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Financial crisis leading to violence Tragedies mounting, suicide prevention hot lines jammed
BY KELLI KENNEDY The Associated Press

    An out-of-work money manager in California loses a fortune and wipes out his family in a murder-suicide. A 90-year-old Ohio widow shoots herself in the chest as authorities arrive to evict her from the modest house she called home for 38 years.
    In Massachusetts, a housewife who had hidden her family’s mounting financial crisis from her husband sends a note to the mortgage company warning: “By the time you foreclose on my house, I’ll be dead.”
    Then Carlene Balderrama shot herself to death, leaving an insurance policy and a suicide note on a table.
    Across the country, authorities are becoming concerned that the nation’s financial woes could turn increasingly violent, and they are urging people to get help. In some places, mental-health hot lines are jammed, counseling services are in high demand and domestic-violence shelters are full.
    “I’ve had a number of people say that this is the thing most reminiscent of 9/11 that’s happened here since then,” said the Rev. Canon Ann Malonee, vicar at Trinity Church in the heart of New York’s financial district. “It’s that sense of having the rug pulled out from under them.”
    With nowhere else to turn, many people are calling suicideprevention hot lines. The Samaritans of New York have seen calls rise more than 16 percent in the past year, many of them moneyrelated. The Switchboard of Miami has recorded more than 500 foreclosure-related calls this year.
    “A lot of people are telling us they are losing everything. They’re losing their homes, they’re going into foreclosure, they’ve lost their jobs,” said Virginia Cerva- sio, executive director of a suicide resource enter in southwest Florida’s Lee County.
    But tragedies keep mounting:
    In Los Angeles last week, a former money manager fatally shot his wife, three sons and his mother-inlaw before killing himself.
    Karthik Rajaram, 45, left a suicide note saying he was in financial trouble and contemplated killing just himself. But he said he decided to kill his entire family because that was more honorable, police said.
    Rajaram once worked for a major accounting firm and for Sony Pictures, and he had been part-owner of a financial holding company. But he had been out of work for several months, police said.
    After the murder-suicide, police and mental-health officials in Los Angeles took the unusual step of urging people to seek help for themselves or loved ones if they feel overwhelmed by grim financial news. They said they were specifically afraid of the “copycat phenomenon.”
    “This is a perfect American family behind me that has absolutely been destroyed, apparently because of a man who just got stuck in a rabbit hole, if you will, of absolute despair,” Deputy Police Chief Michel Moore said. “It is critical to step up and recognize we are in some pretty troubled times.”
    In Tennessee, a woman fatally shot herself last week as sheriff’s deputies went to evict her from her foreclosed home.
    Pamela Ross, 57, and her husband were fighting foreclosure on their home when sheriff’s deputies in Sevierville came to serve an eviction notice. They were across the street when they heard a gunshot and found Ross dead from a wound to the chest. The case was even more tragic because the couple had recently been granted an extra 10 days to appeal.
    In Akron, Ohio, the 90-year-old widow who shot herself on Oct. 1 is recovering. A congressman told Addie Polk’s story on the House floor before lawmakers voted to approve a $700 billion financial rescue package. Mortgage finance company Fannie Mae dropped the foreclosure, forgave her mortgage and said she could remain in the home.
    In Ocala, Fla., Roland Gore shot his wife and dog in March and then set fire to the couple’s home, which had been in foreclosure, before killing himself. His case was one of several in which people killed spouses or pets, destroyed property or attacked police before taking their own lives.
    “The financial stress builds up to the point the person feels they can’t go on, and the person believes their family is better off dead than left without a financial support,” said Kristen Rand, legislative director of the Washington D.C.-based Violence Policy Center.
    Dr. Edward Charlesworth, a clinical psychologist in Houston, said the current crisis is breeding a sense of chronic anxiety among people who feel helpless and panicstricken, as well as angry that their government has let them down.
    “They feel like in this great society that we live in we should have more protection for the individuals rather than just the corporation,” he said.
    It’s not yet clear whether there is a statistical link between suicides and the financial downturn since there is generally a two-year lag in national suicide figures. But historically, suicides increase in times of economic hardship. And the current financial crisis is already being called the worst since the Great Depression.
    Rising mortgage defaults and falling home values are at the heart of it. More than 4 million Americans were at least one month behind on their mortgages at the end of June, according to the Mortgage Bankers Association.
    A record 500,000 had entered the foreclosure process. And that trend is expected to continue through next year, despite the current programs from the government and the lending industry to refinance delinquent homeowners into more affordable loans.
    Counselors at Catholic Charities USA report seeing a “signifi cant increase” in the need for housing counseling.
    One counselor said half of her clients were on some form of antidepressant or anti-anxiety medication. The agency has seen a decrease in overall funding, but it has expanded foreclosure counseling and received nearly $2 million for such services in late 2007.
    Adding to financially tense households is an air of secrecy. Experts said it’s common for one spouse to blame the other for their financial mess or to hide it entirely, as Balderrama did.
    After falling 3 1 /2 years behind in payments, the Taunton, Mass., housewife had been intercepting letters from the mortgage company and shredding them before her husband saw them. She tried to refinance but was declined.
    In July, on the day the house was to be auctioned, she faxed the note to the mortgage company. Then the 52-year-old walked outside, shot her three beloved cats and then herself with her husband’s rifle.
    Notes left on the table revealed months of planning. She’d picked out her funeral home, laid out the insurance policy and left a note saying, “pay off the house with the insurance money.”

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With war and debt, U.S. like U.S.S.R before collapse

    The United States has a national debt of over $10 trillion. Of this, $4 trillion was added during the administration of George Bush. And this is before we account for the additional cost of the bailout.
    Almost every Republican candidate in this election is calling for lower taxes to wildly cheering partisan crowds, while they say nothing about the soon-to-be $11 trillion national debt. The fall of the Soviet Union in 1991 was not caused by the invasion of a foreign state. It collapsed due to a faltering economy caused, in part, by the Soviet Union’s failed war in Afghanistan and the diversion of spending from domestic issues to military issues in a failed attempt to keep up with military spending in the United States.
    As a country, we are living beyond our means. Foreign nations hold a large share of our national debt, and this gives them undue influence in the decisions of our government. Our infrastructure is in need of repair and expansion, and we need to develop and deploy technology that will reduce our dependence on foreign oil. Improving the financial health of this country should be a major goal of any candidate running for public offi ce.
    Republicans scoff at the idea that it can be patriotic to pay taxes. Perhaps they need to re-read the last sentence of our Declaration of Independence: “And for the support of this Declaration, with a firm reliance on the protection of Divine Providence, we mutually pledge to each other our Lives, our Fortunes, and our sacred Honor.”

    VICTOR ROBERTS
    Burnt Hills

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Feds move into banking Reworked bailout plan emphasizes partial ownership
BY JEANNINE AVERSA The Associated Press

WASHINGTON — Big banks started falling in line Tuesday behind a rejiggered bailout plan that will have the government forking over as much as $250 billion in exchange for partial ownership — putting the world’s bastion of capitalism and free markets squarely in the banking business.
Some early signs were hopeful for the latest in a flurry of radical efforts to save the nation’s fi - nancial system: Credit was a bit easier to come by. And stocks were down but not alarmingly so after Monday’s stratospheric leap.
The plan, President Bush declared, is “not intended to take over the free market but to preserve it.”
It’s all about cash and confidence and convincing banks to lend money more freely again. Those are all critical ingredients to getting financial markets to function more normally and reviving the economy. The big question: Will it work?
There was a mix of hope and skepticism on that front. Unprecedented steps recently taken — including hefty interest rate reductions by the Federal Reserve and other major central banks in a coordinated assault just last week — have failed to break through the credit clog and the panicky mind-set gripping investors on Wall Street and around the globe.
    The Dow Jones industrials declined 77 points on Tuesday after piling up their biggest point gain ever on Monday on news of Europe’s rescue plan and in anticipation of the United States’ new measures.
    Initially the U.S. government will pour $125 billion into nine major banks with the hope that they will use the money to rebuild their reserves and to increase lending to consumers and businesses. Another $125 billion will be made available this year to other banks — if they need it — for cash infusions.
    In return, the government will get ownership stakes in the financial institutions. Banks, meanwhile, will have to accept limitations on executives’ compensation.
    “Government owning a stake in any private U.S. company is objectionable to most Americans — me included,” Treasury Secretary Henry Paulson said in announcing the initiative. “Yet the alternative of leaving businesses and consumers without access to financing is totally unacceptable.”
    Whether the $250 billion will be sufficient to encourage banks to lend again is hard to tell, said Anil Kashyap, professor of economics and finance at the University of Chicago’s Graduate School of Business. The Treasury Department arrived at the $250 billion figure after consulting with banking regulators.
    “This plan will work if we wind up with everybody pretty well capitalized,” Kashyap said. “But if it doesn’t reach that point, we’ll be back in soup down the road.”
    The government is counting on banks not to just clutch onto the cash, which aggravated the credit crisis to begin with.
    “The needs of our economy require that our financial institutions not take this new capital to hoard it, but to deploy it,” Paulson said.
    Treasury switched gears deciding to first use a chunk of the $700 billion from the recently enacted financial bailout package to pay for taking partial ownership stakes in banks, rather than using the money to buy rotten debts from financial institutions. The government said it still intends to buy the bad mortgages and other toxic assets, another move aimed at getting credit flowing again.
    Besides the $250 billion this year on the stock purchases, Bush said Tuesday that an additional $100 billion would be needed in connection with covering bad assets. That would leave $350 billion of the $700 billion program, presumably to be spent by the next president.
    Economists as well as both Democratic and Republican lawmakers on Capitol Hill had urged Treasury to first move forward on the capital injection plan, arguing that was a more effective way to battle the financial crisis.
    The first bank to take advantage of the program was Bank of New York Mellon which announced it would sell $3 billion in preferred shares to the Treasury. Other banks initially participating include Goldman Sachs Group Inc., Morgan Stanley, JPMorgan Chase, Bank of America Corp., including the soon-to-acquired Merrill Lynch, Citigroup Inc., Wells Fargo & Co., and State Street Corp.
    The government’s cash infusions are attractive to banks because they are having trouble getting money from elsewhere. Skittish investors have cut them off, moving their money into safer Treasury securities. Financial institutions are hoarding whatever cash they have rather than lending it to each other or customers.
    Two other initiative also were unveiled to stem the credit crisis: The Federal Deposit Insurance Corp. launched an insurance fund to temporarily guarantee new issues of bank debt — fully protecting the money even if the institution fails.
    And, the FDIC will start providing unlimited deposit insurance for noninterest bearing accounts, which are mainly used by businesses to cover payrolls and other expenses. Frequently these accounts exceed the current $250,000 insurance limit, so the expanded insurance should discourage nervous companies from pulling their money out. Both of these efforts would be financed by fees charged to participating financial institutions — not money from the bailout package.
    Even if the new plan works, economists caution that it could take years before locked up lending returns to normal.
    The difference between the rate at which banks lend to other banks and the rate at which they buy U.S. government debt has narrowed, but remains near a 25-year high — a glaring sign that there’s still fear in the market. But there was a hopeful glimmer elsewhere: A crucial short-term, bank-to-bank lending rate called the London Interbank Offered Rate, or Libor, inched down Tuesday. That rate is important because a lot of commercial loans and many adjustable-rate mortgages are tied to it.
    Some of the banks had to be pressured to participate by Paulson, who wanted healthy institutions to go first as a way of removing any stigma that might be associated with banks getting bailouts. Paulson met privately with bank executives on Monday.

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Prepare for bailout backlash
First published in print: Wednesday, October 15, 2008

We're in the middle of a financial crisis, but most economists say there is a broader economic crisis still to come. The unemployment rate will shoot upward. Companies will go bankrupt. Commercial real estate values will decline. Credit card defaults will rise. The nonprofit sector will be hammered.



By the time the recession is in full force, Democrats will probably be running the government. Barack Obama may be in the White House. Democrats will have a comfortable majority in the House and will control between 56 and 60 seats in the Senate.

The party will inherit big deficits. David Leonhardt, my colleague at the Times, estimates that the deficit will sit at around $750 billion next year, or 5 percent of GDP. Democrats had promised to pay for new spending with compensatory cuts, but the economic crisis will dissolve pay-as-you-go vows. New federal spending will come in four streams.

First, there will be the bailouts. If Bear Stearns and AIG can get bailouts, then so can car companies, airlines and others with direct links to Main Street.

Second, there will be more stimulus packages. The stimulus package, passed early this year, was a failure because people spent only 10 percent to 20 percent of the rebate dollars and saved the rest. Martin Feldstein of Harvard calculates the package added $80 billion to the national debt while producing less than $20 billion in consumer spending.

House Speaker Nancy Pelosi promises another package, and it will pass.

Third, we're in for a Keynesian renaissance. The Federal Reserve has little room to stimulate the economy, so Democrats will use government outlays to boost consumption. Nouriel Roubini of New York University argues the economy will need a $300 billion stimulus.

Obama has promised a clean energy/jobs program that would cost $150 billion over 10 years. He's vowed $60 billion in infrastructure spending over the same period. He promises a range of tax credits — $4,000 a year for college tuition, up to $3,000 for child care, $7,000 for a clean car, a mortgage tax credit.

Fourth, there will be tax cuts. Obama promised new tax subsidies to small business, which could cost tens of billions. That's on top of his promise to cut taxes for 95 percent of American households. His tax plans aren't as irresponsible as John McCain's, but the Tax Policy Center says they would reduce revenues by $2.8 trillion over the next 10 years.

There will be a health care plan. In 1960, health care consumed 5 percent of GDP. By 2025, it will consume 25 percent. Obama will spend billions to widen coverage. Obama's plan has many virtues, but the cost-saving measures are chimerical.

We're not talking about a deficit that is 5 percent of GDP, but something much, much, much larger.

The new situation will reopen old rifts in the Democratic Party. Democrats should use their control as a chance to make overdue changes. Liberals will make a push for European-style policies.
The remaining Democratic moderates will argue that it was excess and debt that created this economic crisis. They will continue to argue that it is perfectly legitimate to increase the deficit with stimulus programs during a recession, but that these programs need to be carefully targeted and should sunset as the crisis passes. The moderates will stress that the country faces an insolvency crisis caused by entitlements.
Obama will try to straddle the two camps but the liberals will win. Liberals have mounted a campaign against Robert Rubin-style economic policies, and they control the congressional power centers. Even if he's so inclined, it's difficult for a president to overrule the committee chairmen of his own party. It is more difficult to do that when the president is a Washington novice and the chairmen are skilled political hands. It is most difficult when the president has no record of confronting his own party elders. It's completely impossible when the economy is in a steep recession, and an air of economic crisis pervades the nation.

What we're going to see, in short, is the Gingrich revolution in reverse — and on steroids. There will be a big increase in spending and deficits. In normal times, moderates could have restrained the zeal on the left. In an economic crisis, not a chance. The over-reach is coming. The backlash is next.

David Brooks writes for The New York Times.

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Drama behind a $250 billion banking deal
By Mark Landler and Eric Dash
Wednesday, October 15, 2008

WASHINGTON: The chief executives of the nine largest banks in the United States trooped into a gilded conference room at the Treasury Department at 3 p.m. Monday. To their astonishment, they were each handed a one-page document that said they agreed to sell shares to the government, then Treasury Secretary Henry Paulson Jr. said they must sign it before they left.

The chairman of JPMorgan Chase, Jamie Dimon, was receptive, saying he thought the deal looked pretty good once he ran the numbers through his head. The chairman of Wells Fargo, Richard Kovacevich, protested strongly that, unlike his New York rivals, his bank was not in trouble because of investments in exotic mortgages, and did not need a bailout, according to people briefed on the meeting.

But by 6:30, all nine chief executives had signed — setting in motion the largest government intervention in the American banking system since the Depression and retreating from the rescue plan Paulson had fought so hard to get through Congress only two weeks earlier.

What happened during those three and a half hours is a story of high drama and brief conflict, followed by acquiescence by the bankers, who felt they had little choice but to go along with the Treasury plan to inject $250 billion of capital into thousands of banks — starting with theirs.

Paulson announced the plan Tuesday, saying "we regret having to take these actions." Pouring billions in public money into the banks, he said, was "objectionable," but unavoidable to restore confidence in the markets and persuade the banks to start lending again.

In addition to the capital infusions, which will be made this week, the government said it would temporarily guarantee $1.5 trillion in new senior debt issued by banks, as well as insure $500 billion in deposits in noninterest-bearing accounts, mainly used by businesses.

All told, the potential cost to the government of the latest bailout package comes to $2.25 trillion, triple the size of the original $700 billion rescue package, which centered on buying distressed assets from banks. The latest show of government firepower is an abrupt about-face for Paulson, who just days earlier was discouraging the idea of capital injections for banks.

Analysts say the United States was forced to shift policy in part because Britain and other European countries announced plans to recapitalize their banks and backstop bank lending. But unlike in Britain, the Treasury secretary presented his plan as an offer the banks could not refuse.

"It was a take it or take it offer," said one person who was briefed on the meeting, speaking on condition of anonymity because the discussions were private. "Everyone knew there was only one answer."

Getting to that point, however, necessitated sometimes tense exchanges between Paulson, a former chairman of Goldman Sachs, and his former colleagues and competitors, who sat across a dark wood table from him, sipping coffee and Cokes under a soaring rose- and sage-colored ceiling.

This account is based on interviews with government officials and bank executives who attended the meeting or were briefed on it.

Paulson began calling the bankers personally Sunday afternoon. Some were already in Washington for a meeting of the International Monetary Fund.

The executives did not have an inkling of Paulson's plans. Some speculated that he would brief them about the government's latest bailout program, or perhaps sound them out about a voluntary initiative. No one expected him to present his plan as an ultimatum.

Paulson, according to his own account, presented his case in blunt terms. The nation's largest banks needed to begin lending to each other for the good of the financial system, he said in a telephone interview, recalling his remarks. To do that, they needed to be better capitalized.

"I don't think there was any banker in that room who was going to look us in the eye and say they had too much capital," Paulson said. "In a relatively short period of time, people came on board."

Indeed, several of the banks represented in the room are in need of capital. And analysts said the terms of the government's investment are attractive for the banks, certainly compared with the terms that Warren Buffett extracted from Goldman Sachs for his $5 billion investment.

The Treasury will receive preferred shares that pay a 5 percent dividend, rising to 9 percent after five years. It will get warrants to purchase common shares, equivalent to 15 percent of its initial investment. But the Treasury said it would not exercise its right to vote those common shares.

The terms, officials said, were devised so as not to be punitive. The rising dividend and the warrants are meant to give banks an incentive to raise private capital and buy out the government after a few years. Still, it took some cajoling.

Kovacevich of Wells Fargo objected that his bank, based in San Francisco, had avoided the mortgage-related woes of its Wall Street rivals. He said the investment could come at the expense of his shareholders.

Kovacevich is also said to have expressed concern about restrictions on executive compensation at banks that receive capital injections. If he steps down from Wells Fargo after completing a planned takeover of Wachovia, he would be entitled to retirement benefits worth about $43 million, and $140 million in accumulated stock and options, according to James F. Reda & Associates, a executive pay consulting firm. Pay experts say the new Treasury limits would probably not affect his exit package.

Kovacevich declined to be interviewed about the meeting.

Kenneth Lewis, the chairman of Bank of America, also pushed back, saying his bank had just raised $10 billion on its own. Later, Lewis urged his colleagues not to quibble with the plan's restrictions on executive compensation for the top executives. These include a ban on the payment of golden parachutes, repayment of any bonus based on earnings that prove to be inaccurate, and a limit of $500,000 on the tax deductibility of salaries.

If we let executive compensation block this, "we are out of our minds," he said, according to a person briefed on the meeting.

In an interview on Monday, before the meeting, John Mack said his bank, Morgan Stanley, did not need capital from the Treasury. It had just sealed a $9 billion deal with a large Japanese bank. During the meeting, however, Mack, Morgan Stanley's chief executive, said little, according to participants.

Paulson, however, was peppered with questions about the terms of the investment by other chief executives with experience in deal-making: Lloyd Blankfein of Goldman Sachs, Vikram Pandit of Citigroup, John Thain of Merrill Lynch and Dimon.

Among their concerns were: How would the government's stake affect other preferred shareholders? Would the Treasury Department demand some control over management in return for the capital? How would the warrants work?

With the discussion becoming heated, the chairman of the Federal Reserve, Ben Bernanke, who was seated next to Paulson, interceded. He told the bankers that the session need not be combative, since both the banks and the broader economy stood to benefit from the program. Without such measures, he added, the situation of even healthy banks could deteriorate.

The president of the Federal Reserve Bank of New York, Timothy Geithner, then proceeded to outline the details of the investment program. When the bankers heard the amount of money the government planned to invest, they were stunned by its size, according to several people.

As they heard more of the details, some of the bankers began to realize how attractive the program was for them.

Even as they insisted that they did not need the money, bankers recognized that the extra capital could be helpful if the economy became shakier. Besides, many of these banks' biggest businesses are tied to the stock and credit markets; the quicker they improve, the better their results.

Later, Pandit told colleagues that the investment would give Citigroup more flexibility to borrow and lend. Dimon told colleagues he believed the relatively cheap capital was a fair deal for his bank. Lewis said he recognized the prospects of his bank were closely aligned with the American economy.

Thain was intrigued by the terms of the guarantee by the Federal Deposit Insurance Corporation on new senior debt issued by banks, participants said. He mentally calculated the maturities on debt issued by Merrill Lynch, to determine how the program could benefit his bank.

For Paulson, selling the bankers on capital injections may not have been as difficult as overhauling a rescue program that had originally focused on asset purchases from banks. In the interview, Paulson said the worsening conditions made a change in focus imperative.

"I've always said to everyone that ever worked for me, if you get too dug in on a position, the facts change, and you don't change to adapt to the facts, you will never be successful," he said in the interview.

Paulson insisted that purchases of distressed assets would remain a big part of the program. But having allocated $250 billion to direct investments, the Treasury has only $100 billion left from its initial allotment of $350 billion from Congress to spend on those purchases.

As the meeting wound down, participants said, the bankers focused more on contacting their boards before signing the agreement with the Treasury Department. With time running short and private space limited, some of the bankers left the Treasury building, heading for their limousines while speaking urgently into cellphones.

"I don't think we need to be talking about this a whole lot more," Lewis said, according to a person briefed on the meeting. "We all know that we are going to sign.

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Iran hails world financial crisis as 'end of capitalism'     

Oct 15 11:21 AM US/Eastern

Iranian leaders say the world financial crisis indicates the end of capitalism, the failure of liberal democracy and divine punishment -- marking the superiority of the Islamic republic's political model.
"The school of Marxism has collapsed and the sound of the West's cracking liberal democracy is now being heard," supreme leader Ayatollah Ali Khamenei said on Monday, recalling the fate of the Soviet Union.

Hardline President Mahmoud Ahmadinejad, who is backed by Khamenei, said on Tuesday that "it is the end of capitalism."

Such convictions can be traced back to the ideals of the 1979 Islamic revolution, which Ahmadinejad has sought to revive since he rose to power in 2005.

The firebrand president, who has not missed a chance to denounce Western "decadence" since his election, has exploited the scale of the global crisis to play up his argument.

He benefits from the luxury that the Tehran stock market has been unaffected by the losses that bourses in neighbouring Gulf states have suffered. That stability is attributable to the absence of foreign investors and to the government's firm grip on economic activity.

Several Iranian newspapers, regardless of their reformist or conservative leanings, have also blamed the global economic crisis on excessive liberalism.

And some officials, such as the head of Iran's electoral watchdog body, have come up with less conventional theories and branded the turmoil as "divine punishment."

"These people see the outcome of their bad deeds. This problem has spread to Europe now which makes us happy. The unhappier they are the happier we become," Ayatollah Ali Janati, who heads the Guardians Council, said in last Friday's prayer sermon.

Ahmadinejad has recently echoed that, saying "the reason of their defeat is that they have forgotten God and piety."

The financial crisis should be a divine sign that "the oppressors and the corrupt will be replaced by the pious and believers," he said, adding that "an Islamic banking system will help us survive the current economic crisis."

Ahmadinejad's administration favours such a system, based on interest-free lending, but the system has not been widely implemented and faces criticism by economists.

Elected on a justice campaign, the president has gone on a spending spree to "bring the oil money to the tables" of Iranian people.

But the cash injection to the economy has fuelled inflation, which has risen from around 10 percent at the time of his election to nearly 30 percent.

For Iran's supreme leader, the crisis particularly signifies the superiority of the Islamic republic's political structure, which combines elements of democracy with those of a theocracy.

Khamenei hailed the "victory of the Islamic revolution" in the face of Marxist and liberal ideologies. "Now there is no sign of Marxism in the world and even liberalism is declining," the all powerful leader said.

The Iranian regime deems the concepts of democracy and human rights as "imperialist" tools to dominate other nations.

The Islamic republic thus defends its electoral practice of vetting candidates running for public office according to their religious adherence and its judicial system, which resorts to the death penalty for serious crimes more than any country in the world except for China.

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Iran hails world financial crisis as 'end of capitalism'    

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Don’t blame capitalism or GOP for mortgage mess

    The trend to blame “unfettered capitalism” for the mortgage mess ignores the uplifting effect capitalism has had on India, China and former Eastern Bloc nations, all of whom have seen millions lifted out of poverty by the principles Democrats so regularly deride.
    It wasn’t capitalism that created this mess, it was political meddling. Bill Clinton used the Community Reinvestment Act to all but force lenders into giving loans to people who did not have the credit history or financial resources to buy homes. Threats of investigation and racism were used to coerce companies into entering markets that otherwise wouldn’t have been touched. In short, the desire to be politically correct and appear to be “helping the little guy” was elevated above sound economics. The result was the housing bubble — a distortion of the market that would never have occurred had government not decided to misuse economics to push their pet social policies. Attempts by Republicans to correct this issue in 2003, 2006 and 2007 were rebuffed by Democratic politicians.
Both parties bear some blame for not doing more to prevent this, but a simple investigation of the Fannie and Freddie connections and contributions of Sens. Barney Frank, Chris Dodd, and Barack Obama will show which party had the most to gain from the status quo.
Government meddling created this mess, yet now we’re being told that only government can fix it. Color me skeptical.

DAVID WELCH
Scotia

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Bill Clinton used the Community Reinvestment Act to all but force lenders into giving loans to people who did not have the credit history or financial resources to buy homes

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Mona Charen
Debt, and Dems, get blame for mess
Mona Charen is a nationally syndicated columnist.

    The two candidates for president stood even in the polls when the financial tsunami hit around mid-September. Since then, the Democrat has pulled ahead.
    Perhaps there was nothing John McCain could have done that would have changed things. It may be that voters are primed to blame the party in the White House for any bad news (to say “the party in power” when the Democrats control Congress is to say too much).
    Or was it this? Democrats are so much better at placing blame. From the first moment that Treasury Secretary Hank Paulson warned of a freezing in credit markets, the Democrats, led by Barack Obama, were ready with an explanation that was partisan, simple, and wrong. It was trickle-down economics. It was resistance to regulation. It was, in short, Republicanism that had brought on the crisis. Nancy Pelosi, in a statement on the House floor before the first rescue bill was voted upon, condemned what she called the “Bush recklessness ... the anything-goes economic policy. No regulation. No supervision. No discipline.”
    But if the Bush administration’s laissezfaire economics is responsible for the banking mess, why are France and Britain, both of whom heavily regulate their economies, in the same boat?
    The drumbeat goes on. On Oct. 22, Henry Waxman, chairman of the House Oversight and Government Reform Committee, continued the harangue: “The list of mistakes is long and the cost to taxpayers is staggering. Our regulators became enablers rather than enforcers. Their trust in the wisdom of the markets was infinite. The mantra became that government regulation is wrong. The market is infallible.”
    It’s a plausible claim because Republicans do tend to have more faith in markets than Democrats. The Republicans had an answer. But to find it you needed to search the pages of the Wall Street Journal, or read conservative columnists, or listen to talk radio. It didn’t come from McCain or Palin. They wasted crucial days decrying greed on Wall Street. And while you and I know that Wall Street is peopled by Obama-backing Democrats, most Americans think Wall Street is the home of Republicans in frock coats and bowler hats.
    What they should have done is to point out that Democrats love to give things away. Voters know that this is true. The thing the Democrats were intent on giving away this time was mortgages to those who could not afford them. When the Bush administration (with the strong backing of John McCain) attempted to tighten regulation of Fannie Mae and Freddie Mac — the Democrats’ sandboxes — Barney Frank, Chris Dodd, and Barack Obama refused.
    The McCain/Palin team should have driven home the idea that there is no free lunch, that when government attempts to create wealth by fiat — by simply declaring that “mortgages for everyone” is the new rule and let’s not look too closely at how we pay for this — reality will catch up with you in the end.
    Having firmly placed blame on the Democrats for Fannie Mae and Freddie Mac — the kernel of this disaster — McCain could have polished his maverick credentials by criticizing the Bush administration and some Republicans for the excessive spending they, too, indulged. The great sin this crisis has unveiled is that of excessive debt — government debt, to be sure, but also excessive personal debt. It would have been risky, but McCain would have looked statesmanlike if he had told voters that all of us must henceforth change our ways: from government relying on borrowing from foreigners to individuals running up charges on credit cards. He could have said that capitalism is the greatest engine of wealth creation the world has ever seen. But like democratic government, it requires discipline to succeed. By distorting the natural brakes on lending, Democrats disrupted the self-correcting mechanisms of an otherwise very successful system. Democrats, not Republicans, sought to privatize the rewards (think Franklin Raines, Jim Johnson, Chris Dodd, Jamie Gorelick, and all of the Democrats who got fat campaign contributions from Fannie and Freddie) and socialize the risks of home mortgages.
    Then McCain should have pointed out that Barack Obama has relied on style (aloof and cool), not substance, in his response to the financial crisis. He may impress voters by his demeanor, but his promised actions (higher taxes, trade protectionism, more unionization of the workforce, and much more government spending) are the very policies that can transform an economic downturn into a depression.

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Uses for $700 billion keep shifting
Gov’t ponders many options to spend bailout funds
BY JOHN DUNBAR The Associated Press

    WASHINGTON — First, the $700 billion rescue for the economy was about buying devalued mortgage-backed securities from tottering banks to unclog frozen credit markets.
    Then it was about using $250 billion of it to buy stakes in banks. The idea was that banks would use the money to start making loans again.
    But reports surfaced that bankers might instead use the money to buy other banks, pay dividends, give employees a raise and executives a bonus or just sit on it. Insurance companies now want a piece, and automakers might, too, even though Congress has approved $25 billion in low-interest loans for them.
    Three weeks after becoming law and with the first dollar of the $700 billion yet to go out, officials are just beginning to talk about helping a few strapped homeowners keep the foreclosure wolf from the door.
    As the crisis worsens, the government’s reaction keeps changing. Lawmakers in both parties are starting to gripe that the bailout is turning out to be far different from what the Bush administration sold to Congress.
    In buying equity stakes in banks, the Treasury has “deviated signifi - cantly from its original course,” says Alabama Sen. Richard Shelby, the top Republican on the Senate Banking, Housing and Urban Affairs Committee. “We need to examine closely the reason for this change,” said Shelby, who opposed the bailout.
    The centerpiece of the Emergency Economic Stabilization Act is the “troubled asset relief program,” or TARP for short. Critics note that tarps are used to cover things up. The money was to be devoted to buying “toxic” mortgage-backed securities whose value has fallen in lockstep with home prices.
    But once European governments said they were going into the banking business, Treasury Secretary Henry Paulson followed suit and diverted $250 billion to buy stock in healthy banks to spur lending.
    Bank executives hinted that they might instead use it for acquisitions. Sen. Christopher Dodd, chairman of the Senate banking committee, said this development was “beyond troubling.”
    Sure enough, a day after Dodd, D-Conn., made the comment, the government confirmed that PNC Financial Services Group Inc. was approved to receive $7.7 billion in return for company stock. At the same time, PNC said it was acquiring National City Corp. for $5.58 billion.
    “Although there will be some consolidation, that’s not the driver behind this program,” Paulson recently told PBS talk show host Charlie Rose. “The driver is to have our healthy banks be well-capitalized so that they can play the role they need to play for our country right now.”
    Other planned uses of the bailout money have lawmakers protesting, although it is only fair to note that there is nothing in the law that they just wrote to prevent those uses.
    Sen. Charles Schumer, D-N.Y., questioned allowing banks that accept bailout bucks to continue paying dividends on their common stock.
    “There are far better uses of taxpayer dollars than continuing dividend payments to shareholders,” he said.
    Schumer, whose constituents include Wall Street bankers, said he also fears that they might stuff the money “under the proverbial mattress” rather than make loans.
    Neel Kashkari, head of the Treasury’s financial stability program, told Dodd’s committee this past week that there are few strings attached to the capital-infusion program because too many rules would discourage financial institutions from participating.
    As the bank plan has become a priority, the effort to buy troubled assets has receded from the headlines. Potential conflicts of interest pose all kinds of problems in finding qualified companies to manage that program.
    “Firms with the relevant financial expertise may also hold assets that become eligible for sale into the TARP or represent clients who hold troubled assets,” Kashkari said.
    The challenge was made plain when the Treasury hired the Bank of New York Mellon Corp. as “custodian” of the troubled assets purchase program. The bank will conduct “reverse auctions” to buy the toxic securities on behalf of the Treasury. The lower the price they set, the better chance sellers have of getting rid of the devalued securities.
    On the same day it hired Mellon, the Treasury also picked the company to receive a $3 billion investment as part of the capitalinfusion program — the same bank hired to help manage part of the economic rescue plan became a beneficiary of it.
    With the Nov. 4 election nearing, lawmakers decided it was important to remind the government officials running the bailout program about parts of the law aimed at helping distressed homeowners by offering federal guarantees to mortgages renegotiated down to lower monthly payments.
    “The key to our nation’s economic recovery is the recovery of the housing market,” Dodd said. “And the key to recovery of the housing market is reducing foreclosures.”
    Sheila Bair, who heads the Federal Deposit Insurance Corp., responded that her agency is working “closely and creatively” with Treasury officials to “realize the potential benefits of this authority.”