Nine Circles of Hell!: Wednesday, November 16
The Nine Circles of Hell! – all the news that gives you fits in print – today’s nine most hellish news stories, Wednesday, November 16, 2011, are:
Congress less popular than BP during the spill and US going communist
The Washington Post
Congress’ approval problem in one chart
It’s no secret that people don’t like — ok, loathe — Congress.
The latest Gallup monthly survey pegged Congressional approval at just 13 percent, the second straight month it has hit that all-time low.
“The 2011 average is on track to be the lowest annual rating of Congress in Gallup’s history,” wrote Gallup’s Frank Newport in a memo on the results.
Colorado Democratic Sen. Michael Bennet, who has taken on the unpopularity of Congress as something of a pet cause, said this morning on MSNBC’s “Daily Rundown” that “for the last year or so this town has effectively come the land of flickering lights, where the standard for success is somehow you kept the lights on for the month where the rest of the world isn’t waiting for us to figure out how we’re going to meaningfully participate in the 21st century economy.”
Gingrich paid $1.6 million by “irresponsible” Freddie Mac
Gingrich Said to Be Paid $1.6M by Freddie Mac
Newt Gingrich made between $1.6 million and $1.8 million in consulting fees from two contracts with mortgage company Freddie Mac, according to two people familiar with the arrangement.
The total amount is significantly larger than the $300,000 payment from Freddie Mac that Gingrich was asked about during a Republican presidential debate on Nov. 9 sponsored by CNBC, and more than was disclosed in the middle of congressional investigations into the housing industry collapse.
Gingrich’s business relationship with Freddie Mac spanned a period of eight years. When asked at the debate what he did to earn a $300,000 payment in 2006, the former speaker said he “offered them advice on precisely what they didn’t do,” and warned the company that its lending practices were “insane.” Former Freddie Mac executives who worked with Gingrich dispute that account …
One idea that the former Georgia congressman proposed that Freddie Mac didn’t pursue was initiating a program with the Boy Scouts of America to teach youngsters the importance of saving money and maintaining good credit so they would qualify to buy a home later in life …
Gingrich’s second contract with Freddie Mac was a two-year retainer for which he was paid a total of $600,000, said two people familiar with the agreement.
What he did for the money is a subject of disagreement. Gingrich said during the CNBC debate that he advised the troubled firm as a “historian.” Gingrich said he warned that the company’s business model was a “bubble” and its lending practices were “insane.”
None of the former Freddie Mac officials who spoke on condition of anonymity said Gingrich raised the issue of the housing bubble or was critical of Freddie Mac’s business model.
“We dispute your sources’ account,” said R.C. Hammond, a Gingrich campaign spokesman.
A Freddie Mac spokesman declined to comment on the Gingrich contracts.
Former Freddie Mac officials familiar with his work in 2006 say Gingrich was asked to build bridges to Capitol Hill Republicans and develop an argument on behalf of the company’s public-private structure that would resonate with conservatives seeking to dismantle it.
He was expected to provide written material that could be circulated among free-market conservatives in Congress and in outside organizations, said two former company executives familiar with Gingrich’s role at the firm. He didn’t produce a white paper or any other document the firm could use on its behalf, they said.
Since his retainer with Freddie Mac ended in 2008, Gingrich has become a critic of the government-sponsored enterprises, which were pushed into insolvency by subprime mortgages.
The two companies, Freddie Mac and Fannie Mae, “are so thoroughly politicized and preside over such irresponsible lending policies that they need to be replaced with smaller, private companies operating without government guarantees, whose leaders focus on making a profit, not manipulating politicians,” Gingrich wrote in his 2011 book, “To Save America.”
In an Oct. 11 Republican presidential debate, he said Democrats and housing-loan loan practices led to the house industry’s collapse.
“You ought to start with Barney Frank,” when talking about people to put in jail, Gingrich said, referring to the Massachusetts congressman who’s the top Democrat on the House Financial Services Committee. “Go back and look at the lobbyists he was close to at Freddie Mac,” Gingrich said in the debate, sponsored by Bloomberg News and the Washington Post.
The spectre of bad housing loans returns to haunt economy
The Wall Street Journal
J.P. Morgan to Revive Bad-Loan Securities
J.P. Morgan Chase & Co. plans next year to issue the first U.S. commercial mortgage-backed securities supported by defaulted loans since the 1990s, as it revives a practice that regulators used to extricate the nation from the savings & loan crisis.
The investment bank has approached ratings firms with two pools of distressed loans that it acquired from European banks and other financial institutions, according to people familiar with the matter. J.P. Morgan wants to create commercial mortgage-backed securities, or CMBS, backed by the troubled properties, with interest and principal payments coming from property sales and the buildings’ reduced cash flows.
J.P. Morgan and other banks are considering the business in hopes that such securitizations could become a popular way for investors to finance bulk purchases of loans from banks and loan servicers. These problem loans have been a drag on lenders since the downturn hit, but lately the banks have become more aggressive about unloading them at discounted prices.
Moody’s Investors Service is predicting that “several billion dollars” in commercial-mortgage securities backed by non-performing loans will be issued next year starting in the first quarter. “Whenever you have a downturn, the first couple of years involve anger and denial, but then lenders get down to business and start cleaning up the mess,” said Tad Philipp, who, as director of commercial real-estate research at Moody’s, is reviewing some potential deals now.
Bankers are hearkening back to the aftermath of the U.S. savings & loan crisis of the late 1980s and early 1990s, when the Resolution Trust Corp. was formed to work through hundreds of thousands of residential and commercial loans. In 1992, the agency began selling pools of bad debt carved up into bonds to investors.
Resolution Trust securitizations set the stage for modern-day CMBS, which by 2007 grew into a $234 billion market. The market has struggled to gain traction after the financial crisis, with about $30 billion in CMBS sold this year and about the same expected for 2012.
Investors are more likely now to take a chance with the risky debt, as commercial property values have stabilized in core cities, said Mr. Philipp. The supply of bonds at least initially won’t be as hefty as in Resolution Trust days, because banks often have incentives to do workouts themselves, he said.
Still, the volume of distressed real-estate loans held by banks and servicers of mortgage-backed securities shows no signs of declining. The CMBS delinquency rate, which was less than 1% in 2007, reached 9.8% in October, its second-highest mark ever, according to research service Trepp LLC.
Meantime, more loans that were made during the boom are reaching maturities, posing major headaches for lenders and owners because the properties are now worth less than their mortgages. Around $400 billion of commercial real-estate loans made by all lenders mature in 2012, up from $375 billion this year and $250 billion in 2010, according to Deutsche Bank.
New US cash-for-whistleblowers program gets first test
The Wall Street Journal
After Tip, the Claim For Reward
Whistleblowers alleging that two banks overcharged clients for currency trades could provide an early test of a new U.S. program to encourage tips of possible financial wrongdoing.
The whistleblowers, who are helping the Securities and Exchange Commission in civil investigations into whether Bank of New York Mellon Corp. and State Street Corp. improperly charged customers for currency trades, have filed claims seeking possible bounties from the SEC, according to people familiar with the matter.
The agency’s whistleblower program, launched under the Dodd-Frank financial-overhaul act, stemmed from calls for tougher policing of Wall Street following the financial crisis. The plan for the first time offers government bounties to financial insiders and others who tip off the SEC about alleged securities fraud, offering payments of at least $100,000 to those whose information leads to big enforcement penalties.
The agency finalized its whistleblower rule in May and aims to make its first payment under the program next year, according to people familiar with the matter. Under the program, people whose information leads to an SEC enforcement action with penalties of more than $1 million are guaranteed a 10% to 30% cut of the penalties. To receive the money, the SEC must determine the tips provided original information that led to the enforcement action.
In a report Tuesday, the SEC said it received 334 whistleblower tips in the seven weeks when the final rules became effective on Aug. 12 and the Sept. 30 financial year’s end.
Among those who have filed SEC whistleblower claims are Grant Wilson, a former BNY Mellon currency trader; and Peter Cera and Ryan Gagne, former State Street currency employees; each has provided the government information about currency activities at their former employer, the people familiar with the matter said. The Wall Street Journal first reported the identities of the whistleblowers last month.
BNY Mellon and State Street have denied any wrongdoing and are fighting civil lawsuits filed by state attorneys general and others in the matter. They said they are cooperating with inquiries by government authorities. Michael Lesser and Philip Michael, the lawyers for the whistleblowers, declined to comment, as did an SEC spokesman. The whistleblowers’ cooperation with SEC investigators is likely to increase the legal pressure on BNY Mellon and State Street.Both banks are battling a widening civil law-enforcement probe into allegations that for years they systematically overcharged pension funds and other clients for currency trades. The BNY Mellon and State Street tips are among the first publicly reported possible bounty claims to the SEC.
Jordan Thomas, who helped to craft the whistleblower program before leaving the SEC in July, said the quality of the submissions has been high.
“Some relate to senior people at large financial firms and other corporations, typically hard targets for the SEC to successfully bring enforcement actions against,” said Mr. Thomas, now acting on behalf of whistleblowers as a partner at law firm Labaton Sucharow LLP. He has no involvement in the BNY Mellon and State Street cases.
Millionaires go to DC, tell lawmakers “we want to pay more taxes”
Millionaires ask Congress to raise their taxes
A group of two dozen millionaires stormed Capitol Hill on Wednesday, demanding lawmakers raise their taxes.
“We want to pay more taxes,” said California millionaire Doug Edwards, a former marketing director for Google (GOOG, Fortune 500). “If you’re fortunate, and you make more than a million dollars a year, you ought to pay more taxes.”
The millionaires want Congress to allow the tax cuts passed during the George W. Bush administration to expire. Some want higher taxes generally.
They planned to push lawmakers to reject any deal that the so-called super committee delivers that doesn’t raise taxes on millionaires. The 12-lawmaker panel has until next Wednesday to agree on $1.2 trillion in savings over the next 10 years or risk automatic spending cuts.
“If the super committee bill doesn’t raise our taxes, we will ask our fellow citizens to consider killing the bill,” said Eric Schoenberg of Franklin Lakes, N.J., an adjunct professor of marketing at Columbia Business School.
They planned to take their message to members of the super committee, Tea Party Republicans including Rep. Louie Gohmert of Texas and Rep. Tom Price of Georgia, and even anti-tax champion Grover Norquist.
The group was formed a year ago to push for expiration of the Bush tax cuts, and includes several current and former Google employees. Some of the better-known millionaires in the group include economist Nouriel Roubini, and a few celebrities, such as “The Sopranos” star Edie Falco and filmmaker Abigail Disney, who didn’t make the trip to Washington.
#Occupy image “is the sort of picture that changes things”
The Washington Post
Occupy’s 84-year-old pepper spray victim: Is this the most iconic image of the movement?
When Occupy marched in downtown Seattle on Tuesday night, a priest, a pregnant teenager and an 84-year-old community activist were doused in pepper spray. Although there have been many striking images of violence and peace in Occupy encampments, and many faces of the movement, none may be as immediately striking as this image of Dorli Rainey, taken by Joshua Trujillo.
Rainey’s direct gaze at the camera as her face drips with pepper spray is a haunting, cinematic image of brutality, emphasized even more by the chiaroscuro of dark gloved hands holding her head up to lead her to safety. Dashiell Bennett of the Atlantic has speculated that this image may become the defining one of Occupy unrest.
Rainey, a community activist since the ’60s, decided to walk by the protest on her way to a transportation meeting in the Northgate neighborhood of Seattle. As she told the Stranger, Seattle’s alt-weekly paper, “Cops shoved their bicycles into the crowd . . . If it had not been for my Hero (Iraq Vet Caleb) I would have been down on the ground and trampled.”
When Philip Kennicott wrote in 2005 about the lack of iconic images from the Iraq war, he spoke to the qualities that make a photograph emblematic of a movement or era in history. Until now, many of the photos of Occupy focused on the signs carried by protesters, rather than the clashes with police. This is partially due to access — by many accounts, press were shut out from Monday night’s eviction of protesters from Zucottti Park. Yet, even though Occupy Wall Street and its branches across the country are not analogous to the war, the visual language of iconic imagery is the same.
Too often, Kennicott writes, photographers of conflict focus on objects — a sign, a tent, a mangled car — as a stand-in for people: “The sum total of these substitutions feels, at times, like a theater without actors, a set of props and costumes and extras milling about, without hint of what the real drama is meant to be.”
Rainey has now been unwittingly thrust into that starring role. Protest images that become iconic show us faces in anguish, such as John Filo’s Pulitzer-winning image of the shooting at Kent State. Thankfully, no image or incident quite as violent has emerged from Occupy. Nevertheless, wrote one commenter on the Stranger, “This is exactly the sort of picture that changes things.”
Security bill for London Olympics soars
Ground-to-air missiles could be deployed at London Olympics
Ground-to-air missiles will be deployed to protect the London Olympics next year, under a plan being drawn up by the Ministry of Defence.
Both the RAF and Royal Navy have such weapons in their arsenals, but it would be the first time they are deployed to protect civilians, defence officials said
The defence secretary, Philip Hammond, confirmed the plan after the Guardian reported that the US has raised repeated concerns about security at the London Olympics and is preparing to send up to 1,000 of its agents, including 500 from the FBI, to cover the Games.
Hammond’s predecessor, Liam Fox, raised the issue of security in the Commons on Monday,saying that surface-to-air missiles had been deployed at the Olympic Games at Atlanta in 1996.
He asked Hammond to confirm “there will be a full level of multilayered defence and deterrence for the London Games, including ground-to-air based missiles in London”.
The defence secretary replied: “I can assure you that all necessary measures to ensure the security and safety of the London Olympic Games will be taken, including, if the advice of the military is that it is required, appropriate ground-to-air defences.”
Surface-to-air missiles are deployed in Britain and operated by the RAF Regiment to protect air bases. Navy ships, which are also likely to be deployed alongside London’s docklands, also carry them. A group of RAF Tornado or Typhoon jets are on permanent standby in the event of a terrorists hijacking an aircraft over Britain.
The parliamentary intelligence and security committee reported in the summer that Jonathan Evans, head of MI5, had described the Olympics as a “huge event [which] might have really big security implications”. He added: “We’re going to be pulling at least 150 intelligence staff out of other roles across the service to put them back into intelligence work at the frontline; and possibly 300, which will basically close half of what we are doing in other areas.” The ISC described Evans’s evidence as of “very serious concern”.
Hammond’s announcement came as the government is believed to be close to agreeing a deal with Olympic organisers over how to meet an 11,000 increase in the number of security guards who will be needed inside 2012 venues.
The cost will soar beyond the £282m originally provided to London organisers by the government to pay for security inside Olympic venues, and will be covered from contingency funds within the £9.3bn public funding package.
It emerged in August that the number of security staff needed inside Olympic venues, and the 100-plus training camps for which the London organising committee is also responsible, is likely to be close to 20,000, double the original estimate. As recently as March, when the security firm G4S was hired to provide the personnel, the London Organising Committee of the Olympic and Paralympic Games (Locog) believed that the original estimate of 10,000 would be adequate. But a subsequent detailed planning review over the summer revealed that the number is closer to 21,000.
Sources close to the discussions said an agreement was likely to be reached in the next fortnight over where the additional numbers will come from and how they will be paid for, with negotiations ongoing between the MoD, Locog, the Home Office, the Department of Culture, Media and Sport, G4S and the Government Olympic Executive …
On Monday, the Guardian revealed that the US had raised repeated concerns about security at the London Games and was preparing to send up to 1,000 of its own agents. As at previous Games uniformed security personnel from other nations will accompany athletes and politicians from many countries, but the Home Office said final numbers were still being worked through.
Israeli airstrike on Gaza injures French diplomat, daughter
French diplomat injured in Israeli air strike
France’s consul to the Gaza Strip, (Majdi Jameel Yaseen Shaqqoura, 44) his wife and 13-year-old daughter were injured during an Israeli air strike on Sunday night, said Bernard Valero, French foreign ministry spokesman.
Valero told reporters on Tuesday that the three were were hit by shrapnel at their residence in Gaza, which is located 200 metres from the site of an Israeli missile attack.
“France condemns the consequences of the raid,” he said.
“While we are all for Israeli security, France recalls the utmost necessity to avoid civilian harm,” Valero adde.
Though Valero did not comment on the nature of their injuries, French media reported that Majda Shaqqoura, the consul’s wife, suffered a haemorrhage and miscarried.
The raid, which also killed one Palestinian policeman and wounded four others, is likely to strain already difficult relations between France and Israel.
Israeli planes carried out two raids on the Gaza Strip overnight, wounding a Palestinian, a Hamas official said on Wednesday.
The raids were on targets in Beit-Lahya and northern Gaza, said a member of the security service of Hamas, which controls the Palestinian territory.
An Israeli military spokesman confirmed a raid on “terrorist sites” in the Gaza Strip.
Palestinian fighters in Gaza fired two rockets into southern Israel on Tuesday evening, damaging a farm building but causing no casualties, Israeli police said.
The rockets were a retaliatory strike following the death of a Palestinian policeman in Israeli air raids on Sunday.
New US sanctions could be “boon to Iran”
National Iranian American Council
U.S. Officials Warn that New Sanctions Could be a “Boon” to Iran
U.S. officials warned Members of Congress at a House Oversight Subcommittee hearing that new Iran sanctions proposed in Congress could be a “boon to Iran.”
The debate on new sanctions being championed on Capitol Hill has increasingly focused on the impact such measures could have on the U.S. and international economy.
Director of the Treasury’s Office of Foreign Assets Control Adam Szubin, cautioned, “There are very real scenarios in which an oil spike might hit.”
Obama Administration officials have signaled that sanctions on Iran’s central bank and oil exports could significantly damage the economies of Europe and the U.S. But legislation has recently advanced that could force the President to impose central bank sanctions.
Subcommittee Chairman Jason Chaffetz (R-UT) called concerns about rising energy costs “mystifying.”
“Why is the price of a gallon of gas the primary driver in Obama’s quest to supposedly make sure that they don’t get a nuclear bomb for goodness sake?” Chaffetz asked.
“The price of oil is not the primary driver,” responded Szubin. “It is certainly a consideration, as it is a primary driver of the recovery that’s going on worldwide and the strength of our economy and that of many of our allies.”
But, Szubin said, “If there is a hike in the price of oil, Iran gains. If there is a spike in the price of oil…there could be profound harm to the global economic recovery and a windfall to Iran.”