The Name's of The Fallen - Homage I

We never give up until the last soldier get of from this illegal war. We're not going to forgot the live of those who pay the ultimate sacrifice for his / her country.




Percy H Florez
The Name's of The Fallen
http://www.thenamesofthefallen.com

The Name’s of The Fallen | The Bush’s Legacy | Iraq War

There are 2192 Days...! Since the invasion of Iraq started on March 19, 2003 by order of George W Bush.

As consequences of this irrational action:

1. 4579 US Soldiers, Civilians & Members of the Coalition Task Force are Dead & 1 MIA - POW
2. Billions of dollars are waste
3. The most wanted criminal of the world, Osama Bin Laden still free.
4. Thanks to his policies of torture the reputation of the country around the world is in the most dangerous low level ever.

For more statistics go to: The Name's of The Fallen | Statistics | Iraq War

Percy H Florez

Fannie Mae and Freddie Mac | C-Span Series | Q&A

This week on Q&A, our guest is Peter Wallison of the American Enterprise Institute. Mr. Wallison will discuss the history and background of Fannie Mae and Freddie Mac.


My own question: if this ISN'T CORRUPTION WHAT IT IS?

Percy H Florez


C-Span Series

Q&A

September 14, 2008
Peter Wallison
American Enterprise Institute

Info: This week on Q&A, our guest is Peter Wallison of the American Enterprise Institute. Mr. Wallison will discuss the history and background of Fannie Mae and Freddie Mac.

Uncorrected transcript provided by Morningside Partners.

C-SPAN uses its best efforts to provide accurate transcripts of its programs, but it can not be held liable for mistakes such as omitted words, punctuation, spelling, mistakes that change meaning, etc.

BRIAN LAMB, HOST, Q&A: Peter Wallison, in a book that you published several years ago, you had a piece in there with Ralph Nader.
And Ralph Nader said, ”The mentality of see no evil, hear no evil and speak no evil that pervades official Washington’s approach to the GSEs is a product of an influence machine that is oiled by revolving doors, the care and feeding of key politicians across the nation, a quick strike, taking no prisoners, public relations operation and targeted contributions to advocacy organizations - - activities financed by slush funds created by generous forms of corporate welfare.”

Why was he in your book, a book that was published by the American Enterprise Institute?

PETER WALLISON, RESIDENT FELLOW, AMERICAN ENTERPRISE INSTITUTE: Well, I always looked at Fannie Mae and Freddie Mac as key examples - - maybe the poster children - - of corporate welfare. They are the ones who were most helped by the federal government.

And I figured - - I didn’t know, but I figured - - that Ralph Nader probably looked at it the same way. And I wanted to be sure that when I started on this process, writing that book and doing other things, that I showed that this was not simply something that Republicans or conservatives were interested in, but people who were interested in a fair government, a fair economy and government policies that really didn’t favor corporations.
LAMB: We started a number of weeks ago trying to get you to come talk to us, and you were on vacation. And you live six months of the year in Colorado.

So, it was - - I guess it was perfect for you to be here the week of the takeover.

WALLISON: Oh, yes. This has been quite a week.
LAMB: Where are you personally coming from? Where do you reside, and what have you done in your past?
WALLISON: Well, I’ve been in the government a fair amount. I’ve never run for office, but I’ve helped people who are running for office. And then, in Republican administrations, I’ve had some roles.
I’m a lawyer - - graduate of a law school, and then I practiced law for many years. But during that time …
LAMB: Harvard Law.
WALLISON: Harvard Law School. And during that time, I came in and out of government. I was a counsel to Nelson Rockefeller. I’m a New Yorker, actually, by birth. And so, I got to know Nelson Rockefeller. I became his counsel when he was vice president.
And then in the Reagan administration, I was the general counsel of the Treasury Department. And finally, when Don Regan went over to become chief of staff in the Reagan White House, I went over about a year later - - left my practice once more - - and became a White House counsel for Ronald Reagan.
So, I’ve had a fair amount of government experience and a lot of financial experience in the government.
That’s one of the things that gave me a real interest in Fannie Mae and Freddie Mac.
LAMB: When did you start getting interested?
WALLISON: Well, when I was at the Treasury Department. They were - - Fannie Mae was a fairly significant company in the early 1980s, when I was at Treasury.
And even then, it occurred to me that this was an accident waiting to happen. They were in a - - they had a business model that seemed to me to be unworkable, and one that would eventually cause a lot of problems.
I wasn’t able to do anything at Treasury at the time. We were too busy with many of the problems, including the S&L collapse.
But what I did remember when I left Treasury was that this is a subject that I’d like to return to at some time in the future. And fortunately, when I had an opportunity to go to AEI, I was able then to start looking more seriously at Fannie and start investigating a little bit more exactly how they were doing and whether my thoughts about what was going to happen to them were likely to come true.
LAMB: The statement by Ralph Nader had the word G - - or the letters - - GSE in it. I want to run a clip, just a very brief clip, of Henry Paulson, the secretary of the Treasury, last Sunday, at 11 o’clock in the morning, when he announced the takeover of Fannie Mae and Freddie Mac.
(BEGIN VIDEO CLIP)
HENRY PAULSON, U.S. TREASURY SECRETARY: These preferred stock purchases agreements were made necessary by the ambiguities in the GSE congressional charters, which have been perceived to indicate government support for agency debt and guaranteed MBS.
Our nation has tolerated these ambiguities for too long. And as a result, GSE debt and MBS are held by central banks and investors throughout the United States and around the world, who believe them to be virtually risk-free.
Because the U.S. government created these ambiguities, we have a responsibility to both avert and ultimately address the systemic risk now posed by the scale and breadth of the holdings of GSE debt and MBS.
(END VIDEO CLIP)
LAMB: OK. Break it down. What is MBS?
WALLISON: Mortgage-backed securities.
LAMB: What does that mean?
WALLISON: Well, what happens, one of the ways that Fannie and Freddie operate is to create pools of mortgages. And then they sell securities that are backed by those pools of mortgages. That’s how you get a mortgage-backed security.
LAMB: OK. Let me stop you for a second.
I buy a house. I go to a bank, or the realtor gets me a mortgage. And I agree to pay, let’s just say $400,000 for a mortgage.
What happens to that mortgage?
WALLISON: Well, if the mortgage gets to Fannie Mae or Freddie Mac, it’s put into a pool with a lot of other mortgages. That’s not the only thing they do. They have another way of doing this, but let me deal with the mortgage-backed security issue first.
It’s put into a pool with a lot of other mortgages. Some of them are larger, some of them smaller, but thousands of them, all in the same pool.
Then, securities are sold, backed by that pool. And the securities say we will pay you what we receive from the mortgages in the pool - - your share of what we receive from the mortgages in the pool. And if we don’t - - if the mortgages in the pool don’t perform as we anticipate they will perform, we will pay you anyway.
In other words, we guarantee a certain return out of this pool. That’s what a Fannie or Freddie mortgage-backed security entails.
Now, the reason you are able to get your $400,000 mortgage from some bank that is the lender, is that they know they can sell your mortgage to Fannie, which will buy the mortgage and put it into the pool, and then reimburse itself by selling mortgage-backed securities to investors.
LAMB: So, as an individual, could I turn right around and then buy securities with Fannie’s name on them?
WALLISON: Absolutely.
LAMB: Preferred or common? And what’s the difference?
WALLISON: No. It’s not that kind of security. It’s called a mortgage-backed security. And what it would say is, this security represents a one-millionth share of a certain pool of mortgages that we have created. And if we don’t pay you the specified amount to come out of this pool, then you have us backing the pool.
LAMB: So, if I had bought a security - - and where would I buy that? Through a …
WALLISON: Through a broker.
LAMB: … broker?
WALLISON: Sure.
LAMB: And I owned it right now, and the government just took over Fannie Mae and Freddie Mac, do I still have the security backed?
WALLISON: Oh, sure. Security is absolutely solid. And that’s one of the reasons why the government had to take over Fannie Mae and Freddie Mac, because so many individuals and mostly financial institutions around the world hold exactly those kinds of securities.
LAMB: How much of those securities do the Chinese own?
WALLISON: Oh, I don’t know the number, but it would be very large, probably running into maybe the hundreds of billions of dollars.
LAMB: Japanese, same thing?
WALLISON: Very large. Yes. Most central banks own these kinds of securities. And not only the mortgage-backed securities, but they buy direct borrowings by Fannie Mae and Freddie Mac, that they use - - that is, the two GSEs, government-sponsored enterprises - - use to buy and hold mortgages themselves.
They don’t securitize all their mortgages. They hold a certain number of those mortgages, amounting now to about $1.5 trillion, in their own portfolios. That is, in fact, the most profitable way that they operate.
The mortgage-backed securities is not a very profitable business. It’s a much less risky business. And as a result, it’s not as profitable.
But when they really want to make profits, they buy and hold the mortgages themselves, because what is being paid on the mortgages is a lot more than they have to pay for the money they borrow in order to buy those mortgages.
LAMB: OK. What is a GSE, a government-sponsored enterprise?
WALLISON: Government-sponsored enterprise.
LAMB: And when was the first one started?
WALLISON: Fannie Mae was created in 1968 from an existing organization called Fannie Mae, which was started during the New Deal, and was an actual government agency.
The trouble is that, by 1968, when we were in the middle of the Vietnam War, we were running deficits. And …
LAMB: In our general government.
WALLISON: In the general government. And the Johnson administration realized that the way Fannie Mae was growing, it was causing these deficits, because it was putting out a lot more cash than it was taking in any year, as it grew and bought more and more mortgages.
So, they decided one of the ways to reduce this deficit was to get Fannie Mae off the government’s books, which they did by selling shares to the public in Fannie Mae, and turning it into a quasi-public company - - with private shareholders, but at the same time, a kind of implicit government guarantee, because they were allowed to keep a number of ties to the U.S. government.
So, since that time, the capital markets have believed that the government would back Fannie Mae, and ultimately, Freddie Mac, which was created a few years later, in case they got into any difficulty. And that’s why they’ve never had any trouble raising funds, because there was always the thought in the markets that the government would back them if they got into any trouble.
They denied this for many years. They said, no, no, no. There’s no doubt that we are independent of the government. The government has no responsibility for us. Their supporters in Congress said exactly the same thing.
But now we realize that the markets were right all along. And as soon as they got into trouble, the government stepped in and saved them.
LAMB: I want to jump in this process, because I found this on the Web, again from Ralph Nader.
And it’s - - he wrote a letter to Christopher Cox, who runs the Securities and Exchange Commission, about a lot of things, and including why do the people who run Fannie Mae - - and there’s also Freddie Mac in this - - but Fannie Mae make so much money? And the time period was the years 1998 to 2003.
I’m just going to go down the list. Franklin Raines, at the time, the CEO, compensation from 1998 to 2003 was $90 million. Portion derived from components tied to attaining EPS goals - - earnings per share goals, I assume - - $52 million.
Timothy Howard, compensation the same time period, $30 million. He was, I believe, the chief financial officer.
WALLISON: Yes, CFO.
LAMB: Jaime Gorelick, who we saw a lot of during the 9/11 Commission, she was the vice chairman of Fannie Mae, took away $26 million in those years, ’98 to 2003. And that her portion derived from components tied to attaining her earnings per share goals was $14 million.
And then, Daniel Mudd, who was just let go as the CEO, during that time period - - we’ll come back to him in a moment, because there was a lot more money since 2003 - - took out $26 million.
Now, how is it - - I’m just asking you as a citizen. How is it that this government would have an organization that was solely government, and then created - - Lyndon Johnson created a private company - - quasi-private company …
WALLISON: Right.
LAMB: … with 18 board members …
WALLISON: Right.
LAMB: … and five board members from him …
WALLISON: Right.
LAMB: … and then subsequent presidents …
WALLISON: Right.
LAMB: … would let this kind of money be taken out of this organization? How did that happen?
WALLISON: Well, they are private companies, after all. If they have private shareholders, their obligation is to make sure that their shareholders earn profits. And to the extent that they were successful doing that, they would claim, like any other CEO, or any other major officer of a private company, that they’re entitled to the compensation that they were receiving.
The problem with that argument is that they were helped substantially by the backing of the taxpayers of the United States. And so, one would think that anyone who realized he or she was getting that kind of backing would be less demanding in the compensation that they wanted.
Unfortunately, they didn’t behave that way. They behaved as though they were entitled to all this compensation, when their jobs were made very easy by the fact that the government was seen by the markets as backing them up.
LAMB: Was the original decision on Lyndon Johnson’s part cynical?
WALLISON: You know in Washington, it’s very hard to say what is cynical. This is called smoke and mirrors, I think.
It was - - the idea was to get Fannie and Freddie - - well, get Fannie, at that point, off the books of the government.
If they had done it completely, if they had said, you won’t have a congressional charter, what you will have is a charter from, say, the State of Delaware, and you won’t have any line of credit to the Treasury Department, as they initially had, and we won’t say it’s possible for banks to invest in an unlimited manner in your securities, take away many of the benefits that Fannie and Freddie were given at the time they were privatized - - then, it would have been a perfectly reasonable thing to do.
That would have been a real privatization. Unfortunately, they only did a quasi-privatization, where they allowed the markets to believe that over time, if it was necessary, the government would step in and back them.
LAMB: Well, as you know an awful lot of political people in this town were put on the boards over the years.
But I found this - - and I’m going to go over a list in one of your books - - but I found these couple of paragraphs in a ”New York Times” today. We’re recording this on Tuesday before the Sunday night airing.
”Mr. Bush has never been a fan of the government’s involvement in the mortgage markets. He has long viewed Fannie Mae and Freddie Mac as ’ticking time bombs,’ said his former chief economist adviser, Al Hubbard. As far back as 2002, he began arguing for greater regulatory control over the companies, but was thwarted by Republicans who controlled Congress. Democrats eventually granted the authority, which provided the legal underpinning for the takeover announced on Sunday.”
”Mr. Bush was so disapproving of Fannie Mae and Freddie Mac, Mr. Hubbard said, that beginning early in his administration, he refused to appoint members to their boards. ’That is very significant,’ Mr. Hubbard said. ’No president has ever done that.’ But he said, ’We’re not going to put people on the boards of these institutions that are these huge, systemic financial risks to the economy.’”
Now we call it OFHEO.
WALLISON: Yes.
LAMB: Which is a long way of saying …
WALLISON: Their regulator.
LAMB: … a regulator of this. I mean, it’s interesting that these are supposed to be private organizations, but regulated by outsiders.
WALLISON: Yes.
LAMB: So, we just asked that simple question. ”Can you tell us what’s the regulation? What’s the fact today about presidents you know naming people to the board?”
And they said ”You have to write us a letter.”
And we said, ”We’d like an answer quickly.”
And they said, ”How quickly?”
I said, ”We’d like it today or tomorrow.”
And we never have gotten an answer from them.
WALLISON: Is that right?
LAMB: Yes.
But I just bring that up, because when you wade into this, you look at this fact right here, that he has not appointed …
WALLISON: That’s right.
LAMB: … board members, can you explain that?
WALLISON: Sure.
LAMB: And is the president on the side of right as far as you’re concerned?
WALLISON: Yes. Absolutely. I was for this. I was for a number of things the president was proposing, and still am.
But the point he was trying to make, I think - - I think Al Hubbard’s got one part of it right. But I think what the White House was trying to do was to separate the government from Fannie Mae and Freddie Mac to the extent possible.
The way this thing was set up by Lyndon Johnson and his administration, was to have a real quasi-government agency, in which the president appointed five members of the board, and the shareholders elected the remaining 13. And so, that reflected a certain involvement of the government in their business.
And that - - I think the White House thought - - encouraged the markets to believe that, if they went belly up at some point, the government would step in.
So, I think what the president was trying to do here was to send a different signal. And that is no. We’re not responsible for Fannie Mae and Freddie Mac. They were trying to get the markets to believe during this period that there really wasn’t a connection between the United States government and Fannie Mae and Freddie Mac, and the markets simply would not believe it.
And the markets turned out to be right, because now we find, when they have gotten into financial trouble, that in fact the government did step in and back them.
And this has happened before. I mean, the markets are not crazy, and they are not - - they are not particularly prescient. They just look at what’s happened in the past.
And in the 1980s, the farm credit system had financial difficulties. And, of course, that was also a government-sponsored enterprise. And, of course, the government stepped in and bailed them out.
So, the markets look at that, and they look at what Fannie and Freddie are in relation to the government, and they say, well, this is going to be the same thing. The U.S. government is never going to allow one of these organizations to fail.
And the markets, of course, turned out to be right. We are not allowing them to fail.
LAMB: Again, help us understand how the left and the right come together, on both ends of this, for it and against it.
Bill Greider, a liberal writer for The Nation Magazine - - found this on TheNation.com - - just six weeks ago wrote this.
”So much for market discipline. For everyone else, Washington recommends a cold shower. Talk about warped priorities! The government puts up $29 billion as a sweetener for J.P. Morgan, but only can come up with $4 billion for Cleveland, Detroit and other urban ruins.… A generation of conservative propaganda, arguing that markets make wiser decisions than government, has been destroyed by these events. The interventions amount to socialism, American style, in which the government decides which private enterprises are too big to fail.”
WALLISON: Yes. Well, Fannie Mae and Freddie Mac are sui generis in this respect. And that is, it was always clear to me, and to a lot of other conservatives, that the government was going to bail them out if they got into difficulty. And that’s why they would get into difficulty, because there wasn’t any market discipline.
We believe - - and I think most economists believe - - that the best way to control risk in private companies is to make sure the market is at risk. And so, they will not get the funds that they need, if they are taking risks, and the market is wary and interested in the steps that they are taking in their business before it will lend them any money.
But when they’re backed by the government, that doesn’t happen. And that’s how - - at least in my mind - - we get this kind of corporate welfare that we’ve had with Fannie Mae and Freddie Mac in particular.
LAMB: But what about the bailing out of a Bear Stearns, or …
WALLISON: Well you know all of these things have their reasons, which are somewhat different.
The Bear Stearns issue - - and I happen to agree with that, because at the time the Bear Stearns bailout occurred, the market, the international financial markets, were in a panic. And there was for the first time, certainly in my lifetime, and probably for the first time since the Great Depression, there was real concern worldwide in the stability of all of the major financial institutions in the world, in the global capital markets - - the major banks in Europe, the major banks in the United States, the investment banks in the United States and many other such institutions.
And I think the fear was, at the Treasury Department and at the Federal Reserve, that if Bear Stearns - - which was not one of the larger investment banks in the United States - - but if Bear Stearns failed, the panic that was current in the market at the time would cause investors to run to all these other financial institutions and start withdrawing their funds - - in other words, runs throughout the world.
And they hoped to prevent that by showing that the government will step in and stop that from happening.
This actually was the right thing to do under the circumstances. And with all respect to Bill Greider, if the government had not done that, the people of the United States and the people in the developed world, generally, would be far worse off now, because there wouldn’t be - - many of these financial institutions would have failed, and there wouldn’t be the financing available that is necessary to keep our economies running.
LAMB: Do the people running these institutions ever pay a price? It seems like they walk out with these tremendous severances …
WALLISON: Yes.
LAMB: … multi-millions of dollars they take out, and just go on with life while everybody else gets punished.
WALLISON: Yes, well, this is - - this, unfortunately, is part of the process of recruiting executives very frequently. They get contracts. I’m not justifying this in any way.
But in order to recruit a high-powered executive, you have to sign a contract with that person. And frequently, the contract says, unless you do something wrong, if you’re dismissed by the company, we will pay you a certain amount as a severance.
Again, I don’t want to justify it, but if you go through each of these conditions, each of these cases, case-by-case, I think you’ll find that that’s what happens much of the time. And it’s happening again with Fannie Mae and Freddie Mac, because their two top executives, according to today’s newspapers, may walk away with almost $15 million each as severance - - for managing these companies down the tubes.
LAMB: What I see - - the ”Washington Post” this morning has a piece. The severance packages could be worth as much as 14.9 for - - is it Syron? Is that his last name?
WALLISON: Syron.
LAMB: Syron, Richard Syron, the former Freddie Mac chairman and chief executive. As much as $9.8 million for Daniel Mudd.
But why, in the first place - - again, I go back to the point, the government of the United States created these institutions. I know you say they were standalone companies, but they had five members of their board provided by the United States …
WALLISON: Yes.
LAMB: … by the president of the United States.
Why wouldn’t there be some restriction on taking that kind of money out, when they’re supposed to be serving, in many cases, the little person?
WALLISON: Yes. Well, I think from the standpoint of the boards of directors - - let’s assume the president still had five members on the board. What is the obligation of the board members?
Those board members, I think, were advised by their counsel, that their obligation was to the shareholders, and not to the government. That’s one of the reasons I think why the White House decided initially to withdraw those board members, and not to appoint them anymore, because they weren’t doing anything on behalf of the United States. They were just there as kind of symbols of the government’s backing of Fannie Mae and Freddie Mac, but were not changing the policies of the company in any way.
LAMB: Let me show you a piece of paper. This is not very fancy graphics, but there are 70 members of the House Financial Services Committee. Every time you see a line through a name, that means that, in the 2008 cycle - - and you can actually turn the pages here, same thing on the other side - - the names really don’t matter.
But out of the 70 members, 50 of them got (ph) money for their campaigns …
WALLISON: That’s right.
LAMB: … from Fannie Mae. And, of course, money from Freddie Mac.
But we can add to that, not only do they get tremendous amounts of money all the time in the coffers, they have their PACs give to PACs.
WALLISON: Yes.
LAMB: And the PACs end up serving the members.
WALLISON: Right.
LAMB: And then you have the foundation, which was shut down last year, which I want to ask you about. And then you have the advertising. They spent $75 million a year on advertising.
Why would these institutions have to advertise? Why would Fannie Mae or Freddie Mac have to spend $75 million on advertising?
WALLISON: A very good question. And in fact, until they ran into their financial difficulties, there were many in the financial world, including mortgage lenders, who believed that Fannie and Freddie were trying to get into the business of originating mortgages, and so, were trying to make themselves familiar to the American public in general as good guys.
So, they were doing a lot of kind of public service advertising, and trying to tell the American people that a Fannie Mae or a Freddie Mac mortgage would be something they should want.
They never did get into the mortgage origination business. They stayed in the business of buying mortgages from other lenders. But that was only because they ran into financial difficulties in the early 2000s.
That’s why they were advertising. And all of these payments to Congress, that’s only part of the story.
This was truly a culture of corruption. This is the kind of thing that, say, John McCain, who is running against the culture of corruption in Washington, can point to as a perfect example of what is wrong with this town.
These organizations were made out of federal backing, taxpayers’ backing. They were made into powerful organizations. And their executives and their shareholders took tremendous profits out of these companies - - again, because of the backing of the shareholders.
They then took some of these profits, and they turned it over through campaign contributions to the people on the committees in Congress, who were supposed to be supervising them …
LAMB: By the way, in 2005, total lobbying expenditures, Freddie Mac - - this is not for Fannie Mae, and I want to ask the difference between the two - - was $12,560,000.
WALLISON: Yes. Oh, that surprises me it’s so low.
LAMB: That was actually - - their highest year was 2004. It was close to $16, $17 million.
WALLISON: Yes. Well, it depends on the issues that were before Congress at that time. They hired just about every lobbying firm in Washington, D.C.
LAMB: At one point, there were 42 outside lobbyists.
WALLISON: Yes. And one of the reasons they did that is, not that they needed 42 outside lobbyists. They just wanted to keep anyone else from having lobbyists.
And they practice a very tough business in politics, very tough on individuals who are critics. And a critic could get in a great deal of trouble. There were people whose careers had been ruined by criticizing Fannie Mae and Freddie Mac.
And I personally happen to be very fortunate that I’m working at a place like the American Enterprise Institute, because they were not intimidated by Fannie Mae and Freddie Mac when I began to criticize those two companies, but they made a run at me in other aspects of my life, including a board of directors that I was on. And …
LAMB: Where was that?
WALLISON: I was a director of the Mortgage Guarantee Insurance Corporation, which is a mortgage insurer, and dealt regularly with Fannie Mae.
LAMB: And in what way? How would you deal with Fannie Mae?
WALLISON: Well, they guarantee, they insure mortgages that Fannie Mae makes. Fannie Mae makes a mortgage that has more than an 80 percent loan-to-value ratio. They are required by statute to have mortgage insurance for the remaining 20 percent.
So, that’s - - the mortgage insurance business relies very much on Fannie Mae and Freddie Mac for much of their business.
And it came to pass that the president of this mortgage insurance company went to speak to Fannie Mae about the fact that they weren’t being selected as a mortgage insurer.
And he came back to the board meeting that I was at, and he said, ”Well, we were told that they only like to deal with companies that are friends of theirs. And with Peter Wallison on your board, we just don’t regard you as a friend anymore.”
So, I resigned, right then and there. But it is to me an example of the kind of thuggery that these companies were capable of. And they did that all through Washington, so that the media in Washington and individuals in Washington, and people in Congress who wanted to stand up to them, were under threats all the time.
LAMB: The next one, Public Radio did a report in September - - actually, it was in July. And they just had this one line in here. It was a piece by Peter Overby.
”A rival lobbyist once described Fannie Mae as a political organization that happened to be in the mortgage business.”
WALLISON: Yes.
LAMB: I mean, you had people coming out of the Reagan administration, like Ken Duberstein - - you worked in the Reagan administration - - he went on their board. Ann McLaughlin Korologos was on their board.
WALLISON: Right.
LAMB: She was secretary of labor back in those years. There’s a lot of other Republicans. John Buckley came out of one of the campaigns from the Republican side and went to work over there.
WALLISON: Right.
LAMB: What …
WALLISON: This …
LAMB: I mean, what’s - - how does this happen? Where are the morals of people who have been in the government? They know they’re taking this kind of money. And they know that they are allegedly in the business of helping - - again, how many times have we heard it - - the little people who can’t get mortgages.
WALLISON: Yes. It’s very sad. It’s sad that people are willing to do this.
But the trouble is that this was known. This was known to everybody in Washington. This was known to the media.
Where was the ”Washington Post”? Where was the ”Washington Times”? Where was the ”New York Times”?
These things were known. But Fannie and Freddie are huge advertisers in all of those media. Maybe that’s the reason why all of this stuff was not exposed.
On the other hand, there’s the National Public Radio, which presumably doesn’t have major advertising from Fannie and Freddie, or didn’t at the time. And they didn’t expose it either.
So, it is a very troubling thing to see that something as serious as this, which everyone in Washington knew about, everyone who was on the inside in Washington knew about, refused to do anything about.
That’s why you really do need a political revolution, if you will, someone coming in at the top who says, ”I’m going to change the way this town does business.”
LAMB: Well, let me - - and I don’t mean to be accusatory toward any individual, but just take the secretary of the Treasury, Hank Paulson. He used to run Goldman Sachs. A whole bunch of Goldman Sachs CEOs have been involved in all this process.
WALLISON: Yes.
LAMB: Wikipedia site says he’s worth $700 million. He served on the Financial Forum, or whatever they call it. TIME Magazine called it the most powerful organization in town, 20 big financial institutions. One of those on there besides Goldman Sachs is Merrill Lynch.
The guy who was brought in now to run Fannie Mae is Herb Allison, who used to be the finance chief of the McCain campaign in 2000. He came out of Merrill Lynch. He’s now running Fannie Mae for the government.
What are the - - and I’m not impugning his motives. But it seems like the financial community is all interconnected. And the person that just wants the mortgage out there is the one that is least thought of in this process.
WALLISON: Yes. Although I certainly wouldn’t blame Herb Allison - - yet.
LAMB: I’m not blaming anybody. I’m just saying, it’s all a matter of people who are in these banks, all these banks around the United States are all interchanged with these companies.
WALLISON: But you do - - you do need to have knowledge of the financial markets in order to function in the financial markets. You have to know the people, and you have to know the way the markets work, and so forth.
We actually are very fortunate that Paulson is there right now, because the two earlier secretaries of the Treasury in the Bush administration were not people from the financial markets, and probably would have required a lot of coaching to understand what they were seeing happening.
So …
LAMB: Could I, though, suggest this, and just see what your reaction is? Don’t you really have to have people on these boards that will stand up …
WALLISON: Sure.
LAMB: … to the leadership, and more importantly, just ask questions?
WALLISON: Yes, absolutely. And the fact that they brought in people from Washington for these boards was a terrible mistake, but one that they could be expected to make, because they were purely political creatures.
The reason they survived as they did was because they had the support of the government. So, you would want people on your board who don’t know anything about the financial markets, or anything about making mortgages, or anything about how to construct a financial system or a financial business. You don’t need those skills on your board.
What you need in Washington are people who are in the Washington cognoscenti, the people who go to the cocktail parties and know the congressmen and know the senators, and can make sure that you’re getting heard when there is a challenge.
LAMB: OK. We’ve established that they spent a tremendous amount of money on advertising. They spent a tremendous amount of money on lobbying.
They interchanged former presidential appointees in both Republican and Democratic administrations to the board of directors and to the staff.
WALLISON: Yes.
LAMB: They had this kind of quasi-backing - - now, the full backing - - of the United States government.
WALLISON: Yes.
LAMB: And then, there’s the foundations.
WALLISON: Yes. This is a very interesting - - a very interesting thing, because, of course, we tend to think of foundations as (INAUDIBLE) and charitable, and in some cases, educational.
But they use their foundations for the purpose of garnering what? Political support.
LAMB: OK. Let me put on the screen here some information from the Fannie Mae Foundation.
Funded by $650 million in stock since 1995, and $12.5 million in cash in late 2006. Employed 105 people. Headed by Stacey Stewart, whose 2005 salary is $575,000 plus $72,000 in benefits and deferred compensation.
Shut down in February of 2007. Ms. Stewart went to work inside Fannie Mae.
And then, in a statement that was made by Director Jim Lockhart, who is the now-regulator of Fannie Mae …
WALLISON: Right.
LAMB: … it was just - - it was kind of an off-hand comment. I was watching his news conference last Sunday, and he had eight or nine points that he made. And the eighth one was, all political activities, including all lobbying, will be halted immediately.
But then there’s this one line, and it wasn’t explained. ”We will review the charitable activities.”
The Fannie Mae Foundation spent $60 million there last year, giving $60 million around the country in every state and every district. I think $20 million of that was given in Washington, D.C., alone.
Why did they need a foundation? And what purpose did it serve?
WALLISON: Well, it served their political purposes, like everything else at Fannie. The boards of directors served their political purposes and their foundation served their political purposes, because they gave money to community groups.
And whenever there was a challenge to Fannie Mae or Freddie Mac of any kind, those community groups would write to the congressmen or call the congressmen or the senator and say, ”Don’t do anything to Fannie Mae. They’re good people. They support us. We are in your district. We do these good things for the people in your district.”
So, even though the money was actually being used - - probably, I assume - - for good purposes within these districts, the reason Fannie Mae and Freddie Mac gave out this money was to gain the political support that it bought them in districts all over the country.
LAMB: Do you have any idea why they shut it down?
WALLISON: Yes, because I think they recognized that this was the purpose, that what they were doing - - every time a challenge came up to Fannie and Freddie inside the government, a call went out to all these community groups - - e-mails and telephone calls - - and said, ”You better get on the phone to your congressman and let him know that, if he does anything that’s adverse to our interests, you will be very upset. And you represent X number of people in his district.”
There were records of that. And presumably, when Dan Mudd came in at Fannie Mae after the accounting scandals they had, he said to himself, we don’t need this problem anymore. We’d better shut this stuff down.
LAMB: By the way, Dan Mudd is the son of Roger Mudd …
WALLISON: Yes.
LAMB: … former CBS …
WALLISON: But this is a - - frankly, this is just another part of the scandalous process that was going on here. This is using essentially government money, taxpayer money, to lobby Congress indirectly through these groups.
And more has happened. In the new housing legislation, one of the elements in this housing legislation, which contained the new regulations for Fannie Mae and Freddie Mac, never would have been passed, but for the fact that the Democrats wanted the housing bill aspect of this, because the problems in the housing market - - Senator Shelby said, there isn’t going to be a housing bill out of this committee unless you put tough regulations of Fannie Mae and Freddie Mac in it. So, he got those tough regulations in the bill.
But in addition, Congressman Barney Frank in the House wanted a special fund that comes out of the profits of Fannie Mae and Freddie Mac, and is then used for all of these community groups around the country.
So, we see the same process continuing to work. Even though reform legislation was passed, it contains a nice slush fund that can be used by community groups around the country. So we see the same process continuing to work, even though reform legislation was passed, it contains a nice slush fund that can be used by the officials of Fannie Mae and Freddie Mac to reward community groups.
LAMB: You can go on Google and go looking for this Freddie Mae foundation and some of the information is still there. I did it and I just looked up one state, one year, to get an idea of the kind of money they gave away …
WALLISON: Yes.
LAMB: … and I wondered if you could fill in the blanks here, and I’m just going to read a couple of them.
This is from 2006. The state of California, first one on the list is $5000 and they are all in various denominations, even $750 for somebody that travels some then, support the AFI Silver Theatre and Cultural Center’s 17 annual Larsen Latin American Film Festival that fostered cross-cultural understanding and civic dialogue.
There--let me just read a couple of them.
Korean churches for community development, supportive research on how Korean faith-based institutions could strengthen the cohesiveness of the communities in which they are based, building relationships between different ethnic and racial groups and supporting the community infrastructure, $10,000.
Media (ph) economics for women, 16th Maxwell Award, that’s named after David Maxwell, your CEO …
WALLISON: Right.
LAMB: (INAUDIBLE) Excellence for Tierra del Sol, a 119-unit affordable rental housing project for low income people in Canoga Park, California.
And then this is an interesting one: Regents of the University of California at Berkeley. A rather rich place. $35,000 approved in 2006, supportive research on the nexus between housing and schools and effective ways of integrating housing and educational policies in order to create prosperous livable communities.
I can go on, and …
WALLISON: Sure.
LAMB: … this is an idea, and there are thousands of them …
WALLISON: Sure.
LAMB: … over the years.
WALLISON: Sure.
LAMB: … and that bought them very substantial political support.
WALLISON: See, ordinary corporations, of course, give away lots of money to community organizations and charitable organizations and cultural organizations, and they do this in part to support their products.
So if General Motors gives a gift to a cultural organization, what they hope is that people will then think better of buying a General Motors car.
Fannie Mae and Freddie Mac are different. Those gifts were given for the purpose of building political support for them, not their products because they weren’t at that point selling any products directly to the--to individuals. They were buying mortgages from banks. These gifts were given to organizations that would then, hopefully, come back and support them politically in Congress, so they were using, in effect, the taxpayer money that was backing them to gain--to buy political support in districts around the country that then reflected back on the Congressmen and Senators here in the United States. That was the process that was going on here.
LAMB: Now, you were a lawyer in Gibson Dunn …
WALLISON: Yes.
LAMB: … Crutcher--and Crutcher. That’s a--isn’t that a political …
WALLISON: No.
LAMB: I mean, aren’t there a lot of political lawyers in there? Isn’t Ted Olson there?
WALLISON: Ted is there. Yes. Ted is one and Brad (ph) Starr (ph) was a partner of Ted Olson, yes, but the--this is a--Gibson, Dunn & Crutcher is about 850 lawyers at this point, but all business lawyers and litigators, there’s very little political work done, and even in the Washington office of Gibson Dunn.
LAMB: So you didn’t lobby?
WALLISON: I never lobbied, but I think we had one or two. We may now have one or two lawyers in a 150-lawyer office here in Washington who actually lobby.
LAMB: I mean, the reason I’m bringing this up, I mean, Fannie Mae and Freddie Mac are not the only American institutions that do everything we’re talking about in this town. The connection here and the reason I’m asking you to explain it is because they were government institutions and had government sponsored people on their boards, and were backed up, even though they weren’t directly backed up, by the government money and we’ve seen how …
WALLISON: Yes.
LAMB: … the government’s taking them over.
Explain this, and I know you’re on the other side politically, but just help us out on this. This was in the ”New York Times” today.
WALLISON: Yes.
LAMB: This is Tuesday, before the Sunday that this runs. Mr. Dodd, that’s Chris Dodd, is Chairman of the banking committee.
WALLISON: Yes.
LAMB: The Democratic Chairman, called the White House, accusation incredible and libel, Mr. Dodd all but accused Mr. Paulson, Secretary of the Treasury, of misleading Congress less than two months ago when the Treasury Secretary prevailed upon lawmakers to give him the authority to spend untold billions of dollars to rescue the two companies, assuring them at that time that he had no intention of using that authority.
Boy, when I read that I said (INAUDIBLE)
WALLISON: Yes. That was the same thing that …
LAMB: Well, let me read some more.
WALLISON: Yes. Go on. I …
LAMB: I asked Dodd on the record you know why would you get an authority if you weren’t going to use it, quote, ”We accepted him at his word that all he needed was the authority and that he wasn’t going to exercise it, then he used this authority very aggressively. An angry-sounding Mr. Dodd said in the telephone conference call with reporters, he indicated that he would approach any future commitments by outgoing administration more skeptically, quote, ’Fool me once, your fault, fool me twice, my fault.’ Asked whether he felt duped, Mr. Dodd said, ’I was born at night but not last night. I heard experts over the last few days predicting this outcome, but I responded that I take the administration at their word to find out late Friday afternoon that it was going in this direction. It was hard to believe’.”
WALLISON: There’s a person who is attempting to fool everybody. I think he understood what was happening here. Though he wasn’t being lied to or misled by the Secretary of the Treasury. What Paulson was saying, and I thought actually what Paulson said was the truth at the time, and that is I think we thought, Paulson thought, that with the backing of the U.S. government made explicit through what Congress had authorized in July, there wouldn’t be any need to back--to come in specifically and take over Fannie and Freddie.
But what they found was that the markets didn’t quite believe that Fannie and Freddie were going to pay all of their obligations, and what they found as the days went on was that the spread of interest rates that Fannie and Freddie were paying over treasury rates was gradually growing, and as it grew, it meant that mortgages in the United States would become more expensive because if Fannie has to pay more for its money, then the banks that they lend to will have to pay more for their money, and people will have to pay more for money when they buy homes.
So what I think Paulson saw happening was that he had to reassure the markets that the government was actually behind these institutions, and the only way to do it was to actually take them over, and I think he also knew from the investigations that they did of Fannie and Freddie’s financial condition that they were close to if not insolvent.
So I don’t think Paulson misled anyone in the Senate. I think what he said was you give me this authority, I probably won’t have to use it because the markets will believe that I could come in at any time and take over these companies, and therefore they will know that their loans will be repaid.
Well, they didn’t quite believe it, and we have read during the recent weeks that the Bank of China was beginning to sell off part of its portfolio of Fannie and Freddie’s. Fewer people were showing up at the auctions for Fannie and Freddie securities. They were bidding--they weren’t bidding as aggressively, so Fannie and Freddie were beginning to have to pay more and more for the money they were borrowing, and the pattern was becoming very clear, so treasury really had to act.
Now, I happen to believe they did the wrong thing. He should not have appointed a conservator for Fannie and Freddie. He should have appointed a receiver for Fannie and Freddie. A receiver would be able to modify their business model substantially, and even in his statement Paulson said that they have flawed business models. You, I think, read part of that. They have flawed business models.
That is true. That’s why I thought from the beginning that they were going to be causing trouble for everyone because they are partly profit-making companies and partly companies with a government mission with government backing. Those two things can’t go together in the same institution.
So, Paulson should have moved in and taken them over with a receiver so he could have changed that business model. He didn’t do that.
LAMB: Let me show you and the audience places you’ve seen …
WALLISON: Yes.
LAMB: … we have video of both Fannie Mae and Freddie Mac. Their institutions are both here in Washington. One of them’s out in the plain …
WALLISON: Right.
LAMB: … one of them’s in--out on--what is it, Wisconsin Avenue.
WALLISON: Yes.
LAMB: So Freddie Mac’s on the screen right now, and that’s the one out in the …
WALLISON: Yes.
LAMB: … plain in Virginia in the suburbs. Do you have any idea how many people work there?
WALLISON: No, I don’t.
LAMB: They also had …
WALLISON: The reason this may …
LAMB: … they had a foundation and you know it’s a bipartisan kind of thing.
WALLISON: Yes.
LAMB: Dennis Deacon, senior former Senator, was a former board member, David Gribben , who was a Richard--a Dick Cheney aid, was a former board member and George Herbert Walker Bush aid, Harold Ickes was a former board member, Clinton advisor, Ron Emmanuel, former board member, Clinton senior advisor, and then he--Ron Emmanuel received contributions when he got into the House …
WALLISON: Yes.
LAMB: … from the lobbyists, and Susan Molinari, former Congresswoman, Republican, was an outside lobbyist for Freddie Mac.
Here’s Fannie Mae, and as we look at Fannie Mae, which is …
WALLISON: Yes.
LAMB: … quite a building you can see when you drive up Wisconsin Avenue.
What is the difference between Freddie Mac and Fannie Mae? We’ve been talking a lot about Fannie Mae.
WALLISON: Well, I would say there isn’t any substantial difference at all between them. Fannie is the larger, the more politically active of the two, but as between them, they have exactly the same charters and they’ve done exactly the same thing, and to some extent, they are in competition with one another.
LAMB: Why do we need two?
WALLISON: Well, I think it was good to have two because they were in some competition. If we only had one, that would be a monopoly.
We have had two. Some argue that they were in monopoly pricing anyway, but that’s not been established yet.
In any event, two is always better than one because it does produce a certain degree of competition between these two government-backed organizations.
LAMB: Another article this morning from ”The Wall Street Journal.” Home loan banks draw focus or made rescue plan.
WALLISON: Yes.
LAMB: Now, it starts out by James Haggerty writing the Fannie Mae and Freddie Mac takeover raises questions about another set of institutions started by Congress to help finance housing. There are 12 regional federal home loan banks.
You know a generalist, and I am a generalist, drowns in all this language …
WALLISON: Yes.
LAMB: … and all these institutions, and you get on, there are 12 of those federal home-owned banks across the country. They often have local board members, bankers, in many cases.
WALLISON: Yes.
LAMB: GSEs?
WALLISON: Yes, of course. The government sponsored …
LAMB: Government service--government sponsored enterprises.
WALLISON: Right.
LAMB: And also you add Jenny Mae into that, which …
WALLISON: Well, now that is a government agency. That’s not a government sponsored …
LAMB: That replaced what Fred--what Fannie …
WALLISON: Yes.
LAMB: … was in the beginning.
WALLISON: Right.
LAMB: Under HUD.
WALLISON: Right.
LAMB: What about these federal--no, I mean, you know …
WALLISON: (INAUDIBLE)
LAMB: (INAUDIBLE) no idea.
WALLISON: Look, Ronald Reagan said the closest we’ll ever come to immortality in this life is a government agency, and the federal home loan banks are a perfect example of that because they were established in the depression era to assist the development of a mortgage market and to help people get mortgages, but since then we have developed a very sophisticated mortgage system here in this country, and we don’t need the federal home loan banks.
But they provide subsidized financing to banks, and the banks don’t want to give up this subsidized money that they received from this government-sponsored enterprise.
LAMB: Do you have any idea how much money these individual board members make on these banks and on those …
WALLISON: No.
LAMB: … on the …
WALLISON: No.
LAMB: … Fannie Mae, do they get paid?
WALLISON: Sure. In Fannie and Freddie they get paid, and it’s true also in the federal home loan banks. I just don’t know how much that is.
LAMB: When the stock has fallen at Freddie Mac and Fannie Mae from 65 roughly, $70 down to below a dollar …
WALLISON: Yes.
LAMB: … in less than a year …
WALLISON: Yes.
LAMB: … did the board members protect themselves?
WALLISON: I have no idea, but if they--I don’t know whether they got stock compensation. I don’t know whether they got stock options or anything of that kind …
LAMB: What would you to protect yourself …
WALLISON: (INAUDIBLE) major cash.
LAMB: … to make sure that if all that is going on right now happened that you got your money?
WALLISON: Well, I--if they had stock, if they were given stock or they had bought stock when they became directors, they probably should not have sold that stock while the stock was going down.
I don’t know, as a matter of fact, whether they have. I haven’t ever looked into that, but one way to protect yourself is if you see a disaster looming in the future and you’ve got a substantial amount of that stock, you would sell it off. But I have no idea whether they did that.
LAMB: You’ve been around this town for a long time.
WALLISON: Yes.
LAMB: How much time do you spend in the town now?
WALLISON: About half the year.
LAMB: What do you do for AEI?
WALLISON: I write. I organize conferences. I speak from time to time.
When I say half the year, I’m here half the year. I work 100 percent of the year, but in Colorado where I live the rest of the time, and I’m doing all of this work for the American Enterprise Institute.
LAMB: Now, people on the other side of politics would say AEI is funded by American industry, has its own …
WALLISON: Not quite. Not quite. It’s got a third of its funding comes from corporations, a third comes from individuals, and a third comes from foundations.
So it is not in any sense connected with corporations, and in fact, if anything, if there’s any group that you would identify as connected with AEI, it would be entrepreneurs. This is a free market organization.
LAMB: How would you explain people looking in from the outside to Washington, D.C. right now, seeing these stories, and we have just skimmed the surface.
WALLISON: Right.
LAMB: One word you could apply to our summer is just greed.
WALLISON: Yes.
LAMB: Where is it coming from in this society? Why is this happening in this town now?
WALLISON: Well, I’m not sure it’s only now, but it’s certainly become more prominent now.
I’ve never understood this myself, frankly. I mean, there are--there seem to be two classes of people. There are people who keep score based on money, and there are people who keep score based on success in some other areas like academic success and so forth.
I deal a lot with academics. I hope to rise to the level of an academic some day in my time. And those are not people who are motivated by money. Those are people who are interested in learning, in producing things that are useful.
But other people keep track according to money, and I’m afraid that’s why we have so much, I would call it greed, going on here in Washington when people are trying to use their positions to enrich themselves.
LAMB: Why hasn’t the Congress done more than it has?
WALLISON: Because the Congress is part of the problem rather than part of the solution.
LAMB: Let me read the last paragraph of today’s editorial in ”The Wall Street Journal,” this being Tuesday.
”Mr. Frankn it turned out”… Barney Frank is their Chairman of the Financial Services Committee in the House, ”has had many accomplices from both parties in his protection of Fan and Fred, but he was and is among the most vociferous and powerful. In any other area of American life this track record would get a man run out of town. In Washington he’s hailed as a sage and his history of willful error will be forgotten faster than taxpayers can write a check for $200 billion dollars.”
WALLISON: That’s powerful language.
LAMB: Not to single out Barney Frank, and listen, he’s had many hours on this network so he’s had his time to talk. He--there were journalists saying both Republicans and Democrats.
WALLISON: Yes. And it’s true. It’s true. This could not have happened if both parties weren’t implicated, and I think that raises a lot of questions about our campaign finance system in this country. I think there are ways we could address this problem through the campaign finance system. In fact, I’ve written a book about the subject that’ll be out in April. Maybe we’ll have a chance to talk about it then.
But the Congress is part of the problem here. They are implicated in creating Fannie and Freddie, keeping it alive, protecting those two companies against attack from any side within the political process and in the private sector, and they get benefits from Fannie and Freddie.
You’ve mentioned many of them. They get campaign finance reform. How they get campaign finances, they hire the staff of these people, they hire the lobbyists who are the friends of congressmen and senators, they give out money to community groups who then in turn support those congressmen and senators who are their friends.
It is a very unpleasant thing to watch, and ultimately, it is a way for Congress, without actually appropriating any money, to direct money to their friends, and that’s why I mentioned this thing that Barney Frank was so anxious to get into his bill, this idea of a slush fund that would be available to pay to community groups to support housing, maybe. We hope its housing and not other things, but ultimately it is a way for the Democrats, at least in this case the Democrats, to direct the funds to the groups that support them, and it’s not even appropriated funds. It’s not anywhere.
LAMB: Peter Wallison, thank you very much for your time.
WALLISON: Thank you.

Cero (0.0) In GEOPOLITICS

While the American media is bluffing about the “Invasion of Georgia” the Bush administration just receive a lap in his face as a consequence of his erroneous and horrendous mishandling of the situation in the Middle East; special remarks on his attitudes an action in the illegal war in Iraq.

Percy H Florez


Washington Post, Page A9 first column:
Title: “Bush Question Russia’s Intentions:
Author: By Karen DeYoung – Washington Post Staff Writer

Bush said yesterday: “Russia’s Actions this week have raised serious question about his intentions in Georgia Region…….”

Washington Post, Page A9 first column:
Title: “Bush Question Russia’s Intentions:
Author: By Karen DeYoung – Washington Post Staff Writer

While the administration yesterday recalled the days of Soviet empire, the Russians suggested that invaders and occupiers of Iraq lacked the moral authority to offer criticism. In remarks broadcast on state television, Putin, now Russia premier, decried Western “cynicism” for defending what he said was Georgian aggression against a separatist enclaves in south Ossetia and Abkhazia.
“They of course, had to hang Saddam Hussein for destroying several villages,” he said of the United States.
“It’s a pity that some of our partners, instead of helping, are in fact trying to get in the way,” Putin said. He was referring, he said, to the airlift of “Georgia military contingent from Iraq effectively into combat zone.” U.S. military C-17 flew Georgia’s 2,000-troops contingent in the coalition force in Iraq back to Tbilisi yesterday in response to Georgia government request.


Washington Post, Page A13 Top Middle section, Columns 2,3 and 4
Title: A Path to Peace in the Caucasus
Author: Mikhail Gorbachev
Note about the writer: The writer was the last president of the Soviet Union. He was awarded the Nobel Peace Prize in 1990 and is president of the Gorbachev Foundations, A Moscow thin thank. A version of this article, in Russian, will be published in the Rossiyskaya Gazeta newspaper tomorrow.

The Article:

MOSCOW --- The past week’s events in South Ossetia are bound to shock and pain anyone. Already, thousands of people have died, tens of thousand have been turned into refugees, and towns and village lie in ruins. Nothing can justify this loss of life and destruction. It is a warning to all.

The roots of this tragedy lie in the decision of Georgia’s separatist leaders in 1991 to abolish South Ossetian autonomy. This turned out to be a time bomb for Georgia’s territorial integrity. Each time successive Georgian leaders tried to impose their will by force ---- both in South Ossetia and in Abkhazia, where the issues of autonomy are similar ---- it only made the situation worse. New wounds aggravated old injuries.

Nevertheless, it was still possible to find a political solution. For some time, relative calm was maintained in South Ossetia. The peacekeeping force composed of Russians, Georgians and Ossetians fulfilled its mission, and ordinary Ossetians and Georgians, who live close to each other, found at least some common ground.

Trough all these years, Russia has continued to recognize Georgia’s territorial integrity. Clearly, the only way to solve the South Ossetian problem on that basis is trough peaceful means. Indeed, in a civilized world, there is no other way.

The Georgian leadership flouted this key principle.

What happened on the night of Aug. 7 is beyond comprehension. The Georgian military attacked the South Ossetian capital of Tskhinvali with multiple rocket launchers designed to devastate large areas. Russia had to respond. To accuse it of aggression against “small, defenseless Georgia” is not just hypocritical but shows a lack of humanity.

Mounting a military assault against innocents was a reckless decision whose tragic consequences, for thousands of people of different nationalities, are now clear. The Georgian leadership could do this only with the perceived support and encouragement of a much more powerful force. Georgian forces were trained by hundreds of U.S. instructors, and its sophisticated military equipment was bought in a number of counties. This coupled with the promise of NATO membership, emboldened Georgian leaders into thinking that they could get away with a “blitzkrieg” in South Ossetia.

In other words, Georgian President Mikheil Saakashvili was expecting unconditional support from the West, and the West given him reason to think he would have it. Now that the Georgian military assault has been routed, both the Georgian government and its supporters should rethink their position.

Hostilities must cease as soon as possible, and urgent steps must be taken to help the victims ---- the humanitarian catastrophe, regretfully, receive very little coverage in Western media this weekend ---- and to rebuild the devastated towns and village. It is equally important to start thinking about ways to solve the underlying problem, which is among the most painful and challenging issue in the Caucasus ---- a region that should be approached with the greatest care.

When the problem of South Ossetia and Abkhazia first flared up, I proposed that they be settled through a federation that would grant broad autonomy to the two republics. This idea was dismissed, particularly by the Georgians. Attitudes gradually shifted, but after last week, it will be much more difficult to strike a deal even on such basis.

Old grievances are a heavy burden. Healing is a long process that requires patience and dialogue, with non-use of force an indispensable precondition. It took decades to bring to and end similar conflicts in Europe and elsewhere, and other long-standing issues are still smoldering. In addition to patience, this situation requires wisdom.

Small nations of the Caucasus do have a history of living together. It has been demonstrated that a lasting peace is possible, that tolerance and cooperation can create conditions for normal life and development. Nothing is more important than that.

The region’s political leaders need to realize this. Instead of flexing military muscle, they should devote their effort to building the groundwork for durable peace.

Over the past few days, some Western nations have taken positions, particularly in the U.N. Security Council, that have been balanced far from balanced. As a result, the Security Council was not able to act effectively from the very start of this conflict. By declaring the Caucasus, a region that is thousands of miles from the American continent, a sphere of its “national interest,” the United States made a serious blunder. Of course, peace in the Caucus is in everyone’s interest. But it is simply common sense to recognize that Russia is rooted there by common geography and centuries of history. Russia is not seeking territorial expansion, but has legitimate interests in this region.

The International community’s long-term aim could be to create a sub-regional system of security and cooperation that would make any provocation, and the very possibility of crises such as this one, impossible. Building this type of system would be challenging and could only be accomplished with the cooperation of the region’s countries themselves. Nations outside the region could perhaps help, too ---- but only if they take a fair and objective stance. A lesson from recent events is that geopolitical games are dangerous anywhere, not in the Caucasus.

By, Mikhail Gorbachev
Published, Tuesday, August 12, 2008
Washington Post, (Page A13)

Percy H Florez

VFO

now this is getting out of hand

this banning craze on PB is getting out of hand. this morning Laura condems me because I published something that she claims I meant to smear, flame HRC supporters which is not true. I tried to tell her that, but she wouldn't open up. ahh I 've had it with PB. some of them so immature.

so i got banned. fine i don't care much.

My Bo

For My Bestest Friend. My Dog and Granddaughter Watch the Bird Bath!

The GOPee Mindset. What ALL of us Liberals are Up Against!

Stewart on 7-31-08

This is a must see-Too Funny and too true. Dick move of the Week

Butter Not Guns

In this morning's news, I came across the following:

Israel-Hamas Standoff Deepens Water Woes
The Christian Science Monitor's Rafael D. Frankel reports: "Five hundred yards south from where hundreds of children play in the water next to this refugee camp, a pipe spills 20 million liters of raw sewage into the Mediterranean Sea each day. Between 105 and 120 million liters of sewage are generated daily in Gaza. Of that, only 20 million liters are fully treated, while another 40 million liters are partially treated. The rest flows raw into the sea, storm drains, and a massive landfill north of Gaza City, which spans 4.3 million square feet. The resulting pollution has sullied not only the seawater, but also the aquifer below Gaza, causing a severe shortage of potable water and putting the population at risk for a range of illnesses."

What I want to know is, rather than providing Israel with armorment to slaughter Palestinians and bulldozers to destroy their towns and villages, why isn't the U.S. donating or providing at reduced cost to the Palestinians of both Gaza and the west Bank materielle, equipment and expertese to build sewage treatment plants and other inferstructure to help improve their quality of life?

Doing so would be commencerate with vonted U.S. ideals. It would also go a very long way towards improving foreign, especially Arab and Muslem, attitudes towards the United States.

What have you got to say about this??

I have often been wondering if the time is right for this. All I can
say is wait and see how things work out. Hopefully with the election
of Obama and more new Dems to both congressional houses change will
bring back our country to where we were eights years ago. Otherwise
the action in this article might be our only hope.







NEWS YOU WON'T FIND ON CNN
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Towards a Second American Revolution That existing government by engaging in criminal wars, embargoes, blockades and other black-listing of foreign nations has made the United States not just an international bully but a piranha, world’s leading perpetrator of genocide and dislocation of peopleBy Ben Tanosborn04/07/08 --A Re-Declaration of IndependenceBy the People of the United States of AmericaOn This Fourth of July 2008When in the course of human events, it becomes necessary for one people to dissolve the political bonds which have connected them with its own government, and to assume among the powers of the earth, the separate and equal station to which the laws of nature and of nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the denunciation.We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights; that among these are life, liberty and the pursuit of happiness. That to secure these rights, a new government must be instituted, deriving its just powers from the consent of the governed. That whenever any form of government becomes destructive to these ends, it is the right of the people to alter or to abolish it, and to institute new government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their safety and happiness. Prudence, indeed, will dictate that governments long established should not be changed for light and transient causes; and accordingly all experience has shown that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same object evinces a design to reduce them under absolute despotism, it is their right, it is their duty, to throw off such government, and to provide new guards for their future security. –Such has been the patient sufferance of the people of the United States of America; and such is now the necessity which constrains them to alter their existing system of government. The history of the Executive in this government, exemplified and accentuated by the current administration; together with a long history of a lobbies-corrupted Legislature and a politically-appointed Judicial, are histories of repeated injuries and usurpations, not acting as to balance power but jointly providing a unified corruptive government, all having in direct object the establishment of a world empire and a domestic ruling class able to exercise absolute tyranny over the people. The present and recent past administrations of the United States of America are hereby deemed non-responsive to the interests and well-being of the people of this nation while also acting as an imminent and constant danger to the cause of peace in the world. To prove this, let facts be submitted to a candid world.…That existing government has made itself a self-perpetuating tyranny where the channels to change and impeachment are de facto blocked by the duopolistic party system.… That existing government operates under the auspices of special interest groups whose money influence the election of officials in such government, the enactment of legislation, and the way domestic and foreign policy are created and conducted.… That existing government has not only permitted but promoted the ever-widening gap between haves (20%) and have-nots (80%), with serious wealth and income inequality.… That existing government shows no concern for the well-being of the people as evidenced by the availability of healthcare, education and social welfare relative to other nations with similar or fewer resources.… That existing government is responsible for instilling fear in the population, making terror the underlying reason for curtailing freedoms, spying or even lying to the people.… That existing government maintains a military with a destructive capacity far in excess of that needed for self-defense; and to the detriment of public needs. And that such massive destructive capacity only serves to paint the United States as a coercive, imperialistic and terrorist nation.… That existing government by engaging in criminal wars, embargoes, blockades and other black-listing of foreign nations has made the United States not just an international bully but a piranha, world’s leading perpetrator of genocide and dislocation of people.… That existing government has in fact misgoverned domestically in every facet of governing; while abusing its power to promote mayhem internationally which has gravely damaged the reputation of the people of this nation before the eyes of the world.We, therefore, the people of the United States of America, in self-representation and joined in mind and effort, appeal to the Supreme Judge of the world for the rectitude of our intentions, do, in the name of one another with common joint interests, and self-exercising our authority as free people, solemnly publish and declare, that these United States of America are, and of right ought to be free from the tyranny of the existing government; that they are absolved from all allegiance to this existing Federal government, and that all political connection between them, is and ought to be totally dissolved; and that the Fifty States making up this union immediately join forces to create and summon a Constitutional Congress for the sole purpose of enacting a new constitution and the formation of a new Federal government; representatives to that Congress to be judiciously chosen by the States in proportional numbers to population. The new constitution, and the government which will derive from it, to be exemplary models in morality and brotherhood; such government to have full power to work for peace and against war, to regulate all wealth-producing activities to guarantee a free but fair market, and to do all other acts and things which independent nations may of right do for the well-being of its citizens. And for the support of this declaration, with a firm reliance on the protection of Divine Providence, we, the people of these United States of America, pledge to each other our lives, our fortunes and our sacred honor.© 2008 Ben Tanosborn - www.tanosborn.com
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Hi all

Nice artwork, Marsha!  I decided to come back over here and see what's up.   

Shop, I can see you put a lot of work into this site. It has turned out beautifully.  Now, if only someone was here to talk to, it would be perfect.

Hey has anyone heard from our friend in NH, "mcliberal?"

what's wrong with mike link at PB?

I can only read the blogs, but not comment or post. this has happened to me
at democrat.com. and now it's happened at PB. well if that's the way it is tell mike he can go to hell. after all i did nothing wrong.

...

Welcome Saint Father Benedict XVI – Beinvenido Santo Padre Benedict XVI

Welcome to the land of contradiction and opportunities.

I just remember when I was a young man, long time ago your predecessor the Saint Father John Paul II and his apostolic visit to my lovely Venezuela, I just remember the crow and the cheer of the people and the enthusiasm of the young people like me, but when the first day come up I couldn’t forget when he shake my hand and kiss my face, when he went down from the pulpit and talk directly and frankly with us, that was one of the most important momentum of my live. I just remember his words and his sorrows about the people who suffer and the injustices; I just remember his uncommitted love for the kids and young people.

Just days ago, I listening and washing TV when I see a commercial about your visit and some kind of specific instruction to go in to the one of your massive mass in Washington DC. Yes, I just being astonishing when I hear this condition for security reason: “You have to show some kind of Government ID or Federal ID” in A clear allusion to prevent the assistance of thousands of people who live in this country “UNDOCUMENTED” no because they want. NO Saint Father, because the system is special designed to keep this people in the dark, in the shadow. Yes Saint Father the majority of this people are Hispanic, Catholic people who can be comforted by your words and prayers. Thousand of families are banned with these decisions, special designed for this people. Of course the security of the Saint father when he visit any country it is a priority and main concern of the governments, as a part of this security when I was young man I know this action is an excess, It is well know in the government spheres, if you want to secure an bring security to the Saint Father, first at all, check for arms of any king of explosives, I see this before and I don’t understands why and ID become an impediment to see an listen the spiritual leader of million of Catholics around the word special when they are Hispanic the most affected community for this decision. I don think so this is the recommendations Of the Vatican.

Saint Father, as I said before, welcome to the land of contradiction and opportunities.

This word means the same in any language and any part of the world: “FOOTBALL” except this country where this world means another sport. SOCCER = FOOTBALL in this country.

This country of immigrants and part of these contradictions is those new immigrants are no longer welcomed.

This is a country who suffer the most terrible act of terrorism, and now, security is one of the main concern and has to be one of the main concern of any government in the future, but when this measure trespass the line of the reasonable and invade the privacy and become always aggressive, intrusive, and racist. That policy becomes inconsistent and ineffective.


Security is another word Saint Father, part of the contradiction of this great country. It means in this part of the world HIDDEN PEOPLE but in the rest of the world UNHIDDEN PEOPLE.

There are more than twelve million people suffer as a consequences of this incongruence. There are million of families suffering the abuse of the system as I said before special designed to keep this people on the shadow. People who is subject to the most horrible man hunting for the authorities, father’s and mother’s who can’t rest any more at night for the fear of some one from the ICE come up and knock the door and deport him / her ore the entirely family. Hard workers subject to exploitation for employer’s because they don’t have documents, people subject for any kind of discrimination, like the banned imposed for your visit (WHY THEY DON’T ASK FOR GOVERNMENT ID OR FEDERAL ID AT THE DOORS OF THE STADIUMS TO THE PEOPLE WHO CAME TO SEE THEIR FAVORITES TEAM OF BASEBALL OR BASKETBALL). Father and Mother who don’t see grow his kids, because the plutocracy doesn’t want to speed the process of million and million of application well sustained in the immigration process. That result intolerable, special if they want to know who really they are. Its well knows people are waiting more than TEN YEARS in his immigration process.
Where is the justice on this?

This is the most powerful country of the word, with his own problems, yes, no doubt about that, but this is the country were the most advance technology is in place and the most advance systems of computing and networking are in place too. A country that is able to count million of votes in less than one day automatically. A country who is able to send radio signals to robots out of our planetary solar system.

There are the technology necessary to resolve this issue but for some politician NO.
They want for SECURITY REASON this people on the shadow.

It is a contradiction about security reason, because the best practice for security reason in this situation is KNOW, who they are, how many, where they come from and so on.

Saint Father, finally I would like you to include in your words and prayers these innocent people who are suffer, those families living under fears, those kids crying for her father and mother when they are deported without any considerations and those brave people who every morning wake up early and walk the streets to get the first bus no matter the inclemency of the weather because the government think they are possible terrorist and can allow a valid driver license. One of the most insane and racist laws, pass in these years, for SECURITY REASON.

One more time Saint Father Benedict VI
Welcome to the United Stated of America
God Bless You!

Percy H Florez

A buen entendedor pocas palabras…..!

Habiendo toda la nación escuchado con detenimiento los mensajes o mejor dicho el libreto del General Petraus y del Embajador Crocker acerca de la ilegal guerra de Irak y el sorprendente y efusivo respaldo presidencial que estos tuvieron no que da otra cosa que pensar acerca de los perversos intereses que hay en todo esto. Por eso la siguiente pregón ta:

CUAL ES LE VERDADERO Interés DE ESTA INSENSATA GUERRA?

Lo cierto es que ninguno de las respuestas que estos “honorables” señores dieron ante el Honorable Congreso de este país tiene ninguna congruencia y sustento que permita decir ELLOS TIENEN LA RAZÓN!

Más aun creo que esto fue nada mas que un SHOW bien montado y efectivamente estudiado para distraer la atención de lo que realmente esta sucediendo no solo en el país sino en esta insensata guerra.

Pero como dicen la sabiduría y el proverbio de los viejos hombres……………nunca hay mal que por bien no venga………………y por ahí vino la respuesta del mismísimo primer ministro de Irak, declarando ante los medios internacionales…………………. “NO ESTOY DE ACUERDO CON LA PAUSA EN LA RETIRADA DE LAS TROPAS NORTEAMERICANAS”

Lo mas asombroso de todo es que la prensa de Este país casi no se hiciera eco de semejante declaración y las implicaciones de las mismas………………..mas aun los lideres políticos de ambos partidos y los opositores a la guerra tampoco hicieron eco de estas declaraciones.

PARECIERA QUE A NADIE LE INTERESA LA VIDA DE LOS SOLDADOS AMERICANOS!

Percy H Florez

Saturday Night Fun

now I am really really speechless

I just came across an article that really kicked my rear. this is reality
folks. this is not a bed time story. it don't take much to schook the
beegees out of me. I tried to get this posted on PB, but it seems like
the links don't work. please help me get this out there as there is talk
on PB about voting reub.

geez i don't even know even know where to begin except to say we dems
must really come together and get as many dems elected not only to the
white house but to the house and senate. never before has there been a
time when the destiny of not only this country but the entire world at risk
of being controled by our Government. Could this be the reason why the
GOPEe are working over time?

here is the link http://www.informationclearinghouse.info/article5646.htm

please read this with an open mind and share it with any one you know.

thank you

peace

Little pieces of America