January 2012

Obama Administration Betrays America’s Friends Overseas

by Hans Bader on December 20, 2011

in Immigration, International, Politics as Usual, Zeitgeist

America is now “turning its back” on Iraqis who helped the U.S., contradicting Obama’s rhetoric on the campaign trail. Moqtada al-Sadr, a radical Anti-American Iraqi cleric, with a violent militia at his disposal, “recently declared that all Iraqis who assisted foreign forces are now ‘outcasts.’” Al-Sadr’s militia has killed many people, including American troops, and has a history of torturing opponents to death.  But he is currently a key power-broker in Iraq. Iraqis who helped the U.S. are thus at risk of death, just as Iraqis who helped the British were killed when the British earlier pulled out of the southern Iraqi city of Basra: “when Britain pulled its troops out of Basra a few years ago, 17 such ‘outcasts’ were murdered, their bodies dumped in the streets.”  But few Iraqis facing such threats have been offered asylum in the U.S. or allowed to immigrate.

In 2007, Obama noted that “the Iraqis who stood with America – the interpreters, embassy workers, and subcontractors – are being targeted for assassination,” and called it a “moral obligation” to protect them. But now, this “moral obligation” seems to have been forgotten, perhaps due to short-term political calculations. As Walter Russell Mead notes, this policy of not helping our friends will haunt America in future conflicts, if people refuse to help the U.S. fearing that they may be subject to retaliation later for doing so: “Those who stand by the United States in tough times deserve our thanks and our help.  And from a totally selfish point of view it is important that people deciding how to align themselves in future conflicts know that the United States of America stands by its friends. Here is one case where our leaders need to lead; Congress and the White House must find a way to help and protect our friends.”

This is not the only way the Obama administration has harmed America’s allies. It has also imposed sanctions on pro-American countries, while turning a blind eye to attacks on democracy and civil liberties in anti-American countries.  Obama has shown little interest in criticizing the human rights violations, violent repression, and anti-democratic behavior of Venezuela’s anti-American strongman, as even the liberal Washington Post, which has not endorsed a Republican for president since 1952, noted in an editorial by Deputy Editorial Page Editor Jackson Diehl, “Double Standards on Latin America.” The Post editorial noted Obama’s “willful disregard of political oppression” by anti-American regimes in places like Venezuela, and the fact that his Administration “for months refused to publicly” criticize human-rights abuses in Venezuela.

U.S., Other Countries Threaten to Retaliate Against EU on Airline Emissions “Taxes”

by Fran Smith on December 20, 2011

in Economy, Energy, Environment, Global Warming, International, Trade

The U.S. sent a strong letter to the European Union warning them that the EU’s airline emissions trading scheme — set to start in January 2012 — should be halted or postponed. If not, the letter from U.S. Secretary of State Hillary Clinton said, “. . . we will be compelled to take appropriate action.” According to the Financial Times (registration required), 42 other countries, including major economic powerhouses, such as China and Brazil, signed onto the letter, which seemed to be timed just before the EU’s highest court renders its decision.

On Wednesday the EU’s Court of Justice is expected to rule in favor of the EU’s plan to charge airlines — domestic and foreign — for their carbon emissions. The EU scheme would cover aviation in its controversial — and collapsing — cap-and-trade system for reducing carbon emissions. All planes landing or taking off in the EU would be forced to pay for their emissions, whether those were emitted over EU airspace or not.

Expanding the failing carbon trading system during a period of failing economies seems to be an act of self-flagellation on the part of the EU in the name of environmentalism. Or maybe they are hoping to bring other countries down to a “level playing field” of wasting billions of dollars that would flow into their coffers. A 2009 study by Matt Sinclair of the UK’s Taxpayers’ Alliance estimated that from its introduction in 2005 through 2008, the EU’s carbon trading scheme has cost European consumers €93 billion. Just last month The Australian reported that the Swiss bank UBS had issued a study stating:

. . . the European Union’s emissions trading scheme has cost the continent’s consumers $287 billion for “almost zero impact” on cutting carbon emissions, and has warned that the EU’s carbon pricing market is on the verge of a crash next year.

In a damning report to clients, UBS Investment Research said that had the €210bn the European ETS had cost consumers been used in a targeted approach to replace the EU’s dirtiest power plants, emissions could have been reduced by 43 per cent “instead of almost zero impact on the back of emissions trading.”

If the EU stands by its plan to exert control over airlines of other countries and to charge them for emissions, many have argued that it would attack the sovereignty of other countries, destroy the international legal system in place for airlines – the Convention on International Civil Aviation – put onerous economic burdens on airlines, and raise the cost of international travel and delivery services.

Retaliation would seem inevitable, which could plunge the fragile world economy into a destructive trade war.

Dick Durbin’s Hypocritical Quest for “Honest Information’ on Bank Fees

by John Berlau on December 20, 2011 · 3 comments

in Deregulate to Stimulate, Features, Regulation, Sanctimony, Transparency

Post image for Dick Durbin’s Hypocritical Quest for “Honest Information’ on Bank Fees

Senate Majority Whip Dick Durbin (D-Ill.) wants banks and credit unions to know that he’s all about transparency and “honesty” in consumer fees.

In his recent letter hectoring the Illinois Bankers Association and the Illinois Credit Union League, Durbin proclaimed that  ”consumers in Illinois and across America have made clear their desire for honest information about banking fees.” He urged the banks to “be transparent about fees” by adopting a checking account disclosure form he favors.

Yet when it comes to disclosing to consumers what’s causing these bank fees to rise, Durbin has told these same institutions to just shut up. That’s because honesty and transparency would require that banks and credit unions disclose to consumers the Durbin Amendment to the Dodd-Frank financial “reform.” That measure by Durbin puts price controls on the interchange fees banks can charge merchants for debit card purchases, shifting the costs of debit card processing to consumers.

The contrast is evident in two of Durbin’s interactions with financial firm JPMorgan Chase. Late last week Durbin and many others lauded the firm’s Chase bank unit for adopting a simplified checking account fee disclosure form based on a model developed by the Pew Charitable Trusts’ “Safe Checking” project. The new form contains an upfront three-page schedule of different types of fees. Though there are still lengthy disclosures of terms and conditions — which are effectively mandated by longstanding regulations from laws like the Truth in Lending Act and from excessive litigation — these will now be embedded in Internet links on online copies of the form, a Chase spokesman tells Reuters.

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Federal Officials Gave Valuable Insider-Information to Obama Supporters like North Carolina’s Democratic Governor

by Hans Bader on December 20, 2011

in Legal, Politics as Usual, Zeitgeist

If you’ve lost money in the stock market over the last few years, it may be because politically-favored people are trading in the stock market based on sensitive, confidential government information that you lack — information like monthly federal employment figures, which can drive the stock market up or down by hundreds of points by disclosing the direction the economy is headed. As veteran journalist Michael Barone notes, federal officials are now giving such insider-information to key Obama supporters, like the office of North Carolina’s liberal governor, violating federal criminal laws in the process. As a result, some people who learn of it in advance may be making a quick buck off of that information before it becomes publicly available.    Such information is supposed to be kept confidential by the Bureau of Labor Statistics before its public release. When I worked at the Bureau of Labor Statistics, some statistics were as closely guarded as Fort Knox, and subject to very tight security. If I had had access to such information, and released it, I would have been fired, and criminally prosecuted. (Barone was the principal author of the highly-respected Almanac of American Politics.) As Barone notes,

staffers in North Carolina Governor Beverly Perdue’s office have been getting advance word on monthly unemployment statistics from the U.S. Department of Labor’s Bureau of Labor Statistics. This is highly illegal under federal law and violates what I have understood to be a strong tradition in the BLS and other government statistics that no one—no one at all, not even in the White House—gets advanced word ahead of the public announcement of government statistics.

There’s obviously good reason for this: someone with advanced word could place bets in financial and community markets and make lots of money. That’s why Congress provided for penalties of up to five years in prison and a $250,000 fine for early release of this data. And there’s another excellent reason: government statistical agencies should be free of political influence to insure the integrity of the numbers on which many people depend. . . an important part of the bureaucratic culture of federal statistical agencies is a pride in their independence and integrity; this is something not to be lightly squandered.

This information was earlier reported by the Carolina Journal.

This favoritism toward administration supporters — potentially at the expense of the investing public — is depressing, but perhaps not too shocking, in an age of crony capitalism and corporate welfare exemplified by Solyndra (an entity owned by Obama supporters that got hundreds of millions in preferential taxpayer subsidies after the Obama administration ignored warnings that it would go bankrupt) and the rip-off of Chrysler and GM bondholders (and taxpayers) to enrich the politically-connected UAW union.

Alcohol Regulation Roundup: December 20, 2011

by Michelle Minton on December 20, 2011 · 1 comment

in Features, Nanny State, Personal Liberty, Regulation

Post image for Alcohol Regulation Roundup: December 20, 2011

With the holidays near and all in good cheer, here is some alcohol news at which you can jeer.

And you plan on having booze around the house on Christmas, you had better consult with my previous roundup of Christmas Day liquor sales bans and plan your shopping accordingly.

District of Columbia: Beer lovers in D.C. may soon be allowed to fill growlers. D.C. Councilmember Tommy Wells (D-Ward 6) filed legislation earlier this month that would lift the ban on filling growlers — large jugs that can be filled with fresh beer, enjoyed at home, and refilled.

Georgia: Counties in Georgia have been voting for the past year on whether they want to retain their ban on Sunday alcohol sales or repeal the ban. In November, Savannah was one of the counties that voted to end the ban. This week the city council made it official, meaning that businesses in Savannah (presuming they have a liquor license) may immediately begin serving alcohol on Sundays.

Illinois: For many years, local brewers of any size in Illinois were allowed to self-distribute their product. Since the ’80s, Anheuser-Busch (A-B), the St. Louis-based brewer, has owned a 30 percent share of Illinois distributor Windy City Distribution, but when they tried to buy the remaining 70 percent in 2010, the liquor control board put a stop to it. They say this is because A-B is technically not based in Illinois — they are an out-of-state dealer. A-B claimed, rightfully so, that the laws discriminated against out-of-state producers, and as a result the state passed a law that essentially stopped all brewers — out of state or in-state — from self distributing, though it does allow smaller brewers to continue self-distribution. The liquor control board is in the process of determining whether or not A-B should be allowed to hold onto its 30 percent interest in Windy City Distributor or be forced to divest entirely — something that A-B claims is the goal of its competition, Miller-Coors, which is currently the number-one seller in Illinois.

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Useless Law School “Educations” Shielded Against Improvement and Competition by Special-Interest-Driven Regulations

by Hans Bader on December 19, 2011

in Deregulate to Stimulate, Economy, Employment, Legal, Regulation

The New York Times featured an excellent news story Sunday by David Segal on the costly white elephant that is legal education in America. He describes how law school is expensive because of government-enforced accreditation standards that prevent law schools from containing costs even if they wanted to (and in truth, most law schools are all too happy to jack up their costs and pass them on to law students and consumers of legal services): “the lack of affordable law school options, scholars say, helps explain why so many Americans don’t hire lawyers” when they genuinely need legal assistance or advice. One reason for that is that lawyers who incur a fortune in student loans need to bring (or defend) big-ticket lawsuits — even socially destructive lawsuits — to pay off their loans, instead of providing badly needed legal advice and assistance to people of modest means, who can pay less, even though handling their unmet legal needs would be much more meaningful work for conscientious lawyers. (Certain types of lawsuits are favored by one-way fee-shifting statutes that encourage trial lawyers to bring those particular types of lawsuits, even when the entity being sued is probably innocent.)

The article debunks the self-serving claim of the chairman of the ABA’s legal education section that onerous accreditation standards are necessary to give students “what they have a right to receive in terms of education” and “protect the public.” It examines the experiences of a start up law school in Tennessee, the Duncan School of Law, which is seeking ABA accreditation. The school must have an unnecessarily big library and professors with tenure and time to write law review articles. These requirements enrich law professors at the expense of their students and the public. So, as a couple of former law deans tell Segal, the professors exert their power through the accreditation process to maintain the status quo. In the end, the Duncan School of Law’s advocates had to fly to a beachfront Ritz-Carlton in Puerto Rico to meet with the ABA to make a 15-minute argument for provisional accreditation. The ABA’s questions showed they were interested in the lawyer market in east Tennessee, suggesting that lowering clients’ costs mattered less to them than threatening lawyers’ income — an anti-competitive animus against new, low-cost law schools.

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Today’s Links: December 19, 2011

by Nicole Ciandella on December 19, 2011

in Odds & Ends

OPINION

WALL STREET JOURNAL: “VACLAV HAVEL”
“When [Havel] died Sunday at age 75, he knew his legacy lived on with freedom-seeking people around the world, not least the imprisoned signatories of China’s Charter 08 who took their inspiration directly from him. Their day of freedom is coming.”

MICHAEL MORAN: “SEC Puts Small Downpayment on Justice”
“Hardly worth the fanfare the SEC gave it Friday – taken in context, this remains enormously underwhelming – but the charges against six pre-cataclysm Fannie Mae and Freddie Mac executives could be the beginning of a new attitude I referenced in this post.”

GENE EPSTEIN: “Why Has the Recovery Been So Slow?”
“Begin with a detailed score card. The recovery from the 2008-09 recession has been the slowest since any recession in the post-World War II era. It has taken nine calendar quarters since the recession ended in the second quarter of 2009 for real gross domestic product to climb back to its fourth-quarter ’07 peak. Assume the same rates of growth during the recoveries from the two previous recessions that rank second and third in severity since World War II — ’81-’82 and ’74-’75 — and the recovery from the recent recession should have taken half as long.”

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Fannie Mae and Freddie Mac Were Into Subprime Lending, and Lied About It

by Hans Bader on December 16, 2011

in Bailout Watch, Economy, Legal, Politics as Usual, Zeitgeist

“One of the regular claims from Fannie Mae and Freddie Mac apologists . . . is that the two entities were blameless” for causing the mortgage meltdown and financial crisis, as these two “Government-sponsored enterprises” (GSEs) supposedly “weren’t involved in subprime” mortgages and were forbidden to buy them. This false and dishonest claim has now been refuted.  In charging the former heads of Fannie and Freddie with fraud, “the Securities and Exchange Commission has decided that not only could the GSEs buy subprime, but they did in fact do so and, even worse, they lied about it.”

As Cato Institute economist Mark Calabria notes, “Back in 2008, Paul Krugman went so far as to say, ‘they didn’t do any subprime, because they can’t.’ Just taking 10 minutes to read the actual statute and regulations would have revealed to him that they actually could. Krugman went on to say, ‘Fannie and Freddie buy only mortgages issued to borrowers who made substantial down payments and carefully documented their income.’ Of course, just reading Fannie’s 10-K would have revealed that claim to be false. But why let facts get in the way?”

In the Wall Street Journal, Peter Wallison, who prophetically warned against the risky practices of mortgage giant Fannie Mae, earlier described the key role that government-sponsored entity played in spawning the recent financial crisis, in an article entitled “Government-Sponsored Meltdown.” He cited the findings of a recent book about the causes of the crisis by New York Times business reporter Gretchen Morgenson and financial analyst Josh Rosner, a book called “Reckless Endangerment,” which chronicles how “it was Fannie Mae and the government housing policies it supported, pursued, and exploited that brought the financial system to a halt in 2008.” Earlier, a top investment manager at JP Morgan Private Bank reached a similar conclusion, noting that “new research” showed that “US Agencies played a larger role in the housing crisis than we first reported,” and thus were a “primary catalyst for the US housing crisis.”

(Even now, the Obama Justice Department is pressuring banks to make risky loans to people with bad credit, relying on a strained interpretation of fair lending laws, and the threat of massive lawsuits.)

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Cradle and Grave? Nations that Built the West Now Pulling it Down

by Matt Patterson on December 16, 2011

in Zeitgeist

One of the joys of studying history is discovering the enormous number of bizarre coincidences scattered throughout the affairs of men. Example: Thomas Jefferson, primary author of the Declaration of Independence, died on the 50th anniversary of the adoption of that document, giving his last breath on July 4, 1826. As if that wasn’t coincidence enough, Jefferson’s friend and fellow revolutionary (and his predecessor in the presidency) John Adams passed away on the very same day. “Jefferson still survives,” were Adams’ final words, unaware that his lifelong rival and colleague had expired a few hours previously.

Another interesting coincidence: Free government was invented by two separate peoples, apparently independently, within one year of each other in the late 6th century BC. In 509, the Roman people overthrew the Etruscan kingship that had ruled Rome for centuries and instituted what may have been the world’s first popular government — the Republic was born. A year later across the Adriatic, an Athenian named Cleisthenes helped overthrow the Peisistratid tyranny and ushered in reforms that gave the world its first democracy.

These two peoples, the Italians and the Greeks, for whatever reason, all but invented the civil institutions that define Western civilization to this day. How utterly and sadly ironic then, that Italy and Greece are now championing the very pathologies that may bring about the West’s ultimate demise — government spending, entitlement mentality, and corruption.

As the massive public debt of the two Mediterranean nations threaten to engulf Europe (and the rest of the world) in a financial conflagration that would make the 2008 crisis look like a hiccup, the people of the those nations react to the prospect of cuts in their entitlements with riots, threats, strikes, and violence. And no wonder: As The Washington Post noted, in Italy, “The pension system only until a few years ago allowed workers as young as 50 to retire with pensions as much as 80 percent of their last paychecks.” The government can giveth, but it can’t taketh away — not without a fight, anyway.

Lethargy has replaced liberty as the animating spirit of the Greek and Italian people. Those who once fought for their freedom are now fighting for their handouts. It just goes to show how far the mighty can fall, and how seductive and poisonous are the fruits of government dependency.

We ignore the lesson at our peril.

Memo to Gingrich: Credit Unions are Not GSEs

by John Berlau on December 16, 2011

in Bailout Watch, Deregulate to Stimulate, Economy, Features

Post image for Memo to Gingrich: Credit Unions are <i>Not</i> GSEs

Let me begin this post with a disclaimer, of which many of our readers are already aware. The Competitive Enterprise Institute and OpenMarket.org do not advocate the election or defeat of any political candidate. What we do do is offer our perspective on many of the policies the candidates have to offer. Often a candidate will receive kudos from us for one idea, but strong criticism for another.

In the case of former Speaker of the House Newt Gingrich, I have applauded his and other candidates’ calls to repeal the burdensome accounting mandates from the Sarbanes-Oxley Act of 2002. A few days ago on OpenMarket, Rand Simberg gave qualified praise to Gingrich’s idea for a lunar colony, so long as involved lifting regulatory barriers and not government subsidies.

But in last night’s Fox News debate, Gingrich made an egregious factual error that needs to be corrected. This would be his outrageous assertion that the nation’s thousands of credit unions are “government-sponsored enterprises” akin to the disgraced Fannie Mae and Freddie Mac.

“Credit unions, co-ops, a lot of government-sponsored enterprises do a lot of good,” Gingrich said in response to a question from Chris Wallace about Gingrich’s $1.6 million in consulting fees from Freddie Mac in 2002 and his public praise around that time of the “GSE model”

But these entities Gingrich cited do not bear any resemblance to the “GSE model.” In fact, credit unions are some of the least subsidized financial institutions.

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