From Volume 38, Issue 8 of EIR Online, Published Feb. 25, 2011

United States News Digest

Angelides Makes Waves in Sacramento

Feb. 19 (EIRNS)—Despite very little press coverage, former Financial Crisis Inquiry Commission chairman Phil Angelides' book-signing event in Sacramento attracted at least 100 people, according to the San Francisco Chronicle, which takes note of the Angelides Report's status as a bestseller. "There's a tremendous amount of anger about what happened—people see that Wall Street is fine, and bankers are complaining in Davos [Switzerland; the World Economic Forum] that people are too hard on them, while meanwhile there are millions of people out of work and losing their homes," he said. "That this book is selling so well tells me that people are mad, and want to know what happened."

In a Feb. 17 radio interview from Sacramento on Capitol Radio (, Angelides cited, among the causes of the crisis, the deregulation of derivatives in 2000, and the fact that "Glass-Steagall, which separated banking from risky securities, was wiped away."

He said that former Fed chairman Alan Greenspan had told the FCIC that he had been right 70% of the time and wrong 30% of the time, but that Angelides had replied that "the captain of the Titanic was right 99% of the time. It makes a difference what you're wrong about."

Asked how he had personally experienced the FCIC's investigation, he said that it was as if he had gone to his local community bank, opened the door, and suddenly found "a casino floor as big as New York, New York."

Death Panels, Obamacare De-Funded in House Spending Bill

Feb. 19 (EIRNS)—The House of Representatives has voted to block funding for the Independent Payment Advisory Board (IPAB), the brutal cost-cutting "death panel" which is intended to slash both payments for Medicare and for private health insurance as well. Rep. Nan Hayworth (R-N.Y.) had introduced Amendment #567 to the House Appropriations Bill, arguing that IPAB would be tasked with lowering Medicare costs, but that it would do this by reducing payments to hospitals, and shutting off access to care.

Hayworth's amendment was passed by voice vote this morning, as the House neared passage of the spending bill containing over $60 billion in spending cuts. The final vote on the entire package, which took place about 4:40 a.m., was 235 to 189.

Seven other amendments to prohibit funding for all or parts of Obamacare also passed, and while most of these amendments are given no chance of passage in the Democratic-controlled Senate (although in a mass-strike period, anything can happen), some Congressional Democrats did publicly opposed IPAB in the last session.

Obama Cutting Deal with GOP To Implement Catfood Commission

Feb. 18 (EIRNS)—The White House has opened back-channel discussions with Congressional Republicans to test their willingness to negotiate about cutting the costs of Medicare and Medicaid, closing what is called Social Security's "long-range insolvency," and revising the tax code, the New York Times reported Feb. 15.

Obama himself said on Feb. 15 that he and GOP leaders will "be in discussions over the next several months" on entitlement cuts. Senate Majority Leader Mitch McConnell (R-Ky.) indicated that he is ready to negotiate now with Obama over entitlement costs. "It doesn't have to be public," he said, "but we're still waiting for the President to lead."

Sen. Mark Warner (D-Va.), one of the ringleaders of the "Gang of Six" in the Senate which is attempting to get the Deficit Commission's genocidal schemes implemented, indicated that he fully expects Obama to be on board. In a CNN interview on Feb. 17, Warner said that Congress is focusing on domestic discretionary spending, which is only about 12% of the budget. "Unless we want to whack a lot of programs that actually do some good, you have got to take on the entitlement issues as well," Warner said. "I do think the President has continued to say he's open to this.... But you may need some of us, in a bipartisan area, to kind of go out in front and, again, take some of these initial arrows. But, at the end of the day, we won't get this done unless the administration is part of this long-term solution set. And I think he will be there."

Obama Administration Tells Arizona: Okay To Cut Medicaid Rolls

Feb. 17 (EIRNS)—Health and Human Services Secretary Kathleen Sebelius approved, in a Feb. 15 letter, Arizona Gov. Jan Brewer's proposal to save $900 million, by cutting 280,000 people—250,000 childless adults, and 30,000 parents of poor children (if the parents' annual incomes exceed $10,830)—from the state's Medicaid plan, during fiscal 2012. These cuts can be made, notwithstanding the requirement in the Obama Administration's Affordable Health Care Act, that states maintain their eligibility levels for Medicaid until the Secretary deems the states' new health insurance exchanges to be fully operational; the penalty for failing to maintain the eligibility levels, is a loss of eligibility for Federal matching funds.

The trick here, centers on the fact that the states' existing Medicaid programs include, beyond the federally mandated baseline medical services, "optional services," which the particular state had added in better economic times, often through the Federal matching funds. Many of the states—apparently including Arizona—have asked whether they can get a waiver from HHS for the "optional" portion of their programs.

Sebelius told Brewer that no such waiver is needed by Arizona, because, as the New York Times explained today, "Arizona's expansion of Medicaid to cover low-income childless adults had been enacted a decade ago with special permission from the Federal government, known as a waiver. That waiver, Sebelius wrote, is time-limited and expires Sept. 30," and no law requires the state to maintain that expansion beyond that date. Although the Times does not mention the cuts of less-indigent parents, reports on the California Healthline website and in the Washington Post indicate that those cuts are approved on the same theory.

GOP Lawmaker Garrett Defends Derivatives

Feb. 16 (EIRNS)—Rep. Scott Garrett (R-N.J.), chairman of the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, defended the cancerous derivatives market in an opening statement on Feb. 15 at a hearing on the implications of the aspect of the Dodd-Frank bill that would slap the wrist of the derivatives market. Garrett, who will be opposed for reelection in 2012 by LaRouche Democrat Diane Sare when she wins the Democratic nomination, has publicly attacked the Preamble of the U.S. Constitution's commitment to promote the general welfare. His lying defense of derivatives is entirely consistent with his attack on the Constitution he has sworn to uphold.

In his opening remarks, Garrett said that the Dodd-Frank bill "will have profound effects on our derivatives markets and our broader economy."

"But as this freight train of rulemaking speeds down the tracks towards a mid-July final rulemaking deadline, not enough alarm has been raised over the potential devastating effects this rulemaking will have on the U.S.-based derivatives markets."

Garrett then said that several market participants had told him that this "rulemaking ... would literally spell the end of U.S.-based derivatives markets. They would cease to exist."

Instead of rejoicing, Garrett claimed that this would mean a loss of jobs by making it impossible for many of our financial firms to compete with the rest of the world.

"The U.S. has already lost millions of manufacturing jobs over the last several years, but has remained a world leader in financial services. If there rules get implemented as is, that will no longer be the case."

U.S. Bankruptcy Judge Rules Against MERS

Feb. 15 (EIRNS)—U.S. Bankruptcy Judge Robert E. Grossman issued a ruling in the case against MERS, the Mortgage Electronic Registration System, set up in 1996 by Fannie Mae, Freddie Mac, and several of the big banks, primarily to allow mortgage originators to more easily securitize mortgages and bundle them into mortgage-backed securities, thus skirting the laws and the fees involved in transferring mortgages. MERS also facilitated a huge number of foreclosures in cases in which the actual ownership of the mortgages was, at best, obscure.

The judge, in Central Islip, N.Y., ruled that, "MERS and its partners made the decision to create and operate under a business model that was designed in large part to avoid the requirements of the traditional mortgage-recording process. The court does not accept the argument that because MERS may be involved with 50 percent of all residential mortgages in the country, that is reason enough for this court to turn a blind eye to the fact that this process does not comply with the law." Grossman rejected several concocted excuses put forward by MERS as to why their actions were legal—many of their arguments contradicting each other.

Bloomberg commented that Judge Grossman said he knew the decision would have a significant, potentially devastating impact on the (already collapsed) national mortgage market.

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