Entries from January 2011

WH: Huntsman to Step Down

January 31st, 2011 at 6:37 pm 9 Comments

The New York Times reports:

Jon Huntsman, the United States ambassador to China, has informed the White House that he plans to step down in the next few months, further stoking speculation about his presidential ambitions.

The White House press secretary, Robert Gibbs, told reporters that the president’s staff was aware of Mr. Huntsman’s imminent departure. But he dismissed reports that aides increasingly believe he will challenge the president.

“Ambassador Huntsman has told several people inside this building that he plans to leave during the first part of this year,” Mr. Gibbs said. “I have talked to several people inside this building and I have not heard anybody say they know what the future holds for Ambassador Huntsman.”

A former Republican governor of Utah, Mr. Huntsman was widely seen as a potential rival to Mr. Obama until the president chose to send him to China. Most political observers had expected that Mr. Huntsman might seek the presidency in 2016, after his boss would be off the scene.

But confidants of Mr. Huntsman’s back home have said he is considering whether to move more quickly by trying to capture the Republican nomination in 2012.

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Ex-Airline Employee Admits to Terror Charges

January 31st, 2011 at 6:36 pm 1 Comment

Reuters reports:

A former British Airways computer expert pleaded guilty on Monday to offering himself for terrorist training or insurgent operations abroad and encouraging others to do the same.

Rajib Karim, 31, of Newcastle upon Tyne, admitted three terrorism charges at Woolwich Crown Court, London, the Press Association reported.

The others included funding associates in Yemen and transferring funds for terrorist purposes, and being involved in the production and distribution of a video on behalf of the organisation Jammat-ul Mujahideen Bangladesh.

The defendant, who denied several other similar charges, will return to court on Tuesday to stand trial on the remaining counts.

The hearing is scheduled to last about five weeks.

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Bloomberg Probes AZ Gun Shows

January 31st, 2011 at 6:32 pm 9 Comments

Politico reports:

Bloomberg brought a little muscle to the gun show.

In a move reaching far beyond the New York City mayor’s turf, Bloomberg sent private, undercover investigators to an Arizona gun show. And Bloomberg says his agents found sellers peddling their wares even after buyers said they likely wouldn’t pass a background check.

The sort-of sting operation is Bloomberg’s latest tack in pushing for more and better background checks in the wake of the Tucson shooting.

“We have demonstrated how easy it is for anyone to buy a semi-automatic handgun and a high capacity magazine, no questions asked,” he said.

Bloomberg unveiled a series of videos Monday, shot at the Jan. 23 Crossroads of the West gun show in Phoenix. The videos were shot by undercover investigators working for a private company, Kroll Associates.

In one video, a man trying to buy a gun tells the dealer he probably couldn’t pass a background check. The dealer, undeterred, sells the man a gun anyway.

This isn’t the first time the Bloomberg administration has hired P.I.s to bolster the gun control push. Using city money, he has dispatched Kroll investigators to gun shows in other states, to determine whether dealers would sell guns to people knowing their backgrounds were questionable.

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RNC Debt Hits $23 Million

January 31st, 2011 at 6:09 pm 10 Comments

On Monday afternoon, new RNC chairman Reince Priebus released the figures for the RNC’s staggering financial situation, while simultaneously announcing $500,000 in per month savings from laying off a third of the RNC staff.

According to a press release, the Republican National Committee year-end report through 2010 will show $725,650 cash-on-hand and $21,056,779 million in debt, with a total debt of $23 million. This debt was accrued under former chairman Michael Steele’s term, before Chairman Priebus was elected in mid-January.

As it stands, the RNC owes $8 million dollars to vendors – and for some of the smaller firms the RNC has employed, these debts could threaten their financial viability.

Priebus and the RNC note that they have already laid off 42 members – a full 1/3 – of their staff, for a total payroll savings of $500,000 a month. Doing a little math, that means that the annual total compensation of an average fired employee would have stood at around $140,000 – indicating relatively high-level firings.

As a point of reference, estimates of the RNC’s monthly operating costs had previously ranged from between $2 and $3 million a month.

The Republican National Committee did raise $105 million in 2010, but much of this came from high-cost fundraising which cost $0.64 for every $1 raised. And in 2010, their big donor program was at a ten year low – something that Chairman Priebus has already been moving on.

FrumForum reported on Friday that major donors and former finance chairmen convened in Washington, D.C. last week in order to get the ball rolling right. The wooing of big dollar donors seems to have already made some progress. “We exceeded the RNC’s major donor goals by over 30 percent in January with only half the execution time,” says Priebus in the release.

And Republicans are already expecting even more progress. Major donors are now in the process of scheduling ‘national call days’, in which major donors converge on D.C. in order to solicit large donations by phone.

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Mubarak Offers Talks with Protesters

January 31st, 2011 at 5:40 pm Comments Off

The New York Times reports:

The political forces aligned against President Hosni Mubarak seemed to strengthen on Monday, when the Army said for the first time that it would not fire on the protesters who have convulsed Egypt for the last week. The announcement was followed shortly by the government’s first offer to talk to the protest leaders.

The offer of negotiations on constitutional and legislative reforms was made by the new vice president, Omar Suleiman, who did not offer further details. But it seemed to represent an attempt to blunt the devastating effect of the Army’s statement, which came as the Egyptian economy reeled and on the eve of what organizers hope will be the largest demonstrations yet — a “march of millions” and a general strike — on Tuesday.

It was not immediately clear who Mr. Suleiman addressed his offer to, or whether the opposition would accept. While the protesters have consistently demanded Mr. Mubarak’s resignation above all else, they have lately indicated a willingness to discuss a unity government leading to elections. On Sunday, Egypt’s powerful Muslim Brotherhood and the secular opposition said they had chosen a prominent government critic, Mohamed ElBaradei, to represent their side in possible negotiations with the Army over Mr. Mubarak’s departure.

The Army’s announcement — delivered on state TV with no elaboration by its official spokesman — declared that “freedom of expression through peaceful means is guaranteed to everybody,” and promised to recognize the “legitimate demands” of the protesters.

While the carefully worded statement was seen by some as a veiled threat to use force against those who do not use peaceful means, an associate of Mr. Mubarak’s said it should be taken at face value.

“The Army is not a puppet in the hands of anybody,” including Mr. Mubarak, said Mahmoud Shokry, a retired diplomat and a friend of Mr. Suleiman. “The Army does not want to make any confrontation with the youth.” He said the generals would “ask Mr. Mubarak to leave” before they would accept orders they think could lead to civil war or risk their credibility with the public.

Still, opposition leaders said they were not prepared to celebrate the announcement as the turning point it proved in Tunisia, where the government collapsed after the military refused to shoot at its own people.

The military’s announcement followed a cabinet reshuffle by Mr. Mubarak that the opposition dismissed ahead of time as window dressing. The president appeared fatigued in a ceremony broadcast on state television in which he welcomed a new interior minister, Mahmoud Wagdy, a retired general, who replaces the widelreviled Habib el-Adly. Mr. Mubarak left several longtime associates in place, including the foreign minister, the minister of information and the defense minister.

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Middle East Turmoil: Is Saudi Arabia Next?

David Frum January 31st, 2011 at 4:18 pm 39 Comments

Egypt isn’t the only place in the Middle East with dire social and political problems. Saudi Arabia suffers from the same unemployment and inequality. My latest column for CNN asks: how long can these repressive regimes last?

Ten percent unemployment that has persisted for years. Pervasive under-employment for the highly educated. Women largely excluded from the labor force. One out of seven adults who cannot read.

Personal incomes are stagnating; the population is growing fast. Relative to the Western world, the typical person is worse off today than in 1985.

Society is tightly controlled. Everything from the internet to Vogue is subject to censorship. The police have absolute and arbitrary power.

The authorities are unelected, unaccountable, and corruption is alleged on an epic scale.

The gap between rich and poor is enormous and widening.

The head of state is reputed to have gained a personal fortune approaching $20 billion.

The population is restive: In November, the Interior Ministry announced the arrest of 149 suspected al Qaeda terrorists, following a previous roundup of 113 in March. Now guess: Which Middle Eastern country am I describing? Answer: Saudi Arabia.

As you watch the revolutionary scenes in Egypt, consider this possibility: Every factor driving Egypt to revolution is at work in Saudi Arabia, and possibly even more so.

Saudi Arabia of course is wealthier than Egypt.

Half the population of Egypt lives on $2 a day. Saudi Arabia is a land of Pizza Huts and big box stores.

But middle-income countries have revolutions, too. Observers and visitors to the region express concern about Saudi stability.

Imagine yourself a young Saudi man, born about 1985.

Your parents tell you of a golden age of opportunity and improvement that ended just about the time you were born. Now your family lives in a 1970s-vintage apartment building, vastly more comfortable than your grandparents’ home. But it’s getting crowded for a family with four teenage and young adult sons.

You’d like to marry and get a home of your own. But how? Jobs are scarce, and foreigners are preferred: Employers say they work harder. Such jobs as you could get are beneath your dignity. Saudi universities graduate 6,000 students a year with degrees in education, even as Saudi schools require only 650 new teachers. The Saudi Interior Ministry complained in September that native-born Saudis shun the private sector: More than 6 million foreigners hold private-sector jobs even as 500,000 Saudi job seekers lack work.

So what do you do all day? You can hang out at the mall, try to flirt with the shrouded girls by text message. You can pray at the mosque; that’s always allowed. You can read militant Islamist websites on your computer or try to find ways around the anti-pornography firewalls.

Click here to read the rest.


Italian Foreign Minister Warns of Radical Islam in Egypt

January 31st, 2011 at 4:08 pm 2 Comments

ANSAmed reports:

(ANSAmed) – BRUSSELS, JANAURY 31 – “We do not want a solution that leads to radical Islamism finding itself in power”. This is according to the Italian Foreign Minister, Franco Frattini, who has arrived at the EU Council in Brussels for talks on the Egyptian crisis.

Asked about the European and Italian position on the matter, Frattini said that “as is almost always the case, the EU and Italy have a common vision with the USA. We want an orderly transition towards democracy, we do not want to be the ones to decide who stays and who goes, the Egyptians will do that, but at the same time, we do not want a solution that leads to radical Islamism finding itself in power – this would not be democracy”.

The Foreign Minister was asked if a phase of transition meant an end to the Mubarak regime. “Phase of transition means whatever the Egyptians decide at the next elections,” Frattini answered. “For the moment, there is a period of profound change in the Egyptian government. This is a step that must be accompanied by important radical reforms recognising civil rights”. (ANSAmed).

Judge Declares Healthcare Law Unconstitutional

January 31st, 2011 at 3:09 pm 34 Comments

Bloomberg reports:

President Barack Obama’s health care reform legislation, assailed as an abuse of federal power in a 26-state lawsuit, was ruled unconstitutional by a U.S. judge.

U.S. District Judge Roger Vinson in Pensacola, Florida, declared the law unconstitutional in a ruling today. Then- Florida Attorney General Bill McCollum filed suit on behalf of 13 states on March 23, the same day Obama signed into law the legislation intended to provide the U.S. with almost universal health-care coverage. Seven states joined the litigation last year, and six signed on this year. Virginia Attorney General Kenneth Cuccinelli sued separately on March 23 and Oklahoma Attorney General Scott Pruitt filed his own suit on Jan. 21.

Vinson’s ruling may be appealed to the U.S. Court of Appeals in Atlanta. A federal appeals court in Richmond, Virginia, is already slated in May to hear challenges to two conflicting federal court rulings in that state, one of which upheld the legislation while the other invalidated part of it. The U.S. Supreme Court may ultimately be asked to consider the issue.

The 955-page law bars insurers from denying coverage to people who are sick and from imposing lifetime limits on costs. It also includes pilot projects to test ideas like incentives for better results and bundled payments to medical teams for patient care.

CBO Report Ramps Up Budget Battle

January 31st, 2011 at 2:42 pm 35 Comments

The release last week of new deficit and debt figures for the federal government confirmed what most analysts expected, but not what many Members of Congress anticipated.

The Congressional Budget Office projection of $1.5 trillion in deficit for the current fiscal year, FY11, and forecasts of $1 trillion for FY12 put the Republican House, especially, in a bind.

Simple arithmetic has already revealed to even the most ardent of deficit warriors that the $100 billion in cuts they want in the current fiscal year cannot occur.  The fact that leadership has had to deliver this message means that Speaker John Boehner and House Budget Committee Chairman Paul Ryan have to offer a plan of truly large spending cuts in the near future in order to keep their caucus from fracture.

At stake, of course, is passage of the necessary increase in the federal debt ceiling.  That ceiling is now $14.29 trillion, a number that surely will require a vote by spring.  Without a concrete plan to save $100 billion this year, House leadership must concoct a combination of “process reforms” and spending cutbacks.

The House intends to take up the current fiscal year continuing resolution Feb. 14, two weeks ahead of the scheduled expiration of the CR, although what an early vote accomplishes is unclear.  The Senate will hum and haw before it passes the CR and a conference between the competing visions of the House Republican conferees and the Senate Democratic conferees fundamentally conflict.

Rumblings of a government shutdown over the CR, or over an increase in the debt ceiling grow louder.  Among budget analysts, a growing consensus anticipates no concrete deficit/debt plan during the next 2 years, in large part because the president has so far been unwilling to outline even the sketch of a multi-year approach.

Criticism of the president from the editorial and economics writers of the Washington Post, New York, Times, Financial Times, and The Economist falls on deaf ears.  After all, the folks who read those publications comprise a tiny minority of voters–most of whom consider job creation much more imperative than deficit reduction.

Thus a classic confrontation develops–the two great four-letter words in Washington, D.C., “jobs” and “debt” battle it out.  History shows conclusively that jobs almost always wins.

If that is the outcome of the battle this time, then congressional Republicans, and Tea Party grassroots activists’ anger will explode in a form not yet predictable.


Housing Bubble: Were Borrowers to Blame?

David Frum January 31st, 2011 at 11:40 am 35 Comments

Let’s face it: You won’t read every page of the Financial Crisis Inquiry Commission report. But FrumForum will, over the next days. So let’s proceed together, page by page, identifying the key points.

Click here to read the entire series.


How much should we blame the borrowers?

During the subprime boom, a lot of people got loans they should not have gotten. The longer-term consequences for these borrowers were usually negative, but in the short term – hey, money is money.

It’s easy to condemn exploitive lenders. (And of course there were exploitive lenders: as the FCIC report notes on p. 14: during the boom, 10,500 people with criminal records took jobs in Florida as mortgage brokers; at least 4,065 of whom had records of financial crimes like fraud, racketeering and extortion.)

But still: don’t borrow what you cannot pay back is not only a rule of prudence, it’s also a moral rule. What should we think of those people who violated it, especially those who defaulted before making even a single payment? Surely they should have foreseen their trouble?

The majority FCIC report invites us to consider: maybe more than a few of those borrowers were just too incompetent to make rational decisions about increasingly complex financial products. From page 90:

In theory, borrowers are the first defense against abusive lending. By shopping around, they should realize, for example, if a broker is trying to sell them a higher- priced loan or to place them in a subprime loan when they would qualify for a less- expensive prime loan. But many borrowers do not understand the most basic aspects of their mortgage. A study by two Federal Reserve economists estimated at least 38% of borrowers with adjustable-rate mortgages did not understand how much their interest rates could reset at one time, and more than half underestimated how high their rates could reach over the years. The same lack of awareness extended to other terms of the loan—for example, the level of documentation provided to the lender. “Most borrowers didn’t even realize that they were getting a no-doc loan,” said Michael Calhoun, president of the Center for Responsible Lending. “They’d come in with their W-2 and end up with a no-doc loan simply because the broker was getting paid more and the lender was getting paid more and there was extra yield left over for Wall Street because the loan carried a higher interest rate.”

And borrowers with less access to credit are particularly ill equipped to challenge the more experienced person across the desk. “While many [consumers] believe they are pretty good at dealing with day-to-day financial matters, in actuality they engage in financial behaviors that generate expenses and fees: overdrawing checking accounts, making late credit card payments, or exceeding limits on credit card charges,” Annamaria Lusardi, a professor of economics at Dartmouth College, told the FCIC. “Comparing terms of financial contracts and shopping around before making financial decisions are not at all common among the population.”

Since the 1960s, right and left have agreed: government paternalism is utterly unacceptable.

The right does not want government setting limits on business to protect consumers from themselves. The left dislikes the insinuation that poorer people are less capable than richer people. And so we get sub-prime lending without limit.

New Deal financial regulation was frankly paternalistic. It assumed many people would make bad choices, and so it sought to narrow or remove financial choice. Is the Financial Crisis Commission pointing us back in that direction?