United States News Digest

Congress: We Were Snookered on Bailout

Oct. 31 (EIRNS)—Members of Congress of both parties have begun to protest that they were snookered by Treasury Secretary Henry Paulson's roadshow for the bank bailout bill. For the moment, the protest is on relatively secondary or parochial issues (compared to the insanity of trying to bail out the corpus of derivatives), but the fact of the challenges is of note.

One of the major protests comes from members of the Ohio delegation, over the use of bailout funds for PNC to take over Cleveland's National City Bank. House Minority Leader John Boehner sent a letter yesterday to Paulson, urging (R) him to ensure that acquisitions and executive bonuses aren't paid for with money provided under the Troubled Assets Relief Program (TARP). "These are not the types of expenditures you described during your many discussions on Capitol Hill earlier this fall, and these certainly are not the types of expenditures Members of Congress envisioned when the plan was sent to the President earlier this month," Boehner's letter reportedly said.

New York's Sen. Charles Schumer (D) criticized Paulson for allowing an un-debated tax ruling to become law. It permits companies which are taking over other companies—as in Wells Fargo's takeover of Wachovia—to count the taken-over bank's losses as their own tax losses, and thus offset future taxes for years to come. Schumer said, "I also fear that the notice could ... [lead] to more consolidation in the financial industry than would be necessary," as well as that "the notice, which was never debated by Congress, could end up costing taxpayers tens of billions of more dollars, on top of the hundreds of billions of dollars already approved by Congress in the financial rescue plan."

Even Congressman Bailout himself, Rep. Barney Frank (D-Mass.), has criticized the fact that the Treasury funds are not being used for increased lending: "Any use of these funds for any purpose other than lending—for bonuses, for severance pay, for dividends, for acquisitions of other institutions, etc.—is a violation of the terms of the Act," Frank said today. Frank announced hearings Nov. 12 and 18 by the House Financial Services Committee to review how the bailout is being implemented.

Sen. Chris Dodd (D), investment banker Felix Rohatyn's man in the Senate, says he is considering drafting a Federal statute that allows the government to reclaim Federal money from firms that don't fulfill their commitments. Like Frank, Dodd has announced hearings on the bailout for November.

Thus begins the chase after the horse which was already let out of the barn.

Arnie: Don't Blame Me, 'It's Just the Math'

SACRAMENTO, Oct. 30 (EIRNS)—California's fascist Gov. Arnie Schwarzenegger declared an unofficial state of emergency yesterday, announcing that he will call the legislature back for a special session, most likely on the day after the election. The free-fall in state revenues has given him the opening he has been waiting for, to literally go for the kill against social services and education spending in the state. The budget office has leaked that revenues were at least $5 billion less than anticipated, when the so-called balanced budget deal passed 85 days late in September. At the time, Schwarzenegger acknowledged that the income was $3 billion short of a balanced budget. Added to the $5 billion, the shortfall is now $8 billion, and could go even higher. According to Senate President Pro Tem Don Perata (D-Oakland), the shortfall is closer to $10 billion.

In his statement yesterday, Schwarzenegger said, "Since everyone has to take a haircut here, it's natural that education gets hit, law enforcement gets hit, prisons are going to get hit, and also health care is going to get hit. So, it's just the math, it's not me; it's mathematics that tell you that you have to make cuts in those kinds of different areas." This is some haircut he is proposing—it's more like a decapitation!

Gates Intervenes Into Iran Policy Debate

Oct. 29 (EIRNS)—Secretary of Defense Robert Gates made an important factional intervention on Iran policy yesterday during a speech at the Carnegie Endowment for International Peace, which will have effects not only in the waning days of the Bush/Cheney regime, but setting policy into the next Presidency. While Gates' remarks were otherwise on U.S. nuclear deterrent policy, in response to a question on Iran, he told his audience that, "If you could have a verifiable arrangement that the Iranians had forsworn nuclear weapons and a nuclear warhead program, that the other countries, the international community, would probably be willing to work with the Iranians in terms of figuring out a way where they could get enriched uranium for civil power civil nuclear power, where there have been talks about them using a Russian enriched uranium bank and so on."

He added, "If you could get verifiable arrangements to all of that, I don't think that the international community is concerned about Iran having civil nuclear power to produce electricity." He said that the focus has to be on political and economic pressures. "The key, though, is getting them to stop the enrichment process and then beginning to see what we can work out," he said. "I think there's potential there, but so far they've not shown much interest in it."

GOP and Newsweek Hit Obama with Rezko

Oct. 27 (EIRNS)—After LaRouche PAC posted its hard-hitting video, What's Wrong with American Culture: The Case of Tony Rezko, major U.S. institutions including the Republican National Committee and Newsweek began to dig deeper into the story of Obama's ties to Rezko, who is still awaiting sentencing after being convicted on 16 counts of corruption and fraud. The RNC released a video yesterday called "Obama's House of Cards," that details Obama's "18 years" of dealings with Rezko. Newsweek reports this will be appearing as TV ads against Obama, but so far, the video has only appeared on the web. Going back to 1991, the narrator says that Obama went to Rezko for money to run his election campaign, and Rezko "went to Senator Obama for government contracts."

The video pictures Rezko and Obama with the notorious British-based financier Nahmi Auchi, but never uses Auchi's name, only identifying his photo on the screen as "Tony Rezko's Billionaire Buddy." Nor does it mention Britain, as the base for Auchi's money. The narrator says, "Rezko raised more money for Obama's Senate campaign, and Obama even attended a reception for an Iraqi billionaire who engaged in arms deals with the Iraqi regime in the 1980s." The video then says "when it came time to buy a house, Obama went to Rezko...." and begins a detailed narrative about how Obama and the Rezko families concluded a real estate deal that "closed on the same day." The video moves on to show headlines, or play Obama's voice denouncing the Rezko ties; it concludes with a picture of Obama and the words: "Barack Obama's Friend. Fundraiser. Felon. Fault."