The views expressed in any article published in this blog are the author's own and do not necessarily reflect the views of Joseph Foster or Bob Lupoli.

Tuesday, December 7, 2010

New Democrats? Tax Plan Deal?

Joe: glad to hear your book "Destruction of America" is still on track. I'm a little angry with American politics today. Please see the article from today, below, regarding the tax deal, I say big deal! In return for this deal unemployment benefits are extended - greatly and so the cost will be very expensive in that the U.S. Gov., wil pay more and more money for extended unemployment. Imagine being 58 like some of my friends and acquantances, would you work to break even? Imagine wanting a break for a few years from being a highly paid executive, unemployment compensation might be something you might like and even maybe need for an extended period of time. Passing a simple bill for extending the current tax code or current tax breaks, crazy... since when is $250,000 wealthy? Well to do, doing fine, whatever, but wealthy - as in you'll never have to work for the rest of your life... make it a million at least. -Bob

Barack Obama's tax plan could squeak by with GOP helpBy CARRIE BUDOFF BROWN & JAKE SHERMAN | 12/7/10 6:55 PM EST Updated: 12/8/10 1:18 AM EST
Don’t be fooled by all the shouting. President Barack Obama’s tax-cut deal likely will squeak through the Senate, according to congressional aides, propelled by a coalition of Republicans, moderate Democrats and members won over by last-minute tax sweeteners.  The House, however, is more difficult to call – but there is a path to success there as well, and it likely includes wooing some wavering members by adding a few more specialized tax breaks, aides said.  House Republicans expect nearly all of their 179 members on board and could make up a roughly 40-vote shortfall with the help of Blue Dog fiscal conservatives in the Democratic party.

House Democrats, clearly miffed, say if Obama wants the bill, he’s got to find the votes, which isn’t assured.  “Making the case for this falls on the shoulders of the administration, not House leaders,” said one House Democratic aide. “The White House cut this deal so they gotta defend it.” House Democrats planned to huddle in the basement of the Capitol on Tuesday night to hear the caucus’s concerns, which range from the two-year extension of tax cuts for the wealthy, to the estate tax provisions, to the way the deal went down. The White House is expected to send a Vice President Joe Biden on Wednesday to talk members through the plan, several House aides say.  Still, some Blue Dogs could break from the bill, as could moderate Democrats and even some recently defeated Democrats who accuse the GOP of hypocrisy – for attacking the high price tag the health care and stimulus bills but signing on to this $900 billion or so plan.

New Democrats, the pro-business wing led by New York Rep. Joe Crowley, signaled openness to the bill, but only if bonus depreciation and research and development tax credits are included in the final product. Progressives on Tuesday held their ground, expressing increasing frustration with Obama. Rep. Anthony Weiner (D-N.Y.) said the president went from "zero to compromise in 3.5 seconds." California Rep. Lynn Woolsey, a leading progressive, expressed strong opposition to the deal. "I'm not whipping against it, but I don't like it," she said.  "I don't think that the president should count on Democratic votes to get this deal passed," Weiner told reporters after leaving a closed-door meeting Tuesday night.

House Republicans think the majority of their conference will be behind the plan if it gets to the floor. Even the most conservative budget hawks, like Wisconsin Rep. Paul Ryan, are supporting the compromise, which has been criticized by groups like the Club for Growth calling it “bad policy, bad politics, and a bad deal for the American people” based on the estate tax provision and other debt-incurring spending.  House Democrats are skeptical, though, that Republicans will vote for the bill, and theorize that some may try to hold out for a better deal, but the GOP denies that’s the case.  In the Senate, Majority Leader Harry Reid (D-Nev.) told reporters the votes weren’t there for the president’s package – right now. But three senior Senate Democratic aides conceded that Reid would ultimately find enough Democrats to break a filibuster, if they are able to add a few more tax proposals targeted as the middle class and as long as Republicans continue to stand behind the deal.

'The White House cut this deal so they gotta defend it,' said one Democratic aide. “I think we’re going to have to do some more work,” said Reid, who is expected to propose changes to the package based on conversations with his members. Republicans aides expect as many as 39 GOP senators to support the deal, although the number could dip lower depending how the package is received by voters.  They expect several defections from the right flank of their party. Sens. Tom Coburn (R-Okla.) and Jim DeMint (R-S.C.) have expressed concern about extending the jobless benefits without paying for them. Retiring Sen. Jim Bunning (R-Ky.), as the first Republican to wage this fight earlier this year, could also go against the deal.

Republicans will also need to watch their deficit hawks, who came to Washington promising to rein in federal spending only to vote for a bill that costs about as much as the derided 2009 stimulus bill. Republicans argue that tax cuts are different – it’s about returning taxpayer money. But already, Sen. George Voinovich (R-Ohio) has said the country can’t afford an extension of the Bush tax cuts without paying for them.

A package of additional tax proposals could win over the last batch of Democratic senators, a senior aide said Tuesday. “I think there is a certain amount of surprise – and even shock in the caucus,” said Sen. Dianne Feinstein (D-Ca.). “A few people were able to speak [at the lunch with Biden], not a lot.. … But there’s a lot of surprise – it’s a big, surprising package.“We have no (cost estimate), we have nothing in writing – we have a list of this, and this and this,” she said. “Will this be a good package for the future, will it work, or will we do something that reduces revenues by $1 trillion and doesn’t work and we are stuck with it?”
Manu Raju and Scott Wong contributed to this story.

US Housing Disaster of the Century!

Bob:  My book, “Destruction of America’’ is still on track to be published Jan 2011. Please see my response to an article on “shadow inventory” on I have been in the real estate & housing business for over 35 years and well qualified to address the issue of US housing. U.S. housing will remain depressed for over seven years and may decline by approximately another 25% from today’s level. The issue many analyst attribute as supply demand and the number of foreclose is a major factor, but many analyst are missing another importantfactor, the destruction of the American middle class brought about by Globization of Labour and the deindustrialization of America.

The following is recommended and may help housing recovery; Introduction of a 10 years fixed interest rate of 3% payable by the mortgagee  Interest only, loan to be restricted to owner-occupier of the home. At the end of the 10 years the Mortgagor shall be entitled to 50% of the of the appreciation the other 50% to the homeowners, where the home is sold prior to the end of the 10 years mortgage period the mortgagor shall be entitle to 100% of the appreciation, other factors may be introduced into this mortgage to fine tune the concept. The borrower income to qualify for such mortgage should be based on a 5% mortgage, speculation shall be strictly prohibited and the government shall have the right to seize any profit from such speculation. Some consideration be given to commercial property Investment mortgage. The question may be asked if the Federal Reserve Bank is able to loan Banks  At almost 0% interest, why are not the American people another factor foreign nationals as a second home may also be offered such a mortgage, again there should be a strict restriction , that the property may never be rented, any violation the homeowner shall be subject to a severe penalty and the home confiscated. –Joseph Foster author , ‘’Destruction of America’’ pub date Jan 2011

The 2011 US housing market outlook: Unsettled, underwater and unsold
Daily  DEC 6 2010
Given the importance of the housing market to the US's balance sheet, it's no surprise that many observers are looking for any evidence that prices on family homes have finally bottomed out. But that positive statistic must be placed in a longer-term context of declining prices, bulging inventories of unsold homes and ongoing legal improprieties in the nation's foreclosure machinery. And against that background, the NAR's news doesn't feel all that impressive. The rise in sales agreements is also clouded by reports that new-home sales fell 8.1% in October to a seasonally adjusted annual pace of only 283,000, a near-record low, while existing-home sales declined 2.2% to an annual rate of about 4 million. In the third quarter, home sales tumbled 25% to a 4.16 million seasonally adjusted annual pace from the previous three months, a rate that was 21% below the 5.28 million clip of 2009's third quarter.

Some real estate analysts foresee another three years of price declines as the massive inventory of underwater and foreclosed homes is slowly sold off, and we need look no further than the basics of supply and demand to understand why: Analysts estimate that as many as 12 million more properties will be put up for sale over the next few years. If about 4 million homes are sold annually, then it would take three years to clear the backlog.

Homeowners in a Money-Losing Position
The so-called "shadow inventory" of unsold homes -- bank-owned properties that are being held out of the market by lenders -- is also rising. Though banks have sold around 700,000 foreclosures in the past nine months, that is down 25% from last year's sales. Analysts from Morgan Stanley estimate that the number of bank-owned and foreclosure-bound homes that have yet to hit the market is close to 8 million.

In light of this imbalance between supply and demand, some real estate observers expect house prices to fall another 8% from current levels. Nearly one-quarter of all U.S. homeowners with a mortgage -- 11 million borrowers -- owed more than their homes were worth as of June 30, according to real estate analytics firm CoreLogic (NYSE: CLGX) nother 2.4 million borrowers had less than 5% equity in their houses and would likely lose money on a sale after paying broker fees and closing costs.

Given the millions of homes in the foreclosure pipeline, it's little wonder that prices are falling in most markets. Demand for foreclosed properties fell off a cliff in the third quarter, providing more evidence that housing appears to entering a second leg down after prices and sales recovered in 2009 and early 2010.

Home Equity Still Way Down  
According to the Federal Reserve's most recent Flow of Funds Report, homeowners' equity is down about $6 trillion from the 2006 top in real estate prices. While the recovery in home valuations boosted homeowners' equity from a low of $6 trillion up to $7 trillion, homeowners' equity as a percentage of home values is still down from a high near 60% to 40%. Since one-third of American homes are owned free and clear, most of that equity resides in homes that are unencumbered by mortgages. Home mortgage debt has slipped modestly from $10.5 trillion to $10.15 trillion, largely as a result of lenders' write-downs in short sales -- where homes are sold for less than the mortgage owed and the bank accepts the loss -- and foreclosure auctions.

For those watchers, November 2nd had a bit of good news: The National Association of Realtors reported that its index of sales agreements for previously occupied homes rose 10.4 % in October. So, while the recent recovery in sales and prices has lifted homeowners' equity somewhat, households have still lost $6 trillion in equity, and one-quarter have no equity at all and owe more on their mortgages than their homes are worth. Household mortgage debt is still close to the levels reached at the peak of the housing bubble.

Foreclosure woes and tightening standards cloud the market
Though lenders insist they have restarted foreclosure proceedings with more careful attention to due process, a host of legal actions are calling that claim into question. In one recent case, US Bankruptcy Court Judge Judith H. Wizmur rejected a foreclosure claim on the home of John T. Kemp of New Jersey, ruling that his mortgage company had failed to deliver the note to the trustee as required when it sold the mortgage. That may leave the new trustee, Bank of New York Mellon, with no standing to foreclose, and the ruling casts doubt on the legality of many, many other foreclosures.

Other legal battles have erupted over short sales as the primary mortgage holders have been stymied by lenders holding second mortgages who refuse to sign off on sales that give them little of the proceeds. Meanwhile, real estate attorneys are poring over thousands of records, scanning for serious errors which could negate foreclosure claims by lenders, while holders of mortgage-backed securities are pushing banks to buy back improperly transferred mortgages. Modifications are working only half the time

The market of possible buyers has shrunk as well. As the Federal Housing Administration has guaranteed more mortgages in recent years, the default rate on FHA loans has skyrocketed. In an attempt to stem this rising tide of foreclosures, lenders have raised their minimum credit score on FHA-insured loans to 640 from 620. That will exclude about 6 million people from the pool of potential home buyers, according to FICO, which created the formula for the ratings. With over 9% of prime mortgages now in default, it's especially troubling to industry observers that the loan modification programs designed to save households from future defaults are experiencing redefault rates of 50%, meaning half of the households that receive mortgage modifications end up defaulting again within a year.

Add all these factors up, and it seems likely that the housing market will remain unsettled in 2011

Monday, December 6, 2010

Can U.S. States be Bankrupt?

Joe:  can a US state go bankrupt? In short the answer, like most political answers is NO (but – yes) or oftentimes it’s the other way around. I think probably what will happen is the US Government will end up bailing out the states and in return will gain more control. Interested in any comments you may have. - Bob

State Bankruptcy Fears May Be Overstated
Despite all the talk of state bankruptcies, states cannot legally go bankrupt.
Investment Dealer’s Digest
By Andrew Ward, The Bond Buyer
January 12, 2009
SAN FRANCISCO--Is your state about to go bankrupt?
Given the cries of "Bankruptcy!" and "Fiscal Armageddon!" echoing through state houses and editorial pages from California and Arizona to Illinois and Alabama, you might just think so. Arizona Treasurer Dean Martin last week warned that his state's lawmakers needed to act quickly "or the state will be looking at bankruptcy next year." California newspapers have been issuing similar warnings, though Gov. Arnold Schwarzenegger prefers "fiscal Armageddon" to "bankrupt" in explaining his $40 billion budget deficit.
The former action star's phrasing is probably better. States are out of luck when it comes to the sweet protections of US Bankruptcy Court. They can go broke. They can default. California and Arizona may pay some bills with IOUs. They just can't be bankrupt in the legal sense of the term. "States can't file Chapter 9 bankruptcy protection," said James Spiotto, a municipal bankruptcy expert at Chapman and Cutler LLP in Chicago. The municipal bankruptcy code limits filings to "municipalities" or an "instrumentality of a state."
The Congress intentionally excluded states when they wrote the law in the 1930s. Spiotto said the reason is that the US Constitution guarantees states' rights and limits the power of the federal government over states. "They are sovereigns just like United States, just like Brazil or any other country," he said. "The federal government and state governments are separate and sovereign bodies under the 10th and 11th amendments." So even though Arizona could be the Ecuador or Argentina of municipal finance, it can't follow municipalities like Vallejo and Orange County--both in California--into the bankruptcy courts. Ecuador last month repudiated $3.8 billion of bonds owed to foreign creditors. Argentina defaulted on $81 billion of debt in 2000. Brazil, for the record, hasn't defaulted since 1990 and protested Ecuador's default.

Lest Americans feel too superior or comforted, Spiotto says at least 11 US states did repudiate their debts in the 1800s. The majority were Southern states that didn't think they should pay back debts incurred by Northern carpetbaggers after Reconstruction. Ratings analysts said that even in the current steep economic downturn, all 50 US states remain solid investment-grade credits, and the fact that governors and treasurers issue dire warnings when budgets fall out of balance is part of the reason. "States tend to have well-developed budget and revenue monitoring processes," Standard & Poor's analyst Robin Prunty said last month in a report on state credit quality. "Actively identifying the stress derived from the current revenue climate and implementing difficult and what may be politically unpopular spending and revenue measures have been the key elements of credit stability to date."
The day after Arizona Treasurer Martin warned of bankruptcy, Standard & Poor's reaffirmed the state's AA credit rating, based on the "expectation that the Legislature will make expected necessary and timely budget adjustments to offset further revenue declines and a widening budget gap due to economic weakness."
California's constitution requires that the state make debt payments before other spending. Treasurer Bill Lockyer--who has himself criticized the state's "Banana Republic" budgeting--has repeatedly said that means bond investors are safe even amid rolling budget crises.

By Maggie’s Farm November 22, 2010
Maggies Farm – We are a commune of inquiring, skeptical, politically centrist, capitalist, anglophile, traditionalist New England Yankee humans, humanoids, and animals with many interests beyond and above politics.
The end of the line is rapidly approaching for unsustainable government spending. The states will be the first to reach that station. The arrival will be a painful crash. The impact will reshape much of the US government policies of the past half century.  The triage of those affected will raise bloody howls of anguish, and none will escape the effects. Those who survive the fittest will be those most adaptable to a renewed America of more effective use of personal and financial resources. All will face difficult choices. True need will be better defined, to protect those really unable to cope.  True merit will be better rewarded.

Most agree that the root cause of the crash, the bulk of most of the deficits, is bloated government policies and the agencies that implement them. Some argue, instead, that the gap be filled by increased taxes, not facing that spending excesses will then require more again, further reducing the incentives to produce and afford taxes. I’m not one to say that government workers goof off more than private industry workers. It’s not their work ethic that I fault. It is the policies that political leaders set them on that are at fault both for the financial ruin that most states and the federal government face and for the frustration expressed by taxpayers over servicing a better paid civil service than themselves.

A conservative commenter thinks that President Obama will act with his “natural tendencies to ‘rescue’ and ‘control’ things” and that “The nature of his response could determine his tenure at the White House.” A liberal commenter thinks that former US Senator Alan Simpson’s remark, that “the blood bath will be extraordinary” in April when the federal debt limit comes up for a required vote to increase it, when – the commenter fears – “we can only hope that the nation that emerges from that blood bath is still one we recognize.” (Republicans will require spending cuts.)

The public mood is contradictory. Most want someone else’s ox to be gored. Increase someone else’s taxes. Cut someone else’s entitlement. Slash government payrolls. Don’t eliminate the program that benefits me. This time, however, as in the case of California’s continuing $25+ billion structural deficit, over a quarter of its budget, there are no more cans and the end of the road is before us. Leaving it to the politicians has meant cost-cutting nibbles and kicking the can down the road with accounting tricks. Court challenges have often resulted in reversals of spending cuts, due to judicial quibbles, activism, or faulty drafting of the cuts.

Federal legislation would be needed to allow states to declare bankruptcy, or to forbid bailouts of the states, or the Congress may simply refuse to bail out the states. More howls, and more judicial meddling.  But, it is the necessary next step, if Congressional budget-hawks have the wings to withstand downdraft counter-pressures from many voters at home and, instead, soar to responsibility. State legislators and governors will be forced to make hard choices. At the state level, civil service unions will have to renegotiate contracts. Program excesses will have to be trimmed. Some taxes may be raised. There will, then, be carry-over to federal programs. There will be increased demands to trim spending mandates imposed on the states and to trim other federal programs that will be seen as excessive in light of the dimmed largesse of the states.
All will enter a new America, in which there is a more direct connection between one’s own views, own comforts, and own efforts.  It will be a difficult adjustment for all, painful for many, and would be a welcome improvement.  The alternative is greater difficulties and pain for all if we allow complete insolvency and dissolution of assets by avoiding the confrontation with realities.

Friday, December 3, 2010

Farmer Payouts!

Joe: does this make any sense to you? I suppose farmers can be discriminated by the government if they have a loan program and the loans are given out unequally. But here it seems (see story below) the loan came late. Why is the government even involved in loans to private business at all? The US government should not be involved at all. If loans were to be given it should be by state government. This fiasco will cost the government millions & millions. - Bob

Updated: Fri, 12/03/2010 - 12:22pm
Now that the U.S. government has dished out billions of dollars to settle discrimination lawsuits with black farmers and Indians, Hispanic and women farmers are pushing to get a piece of the generous reparation pie.

A few weeks ago Congress approved a landmark $4.55 settlement to make amends to blacks and Indians, who say they were victims of the government’s discriminatory practices. A chunk of the money will go to Indians who claim Uncle Sam mismanaged royalties from leases of tribal land, with the rest (around $1.15 billion) going to black farmers and would-be farmers who say they were cheated out of federal aid because of their race.

Proudly announcing the black farmer settlement, Agriculture Secretary Tom Vilsack said that “civil rights has become a top priority” since President Obama picked him to run the U.S. Department of Agriculture and that the agency has “implemented a comprehensive program to correct past errors” and taken “definitive action” to ensure minorities are treated fairly. Hispanic and women farmers plan to put that to the test, announcing this week that they too want lots of cash for their suffering. Their lawsuit was actually filed about a decade ago, but the government hasn’t offered a big enough settlement so they’ve been holding out. Earlier this year the Obama Administration made a $1.33 billion offer to close the case, but they rejected it as “grossly inadequate.”

The recent settlements with two different minority groups has empowered the Hispanic and female farmers who this week blasted the Obama Administration for not treating them as well as their black and Native American counterparts. Their attorney calls it a “slap in the face” because blacks and Indians are going to get “more money and a better process.”

by Brad Woodard / 11 News
Updated Wednesday, Jan 27 2010
HOUSTON—In the shadows of the mountains near El Paso, where New Mexico’s border meets Texas, the remnants of a simple farming life sit mostly idle. Lupe Garcia and his ancestors have been working the land there for centuries. "The Spaniards came in the 1500s, and my family came with the Spaniards," Garcia said. "We were here before the Pilgrims." In 1955, Garcia’s father, a decorated World War II veteran, managed to buy a farm. In its prime, the family was working 1,000 acres. But times have changed.
"Right now, I’m farming 60 acres," Garcia said. "Imagine a business envelope and the postage stamp in the corner. At one point, Mr. Garcia owned the whole envelope. Now he owns the postage stamp, and every day of his life he has to wake up and look out to that," attorney Stephen Hill said. Garcia is now the lead plaintiff in a lawsuit alleging discrimination by the U.S. Department of Agriculture. "They wanted me to stop and give up. This is not right. We all have the same right to land freedom," Garcia said.
Hill said an Anglo neighbor once approached Garcia as he worked in his field and taunted him. "[The neighbor] came by and said, ‘Keep up the good work. You’re just fixing it up for me,’" Hill said. The neighbor told Garcia the farm would belong to him in 10 years. That was in 1989, and the neighbor’s prediction eventually came true. Garcia was forced to liquidate. "Between 1990 and 2000, they starved us to death. They shut off our credit. They cut our wrist and let us bleed out," Garcia said. More than 100 Hispanic farmers have joined Garcia’s lawsuit. Some of the cases date back to the early days of the Reagan Administration when the civil rights office of the USDA was quietly dismantled. Farmers said their loans were either arbitrarily denied, or in the case of Bobby Ortega, intentionally delayed for months.
"So as the loans came in very late, I didn’t have money to buy fuel, the seed, the fertilizer, and I was losing time. And with Mother Nature you only have so much time to get your crops in," Ortega said.
"White farmers have told me they’ve been notified by the USDA the money is here, come in and get it," Hill said.
But the money came too late for Ortega. "I lost the farms," he said. His only options were to allow the bank to repossess his equipment or somehow pay off his loans. "I took out my life insurance and maxed out my credit cards to pay off these loans," Ortega said. He’s among an estimated 82,000 Hispanic farmers in the U.S., many of whom could be affected by the Garcia case.

Yet the case has languished in the courts. What’s more, a year before the Garcia lawsuit was filed, black farmers were granted class action status in a lawsuit making essentially the same allegations. Rather than risk a trial, the federal government is settling for $1 billion. President Obama has set aside an additional $1.25 billion to cover new claims from black farmers, and yet the Supreme Court recently declined to hear the Garcia case. "That is preposterous, and the only reason the government is doing that is to hope that some of these farmers will give up and go away, and those that don’t give up and go away will die," Hill said.

"They ruined my credibility, my family’s credibility, my kids’ credibility beyond repair. My dad died five years ago," Garcia said. He says the system that was supposed to be there to help them is ultimately doing them in.

Wikileaks: Mexico a Failed State?

Joe:  having lived in Tijuana for nearly 4 years and managing an 80-100 person operation I have the experience of the having to close the factory down one day because of a massive shootout two blocks away, where 5 kidnapped victims for ransom where shot upon being discovered by the police. Our factory workers were often stopped on the way to work in the morning by a few bad policemen and were ordered to give the cops money for not having ID (a made up reason for extortion). Mexico is like Columbia and needs US involvement, Hillary tried this approach several months ago as a trial balloon, and as written about in Foreign Affairs (see summary below). Calderon feigned insult but the guy needs help but his Mexican pride won’t allow this. I like Mexico but right now the situation is like having crap on your back porch. A country, our neighbor, is in need of our help and assistance is not receiving it in an adequate way because it reflects our own problems. I suppose we must work on healing thyself first.   – Bob

WikiLeaks cables reveal unease over Mexican drug war

The secret cables give a much starker U.S. view of the pitfalls facing Mexican President Felipe Calderon in his campaign against drug cartels.
December 2, 2010
By Tracy Wilkinson, Los Angeles Times
Reporting from Mexico City — In contrast to their upbeat public assessments, U.S. officials expressed frustration with a "risk averse" Mexican army and rivalries among security agencies that have hampered the Mexican government's war against drug cartels, according to secret U.S. diplomatic cables disclosed Thursday. The cables quoted Mexican officials expressing fear that the government was losing control of parts of its national territory and that time was "running out" to rein in drug violence. The cables gave a much starker view of the pitfalls and obstacles facing Mexican President Felipe Calderon, a departure from the public statements of unwavering support that have come out of Washington for most of the 4-year-old war, which has claimed more than 30,000 lives.
Two cables from U.S. Embassy officials in Mexico, one dated January of this year and the other October 2009, praise Calderon for persisting in his campaign to tackle "head on" the powerful cartels that traffic most of the cocaine, heroin and marijuana that reaches the U.S.
But the Mexican president's struggles with "an unwieldy and uncoordinated interagency" law enforcement effort have created the perception that he is failing, the cable dated Jan. 29 said. His inability to halt the violence or contain the rising death toll has become a principal political liability as his public ratings have declined, it said.
The U.S. assessment said Calderon's tools are limited: "Mexican security institutions are often locked in a zero-sum competition in which one agency's success is viewed as another's failure, information is closely guarded, and joint operations are all but unheard of," said the January cable, which is signed by the No. 2 official in the U.S. Embassy in Mexico, John D. Feeley, a veteran diplomat with extensive experience in Latin America. "Official corruption is widespread, leading to a compartmentalized siege mentality among 'clean' law enforcement leaders and their lieutenants," he said. "Prosecution rates for organized crime-related offenses are dismal; 2% of those detained are brought" to trial.
The cables are part of a massive release of thousands of classified documents by the WikiLeaks website that has turned an uncomfortable light on the workings of American diplomacy. The documents involving Mexico are said to number 2,836, and the first were made public Thursday by the Spanish newspaper El Pais.
How to Defeat Mexico's Drug Cartels
Mexico is currently suffering from the same sort of drug-related violence that plagued Colombia during the 1980s. Mexico and the United States can learn a great deal from Colombia's example, including that they must build law enforcement capacity and not rely solely on military force.
ROBERT C. BONNER is Senior Principal of the Sentinel HS Group. He was Administrator of the U.S. Drug Enforcement Administration from 1990 to 1993 and Commissioner of U.S. Customs and Border Protection from 2001 to 2005.

Unemployment jumped to 9.8% in November 2010

Joe: three articles from three different sources. None of them speculate as to the cause of unemployment. As for lowering the rate, nothing seems to be working from the government side. - Bob

By Don Lee,

By Patrice Hill  The Washington Times

Thursday, December 2, 2010

Margaret Heffernan: Willful Blindness

Joe: this is not directly related to American Politics but it seems very interesting. I didn't know "willful blindness" as a legal term. - Bob

Bank of America is Not the Only Company that Should Fear Wikileaks
By Margaret Heffernan | December 1, 2010
Margaret Heffernan worked for 13 years as a producer for BBC Radio and Television before running her first company.

Bank of America is right to fear Wikileaks. Any company that  loses 3% of its stock value on a rumor is in a pretty vulnerable place. I have no particular insight or knowledge to challenge or support the rumors that Wikileaks’ next target is this bank, and rumors are hardly a new phenomenon. But what interests me–and should concern every company–is the fatal corporate flaw that makes Wikileaks so powerful. Most companies worldwide have skeletons in their closets that they hope no one will ever see - including themselves. That they’d prefer to look away is institutionalized willful blindness, and it’s reaching epidemic proportions.

A Bad Habit in Corporations
Willful blindness started life as a legal concept; it holds that when there are things you could know and should know, but manage not to know, you’re still responsible. The idea was central to the conviction of Jeff Skilling and Ken Lay in the Enron trial. But it’s more than just a legal idea: it’s the bad habit that lies at the heart of far too many businesses.
Researching my book on the subject, I’ve studied willful blindness around the world, in companies large and small in every sector. And I’d argue that the biggest problem we face, in business and in government, isn’t the stuff we don’t know about - but the stuff we do know about but turn away from. Until, often out of sheer despair and frustration, someone leaks.

Organization Silence: A Big Red Flag
Institutional blindness has lots of danger signs. Chief among them is organizational silence, a term coined by two American academics, Elizabeth Morrison and Frances Milliken at NYU’s Stern Business School. When they interviewed a cross-section of executives, they found that fully 85% of them had, at some point, felt unable to talk to their boss about something in the business that bugged them. In other words, something was wrong but they couldn’t discuss it. I repeated the study in the UK - and got a similar result. The consequence of all that silence is simple: something is wrong, lots of people know, but nobody’s doing anything.
Another danger sign is unanimity. If there’s a key initiative around which there is no real debate, the chances are you’re turning a blind eye to something no one wants the political pain of handling.

Don’t Shoot the Messenger
Eliminating willful blindness isn’t simple because it is a part of human nature. If you preferred not to look at this month’s credit card bill, or you didn’t get around to scheduling that mammogram, you’ll know what I mean. Because it is so fundamental to all of us, it poses a serious endemic risk that only determined and brave leaders ever overcome.  They start with the knowledge that they don’t know what’s really going on - and put in place aggressive strategies to improve their peripheral vision. It isn’t easy and the challenge never goes away for anyone.
Everyone now will decry Julian Assange and Wikileaks; it is, after all, easier to shoot the messenger. And there are, admittedly, serious ethical issues around what and how to publish. But even if you eliminated Wikileaks tomorrow (as plenty of people would like to) the problem won’t go away. Neither Assange nor his site and its inevitable clones would have anything to do if leaders made themselves willfully sighted. if you have skeletons in your corporate closets, the safest thing is to take them out and look at them yourself.
Before someone else does.

China: ready to abandon North Korea?

Joe:  see the article below. Is it possible as reported by Tisdall in the Gurdian via Wiki Leaks that China is fed up with north Korea and would accept reunification under a South Korean democratic government? This runs counter to the conventional wisdom of it being a “buffer state” for China. The question is why would China not care if North Korea collapsed and was taken over. It may be a sign that China feels secure in the New World Order (so to speak). It’s economic strength will allow China to sell to a new larger market. I suppose this is the carrot. –Bob

Leaked dispatches show Beijing is frustrated with military actions of 'spoiled child' and increasingly favours reunified Korea
South Korean war veterans protest after North Korea attacked Yeonpyeong Island. The WikiLeaks cables reveal Beijing believes such actions are those of a 'spoiled child'.
China has signalled its readiness to accept Korean reunification and is privately distancing itself from the North Korean regime, according to leaked US embassy cables that reveal senior Beijing figures regard their official ally as a "spoiled child".  WikiLeaks
China is sharply critical of US pressure tactics towards North Korea and wants a resumption of the six-party nuclear disarmament talks. But the Guardian can reveal Beijing's frustration with Pyongyang has grown since its missile and nuclear tests last year, worries about the economic impact of regional instability, and fears that the death of the dictator, Kim Jong-il, could spark a succession struggle. China's moves to distance itself from Kim are revealed in the latest tranche of leaked US embassy cables published by the Guardian and four international newspapers.
The leaked North Korea dispatches detail how:
South Korea's vice-foreign minister said he was told by two named senior Chinese officials that they believed Korea should be reunified under Seoul's control, and that this view was gaining ground with the leadership in Beijing.
• China's vice-foreign minister told US officials that Pyongyang was behaving like a "spoiled child" to get Washington's attention in April 2009 by carrying out missile tests.
• A Chinese ambassador warned that North Korean nuclear activity was "a threat to the whole world's security".
• Chinese officials assessed that it could cope with an influx of 300,000 North Koreans in the event of serious instability, according to a representative of an international agency, but might need to use the military to seal the border. In highly sensitive discussions in February this year, the-then South Korean vice-foreign minister, Chun Yung-woo, told a US ambassador, Kathleen Stephens, that younger generation Chinese Communist party leaders no longer regarded North Korea as a useful or reliable ally and would not risk renewed armed conflict on the peninsula, according to a secret cable to Washington.

Chun, who has since been appointed national security adviser to South Korea's president, said North Korea had already collapsed economically. "The two officials, Chun said, were ready to 'face the new reality' that the DPRK [North Korea] now had little value to China as a buffer state – a view that, since North Korea's first nuclear test in 2006, had reportedly gained traction among senior PRC [People's Republic of China] leaders. Chun argued that in the event of a North Korean collapse, China would clearly 'not welcome' any US military presence north of the DMZ [demilitarised zone].  "Chun dismissed the prospect of a possible PRC military intervention in the event of a DPRK collapse, noting that China's strategic economic interests now lie with the United States, Japan and South Korea – not North Korea." Discussing how to tackle the issue with the charge d'affaires at the Beijing embassy, He Yafei observed that "North Korea wanted to engage directly with the United States and was therefore acting like a 'spoiled child' in order to get the attention of the 'adult'. China encouraged the United States, 'after some time', to start to re-engage the DPRK," according to the diplomatic cable sent to Washington. A second dispatch from September last year described He downplaying the Chinese premier's trip to Pyongyang, telling the US deputy secretary of state, James Steinberg: "We may not like them ... [but] they [the DPRK] are a neighbour." It quoted a representative from an international agency saying Chinese officials believed they could absorb 300,000 North Koreans without outside help. If they arrived "all at once" it might use the military to seal the border, create a holding area and meet humanitarian needs. It might also ask other countries for help. "We understand Lee asked Hu what China thought about the North Korean domestic political situation and whether Beijing had any contingency plans. This time, Hu apparently pretended not to hear Lee," it said. The cable does not indicate the source of the reports, although elsewhere it talks about contacts at the presidential "blue house" in South Korea.