Author: Steve Boren

California Watch

Forget climate change — the real threat to the planet and all of us riding on it comes from screwball scientists and their schemes to "save" us from nonexistent threats.

The latest plot sounds like it might have been hatched by a Bond villain: a series of simulated volcanic explosions to fill the atmosphere with a manmade chemical sunblock that would shield the entire planet.

Can you imagine anyone saying this stuff with a straight face? Yet that’s just one of a number of dead-serious proposals in the growing field of "geoengineering."

Another scheme involves spraying seawater into the sky around the planet to create more clouds, lowering the global temperature. I hope you’ve invested in a good umbrella.

What’s even more disturbing is that our government is actually taking this nonsense seriously. The National Science Foundation just awarded $382,000 of YOUR money to University of Montana researchers just to study the ethics of geoengineering.

They should have asked me — I could solve that one for free: Ethics won’t matter one whit if we’re all dead after scientists blow their volcanic loads and dump the sea into the sky.

I wasn’t around when the dinosaurs got wiped out — I’m not that old — but the leading theory says it started with a meteor impact. The space rock itself didn’t kill off the creatures…instead, the real culprit was a massive cloud of dust kicked up by the impact, blocking out the sun.

Sound familiar?

I’m not convinced the climate is changing in the first place — and even if it is, it’s certainly not because of anything we’ve done. The planet’s a lot older and stronger than us.

But if we give in to this manufactured panic and let the mad scientists engineer the environment for us, we’ll go the way of the dinosaurs ourselves.

Hoping common sense isn’t extinct,

William Campbell Douglass II, M.D.

You’ve probably never heard of Shahrukh Khan, but to call him an Indian actor would be like calling Stephen Spielberg a guy who makes films in California.

Khan is one of the world’s richest and most successful movie stars, even if he’s a complete unknown in the United States. He ranked 41st on Newsweek’s list of the world’s most powerful people last year — ahead of mighty Oprah, and only five places behind the Pope.

I’m not about to confess my secret love of Bollywood films — I’d never heard of the guy myself. But he’s got a cautionary tale for all of us, and it happened on a screen where Big Brother wants all of us to be the star.

"King Khan," as he’s known, had the misfortune of strolling through one of those new full-body airport scanners I’ve been warning you about…the kind that peek beneath your clothing and snap an image of your privates, just in case you’re hiding weapons beneath your scrotum.

Airport officials and security "experts" have sworn up and down that these images aren’t saved…and that faces are automatically blurred so the screener, who’s in an isolated location, has no idea who’s getting Big Brother’s electronic evil eye.

But try telling that to Khan — because he says he was later greeted by airport workers in London who had printouts of his x-rated X-ray.

So much for their privacy claims — I hope you didn’t buy that hogwash in the first place. If low-wage airport workers can rape his privacy and get away with it, they can do far worse to you.

Meanwhile, their bogus safety claims are already getting a second look too.

The Inter-Agency Committee on Radiation Safety says these things pose a health risk — and that pregnant women and children should not be forced through them. The report — which wasn’t meant to be made public — also said governments should have to justify their use of these radiation machines.

Don’t hold your breath waiting for that to happen.

Remember: There is NO safe level of ionizing radiation. If you have to fly in Big Brother’s world, I feel bad for you — because the plan is for EVERY air traveler, including pregnant women and babies, to pose for the government’s candid cameras.
Me? I’m keeping my feet planted on the earth.

William Campbell Douglass II, M.D.

World economies I get: currency, trading, deficits, surpluses… World politics is another story. I follow what happens: summits, policy changes, elections: but what does it mean for energy markets, potential threats, actual relations between countries? These situations define our future – financial and otherwise.

Today I'm sending you a piece from STRATFOR on the relationship between Iran and Brazil – and what it means for energy, trade, U.S. sanctions, and this rising power in the South. STRATFOR is my go-to source for all things geopolitical. The great thing about it is that it's not just available to government agencies, Fortune 500 corporations and financial advisers such as myself. Rather, you too can access their content. Sign up here for STRATFOR's free weekly intelligence reports. I highly recommend it for investors at any level.

John Mauldin
Editor, Outside the Box

Brazil, Iran: A Troublesome Relationship for the U.S.

Stratfor Today » February 26, 2010

EVARISTO SA/AFP/Getty Images
Iranian President Mahmoud Ahmadinejad (R) and Brazilian President Luiz Inacio Lula da Silva shake hands in Brasilia on Nov. 23, 2009

Summary

U.S. Undersecretary of State William Burns traveled to Brasilia on Feb. 25 in advance of a trip by U.S. Secretary of State Hillary Clinton to Brazil on March 3. The diplomatic preparation work in which Burns is involved centers on Brazilian President Luiz Inacio Lula Da Silva's intensifying long-distance relationship with Iran. For now, the Iranian-Brazilian love affair does not stretch far beyond rhetoric, but Washington sees a growing need to keep Lula's foreign policy adventurism in check, particularly when it comes to Brazil forging nuclear and banking ties with Iran.

Analysis

Related Links

• Brazil and Iran: An Unlikely Partnership
• The Iranian Saga Continues

U.S. Undersecretary of State William Burns, the State Department's point man on Iran, traveled to Brasilia on Feb. 25 to lay the groundwork for U.S. Secretary of State Hillary Clinton's visit to Brazil on March 3. Usually, such a visit would not require extensive prep work by an undersecretary, but from Washington's point of view, Brazil has moved up in the list of diplomatic priorities. The reason? Iran.

Getting Keen on Iran

Brazilian President Luiz Inacio Lula Da Silva has been getting cozy with Iran as of late. On Feb. 24, da Silva came to Iran's defense, asserting that “peace in the world does not mean isolating someone.” He also defended his decision to follow through with a scheduled visit to Iran on May 15 in spite of Iran's continued flouting of international calls to curb uranium-enrichment activity and enter serious negotiations on its nuclear program. He scoffed at the notion that his trip had turned into a scandal and said when he travels to the Persian Gulf, he is “going to negotiate with Iran and sell things to Iran so that Iran can also buy things from Brazil.”

The basic question running around Washington in regards to da Silva's behavior is, “What gives?” The United States has long considered da Silva a crucial ally and bridge to the Latin American left. Sharing a common vision with da Silva for business-friendly policies, Washington has relied on the charismatic Brazilian leader to help balance against the more antagonistic, anti-imperialist agenda espoused by leaders like Venezuelan President Hugo Chavez. This is not to say that da Silva was a card-carrying member of the pro-United States camp, but he would take extra care to walk a fine diplomatic line between the United States and its adversaries, like Cuba and Venezuela.

Lately, however, da Silva and his Cabinet appear to be going out of their way to telegraph to the world that Iranian-Brazilian relations are blossoming, putting Brazil within firing range of one of Washington's biggest foreign policy imperatives. Brazilian officials reacted warmly to Iranian President Mahmoud Ahmadinejad's controversial victory in the June 2009 presidential election and were quick to roll out the red carpet for the Iranian president when he paid a state visit to Brazil in November 2009.

Tehran is more than happy to receive such positive attention from Brasilia. Brazil holds a nonpermanent seat on the U.N. Security Council, and U.N. sanctions against Iran require the support of at least 9 of the 15 council members. In addition to having to deal with potential Russian and Chinese vetoes among permanent members, the United States also has to take into account that it will not have the vote of Brazil, which is not satisfied with its temporary seat and is using its foreign policy credentials to seek global support for a permanent seat. Even rhetorical support from an emerging power like Brazil helps Iran in gathering diplomatic fodder to try to prevent a sanctions coalition from amalgamating.

Brasilia's Global Emergence

Da Silva has several strategic motives for publicly playing defense for Iran, most of which have very little to do with Iran itself.

Though Brazil has existed in isolation for much of its post-colonial history with most of its attention occupied by internal political and economic turmoil, the country now finds itself, uniquely, in a stable enough position to start reaching abroad and developing a more assertive foreign policy. Brazil has the political and economic heft to declare itself the regional hegemon, regardless of whether the states in Brazil's immediate abroad are prepared to accept such a reality. In addition to boasting a rapidly modernizing military and a burgeoning energy sector that will place the country among the world's top energy producers within a decade, Brazil has membership in practically every internal grouping that it can find membership in. As da Silva famously said earlier this month, “Brazil is part of the G-20, G-7, G-8, G-3. In short, any G they make they have to call Brazil. We are the most prepared country in the world to find the G-spot.”

With an ambitious foreign policy agenda being charted out in Brasilia, da Silva apparently sees some diplomatic benefit in promoting a more contrarian view to the United States. In addition to getting close to Iran, da Silva made a point recently of staunchly defending Chavez's government as a democracy (while referring to his own country as a “hyper-democracy”), and he continues to press the United States to lift its trade embargo against Cuba. By carving out a more controversial position for itself in the international arena, the Brazilian government is looking to gain some credibility in places like Tehran and Caracas to promote itself as a mediator in their thorny dealings with the United States.

Taking Risks at Home

Despite the overabundance of mediators in the Middle East and Brazil's glaring lack of leverage in the region, da Silva remains fixated on the Iran portfolio. This policy does not come without political risks for da Silva. Within Brazil, many are puzzled and uncomfortable with the idea of Brasilia publicly aligning itself with Tehran when even countries like Russia and China (who, unlike Brazil, actually have substantial relations with Iran) are taking care to diplomatically distance themselves every time the regime flouts the West's demands to show some level of cooperation on the enrichment issue.

Indeed, da Silva's decision to politically embrace Ahmadinejad when he came to visit Brazil last year had a polarizing effect on the Brazilian political scene. Da Silva is in the last year of his term and his popularity is still soaring, but his Iran policy could be problematic for his chosen candidate, Brazilian Cabinet Chief Dilma Rousseff, in the run-up to the October presidential election.

When Israeli President Shimon Peres arrived in Brazil to get a pulse on da Silva and his Iran agenda prior to Ahmadinejad's visit in late 2009, Sao Paulo state Governor Jose Serra, Brazil's main opposition leader, took the opportunity to invite Peres to his state, where he made a pro-Israeli speech and later condemned da Silva's reception of Ahmadinejad. Serra is already leading Rousseff in polls by 11 percentage points. Conscious of Brazil's percentage of Jewish population (less than 1 percent of total population) and a sizable number of Brazilians growing leery of da Silva's foreign policy adventurism with Iran, Serra can be expected to hone in on this issue in his campaign. It remains to be seen whether domestic politics in Brazil will lead da Silva to back off his Iran outreach should it prove detrimental to Rousseff's campaign.

The Brazilian business community has not yet reacted strongly to da Silva's diplomatic flirtations with Tehran, but the further da Silva goes in this Iran initiative, the more problems he could create for Brazilian traders who are heavily integrated with the West. Along this vein, it will be important to watch for signs that the United States will seek to retaliate where it hurts Brazil most: In its pocketbook. There already has been talk of restricting access to U.S. financing in the oil and natural gas sector in Washington; and at a time when Brazil has high hopes for the sector, alienating the United States and its high-technology firms could develop into a serious roadblock.

Not Ready to Throw Caution to the Wind?

So far, Washington and others can find comfort in the fact that Brazil and Iran currently do not have much to boast of beyond the diplomatic fanfare. Although Brazil is Iran's largest trading partner in Latin America, the total annual trade between the two remains small at roughly $1.3 billion (with Brazil making up most of this trade through meat and sugar exports). And since Brazil is already self-sufficient in oil, the country simply does not have a big appetite for Iranian energy exports to support a major boost in this trade relationship.

Although Da Silva may see the strategic benefit for now in promoting himself as an advocate of the Iranian regime, he also seems to be conscious of when to take a step back. Much to Washington's discontent, Brazil made a foray into the Iranian energy market in 2003 when state-owned Petrobras obtained exploration and drilling rights in the Caspian Sea under a $34 million agreement. Petrobras, however, said in November 2009 that it was pursuing an end to its activities in Iran, claiming that their technical evaluation concluded that the project was no longer commercially viable. Though Petrobras insisted the decision to leave was not made under political pressure, the announcement came as the United States was gearing up sanctions against Iran's energy sector, perhaps shedding a ray of light on Brazil's pragmatism in handling the Iranian portfolio.

Da Silva's Cabinet also has shown similar restraint in dealing with Iran's nuclear controversy. Brazil has a modest nuclear power program — complete with two nuclear power plants in operation and one under construction, enrichment facilities and a small reprocessing plant. Iran has tried to claim in the past that Brazil has offered to enrich uranium on Iran's behalf (similar to how it exaggerates Japan's willingness to ensnare itself in Iran's nuclear program); however, Brazilian Foreign Minister Celso Morim and local technicians have denied that they would do so, claiming that Brazil does not have sufficient technology to take part in such a deal.

But Washington is not taking chances on Brazil's newfound interest in Iran — hence the U.S. diplomatic entourage that is now making its way to Brasilia. In a tone reminiscent of a parent lecturing a teenager coming of age, U.S. State Department spokesperson Philip Crowley said Feb. 25, “Clearly Brazil is an emerging power with growing influence in the region and around the world, and we believe that with that influence comes responsibility.”

How Far Will Da Silva Go?

While most of the Iran-Brazil relationship consists of diplomatic theater, there are two areas of potential cooperation that could be game changers for the United States: banking and nuclear energy. Iran is facing escalating sanctions pressure over its nuclear program. One of the many ways Iran has tried to circumvent this threat is by setting up money-laundering operations abroad to keep Iranian assets safe and trade flowing. In Venezuela, where Chavez will more readily take on an opportunity to stick it to Washington, and in Panama, where banking transparency is an ongoing concern, Iran has forged ties between local banks and Banco Internacional de Desarrollo CA, a subsidiary of Export Development Bank of Iran (EDBI), to give Iran indirect access to the U.S. financial system. EDBI already has been blacklisted by the U.S. Treasury Department for directly supporting Iran's nuclear weapons program and the Islamic Revolutionary Guard Corps. The blacklist affords the United States both the ability for sanctions on Americans dealing with these banks and a pressure lever against foreign firms interested in keeping their U.S. assets safe.

Iran has tried a similar banking tactic in Brazil. When Ahmadinejad paid a visit to Brazil in May 2009, Iranian EDBI and Brazilian banking officials drafted a memorandum of understanding that was on the surface a mere agreement to facilitate trade between the two countries. But facilitating banking cooperation could mean a lot of things, including the establishment of Iranian banks in Brazil to evade the U.S. sanctions dragnet. Brazil already is believed to direct most of its trade with Iran through the United Arab Emirates to avoid attracting negative attention, but Iranian banks on Brazilian soil would not be easy to hide and would not be ignored by the United States.

Then there is the ever-controversial nuclear issue. Reports also emerged in the Brazilian press Feb. 26 that Brazil's Office of Institutional Security, which answers to the president, has begun consultations with technicians in Brazil's nuclear program to establish what points can be included in a possible nuclear deal with Iran that could be signed during da Silva's visit to Iran in May. The O Globo report does not specify what points of cooperation are being discussed, but Brazil reportedly is working on a new uranium-refining technique called magnetic levitation, which is being developed by the navy at the Aramar lab in Sao Paulo. The news follows a Brazilian announcement from early 2009 that the country is pursuing uranium enrichment on an industrial scale, with a goal to produce 12 tons of enriched uranium for nuclear power supply.

Brazil not only is working toward self-sufficiency in nuclear power but also may be positioning itself to become a supplier of nuclear fuel for the global market. Such a move could boost Brazil's mediation credentials in dealing with countries like Iran, but would draw ire from the United States and Israel, which do not want to see Iran acquiring additional nuclear fuel unless Tehran first makes concrete guarantees on curbing the Iranian enrichment program. Adding to these nuclear tensions is Brazil's continued refusal to sign an additional International Atomic Energy Agency protocol for strengthened safeguards in the lead-up to a Nuclear Nonproliferation Treaty review conference scheduled for May. Brazil maintains that it has enough legal mechanisms to prove the peaceful nature of its program, which Iran will echo in defense of its own nuclear activities.

Da Silva has yet to finalize who all will be accompanying him to Tehran this May as the first Brazilian president to visit the Islamic republic. With da Silva pushing the envelope, STRATFOR will be watching closely to see whether discussions among Iran and Brazilian banking and nuclear officials could transform a relationship resting mostly on paper and rhetoric into a real threat to U.S. interests.

http://feedproxy.google.com/~r/John_…r-the-u-s.aspx

President Obama finally made it official yesterday: he wants Congress to ignore Senate rules – and the American people – and use a parliamentary trick called "reconciliation" to pass his health care takeover legislation. Fortunately, there’s a catch: before the Senate can use reconciliation to force through Obama’s tweaks, the House would have to pass the Senate health care bill. And we must stop them. In his remarks the president demanded that Congress cave in and vote "in the next few weeks."

The key vote will now occur in the House of Representatives – perhaps within 10 to 12 days – and we have to win it. That’s because it’s impossible for the Senate to make changes via reconciliation until after the Senate bill has passed the House. Of course, once the Senate bill passes the House, President Obama will sign it and it will become the law of the land – whether or not the reconciliation trick makes some changes around the edges.

Speaker Pelosi will use every trick in the book to try and find the 216 votes she will need to ram through the health care bill passed "pre-Scott Brown" with 60 votes in the Senate back in December. This will be the key vote.

You remember the Senate bill… 2,700 pages of big government waste, fraud and abuse… corrupt back-room deals including the "Cornhusker Kickoff" to buy Ben Nelson’s vote, the $300 million "Louisiana Purchase" to buy Senator Landrieu’s vote… $1 trillion in new spending that will run up the deficit… tens of thousands of new government bureaucrats and dozens of new federal agencies… government boards to decide what medical treatments will be allowed and for which citizens based on the government’s view of "quality of life"… a vast new entitlement when current entitlements like Medicare and Social Security are already headed for bankruptcy. I could go on but you get the picture.
Democrats in the House will try to justify their votes for the disastrous Senate bill based on vague promises that it will be "fixed" later. But no changes could fix this disastrous bill. If the Senate bill passes the House, a Washington takeover of health care will be a certainty.
That means in just the next few days, we’ve got to make sure our individual members of the House of Representatives feel the maximum heat from grassroots activists like you and me.

You may think, "My member is a firm NO vote, so it’s a waste of time" or the opposite, "My member of Congress is a YES vote so why call or email?" Here’s why I’m asking you to call and email them anyway: we need to show the national outrage over this latest attempt to ram this through, and that means burying Congress, all of Congress, with personal calls and emails from Americans.

I’m asking you to take 3 steps.

1. Call and email your member of Congress in the next 24 hours. CLICK HERE to email your member, and CLICK HERE to call your member; – based on your zip code we can provide the right information for your representative. Tell them to vote NO on the corrupt, big government Senate health care takeover bill and tell them Americans do not want this parliamentary trick called "reconciliation."

2. Forward this email to your friends, family, co-workers, and fellow activists across the nation asking them to do the same thing. They may not know how much the House vote matters. Your friends and family need to hear from someone they know and trust that now is a crucial time on health care and protecting our freedoms.

3. Commit to being a part of the "Honk Against the Health Care Takeover" event on March 16. Here’s how it will work. On March 16 at 12 noon your time, we’re asking you to drive to your nearest congressional district office CLICK HERE FOR THE OFFICE NEAREST YOU and drive around the office for at least 15 minutes occasionally honking your horn. Our goal is to have Americans across the nation telling the politicians to keep their hands off our health care through this "Honk Against the Health Care Takeover" effort.
CLICK HERE to let us know you’ll join the effort and please recruit your friends. To show people why you’re honking, when you register we’ll send you a "Honk Against the Health Care Takeover" bumper sticker. You’ll also be able to download and print a sign for your car window on our website.
Yesterday, the president actually said the nation is "waiting for [Washington] to act" on the health care issue. This is arrogance and political posturing at its worst. Like us, the president knows the truth. Every reputable public opinion poll for months has clear majorities of the American people saying "NO" to the health care "reform" coming out of Washington, D.C.
Now is the time to finish the job of protecting this most personal freedom by stopping the Democrats’ Washington takeover of our health care in the U.S. House of Representatives.

GAAS:155:10 Contact: Aaron McLear
For Immediate Release: Eric Alborg
Thursday, March 4, 2010 916-445-4571

Governor Arnold Schwarzenegger today issued the following statement after U.S. Secretary of Education Arne Duncan announced that California was not selected as a finalist for round one of the Race to the Top funding program.

“This decision by the Obama Administration demonstrates that we need to be more aggressive and bolder in reforming our education system. While the reforms we passed did move our state forward, they did not go far enough because other states were more competitive,” said Governor Schwarzenegger. “I will continue to fight for additional education reforms to make California truly competitive for the billions of dollars our students desperately need – the people of California expect nothing less.”

Under the federal Race to the Top guidelines, states not funded under Race to the Top Round One will have the opportunity to apply for funding under Race to the Top Round Two with state applications due on June 1, 2010.

On July 24, 2009, President Obama and Secretary Duncan announced federal eligibility and competitiveness requirements for states to compete for $4.35 billion in Race to the Top funding. At the time, California was ineligible to apply. Governor Schwarzenegger took immediate action, calling a special session of the legislature and introducing a bi-partisan legislative package to ensure California could become eligible for this education funding. Since then, Governor Schwarzenegger signed the legislation necessary to make California eligible to apply and then signed historic education reform legislation to give parents choices, and to require California’s lowest achieving schools to make bold changes and improve student achievement.

Governor Schwarzenegger created the California Recovery Task Force to track the American Recovery and Reinvestment Act funding coming into the state; work with President Barack Obama’s administration; help cities, counties, non-profits, and others access the available funding; ensure that the funding funneled through the state is spent efficiently and effectively; and maintain a Web site that is frequently and thoroughly updated for Californians to be able to track the stimulus dollars.

Thank you for writing to express your opposition to the U.S. Environmental Protection Agency’s (EPA) finding that greenhouse gases endanger public health and welfare and to share your support for efforts to prevent the EPA from regulating those emissions under the Clean Air Act. I appreciate hearing your thoughts on this issue, and I welcome the opportunity to respond.

On December 7, 2009, EPA Administrator Lisa Jackson concluded that the current and projected atmospheric concentrations of six greenhouse gases threaten the public health and welfare of current and future generations. The EPA’s finding responds to the 2007 U.S. Supreme Court decision Massachusetts v. EPA in which the Court found that greenhouse gases are air pollutants under the Clean Air Act and required the EPA to review whether greenhouse gas emissions pose a threat to public health and welfare. While the endangerment finding itself does not impose any emission reduction requirements on industry or other entities, the finding allows the EPA to finalize the greenhouse gas emissions standards for vehicles, and over time will necessitate EPA to limit greenhouse gas emissions from large stationary sources.

As you know, Senator Lisa Murkowski (R-AK) has introduced a resolution of disapproval (S.J. Res. 26) to overturn the EPA’s finding on whether greenhouse gases endanger the public health and welfare, which was ordered by the Supreme Court in its Massachusetts v. EPA decision. Under the Congressional Review Act, Congress has the authority to disapprove a rule issued by an agency by enacting a joint disapproval resolution within 60 legislative days of receiving the rule. The resolution must be signed by the President in order to overturn a rule.

I appreciate hearing your concern that the endangerment finding will lead to the regulation of greenhouse gases under the Clean Air Act. In my view, there is convincing scientific evidence that climate change is happening, and the United States needs multiple tools to protect public health and the environment from its impacts. I believe that the cost of failing to act to address climate change exceeds the cost of taking the necessary steps to slow it. While I believe that regulating the largest greenhouse gas emitters under a new cap and trade system would be more effective and less expensive than regulating these sources under the existing Clean Air Act, Congress must ensure that the EPA has tools to reduce emissions from large-scale emitters in the United States in a way that minimizes costs to consumers.

Again, thank you for writing. If you have additional questions or comments, please contact my Washington, D.C. office at (202) 224-3841. Best regards.

Sincerely yours,
Dianne Feinstein
United States Senator

Further information about my position on issues of concern to California and the Nation are available at my website .: United States Senator Dianne Feinstein, California :: Home :.. You can also receive electronic e-mail updates by subscribing to my e-mail list at .: United States Senator Dianne Feinstein, California :: E-Newsletter Signup :..

COVERAGE Therewill be a mult box available for audio feed of the Once-In-A-Lifetime Conversation
NOTES: with Maria Shriver, Dr. Sally Ride, Erin Brockovich, Lisa Ling and Rita Moreno.

EDUCATION
By Charles Taylor Kerchner and Dominic J. Brewer (Posted first at HuffingtonPost.com)

The Los Angeles Unified School District board, which in August voted 6-1 for a competition between internal and external education providers, did its best to kill it off on last week. A different policy for change is needed. Here’s why. Read more…

Let’s Streamline This Joint! DONE
By Greg Nelson

Before a rainy day crowd of 80 or so neighborhood council activists, Deputy Mayor Larry Frank explained that one of the main reasons for trimming down the Department of Neighborhood Empowerment and consolidating it with the Community Development Department was that the councils had become “over-regulated, over-lawyered, and over-bureaucratized.”

And with that, Frank established a new bond with the grassroots.

Some applauded. Some shed tears of joy. And others seen asking the videographers to replay the video tape as if they had just been paroled from prison.
CityWatch
Read more…

William Campbell Douglass II, M.D.

I hope you’ve got a little extra in the piggy bank — because ObamaCare is going to need a lot more help.

Don’t want to pay? Tough. Don’t have the money? Too bad. The key word here is sacrifice — and you’re playing the part of the lamb while the Washington party rolls on.

The little Bolsheviks behind ObamaCare claim one of the ways they’ll pay for their socialist medicine scheme is through cost savings…like eliminating the $60 billion lost each year to Medicare fraud.

There’s just one problem: We’ve either got the world’s smartest crooks, or the Keystone Kops have been placed in charge of catching them.

Two years into a major crackdown on Medicare freeloaders, fraudsters and other crooks…and we’ve got practically nothing to show for it. Medicare fraud prosecutions were up just 2 percent last year.

That’s it — 2 percent.

Since this crackdown began under President Bush in 2007, it’s proof that failure is truly a bipartisan effort. That’s two different administrations who’ve tried — and failed — to rein in Medicare fraud.

And as a taxpayer, you’re getting the bill three times over. The first bill is for those $60 billion in fraudulent claims paid each year. The second bill is to pay for all those Kops, investigators and prosecutors who aren’t cracking down on it (I’m sure they’re enjoying those nice offices in Miami, though). And the third bill will come due with ObamaCare — when you’ll be forced to pony up extra bucks because the savings never materialized.

I’ve done the math. For many Americans, their monthly ObamaCare bills will be the biggest cost in their household — even more expensive than mortgage payments, and that’s if you believe the numbers they’re throwing around right now.

Trust me, it’ll be more — a lot more.

Remove those imaginary savings from the equation, and when the real bill comes due, no health-care system in the world will be able to ease the pain.

They can’t seem to find the freeloaders and fraudsters — but they’ll sure as heck find you. And then, Obama’s call for change will turn into cries of, "Buddy, can you spare some change?"

That’s not the only trouble Big Brother’s brewing for you… keep reading to find out how they’re tracking your babies

William Campbell Douglass II, M.D.

1. Economy Continues to Recover, But Slowly
2. Consumer Confidence Falls Off a Cliff
3. Bank Lending Continues to Plunge
4. More Really Bad News on the Housing Front
5. Are “Option-ARMs” the Next Subprime Crisis?
6. End of an Era for Coach Halbert

Introduction

Most economists and market analysts agree that the US economy has been through the worst of the recession. The economy clearly rebounded in the 4Q of last year, as I will discuss in more detail below. Some economic reports suggest that the economy will continue to strengthen through the balance of this year, such as the Index of Leading Economic Indicators which has risen for the last 10 consecutive months.

Unfortunately, two reports released last week were extremely negative. First, consumer confidence unexpectedly plunged in January. No analysts I read saw this large a drop coming. Second, the Federal Deposit Insurance Corporation (FDIC) released its quarterly report which showed that lending by US banks plunged last year in the sharpest decline since 1942. We also saw new unemployment claims spike higher for the week ended February 20.

It is widely agreed that consumer spending accounts for apprx. 70% of GDP. With the Consumer Confidence Index unexpectedly plunging almost 20% in February alone, this raises serious doubts about economic growth going forward in 2010. Likewise, spending by businesses is also a big part of GDP, but if bank lending to businesses remains hamstrung, this is not a good sign for the overall economy.

I have argued for some time that the nice rebound in the economy in the 4Q was largely due to inventory rebuilding. I have likewise argued that inventory rebuilding would be only a relatively short-term boost to the economy, and that economic growth would be upward but disappointing in 2010. I have also suggested that we could well be in for a double-dip recession in 2011, if not sooner.

The latest reports on consumer confidence and bank lending, along with continued high unemployment, virtually assure my arguments for disappointing growth in 2010 and support my suggestion of a possible double-dip recession in 2011. We will discuss all this as we go along this week, plus another possible negative shock to come from the housing market. Sorry to be so negative, but things are what they are.

Economy Continues to Recover, But Slowly

Before I get to the discussion of plunging consumer confidence and bank lending, let’s first review the latest routine economic reports. The US economy continues to struggle to dig out of the recession. The Commerce Department’s second estimate on 4Q GDP came out last Friday, and it came in at 5.9% (annual rate), up from 5.7% in late January, and in-line with the pre-report consensus.

The Commerce Department again confirmed that inventory rebuilding accounted for much of the advance in GDP in the 4Q, followed by exports and consumer spending in third place. Real personal consumption expenditures increased 1.7% in the 4Q quarter, compared with an increase of 2.8% in the 3Q.

The Index of Leading Economic Indicators (LEI) registered its 10th consecutive monthly increase in January, rising 0.3%. The continued rise in the LEI is a strong indication that the economy is in recovery; however, the January rise of 0.3% was far short of the December rise of 1.2%. The tepid rise in January added fuel to the argument that GDP growth will be disappointing in 2010.

Retail sales rose a better than expected 0.5% in January following a loss of 0.1% in December. On the manufacturing front, the ISM Index rose again in January to 58.4 from 54.9 in December. Any reading above 50% in the ISM Index suggests that the economy is expanding, at least slowly in this case.

Orders for durable goods (big-ticket items) rose a better than expected 3% in January, up from 1.9% in December. Industrial production rose 0.9% in January, up from 0.7% in December. And the factory operating rate (capacity utilization) rose modestly in January. That’s about it for the good news of late.

The US unemployment rate fell from 10% to 9.7% in January, even as businesses cut another 20,000 jobs last month. The drop in the headline unemployment rate occurred primarily because a large number of Americans gave up on looking for work late last year and in January and were therefore not counted in the official unemployment rate. And as we learned last Thursday, the number of Americans filing for state jobless benefits is still increasing at the rate of almost 500,000 a week.

Consumer Confidence Falls Off a Cliff

The markets got a shocklast Tuesday when the Conference Board announced that its widely followed Consumer Confidence Index basically fell off a cliff last month. The Index plunged to 46.0 in February from January’s 56.5, a drop of apprx. 20%, following several months of increases. This is the largest monthly plunge in consumer confidence in recent history, and was totally unexpected.

The non-partisan Conference Board said that consumers are still in a generally “sour mood,” due partly to continued pessimism about job prospects and income worries, and suggested that consumer spending could fall in the months ahead. Remember that consumer spending accounts for apprx. 70% of GDP.

Lynn Franco, director of the Conference Board’s ConsumerResearchCenter, said in an interview following the report’s release: “This recovery has been driven more by business than by the consumer. The fact that we’re not adding jobs but are still shedding them is doing very little to comfort consumers. While other indicators are showing that the recession is over, to the consumer it still feels like we’re still mired in the recession.”

“Concerns about current business conditions and the job market pushed the Present Situation Index down to its lowest level in 27 years. Consumers’ short-term outlook also took a turn for the worse, with fewer consumers anticipating an improvement in business conditions and the job market over the next six months. Consumers also remain extremely pessimistic about their income prospects. This combination of earnings and job anxieties is likely to continue to curb spending.”

There has been a great deal of discussion about the plunge in consumer confidence since last week’s surprising report. Some of the reasons are obvious, as pointed out above by the Conference Board. People are worried about their jobs, or lack thereof, and millions of Americans who are working are “under-employed” in jobs that pay a fraction of what they were used to making. American consumers are quickly figuring out that this is a “jobless recovery,” and they are increasingly unhappy about it.

As I will detail below, credit remains very tight. Small business owners can’t get loans to expand their operations. Among those who can get access to credit, many are so concerned about the economy and a double-dip recession that they are reluctant to take on more debt, and some are even paying down their lines of credit.

At the risk of going political, I happen to believe that millions of Americans have recently turned negative because the “hope and change” that President Obama promised has not happened. Instead, they see the government spending outrageous sums of money and running $1+ trillion deficits as far as the eye can see. No wonder consumer confidence is in the tank.

Speaking of falling off a cliff, have you seen the latest polls on how the American public views the job Congress is doing? The latest Rasmussen poll last week found that 71% of Americans believe that Congress is doing a “bad” job, while only 10% believe they are doing a “good” job. This is the lowest approval rating ever recorded by Rasmussen and was up from 61% just one month earlier.

Bank Lending Continues to Plunge

The FDIC reported last week that bank lending shrank at a record pace in 2009. The lead article in the Wall Street Journal last Tuesday read: “Lending Falls at Epic Pace.” How true, unfortunately. Last year, US banks posted their sharpest decline in lending since 1942, suggesting that the industry’s continued slide is making it harder for the economy to recover.

While top-tier banks are recovering at a faster clip, the rest of the industry is still suffering, according to a quarterly report from the Federal Deposit Insurance Corp (FDIC). Banks fighting for survival, especially those plagued by losses on commercial real estate (as I have written about often recently), are less willing to extend loans, siphoning credit from businesses and consumers.

Besides registering their biggest full-year decline in total loans outstanding in 67 years, US banks set a number of other grim milestones last year. According to the FDIC, the number of US banks at risk of failing hit a 16-year high at 702. More than 5% of all loans were at least three months past due, the highest level recorded in the 26 years the data have been collected.

And the problems are expected to last at least through 2010. FDIC Chairman Sheila Bair said that banks are “bumping along the bottom of the credit cycle,” and that the number of bank failures in 2010 will likely eclipse the 140 recorded last year.

The FDIC’s latest report revealed that asset-quality indicators for banks continued to deteriorate in the 4Q as borrowers continued to fall behind on their loans. Banks wrote down $53 billion in loans in the final three months of last year. The quarterly write-off rate was the highest ever recorded in the 26 years the FDIC has collected the data. A total of $391.3 billion of all loans and leases, or 5.4%, were at least three months past due at the end of 2009.

The fact that banks are not lending remains a problem for policy makers who are eager for banks to lend again. Lawmakers on Capitol Hill and administration officials have pushed banks to lend, particularly in light of the billions in taxpayer aid injected into the financial industry over the past two years. But banking groups and their members counter that they are under pressure from regulators to be more prudent in their lending practices, and that demand from struggling consumers and businesses isn’t there.

Initiatives such as the Obama administration’s $30 billion small-business lending program will rely on banks’ making loans at a time when many of those same firms are wrestling with a rising tide of commercial-real-estate problems (as I have chronicled previously), or they are being told to add to reserves by regulators.

The FDIC said that the decline in loan balances in the 4Q hit all major categories—from construction to commercial loans and residential mortgages. Only credit-card loans increased in the 4Q.

It remains unclear whether the sharp decline in loans outstanding stems from banks’ tightening standards and a fear of lending or from weak demand from potential borrowers still spooked by the recession. Frankly, it seems obvious it’s a combination of both. FDIC Chief Economist Richard Brown recently noted: “Lending has been weak and spending by businesses and consumers has also been weak.”

A January survey by the Federal Reserve of senior loan officers showed banks have slowed their efforts to tighten lending standards, but have not backed off the more stringent loan terms they put in place over the past two years. The same report, however, also showed that demand for loans from businesses and consumers continues to fall. Bankers, on the other hand, say creditworthy borrowers are hard to come by.

The FDIC Chairman Sheila Bair said officials are eager for banks to make loans in their communities, putting the onus on the bigger institutions to do more small-business lending. “The larger institutions I think need to step up to the plate here too,” Ms. Bair said, describing as “significant” the declines in their loan balances and credit lines over the last two years.

Lawmakers who are pushing banks to lend more are coming to realize the magnitude of troubled commercial-real-estate loans (you read it here first). The FDIC’s Mr. Brown said these loans take longer than residential mortgages to go bad, dragging out the hit to a bank’s balance sheet.

The FDIC’s Mr. Brown concluded: “While the economy is moving ahead, banking results tend to lag behind. The problem loans and the earnings of the industry will improve somewhat after the economy improves.”

As the chart above illustrates, bank lending remains in freefall. While the FDIC report suggests that most banks are no longer tightening their lending standards, there is little or no evidence that they will relax them anytime soon. Likewise, it remains to be seen when, or if, demand for commercial loans will begin to rise among small and medium sized businesses.

None of this is good for the economy, and this is a big reason why I expect GDP growth to disappoint this year. While the credit markets may not be frozen as they were in late 2008, they are still at least frosty.

More Really Bad News on the Housing Front

Let me begin with the only bit of positive news. In January, housing starts rose 2.8%, the best pace in six months. But that is where the good news ends and the really bad news begins.

New home sales in January plunged by 11.2% from December levels to a seasonally adjusted annual rate of 309,000 units, the Commerce Department said last Wednesday. The decline brought sales to their lowest level since the government began tracking the numbers in 1963. Sales were 6.1% lower than in January 2009.

The drop in sales in January triggered an increase in the backlog of unsold new homes on the market, pushing it up to the equivalent of what would normally be sold in 9.1 months versus eight months in December. And the abundance of homes on the market continued to bring prices down. The median sales price for new homes fell 2.4% to $203,500 in January, compared with a year ago.

Faltering demand in the housing market also led to a drop in mortgage applications for both new and existing homes. The Mortgage Bankers Association’s seasonally adjusted purchase index fell 7.3% for the week ended Feb. 19 from the prior week. It is the index’s lowest level since 1997.

Existing home sales last month were also sharply lower, down 7.2%, well below expectations, to a seven-month low. This was the second consecutive monthly decline in existing home sales. And remember that this is happening at a time when there are tax rebates of $6,500-$8,000 for home purchasers. What do you think will happen to home purchases when these tax breaks go away?

Much of this bad news is no doubt related to the plunge in consumer confidence last month and the continued tightness in the credit markets, as discussed above. Unfortunately, weak home sales in January are not the industry’s only problem.

Are “Option-ARMs” the Next Subprime Crisis?

Some housing analysts believe that the option adjustable-rate mortgage market may be the next subprime disaster. Recent analysis from Standard & Poor’s (S&P) anticipates that a full 37.5% of such loans, referred to as “option-ARMs,” that were written in 2007, at the height of lax lending, will eventually go bad.

The problem with option-ARMs begins with the fact that people who took out these loans were given the option to make ultra-low payments for the first few years, and many of them did exactly that. Borrowers who took advantage of these ultra-low payments, mostly middle- and upper-class with good credit scores, were allowed to make payments that didn’t even cover the interest owed (let alone the principal), with the understanding that payments would go up later on to make up for the shortfall.

That allowed people to buy bigger, more expensive houses than they would have been able to qualify for otherwise. Most of these families banked on a good economy and rising incomes by the time the resets took place five years later. Likewise, many assumed they could just sell the house in five years in the unlikely event they couldn’t make the higher payments. Thanks to the recession, the credit crisis and the housing crash, these people are now stuck in their ARMs.

Some option-ARMs have already reset (more on this below), but the bulk of these loans don’t reset until the last half of 2010 and the first half of 2011. By the middle of next year, more than $10 billion worth of option-ARMs will reset higher each month, according to data from mortgage tracker Loan Performance. That comes close to the figures we saw during the subprime crisis.

As noted above, some people with option-ARMs have already seen their payments spike, thanks to caps on “negative amortization” – that is, a loan balance that grows, instead of shrinks, over time. Austin-based Amherst Securities, a big player in mortgage-backed securities, dissected one such loan, which was written in 2007 for $465,000 over 40 years. A minimum monthly payment that started at $1,260 soon rose to $1,354 and then to $2,806, more than twice the original amount. The borrower quickly defaulted.

Even without negative amortization, many borrowers will see their monthly payments jump by 50% or more. According to an S&P study of loans originated in 2005, borrowers who have undergone a higher reset are nearly three times as likely to default as those who haven’t. S&P managing director Diane Westerback warns, “Some of the damage has already been done but the loss projections are increasing.”

With the housing market as it is, borrowers will find few good alternatives for rescue should they run into trouble. The traditional response of refinancing into a more affordable loan is off the table for many homeowners, considering that property prices have plummeted. More than 85% of option-ARM holders owe more on their loan than their house is worth, a situation known as negative equity or being “underwater.” Typically, a refinance is impossible without the borrower having at least 20% equity in a house.

The Obama administration’s big loan-modification effort, the Housing Affordability Modification Program (HAMP), does little to help such borrowers since in many cases lenders will recoup more by foreclosing (the test any loan modification must pass) than refinancing. A recent Bank of America / Merrill Lynch study of loan modifications at IndyMac, which provided the template for broader modification efforts, found that only about 20% of subprime loans had been rewritten, while fewer than 8% of option ARMs were refinanced.

The good news, if you can call it that, is that these loans are very concentrated geographically. About 75% of all option-ARMs were written in California, Florida, Arizona and Nevada, with the vast majority of those in California. People living in Phoenix, Las Vegas and California’s Inland Empire, which have high concentrations of option ARMs, can expect to see renewed downward pressure on home prices. Home prices in some of these areas are already down 30-40%.

Clearly, foreclosures are going to skyrocket again as the bulk of the option-ARM resets kick in later this year and next year. The question is whether or not these will negatively affect home prices around the country, since most option-ARMs are concentrated in only four states. Time will tell but this is not good news for the housing market or the credit markets.

End of an Era for Coach Halbert

Last Saturday, I was driving my daughter home from her last basketball game of the season which was played in San Antonio. My daughter is a senior in high school and a point-guard on the team. Her team won its District, Bi-District and Area championships this year. My daughter, by the way, won a 1st-Team spot on the “All-District” team and the “All-State Academic” team.

But as we were driving home, I realized that my days of coaching and driving to and from our kids’ sporting events were over, as my daughter is graduating in May. Long-time clients and readers will recall that I have been very active in coaching youth sports since my oldest child was five years old. I have coached football, basketball and baseball for the last almost 15 years.

In recent years, I have concentrated on coaching baseball for our high school, including last year when my son had graduated and gone on to college. But it just wasn’t the same without a kid on the team, so for the first time in many years, I am no longer a coach.

I tell people that I was “abducted” into coaching almost 15 years ago when I took my son to his first tee-ball practice. Since there was only one coach there, I stayed and helped out. At the end of the practice, the coach motioned me over to his car, reached inside and handed me a cap and jersey and said (not asked), “You’ll be my assistant coach.” He and I went on to coach baseball, football and basketball for years.

Coaching youth sports for so many years has given me some of the best memories of my life, brought me closer to my kids, and some of my best friends to this day are fellow coaches. It still warms my heart when I’m on campus, and many of the kids still address me as “Coach Halbert.”

While it hasn’t been easy to retire from coaching, I have a bigger challenge coming up in August when my daughter goes away to college and Debi and I become empty-nesters. I had a very rough time when our son left for college, but it will be much worse this time. Fortunately, Debi is still my best friend (and business partner), so I’m sure we’ll get through it.

Very best regards,

Gary D. Halbert

SPECIAL ARTICLES

Get Ready For The Double-Dip
http://www.businessinsider.com/ameri…ble-dip-2010-2

Bank lending plunges
http://www.cbsnews.com/blogs/2010/02…y6238210.shtml

Where the votes stand on healthcare reform
http://online.wsj.com/article/SB1000…elowLEFTSecond

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