has fled; they look at him now like a man wearing a partially removed disguise. Never again will they take anything on faith. They will be cautious in the living of their lives, taking nothing at face value. They'll brace for impact when there's no reason. He could have spared them all this, yet managed not to.

The novel's getting pretty dark, and that worries me. Time for a little comic relief. Real-life Eliot has few friends, we're told, the natural result of what some people like to call his arrogance, though my Eliot has never thought of it in those terms until now. Arrogant? He'd simply tried to put criminals in jail where they belonged. Wasn't that his job? Is that any reason he should be friendless now? So I'll give my Eliot one friend, someone to help him put what he's done into perspective. I'll give this friend some of my own cynical humor. Ah, what the hell, I'll give him my name. Call him Rick. I can change that later with a keystroke.

Before everything begins to unravel, Eliot confides to Rick that he's made a mess of things, betrayed everyone he loves, that he isn't even sure who he is anymore. But Rick will tell him not to be melodramatic. It's true that he's made mistakes, big ones, Rick explains, but they aren't what Eliot thinks they are. Rick admits he's outraged that Eliot has spent $80,000 on prostitutes, because it shouldn't cost that much to get a little action in America. It's like one of those $500 Pentagon hammers. Downright wasteful. And why order a hammer from New Jersey and pay the shipping? There are perfectly good hammers in Washington -- it's a damned city of hammers, when you think about it. Where on earth did Eliot get the idea that New Jersey hammers were superior? All he wanted to do was nail something, right?

Don't joke, Eliot tells Rick. This isn't funny; he could go to jail. But to Rick's way of thinking, that's the biggest joke of all. Your average CEO can claim millions in salary and stock options in the same year his company is going down the tubes, and it's all perfectly legal. You want to know what you're really guilty of, Eliot? Cluelessness. You didn't forget who you are, you forgot where you are. This is America, pal, where you can lead the nation into war on false pretenses and be rewarded with a second term in office, but where illicit sex is and has always been an impeachable offense. (Note to self: A little of this Rick character goes a long way.)

How will my Eliot's story end? Do I wait for real-life events to unfold or make something up? What kind of story will it be? A tragedy? Maybe, but somehow I don't think so.

My Eliot's no Gatsby, and there's no reason he should wind up floating face-down in the pool. What he's really done is blown it. He's had a great opportunity, and he's blown it. There will be both private and public consequences. He will be punished, and he will punish himself. He will survive. So will his family. People do. What is the basis for such breezy optimism? Well, for one, there's historical precedent. Hillary Clinton wasn't done in by her knucklehead husband. I wouldn't pretend to know what's in her heart, but she's clearly functioning. And Chelsea, God love her, seems to have weathered the effects of her old man's late-onset adolescence.

I'm not going to write a novel based on Spitzer, and I'll probably never finish either of the two novels I have played with for years. But this analysis tells me why Spitzer's story on the news interests me as much as it does, and why I find the news reports so unsatisfying. The reporters keep trying to simplify Spitzer's character so that is can be explained in a single sentence.

I guess they are too busy just trying to report the car wreck on I-95 or the IED in Iraq to bother with describing a complex character. Those reporters will never finish their novels or get them published, either. Too much fact, explanations that are too simple. Even when such an excellent example of a complex, paradoxical character as Elliot Spitzer is simply handed to them on a plate with a bow wrapped around him.

---

Thanks to the inimitable Laura Rozen of War & Piece who directed me to this excellent report in the Washington Post. But for her I would have missed it.

Recession is here - WSJ reports 70% of economists agree

From the WSJ:

Economists in the latest Wall Street Journal forecasting survey are increasingly certain the U.S. has slid into recession, a view reinforced by new data showing a sharp drop in retail sales last month.

"The evidence is now beyond a reasonable doubt," said Scott Anderson of Wells Fargo & Co.

Thirty-six of 51 respondents, or more than 70%, said in a survey conducted March 7-11 that the economy is in recession.

So what's wrong with the other 15 economists?

Now, when does the WSJ recognize that the Recession will last at least through 2009?

Dollar collapsing 03/14/2008

I can't be the only one who saw this coming. I can only assume that the financial media simply didn't want it reported. December 21, 2006 I wrote a post entitled Watch the dollar in 2007. Obviously the problems were predictable. Here is the new report from the Associate Press (by way of TPM.)

ALAN CLENDENNING
AP News

Mar 13, 2008 14:04 EST

Antique store owners in lower Manhattan, ticket vendors at India's Taj Mahal and Brazilian business executives heading to China all have one thing in common these days: They don't want U.S. dollars.

Hit by a free fall with no end in sight, the once mighty U.S. dollar is no longer just crashing on currency markets and making life more expensive for American tourists and business people abroad; its clout is evaporating worldwide as foreign businesses and individuals turn to other currencies.

Experts say the bleak U.S. economic forecast means it will take years for the greenback to recover its value and prestige.

So how did we get here? Here are a few posts from 2007 that provide examples:

• Dollar still dropping Sunday, October 28, 2007
• The dropping dollar and the price of oil Monday, October 29, 2007
• Dollar value uncertain - inflation and recession or healthy economy coming? Monday, November 05, 2007
• Iran stops trading oil in dollars Saturday, December 08, 2007
• Dollar Still dropping (Feb 2008) Wednesday, February 27, 2008

The dollar has been artificially too high for years, but that was for political purposes. The Bush administration has been using this artificially high dollar and borrowed internationally (especially from China) to fund the war in Iraq and the tax cuts for the wealthy.

The low interest rates and bad underwriting procedures Alan Greenspan permitted and encouraged during Bush's first term in order to ensure his reelection created the Housing bubble. The collapse of the housing bubble has effectively destroyed the American credit market and is throwing the economy into the current recession. The only solution available to the federal reserve is to lower interest rated. (Anyone want to argue that when Alan Greenspan started increasing interest rates a quarter percent per month in February 2005 that he let is go too long and interest rates got too high too fast?)

Now the bill for all the borrowing the Bush administration has done to pay for their war in Iraq is coming due. The economy is in recession and the federal reserve is having to lower interest rates .

But lowering interest rates makes the dollar less attractive internationally. So the value of the dollar is dropping. How far? Well, Ben Bernanke is expected to lower interest rates again later this month. So the fall will continue.

As the dollar falls, the price of oil to run the economy will keep going up. So will everything else Americans buy internationally. Can you spell I-N-F-L-A-T-I-O-N?

It has already started. Food prices have gone up sharply starting in December 2007, and the price of gasoline has gone high enough to reach the headlines and the TV "News".

Inflation, of course, means that lenders will raise interest rates on their loans, and this is beyond the control of the Federal Reserve. So the economy will continue to sputter along, the fed will continue to try to lower interest rates, and we will all suffer with inflation as well.

It is interesting that the unemployment rate has not gone up. That's not the same as saying that there are not enough jobs being created in the economy to bring in the new workers. It says that a lot of people simply don't think that they can find a job so they have quit trying. So what, you say? Low unemployment means that wages will not be bid up. So along with inflation and shortage of jobs, wages will not keep up with inflation. For most workers additional skills and training will not improve their conditions.

So how long will this set of problem be inflicted on the American workers? As I said in December 2006 - "Watch the dollar"

There is a whole set of problems (most set in place or aggravated by conservative economic policies of the Reagan Revolution) but they will work their way out after a period of suffering. The indicator that things are starting to get better will be the international value of the dollar. The dollar will continue to fall as long as the problems are getting worse. At some point after international speculators and investors decide the worst has passed and things are getting better, the dollar will level off and possibly even recover a little. That turning point is what we are all looking for.

It won't be soon. The announcements in the business press that things will start getting better in 2009 are optimistic, based on hope rather than knowledge. When asked why they make that prediction, everyone will say fuzzy stuff like "The economy is inherently strong and should quickly recover." That's as far as their thought goes. They have no current facts to demonstrate inherently strong, just feelings like "It's always gotten better quickly." Or "We know more about the economy than we did during the Depression." Yeah, and the Japanese economists knew about the Depression and still underwent a decade of really slow economic growth. America is in uncharted economic waters, so hope isn't going to provide any realistic answers and experience in financial markets is more likely to be a negative than be useful.

So we need to keep watching the value of the dollar. It's the canary in the mineshaft, but to mangle the allusion, right now the canary is dead. We are looking for its resurrection. Maybe in 2010?

Whining about super delegates deciding between Clintion and Obama

When the Democratic National Convention meets in Denver this Summer to choose a nominee for the Presidential race, there will be three different kinds of delegates. There will be those chosen by state conventions on the basis of primary votes, there will be those chosen by state conventions based on caucuses, and there will be the party officials who are sent as what are called "super delegates."

The delegates, once there, will each have equal influence in their state delegations. None are more powerful than others according to the rules. So what can we expect from each kind of delegate? Look at their source.

The delegates selected based on primary votes represent those people who, for the most part, do not bother with politics until the media start announcing an upcoming election. The actual delegates are selected by the state conventions, so they are to some extent active in the party or they are friends of someone who is active in the party. They will in general be the least committed to the Democratic Party.

Those selected by the caucus process generally have political axes to grind. They want something from the party, not just a trip to Denver, and they were willing to spend time and effort to participate. They will tend to be much more committed to the Democratic Party itself, and perhaps to the candidate they were selected to be a delegate for.

The Super delegates are the most committed and experienced Democrats. They will be less influenced by whether some candidate represents a person like them, and a lot more influenced by whether a candidate can win the election, and upon winning, whether that candidate has coattails that other Democrats running down-ballot can expect help from.

According to The Hill the super delegates are beginning to look at Obama as the more likely of the two remaining candidates to have long coattails.

For people who whine that the candidate should not be selected by the super delegates, that's silly. The Democratic Party has two candidates remaining, either of whom is vastly superior to the presumptive Republican candidate McCain (who, himself, was the best of the Republican choices.) If the final choice between the nearly equally matched Obama and Clinton cannot be decided by the delegates selected through caucus and primary process, then it is quite appropriate for the super delegates to make the final decision based on which of the two will better build the Democratic Party for the future.

One of Jimmy Carter's great failings was that he had few coattails when elected in 1976, and then he disdained building the Democratic Party while in office. This was a time when the conservatives were working to build the Republican party, and gave us the disasters of Ronald Reagan, Bush 41, and Bush 43.

The Democrats have two excellent candidates for President and must choose only one this year. That's frankly not an easy decision, as the series of close primaries and caucuses have shown. If the primary voters and caucus attendees can't resolve the issue and the tie-breaking decisions come down to which of the two is better for the Party, then we all win. Except, of course, the second choice for the Presidential nominee. The Democrats are going to come out of Denver in better shape than they went in.

Washington Post reports on fraud at the National Republican Congressional Committee

The Washington Post provides background for the earlier report that the Financial Director of the NRCC, Christopher Ward, has apparently been embezzling money form the committee and perhaps from the campaign committees of many of the Republican Congressmen whose political fund raising committees he was director of. Some interesting vignettes:

• In the last eight years, Ward is listed as treasurer for 83 GOP fundraising committees.
• He has supervised committees that raised over "..$400 million, $368 million of it at the National Republican Congressional Committee."
• "Republican lawmakers and former committee staff members now allege that Ward fabricated audits and other financial documents for 2003 to 2006, some of which were turned over to a Wachovia Bank branch in McLean in October 2006, when the NRCC borrowed $8 million in last-minute money for congressional campaigns."
• "Rep. Peter T. King (N.Y.) ... said in an interview that he has discovered that Ward paid himself $6,000 in consulting fees from King's political action committee in 2007 -- though King believed that he had shuttered the committee early last year. Upon learning of the NRCC investigation, King said he found that his PAC remained open all of last year. Ward paid himself the fees from King's PAC, which received just three contributions and dispensed one check in 2007, FEC records show."
li>The financial problems at the cash-strapped NRCC led "...retiring Rep. Thomas M. Davis III (Va.), who chaired the NRCC for four years earlier this decade" to say "The House Republican brand is so bad right now that if it were a dog food, they'd take it off the shelf."
• "In 2005, 2006 and most of 2007, the NRCC paid Ward $80,000 to $90,000 a year, but he was one of only two full-time aides there who were allowed to work as outside consultants to lawmakers. That doubled his salary, according to a review of records compiled by CQ MoneyLine, a Web site that tracks campaign finances.
  
  In 2007, for example, Ward's consulting firm collected $100,000 from the 19 PACs and committees for which he served as treasurer. Last October, Ward left the NRCC as treasurer but remained on the payroll as a $7,500-a-month consultant."
• "Any material misstatement on a bank application is a federal crime," said Stanley Brand, a Washington defense lawyer. He said the committee probably contacted the FBI in an attempt to portray itself as the victim of a crime -- punishable by as much as $1 million in fines and 30 years in prison -- and to inoculate NRCC officials from prosecution.
  
  "They blew the whistle on themselves, which is what you'd do to protect yourself," he said.

The discovery of the fraud is one any Auditor will recognize as a classic. The fraud worked as long as the crook was in position to control all the records. Ward's reputation as a workaholic is also classic. An individual conducting a fraud cannot afford to let anyone else work on the books they are stealing from, so they do all the work themselves, rarely taking any time away from the job. Fraud requires a lot of overtime. Here is how the fraud surfaced:

The first inkling of trouble came when Conaway took over the NRCC's auditing subcommittee in early 2007. A certified public accountant himself, Conaway said in interviews that he asked for something considered routine in the corporate world: an audit of NRCC books for the previous year by an outside firm and a meeting with the auditors.

"My expectation was that that frank meeting would take three minutes," Conaway said.

Instead, Ward kept putting him off, he said. "Okay, we'll get it for the next meeting, we'll get it for you," Ward said, according to Conaway, who became suspicious of what he described as Ward's "passive aggressive" behavior.

He said Ward avoided the issue for months, until January, when Ward told Conaway that he and GOP lawmakers would meet with auditors. But Ward canceled the meeting 30 minutes before it was scheduled to begin.

Republicans called the outside firm and found out that no audits had been done since 2003. After looking at the documents Ward had given them for each year, they determined that he had fabricated them, according to Davis and other officials with knowledge of the matter, who spoke on the condition of anonymity.

This is why auditors want everyone working with accounting records to take a vacation of at least two weeks a year, so that someone else goes through the books while they are gone. Rep Conway, as a CPA himself, did what should always be done when someone new takes over supervision of the books. He asked to see the audit records and speak to the auditors who conducted oversight of the records. That's how fraud is either prevented or discovered.

So how did Christopher J. Ward become an embezzler? There are some clues in his career, but no obvious answers from current reports. He got his Political Science degree in 1990 and immediately began work in Republican politics, moving to the NRCC in the middle 90's shortly after the Gingrich-inspired take-over of the House of Representatives. He was good at his job. Ward was the guy that Republican Congressmen in trouble were steered to in order to help them get out of the trouble, an example being recently indicted Arizona Congressman Rick Renzi.

The cultural environment Ward worked in cannot be ignored. Ward's time at the NRCC went along with the Abramoff scandal, the Duke Cunningham scandal and the Bob Ney scandal, just to name the ones presently in prison. In a culture in which Republicans who believed they should each have the right to collect as much money as they could get their hands on flourished, and Ward was a key enabler of many of those who moved closest to being caught, he certainly must have felt that his expertise and efforts deserved as much financial reward as he could collect. It should be no surprise that his career bloomed as the Republican controlled Congress, and his fraud was discovered after the Republicans were removed from control of Congress.

It would be hard to overlook the moral lesson about Republican control of government in this fraud, but I'm sure the Republicans will be working hard to both obfuscate and overlook the lesson. Unfortunately, their opponents, the Democrats will be too polite to bring it up.

Christopher J. Ward has added his name to those representative of the control of the federal government by movement conservatives. Others in the pantheon include (in no particular order) Randy "Duke" Cunningham, Bob Ney, Mark Foley, Steven Biskupic,
Tom DeLay, Rachel Paulose, Alberto Gonzalez, "Scooter" Libby, John Doolittle, Jack Abramoff and many, many more.

---

The reporting on this story by Washington Post Staff Writer Paul Kane is excellent, and he should be congratulated for it.

Amazing - House Dems defend quaint rule of Law in opposition to Bush

I didn't think I'd see this. The Republicans are in the tank, and Bush/Cheney are nostalgic for a King who rules by the doctrine of the divine right of Kings. The Senate Dems, especially Sen. Jay Rockefeller (another sterling example that inherited wealth is bad for the character), have also bought into the process of destroying the Rule Of Law in America.

Apparently there remains a pocket of Americans in the House who understand that what has made America great has been the Republic under the American Constitution and the Rule of Law. The spokesman for America against the forces of darkness who control the White House is John Conyers (D-MI), supported by Nancy Pelosi. Conyers explains why the House Judiciary Committee has resoundingly rejected retroactive immunity for the telecoms. (From Paul Kiel)

the Administration has not established a valid and credible case justifying the extraordinary action of Congress enacting blanket retroactive immunity as set forth in the Senate bill."

They cite a number of factors as to why it would be inadvisable to remove the issue from the courts and give the telecoms a free pass on lawsuits challenging the program. But the overarching reason seems to be that it's far from clear that the warrantless wiretapping program was legal, as the administration insists. In fact, they write, "our review of classified information has reinforced serious concerns about the potential illegality of the Administration’s actions in authorizing and carrying out its warrantless surveillance program."

The full statement from the House Judiciary committee can be found here.

The new Bill which is expected to replace the idea of retroactive immunity for crimes previously conducted by the telecoms at the demand of the Bush administration will instead give the courts authorization to hear the classified material at issue in the case. Paul Kiel describes it here.. The House is expected to vote on it sometime today, Thursday.

More details on Spitzer

If either the prurience or the politics of Elliot Spitzer's dalliance with extremely high priced hookers has gotten your attention, then Jeralyn Merrit of Talkleft has collected a great deal of information and since she is a defense attorney, she also explains the relevance and apparent legal strategies.

Laura Rozen (War & Piece) also reports more information, this focusing especially on the details of the prostitution organization, the Emperors Club VIP. I was surprised at the prices the Emperors Club charges. This is from the New York Post (referenced by Rozen)

Two other women, Tanya Hollander, 36, a nutritionist from upstate Rhineback, and Temeka Rachelle Lewis, 32, of Brooklyn, face similar charges for handling the day-to-day business.

For several years, wealthy men could go online and pick through mini-biographies of the women. Their bodies were pictured but their faces obscured.

"Raquel," who worked in New York and LA, was described as "an avid writer, actress and journalist."

Men paid $1,100 to $5,500 an hour or could get discounted day or multiple-day rates of $25,000 to $50,000. American Express and wire transfers were accepted.

Sometimes the women took imprints of the men's credit cards on the spot and faxed them back to the pimping couple.

The operation started to unravel after one of the hookers agreed to become a confidential source for the FBI in late 2006.

If you wondered where those tax cuts that Bush and Cheney rammed through for their wealthy supporters, this is what those tax cuts were buying. Had to be. No one else except the recipients of those tax cuts could afford those prices.

Somehow this seems to me to be a real justification for a sharply progressive income tax on both investment and wage income, along with hefty inheritance taxes. Paying for sex is not either socially or economically valuable, and should be discouraged.

McCain = Bush's third term

If you like George Bush you'll love John McCain. Here is Juan Cole describing how McCain has completely adopted the Bush positions so that he can get Republican support for his run for President.

March 12, 2008 | The most important thing about the endorsements proffered to John McCain by George W. Bush and evangelist John Hagee last week was McCain's reaction to them. The freshly minted Republican nominee for president, who has had harsh words in the past for both Bush's policies and evangelical "agents of intolerance," meekly accepted their support. He knows he cannot win in November if the evangelicals and pro-war conservatives stay home. How far will McCain go in presenting himself as Son of Bush in order to energize his party's base? To date, based on his willingness to embrace the Bush agenda and to associate with religious extremists, the answer seems to be pretty far indeed.

Cole then continues to lay out how McCain has reversed his own previous positions and adopted those of George Bush in order to get the Republican nomination for President.

It's an interesting strategy for a run for President. McCain is emulating and asking for the endorsement of the single most unpopular President known since the statistics on that question started to be collected. Even Goldwater didn't adopt such an unlikely strategy for his run for the Presidency. Go read Dr. Cole's article.

The Bush obsession with Iraq

It is becoming more and more clear that the Bush administration started off in February 2001 with a plan to invade Iraq. That desire has become the central focus - in fact the obsession - of the Bush administration and of the national Republican Party. This is an effort to trace that obsession.
The Beginning

Bush administration before 9/11

The diversion into Afghanistan

The pivot back to Iraq

The failure in Iraq and the failure to justify the pivot to America

What's left in Iraq, America?

The Beginning

Where the idea of invading Iraq started is not clear, but here is a speculation. The Republicans had a real problem after 1989 when the USSR collapsed and Communism ceased to exist as a threat to America. Without a threat to America, how do Republicans get elected? How do defense contractors get new defense contracts? How do the Army, Navy and Air Force continue to justify spending more money on "defense" than all the nations in the rest of the world put together?

Saddam Hussein provided a partial answer in 1991 when he invaded Kuwait and threatened Saudi Arabia. He presented a threat to America's oil supplies and to George H. W. Bush's personal friends in Saudi Arabia, so very quickly Bush 41 organized an army sent it to Saudi Arabia, and used it to decisively defeat the Iraqi military in his 100 hour war. But he won too quickly, and it was over so that Bill Clinton could take advantage of Bush 41's lack of awareness of domestic American problems, together with Ross Perot's entry into the race, and get elected as President. This, of course, infuriated the conservatives. They understand that government is the responsibility of the elite, which incorporates Republicans and movement conservatives while automatically excluding Democrats.

The Project for the New American Century came up with a solution to the lack of an enemy for Republicans to rail against. Their 1998 Open letter to President Clinton on Iraq provided the framework for the Bush 43 administration's obsession with attacking Iraq. It immediately became the centerpiece of the Bush 43 administration as soon as he and Dick Cheney were sworn in.

Bush administration before 9/11

In my post Incompetent conservative Bush failed to prevent 9/11 I offer evidence that the Bush administration ignored the terrorist threat prior to 9/11. My speculation is that this was intentional. A terrorist attack on the American homeland could be used to justify an attack on Iraq, a nation whose military we had previously defeated easily and who was in much less capable military shape by 2001.

The diversion into Afghanistan

Osama bin Laden acted as they expected and attacked the World Trade Center and the Pentagon. Again it is speculation, but it seems likely the George W. Bush never expected Osama's attack to be so spectacularly successful. But it did provide the PR hook on which to hang an attack on Iraq. Many of us recall that Bush was immediately ready to attack Iraq, and had to be almost literally forced to attack Afghanistan, the actual source of the terrorists who committed 9/11. Sec. Def. Rumsfeld refused to send sufficient troops to Afghanistan to properly do the job, very probably because he wanted to use them in Iraq which was the central focus of the Bush administration. The escape of Osama bin Laden was one result of that penury.

The pivot back to Iraq

Digby then points to the next stage of attacking Iraq:

The Iraq-Al Qaeda link was cultivated through hundreds of the 935 false statements the Bush Administration made in the run-up to war. Without it, there would be no pivot from Afghanistan to Iraq, no case made to the public that both wars represented the same fight against terrorism.
[Highlighting mine - Editor WTF-o]

That pivot from Afghanistan to Iraq had been an unplanned for problem. They had expected the terrorist attack on America, together with Saddam's clearly bad reputation, to be sufficient to justify an immediate attack on Iraq. They hadn't planned on Afghanistan as a central focus of the war. But planning has not been their long suite, as demonstrate by the lack of a plan for the occupation for Iraq and the lack of a plan to get Turkey to cooperate with the northern prong of the invasion of Iraq. [Keep in mind that diplomacy is not planned in the Pentagon, and it was the responsibility of the White House to get the Turks to cooperate with the invasion. That didn't happen either.]

Ultimately it is going to be the failure of the Bush administration to show any connection between Iraq and the al Qaeda terrorists that damns the whole project. That's why the new report that Military finds no connection between Saddam and al Qaeda is still being fought by Bush apparatchiks like Doug Feith.

The failure in Iraq and the failure to justify the pivot to America

That failure to effectively lay the blame for 9/11 on Saddam is a disaster for the Republicans, second only to their military and political failure in the conduct of the occupation. There was no real reason (outside PNAC fantasies) to attack Iraq, so the conservatives had to develop a public relations ploy. It looks more and more likely that permitting 9/11 to happen was that public relations ploy. When the American public unexpectedly directed their anger at al Qaeda, the Taliban and Afghanistan instead of Iraq, it started going South on the Bush administration.

They have spent the time since then scrambling to justify the war and occupation of Iraq while covering up their complicity in causing 9/11 by such things as first resisting the 9/11 Commission and then, when that failed, by getting Condi Rice's deputy, Philip Zelikow, appointed executive director of the 9/11 Commission so that he could derail it.

What's left in Iraq, America?

As long as the Bush administration remains in power they can continue to conceal the true level of their total incompetence and failure. Their failures are legion, and run across the board of government. But it should be clear that attacking Iraq was the prime goal of the Bush administration on their first day in office, and Iraq will have totally absorbed their efforts until the last day Bush and Cheney remain in office. Nothing else has mattered to them for over seven years so far, and if they can get McCain elected President the focus on Iraq will continue for another four years.

That is why the Bush 43 Presidency is the greatest failed Presidency in American history. The entire American federal government has been totally focused on some strange unneeded and unachievable fantasy in Iraq since day one of the Bush Presidency in January 2001. There has been no success, just a series of greater or lesser failures, and there is not any prospect of real improvement either for America or for Iraq.

As soon as a Democrat takes office as President, the next step is going to be for both the congressional Republican Party and the media in general to take up the cry "Don't investigate all this. It is over. Why destroy lives and careers?" but such cries need to be ignored. They are just one step in the Republican effort to regain office and do to America again what they have done during the last decade.

This won't be over until investigators open the crypt of the Republican undead and put a stake though their heart, but one thing is clear. The Bush 43 administration has had the invasion of Iraq as its central focus from before George W. Bush took office. It will remain the central focus of the Presidency after he leaves, eight years later. The invasion and occupation started without honest reasons given to the American public or the world. Terrorism and revenge for 9/11 was presented as the reason, but obviously was merely an excuse for what had been decided well before 9/11. As of 2009 the occupation of Iraq will continue to drain resources without any purpose beyond trying to clean up the mess created by the invasion itself.

That's the legacy of George W. Bush, Dick Cheney, and the conservative movement.

Elliot Spitzer; Prostitutes; Why is the DoJ involved?

OK. We all know that sex sells media advertising, and it changes votes for politicians. So when Elliot Spitzer, Mr. Clean who made his reputation as an Attorney General going after crooked Wall Street financiers and prostitution rings gets caught hiring a high end prostitute, we can expect a great deal of hullabaloo.

But that was yesterday. Now, today, is time for some questions about how his actions were exposed (leaked?) and why the Department of Justice Public Integrity Unit was after him for what is a state crime a lot less serious than the corruption that sent Congressmen Randy "Duke" Cunningham and Bob Ney to prison.

Those two were both taking bribes and gave government favors for those bribes. That's what the Public Integrity Unit investigates. Where is it in the Spitzer case? There is no allegation that the independently wealthy Spitzer used government money for his recreational activities, nor is that any allegation that he provided favors to anyone. What he did was hypocritically hire a prostitute or a series of prostitutes. As far as I know, America does not use the government to enforce morality or penalize hypocrisy. What DOES happen in the U.S. is that the DoJ under Bush investigates Democrats with the intent to destroy them politically, while protecting Republicans like Rep. Jerry Lewis and John Doolittle.

Is this another case of the Republicans using the Department of Justice to destroy a successful Democratic politician like they did Alabama Governor Don Seigelman?

Jane Hamsher at Firedoglake asks some questions that really need to be answered here.

1. Why would the bank tell the IRS and not Spitzer himself if there was a suspicious transfer? Spitzer is a longtime client, a rich guy and the governor. We're talking thousands of dollars here, not millions. It doesn't make a whole lot of sense that they spotted a "suspicious transfer" made by the governor, and that this is how things began. It's possible it was just ordinary paperwork the bank had to file with the government whenever some particular flag was raised, but if that's the case, why did the DoJ go to DefCon 3?
2. What is a USA doing prosecuting a prostitution case? This isn't normally what the feds spend their time with.
3. Mike Garcia is a Chertoff crony. Sources familiar with the investigation say that he sent a prosecution memo to DC two months ago asking for authority to indict a public figure (Spitzer). Which means they had their case made long before the wire tap of February 13. Why did they then include this line from that conversation in the complaint?

   LEWIS continued that from what she had been told "he" (believed to be a reference to Client-9) "would ask you to do things that, like, you might not think were safe -- you know -- I mean that...very basic things...."Kristen" responded: "I have a way of dealing with that...I'd be like listen dude, you really want the sex?...You know what I mean."

   This salacious detail does not seem like it's necessary to make their case, and appears to be added for no other purpose than to destroy Spitzer's career.

4. How did Spitzer's name get leaked to the media, and who did it? Didn't happen to Dave Vitter.
5. Why did Mike Bloomberg suddenly start talking about running for governor recently? And why did he give $500,000 to Joe Bruno? He's good buddies with Mike Mukasey. What did he know and how did he know it?
6. The Mann Act? Are you kidding?
7. Spitzer's been in the line of fire of the GOP hit squad for a while. Roger Stone, Roger Stone, Roger Stone.

There are all kinds of things about this that just don't pass the smell test.

This isn't a totally fraudulent federal prosecution for political purposes like the one Wisconsin U.S. ATtorney rammed through in oder to get of the list of U.S. Attorneys to be fired (see:

• Wisconsin US attorney rammed through fake corruption case of Democrat before last Governor's election.,
• US Atty Biscupic (Wisc) saved his job by prosecuting Georgia Thompson and


• US attorney Biscupic (Eastern Wi.) again reversed by Appeals Court - can't convict for no crime.

) but it is awfully close. There is no federal crime here. Not even an allegation of one that could be prosecuted effectively. There is clearly no political corruption, which is what the DoJ Public Integrity Unit is designed to investigate and prosecute - ans which they have failed to do in the cases of Rep. John Doolittle and William Jefferson.

Elliot Spitzer does appear to have pulled off a real political screw-up, but a crime? It's not one the DoJ's Public Integrity Unit was set up to investigate or prosecute. Given the history of the Justice Department as a tool of political assassination for the Bush administration and the Republican Party, this Spitzer situation is highly suspicious.

Once again the Bush administration is using public money and resources to maintain their power. I'd watch for Bloomberg to run for NY Governor as a Republican next election myself. This case stinks to high heaven of Republican corruption. It's what they do.

Military finds no connection between Saddam and al Qaeda

ABC News reports:

ABC News has obtained a comprehensive military study of Saddam Hussein's links to terrorism. The study, which is due to be released Wednesday, is based on the analysis of some 600,000 official Iraqi documents seized by US forces after the invasion. It is also based on thousands of hours of interrogations of former top officials in Saddam's government who are now in U.S. custody.

The headline: "This study found no 'smoking gun' (i.e., direct connection) between Saddam's Iraq and al Qaeda."
whj
Others have reached the same conclusion, but no previous study has had access to so much information. Further, this is the first official acknowledgement from the U.S. military that there is no evidence Saddam had ties to Al Qaeda.
[Highlighting mine - editor WTF-o]

Compare this to the statement from Doug Feith (reported by Ricks and DeYoung of the Washington Post) defending his belief that the peremptory invasion of Iraq was the correct decision

In his book, Feith defends the intelligence activities on grounds that the CIA was "politicizing" intelligence by ignoring evidence in its own reports of ties between Hussein and international terrorists.

Doug Feith is clearly one of the conservative "true-believers" who will resist acknowledgment of the truth even when it is shown by overpowering evidence. Feith is representative of the decision-makers in the Bush administration who initiated the Iraq war and occupation, demonstrating their mindset.

Consider this in support of my earlier speculation about why the Bush Administration was so hell-bent on invading Iraq from day one of Bush's inauguration and why it is realistic to believe that they would consider any actions they took, no matter how despicable, to be justified in invading Iraq. They simply don't let facts interfere with what they believe.

With such an attitude, it is no surprise that they have great disdain for the CIA and the Intelligence Community and why Doug Feith set up his own Intelligence evaluation unit inside his Office of Special Plans (OSP) at the Pentagon, from which Feith's own warped views of what raw Intelligence reports meant were "stovepiped" (so that they could not be contradicted by others with better judgment and more facts) to the Office of Vice President Cheney. Dick Cheney, also a committed conservative true-believer, had a similar disdain for the CIA and the Intelligence Community, for the same set of reasons. They kept contradicting his strongly-held but inaccurate conservative-dogma-based beliefs.

Doug Feith clearly wanted to get out ahead of his critics and present his side of the arguments before they did. Unfortunately, real research conducted by the military debunks him at every step. General Tommy Franks was correct. Doug Feith really is the fucking stupidest guy on the face of the earth. This new military report - not something from Feith's "enemies" in the CIA - demonstrates that conclusively.

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Addendum March 13, 2008 4:27 PM
The report that the Bush administration decided at the last minute yesterday was too explosive to release can be found in .pdf form here on the ABC News site.

Incompetent conservative Bush failed to prevent 9/11

Unlike the compliant American media, the Sidney Morning Herald has now published the truth that exposes how utterly incompetent the Bush administration was in protecting America from terrorism. Here is how the SMH describes how the Bush administration dealt with the of Intelligence presented to the Bush and his official which warned of the danger of a 9/11 type event which bin Laden was expected to carry out:

The warnings were going straight to President Bush each morning in his briefings by the CIA director, George Tenet, and in the presidential daily briefings. It would later be revealed by the 9/11 commission into the September 11 attacks that more than 40 presidential briefings presented to Bush from January 2001 through to September 10, 2001, included references to bin Laden.

And nearly identical intelligence landed each morning on the desks of about 300 other senior national security officials and members of Congress in the form of the senior executive intelligence brief, a newsletter on intelligence issues also prepared by the CIA.

Here is a listing of some of the Intelligence warnings which the decision makers in the Bush administration, from Bush on down, were aware of.

• "Bin Ladin Public Profile May Presage Attack" (May 3)
• "Terrorist Groups Said Co-operating on US Hostage Plot" (May 23)
• "Bin Ladin's Networks' Plans Advancing" (May 26)
• "Bin Ladin Attacks May Be Imminent" (June 23)
• "Bin Ladin and Associates Making Near-Term Threats" (June 25)
• "Bin Ladin Planning High-Profile
  Attacks" (June 30),
• "Planning for Bin Ladin Attacks Continues, Despite Delays" (July 2)

And what did the Bush administration do about all this information?

Other parts of the Government did respond aggressively and appropriately to the threats, including the Pentagon and the State Department. On June 21, the US Central Command, which controls American military forces in the Persian Gulf, went to "delta" alert - its highest level - for American troops in six countries in the region. The American embassy in Yemen was closed for part of the summer; other embassies in the Middle East closed for shorter periods.

But what had Rice done at the NSC? If the NSC files were complete, the commission's historian Warren Bass and the others could see, she had asked Clarke to conduct inter- agency meetings at the White House with domestic agencies, including the Federal Aviation Administration and the FBI, to keep them alert to the possibility of a domestic terrorist strike.

She had not attended the meetings herself. She had asked that the then attorney-general, John Ashcroft, receive a special briefing at the Justice Department about al-Qaeda threats. But she did not talk with Ashcroft herself in any sort of detail about the intelligence. Nor did she have any conversations of significance on the issue with the FBI director, Louis Freeh, nor with his temporary successor that summer, the acting director Tom Pickard.

There is no record to show that Rice made any special effort to discuss terrorist threats with Bush. The record suggested, instead, that it was not a matter of special interest to either of them that summer.

Bush seemed to acknowledge as much in an interview with Bob Woodward of The Washington Post that Bush almost certainly regretted later. In the interview in December 2001, only three months after the attacks, Bush said that "there was a significant difference in my attitude after September 11" about al-Qaeda and the threat it posed to the United States.

Before the attacks, he said: "I was not on point, but I knew he was a menace, and I knew he was a problem. I knew he was responsible, or we felt he was responsible, for the previous bombings that killed Americans. I was prepared to look at a plan that would be a thoughtful plan that would bring him to justice, and would have given the order to do that. I have no hesitancy about going after him. But I didn't feel that sense of urgency, and my blood was not nearly as boiling."

If anyone on the White House staff had responsibility for making Bush's blood "boil" that summer about Osama bin Laden, it was Rice.

The key person who should have pulled all this together and gotten Bush to become aware of the overall picture was the director of the National Security Council, Condaleeza Rice. It is clear that she failed to do anything. Her main action since then has been to get her loyal subordinate, Philip Zelikow, appointed executive director of the 9/11 Commission so that he could cover up her total failure in the run-up to 9/11.

So the evidence is making it clear that the key decision-makers in the Bush administration ignored all warnings of a major terrorist action against the U.S. The question that will probably never be answered definitively was whether they did this intentionally.

It is my speculation that the Bush administration wanted to generate public support for an attack on Iraq. It is well known (Paul O'Niel's book) that the first consideration the Bush people had upon taking office in January 2001 was trying to determine how to attack Iraq. What better excuse than a terrorist attack on American soil? As Naomi Klein has documented, these are people who believe in The Shock Doctrine as a way to frighten the public into supporting an unprovoked attack on Iraq. The rather extreme lies and misrepresentations expressed by members of the Bush administration to justify the attack on Iraq made it clear that they would do or say anything to get their war. They assumed that the success of the attack on Iraq and the positive restructuring of the entire middle east that they expected to result would justify the means they used to conduct the invasion.

The utter failure of the Iraq invasion and occupation has made it even more important that they conceal their actions that led to the disaster. One set of those actions was their inaction in the face of terrorist threats and their failure to prevent 9/11.

The Sidney Morning Herald has published the story of the complete failure of the Bush administration to prevent or avoid 9/11. The reason for their clear failure is not as clear, but once you recognize that they are conservative true-believers who think that their prescriptions are certain to work but are blocked by their domestic enemies, it becomes easy to accept that they would take any action to conduct the invasion of Iraq because they believed it would allow conservative free market forces to be freed to create a democratic free-market paradise in the Middle East that everyone living there would want to join.

The failure of that fantasy is as clear now as it was predictable in 2001, but the conservative true-believers won't accept that they are out of touch with reality. Expect them to search for domestic enemies who "sabotaged" their efforts. That's what it means to be a conservative true-believer. Conservatism is seen as perfect and can never fail, so failures must either be the result of sabotage by enemies of conservatism or by alleged conservatives who tried to implement the conservative vision but who were insufficiently conservative to achieve it. Had they tried harder, put more effort into process, sacrificed more, then conservative doctrine would have prevailed.

The fact is that the Bush administration attempted to apply conservative doctrine to the combined problems of the Middle East and terrorism in 2001 and their efforts failed. Everything they have done since then has consisted of efforts to conceal their failure, punish and eliminate their domestic enemies who - presumably - caused that failure, and to apply conservative principles with greater effort in the face of great resistance.

The result is the greatest failure of any American Presidency ever, even greater than the disaster that Andrew Johnson made of Reconstruction after the Civil War and the economic disaster Herbert Hoover failed to deal with when conservative economic principles created the economic disaster we now call the Great Depression. And it all started because, for whatever reason, the Bush administration failed to act on all the many warnings they got in 2001 of an impending terrorist attack.

The Republican's loss of Hastert's Congressional seat

Chris Cillizza makes some interesting points about Saturday's special election for Illinois Congressional District 14.

• The district has been reliably Republican, going for Bush in 2004 by eleven percentage points over Kerry.
• The race was fought largely on national issues rather than local issues.
• The Democrat Bill Foster beat the Republican Jim Oberweis 53% to 47%, or plus six percent Democratic.

Consider my earlier list of open seats from January 25, 2008 and look at the far right-hand column. That shows the percentage difference in that electoral district in the 2004 Presidential election.

The result in Ill 14 suggests that nationwide the advantage has shifted 11 + 6 Democratic. That means remove the eleven Republican advantage points shown in the last column from 2004 and then remove 6 more Republican points because that was Foster's advantage over Oberweis. Any race shown below that is not in a Republican plus 17 district is up for grabs by Democrats this Fall.

That makes 12 of the 21 Republican seats in this list leaning Democratic, and the 5 Democratic seats are safe. So of the 27 House seats shown below I would expect 17 to go Democratic, for a net loss of 12 by the Republicans.

The Senate remains a gain of three seats for the Democrats.

House

1	Allen, Tom	D	ME-01	Run for Senate	D+12
2	Carson, Julia	D	IN-07	Died	D+16
3	McNulty, Michael R	D	NY-21	Retire	D+13
4	Udall, Tom	D	NM-03	Run for Senate	D+9
5	Udal, Mark	D	CO-02	Run for Senate	D+17
6	Cubin, Barbara	R	WY-At lg	Retire	R+40
7	Davis, Jo Ann	R	VA-01	Died	R+21
8	Dolittle, John	R	CA-04	Retire	R+24
9	Everett, Terry	R	AL-02	Retire	R+34
10	Ferguson, Mike	R	NJ-07	Retire	R+6
11	Gilmore, Paul	R	OH-05	Died	R+22
12	Hastert, Dennis	R	IL-14	Resigned	R+11
13	Hobson, Dave	R	OH-07	Retire	R+14
14	Hunter, Duncan	R	CA-52	Retire	R+23
15	LaHood, Ray	R	IL-18	Retire	R+16
16	McCrery, Jim	R	LA-04	Retire	R+19
17	Pickering, Chip	R	MS-03	Retire	R+31
18	Pryce, Deborah	R	OH-15	Retire	D+0 *
19	Ramstad, Jim	R	MN-03	Retire	R+3 *
20	Regula, Ralph	R	OH-16	Retire	R+8
21	Renzi, Rick	R	AZ-01	Retire	R+8
22	Saxton, Jim	R	NJ-03	Retire	R+2 *
23	Tancredo, Tom	R	CO-06	Retire	R+21
24	Walsh, Jim	R	NY-25	Retire	R+2 *
25	Weldon, Dave	R	FL-15	Retire	R+14
26	Weller, Jerry	R	IL-11	Retire	R+7
27	Wilson, Heather	R	NM-01	Run for Senate	R+3

Senate

1	Allard, Wayne	R	CO	Retiring	R+5 *
2	Craig, Larry	R	ID	Retiring	R+38
3	Domenici, Pete	R	NM	Retiring	R+1 *
4	Hagel, Chuck	R	NB	Retiring	R+33
5	Lott, Trent	R	MS	Resigning	R+19
6	Warner, John	R	VA	Retiring	R+9

That is merely the implications that can be drawn from Saturday's special election in what should have been a safe Republican seat. The use of numbers allows us to aggregate political tendencies nationally, but in any given race local forces will be the deciding factor. Also, this is of course eight months before the general election.

A lot can change in two-thirds of a year. One thing that I do expect to change is that the Recession is going to get worse, which will make things even more difficult for Republicans. Another thing that can change is for the Bush administration to fabricate an excuse to attack Iran, which would create a rally-around-the-flag atmosphere. Since we are still conducting the folly of the Iraqi Occupation, that would be an extremely high-risk political strategy, one that even our Republican-compliant media (excluding the Republican house organ, FOX) might not support.

---

Addendum. Significant spelling corrections made March 11, 2008 11:21 AM.

America is blind to reality - that's the reason why the recent decade has been so bad

SusanG reviews two extremely revealing books. The stories are frightening.

First is Still Broken: A Recruit's Inside Account of Intelligence Failures, from Baghdad to the Pentagon by A.J. Rossmiller. Rosmiller was an analyst with the Defense Intelligence Agency. He describes being sent to Iraq where he develops intelligence on the bad guys and hands it off to the troops who go out to pick them up. When the identified bad guys aren't there, the troops pick up anyone in the area. Those innocent individuals were then sent to abu Ghraib on the assumption that the Intelligence people and MPs at the prison would sort out the innocents from the bad guys. But at the prison, the assumption was that everyone who was sent to then was automatically guilty. The best intelligence he would send to the consumers would be kicked back by his supervisors as too pessimistic. They were looking for happy talk that agreed with their bias, not real Intelligence. Rossmiller finally quit and has now written this expose.

The second book is So Wrong for So Long: How the Press, the Pundits, and the President Failed on Iraq by Greg Mitchell. Mitchell is the editor of the publishing industry's magazine, Editor & Publisher. He describes an American media that, like Rossmiller's DIA, has been going along to get along and publishing happy talk news when the truth is too harsh and negative to face. The result is an ignorant American public which gets angry when someone tries to tell them something different from what they believe. The Editors then cater to the ignorant Yahoos instead of informing them (ensuring their continued ignorance), while also rejecting all criticism of their work as coming from ignorant Yahoos. The book is a collection of six years of Gregg's columns with introductions that describe the actual situation at the time the rotten news he castigates was published.

Since 9/11 America has been flying blind. Our military forces in Iraq are afraid to look at the reality they are operating in, probably because their political masters have carefully promoted only those military officers who tell them what they want to hear. those compliant officers have institutionalized rejection of harsh truths that do not confirm the leader's beliefs. Here at home the Media has performed a similar form of self-blinding to meet the desires of the Republican Party who depends on public ignorance if they are to remain power.

The conservative Republicans cannot remain in power unless the American public is frightened and ignorant, and with control over the White House and Congress they have been able to ensure that those conditions existed. But it appears that the Republicans have swallowed their own blinding Kool-aide. A government that fakes its Intelligence cannot operate effectively in reality, which explains the Katrina disaster and the almost total failure of Republican governance. With FOX News, the Washington Times, and a totally encompassing set of propaganda outlets masquerading as News outlets they have been able to fool the American public for the last six years, but it is beginning to unravel.

The current economic situation, being spun by, among others, our illustrious President as "not a recession and not likely to become one", is another example. This comes from the guy who is so unaware of reality that he does not know that the price of gasoline is approaching $4.00 per gallon. The government does not recognize reality because they have the best experts pumping out happy talk instead of real analysis. I would not be surprised to find out that they have been "cooking" the economic data that the federal government publishes, at least around the edges. That would make the economic reports we all depend on to tell us how the Macro economy is performing little more than the same economic happy talk the financial sales people and the politicians have been feeding us.

Napoleon warned against the General who lost contact with his enemy. Such a general, operating blind, can expect to be defeated. America is in much the same situation right now. Our political leaders are unaware that accurate bad news is completely superior to inaccurate news that confirms what they want to believe, so they manipulate the news - the Intelligence - they are given. They have lost contact with reality.

Those two books SusanG reviewed are efforts to make reality impinge on the rest of us.

Doug Feith speaks on how Iraq went wrong

Douglas Feith is telling his side of why the Iraq war went bad, and Thomas E. Ricks and Karen DeYoung of the Washington Post provide a preview of what the book is going to say. Feith defends his use of alleged "Intelligence" that was supposed to link Saddam Hussein to al Qaeda after the Intelligence Community dismissed it as unreliable and unsupported. In the article Feith is described as still certain that the invasion of Iraq was needed, although he does not set out what America was going to gain from the invasion.

Feith defends the intelligence activities on grounds that the CIA was "politicizing" intelligence by ignoring evidence in its own reports of ties between Hussein and international terrorists. [Snip]

...the book does not address some of the basic facts of the war, such as the widespread skepticism inside the top of the U.S. military about invading Iraq, with some generals arguing that doing so would distract attention from the war against global terrorists. Nor does Feith touch on the assertion of his fellow war architect, then-Deputy Secretary of Defense Paul D. Wolfowitz, that Iraq would be able to pay for its reconstruction with oil revenue.

Feith says surprisingly little new about the conduct of the war on the ground, instead focusing on the policy battles in Washington and asserting that most accounts thus far have been written from the point of view of the State Department and the CIA. He attacks those criticisms as "fear-mongering" that serves the interests of certain officials and journalists.

Powell and his deputy, Richard L. Armitage, are described as repeatedly working behind the scenes to undercut sound proposals by Feith and other Pentagon officials and to undermine decisions Bush had made. Feith criticizes Powell's failure to persuade France and Germany to support U.S. war policy at the United Nations, and to gain Turkey's approval for U.S. troop movements in its territory, as failures of effort and commitment. Feith also asks what would have happened if Powell had argued with Bush against overthrowing Hussein. Powell might have persuaded the president, Feith writes, or, if not, could have resigned.

Feith's disdain for Armitage, with whom he sparred at NSC deputies meetings, is palpable. Powell's deputy, he says, "reflexively opposed any idea originating at the Pentagon."

Feith's major focus in the book is on the failures in Iraq during the post-war period.

He argues, as have other Iraq hawks such as Richard Perle -- a former Reagan administration Pentagon official and outside Rumsfeld adviser -- that the administration's careful approach to Iraq, including a swift transition to Iraqi control, was prevented from succeeding by ill-informed or disloyal subordinates.

The idea to which Feith appears most attached, and to which he repeatedly returns in the book, is the formation of an Iraqi Interim Authority. Feith's office drew up a plan for the body -- to be made up of U.S.-appointed Iraqis who would share some decision-making with U.S. occupation forces -- in the months before the invasion. But while he says that Bush approved it, he charges that Bremer refused to implement it.

As the man responsible for Pentagon planning for the invasion and occupation of Iraq you would hope that his book would provide insights into the reasons and mechanisms behind those operations. That doesn't seem to be the case. Mr. Feith makes the point that Bush presented the decision to invade Iraq in a December 18, 2001 meeting of the National Security Council as a "done deal" . This statement by Doug Feith provides confirmation of that views stated later in the Downing Street Memo .

The Downing Street Memo reported the view of senior British Labor government, defense and intelligence leaders at a July 2002 meeting in which the American intent to invade Iraq was similarly characterized as a "done deal." The American policy was already established, and the Intelligence was being "fixed" to implement the policy. Mr. Feith appears to simply accept the decision to invade Iraq without question, and according to Ricks and DeYoung Feith does not bother to defend that decision.

Mr. Feith' book has the primary goal of placing the blame for the failure of the Iraq invasion and occupation on his bureaucratic opponents and deflecting blame from himself. That says a lot about the invasion. Although he does not admit that it was a mistake, his book appears to be primarily an effort to place the blame for the Iraqi failure on someone, almost anyone, other than himself and the other war hawks such as George Bush, Richard Perle and Don Rumsfeld.

The list of who Feith thinks is at fault for the failure of the Iraqi adventure is long. He blames the CIA and the Intelligence Community, Gen. Tommy Franks, Condaleza Rice, Colin Powell, Richard Armitage, Jerry Bremer and a cast of hundreds. The leader did not fail, he was ill-served by his subordinates (not including the ever-loyal Doug Feith.)

Feith particularly blames the failure of the post attack occupation on the failure of then CentCom Commander Gen Tommy Franks to attend to planning for the post-war period and on the complete failure of Jerry Bremer to carry out the intended hand-off of the Iraqi government to Ahmed Chalabi and his Iraqi National Congress. Feith still thinks that he Intelligence he was using from Ahmed Chalabi and the Iraqi National Congress should have been the basis of decision making for the post war installation of a new Iraqi government.

In short, it appears from the Ricks - DeGrass article that Feith's book is an effort by Feith to exculpate himself from the disaster than Iraq has become. He wants to place the blame somewhere - anywhere - other than on himself. I doubt that it will work, but the book - still the editing process - is not scheduled to be published until June. The article describes Feith as very much the kind of small person of limited ability and restricted views - a conservative apparatchik - that has been his reputation. I'd be very surprised if the final version of the book offers anything different.

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Addendum 2:54 PM
Neat! Emptywheel points to the apparent politics behind the publication of the Ricks - DeYoung article.

The book Feith is going to publish will take after Colin Powell, Jerry Bremer and Tommy Franks big time. It really is interesting how somehow Ricks and DeYoung were able to obtain an advance copy in time to read it and then interview Powell, Franks, and Bremer, all major targets of the book.

Purely coincidence, I am sure. Just good journalism there.

U.S. Attorney Yglesias - I was fired for political reasons

David Yglesias, former U.S. Attorney in New Mexico, is publishing a book on how he was fired. Here is an early report from McClatchy News on what he has to say:

WASHINGTON — A longtime protege of President Bush told former U.S. Attorney David Iglesias that he was fired for political reasons and that he shouldn't fight his ouster, Iglesias says in a new book.

"This is political," Iglesias recalls Texas U.S. Attorney Johnny Sutton telling him shortly after he was ousted. "If I were you, I'd just go quietly."

Iglesias, a former U.S. attorney in New Mexico, is one of nine federal prosecutors whose firings triggered a yearlong controversy at the Justice Department and led to the resignations of Attorney General Alberto Gonzales and 11 other Justice Department officials.

The book will be published in June, to be titled "In Justice."

Jobs reports today is bad news

Contradicting the predictions of the economic happy-talk specialists, the U.S. lost jobs in February. CNBC:

U.S. employers cut payrolls for a second straight month during February, slashing 63,000 jobs for the biggest monthly decline in nearly five years as the nation's labor markets weakened steadily, a government report on Friday showed.

The Labor Department said last month's cut followed an upwardly revised loss of 22,000 jobs in January rather than the 17,000 reported a month ago. It also said only 41,000 jobs were created in December, half the 82,000 originally reported.

Let's put that into perspective. Every month there are approximately 100,000 new entrants into the job market that need to be accommodated with new jobs. That's not as hard as it might seem, since those new potential employees themselves create new jobs if they have money to spend. Any number less that 100,000 net new jobs means the economy is shedding jobs.

The economists don't know officially if we are in a Recession until after the fact, when they can measure total gross domestic product which has occurred and determine if it actually declined over two quarters. Until that figure comes in, the net jobs gained or lost is the best proxy we have for what the results of the gross domestic product surveys is likely to say.

If I were an incumbent politician who wanted to hold on to power in an election year and I was facing the current set of facts I would be in the media emphasizing that right now we don't know that we are in a recession. Then I would emphasize all the potentially positive news I could find, and low-ball estimates of how long the current set of reported difficulties (see also here)are likely to last. I would do that same thing if I were selling investments or trying to borrow money to set up deals. In those cases, economic happy talk would be in my best interest, and I'd spend money to see it spread in the media.

The result is going to be that the media will report a lot more happy talk (being pushed by people who want to sell is something) than either negative or objective reports.

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Jerad Bernstein describes today's jobs reports. He's not selling happy talk.

Capture of Victor Bout related to raid on FARC in Ecuador

It doesn't surprise me that the recent attack by Colombian forces 1.8 KM into Ecuador which killed the second ranking man in the FARC was based at least in part on Intelligence supplied by the U.S. The American Drug Enforcement Agency (DEA) has a long-standing relationship with the Colombian government and a clear reason to want the FARC taken down, since it is a revolutionary movement that is financed by a combination of drug profits (based on drugs smuggled through Colombia, up Central America and Mexico, and into the U.S.) and kidnappings.

Nor am I surprised that Russian arms dealer Viktor Bout was arrested in Thailand Thursday. Bout is reputed to have sold and smuggled arms in a lot of hot spots around the world, sometimes on contract to U.S. government agencies. His reputed connections to U.S. agencies has apparently been a major reason why he has avoided capture as long as he has. His capture in Thailand was apparently based on a U.S. warrant through the DEA.

It is the connection between the capture of Bout and the raid into Ecuador that killed FARC deputy commander Luis Edgar Devia Silva (known as "Paul Reyes") that surprises me. This connection is suggested by the involvement of the DEA in Bout's capture as well as the claims that the warrant is for selling arms to the FARC.

The cross-order raid into Ecuador to kill Reyes has upset both the President of Ecuador and Hugo Chavez of Venezuela, but It appears that both Venezuelan President Hugo Chavez and Ecuadorean President Rafael Correa were allowing the FARC to operate from sanctuary behind the Ecuadoran border

Colombian President Alvaro Uribe leveled allegations of his own, saying he would bring charges of state-sponsored terrorism against leftist Venezuelan President Hugo Chavez at the International Criminal Court, citing evidence from the dead rebel's laptop computer that Chavez gave $300 million and other resources to the FARC.

The truth of Uribe's charges has yet to be confirmed. It is known that Chavez wants the FARC to be considered a legitimate political movement within Colombia rather than merely as a terrorist organization. Uribe's allegations fit that context, but that doesn't make them true.

If the allegations of Chavez's support to FARC prove out, then his movement of troops to the border of Colombia to be little more than bombast to cover the fact that he has been caught attempting to destabilize Colombia. The arrest of Victor Bout in Bangkok under a DEA warrant suggests that there is a lot we don't know, and that we need to know.

So, we wait for the next shoe to drop. It shouldn't be too long.

NRCC - More Republican business as usual - crooked

The other shoe has dropped. And to be honest, the problem was surfaced by a Republican Congressman, Mike Conway, a CPA in real life, who tried to speak to the auditors who had audited the NRCC (National Republican Campaign Committee - the Republican organization of Congressmen who work to get more Republicans elected to Congress.) Mike was having trouble even getting a copy of the audit report from Christopher Ward who was the NRCC's treasurer. There was a good reason why Mike was having trouble getting the audit report. There was none.

As Paul Kiel at TPM Muckraker reported, Christopher Ward has been forging an audit report for several years. Since Rep Conway wanted to speak to the auditors, that wasn't good enough. There were no auditors to speak to.

The New York Times reports this morning that the FBI is now investigating because "...hundreds of thousands of dollars are missing and presumed stolen" from the NRCC. Chris Ward is no longer employed by the NRCC, and is the target of the FBI's investigation.

For decades now the Republican free traders have been reducing oversight on various financial and non-financial activities by making regulations less explicit and by reducing oversight. The results have been increased danger to consumers (lead in children's toys), increased environmental destruction, incompetent and even crooked mortgage lending, and frauds like this one perpetuated on the NRCC itself. While most people are honest in most ways, they cannot be trusted to be honest if they are not checked on. There has to be oversight.

Without audits, taxpayers will not pay their taxes or keep honest books. This is just one more example of the wrongheadedness of the Reagan Revolution's complaint of "Get the government off our backs." That complaint was primarily started by people who did not want to put in the effort of doing their job accurately and keeping good records, a characteristic (in my opinion) of many otherwise excellent salespeople.

Now the Republican complaint of "Get government off our backs" has come back to bite the Republican Party in the rear end - again.

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My earlier post on this subject can be seen here along with a link to an earlier report by The Politico.