Acorn Registers the Dallas Cowboys to Vote In Nevada

Every election cycle Acorn pops up with these sorts of shenanigans - voter fraud that is always for the benefit of liberal candidates.  McCain would be well served to hammer Obama on his close and long-term ties to this group.  There are isolated examples, but you’ll be hard pressed to find examples of systemic voter fraud benefiting conservatives.  Voter fraud almost always is for the benefit of left wing and Democrat candidates.  I’ll be looking out for  Tony Romo and Terrell Owens at my Atlanta voting precinct November 4^th.  If Michael Vick tries to vote, my suspicions will be raised, since the last time I checked, he was still locked up in Leavenworth.

http://elections.foxnews.com/2008/10/07/acorn-vegas-office-raided-voter-fraud-investigation/

 

Barney Frank Plays His Trump Card

I’ve been waiting for this and here it is.  For years Fannie and Freddie and their enablers, Frank and Dodd and the gang, would accuse as “hating poor people” and “not wanting affordable housing” anyone who tried to responsibly regulate, limit, or otherwise look into their activities.  Barney Frank now adds the unfortunate but predictable extension – some of these poor people are black, so people (read "Republicans") attacking the GSE’s are "racists".  This guy is so dirty with this stuff it is unbelievable - and now this despicable diversionary tactic. 

http://www.breitbart.com/article.php?id=D93LAKT01&show_article=1

Democrat's GSE Denial or, "We didn't do it, nobody saw us!"

A liberal friend of mine recently sent me some material repeating the Democrat talking points that Fannie Mae and Freddie Mac, enabled by congressional Democrats, are not to blame for the finanical crisis, and that Republicans pointing at the GSE's are only trying to deflect blame from a failure of deregulation. The sources provided included a column from BusinessWeek, an op-ed by liberal economist and New York Times columnist Paul Krugman, and a piece from The Huffington Post.

The problem with The Huffington Post, besides the anger and hate, is that stuff gets thrown out there un-cited or cited from dubious sources that is for the consumption of the left who mostly just shout “Amen” - with no critical thinking. It is actually quite amusing how many of the featured articles on The Huffington Post are from "political pundits" such as Barbara Streisand and Alec Baldwin. Unfortunately, the NYT’s is getting more like The Huffington Post every day, with Frank Rich (dubious and spurious "facts") and Bob Herbert (anger) leading the charge. No respectable journalist is going to look to The Huffington Post for a factual discourse. But I digress.

In The Huffington Host piece, written by a Mr. Abromowitz, he actually cites Wikipedia as a source for what Fannie and Freddie can and can’t do. You’ve got to be kidding me. As I’ve explained to my kids, Wikipedia is useful for quick access to information, but it is not a valid source for a school paper (or an op-ed in this case). Anyone can put something out on Wikipedia, or edit a piece that is already published. For all I know Abromowitz placed the entry there himself. Abromowitz writes:

“Now, as even Wikipedia will tell you, "the term 'subprime' refers to loans that do not meet Fannie Mae or Freddie Mac guidelines." So how can Republicans point to Fannie and Freddie to lay blame when asked about the current housing crisis?”

I looked at the author’s bio, and he is an attorney whose work focuses on “affordable housing”, So he has to know what he is writing is not true. Krugman repeats the falslehood that Fannie and Freddie can’t touch sub-prime paper (un-cited). Krugman should know better. In addition, Krugman writes:

“Fannie and Freddie had nothing to do with the explosion of high-risk lending a few years ago, an explosion that dwarfed the S.& L. fiasco.”

I don’t know anything about Aaron Pressman in BusinessWeek, so I don’t know if he should know better or not. He does cite a Federal Reserve study that recounts the causes of the crisis and does not mention the GSE's. The Fed study is accurate, but focuses only on the scope of the Fed’s mission, which does not include the GSE's, but does focus on what in my opinion is the other root cause – the incompetence (or worse) of the rating agencies. He goes on to state the following (un-cited), which is demonstrably false.

“All those no money down, no interest for a year, low teaser rate loans? All the loans made without checking a borrower’s income or employment history? All made in the private sector, without any support from Fannie and Freddie.”

The most in-depth and factual analysis I have found is an overview paper from the American Enterprise Institute written by Peter J. Wallison, the Arthur F. Burns Fellow in Financial Policy Studies at AEI, and Charles W. Calomiris, the Henry Kaufman Professor of Financial Institutions at Columbia Business School. The were assisted by Edward Pinto, a former chief credit officer of Fannie Mae, who helped decipher the GSE's Enron-like disclosures. It is scrupulously cited and footnoted. Mr. Walllison testified before Congress yesterday as an expert on the subject.

http://www.aei.org/publications/pubID.28704/pub_detail.asp

It is a very long piece, but I’ll highlight a few points.

• In 1994, Fannie Mae Initiated a $1 trillion affordable housing initiative, and both Fannie and Freddie announced new $2 trillion initiatives in 2001.
• In the early ‘90’s the Democrat-controlled Congress lowered the capital requirement for the GSE's from 10% to 2.5%% in order to increase funding for “affordable housing”.
• In 1995, the Clinton administration approved the GSE's purchase of sub-prime loans in order to meet their affordable housing targets (pre-OFEHO, there was no GSE egulatory agency at the time), but did not provide any rules about lending practices that needed to be followed for these loans.
• In 2004, the House Financial Services Committee developed a GSE oversight reform bill that was so badly weakened by GSE lobbying that the Bush administration refused to support it. The Senate Banking Committee, then under Republican control, adopted much stronger legislation in 2005, but unanimous Democratic opposition to the bill in the committee doomed it when it reached the floor, including opposition from Barack Obama.
• On June 30, 2008, Fannie held or had guaranteed subprime and Alt-A loans with an unpaid principal balance of $553B, plus $25B of Alt-A and $36.3B of subprime loans purchased as private label securities That’s a grand total of $619B – or 23% of its single-family mortgage book.
• In August of this year, Freddie reported that 52% of its entire single-family credit guarantee portfolio was from the problematic book years 2005-2007. It further reported that these mortgages had the following subprime characteristics: option ARM - 72%, interest only - 90%, credit scores fo less than 620 - 61%, loan to value greater than 90 - 58%, Alt-A - 78%.
• Freddie’s total junk, Alt-A and subprime loan exposure in August was $392B, or 20 percent of its entire single-family mortgage book.
• Fannie Mae and Freddie Mac became the biggest buyers of the AAA tranches of subprime pools in 2005–07. Without their commitment to purchase the AAA tranches of these securitizations, it is unlikely that the pools could have been formed and marketed around the world.
• The AEI paper also dissects what it charitably calls Krugman's "confusion” about his misstatements that the GSE's were prohibited by law from purchasing sub-prime loans, and that the GSE's exposure to sub-prime loans was zero, neither of which is true.
  
• On September 23, in Congressional testimony, regulator James Lockhart said the following as reported in the Washington Post:

Fannie Mae and Freddie Mac purchased and guaranteed "many more low-documentation, low-verification and non-standard" mortgages in 2006 and 2007 "than they had in the past." He said the companies increased their exposure to risks in 2006 and 2007 despite the regulator's warnings.

Roughly 33 percent of the companies' business involved buying or guaranteeing these risky mortgages, compared with 14 percent in 2005. Those bad debts on mortgages led to billions of dollars in losses at the firms. "The capacity to raise capital to absorb further losses without Treasury Department support vanished," Lockhart said.

The Obama Policy Challenge

It is very possible that the current economic crisis will lead to Barack Obama winning the presidency. Ironically, Obama's policies, if enacted, will further damage the economy. When I ask Obama supporters why they think he is the best candidate to lead our country, I invariably hear that Obama has superior judgment, is thoughtful, and is eloquent. But here is the problem. Whenever I ask for an example of Obama’s superior judgment other than the fact he opposed the Iraq war from the safe confines of the Illinois statehouse I draw a blank.

Likewise, it is hard to get specifics from supporters on actual policy proposals that they think are better than McCain's. Or they'll say something like, "Obama will provide health care to every American". Well, McCain's plan will too. Can they tell me why Obama's heath care plan is superior to McCain's in any factual sense? They cannot.

To take the Obama Policy Challenge you have to come up with several Obama policies that are materially different from McCain’s position on the same subject. For example, both Obama and McCain agree that we need a few more troops in Afghanistan. Both agree we need to concentrate our efforts on the Afghanistan/Pakistan border region. Both agree that torture is unacceptable. Both agree (finally) that the surge “succeeded beyond our wildest expectations”. They both support the wiretapping FISA program. Both support campaign finance reform (as soon as Obama is done with his campaign). In fact, I think Obama hurt himself in the first debate by starting off many of his rebuttals by agreeing with McCain on many of the issues.

Speaking of judgement, Governor Palin is making a strong case on the campaign trail that Obama’s long relationship with Bill Ayers is a problem. It is interesting that the 5 years Obama spent on Ayres’ board, which is really the only executive experience he has, is the one period Obama will not talk about. Ayers’ Annenberg Challenge raised and distributed money to leftist groups with the goal of supporting Ayers’ educational philosophy – the radicalization of young students. Obama was in charge of distributing the money each year to groups like Acorn in order to turn school children in to little Bill Ayres. This is the man who would be president.

The explanations from the Obama campaign regarding the Ayres relationship have been a dog’s breakfast of shifting spin. Bill Ayers was “just a guy in Obama’s neighborhood”. When Obama met Ayers he was a respectable professor – Obama did not know about his radical background as a terrorist. Obama was only 8 when Ayers was bombing the Pentagon (I have no idea why this excuses Ayers’ actions and makes it OK to be his pal). At one point Obama’s campaign manager said their kids went to the same school. That may be the best one, as Ayers’ kids are 20 years older than Obama’s. I think it was just last year when a Chicago magazine featured Bill Ayers and published a picture of him proudly grinding an American flag into the ground in a back alley.

The Obama campaign believes the Ayers issue is damaging, because they have counterattacked hard by misrepresenting McCain’s days with the “Keating 5”. McCain did show some bad judgment getting anywhere near this guy, and was investigated by the Democrat-led Senate. But he was cleared 100%. In addition, the attorney hired by the Democrats to investigate McCain said that the senator was the most squeaky clean politician he’d ever seen. In a battle of associations, Keating is of course a legitimate topic, but only if you don’t lie about it.

I frankly don’t understand why the McCain campaign is so reluctant to make a big issue out of the other ghosts of Obama’s past. He sat in the church pew of America hater and racist Reverend Wright for 20 years, but claims to have never heard anything divisive. I get the sense that McCain thinks Wright is off-limits because of the racial overtones of attacking him. But since the only black votes McCain will probably get are Thomas Sowell and Condi Rice I’m not sure why that matters.

Obama’s mentor getting started in the Illinois senate was state legislator Alice Palmer, who prior to the fall of the Soviet Union travelled frequently to communist party meetings there. She was a vocal proponent that everything the Soviet Union was did was good and everything the U.S. did was bad (sound familiar?). I haven’t heard a peep out of the McCain campaign about her.

I think that if the great uninformed majority who are going to vote for Obama might be given pause if they truly knew how comfortable he is with these radical America haters – and how he sought them out as mentors and advocates for his political gain. What if the reciprocal was true and McCain had maintained a 20 year relationship with a white supremacist, distributed millions of dollars to radical fascist activist groups, and been pals with someone who had bombed abortion clinics and black churches back in the day and said he “didn’t do enough” and was “unrepentant”, all along claiming to usher in post-partisan politics? McCain wouldn’t even be able to run for county commissioner. Can anyone explain perhaps the most extreme double standard in the history of politics in our country? Please post a response and let me know. It truly eludes me.

Remember, to play the Obama Policy Challenge you have to be able to come up with several examples of Obama’s superior judgment, and several policy proposals that are materially different from McCain that you agree with. I’d really like to know. You can’t claim superior judgment without evidence of such, and thoughtfulness without policy as a lone credential for the presidency is insufficient.

The Roots of the Financial Crisis - A Sketchy Analysis By the NYT's

http://www.nytimes.com/2008/10/05/business/05fannie.html?pagewanted=1&hp

Although seemingly in-depth on the surface, this article is typical of the NYT’s when their agenda is culpable.

There is only a brief mention of Barney Frank.  No mention the #1 and #2 largest recipients of GSE money – Dodd and Obama.  No mention of the constant attempts by the GOP over the last decade to strengthen oversight and reform the GSE’s – reforms viciously attacked by Barney Frank and his posse.  No mention of congress overlooking the GSE’s creating what amounted to a MBS hedge fund to increase earnings – which had nothing to do with their charter but greatly increased risk.

The comment about charging higher fees for riskier loans to offset risk doesn’t make sense.  If the capital ratio doesn’t change then these fees aren’t retained to offset losses.  They just goose earnings that lead to larger bonuses for the executives and the investors. 

The Countrywides of the world would never have generated all the questionable loans if the GSE’s weren’t being pushed by Congress to aggressively expand “affordable housing”.

A casual reader of this story would largely be led to believe that they were rouge agencies and that Congress had a limited role in our financial crisis.

The other root cause of the crisis rests with the ratings agencies.  They’re rating of MBS’s as ‘AAA’ that clearly were not, combined with Greenspan’s and Japan’s ‘free’ money meant that financial institutions and investment banks were comfortable in taking on leverage levels that otherwise would have been insane.  I am actually quite surprised the S&P’s of the world have not been driven out of business by massive class action suits.

Almost everything of consequence in the financial crisis can be traced back to these two root causes.

Our Financial Crisis - The Facts Don't Seem to Matter

http://article.nationalreview.com/?q=NGRjODM1MTJlOGZiZDk2ODI4NTUzMWMxYjgwMjliMGQ=

I think Thomas Sowell probably has it right.  Facts don’t matter when it comes to the financial crisis.  The McCain campaign seems strangely reticent when it comes to connecting the dots for the American people about the cause and the principals in the financial crisis.  The republicans are not doing a good job explaining their economic policies and are doing even worse at showing how misguided Obama’s economic policies are.  How many times did Palin talk about Wall Street greed during the debate instead of democratic intransigence? 

In fact they are not really economic policies at all - they are class-warfare social policies.  Although I believe McCain/Palin will close the gap and make it a close election, I fear that Obama will be elected by a majority of Americans that don’t understand the issues, and perhaps don’t care.  Combined with Acorn voter fraud the democrats will be tough to beat in the key battleground states. 

McCain is pulling out of Michigan because the campaign doesn’t think they can turn a heavily democratic state.  This is the frustration of us conservatives.  Michigan’s voters would rather stay with the party that helped get them into the mess they’re in instead of trying something different.

The real tragedy is that Obama’s “economic/social” policies will not help the economy and will most likely hurt badly, not just not the U.S., but the world.  But he’ll be thoughtful and articulate throughout it all.

The Democrat's Deregulation Red Herring

The last weeks have reached the height of incredulity with the likes of Barney Frank denying any responsibility for our current financial crisis. Perhaps a look at the root causes is in order.

It all started with Jimmy Carter and the Community Reinvestment Act in 1977, mandating that banks increase leading to low income families in the name of “affordable housing”. More pressure to expand sub-prime lending was put on the banks by the democratic congress in the 1990’s by expanding the 1977 legislation. Along the way the GSE's spent millions lobbying congress and contributing campaign money to the GSE's supporters. Over time, the GSE's became a sort of slush fund for liberal causes, contributing money to all sorts of liberal organizations and causes.

President Clinton’s administration pushed to reform the GSE’s Alan Greenspan made it his personal mission for years - warning over and over again against the size and activities of the GSE's. The Bush administration took up the task along with republicans in Congress. After it came to light that the GSE’s had committed accounting fraud to maximize bonus payouts to executives, the GOP tried to use this as leverage to finally increase oversight and put a regulator in place with real teeth. It was blocked by Barney Frank and his “posse”, the apologists for the GSE’s. I love the video clip circulating on the Internet with Fannie Mae CEO Raines stating that Fannie purchased mortgages were so “riskless” that their capital requirement should be lowered to 2%. He pulled $90M in compensation out of Fannie and is now an advisor to the Obama campaign.

Anyone who challenged the out of control GSE’s was labeled a hater of poor people, an opponent of affordable housing. Congress encouraged and enabled the GSE's to dramatically expand it's purchase of sub-prime loans. With the implicit backing of the government, and the desire to buy this questionable paper, the market rushed to generate as much of it as possible, without much regard to the particulars.

The current Democrat regime holds the repeal of the Glass-Steagall Act, an effort partly architected by McCain advisor Phil Graham, as a catalyst in creating the financial crisis. The Democrats shout out that the reckless obsession with laissez faire financial markets by the GOP are to blame. But as Bill Clinton has recently pointed out, the repeal of Glass-Steagall in 1999 actually increased the stability of the financial sector in this current crisis. Obama accuses McCain of supporting irresponsible deregulation, but the truth is more about allowing consumers to use ATM’s across state line and the like.

This all is a great example of how members of congress should be barred from accepting campaign contributions from lobbyists who represent the industry or companies that the members oversee on their respective committees.

It is quite amazing the way the democrats have convinced the uninformed majority that the problem is everyone’s fault but their own.

Obama and the Saul Alinsky Method

Barack Obama's long-term association with racist Reverend Wright has been widely publicized, and to a lessor extent the terrorist Bill Ayers. But the foundation of much of Obama's early work as a community organizer, and it appears parts of his world view were influenced by Saul Alinsky. Senator Obama was trained by Chicago's Industrial Areas Foundation, founded by the radical communist organizer Alinsky in 1940, by Alinsky disciples. Michelle Obama actually used phrases from Alinsky's last book, Rules for Radicals in her speech at the democratic national convention. There is even a picture on Obama's campaign web site teaching at the University of Chicago with "Power Analysis" and "Relationships Based on Self-Interest" written on the board, key terms used in the Alinsky method.

Alinsky was a strong proponent of the end justifying the means. He was a bare knuckle brawler that inspired generations of far-left activists. The GOP has never been good at these types of win at all cost practices on the ground. Alinsky believed in ignoring ethics and morals to achieve his desired outcome. In Rules for Radicals Alinsky wrote, "Ethical standards must be elastic to stretch with the times…all values are relative in a world of political relativity." He even went so far as to praise the "first radical…who rebelled against the establishment and did it so effectively that he at least won his own kingdom — Lucifer." ACORN is an organization based on the Alinsky method.

It is predictable that the states where ACORN is being caught perpetrating voter fraud this election cycle are the key swing states (Ohio, Florida, etc.). In Ohio yesterday, a judge ruled against a GOP lawsuit that asked that people not be able to register to vote and vote and the same day. No chance of fraud there! In the 2004 election, a change of 3-4 votes per precinct in Ohio would have made John Kerry president.

As a community organizer, Obama had close ties to the Chicago ACORN chapter and trained a number of their leaders and activists. Recently Obama's campaign paid $800,000 to ACORN for "field work". In Obama's original 1996 state senate campaign (launched with an event at Bill Ayers house) ACORN members were used as volunteer shock troops.

According to the New York Times, Obama's memberships on the Woods Fund and Joyce Foundation boards, "allowed him to help direct tens of millions of dollars in grants" to various liberal organizations, including Chicago ACORN.

I think Bill O'Reilly had a valuable insight when he commented to Obama in his interview of him that Obama seems very comfortable with very far-left people and organizations. How many average middle Americans would feel comfortable sitting down and even having a conversation with Bill Ayers, Bernardine Dohrn, Saul Alinksy, Alice Palmer, Reverend Wright, Father Phlegar or Louis Farrakhan? It is a rouges gallery of American terrorists, communists, leftist radicals, racists, and anti-Semites.

How can you reconcile these associations and history against someone who has pledged to the "post-partisan"? In Obama's associations, voting record, and work history there is not a single indication that he will govern from the center. If you know of any, let me know. If his track record is a guide, he will be the most radically leftist president in our history, but I'm sure in a thoughtful way.

Fairness is the most overused and disingenuous word in the liberal lexicon. Massive tax increases under the guise of "fairness". No free trade agreements under the guise of "fair trade". $340B in annual spending increases to "recast" the safety net woven by FDR and LBJ. Wealth redistribution on an unprecedented scale. It doesn't sound like a post-partisan agenda to me. Obama's "fairness" sounds a lot like socialism.

Media Double Standard Alive and Well

If Sarah Palin had made even a few of the dozen or so overt misstatements that Joe Biden made in the VP debate the media would be calling for her to be removed from the GOP ticket. Joe, of course gets a “pass” by the media.

It is hard to believe that someone that has been Washington for so long, and on the Foreign Relations Committee for years, could be so constantly wrong with the facts. I almost fell out of my chair when he started talking about Israel and the surrounding area. He must of made six statements in about 60 seconds that were not just incorrect, but way incorrect.

Sarah Palin didn’t have enough time or background knowledge to call him on all of it. I'm certainly not going to make Governor Palin out to be some foreign policy expert, but she did seem more comfortable than Biden in talking about Pakistan and Afghanistan. You knew that she really hit her stride when she asked Ms. Ifill if they could go back and talk more about Afghanistan. Biden gave the impression as having more depth, but what good is that if the specifics of that “depth” are factually incorrect. Unfortunately I fear the uninformed majority in this country don’t know enough to understand that he is spouting nonsense.

McCain was castigated because he briefly misspoke about Iran helping Al Qadea (which actually turned out to be true as part of Iran’s destabilization strategy, but was not what McCain meant). But when Biden couldn’t keep Hamas and Hezbollah straight or makes up history about Lebanon the mainsteam media is silent.

The above points to Biden's inadvertent misstatements, and does not include the out and out falsehoods or misrepresentations that are standard talking points in the Obama/Biden stump speech such as: McCain wants to give the oil companies another $4B in tax breaks; Obama never said he would meet with Ahmadinejad (you can watch the primary debate where he said exactly this on http://www.youtube.com/ - he as only compounded the problem since by first trying to explain it and then trying to deny it).

Perhaps the most stupid but factual statement that Biden made during the debate was accusing that McCain’s tax credit for families to buy their own health insurance would “go straight to the insurance companies”. Scandalous! Duh, its money to buy insurance!

Nancy Pelosi's Summer Break, Part II

In addition to “saving the planet” here is what Nancy Pelosi said yesterday at an end-of-session roundtable in defense of her not allowing a vote on drilling:

"I will not ... give the administration an excuse for its failure."

Now that’s funny. The Bush administration has produced a balanced and thoughtful energy strategy that has a strong commitment to alternative energy along with appropriate use of traditional energy sources. The Democratic controlled Congress has refused to even consider it. I have read it, but I doubt if Nancy Pelosi has bothered.

The Bush administration has accomplished more regarding alternative energy research than any administration in history. Certainly very little was done by Clinton/Gore. Speaker Pelosi’s answer - go after evil speculators and drive the oil futures market off-shore, confiscate “windfall profits” from oil companies so they’ll have less money to fund exploration, release oil from the Strategic Petroleum Reserve, sue OPEC, promote corn-based ethanol, count on alternatives that are decades away from prime time, block nuclear power, and on and on.

From the San Francisco Chronicle:

“Pelosi has been holding votes on measures aimed at addressing gas prices, such as legislation to crack down on speculators in energy commodity markets and a measure to force Bush to release oil from the Strategic Petroleum Reserve. But here's the catch: The bills have won majority support, but failed to get the two-thirds backing needed to pass under special rules Pelosi has used to keep Republicans from offering a drilling measure on the House floor.”

These bills have been passing by a wide majority but aren’t going forward due to the two-thirds rule. It is the only way she under congressional rules can block the GOP from offering any amendments.

Some democracy, huh? Shouldn’t the House at least be allowed to vote on this stuff? Now a group of democrats are defying Pelosi by working with the GOP on a compromise bipartisan bill to increase domestic production and also accelerate conservation and alternative energy sources. But with Nancy banging the gavel today to adjourn for 5 weeks, I guess it will have to wait.

Some in the GOP are so frustrated that they have asked President Bush to call Congress back into emergency session, which he can do under Article II of the Constitution, to deal with the energy issue. No summer break until Pelosi/Reid actually do something!

From FoxNews.com:

House Minority Whip Roy Blunt (R-MO) said, “I just saw one of the Democrats interviewed on television. The question was, if [gas] was $10 a gallon and you knew exactly where to get it in Alaska or on the coast, would you drill there, and there was no answer."

I’d like to know which Democrat that was. I’ll bet he was like a deer caught in the headlights. Nancy Pelosi's desperate maneuvers are only reinforcing that Congress is the cause of much of our energy crisis, not the White House.

Time For Nancy Pelosi's Summer Break

Nancy Pelosi continues to earn a reputation as the least effective Speaker of the House in generations. She also has an ideological coarseness that is distinctly unpleasant, and is not becoming to the with the office of the Speaker.

Her abdication, aided and abetted by Senate Majority Leader Harry Reid, of one of Congress’ primary roles, appropriations, is appalling. Congress will adjourn today for a five week break without passing a single appropriations bill - the first time this has happened since the 1950's.

Under Pelosi/Reid Congress continues to spend a great deal of time and money investigating manufactured "scandals" like Valerie Plame and Justice Department hirings and firings. Meanwhile, there has been no investigation of “Friends of Angelo” corruption even as Congress passed the “Bank of America/Countrywide Financial Bailout Act”. Why? Because Democrats, including Chairman of the Senate Banking Committe Chris Dodd, are dirty with it. Contrast this with the Bush executive branch who had no qualms about indicting Republican Senator Ted Stevens on corruption charges in an election year.

Ms. Pelosi has spent all summer maneuvering to make sure no vote on off-shore drilling occurs. To do so she has had to resort to virtually shutting down Congress. If a vote to authorize new domestic production was allowed, there is a good chance it would pass.

Today's Wall Street Journal commenting on the failure to pass an anti-speculation bill said, "But the legislation actually failed to become law -- by design. It needed a two-thirds majority because Speaker Pelosi suspended the rules to prevent Republicans from offering amendments, drilling among them. Ms. Pelosi had decreed that she would not permit a roll-call vote under any circumstances, even if it stopped her own goal of wrecking the U.S. futures market."

When questioned during an interview by Politico about her opposition to any expansion of domestic energy production, she testily replied, "I'm trying to save the planet, I'm trying to save the planet." Since Ms. Pelosi opposes oil, coal and nuclear, 93% of all potential energy production is off limits, with viable alternatives many years away.

Today's Wall Street Journal editorial page suggested that this sort of behavior could have repercussions come November. I, however, am under no such illusions about Speaker Pelosi losing an election this fall. She is no doubt regarded as a hero to her loony left district in San Francisco. But I am not aware of a single position that Speaker Pelosi advocates that stands up to intellectual scrutiny.

Barack Obama - A Career Without Conviction

http://www.nytimes.com/2008/07/30/us/politics/30law.html?_r=1&em&oref=slogin

The above link is to a New York Times article about Barack Obama. I applaud the New York Time’s for a thoughtful and insightful piece. I wish more of their work was like this.

I find it fascinating the lengths Obama has gone to over the years to not take a definitive stand on anything. He voted “present” 130 times in the Illinois Senate, instead of casting "yes" or "no" votes on legislation. In 12 years at the University of Chicago he never published a scholarly article. In the U.S. Senate he has not taken the lead on any issue. His law school students admired his intellect and his ability to parse the complexities of issues but were frustrated by his unwillingness to ever say what he believed.

In the NYT’s article, libertarian colleague Richard Epstein summed it up well when he lamented that Barack Obama would not venture beyond his ideological and topical comfort zones. “His entire life, as best I can tell, is one in which he’s always been a thoughtful listener and questioner, but he’s never stepped up to the plate and taken full swings.”

When you combine this with his wholesale reversals on almost every key campaign position, like the FISA bill with retroactive immunity (he had promised to lead a filibuster against this), public funding for campaign finance, or gun control, it leads me to one conclusion. He is deeply unprincipled.

Can you with any conviction say what it is Obama believes? I can’t. Ronald Reagan spent a decade meeting and speaking with groups in every corner of the country to articulate his plan to defeat communism, promote smaller government, and recharge the economy by cutting taxes. As president, Ronald Reagan governed according to his principles; there was no confusion. Barack Obama has spent 20 years taking extreme care to ensure no definitive position could ever be ascribed to him.

Is a thoughtful listener and questioner and an accomplished facilitator who cannot take a definitive, principled stand the best person to be President? Can he make the “least bad choice” or will he be paralyzed by his ability to see the unfortunate consequences of every course of action? In this regard, Barack Obama is a very risky proposition.

Obama's Surge Illogic

Barack Obama is running a good campaign. His staff understands the power of images and there have been no shortage of positive images for the Obama campaign during his trip to the Middle East.

Senator Obama has benefited from an adoring media who have not pressed him on the tough issues. But on his recent trip to the Middle East, he has been asked several times about his lack of support for the surge. An ABC correspondent posed to Senator Obama whether he would support the surge, knowing what he knew now? Katie Couric attempted three times to get a straight answer from Obama on this subject, without success.

Obama has begun to fully acknowledge that the surge and accompaigning change in strategy has transformed the security situation in Iraq. But Obama answered ABC that he would not support the surge knowing what he knows now. He went on to say that "these types of hypotheticals are difficult". He looked uncomfortable during the exchange and appeared weak in his response to a question he is bound to be asked.

To acknowledge the success of the surge but then to say he still would not support it in hindsight is illogical, and he knows it. It is hardly a difficult hypothetical to understand that if you knew the surge would work that it follows you would support it.

This is not the first time Obama has looked uncomfortable and unprepared when confronted with the rare tough question. When during the ABC debate George Stephanopolis asked him about his long term association with American terrorist Bill Ayers, he was similarly befuddled. Senator Obama is an accomplished and powerful speaker when aided by a teleprompter. Without a teleprompter and written script, he can be an indifferent speaker.

Perhaps chagrined about their lack of objectivity up to this point, hopefully the media will begin to ask the tough questions.

How Congress' Hybrid Subsidy Misses The Mark

Congress has a troubling tendency to dictate the means rather than the goal to be achieved. In doing so, Congress believes that it knows best to accomplish a desired outcome. This arrogance almost always results in sub-optimization. Instead of allowing the creativity of the marketplace to figure out the best way to achieve the ultimate goal, Congress prescribes the means.

The tax credit for hybrid vehicles is a great example. Congress offers a tax credit of up to $3,150 for hybrid vehicles. Hybrids combine an electric motor along with a scaled down combustion engine to achieve greater gas mileage.

But is promoting hybrid vehicles the right goal? Of course not. The ultimate goal is to reduce the amount of transportation fuel that the country uses, both to reduce our dependence on foreign oil and to reduce C02 emissions.

Since hybrids use less fuel, how does subsidizing this particular technology sub-optimize the results? Because selling more hybrids does not necessarily reduce the countries fleet mileage. A Chevy Tahoe hybrid gets 22 MPG. Why should a buyer of such a vehicle get a credit when a person who buys a conventionally powered Toyota Corolla which gets far higher gas mileage (27/35) does not?

If the goal truly is to reduce gasoline usage, why does Congress not have a rebate based on the best MPG instead of a particular technology? Why not have a tiered subsidy with the most rewards for people that buy the highest MPG vehicles, regardless of technology?

Compounding the problems with Congress' central planning model is that subsidies for hybrids increases demand, which elevates the price the price in the market. Manufacturers also build at least part of the subsidies into the prices of the vehicles. Just try to get a hybrid at list price. Congress also saw fit to put a cap on how many of each make and model hybrid can receive a credit. For example, the Toyota Prius is currently "capped out".

The kicker is that many of the people that will buy a hybrid, costing more than a traditionally powered vehicle, will be caught buy the Alternative Minimum Tax (AMT). For those swept up in the AMT dragnet, the hybrid tax credit is disallowed.

Should We Take Iran's Threats Seriously? The Left Wing Loons Respond

There was an op-ed in the NYT’s Friday by an Israeli historian Ben Morris regarding Iran's threat to Israel's survival. The gist was that Israel will have no choice but to preemptively strike Iran if progress to end their nuclear capabilities isn’t made on other fronts. A writer on The Huffington Post, the far left blog/smear site, posted a detailed response to the NYT’s piece. I didn’t agree with everything he said but it was a decent enough effort and he had some good points.

But when you read the comment section following his critique the far left loons come out. At the bottom of this post are a couple of the more coherent comments. Typos, grammatical errors and rampant conspiracy theories are theirs – I’ve simply cut and paste them as is. The amount of blind hatred and just plain ignorance about the world is stunning. Unfortunately, because they are on a site like The Huffington Post, they probably vote.

Israel was chartered as a country on a tiny sliver of land by the U.N. in 1948. At its narrowest, you can drive from the ocean to the eastern border in about an hour. The Arabs immediately attacked to drive the small Israeli force into the sea. They barely survived. The Arabs massed what should have been overwhelming forces over and over again with the purpose of destroying the Jewish state including 1967 and 1973. Desperate, pitched battles all. No Arab country has ever acknowledged Israel’s right to exist.

Is it unfortunate and unfair that the Palestinians have lost the right to a 300 by 60 mile stretch of land in recognition of the historical Jewish homeland? Yes. But when you compare the almost incomprehensible vastness of Arab lands in the Middle East, is this so much to concede? The displaced Palestinians have chosen to live in what amount to refugee camps for 60 years, encouraged to do so and left in poverty by their wealthy Arab brethren. Meanwhile, Israel with a population about the size of New York City has become an extraordinary economic and technological powerhouse – also by choice.

Israel has agreed to land concessions and has even recognized that Jerusalem will ultimately have to be divided. But when you are negotiating with a party that believes in their core that the only acceptable solution is your destruction, it is a pretty one sided conversation.

I love some of the comments below that say if only Israel was not a belligerent power intent on expansion everything would be peaceful. If Israel would just choose to live in peace Hezbollah would simply melt away. The view from the left seems to always be that Israel is the aggressor. Israel has never attacked, or even responded militarily, without extreme provocation.

I cannot imagine any other sovereign state on the planet being as hesitant to strike back as Israel is in the face of constant deadly attacks. In something like the last 8 months 4,000 Iranian supplied rockets have been fired into Israel from the Gaza Strip. Israel responds as best it can, but the casualty statistics show that they are rarely willing to risk killing non-militants. Since the rockets are most often fired from civilian areas their response options are limited. Iran sponsored Hezbollah has no such restrictions.

With apologies to the commenter below that Akmadinajad has simply been “mistranslated”, Iran’s leaders regularly and emphatically say that Israel will be destroyed. Iran is continuing and expanding its nuclear enrichment efforts. Those that say that Iran has halted its nuclear weapons program don’t understand what it takes to make a nuclear bomb in the 21st century. Enrichment is the hard part. The rest can be completed relatively quickly.

So given the history of Arabs fulfilling their threats against Israel, Iran’s threats must be taken at face value. Much of the human experience is about surviving. What is Israel supposed to do, passively accept a nuclear holocaust and the destruction of its entire population?

Comments on The Huffington Post:

• "The US is under the body-snatchers-like control of the multinational corporations led by teh oil companies. Israel is suffering from a group insanity which believes that ethnic cleansing and atomic war are preferable to accepting the fact that Israel, in order to survive, must live within its own borders and at peace with its neighbors."
• "Doesn't he realize how much his words about the Palestinians parallel the speeches of Hitler prior to Crystal-Nacht? The parts about Iran sound EXACTLY like how Hitler described the USSR in 1940 (Hitler thought the western powers would "assist" him in the invasion of the USSR too.) I guess what goes around comes around."
• "If Mr. Morris advocates and justifies a preemptive attack on Iran they and those who support those views should be branded as international criminals and terrorists."
• "Problem is, as I see it, that the Israelis seem to have taken the Holocaust out on the Palestinians who had nothing to do with it."
• "As Dr. Goebbels proved, by defining your [Israel’s] enemies as sub human you can push the limits of National morality to any level."
• "Iran is a rational country and has demonstrated it in many occasions."
• "One good thing: If Iran is attacked, then industrial society will collapse, and at least we won't have to worry about global warming any more..."
• "Isn't the root problem the fact that Israel already has nuclear weapons and has refused to sign the Nuclear Nonproliferation Treaty? Isn't that what has destabilized the region and caused Iraq and Iran to pursue development of their own WMDs?"
• "Actually, the root problem is that BushCo wants higher oil prices, and the Iranians want higher oil prices, and so neither of them has any interest in reducing tension in the Gulf. In my view, nukes are just an excuse. Why some Israelis are getting mixed up in this cynical and dangerous game beats me. Probably for internal political reasons - the Palestinian bogeyman isn't as scary as he once was, and the far right needs a new enemy to justify its bigotry."
• "Zionist ideology scares me to death. It is illogical, bigotted, fear-based, and for some reason not allowed to be discussed publicly in America."
• "Please do not feed us the drivel about Iran waging a proxy war by supporting terrorists like Hizbollah and Hamas. One man's terrorist is another's freedom fighter. The day a lasting peace can be negotiated between Israel and her neighbors, these organizations will cease to exist as a threat to anyone."
• "And the idea that Iranians want to destroy Israel is so ridiculous. It's all based on a mistranslation of one single sentence of Ahmadinejad, where he in fact said that the Israeli apartheid regime should disappear - not Israel as a country."

Has The U.S. Invasion of Iraq Destabilized The Middle East And Contributed To Higher Oil Prices?

In the face of surging oil prices Democrats have attacked President Bush and the U.S. invasion of Iraq as destabilizing the Middle East and greatly contributing to high oil prices. Also, the left claims that Bush's policies in the Middle East have elevated Iran as the main player in the region which has made the world less safe and has also added to a risk premium for oil. Are these assertions true? An analysis can be framed in 4 sections along with conclusions and implications.

Has Iraq’s current and future oil production been diminished by U.S. actions?

Iraqi oil production peaked in the 1980’s at about 3.5M barrels per day. Prior to the U.S. invasion of Iraq in 2003, production had dropped to 2.5M barrels a day. The primary cause of the reduced production was a lack of investment and lack of technology. Had the U.S. not invaded Iraq, oil production would have continued to fall.

Iraq’s oil production today is 2.5M barrels a day, identical to the pre-invasion volume. With the situation stabilizing, the Iraqi government is now bidding out contracts to oil companies to greatly improve the technology, investment, and production of Iraqi oil. The U.S. Energy Information Administration (EIA) estimates the long term sustainable production of oil in Iraq to be between 2.8 and 2.9 million barrels a day.

Has the U.S. action in Iraq reduced oil production in the Middle East outside of Iraq?

The U.S. invasion of Iraq has not reduced production elsewhere in the Middle East. Rather the Saudis have increased production. It should be noted that the two largest sources of oil consumed in the U.S. are Canada and Mexico. Canadian production is increasing due to investment in oil sands. Mexican production is falling due to aging fields that have suffered through underinvestment, mismanagement and corruption since the oil industry was nationalized. Another major source of oil consumed in the U.S. is from Venezuela. Venezuelan oil is heavy, high sulfur stuff that is difficult to refine. Oil production is falling in Venezuela since the industry was nationalized by El Presidente Chavez. Venezuela fields are suffering from underinvestment and desperately need advanced production technology that is now not available to them.

Is Iran now the main player in the Middle East, and if so, what are the root causes?

Now that both the political and security situation in Iraq has improved dramatically, it is a good time to consider this question. I think most will agree that Israel is the strongest military force in the Middle East. The United Arab Emigrants has the most dynamic, fastest growing, and diverse economy of all the Arab countries and has become the financial center of the region. The Saudis have a stable, albeit corrupt and bloated monarchy, and the most wealth from oil revenues. Arab-Persian tensions at least partly counters the fact that both Iran and the majority of Iraqis are of the Shiite branch of Islam. So you have a troika of Sunni Saudi Arabia, Shiite/Arab Iraq, and Shiite/Persian Iran along with Jewish Israel. This appears to be a fairly balanced situation – or at least no less stable than 10 years ago. Clearly, if radical Shiites had won the civil war in Iraq it would be another matter altogether. But a sovereign and democratic Iraq is a clear counterbalance to the radical theocracy in Iran.

Although Iran is rhetorically provocative, it is rotting from the inside out. There is a high level of dissatisfaction among younger, progressive Iranians that take offense to being beaten for leaving the house without a burka. Iran has under invested in its energy infrastructure (sans nuclear) and must import most of its refined distillate transportation fuel. As a result they are highly vulnerable to sanctions, if the U.N. was a responsible and proactive organization.

The biggest threat to the region minus Saddam is Iran gaining access to nuclear weapons. Given their progress to date, this effort was well underway before 2003. The invasion of Iraq was not a trigger for initiating a nuclear program. Iran’s stated goal is not to invade Iraq or any other Arab state, but to destroy Israel. Certainly the U.S. action in Iraq is neither here nor there when it comes to this obsession. Iran’s continued push to produce weapons grade nuclear material is not about the U.S. and Iraq.

The Iranian Islamic Caliphate has been in place for 30 years, dating back to the Carter Administration. Iraq’s place in the region is not one of being the main power, but one of several powers. It is no more or less radical today than before the invasion.

Irrespective of production, is there a greater risk premium in the price of oil today than before the Iraq invasion? If so, is the root cause the U.S. involvement in Iraq?

It is broadly agreed that there is a significant risk premium in the price of oil. The U.S. invasion was destabilizing until the surge and change of strategy worked. But in the last 18 months the progress in Iraq’s security and political situation has been transformed. Sectarian violence for the last 6 months has been zero. After a one year boycott, Sunnis are returning to the government. 15 of the 18 legislative benchmarks have been met. The last big hurtle is the sharing of oil revenues between the provinces. But the al Maliki government has been distributing the revenues in an equitable fashion to Sunni and Shiite alike while the legislation continues to be negotiated.

The fact that the price of oil has doubled in the last year, even as violence was rapidly diminishing in Iraq, leads one to conclude that the U.S.’s Iraqi involvement is not contributing to the risk premium. You can draw a line on a chart from the upper left to the lower right indicating the reduction in sectarian violence in Iraq. Then you can draw a line on the same chart from the lower left to the upper right indicating the increase in the price of oil.

What has changed in the last year that could cause an increase in the risk premium for oil? The most likely culprit is Iran’s nuclear ambitions combined with ever more apocalyptic language about the inevitable destruction of Israel. For its part, Israel will have no choice but to strike preemptively if the choice is that or the end of its existence and the death of all of its people. Israel has destroyed nuclear facilities in Iraq and Syria over the last decades, and they will have no option but to attack Iran if the international community does not act responsibly. In response, Iran has promised to block the Strait of Hormuz if attacked. This increasing tension is the biggest single cause of the risk premium for the price of oil.

Conclusions and Implications

Consider this – most of the world’s oil is controlled by sovereign governments hostile to the U.S. (Saudi Arabia, Russia, Venezuela), or chronically unstable (Nigeria). The best short to intermediate term answer to reducing the risk premium for oil is to develop a Western hemisphere energy strategy that will more broadly diversify the sources of oil into less risky regions.

Canada is expanding production in its extensive oil sands. Brazil is in the first stages of developing deep-water fields in its outer continental shelf (OCS) that are the largest reserves discovered in decades. We can work constructively with Mexico to improve its oil production technology. We can eliminate the import duty on Brazil’s sugar cane based ethanol while eliminating our corn based ethanol mandate. We can dramatically expand domestic production in our vast oil shale deposits (potentially more oil than Saudi Arabia – but higher production costs), the OCS, and that tiny corner of ANWR that has proven reserves of 13B barrels.

Longer term we need to be aggressively developing alternative energy technologies, understanding that broadly viable alternative solutions may take a long time. But greatly diversifying oil production in North and South America is the best way to reduce the risk premium, and increase supply overall, in the foreseeable future.

The Obama/Pelosi/Reid answer: nationalize the U.S. oil and refining industry, divert oil company profits from further oil exploration to fund alternative fuel research that may not help for decades, continue protectionist policies to prop up corn-based ethanol (30% of our corn used to produce 3% of our transportation fuel), release oil from the strategic oil reserve, and continue to prohibit new domestic production. None of these Democratic proposals will lower the price of oil - rather, quite the opposite.

Is Barack Obama The Heir To JFK's Legacy?

Barack Obama has none too subtle about wanting us to believe he is the heir to John F. Kennedy's legacy. The Obama campaign's latest maneuver to promote this linkage has surfaced in the planning for the senator's upcoming trip to Europe and the Middle East. The campaign has made a request of the German government for Obama to speak in front of the Brandenburg Gate, the site of JFK's famous "Ich bin ein Berliner" speech, and Ronald Reagan's powerful and prescient "Mr. Gorbachev, tear down this wall." speech.

German Chancellor Merkel has made known her reluctance to grant Barack Obama's request. Kennedy and Reagan were both statesman when they made their seminal speeches. Barack Obama is a tourist by comparison.

Is Barack Obama the heir to the Kennedy legacy? Like Kennedy, Barack Obama is a young and charismatic politician with a gift for oratory. Both are Democrats. Unfortunately for Barack Obama, the comparison ends there.

Kennedy served full terms in both the House of Representatives and the Senate before launching his candidacy for President. Barack Obama has served only a partial term in the U.S. Senate. His legislative record is so scant that his TV commercials cite legislation he voted for as an Illinois state senator.

As President, John F. Kennedy was a pro-growth Democrat who cut taxes, creating a surge in the economy and greatly increasing tax revenues to the federal government as a result. Barack Obama is against policies that promote economic growth and instead supports protectionism, exclusionary union agendas and austerity.

President Kennedy experienced the horrors of war in WWII and was a strong advocate for national defense. Obama has piled up a number of unfortunate statements that highlight his naivety when it comes to global matters and national defense.

Standing in front of the Brandenburg Gate will not change the fact that Barack Obama and John F. Kennedy could not be more different in terms of experience and policies. Today, Kennedy's pro-growth and strong defense policies would make him a Republican.

The candidate for this year's presidential campaign that would govern the most like John F. Kennedy: John McCain.

Opponents To Off-Shore Drilling Are Still Living In 1969

Speaker of the House Nancy Pelosi has stated unequivocally that she will not support drilling on the outer continental shelf (OCS). Senate Majority Leader Harry Reid appears ready to tow the no drill line as well. For politicians like Ms. Pelosi, the 1969 oil spill off of the coast of Santa Barbara, California was fundamental to shaping their view that drilling for oil on the OCS was too risky.

1969 was a long time ago. The advances in drilling technology since 1969 have been nothing sort of extraordinary. Companies like Smith International, Hydril, Amcol International, National Oilwell Varco and Oceaneering have transformed the process. In the western Gulf of Mexico, the only off-shore area where drilling is permitted in the lower 48 states, there has not been a major or even minor incident. Even in the tempest of Katrina, not a single drop of oil was spilled in the gulf.

Today, the technology exists to drill deeper and less invasively than ever before. What is most frustrating about this, is that these predominately American technologies are being used everywhere else in the world but America. Brazil's Petrobras has discovered enormous oil reserves off their continental shelf that are only now recoverable due to the advances in deep water drilling and production technology.

Think about how long ago 1969 was in terms of technology. In 1969 the IBM PC was still 11 years from being invented. The F-4 Phantom was the front-line fighter for the U.S. military. Most family TV's were black and white. Cars regulated gas flow using carburetors. The Arpanet, the Defense Department's distant predecessor to the Internet, was just in the planning stage. Music would still be sold on pressed vinyl albums for years to come.

Politicians and advocates that oppose drilling in the OCS are still living in 1969. Time for a time warp to the present.

Confusion Reins At The SEC

SEC Chairman Christopher Cox announced before the Senate Banking Committee on Tuesday that he was invoking emergency powers to ban naked shorting of Freddie Mac and Fannie May, along with a number of other primary broker banks.

When a stock is sold short, the seller borrows the shares from his broker and then immediately sells them, hoping to buy them back later at a lower price and return them to his broker. At a minimum, the broker of a short seller has to at least locate the shares to be borrowed. Naked short selling means that shares are sold without borrowing or even locating the shares. This allows large traders such as hedge funds to lean into stocks and push them down by selling lots and lots of shares they don't have.

So it naked short selling illegal or not? On CNBC yesterday afternoon Commissioner Cox told Erin Burnett that naked short selling was not illegal. This answer clearly surprised the seasoned CNBC journalist. But in today's New York Times, Cox is quoted as saying on a conference call with reporters, “A run on the bank that can take hold quickly would likely be turbocharged by illegal naked short selling.”

Market maven and CNBC personality Jim Cramer appeared just after Commissioner Cox and actually read from the SEC's own regulations spelling out that naked shorting is clearly banned. Mr. Cramer was incredulous that Commissioner Cox would think he needed to take emergency action for something he could, and should have been doing, all along.

There are a few exceptions regarding market makers, but for the broad trading community, naked shorting is prohibited. In fact, Mr. Cramer, who ran a successful hedge fund for years, said that if a short seller does not deliver the shares for settlement, he risks having his broker unwinds the trade with the short seller taking a big hit.

Why all the confusion? Let's face it, the SEC has never been an organization that inspires confidence with their vigilance and competence. They have been asleep at the wheel again and again, most recently during the collapse of Bear Sterns. Perhaps the invocation of "emergency powers" is an attempt to divert attention from the fact that the SEC's lax attitude toward oversight has once again caused damage. The bottom line is that Commissioner Cox's lack of clarity and lack of understanding of his own organization's regulations does not inspire confidence.

Obama Eases Toward The Mother Of All Flip-Flops

Barack Obama wildly careening to the right for the general election has been well publicised. The last big flip-flop to come is on Iraq.

The anti-war segment of the Democratic party is so invested in immediate withdraw, Obama needs to be particularly careful that this latest maneuver will not upset his liberal base even further. But there is no question that the Senator has begun the process of shifting his long held view that the surge would never work, and that a troop withdraw on a rigid and predetermined timetable would be immediate and nonnegotiable when he took office.

Tuesday reiterated his position for the base that he strongly stands by his plan to end the war. Part of his rationale is that the Iraqis have not made political progress, which is demonstrably untrue. Great progress has been made in the political reconciliation of Iraq.

During the original Senate hearing where General Petreaus reported the first successes of the troop surge, Senator Obama was critical and dismissive. Hillary Clinton essentially called General Petreaus a liar. Barack Obama was not willing to criticize MoveOn.org's deplorable "General Betrayus" add in the New York Times. Now, just last week, Barack Obama made comments that were critical of the ad.

Now if you go to Obama's web site, the shift is taking place in real time. The New York Daily News reported that Obama's campaign has removed a statement criticising the surge from the section discussion his solution for Iraq. Obama campaign aid Wendy Morigi explained that the change was made to better reflect current conditions.

But the changes do not stop there. Whereas Obama's web site previously stated tersely that, "Obama will immediately begin to remove our troops from Iraq.", it now has more nuanced language that Obama will pursue "a responsible, phased withdrawal" that will be directed by military commanders and done in consultation with the Iraqis. In addition, the web site includes a new statement that Obama "would reserve the right to intervene militarily, with our international partners, to suppress potential genocidal violence within Iraq."

Senator Obama departs shortly for the Middle East with stops in Israel and Iraq. On his return, be prepared for his consultations with military commanders and Iraqi leaders to continue to soften his position on Iraq.

Today's Senate Banking Committee Testimony

Federal Reserve Chairman Bernake appeared before the Senate Banking Committee as part of is semi-annual testimony on the state of the economy. Afterward, Treasury Secretary Paulson and Securities and Exchange Commission Cox joined to further examine the plan for backstopping Freddie Mac and Fannie Mae.

The Democrats who make up the majority of the committee went after Bernake with all of their pet economic theories, which usually have no basis in economics. Chairman Bernake very patiently explained basic economics to each of them. Secretary Paulson did the same regarding capital markets.

A couple of the Democrat's favorite themes today included:

• The deficit (which in the Democrats view of reality is entirely the fault of President Bush, although only Congress can authorize spending) is the cause of the weak dollar. Chairman Bernake explained that the current deficit had a minimal effect on the dollar.
• Speculators are the reason oil prices keep going up. Bernake’s explained that this was not true - oil “speculators” provide stable price discovery and liquidity. The fundamentals of supply and demand are the biggest reason oil prices are going up. Demand is increasing in a world of inelastic supply. The weaker dollar is a contributory factor, but not the main factor.
• Why didn’t we see this problem coming with Fannie and Freddie? On this one both Mr. Bernake and Mr. Paulson were completely exasperated. Paulson went through a litany of all the efforts of Treasury to get Congress to reform the GSE’s – with zero results. You can go back 10 years or more and look at Greenspan’s testimony to this very body practically begging Congress to reform the GSE’s. Instead Congress pressed the GSE’s over the last decade to increase their leverage and expand lending to facilitate mortgages to low-income borrowers. Now they have also approved Fannie and Freddie to increase their exposure to more expensive mortgages as well.

One spirited exchange had a Democratic Senator insinuating that Paulson did not understand capital markets! Whatever you think of Hank Paulson, former CEO of Goldman Sachs, the world’s most successful and highly regarded investment bank, he certainly understands markets.

The most embarrassing episode was SEC chairman Cox stating that he had issued instructions for “emergency powers” to be invoked to prevent naked short selling. Since naked shorting is already illegal, this was simply an admission that the SEC has been asleep at the wheel as usual and has not be enforcing their own regulations.

It also highlighted perhaps one of the stupidest decisions in SEC history, eliminating the uptick rule last year. Eliminating the uptick rule, combined with zero enforcement of naked shorting, has made it easier for hedge funds to lean into individual stocks and conduct “bear raids”.