Commentary Magazine


Topic: Securities and Exchange Commission

There He Goes

A majority of the House would have voted to extend all the Bush tax cuts, but Nancy Pelosi wouldn’t allow a vote. The president’s class-warfare gambit went down the drain. And now he’s coming up with new excuses for why he’s championing a massive tax increase at a meeting of his economic advisory board:

Obama gave his most detailed response to date to [former budget director, Peter] Orszag’s attention-grabbing debut column in the New York Times in which the ex-OMB maven suggested the White House would be wise to accede to a deal in which the Bush-era income tax cuts were extended for two years for all income levels — and then allowed to expire.

Orszag’s fallback position was advanced by Harvard Economist Martin Feldstein and former Securities and Exchange Commission Chairman William Donaldson more enthusiastically than Orszag did. Obama said, in essence, that their stance was intellectually legit, but politically naive.

“The consequences of extending the upper-income tax cuts, based on what we’ve heard fairly explicitly in the political environment, is that you do that now you’re going to do it forever,” Obama said. “There’s not going to be necessarily a deal that says — as Martin, I think — an entirely respectable position is to say extend them all for two years and then they go away. I mean, that’s an intellectually consistent position. But that’s not really the position that is being promoted up on Capitol Hill.”

Actually, that is precisely the position being promoted — a two-year extension — by Democrats. He now seems to be contending — though his argument is less than crystal clear — that once you continue to uphold lower tax rates, people will want to keep them at that reduced rate. Forever!

No wonder his poll numbers and those of his party are sinking. More shocking than the president’s flimflammery is his ongoing disdain for the private sector:

“There’s this concern about the business community’s attitude about the administration. And it’s not just the business community, it’s high-income individuals, entrepreneurs and others. And so the increase in the tax on those individuals is a signal that the administration” — Feldstein said.

“They have to pay slightly higher taxes,” Obama interrupted.

“That they’re going to have to pay higher taxes, and it may be even more going forward,” Feldstein said.

There you have it. Even as his poll numbers continue to sink, the public becomes increasingly convinced that he doesn’t “get it” when it comes to the economy, the recovery stalls, and a chunk of his party rises in revolt, Obama’s answer remains the same on tax hikes: the “rich” and businesses can handle it. Remarkable.

A majority of the House would have voted to extend all the Bush tax cuts, but Nancy Pelosi wouldn’t allow a vote. The president’s class-warfare gambit went down the drain. And now he’s coming up with new excuses for why he’s championing a massive tax increase at a meeting of his economic advisory board:

Obama gave his most detailed response to date to [former budget director, Peter] Orszag’s attention-grabbing debut column in the New York Times in which the ex-OMB maven suggested the White House would be wise to accede to a deal in which the Bush-era income tax cuts were extended for two years for all income levels — and then allowed to expire.

Orszag’s fallback position was advanced by Harvard Economist Martin Feldstein and former Securities and Exchange Commission Chairman William Donaldson more enthusiastically than Orszag did. Obama said, in essence, that their stance was intellectually legit, but politically naive.

“The consequences of extending the upper-income tax cuts, based on what we’ve heard fairly explicitly in the political environment, is that you do that now you’re going to do it forever,” Obama said. “There’s not going to be necessarily a deal that says — as Martin, I think — an entirely respectable position is to say extend them all for two years and then they go away. I mean, that’s an intellectually consistent position. But that’s not really the position that is being promoted up on Capitol Hill.”

Actually, that is precisely the position being promoted — a two-year extension — by Democrats. He now seems to be contending — though his argument is less than crystal clear — that once you continue to uphold lower tax rates, people will want to keep them at that reduced rate. Forever!

No wonder his poll numbers and those of his party are sinking. More shocking than the president’s flimflammery is his ongoing disdain for the private sector:

“There’s this concern about the business community’s attitude about the administration. And it’s not just the business community, it’s high-income individuals, entrepreneurs and others. And so the increase in the tax on those individuals is a signal that the administration” — Feldstein said.

“They have to pay slightly higher taxes,” Obama interrupted.

“That they’re going to have to pay higher taxes, and it may be even more going forward,” Feldstein said.

There you have it. Even as his poll numbers continue to sink, the public becomes increasingly convinced that he doesn’t “get it” when it comes to the economy, the recovery stalls, and a chunk of his party rises in revolt, Obama’s answer remains the same on tax hikes: the “rich” and businesses can handle it. Remarkable.

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Showboating Against Wall Street Greed

The marathon Goldman-bashathon yesterday suggests that Congress knows even less about financial reform than it does about health care. There was profanity from Sen. Carl Levin and histrionics from practically everyone else. The New York Times explains what really was going on:

For hour after hour on Tuesday, Democrats and Republicans interrogated Goldman’s mortgage men, including the chief executive, Lloyd C. Blankfein, and Fabrice Tourre, the employee named in the S.E.C. complaint, putting them on the spot over Wall Street’s questionable conduct at a legislatively propitious moment.

None of the Goldman executives have been found to have done anything wrong, but some Democrats were ready to place them in the same role played in past financial crises by high-fliers like Charles Keating, Michael Milken and Ken Lay, all of whom came to personify the excesses of the moment.

The hearings were the culmination of a Democratic strategy to take full advantage of the opportunity created by the S.E.C. civil case.

Frankly, it’s not even clear that the senators fully understood the transaction or were aware that there’s nothing illegal or unusual about investments between sophisticated players who are taking opposing bets in the marketplace. I was reminded of Rep. Louise Slaughter, who invoked the tale of an uninsured woman reduced to using her dead sister’s dentures. That had about as much to do with the merits of health-care reform — and revealed the paucity of lawmakers’ understanding of the subject — as a flaky fraud charge against Goldman Sachs does with financial reform. The hunger for anecdotal evidence of Wall Street greed — with little understanding of the anecdote — makes for good TV and poor reform.

There are real issues to be examined (e.g., the independence of rating agencies, the conflicts in investment-banking transactions), but it’s far from clear that the pending legislation is going to address those. But — like the frenzy to nix AIG bonuses — lawmakers aren’t as interested in legal niceties or creating a coherent, predictable financial system as they are in stoking populist anger against Wall Street. It is a convenient way of redirecting public anger away from them, of course. It might work, but we’re likely to wind up with financial “reform” that reforms very little.

The marathon Goldman-bashathon yesterday suggests that Congress knows even less about financial reform than it does about health care. There was profanity from Sen. Carl Levin and histrionics from practically everyone else. The New York Times explains what really was going on:

For hour after hour on Tuesday, Democrats and Republicans interrogated Goldman’s mortgage men, including the chief executive, Lloyd C. Blankfein, and Fabrice Tourre, the employee named in the S.E.C. complaint, putting them on the spot over Wall Street’s questionable conduct at a legislatively propitious moment.

None of the Goldman executives have been found to have done anything wrong, but some Democrats were ready to place them in the same role played in past financial crises by high-fliers like Charles Keating, Michael Milken and Ken Lay, all of whom came to personify the excesses of the moment.

The hearings were the culmination of a Democratic strategy to take full advantage of the opportunity created by the S.E.C. civil case.

Frankly, it’s not even clear that the senators fully understood the transaction or were aware that there’s nothing illegal or unusual about investments between sophisticated players who are taking opposing bets in the marketplace. I was reminded of Rep. Louise Slaughter, who invoked the tale of an uninsured woman reduced to using her dead sister’s dentures. That had about as much to do with the merits of health-care reform — and revealed the paucity of lawmakers’ understanding of the subject — as a flaky fraud charge against Goldman Sachs does with financial reform. The hunger for anecdotal evidence of Wall Street greed — with little understanding of the anecdote — makes for good TV and poor reform.

There are real issues to be examined (e.g., the independence of rating agencies, the conflicts in investment-banking transactions), but it’s far from clear that the pending legislation is going to address those. But — like the frenzy to nix AIG bonuses — lawmakers aren’t as interested in legal niceties or creating a coherent, predictable financial system as they are in stoking populist anger against Wall Street. It is a convenient way of redirecting public anger away from them, of course. It might work, but we’re likely to wind up with financial “reform” that reforms very little.

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Flotsam and Jetsam

Ben Smith sounds skeptical about this ad campaign: “If Alexi Giannoulias pulls this one off, it’ll be one for the annals of political history: He’s trying to cast the failure of his family’s bank — which he ran as recently as four years ago and which failed Friday, the latest casualty of the bad loans in the run-up to the financial crisis — as a reason to sympathize with him and vote for him.”

What — you’re skeptical that the SEC can investigate itself ? “The Securities and Exchange Commission’s (SEC) investigative office said Sunday it had begun an investigation into whether charges against Goldman Sachs were politically timed.”

Michael Rubin is skeptical about the Obami spin that we need an ambassador in Damascus because Syria’s ambassador here doesn’t accurately relay information to Bashar Assad. “We have an embassy in Damascus, and we can pass messages anytime we so choose. If the State Department seriously believes the Syrian ambassador in Washington doesn’t report things back to Damascus (too busy, as he is, taking trips to Oklahoma and California), then Secretary Clinton can make clear to Damascus through other means that it’s time Syria sent responsible diplomats. But the fact is that Bashar al-Assad wants an American ambassador because it would symbolize his rehabilitation. The only question that Secretary of State Hillary Clinton and President Barack Obama should answer is whether they think that rehabilitation is warranted at this point in time.”

Americans remain overwhelmingly skeptical about the benefits of ObamaCare: “Support for repeal of the recently-passed national health care plan remains strong as most voters believe the law will increase the cost of care, hurt quality and push the federal budget deficit even higher. The latest Rasmussen Reports national telephone survey finds that 58% of likely voters nationwide favor repeal, while 38% are opposed. … Sixty percent (60%) of voters nationwide believe the new law will increase the federal budget deficit, while just 19% say it will reduce the deficit. Fifty-seven percent (57%) think the law will increase the cost of health care, while 18% believe it will reduce costs.”

James Capretta is skeptical of HHS Secretary Katheleen Sebelius’s spin on ObamaCare: “The chief actuary for Medicare has released a memorandum providing cost estimates for the final health legislation passed by Congress and signed by the president. Amazingly, the HHS secretary tried to suggest that the memo confirms that the legislation will produce the favorable results that the legislation’s backers have touted for months. That’s nothing but spin. In truth, the memo is another devastating indictment of the bill. It contradicts several key assertions by made by the bill’s proponents, including the president. For starters, the actuary says that the legislation will increase health care costs, not reduce them — by about $300 billion over a decade. … The actuary also says that the financial incentives in the bill will lead many employers to stop offering coverage altogether.”

Skeptical of the chances for a “Palestinian nonviolent movement“? You should be: “Proponents hope civil disobedience, part of a strategy they call the White Intifada, also will flummox Israeli authorities in their efforts to crack down on protesters waving banners rather than shooting automatic rifles, and cast Israeli soldiers as oppressors. Unlike Ghandi [sic] or the Rev. Martin Luther King, Jr., however, the Palestinians who support this approach for the most part don’t appear to be embracing nonviolence as a philosophy. Rather they see it as part of a calculated strategy to achieve Palestinian goals.”

The Gallup poll bolsters skeptics (like me) who doubt Obama’s ability to turn out young voters for a midterm election: “Younger voters remain less enthusiastic about voting in this year’s midterm elections than those who are older, underscoring the challenge facing the Democratic Party in its efforts to re-energize these voters, who helped President Obama win the presidency in 2008.”

Mark Hemingway is right to be skeptical that the new head of the Service Employees International Union wants the union to be “less political.”

Ben Smith sounds skeptical about this ad campaign: “If Alexi Giannoulias pulls this one off, it’ll be one for the annals of political history: He’s trying to cast the failure of his family’s bank — which he ran as recently as four years ago and which failed Friday, the latest casualty of the bad loans in the run-up to the financial crisis — as a reason to sympathize with him and vote for him.”

What — you’re skeptical that the SEC can investigate itself ? “The Securities and Exchange Commission’s (SEC) investigative office said Sunday it had begun an investigation into whether charges against Goldman Sachs were politically timed.”

Michael Rubin is skeptical about the Obami spin that we need an ambassador in Damascus because Syria’s ambassador here doesn’t accurately relay information to Bashar Assad. “We have an embassy in Damascus, and we can pass messages anytime we so choose. If the State Department seriously believes the Syrian ambassador in Washington doesn’t report things back to Damascus (too busy, as he is, taking trips to Oklahoma and California), then Secretary Clinton can make clear to Damascus through other means that it’s time Syria sent responsible diplomats. But the fact is that Bashar al-Assad wants an American ambassador because it would symbolize his rehabilitation. The only question that Secretary of State Hillary Clinton and President Barack Obama should answer is whether they think that rehabilitation is warranted at this point in time.”

Americans remain overwhelmingly skeptical about the benefits of ObamaCare: “Support for repeal of the recently-passed national health care plan remains strong as most voters believe the law will increase the cost of care, hurt quality and push the federal budget deficit even higher. The latest Rasmussen Reports national telephone survey finds that 58% of likely voters nationwide favor repeal, while 38% are opposed. … Sixty percent (60%) of voters nationwide believe the new law will increase the federal budget deficit, while just 19% say it will reduce the deficit. Fifty-seven percent (57%) think the law will increase the cost of health care, while 18% believe it will reduce costs.”

James Capretta is skeptical of HHS Secretary Katheleen Sebelius’s spin on ObamaCare: “The chief actuary for Medicare has released a memorandum providing cost estimates for the final health legislation passed by Congress and signed by the president. Amazingly, the HHS secretary tried to suggest that the memo confirms that the legislation will produce the favorable results that the legislation’s backers have touted for months. That’s nothing but spin. In truth, the memo is another devastating indictment of the bill. It contradicts several key assertions by made by the bill’s proponents, including the president. For starters, the actuary says that the legislation will increase health care costs, not reduce them — by about $300 billion over a decade. … The actuary also says that the financial incentives in the bill will lead many employers to stop offering coverage altogether.”

Skeptical of the chances for a “Palestinian nonviolent movement“? You should be: “Proponents hope civil disobedience, part of a strategy they call the White Intifada, also will flummox Israeli authorities in their efforts to crack down on protesters waving banners rather than shooting automatic rifles, and cast Israeli soldiers as oppressors. Unlike Ghandi [sic] or the Rev. Martin Luther King, Jr., however, the Palestinians who support this approach for the most part don’t appear to be embracing nonviolence as a philosophy. Rather they see it as part of a calculated strategy to achieve Palestinian goals.”

The Gallup poll bolsters skeptics (like me) who doubt Obama’s ability to turn out young voters for a midterm election: “Younger voters remain less enthusiastic about voting in this year’s midterm elections than those who are older, underscoring the challenge facing the Democratic Party in its efforts to re-energize these voters, who helped President Obama win the presidency in 2008.”

Mark Hemingway is right to be skeptical that the new head of the Service Employees International Union wants the union to be “less political.”

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Flotsam and Jetsam

Cleaning up Undersecretary Michele Flournoy’s mess (“Military force is an option of last resort. It’s off the table for now”), a Pentagon spokesman: “We are not taking any options off the table as we pursue the pressure and engagement tracks. … The president always has at his disposal a full array of options, including use of the military … It is clearly not our preferred course of action but it has never been, nor is it now, off the table.” Never underestimate how incompetent this crew is.

Is the Goldman Sachs case a big mess? “The testimony of a former Paulson & Co official could undercut the Securities and Exchange Commission’s fraud case against Goldman Sachs, CNBC has learned. The former Paulson lieutenant, Paolo Pellegrini, testified that he told ACA Management, the main investor in a Goldman mortgage-securities transaction, that Paulson intended to bet against—or short—the portfolio of mortgages ACA was assembling. If true, the testimony would contradict the SEC’s claim that ACA did not know Paulson was hoping the mortgage securities would fail and weaken charges that Goldman misled investors by not informing ACA of Paulson’s position.”

Did the White House mess with the SEC? “President Barack Obama is brushing off suggestions that the White House influenced the timing of fraud charges against Goldman Sachs. In an interview set to air Wednesday on CNBC, Obama said the White House had nothing to do with the Securities and Exchange Commission’s decision to file fraud charges Friday against Goldman Sachs.” It was just a grand coincidence, I suppose.

Too messy for Blanche Lincoln: “Sen. Blanche Lincoln, under fire for keeping a $4,500 contribution from Goldman Sachs’s political action committee, has canceled a fundraising lunch with Goldman executives that was scheduled for Monday and would have netted many times that amount for the Arkansas Senator’s reelection campaign.”

Lots of people think the country is a mess: “Sixty-one percent (61%) of all voters now say the nation is heading down the wrong track, down slightly from last week but just one point above the lowest level of pessimism measured since last October.”

Robert Gates is in charge of keeping the messes to a minimum: “That new administration’s rapidly getting old, but Gates continues to serve, struggling to limit the damage done to our national defense. Recently, he fought to keep our new nuclear-giveaway treaty with Russia within tolerable bounds. That treaty’s bad — but without Gates it would have been worse. Now we know that he was also pushing on Iran. Last week, somebody (not Gates) leaked a January memo the SecDef sent to the White House. The message? We need to prepare for all contingencies regarding Iran. Now.”

The ongoing Massa ethics mess: “The top members on the House ethics committee interviewed Majority Leader Steny Hoyer (D-Md.) on Wednesday afternoon – just hours after the ethics panel created a special subcommittee to investigate sexual harassment allegations surrounding former Rep. Eric Massa (D-N.Y.).”

That mess widens: “The FBI is investigating the case of former Rep. Eric Massa, accused by his onetime male staff members of sexual harassment.”

Cleaning up Undersecretary Michele Flournoy’s mess (“Military force is an option of last resort. It’s off the table for now”), a Pentagon spokesman: “We are not taking any options off the table as we pursue the pressure and engagement tracks. … The president always has at his disposal a full array of options, including use of the military … It is clearly not our preferred course of action but it has never been, nor is it now, off the table.” Never underestimate how incompetent this crew is.

Is the Goldman Sachs case a big mess? “The testimony of a former Paulson & Co official could undercut the Securities and Exchange Commission’s fraud case against Goldman Sachs, CNBC has learned. The former Paulson lieutenant, Paolo Pellegrini, testified that he told ACA Management, the main investor in a Goldman mortgage-securities transaction, that Paulson intended to bet against—or short—the portfolio of mortgages ACA was assembling. If true, the testimony would contradict the SEC’s claim that ACA did not know Paulson was hoping the mortgage securities would fail and weaken charges that Goldman misled investors by not informing ACA of Paulson’s position.”

Did the White House mess with the SEC? “President Barack Obama is brushing off suggestions that the White House influenced the timing of fraud charges against Goldman Sachs. In an interview set to air Wednesday on CNBC, Obama said the White House had nothing to do with the Securities and Exchange Commission’s decision to file fraud charges Friday against Goldman Sachs.” It was just a grand coincidence, I suppose.

Too messy for Blanche Lincoln: “Sen. Blanche Lincoln, under fire for keeping a $4,500 contribution from Goldman Sachs’s political action committee, has canceled a fundraising lunch with Goldman executives that was scheduled for Monday and would have netted many times that amount for the Arkansas Senator’s reelection campaign.”

Lots of people think the country is a mess: “Sixty-one percent (61%) of all voters now say the nation is heading down the wrong track, down slightly from last week but just one point above the lowest level of pessimism measured since last October.”

Robert Gates is in charge of keeping the messes to a minimum: “That new administration’s rapidly getting old, but Gates continues to serve, struggling to limit the damage done to our national defense. Recently, he fought to keep our new nuclear-giveaway treaty with Russia within tolerable bounds. That treaty’s bad — but without Gates it would have been worse. Now we know that he was also pushing on Iran. Last week, somebody (not Gates) leaked a January memo the SecDef sent to the White House. The message? We need to prepare for all contingencies regarding Iran. Now.”

The ongoing Massa ethics mess: “The top members on the House ethics committee interviewed Majority Leader Steny Hoyer (D-Md.) on Wednesday afternoon – just hours after the ethics panel created a special subcommittee to investigate sexual harassment allegations surrounding former Rep. Eric Massa (D-N.Y.).”

That mess widens: “The FBI is investigating the case of former Rep. Eric Massa, accused by his onetime male staff members of sexual harassment.”

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Conflict — What Conflict?

Some might find it off-putting that the “most ethical administration ever” (or is that the Congress?) would see its White House counsel Greg Craig representing the administration’s juiciest and most fortuitous target, Goldman Sachs. How can this happen? Politico reports:

“A former White House employee cannot appear before any unit of the Executive Office of the President on behalf of any client for 2 years—one year under federal law and another year under the pledge pursuant to the January 2009 ethics E0,” said a White House official.

The official also said that the White House had no contact with the SEC on the Goldman Sachs case. “The SEC by law is an independent agency that does not coordinate with the White House any part of their enforcement actions.”

Well how do we know there was no coordination? In fact, the entire Goldman strategy is that this was a political set-up from the very beginning:

An attempt to discredit the Securities and Exchange Commission by painting the case as tainted by politics because it was announced just as President Barack Obama was ramping up his push for financial regulatory reform, including a planned trip to New York on Thursday.

“The charges were brought in a manner calculated to achieve maximum impact at point of penetration,” a Goldman executive said.

Among the points Greg Palm, co-general counsel, plans to emphasize on the call is “how out of the ordinary the process was with the SEC,” the executive said. The SEC usually gives firms a chance to settle such charges before they are made public. Goldman executives say they had no such chance, and learned about the filing while watching CNBC.

So if the White House was meddling, or doing so with intermediaries, and this is central to Goldman’s defense, what is Craig doing litigating against the U.S. government?

Some might find it off-putting that the “most ethical administration ever” (or is that the Congress?) would see its White House counsel Greg Craig representing the administration’s juiciest and most fortuitous target, Goldman Sachs. How can this happen? Politico reports:

“A former White House employee cannot appear before any unit of the Executive Office of the President on behalf of any client for 2 years—one year under federal law and another year under the pledge pursuant to the January 2009 ethics E0,” said a White House official.

The official also said that the White House had no contact with the SEC on the Goldman Sachs case. “The SEC by law is an independent agency that does not coordinate with the White House any part of their enforcement actions.”

Well how do we know there was no coordination? In fact, the entire Goldman strategy is that this was a political set-up from the very beginning:

An attempt to discredit the Securities and Exchange Commission by painting the case as tainted by politics because it was announced just as President Barack Obama was ramping up his push for financial regulatory reform, including a planned trip to New York on Thursday.

“The charges were brought in a manner calculated to achieve maximum impact at point of penetration,” a Goldman executive said.

Among the points Greg Palm, co-general counsel, plans to emphasize on the call is “how out of the ordinary the process was with the SEC,” the executive said. The SEC usually gives firms a chance to settle such charges before they are made public. Goldman executives say they had no such chance, and learned about the filing while watching CNBC.

So if the White House was meddling, or doing so with intermediaries, and this is central to Goldman’s defense, what is Craig doing litigating against the U.S. government?

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Flotsam and Jetsam

Mind-boggling: Admiral Mike Mullen proclaims, “Iran getting a nuclear weapon would be incredibly destabilizing. Attacking them would also create the same kind of outcome. …In an area that’s so unstable right now, we just don’t need more of that.” The only difference is that one way there’s a nuclear-armed revolutionary Islamic state.

Priceless: “Goldman Sachs is launching an aggressive response to its political and legal challenges with an unlikely ally at its side — President Barack Obama’s former White House counsel, Gregory Craig.”

Suspicious: “The Securities and Exchange Commission fraud case against Goldman Sachs may be settled before it ever sees a courtroom. Yet intentionally or not, the SEC has already secured at least one victory in the court of media opinion. Last Friday, the same day that the government unexpectedly announced its Goldman lawsuit, the SEC’s inspector general released his exhaustive, 151-page report on the agency’s failure to investigate alleged fraudster R. Allen Stanford. Mr. Stanford was indicted last June for operating a Ponzi scheme that bilked investors out of $8 billion. … But the SEC is very good at nailing politically correct targets like Goldman years after the fact on charges that have little or nothing to do with the investing public. On the Goldman case, by the way, the news broke yesterday that the SEC commissioners split 3-2 on whether to bring the lawsuit — a rare partisan split on such a prominent case and further evidence of its thin legal basis.” And just in the nick of time to help the PR on the financial regulations bill!

Definitive (confirmation that the Dems are in a heap of trouble): “Republican candidates now hold a 10-point lead over Democrats in the latest edition of the Generic Congressional Ballot, tying the GOP’s high for the year recorded the second week in March and their biggest lead in nearly three years of weekly tracking.”

Frightening but not surprising: “It may be too late to stop Iran developing a nuclear weapon, a former senior US defence official has warned. The official, who has long experience with several US administrations, said President Obama had waited too long to take tough action against Tehran. ‘Fifteen months into his administration, Iran has faced no significant consequences for continuing with its uranium-enrichment programme, despite two deadlines set by Obama, which came and went without anything happening,’ the former official, who was speaking on condition of anonymity, told The Times. ‘Now it may be too late to stop Iran from becoming nuclear-capable.'”

Gutsy: “After being stonewalled by the Obama administration for five months, Senators Joe Lieberman, I-Conn., and Susan Collins, R-Me, issued subpoenas Monday to Defense Secretary Robert Gates and Attorney General Eric Holder for a list of witnesses and documents regarding the Nov. 5, 2009 Fort Hood massacre.”

Irrelevant: “Mitt Romney continues to look like the early front-runner for the GOP presidential nomination in 2012. A Public Policy Polling (D) survey shows Romney leading former Alaska Gov. Sarah Palin and former Arkansas Gov. Mike Huckabee in every region except the South, where Huckabee uses his home-field advantage to lead the field.” Ask Rudy Giuliani what early polls mean.

Depressing: “Both left and right [in Israel] are troubled, and both largely about the same things, especially the Iranian nuclear program combined with growing tensions with the Obama administration. ‘There is a confluence of two very worrying events,’ said Michael Freund, a rightist columnist for The Jerusalem Post in a telephone interview. ‘One is the Iranian threat, an existential threat. Add to that the fact that for the first time in recent memory there is a president in the White House who is not overly sensitive to the Jewish state and its interests. You put the two together and it will affect anyone’s mood, even an optimist like me.” Overly? Not at all.

Mind-boggling: Admiral Mike Mullen proclaims, “Iran getting a nuclear weapon would be incredibly destabilizing. Attacking them would also create the same kind of outcome. …In an area that’s so unstable right now, we just don’t need more of that.” The only difference is that one way there’s a nuclear-armed revolutionary Islamic state.

Priceless: “Goldman Sachs is launching an aggressive response to its political and legal challenges with an unlikely ally at its side — President Barack Obama’s former White House counsel, Gregory Craig.”

Suspicious: “The Securities and Exchange Commission fraud case against Goldman Sachs may be settled before it ever sees a courtroom. Yet intentionally or not, the SEC has already secured at least one victory in the court of media opinion. Last Friday, the same day that the government unexpectedly announced its Goldman lawsuit, the SEC’s inspector general released his exhaustive, 151-page report on the agency’s failure to investigate alleged fraudster R. Allen Stanford. Mr. Stanford was indicted last June for operating a Ponzi scheme that bilked investors out of $8 billion. … But the SEC is very good at nailing politically correct targets like Goldman years after the fact on charges that have little or nothing to do with the investing public. On the Goldman case, by the way, the news broke yesterday that the SEC commissioners split 3-2 on whether to bring the lawsuit — a rare partisan split on such a prominent case and further evidence of its thin legal basis.” And just in the nick of time to help the PR on the financial regulations bill!

Definitive (confirmation that the Dems are in a heap of trouble): “Republican candidates now hold a 10-point lead over Democrats in the latest edition of the Generic Congressional Ballot, tying the GOP’s high for the year recorded the second week in March and their biggest lead in nearly three years of weekly tracking.”

Frightening but not surprising: “It may be too late to stop Iran developing a nuclear weapon, a former senior US defence official has warned. The official, who has long experience with several US administrations, said President Obama had waited too long to take tough action against Tehran. ‘Fifteen months into his administration, Iran has faced no significant consequences for continuing with its uranium-enrichment programme, despite two deadlines set by Obama, which came and went without anything happening,’ the former official, who was speaking on condition of anonymity, told The Times. ‘Now it may be too late to stop Iran from becoming nuclear-capable.'”

Gutsy: “After being stonewalled by the Obama administration for five months, Senators Joe Lieberman, I-Conn., and Susan Collins, R-Me, issued subpoenas Monday to Defense Secretary Robert Gates and Attorney General Eric Holder for a list of witnesses and documents regarding the Nov. 5, 2009 Fort Hood massacre.”

Irrelevant: “Mitt Romney continues to look like the early front-runner for the GOP presidential nomination in 2012. A Public Policy Polling (D) survey shows Romney leading former Alaska Gov. Sarah Palin and former Arkansas Gov. Mike Huckabee in every region except the South, where Huckabee uses his home-field advantage to lead the field.” Ask Rudy Giuliani what early polls mean.

Depressing: “Both left and right [in Israel] are troubled, and both largely about the same things, especially the Iranian nuclear program combined with growing tensions with the Obama administration. ‘There is a confluence of two very worrying events,’ said Michael Freund, a rightist columnist for The Jerusalem Post in a telephone interview. ‘One is the Iranian threat, an existential threat. Add to that the fact that for the first time in recent memory there is a president in the White House who is not overly sensitive to the Jewish state and its interests. You put the two together and it will affect anyone’s mood, even an optimist like me.” Overly? Not at all.

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Cutting Angels’ Wings

Congress has passed or contemplated so many blunders of late that I, for one, am finding it harder and harder to muster fresh outrage toward every new one. But this latest being cooked up by Chris Dodd deserves a special shout out:

First, Dodd’s bill would require startups raising funding to register with the Securities and Exchange Commission, and then wait 120 days for the SEC to review their filing. A second provision raises the wealth requirements for an “accredited investor” who can invest in startups — if the bill passes, investors would need assets of more than $2.3 million (up from $1 million) or income of more than $450,000 (up from $250,000). The third restriction removes the federal pre-emption allowing angel and venture financing in the United States to follow federal regulations, rather than face different rules between states.

All the prerogatives over private businesses; all the power over health care, now near absolute; all the dabbling in the inner workings of financial institutions; in short, all the regulation in the world, cannot seem to satisfy this government. Are the Democrat legislators ever going to have enough? Or is their regulatory fetish feverishly looking for new, exotic objects?

While Obama sheds crocodile tears over how hard startups have it, his henchman is working night and day to ensure that they never receive seed funding. Whichever way this bill is looked at, not a single rationalization for saddling angels with such burdens can be found. Unless, of course, Democratic legislators so believe in their own rhetoric of strife against them big, eeeevil corporations that they want to kill them in their womb or prevent them form ever being born, let along growing big. And if such is the motive, conscious or unconscious, no measures could backfire more sorely than the ones being dealt out. For any regulation that raises new barriers to entry eventually hinders competition, confers undue advantages to incumbents, and fosters just the kind of environment where oligopolies can flourish. If there ever were such a sinister monolithic entity as “Big Business,” it could not be more satisfied with this bill. But it is surely an occasion for entrepreneurs to weep, as I can attest from being married to one, all of whose startups owe their inception to angel investment and might have never come into existence under such debilitating regulation. Economic recovery in America is being dealt a crippling blow.

Congress has passed or contemplated so many blunders of late that I, for one, am finding it harder and harder to muster fresh outrage toward every new one. But this latest being cooked up by Chris Dodd deserves a special shout out:

First, Dodd’s bill would require startups raising funding to register with the Securities and Exchange Commission, and then wait 120 days for the SEC to review their filing. A second provision raises the wealth requirements for an “accredited investor” who can invest in startups — if the bill passes, investors would need assets of more than $2.3 million (up from $1 million) or income of more than $450,000 (up from $250,000). The third restriction removes the federal pre-emption allowing angel and venture financing in the United States to follow federal regulations, rather than face different rules between states.

All the prerogatives over private businesses; all the power over health care, now near absolute; all the dabbling in the inner workings of financial institutions; in short, all the regulation in the world, cannot seem to satisfy this government. Are the Democrat legislators ever going to have enough? Or is their regulatory fetish feverishly looking for new, exotic objects?

While Obama sheds crocodile tears over how hard startups have it, his henchman is working night and day to ensure that they never receive seed funding. Whichever way this bill is looked at, not a single rationalization for saddling angels with such burdens can be found. Unless, of course, Democratic legislators so believe in their own rhetoric of strife against them big, eeeevil corporations that they want to kill them in their womb or prevent them form ever being born, let along growing big. And if such is the motive, conscious or unconscious, no measures could backfire more sorely than the ones being dealt out. For any regulation that raises new barriers to entry eventually hinders competition, confers undue advantages to incumbents, and fosters just the kind of environment where oligopolies can flourish. If there ever were such a sinister monolithic entity as “Big Business,” it could not be more satisfied with this bill. But it is surely an occasion for entrepreneurs to weep, as I can attest from being married to one, all of whose startups owe their inception to angel investment and might have never come into existence under such debilitating regulation. Economic recovery in America is being dealt a crippling blow.

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Democrats Try to Smother the Bad News

As I’ve noted during the week, the ObamaCare steamroller is already flattening the bottom lines of a number of large employers. Not content to see billions of losses pile up, the Democrats have now begun to berate employers for accurately accounting for the anticipated losses. The Wall Street Journal editors note:

Henry Waxman and House Democrats announced yesterday that they will haul these companies in for an April 21 hearing because their judgment “appears to conflict with independent analyses, which show that the new law will expand coverage and bring down costs.”

In other words, shoot the messenger. Black-letter financial accounting rules require that corporations immediately restate their earnings to reflect the present value of their long-term health liabilities, including a higher tax burden. Should these companies have played chicken with the Securities and Exchange Commission to avoid this politically inconvenient reality? Democrats don’t like what their bill is doing in the real world, so they now want to intimidate CEOs into keeping quiet.

On top of AT&T’s $1 billion, the writedown wave so far includes Deere & Co., $150 million; Caterpillar, $100 million; AK Steel, $31 million; 3M, $90 million; and Valero Energy, up to $20 million. Verizon has also warned its employees about its new higher health-care costs, and there will be many more in the coming days and weeks.

Well, this is par for the course: a complete disregard for the consequences of their own handiwork, the bullying of private enterprise, and the determination to politicize what were once economic and legal judgments. One can see in the Democrats’ fury the desperate attempt to conceal the implications of their monstrous legislation, to maintain as long as possible the fiction that ObamaCare is a great cost-saver, and boon to employers. It’s going to be hard to keep up the charade, for as the editors note, ObamaCare “was such a shoddy, jerry-rigged piece of work that the damage is coming sooner than even some critics expected.”

In that regard the adverse consequences of ObamaCare will likely be more apparent than those of the ill-conceived stimulus plan, which “merely” added to the ocean of red ink. How will shareholders, small-business owners, employees, and retirees react as they see the damage pile up, and learn that there is more in store if the bill is fully implemented? Well, they might find “Repeal and Replace!” an attractive message.

As I’ve noted during the week, the ObamaCare steamroller is already flattening the bottom lines of a number of large employers. Not content to see billions of losses pile up, the Democrats have now begun to berate employers for accurately accounting for the anticipated losses. The Wall Street Journal editors note:

Henry Waxman and House Democrats announced yesterday that they will haul these companies in for an April 21 hearing because their judgment “appears to conflict with independent analyses, which show that the new law will expand coverage and bring down costs.”

In other words, shoot the messenger. Black-letter financial accounting rules require that corporations immediately restate their earnings to reflect the present value of their long-term health liabilities, including a higher tax burden. Should these companies have played chicken with the Securities and Exchange Commission to avoid this politically inconvenient reality? Democrats don’t like what their bill is doing in the real world, so they now want to intimidate CEOs into keeping quiet.

On top of AT&T’s $1 billion, the writedown wave so far includes Deere & Co., $150 million; Caterpillar, $100 million; AK Steel, $31 million; 3M, $90 million; and Valero Energy, up to $20 million. Verizon has also warned its employees about its new higher health-care costs, and there will be many more in the coming days and weeks.

Well, this is par for the course: a complete disregard for the consequences of their own handiwork, the bullying of private enterprise, and the determination to politicize what were once economic and legal judgments. One can see in the Democrats’ fury the desperate attempt to conceal the implications of their monstrous legislation, to maintain as long as possible the fiction that ObamaCare is a great cost-saver, and boon to employers. It’s going to be hard to keep up the charade, for as the editors note, ObamaCare “was such a shoddy, jerry-rigged piece of work that the damage is coming sooner than even some critics expected.”

In that regard the adverse consequences of ObamaCare will likely be more apparent than those of the ill-conceived stimulus plan, which “merely” added to the ocean of red ink. How will shareholders, small-business owners, employees, and retirees react as they see the damage pile up, and learn that there is more in store if the bill is fully implemented? Well, they might find “Repeal and Replace!” an attractive message.

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Is Max Boot Wrong, or Very Wrong?

Over at contentions, Max Boot has written skeptically about the fact that I have written skeptically about a new Defense Science Board study, which raises alarms about the Department of Defense’s vulnerability to cyber-attacks.
 
I had wondered, “if our adversaries are as good as we are saying they are at exploiting vulnerabilities in our technology, why are their brilliant programmers not going off on freelance missions to tap in, say, to the electronic systems of a Goldman Sachs and transferring its assets to themselves?

Max says that “the short answer is they are doing precisely that. It’s just that the public doesn’t hear much about it because the targeted institutions want to keep as quiet as possible for obvious reasons, so as not to encourage copycats and not to endanger the confidence of their clients, investors, and counterparties.”

This I very much doubt. Major financial institutions operate in a highly regulated environment and are simply not permitted to conceal massive thefts. The big investment houses that do business in the United States are required to turn over immense reams of data every quarter to the Fed; they are also under intense scrutiny by the Securities and Exchange Commission. Most of them are publicly held. It is inconceivable that some hackers could siphon a couple of hundred millions bucks from, say, Lehman Brothers, without shareholders learning of it. Even if the banks had the legal right to conceal massive thefts, I doubt they could. These kinds of institutions may not be quite as colander-like as the CIA, but if millions have been stolen from their coffers via a hacker’s keystroke, such juicy information would surely leak.

Like Max, I believe in protecting ourselves from all sorts of emerging threats, from nano-robots armed with lethal bacteria to Iranian ICBMs tipped with ayatollahs. But I don’t believe in developing a military policy based upon gropes in the dark.

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Over at contentions, Max Boot has written skeptically about the fact that I have written skeptically about a new Defense Science Board study, which raises alarms about the Department of Defense’s vulnerability to cyber-attacks.
 
I had wondered, “if our adversaries are as good as we are saying they are at exploiting vulnerabilities in our technology, why are their brilliant programmers not going off on freelance missions to tap in, say, to the electronic systems of a Goldman Sachs and transferring its assets to themselves?

Max says that “the short answer is they are doing precisely that. It’s just that the public doesn’t hear much about it because the targeted institutions want to keep as quiet as possible for obvious reasons, so as not to encourage copycats and not to endanger the confidence of their clients, investors, and counterparties.”

This I very much doubt. Major financial institutions operate in a highly regulated environment and are simply not permitted to conceal massive thefts. The big investment houses that do business in the United States are required to turn over immense reams of data every quarter to the Fed; they are also under intense scrutiny by the Securities and Exchange Commission. Most of them are publicly held. It is inconceivable that some hackers could siphon a couple of hundred millions bucks from, say, Lehman Brothers, without shareholders learning of it. Even if the banks had the legal right to conceal massive thefts, I doubt they could. These kinds of institutions may not be quite as colander-like as the CIA, but if millions have been stolen from their coffers via a hacker’s keystroke, such juicy information would surely leak.

Like Max, I believe in protecting ourselves from all sorts of emerging threats, from nano-robots armed with lethal bacteria to Iranian ICBMs tipped with ayatollahs. But I don’t believe in developing a military policy based upon gropes in the dark.

One such grope is Max’s reference to a Financial Times story about a 2005 attack against the London offices of the Japanese bank, Sumitomo. That episode lends support to my view and casts skepticism on Max’s skepticism about my skepticism. A key phrase in Max’s telling of that story is that the thieves “almost managed” to carry out their plot. A somewhat different way of describing that same outcome is that they didn’t manage to carry it out.

How did Scotland Yard get wise to the cyber-thieves? They were uncovered when bells and whistles sounded after they tried to transfer funds electronically to an account in Israel. In other words, Sumitomo’s cyber-security kicked in. Perhaps Sumitomo subscribes to McAfee’s “Total Protection, 12-in-1″ anti-virus and firewall software available for only $59.95 a year. Perhaps they paid much more to some smart programmers to build far fancier and more effective programs to guard against intrusion and theft. Whatever they have in place, the Pentagon needs to buy a version of it as well, and make sure that that it is kept regularly updated. It worked for Sumitomo.

Yes, there are manifold dangers in the cyber-realm. One problem flows from the fact that approximately half of the U.S. population is of below average intelligence. This helps to explain why some 1.78 million Americans have fallen victim to fake emails encouraging them to disclose personal banking information. The ensuing losses total more than $1 billion to date. But bankers and the programmers they hire are decidely not of below average intelligence. That is a major reason why electronic robberies of corporate coffers remain exceedingly rare.

This is not to say that the Pentagon should not be on guard. It should certainly be wary of purchasing software applications written by starving North Korean programmers toiling in front of Soviet-era workstations with Kalashnikovs pointed at their heads. And it also should be on guard against denial-of-service attacks of the kind Russia launched against Estonia earlier this year. But when Max cites that episode and concludes that “the U.S. is just as vulnerable to such an attack,” for the first time since I met Max a decade ago, I suddenly began to doubt his command of Estonian.

Silicon Valley is located in California not in Tallinn. Microsoft is located in Seattle not in Tartu. The GDP of Estonia last year was $26.8 billion. The market value of Lehman Brothers last year—one Fortune 500 corporation alone—was $38 billion. Is the mighty U.S. truly just as vulnerable to cyber-attack as mouse-sized Estonia? The U.S. may face dangers in the realm of malicious software and from hacking, but we also clearly face dangers from those who would exaggerate those dangers.

Max Boot is a good friend but I am afraid that there are only two ways that this bitter dispute can be settled. The first is that he and I face off in a duel. The second is that just before sundown on Sunday he should admit that he has been doing some groping in the dark. I will simultaneously make the same admission.

Before either of us reaches any firm conclusions about the Pentagon’s software problems, it would behoove us both to hear from computer experts in the financial industry—not just from those who are captives of our military-industrial-computer complex—about our real vulnerabilities and about the most cost-efficient way to address them.

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