From the New York Times

The following is a letter sent on Tuesday by Jake DeSantis, an executive vice president of the American International Group’s financial products unit, to Edward M. Liddy, the chief executive of A.I.G.

DEAR Mr. Liddy,

It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. I hope you take the time to read this entire letter. Before describing the details of my decision, I want to offer some context:

I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.

After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.

I take this action after 11 years of dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down.

You and I have never met or spoken to each other, so I’d like to tell you about myself. I was raised by schoolteachers working multiple jobs in a world of closing steel mills. My hard work earned me acceptance to M.I.T., and the institute’s generous financial aid enabled me to attend. I had fulfilled my American dream.

I started at this company in 1998 as an equity trader, became the head of equity and commodity trading and, a couple of years before A.I.G.’s meltdown last September, was named the head of business development for commodities. Over this period the equity and commodity units were consistently profitable — in most years generating net profits of well over $100 million. Most recently, during the dismantling of A.I.G.-F.P., I was an integral player in the pending sale of its well-regarded commodity index business to UBS. As you know, business unit sales like this are crucial to A.I.G.’s effort to repay the American taxpayer.

The profitability of the businesses with which I was associated clearly supported my compensation. I never received any pay resulting from the credit default swaps that are now losing so much money. I did, however, like many others here, lose a significant portion of my life savings in the form of deferred compensation invested in the capital of A.I.G.-F.P. because of those losses. In this way I have personally suffered from this controversial activity — directly as well as indirectly with the rest of the taxpayers.

I have the utmost respect for the civic duty that you are now performing at A.I.G. You are as blameless for these credit default swap losses as I am. You answered your country’s call and you are taking a tremendous beating for it.

But you also are aware that most of the employees of your financial products unit had nothing to do with the large losses. And I am disappointed and frustrated over your lack of support for us. I and many others in the unit feel betrayed that you failed to stand up for us in the face of untrue and unfair accusations from certain members of Congress last Wednesday and from the press over our retention payments, and that you didn’t defend us against the baseless and reckless comments made by the attorneys general of New York and Connecticut.

My guess is that in October, when you learned of these retention contracts, you realized that the employees of the financial products unit needed some incentive to stay and that the contracts, being both ethical and useful, should be left to stand. That’s probably why A.I.G. management assured us on three occasions during that month that the company would “live up to its commitment” to honor the contract guarantees.

That may be why you decided to accelerate by three months more than a quarter of the amounts due under the contracts. That action signified to us your support, and was hardly something that one would do if he truly found the contracts “distasteful.”

That may also be why you authorized the balance of the payments on March 13.

At no time during the past six months that you have been leading A.I.G. did you ask us to revise, renegotiate or break these contracts — until several hours before your appearance last week before Congress.

I think your initial decision to honor the contracts was both ethical and financially astute, but it seems to have been politically unwise. It’s now apparent that you either misunderstood the agreements that you had made — tacit or otherwise — with the Federal Reserve, the Treasury, various members of Congress and Attorney General Andrew Cuomo of New York, or were not strong enough to withstand the shifting political winds.

You’ve now asked the current employees of A.I.G.-F.P. to repay these earnings. As you can imagine, there has been a tremendous amount of serious thought and heated discussion about how we should respond to this breach of trust.

As most of us have done nothing wrong, guilt is not a motivation to surrender our earnings. We have worked 12 long months under these contracts and now deserve to be paid as promised. None of us should be cheated of our payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house.

Many of the employees have, in the past six months, turned down job offers from more stable employers, based on A.I.G.’s assurances that the contracts would be honored. They are now angry about having been misled by A.I.G.’s promises and are not inclined to return the money as a favor to you.

The only real motivation that anyone at A.I.G.-F.P. now has is fear. Mr. Cuomo has threatened to “name and shame,” and his counterpart in Connecticut, Richard Blumenthal, has made similar threats — even though attorneys general are supposed to stand for due process, to conduct trials in courts and not the press.

So what am I to do? There’s no easy answer. I know that because of hard work I have benefited more than most during the economic boom and have saved enough that my family is unlikely to suffer devastating losses during the current bust. Some might argue that members of my profession have been overpaid, and I wouldn’t disagree.

That is why I have decided to donate 100 percent of the effective after-tax proceeds of my retention payment directly to organizations that are helping people who are suffering from the global downturn. This is not a tax-deduction gimmick; I simply believe that I at least deserve to dictate how my earnings are spent, and do not want to see them disappear back into the obscurity of A.I.G.’s or the federal government’s budget. Our earnings have caused such a distraction for so many from the more pressing issues our country faces, and I would like to see my share of it benefit those truly in need.

On March 16 I received a payment from A.I.G. amounting to $742,006.40, after taxes. In light of the uncertainty over the ultimate taxation and legal status of this payment, the actual amount I donate may be less — in fact, it may end up being far less if the recent House bill raising the tax on the retention payments to 90 percent stands. Once all the money is donated, you will immediately receive a list of all recipients.

This choice is right for me. I wish others at A.I.G.-F.P. luck finding peace with their difficult decision, and only hope their judgment is not clouded by fear.

Mr. Liddy, I wish you success in your commitment to return the money extended by the American government, and luck with the continued unwinding of the company’s diverse businesses — especially those remaining credit default swaps. I’ll continue over the short term to help make sure no balls are dropped, but after what’s happened this past week I can’t remain much longer — there is too much bad blood. I’m not sure how you will greet my resignation, but at least Attorney General Blumenthal should be relieved that I’ll leave under my own power and will not need to be “shoved out the door.”

Sincerely,

Jake DeSantis

Freedom is not worth having if it does not connote
freedom to err. It passes my comprehension how
human beings, be they ever so experienced and
able, can delight in depriving other human beings
of that precious right.

- Mahatma Gandhi

I like this quote. I suppose that one could also say that you can’t have the freedom to succeed unless you also have the freedom to fail.

Now contrast that quote with this quote.

Four freedoms: The first is freedom of speech and
expression – everywhere in the world. The second
is freedom of everyone to worship God in his own
way, everywhere in the world. The third is freedom
from want . . . everywhere in the world. The
fourth is freedom from fear . . . anywhere in the
world.

- Franklin D. Roosevelt

This quote implies that you cannot have the fredom to fail… which would conversly mean that you cannot have the freedom to succeed. If you fail in life then your actions will result in wanting. What about freedom from fear? What things are people fearful of? Should I not be fearful of being fired if I don’t do my job? Should I be fearless of taking risk? How can the government free people from emotion?

I believe that FDR is bastardizing the word ‘freedom.’ Freedom, as in liberty, simply means free from obstruction. Look at how he uses the word ‘of’ and the word ‘from.’

Lets see what our founding fathers had to say about the matter.

When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

So, I’d very much like not to be free from fear, nor wanting.

I read an interesting article and comment that I wanted to share from the Wall Street Journal.

Democracies are averting their eyes from the threats we face.

After 9/11, historians and pundits rushed to give a new era a suitable name. My favorite was Norman Podhoretz’s, who called it “World War IV.” In doing so, he recast the Cold War as World War III while putting the attacks in a century-long context of the global struggle between democratic and totalitarian forces.

But the election of Barack Obama and the financial crisis have now ushered us into the post-post-9/11 world, and this era, too, needs a name. Let’s call it “the Locarno Restoration.”

Locarno, a picturesque Swiss town on the shores of Lake Maggiore, was the site of a series of treaties signed in 1925 between France, Germany, Britain, Italy and Belgium. They ostensibly guaranteed the post-World War I borders on Germany’s western frontier with France and Belgium, but agreed that Germany’s eastern frontiers could be subject to revision. They also paved the way for Germany’s membership in the League of Nations.

Though now mostly forgotten, the Locarno Treaties were, as Henry Kissinger once wrote, “greeted with exuberant relief as the dawning of a new world order.” For the rest of the 1920s, people spoke of “the spirit of Locarno,” which meant, in effect, that personal good will begat good political results, whatever the underlying facts. The foreign ministers of Germany, France and Britain each won a Nobel Peace Prize for their efforts — proving, if nothing else, that the Nobel committee was in the grip of fools long before the prize went to Jimmy Carter.

Of course Locarno failed. It failed in part because it implicitly acknowledged that Germany would not have to honor the terms (however invidious) of the Versailles Treaty, in part because it exposed the limits of how far Britain and France were willing to go to guarantee the peace in Europe, and in part because it betrayed smaller powers, particularly Poland, whose parliamentary democracy was soon overthrown in a coup d’état.

Above all, Locarno failed because it combined wishful thinking with political weakness in a way that was bound to be tested and exploited by the fascist powers. If the 1930s were, per W.H. Auden’s line, a “low, dishonest decade,” it was mainly because the 1920s were so high-mindedly self-deceived.

We are in a similar state today.

As in the 1920s, we have emerged (if only partially), from several years of war — scarcely anticipated, earnestly begun, bravely fought, often badly waged and, at least in the case of Iraq, ambiguously won. It was an emotionally exhausting war justified first on grounds of national survival, then for spreading democracy. The moral clarity and political unity that went with the war’s beginning collapsed into political division and disillusion.

From this there has emerged under the Obama administration a new kind of moral clarity. It is founded on conciliatory tendencies, a preference for multilateral solutions, a powerful desire to be on the right side of global public opinion, and an instinct for looking away from that which we’d rather not to see. This has put some political stress on our residual post-9/11 commitments, particularly in the case of Afghanistan, while creating an overwhelming aversion to possible confrontations, particularly against revanchist Russia and millenarian Iran.

The Locarno generation felt similarly about standing in the way of Japan’s invasion of Manchuria, Italy’s of Abyssinia and Germany’s of Czechoslovakia. In their case, as increasingly in ours, a weak foreign policy was a function of severe economic distress. But economic considerations were as often an alibi for inaction as they were a reason for it. Folklore aside, the German economy was in considerably worse shape than Britain’s for most of the ’30s. But while the British were timid, Hitler was willful.

Today, Russia and Iran are in a parlous economic state, but they are also keen to seek their advantage through calculated acts of provocation and aggression. They sense that the commitments the Bush administration made to the security of our allies aren’t ones the Obama administration is especially eager to honor. That goes for missile defense in Poland and the Czech Republic; for the independence of Georgia, Ukraine and other former Soviet republics; for the status of forces agreement with Iraq; perhaps also for the security of Israel if it opts for air strikes against Iran’s nuclear facilities.

We know how this movie ends. So here’s a suggestion: If we’re going to squander trillions in “stimulus,” let’s spend more on defense. An F-22 assembly line adds just as much to employment as a few thousand more “green” workers, with the added bonus of deterring our enemies. That’s a lesson the democracies learned almost too late in the dismal post-Locarno years. Why make the same mistake twice?

Here is one of the first comments from that article.

Excellent article – and darkly prescient, unfortunately.

In response to Stephens’ question at the end of the piece: “Why make the same mistake twice?” – I wanted to share the following ten historical laws set forth by Professor Rufus Fears, a professor of classics at the University of Oklahoma (he’s probably the best speaker and storyteller I have ever heard – if you want to find out more about him, please look at http://www.teach12.com/ttcx/CourseDescLong2.aspx?cid=4360:

Ten Lessons of History

We may sometimes refer to the following 10 lessons of history as laws, but they are more like signposts to guide us in the right direction.

A. The first of these lessons is that WE DO NOT LEARN FROM HISTORY, and the consequences of this failure are tragic. This law explains why the same cycles of oppression and war – brief glimpses of freedom before a return to tyranny – have occurred throughout history.

B. The second law is that science, technology, the global economy, and the information superhighway do not make us immune to the lessons of history. We tend to believe that the lesssons of the past simply do not apply in our advaced age of instant communication, but people held the same misguided belief in 1914.

C. We also tend to believe, as a nation – and our foreign policy has been based on this belief – that freedom is a universal value, but this is simply not true.
1. In this course, we will distinguish among national freedom, that is, freedom from foreign control; political freedom, the freedom to elect officials and to make laws; and individual freedom to live as one chooses as long as others are not harmed.
2. We will see that freedom is not a universal value; if it were, perhaps so much of world hisotry would not be a recurring story of war, tyranny, and oppression.

D. The fourth law of history is that power – the desire to dominate others – is a universal value. We see this throughout history, from the very beginning of civilization, in individuals seeking to become absolute despots and in empires or superpowers expressing the national statement of this universal value.

E. Fifth, we will learn that the Middle East is the graveyard of empire. From the beginning of civilization, invaders have repeatedly come to the Middle East with good intentions, and repeatedly, these invaders have failed, frequently bringing down their own empires in the process.

F. The sixth lesson of history is that America shares the destiny of the great democracies, republics, and superpowers of the past. The Founders of our country understood that the Athenian democracy and the Roman Empire offered profound lessons for our democracy and our republic.

G. The seventh lesson is that religion and spirituality, along with a lust for power, are the most profound motivators in human history. It is difficult for Americans to understand societies, such as those in the Middle East, in which religion provides a comprehensive worldview.

H. The eighth lesson is the great nations rise and fall because of human decisions, not anonymous social or economic forces. This course asserts that history is made by great individuals, such as Winston Churchill, Genghis Khan, Alexander the Great, Julius Ceasar, or the Founders of our country. Decisions made by such leaders can lead a nation to greatness or bring about its ruin.

I. A corollary to the eighth lesson is the idea that there is a dinstinction between a politician and a statesman. We will see that a true statesman has bedrock principles, a moral compass, the ability to build a consensus to achieve a vision, and the vision itself.

J. Finally, the last lesson is that America has charted a unique role in history, from its foundation in freedom and guided by science and technology, America may still be able to lead the world into a new age of peace and prosperity – if we are willing to learn from the past.
1. We live now in an ahistorical age. Althought we have a good deal of historical knowledge, we do not think historically.
2. We must learn to use history as the Founders did – to make decisions at a critical time
3. As a group, the Founders met the definition of true statesmen, establishing the country on a bedrock of principles, based on an absolute sense of moral values and with the vision of peace, prosperity, and security for citizens of the future.

Loose money and politicized mortgages are the real villains.

By PHIL GRAMM

The debate about the cause of the current crisis in our financial markets is important because the reforms implemented by Congress will be profoundly affected by what people believe caused the crisis.

Getty Images

President Bill Clinton signs the Financial Services Modernization Act of 1999.

If the cause was an unsustainable boom in house prices and irresponsible mortgage lending that corrupted the balance sheets of the world’s financial institutions, reforming the housing credit system and correcting attendant problems in the financial system are called for. But if the fundamental structure of the financial system is flawed, a more profound restructuring is required.

I believe that a strong case can be made that the financial crisis stemmed from a confluence of two factors. The first was the unintended consequences of a monetary policy, developed to combat inventory cycle recessions in the last half of the 20th century, that was not well suited to the speculative bubble recession of 2001. The second was the politicization of mortgage lending.

The 2001 recession was brought on when a speculative bubble in the equity market burst, causing investment to collapse. But unlike previous postwar recessions, consumption and the housing industry remained strong at the trough of the recession. Critics of Federal Reserve Chairman Alan Greenspan say he held interest rates too low for too long, and in the process overstimulated the economy. That criticism does not capture what went wrong, however. The consequences of the Fed’s monetary policy lay elsewhere.

In the inventory-cycle recessions experienced in the last half of the 20th century, involuntary build up of inventories produced retrenchment in the production chain. Workers were laid off and investment and consumption, including the housing sector, slumped.

In the 2001 recession, however, consumption and home building remained strong as investment collapsed. The Fed’s sharp, prolonged reduction in interest rates stimulated a housing market that was already booming — triggering six years of double-digit increases in housing prices during a period when the general inflation rate was low.

Buyers bought houses they couldn’t afford, believing they could refinance in the future and benefit from the ongoing appreciation. Lenders assumed that even if everything else went wrong, properties could still be sold for more than they cost and the loan could be repaid. This mentality permeated the market from the originator to the holder of securitized mortgages, from the rating agency to the financial regulator.

Meanwhile, mortgage lending was becoming increasingly politicized. Community Reinvestment Act (CRA) requirements led regulators to foster looser underwriting and encouraged the making of more and more marginal loans. Looser underwriting standards spread beyond subprime to the whole housing market.

As Mr. Greenspan testified last October at a hearing of the House Committee on Oversight and Government Reform, “It’s instructive to go back to the early stages of the subprime market, which has essentially emerged out of CRA.” It was not just that CRA and federal housing policy pressured lenders to make risky loans — but that they gave lenders the excuse and the regulatory cover.

Countrywide Financial Corp. cloaked itself in righteousness and silenced any troubled regulator by being the first mortgage lender to sign a HUD “Declaration of Fair Lending Principles and Practices.” Given privileged status by Fannie Mae as a reward for “the most flexible underwriting criteria,” it became the world’s largest mortgage lender — until it became the first major casualty of the financial crisis.

The 1992 Housing Bill set quotas or “targets” that Fannie and Freddie were to achieve in meeting the housing needs of low- and moderate-income Americans. In 1995 HUD raised the primary quota for low- and moderate-income housing loans from the 30% set by Congress in 1992 to 40% in 1996 and to 42% in 1997.

By the time the housing market collapsed, Fannie and Freddie faced three quotas. The first was for mortgages to individuals with below-average income, set at 56% of their overall mortgage holdings. The second targeted families with incomes at or below 60% of area median income, set at 27% of their holdings. The third targeted geographic areas deemed to be underserved, set at 35%.

The results? In 1994, 4.5% of the mortgage market was subprime and 31% of those subprime loans were securitized. By 2006, 20.1% of the entire mortgage market was subprime and 81% of those loans were securitized. The Congressional Budget Office now estimates that GSE losses will cost $240 billion in fiscal year 2009. If this crisis proves nothing else, it proves you cannot help people by lending them more money than they can pay back.

Blinded by the experience of the postwar period, where aggregate housing prices had never declined on an annual basis, and using the last 20 years as a measure of the norm, rating agencies and regulators viewed securitized mortgages, even subprime and undocumented Alt-A mortgages, as embodying little risk. It was not that regulators were not empowered; it was that they were not alarmed.

With near universal approval of regulators world-wide, these securities were injected into the arteries of the world’s financial system. When the bubble burst, the financial system lost the indispensable ingredients of confidence and trust. We all know the rest of the story.

The principal alternative to the politicization of mortgage lending and bad monetary policy as causes of the financial crisis is deregulation. How deregulation caused the crisis has never been specifically explained. Nevertheless, two laws are most often blamed: the Gramm-Leach-Bliley (GLB) Act of 1999 and the Commodity Futures Modernization Act of 2000.

GLB repealed part of the Great Depression era Glass-Steagall Act, and allowed banks, securities companies and insurance companies to affiliate under a Financial Services Holding Company. It seems clear that if GLB was the problem, the crisis would have been expected to have originated in Europe where they never had Glass-Steagall requirements to begin with. Also, the financial firms that failed in this crisis, like Lehman, were the least diversified and the ones that survived, like J.P. Morgan, were the most diversified.

Moreover, GLB didn’t deregulate anything. It established the Federal Reserve as a superregulator, overseeing all Financial Services Holding Companies. All activities of financial institutions continued to be regulated on a functional basis by the regulators that had regulated those activities prior to GLB.

When no evidence was ever presented to link GLB to the financial crisis — and when former President Bill Clinton gave a spirited defense of this law, which he signed — proponents of the deregulation thesis turned to the Commodity Futures Modernization Act (CFMA), and specifically to credit default swaps.

Yet it is amazing how well the market for credit default swaps has functioned during the financial crisis. That market has never lost liquidity and the default rate has been low, given the general state of the underlying assets. In any case, the CFMA did not deregulate credit default swaps. All swaps were given legal certainty by clarifying that swaps were not futures, but remained subject to regulation just as before based on who issued the swap and the nature of the underlying contracts.

In reality the financial “deregulation” of the last two decades has been greatly exaggerated. As the housing crisis mounted, financial regulators had more power, larger budgets and more personnel than ever. And yet, with the notable exception of Mr. Greenspan’s warning about the risk posed by the massive mortgage holdings of Fannie and Freddie, regulators seemed unalarmed as the crisis grew. There is absolutely no evidence that if financial regulators had had more resources or more authority that anything would have been different.

Since politicization of the mortgage market was a primary cause of this crisis, we should be especially careful to prevent the politicization of the banks that have been given taxpayer assistance. Did Citi really change its view on mortgage cram-downs or was it pressured? How much pressure was really applied to force Bank of America to go through with the Merrill acquisition?

Restrictions on executive compensation are good fun for politicians, but they are just one step removed from politicians telling banks who to lend to and for what. We have been down that road before, and we know where it leads.

Finally, it should give us pause in responding to the financial crisis of today to realize that this crisis itself was in part an unintended consequence of the monetary policy we employed to deal with the previous recession. Surely, unintended consequences are a real danger when the monetary base has been bloated by a doubling of the Federal Reserve’s balance sheet, and the federal deficit seems destined to exceed $1.7 trillion.

Mr. Gramm, a former U.S. Senator from Texas, is vice chairman of UBS Investment Bank. UBS. This op-ed is adapted from a recent paper he delivered at the American Enterprise Institute.

Ah…

We sure do live in interesting times. Honestly I prefer the boring times where things boringly work the way they’re meant to work.

It looks like we are about to have massive government spending in order to ’stimulate’ our economy. Never mind the fact that the things they (the Democrats) want to spend money on has nothing to do with the economy. They claim that there are no earmarks in this new legislation but that is only because they don’t need to earmark their pork and sneaky legislation.

I just found out one new item that they are putting in. The return of unlimited welfare. Back when Newt Gingrich and the Republican’s finally took control of the congress, after 50 some years of Democrat control, they created the Contract with America. One of the most important pieces of that legislation was welfare reform. It put a limit on how long people could recieve federal dollars. Bill Clinton often took all the credit for this and it’s subsequent increase in employment, but it was the Repulican’s that fought for this.

Now I read this under reported story.

The Return of Welfare As We Knew It

The House stimulus bill endangers Clinton’s biggest reform.

By BENJAMIN E. SASSE and KERRY N. WEEMS

Twelve years ago, President Bill Clinton signed a law that he correctly proclaimed would end “welfare as we know it.” That sweeping legislation, the Personal Responsibility and Work Opportunity Act, eliminated the open-ended entitlement that had existed since 1965, replacing it with a finite, block grant approach called the Temporary Assistance to Needy Families (TANF) program.

TANF has been a remarkable success. Welfare caseloads nationally fell from 12.6 million in 1997 to fewer than five million in 2007. And yet despite this achievement, House Democrats are seeking to undo Mr. Clinton’s reforms under the cover of the stimulus bill.

Currently, welfare recipients are limited to a total of five years of federal benefits over a lifetime. They’re also required to begin working after two years of government support. States are accountable for helping their needy citizens transition from handouts to self-sufficiency. Critically, the funds provided to states are fixed appropriations by the federal government.

Through a little noticed provision of the stimulus package that has passed the House of Representatives, the bill creates a fund for TANF that is open-ended — the same way Medicare and Social Security are.

In the section of the House bill dealing with cash assistance to low-income families, the authors inserted the bombshell phrase: “such sums as are necessary.” This is a profound departure from the current statutory scheme, despite the fact that, in this particular bill, state TANF spending would be capped. The “such sums” appropriation language is deliberately obscure. It is a camel’s nose provision intended to reverse Clinton-era legislation and create a new template for future TANF reauthorizations.

Most liberals have always disliked welfare reform; critics of TANF believed Mr. Clinton supported it only to get re-elected. Some asserted it was racist or intended to punish the poor. Others claimed that the funds to assist single mothers with child care, transportation and job training were never as generous as were allegedly promised. Today, the fact that disqualification from the program is based on failing to secure a job within two years seems especially harsh given this economic crisis.

There are legitimate objections to the program that are worth debating. But this is not an open debate: It is a near secret provision buried deep in a more than 600-page piece of legislation.

The TANF provisions of the stimulus bill, like the nearly $100 billion Medicaid provisions, are less about stimulating the economy, and more about the federal government absorbing the states’ budget problems. State budgets may be swamped with those needing temporary relief, and a contingency fund could help. But it should be a definite amount, not a precedent-setting, open-ended amount. (If the initial TANF allocation is not sufficient, Congress could appropriate another definite amount.)

The offending language is not in yesterday’s Senate version of the bill, but that provides little comfort. The attempt to undo welfare reform has not been transparent, and the conference committee provides the perfect closed-door environment for slipping in “such sums” language into the final bill without public scrutiny.

Welfare reform was arguably the most important legislative development of the mid-1990s. It is bad policy to jettison it with five words during an economic crisis.

All who are concerned about our nation’s unfunded obligations should be on guard against attempts to slip “such sums” language into any conference committee bill. Welfare policy is too important to change with a stealth maneuver.

Mr. Sasse, former U.S. assistant secretary of Health and Human services, teaches policy at the University of Texas. Mr. Weems, former vice chairman of the American Health Information Community, held the position of administrator of the Centers for Medicare and Medicaid services until last month.

Printed in The Wall Street Journal, page A15

I just wanted to point out an interesting tid-bit from President Obama’s first news conference he held two days ago.

President Obama in 2009

Some of the criticisms really are with the basic idea that government should intervene at all in this moment of crisis. Now, you have some people, very sincere, who philosophically just think the government has no business interfering in the marketplace. And, in fact, there are several who’ve suggested that FDR was wrong to interfere back in the New Deal. They’re fighting battles that I thought were resolved a pretty long time ago.

James K. Glassman 2009

Despite Franklin Roosevelt’s aggressive spending, unemployment reached 25 percent in 1933, fell only to 14 percent by 1937, and was back up to 19 percent in 1939.1 In the end, the New Deal did little or nothing to resuscitate the economy. Certainly, inept monetary policies helped prolong the Great Depression, as did tax increases, constant interventions in the conduct of business, and the erection of global trade barriers, beginning with the Smoot-Hawley Tariff in 1930, more than two years before Roosevelt took office. There was a stretch of twelve years from the stock-market crash to Pearl Harbor, and, during that time, fiscal stimulus simply did not jump-start the economy (or, in Keynes’s own metaphor, awaken Sleeping Beauty).

Ben S. Bernanke in 2000

Finding an explanation for the worldwide economic collapse of the 1930’s remains a fascinating intellectual challenge.

Wikipedia 2009 – Causes of the Great Depression

The causes of the Great Depression are still a matter of active debate among economists. The specific economic events that took place during the Great Depression have been studied thoroughly: a deflation in asset and commodity prices, dramatic drops in demand and credit, and disruption of trade, ultimately resulting in widespread poverty and unemployment. However, historians lack consensus in describing the causal relationship between various events and the role of government economic policy in causing or ameliorating the Depression.

Wikipedia 2009 – The New Deal

A number of economists believe the New Deal delayed economic recovery. A 1995 survey of economic historians asked whether “Taken as a whole, government policies of the New Deal served to lengthen and deepen the Great Depression.” Of those in economics departments 27% agreed, 22% agreed ‘with provisos’ (what provisos the survey does not state) and 51% disagreed. Of those in history departments, only 27% agreed and 73% disagreed.

UCLA economists Harold L. Cole and Lee E. Ohanian are among those who believe the New Deal caused the Depression to persist longer than it would otherwise have, concluding in a study that the “New Deal labor and industrial policies did not lift the economy out of the Depression as President Roosevelt and his economic planners had hoped,” but that the “New Deal policies are an important contributing factor to the persistence of the Great Depression.” They claim that the New Deal “cartelization policies are a key factor behind the weak recovery.” They say that the “abandonment of these policies coincided with the strong economic recovery of the 1940s.” Cole and Ohanian claimed that FDR’s policies prolonged the Depression by 7 years.

Perhaps President Obama would like to set the record strait for us about the Great Depression. He could start by updating the Wikipedia article.

James K. Glassman

Food for thought

By GUNNAR HEINSOHN

Dying nations are usually defined as those with fertility rates of 1.5 or lower. By that measure, 30 European countries are either dying today or — like France — seeing their cultures and populations transformed by growing ethnic and religious minorities.

Europe is shrinking just as the population in Islamic, African and Asian countries is exploding. In 2020, there will be one billion “fighting-age” men (ages 15-29) world-wide; only 65 million will be Europeans. At the same time, the Muslim world will have 300 million males, often with limited opportunities at home.

Little can be done to reverse Europe’s demographic fate. Germany’s 80 million inhabitants would need 750,000 skilled immigrants every year up to 2050 to offset the declining fertility rate that started in 1975. Even if such an unrealistic immigration level could somehow be achieved (only 10,000 skilled immigrants a year are arriving now), Germany’s median age would still jump to 52 from 42 while ethnic Germans would become a minority in their own country.

This isn’t the first time Europe has found itself tottering on the edge of extinction. Throughout the 1400s, outbreaks of bubonic plague and pressure from conquering Muslim armies reduced Europe’s population to 40 million from 70 million. In 1484 Pope Innocent VIII responded to the crisis by decreeing the death penalty for “persons of both sexes who by accursed charms and crafts, enormities and horrid offenses, slay infants yet in the mother’s womb (or who) hinder women from conceiving.” Midwives, who were also experts in birth control and abortion, were prosecuted and killed.

The results were immediate, producing fertility rates as high as in Gaza or Niger today. By 1510, the number of male births in England had almost doubled. After 1500 and right up to 1914, West European women raised on average about six children, twice as many as during the Middle Ages.

The European economy couldn’t keep up. Because a father’s land went to his oldest son, the younger brothers were often left to fend for themselves. They quickly found an outlet. In the 16th century, Spain called its young conquistadors “Secundones,” second sons, those who don’t inherit. Starting with Columbus’ second voyage (1493), Europe’s surplus males (representing about 10% of the world’s fighting-age males at the time) began the conquest of the world. And despite their wars around the globe and the 80 million who died in Europe’s domestic wars and genocides, their population rose tenfold to 400 million. The original population bomb was a weapon made in Europe. Over the next few centuries, Europeans took control of 90% of the globe.

Who was to be master in Europe? In the early 1800s, France, West Europe’s most populous nation for 800 years, made its last bid. At the time of Waterloo, France was able to draw on 5% of the world’s males of fighting age. It took an alliance of Great Britain (10 million people) and Prussia (also 10 million) to prevail over France’s 27 million. After 1861, Germany passed France’s population and shortly afterwards defeated its neighbor across the Rhine. At the beginning of the 20th century, Europe’s share of fighting age males had grown to 35%, with 10% belonging to the empires of Berlin and Vienna alone. In 1914 these two behemoths used their population advantage to make a bid for world supremacy. But their campaign to capture Eurasia’s land mass failed to take account of a newcomer to the world stage. Though separated by an ocean, the U.S. commanded about the same demographic and industrial potential.

Japan, Italy and Germany became the last great powers that tried — and failed — to take territories away from other leading powers. After 1945 Europe lost every war it fought, from Indochina, to Algeria to Timor. Euphemisms such as “emancipation of the colonies” hide the true causes behind this chain of defeats. If Europeans had continued to multiply like in its imperialistic prime, the world would still tremble before their armies. In just 100 years, Muslim countries have duplicated the tenfold growth that Europe experienced between 1500-1900. In the last century, the Muslim population skyrocketed to 1.4 billion from 140 million.

If Europe had merely matched the fourfold increase of the United States (to 300 million from 75 million between 1900-2006), the continent’s 1.6 billion would still dwarf China (1.3 billion) and India (1.1 billion). Yet, Europe’s share of the world’s fighting-age males, which stood at 27% in 1914, is lower today (9%) than it was in 1500 (11%). Thus, the new clothes of European “pacifism” and “soft power” conceal its naked weakness.

With a fertility rate at the 2.1 replacement level, the U.S. is still defendable. But how many times can America send out their only sons to prevent all those second, third or fourth sons from engaging in acts of violence abroad? In some ways, the faster Europe collapses the better it will be for the U.S., whose chances of defeating global terrorism would improve by a panic-driven influx of the Old World’s best, brightest and bravest ready to strengthen it economically and militarily.

The alternative to the terrorism of the Islamist secundones will not be peace but — as it was for their “Christianist” predecessors in Peru, Mexico and India — conquest. Terror is merely conquest’s little brother.

Mr. Heinsohn is professor of sociology at Bremen University and founder and president of the Raphael-Lemkin-Institut.

And the pro-gay marriage crowd make the innocuous claim that if they’re are recognized to marry that they wont force Churches to perform same-sex marriages. I don’t believe them in the slightest.

EHarmony to offer same-sex matches after New Jersey settlement

Coming soon to EHarmony — Adam and Steve.

The Pasadena-based dating website, heavily promoted by Christian evangelical leaders when it was founded, has agreed in a civil rights settlement to give up its heterosexuals-only policy and offer same-sex matches. Started by psychologist Neil Clark Warren, who is known for his mild-mannered television and radio advertisements, EHarmony must not only implement the new policy by March 31, but also give the first 10,000 same-sex registrants a free six-month subscription.

“That was one of the things I asked for,” said Eric McKinley, 46, who complained to New Jersey’s Division on Civil Rights after being turned down for a subscription in 2005.

The company said that Warren was not giving interviews on the settlement. But attorney Theodore Olson, who issued a statement on its behalf, made clear that the company did not agree to offer gay matches willingly.

“Even through we believed that the complaint resulted from an unfair characterization of our business,” Olson said, “we ultimately decided it was best to settle this case with the Attorney General since litigation outcomes can be unpredictable.”

The settlement, which did not find that EHarmony broke any laws, calls for the company to either offer the gay matches …

I recently downloaded a copy of Windows 7 Milestone 3 (M3). Curiosity had gotten the best of me. This is the same copy of Windows 7 that Microsoft has just passed out at its recent Professional Developers Conference, PDC. At this conference Microsoft demoed the newest update to their UI (or UX as they like to say now) but unfortunately those new features aren’t in this build as they weren’t stable enough to pass out to the public.

So after I downloaded Win7 M3 I wanted to get it installed to play around with it. I had two options.

1. Microsoft Virtual PC
2. My old PC I built in 2000/2001.

I figured that since I don’t use my old PC for anything any more I’d see how it would fair. The following are my notes.

Windows 7 M3 Notes – Oct 31 2008

Hardware
1GHz AMD Athlon
512MB of PC133 RAM
120GB HDD
Motherboard ABIT KT7A

Turn on PC 5:40PM
Win7 DVD Boot Splash Screen, Pressed “Install Now” – 5:42PM
Create 40GB Partition – 5:44PM
away (Halloween Stuff)
Create Password Screen 6:11PM
Enter
-Password
-Password Hint(Required)
-Product Key
-Windows Update Settings
-Date & Time

Preparing Desktop 6:13PM
Usable Desktop 6:14PM

Total install time: 34 min’s

So, yes it installed just fine on my 7 year old PC. However, there were problems that I encountered after the install that I couldn’t resolve.

The biggest problem of all was the lack of driver support for old hardware. I couldn’t find drivers for either of my two old 10MB/s NICs, my Linksys Wireless B NIC, nor my ATI Radeon 8500. So I was unable to get any network connection or use my graphics card in any real capacity. However, after having those problems I was still able to use Windows 7, obviously I didn’t have Aero enabled and the initial indexing was taking a toll on the HDD but it was a fairly usable experience for a 7 year old PC running a beta of the latest Microsoft Windows. I was impressed, it ran comparably to Windows XP with generic graphic drivers, usable but a fair amount of ‘clipping.’

Here is a pic from the System Info page.

Here is the breakdown of my Windows hardware score (the reason for the 1.0 is due to the fact that I can only install the default SVGA drivers and not any specific ATI drivers). Also I believe that the HDD is 3-4 years old, which is probably why it scored higher.

So that basically ended that experiment. On the bright side I now know for sure that my old PC needs to be junked… even if it still runs, there isn’t much use for it for me. So sad.

I just finished reinstalling Win7 on Virtual PC so I can play around with it a bit more. A quick note. I used the new Ribbonized version of MSPaint and was pleasantly surprised that, by default, it saves files in the PNG format. While it supports PNG in Vista the default is JPG.

Interesting.

Update

I played around with it a little bit more this morning. I still couldn’t find any Vista Drivers for my Radeon 8500, however I decided to try and install the XP drivers. I was able to install them through the Device Manager but not through the ATI Catalyst install manager. Also every time I shut down or reboot with the XP drivers I get a BSOD. The desktop performance improved slightly but I wouldn’t put it comparable to WinXP with the proper drivers. I was able to increase the Graphics score.

After seeing my Radeon 8500 get a Graphic score of 1.9 I can see why neither ATI or Microsoft would want to support 7 year old hardware… If I still had my 3dfx 3500 I’d be curious to see how Win7 and Vista score it.

You can see from msinfo32 that the final BIOS update was from 2002.