Dean Baker writes a fabulous new post on the skanky tactics of the Deficit Hawks.

Jingoism and the Budget Deficit: Using Any Tactic to Advance the Budget Cutting Agenda

The deficit hawks apparently believe that their case is so weak that they must resort to crass jingoism to push their agenda. NBC apparently intends to run a piece on the evening news on Tuesday that talks about the portion of the government debt that is owned foreigners, highlighting the role of China.

This is incredibly dishonest. The extent to which foreigners hold U.S. assets is determined by the trade deficit, not the budget deficit. (Actually, the causation largely goes the other way. The decision of foreign governments and/or investors to buy dollar assets raises the value of the dollar, leading to a larger trade deficit.) Insofar as there is an issue of U.S. indebtedness, it is the holding of U.S. assets in general by foreigners. This represents claims against future U.S. output that will be paid out to foreigners rather than being available for domestic consumption. Whether foreigners hold shares of General Electric and Microsoft or U.S. government bonds makes no difference, especially since one can be readily sold to buy the other any day of the week.

A serious discussion of this issue would focus on the value of the dollar. That is the relevant factor in the story of foreign indebtedness. Given the current value of the dollar, at the same level of GDP, we would be building up just as much foreign debt if the government were running a budget surplus rather than a $1.3 trillion deficit. Economists all know this.

However, the deficit hawks are not interested in a serious discussion. They are pushing their agenda of cutting Social Security and Medicare. And they are apparently willing to appeal to crude jingoism to make their case.

Can we ever have an honest debate in this country over such a serious topic as this? The College Republicans headed by Norquist, Reed and Abramoff in the '80s, along with the rise of Newt Gingrich in 1994, rendered the political environment in America toxic, and it has never recovered.

I am so pleased this is finally happening. Haiti has been burdened by its national debt for a long time and this will help speed their recovery from the massive earthquake:

The world's leading industrialised nations have pledged to write off the debts that Haiti owes them, following a devastating earthquake last month.

Canada's finance minister announced at a summit in Iqaluit, northern Canada, that Group of Seven countries planned to cancel Haiti's bilateral debts.

Jim Flaherty said he would encourage international lenders to do the same.

Some $1.2bn (£800m) of Haiti's debts to countries and international lending bodies has already been cancelled.

"We are committed in the G7 to the forgiveness of debt, in fact all bilateral debt has been forgiven by G7 countries vis-a-vis Haiti," Mr Flaherty said at the end of the two day gathering of finance ministers.

A C&Ler named mc sent in this very good e-mail about the causes of the financial meltdown we've just witnessed and the people who helped cause it.

I have almost 40 years of experience as a retail banker and financial services provider. I opened, managed and served as country head in Spain, Korea, Canada and the US. I would like to contribute comments and blogs.

It is not so difficult to find the people who should be held accountable for the financial meltdown of 2009. It seems, however, from 2001 until the present day nobody tries to find anyone responsible for anything.

There are 2 people in government that bear the bulk of the responsibility for our financial meltdown as well as the presidents of all banks that participated in the approval of mortgages with substandard credit criteria and the packaging and selling of such mortgages as asset backed securities. Additionally, all of these banks had, or should have had, senior risk asset management committees who were equally responsible. In each case they understood the risks and didn’t care as long they increased compensation for themselves and their company

As for the politicians, 2 of them bear the primary responsibility of these bankrupting financial policies. We need look no further than John McCain’s financial advisor Phil Gramm. Gramm, on Dec. 15, 2000, snuck into a congressional bill an act which prevents the government from regulating investment banks’ credit swaps. Gramm is the one who called Americans whiners and told us that the crisis was in our heads. McCain considered him for the position of Secretary of the Treasury.

Equally responsible for our economic crises was the SEC chairman (Christopher Cox), who changed a key regulation in 2004. Under pressure from those who wanted to please their campaign contributing Wall Street buddies the SEC approved a measure that let investment banks lend out 30 times the amount of capital they had backing up their loans. Before 2004 they could only lend out 12 times the amount of capital.

A solution to the banking meltdown that would prevent it from happening again would be:

1) Reinstate the regulation of CDSs and CDOs by the SEC (assumes increasing head count & improving the quality of staff).
2) Reinstate the 12 to 1 leverage ratio.
3) Require increased capital by product where the riskier assets require more capital reserves
4) Create a regulation that requires each sale of packaged assets by a bank or investment broker to provide some percentage of recourse to the purchaser.
5) Make the board of directors have fiduciary responsibly to stock holders and face fines and civil charges

There are others that share a lot of the blame too, like Bernanke, and no doubt he could name them too. But this is right on: The conservative mania for deregulation -- they like to call it "small government" -- is the root cause of our economic meltdown.

And Sarah and the Tea Partiers are still trying to sell us on the idea that more of the same is what we need. Because, you know, a nice PCB cocktail topped off with a cigar is just what you need to cure cancer.

Tim Geithener testified yesterday morning in front of the House Committee on Oversight and Government Reform, and I still don't know why we should give Geithner the benefit of the doubt. We shouldn't question him because we don't know how much worse it would be if he hadn't done all these things, right?

WASHINGTON — In heated questioning that at times took on the air of a cross-examination, Treasury Secretary Timothy F. Geithner on Wednesday defended his role and the government’s actions in bailing out the American International Group, saying Washington did what was necessary to prevent “a second Great Depression.”

But Mr. Geithner, who led the New York Federal Reserve Bank at the time, said he was not involved in the decision not to release information about deals that sent billions of taxpayer dollars from the bailout of A.I.G., the insurance giant, to big banks.

“I withdrew from monetary policy decisions,” Mr. Geithner said, “and day-to-day management of the New York Fed.”

The committee called Mr. Geithner, former Treasury Secretary Henry M. Paulson Jr. and other officials to explain, once again, the confounding results of an $85 billion rescue loan made to A.I.G. in September 2008. The loan sheltered big banks from any losses, but saddled A.I.G. with a debt so crushing that the Treasury soon had to step in and provide even more rescue money.

The questions aimed at Mr. Geithner focused almost immediately on his role in the A.I.G. bailout and why those negotiating on behalf of the taxpayers did not push the banks to make concessions, like returning the collateral to A.I.G. or accepting less than full value for their contracts with the insurer.

Throughout the morning, Mr. Geithner tried to persuade lawmakers that the government acted “in the best interests of the American people,” and not in the interests of big banks, in particular, as many lawmakers asserted, Goldman Sachs. Mr. Geithner, while keeping his composure throughout the questions, was forceful in his defense.

“I think the commitment to Goldman Sachs trumped the responsibility that our officials had to the American people,” Representative Stephen F. Lynch, Democrat of Massachusetts, told Mr. Geithner. His voice rising, his finger pointed at Mr. Geithner, Mr. Lynch expressed his frustration at the financial bailouts, and the bonuses now being paid by banks. “It stinks to the high heavens what happened here,” Mr. Lynch said. “I don’t like the obfuscation. And to top it all off, the disclosure was not there.”

In his comments, Mr. Geithner called for better controls on risk-taking by large financial institutions, and pointed out that more than a year after the near-collapse of A.I.G., the government still had no systems in place to cope with such failures. At times, the hearing took on a scolding, even berating, tone. One lawmaker, Representative John L. Mica, Republican of Florida, called upon Mr. Geithner to resign.

“I believe either you made a bad decision there, or there was the attempt to cover up one of the biggest bailouts, backdoor bailouts, in history,” Mr. Mica said. “Now, you’ve tried to frame it as you did it in the interest of the people and the failure of the system, I’m telling you, these are lame excuses. You were in the charge and did the wrong thing, or participated in the wrong thing.”

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As President Obama prepares for his State of the Union address, two stories Monday regarding his stimulus package highlighted his political conundrum. USA Today's quarterly survey of 50 economists produced a median estimate that the $787 billion American Recovery and Reinvestment Act (ARRA) prevented unemployment from reaching 10.8%, saving 1.2 million jobs as a result. But even as the economists praised the stimulus for restarting GDP growth, a CNN poll found that "nearly three out of four Americans think that at least half of the money spent in the federal stimulus plan has been wasted." Sadly for the President, perception - even when it's wrong - is reality.

To be sure, with unemployment at 10% and forecast to remain above 9% by the end of 2010, the continuing pain caused by the dismal job market is very real. But the dividends of the stimulus package to date, even with changing White House accounting rules for the 1.5 to 2 million jobs it claims to have saved, are clear and growing.

For the three month period which ended in June, the Economic Policy Institute announced the Obama stimulus measures overall added "up to 3 full percentage points of annualized growth in the quarter." For its part, the Wall Street Journal in September agreed with that assessment:

Many forecasters say stimulus spending is adding two to three percentage points to economic growth in the second and third quarters, when measured at an annual rate. The impact in the second quarter, calculated by analyzing how the extra funds flowing into the economy boost consumption, investment and spending, helped slow the rate of decline and will lay the groundwork for positive growth in the third quarter -- something that seemed almost implausible just a few months ago. Some economists say the 1% contraction in the second quarter would have been far worse, possibly as much as 3.2%, if not for the stimulus.

On Monday, the USA Today panel of economists concurred.

Further, they largely agreed stronger action is still needed:

Unemployment would have hit 10.8% -- higher than December's 10% rate -- without Obama's $787 billion stimulus program, according to the economists' median estimate. The difference would translate into another 1.2 million lost jobs.

But almost two-thirds of the economists said the government should do more to spur job growth. Suggestions included suspending payroll taxes for Social Security and Medicare, increasing spending on infrastructure, enacting a flat tax on income and extending jobless benefits.

Importantly, as ProPublica documented in its recovery tracking project, only a fraction of the stimulus pot has been spent to date. As of January 25, 2010, only $172 billion of the program budget had spent so far with another $157 billion in process, leaving $251 billion in remaining funding. Meanwhile, by ProPublica's accounting, $93 billion in ARRA tax cuts have been paid out, with another $119 billion still to come.

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Putting those of us who are middle-aged out to pasture with Social Security is not such a great solution for the people whose retirement accounts were decimated by the market crash - not to mention, of course, the president's plan to allow a bipartisan commission "suggest" Social Security and Medicare cuts in the near future.

But hey, at least Kucinich is at least trying to do something about jobs -- which is more than you can say for most members of Congress:

CLEVELAND -- An Ohio congressman pushed for a new program to add a million new jobs Monday.

Congressman Dennis Kucinich unveiled his plan Monday afternoon at his Lakewood office.

Kucinich proposed offering early retirement with social security benefits and health insurance subsides to people as young as 60 years old. He said that will free up as many as a million new positions in businesses that have already shed jobs.

"In every business, people are cutting to the point of where they're not functioning the way they used to. So, this gives business a chance to get new blood in. At the same, be able to do it in a way that they don't have to have access more money to do it,” Kucinich said.

Kucinich said he’ll introduce his Kucinich job plan bill this week on the floor of the U.S. House of Representatives.

More info here.

Oh yes, the deficit hawks are circling. Obama's decided to throw them some fresh meat in his State of the Union address -- and since he's ruled out cuts in defense spending, this money will come from someplace else.

According to Jared Bernstein, chair of the White House Council of Economic Advisors, this won't be as bad as it sounds: "No stupid Hooverism around here." While I can't help but wonder if this will be taken from the programs that serve the neediest (since those are the constituencies without powerful political backers) he says this will be targeted to specific waste.

Well, we'll see. Maybe this is just political theater, where Obama "proves" he can stand up to liberals. (Krugman says it looks like "pure disaster.")

I just have to wonder if he'd do this without getting some concessions in return from the Blue Dogs. We do know it'll make Evan Bayh happy, and that's what's important!

WASHINGTON -- Facing voter anger over mounting budget deficits, President Barack Obama will ask Congress to freeze spending for some domestic programs for three years beginning in 2011, administration officials said Monday. Separately, Obama unveiled plans to help a middle class "under assault" pay its bills, save for retirement and care for kids and aging parents.

The spending freeze would apply to a relatively small portion of the federal budget, affecting a $477 billion pot of money available for domestic agencies whose budgets are approved by Congress each year. Some of those agencies could get increases, others would have to face cuts; such programs got an almost 10 percent increase this year. The federal budget total was $3.5 trillion.

The three-year plan will be part of the budget Obama will submit Feb. 1, senior administration officials said, commenting on condition of anonymity to reveal private details.

The Pentagon, veterans programs, foreign aid and the Homeland Security Department would be exempt from the freeze.

What a difference a year makes!

I hope this works. But we're facing a wave of commercial mortgage failures, and I don't think we have a stable enough economy to take it:

For more than a year, the government pulled out the stops to revive home buying by driving down mortgage rates.

Now, whether the housing market is ready or not, the government is pulling out.

The wind-down of federal support for mortgage rates, set to end in two months, is a momentous test of whether the Obama administration and the Federal Reserve have succeeded in jump-starting the housing market and ensuring it can hold its own. The stakes for the economy are massive: If the market again falls into a tailspin, homeowners could face another wave of trouble, and it would deal a body blow to President Obama's efforts to get the economy on track.

Keeping the mortgage rates at historic lows, which required a commitment of more than $1 trillion, was viewed within the administration as a central plank of the economic strategy last year, senior officials said. Though the policy did not attract as much attention as rescue efforts to bail out banks, it helped revitalize home buying in some parts of the country and put money in the pockets of millions of homeowners who were able to refinance into lower monthly payments, the officials added.

"We did what we thought was necessary to stabilize the market, but we don't think the government should continue special efforts forever," said Michael S. Barr, an assistant secretary at the Treasury Department. "As you bring stability, private participants come back in. We do expect this now that the market has stabilized. I'm not going to say there will be no effect on rates, but we do think you are seeing market signs and market signals that there should be an orderly transition."

That's mere chump change to these guys! I just have to wonder if the Democrats are still dumb enough to roll over for them:

Banks are mobilising a smooth-running lobbying machine in Washington to ­battle Barack Obama's plans to limit the size and scope of Wall Street institutions, as financial services firms gear up to stop a shake-up that could slice away large chunks of their operations.

Their influence on Capitol Hill is broad – the top eight US banks spent $26m (£16m) on lobbying efforts last year, an increase of 6% on 2008 despite their financial woes, according to Congressional records. And in the first 10 months of 2009, the financial industry donated $78.2m to federal candidates and party committees – more than any other business sector – according to political research institute the Centre for Responsive Politics.

"The power of the financial services sector in this city has not dissipated at all … they've just done things in a quieter way," said Ethan Siegel, an analyst at financial consultancy The Washington Exchange, who monitors Congress for big investors. "They haven't pulled back on their lobbying just because they've become piñata [punchbags] in the press."

Wall Street lobbyists argue that scaling back the size of banks misdiagnoses the cause of the financial crisis, jeopardises jobs, damages America's competitiveness and could inhibit growth.

The Financial Services Forum, which represents 18 top banks including Goldman Sachs, JP Morgan and Citigroup, says the problem of institutions becoming "too big to fail" ought to be tackled through more effective supervision, and by creating an authority able to wind down failing firms, rather than by forcing them to shrink. Spokeswoman Erica Hurtt said: "This was not a trading crisis and these proposals miss the mark. They won't get to the causes of the crisis."

Banks' persuasiveness has already had significant impact on the Obama administration. Plans for the creation of a consumer financial protection agency are meeting staunch Senate opposition and may be watered down to get the 60-40 support needed to override objections.

One widely used strategy by the financial industry has been to deploy representatives of smaller high-street banks to make the case to lawmakers. Organisations such as the Independent Community Bankers of America tend to get a sympathetic hearing because they can point to members in towns and cities in almost every Congressional district, rather than purely in lower Manhattan.

Really, doesn't this whole thing have the feel of a show trial? "Let the people have their moment and then we can get back to business as usual." I figure, if this is what they're actually admitting, God only knows what else they were up to:

WASHINGTON — Goldman Sachs' chief acknowledged Wednesday that the investment bank engaged in "improper" behavior in 2006 and 2007 when it made huge bets on a housing downturn while peddling as safe more than $40 billion in securities backed by risky U.S. home loans.

Lloyd Blankfein, Goldman's chairman and chief executive, made the surprising concession at the opening hearing of the Financial Crisis Inquiry Commission, a 10-member panel that Congress created to investigate and lay out for the public the causes of the worst financial crisis since the Great Depression.

Blankfein and senior officers of three other of the nation's most prominent banks told the panel that serious flaws in their risk models and business practices contributed to Wall Street's meltdown and the massive taxpayer bailouts that followed. The commission also heard testimony that the banks and quasi-government mortgage giant Fannie Mae recklessly took on as much as 95 times more risk than they could cover, and that Wall Street excels "at pulling the wool over the eyes of the American people."

Blankfein faced the toughest questioning.

Commission Chairman Phil Angelides, a former California state treasurer, warned Blankfein that he'd be "brutally honest" in his questioning. He asked why Goldman thought it was necessary to take out protection against investment-grade mortgage securities it was selling by purchasing insurance-like contracts known as credit-default swaps. Angelides likened it to selling a car with knowledge it had faulty brakes and then taking out an insurance policy on the buyer.

"I do think the behavior is improper, and we regret . . . the consequence that people have lost money in it," Blankfein told Angelides.

I don't want Blankfein's feigned regret. I want him to have to live the rest of his life eating ramen noodles and living in a cardboard box on the street, just like the people who lost their life savings have to do.

Until Wednesday, Goldman had insisted that it was merely managing its risks when it placed "hedges," in the form of wagers against the housing market, various venues including in secret offshore deals, with insurance giant American International Group and on a private London exchange.

In November, McClatchy reported exclusively that Goldman failed to tell investors about its contrary bets while selling $39 billion in risky mortgage securities it had issued, and another $18 billion in similar bonds issued by other firms. The Securities and Exchange Commission and Congress are investigating Goldman's swap dealings, said knowledgeable people who asked not to be identified because of the sensitivity of the issue.

While conceding that its contrary bets were improper, Blankfein said that in most cases Goldman took those positions to offset bets it had underwritten for clients seeking to wager on a housing downturn.

Good PR move, I guess. Obama allowed public anger to build and now it looks like he only slammed the bankers because he had to. Which is, you know, probably true.

I prefer Yves' idea: That this should be positioned as a windfall profits tax. They didn't earn these outrageous profits; those profits wouldn't exist with the federal government infusing cash into their dying companies.

President Obama plans Thursday to propose a sharp increase in the taxes paid by the nation's largest financial institutions designed to raise $90 billion over the next decade while constraining the industry's ability to take large risks and reap outsize rewards, a senior administration official said.

The tax proposal, which would require congressional approval, is meant to make a splash, demonstrating to the public that the administration is now focused on reforming the financial industry after more than a year of bailout efforts. The official, who spoke with reporters before the president's announcement on condition of anonymity, said that large firms were reaping renewed profit from a rescue intended to help the broader economy and that the public deserved a larger share of the money.

The nation's largest banks are expected to report large annual profits over the next week, along with plans to set aside billions of dollars for employee bonuses.

[...] Industry executives are warning that hitting banks will hurt the broader economy because firms would seek to impose the cost of any tax on customers.

"Using tax policy to punish people is a bad idea," Jamie Dimon, the chief executive of J.P. Morgan Chase, told reporters Wednesday after his testimony before the Financial Crisis Inquiry Commission. "All businesses tend to pass their costs on to customers."

[...] Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, said he supports the administration's plan, but he also is holding hearings next week to consider additional ways of curbing compensation, including reversing a cut in the tax rate that applies to the largest bonuses.

Frank said he was unmoved by the argument that the higher taxes might reduce the flow of money to the broader economy. He said some banking activities appeared to have only one purpose: "to simply make money for the people who participate."

He also played down concerns that talent would leave the industry.

"I don't know where people would go for comparable salaries," Frank said. "I guess perhaps they could star in major motion pictures."

Not only did they want us to bail them out, they want to keep the names of the beneficiaries a big secret. While there's at least a theoretical chance that this information could affect stock prices, Wall Street seems to be doing quite well in spite of hanging by a thread, doesn't it?

Jan. 11 (Bloomberg) -- The Federal Reserve asked a U.S. appeals court to block a ruling that for the first time would force the central bank to reveal secret identities of financial firms that might have collapsed without the largest government bailout in U.S. history.

The U.S. Court of Appeals in Manhattan will decide whether the Fed must release records of the unprecedented $2 trillion U.S. loan program launched after the 2008 collapse of Lehman Brothers Holdings Inc. In August, a federal judge ordered that the information be released, responding to a request by Bloomberg LP, the parent of Bloomberg News.

“This case is about the identity of the borrower,” said Matthew Collette, a lawyer for the government, in oral arguments today. “This is the equivalent of saying ‘I want all the loan applications that were submitted.’”

Bloomberg argues that the public has the right to know basic information about the “unprecedented and highly controversial use” of public money. Banks and the Fed warn that bailed-out lenders may be hurt if the documents are made public, causing a run or a sell-off by investors. Disclosure may hamstring the Fed’s ability to deal with another crisis, they also argued. The lower court agreed with Bloomberg.

Krugman wades into the question of whether Jonathan Gruber's work is suspect in light of his government grant:

For those who haven’t been following this, Gruber — who is one of the three or four top health care economists in the nation — turns out to have a large research grant from the Department of Health and Human Services, for modeling the consequences of various reform plans. This has led some people, mainly Marcy Wheeler at Firedoglake, to question Gruber’s objectivity.

The truth is that this is no big deal. Gruber’s grant is from HHS, not the West Wing; it’s basically the same kind of thing as, say, an epidemiologist receiving a grant from the National Institutes of Health. You wouldn’t ordinarily say that this tarnishes the epidemiologist’s credentials as an independent analyst on infectious diseases, unless you want to say that nobody receiving a research grant can be considered independent.

The only reasons you might see this differently would be if Gruber were either receiving a sweetheart deal, or seemed to have changed his views to accommodate his sponsors. Neither is remotely true. Gruber is very much the go-to guy on modeling reform: it’s hard to think of who else could be doing the work better. And his position on reform has been entirely consistent.

Should Gruber have made a fuller disclosure? Yes — I think he was being too much of an academic, taking for granted that everyone understands the difference between being a political hired gun and receiving a research grant. Should he disclose the contract every time he writes anything? Well, maybe — but a brief mention should suffice. When you’re writing 800-word op-eds, you need to reserve as much space as possible for real content.

And I have every intention of continuing to cite Gruber on matters related to health care. He’s the top micro-modeling expert, and getting this stuff right is more important than this essentially trivial controversy.

[...] What the folks at Firedoglake should ask themselves is this: do you really want to become just like the right-wingers with their endless supply of fake scandals?

Even though I posted Marcy's story, I thought this probably wasn't as big a deal as it sounded. And that's one reason why I try not to jump to conclusions when I first read or see a story -- odds are high that the information is incomplete or out of context, by very nature of the 24-hour news cycle.

And jumping to conclusions is the same thing I hate about cable news. I'm not eager to follow in their footsteps.

We've been so often misled by the media that it's good to stay skeptical, but let's also retain a willingness to see how a story unfolds.

Goldman Sachs continues to get an inaccurate read on public opinion. What they don't seem to understand is that people who are now in their second year of unemployment won't forget that the same people who caused this mess are making exorbitant sums as a reward for having done so.

And standing in line at a food pantry to which Goldman Sachs has donated the food only rubs salt in that wound:

As it prepares to pay out big bonuses to employees, Goldman Sachs is considering expanding a program that would require executives and top managers to give a certain percentage of their earnings to charity.

The move would be the latest in a series of initiatives by Goldman to soften criticism over the size of its bonuses, which are expected to be among the largest on Wall Street, bringing average pay to about $595,000 for each employee — with far higher amounts for top performers.

Goldman set aside $16.7 billion for compensation in the first nine months of 2009, and in good years, the firm dedicates about three-quarters of its compensation budget to year-end bonuses. The firm is expected to report later this month what could be record profit of about $12 billion for 2009, according to analysts’ estimates, compared with $11.7 billion in 2007. Its final compensation pool and executive bonuses will be announced then.

The firm said last month that its 30 most senior executives would be paid bonuses all in stock, but the bank placed no limit on how large those bonuses might be.

While the details of the latest charity initiative are still under discussion, the firm’s executives have been looking at expanding their current charitable requirements for months and trying to understand whether such gestures would damp public anger over pay, according to a person familiar with the matter who did not want to be identified because of the delicacy of the pay issue.

Maybe if I go back to bed, this will all turn out to be a bad dream? No such luck. Our corrupted, money-centered political system looked at the recent events, saw how lack of regulation and enforcement turned the economy on its head, and concluded... what? That it would be better to reward the perpetrators by protecting them from consequences!

What they're really doing is constructing a system where people will return to keeping their money in a shoebox under the bed:

...The primary purpose of money markets is to provide virtually instantaneous access to a portfolio of practically risk-free investment alternatives: a typical investor in a money market seeks minute investment risk, no volatility, and instantaneous liquidity, or redeemability. These are the three pillars upon which the entire $3.3 trillion money market industry is based.

Yet new regulations proposed by the administration, and specifically by the ever-incompetent Securities and Exchange Commission, seek to pull one of these three core pillars from the foundation of the entire money market industry, by changing the primary assumptions of the key Money Market Rule 2a-7. A key proposal in the overhaul of money market regulation suggests that money market fund managers will have the option to "suspend redemptions to allow for the orderly liquidation of fund assets." You read that right: this does not refer to the charter of procyclical, leveraged, risk-ridden, transsexual (allegedly) portfolio manager-infested hedge funds like SAC, Citadel, Glenview or even Bridgewater (which in light of ADIA's latest batch of problems, may well be wishing this was in fact the case), but the heart of heretofore assumed safest and most liquid of investment options: Money Market funds, which account for nearly 40% of all investment company assets. The next time there is a market crash, and you try to withdraw what you thought was "absolutely" safe money, a back office person will get back to you saying, "Sorry - your money is now frozen. Bank runs have become illegal." This is precisely the regulation now proposed by the administration. In essence, the entire US capital market is now a hedge fund, where even presumably the safest investment tranche can be locked out from within your control when the ubiquitous "extraordinary circumstances" arise. The second the game of constant offer-lifting ends, and money markets are exposed for the ponzi investment proxies they are, courtesy of their massive holdings of Treasury Bills, Reverse Repos, Commercial Paper, Agency Paper, CD, finance company MTNs and, of course, other money markets, and you decide to take your money out, well - sorry, you are out of luck. It's the law.