You Cannot Spell W-a-s-t-e Without A Involving A Lot From W-a-s-h-i-n-g-t-o-n

Just when you think you know about all the waste that is generated by the American political class and the government that it runs, more wasteful spending, and the taxpayer money used to support it, comes tumbling down the road and into the storm sewer, never to be seen again.

In past posts to this blog we have reviewed the Federal government's estimate that it wastes between $60 and $90 billion a year in fraud and erroneous payouts in its Medicare and Medicaid programs. Earlier this week we reviewed a Senate investigation of the National Science Foundation that had actually spent research dollars investigating on how to ride a bike, estimating when dogs became man's best friend, and measuring how racist are users of online dating sites.

But it does not end there, if you consider some recent identification of more government waste that has just been found and publicized over the past few weeks:

- An Associated Press article by Stephen Ohlemacher on June 14, 2011 documented how the Social Security Administration (SSA) made $6.5 billion in erroneous overpayment's to people not entitled to the payments in 2009. The $6.5 billion included $4 billion in bogus payments from a single SSA program, supplemental income program for the poor. This $4 billion was a whopping 10% of the program's entire budget.

More distressing than the $6.5 billion, which is bad enough, the SSA Inspector General has estimated that the entire Federal government doled out $125 billion worth of improper payments in 2010 for all reasons, fraud, incompetence, etc. This is $15 billion more than what were improper payments in 2009, a 14% rise in waste in just a single year. The trend in curbing government waste is obviously going in the wrong direction.

For comparison purposes, without the $125 billion in waste, last year's budget deficit would have been reduced by more than 10%. Put another way, if this wasteful spending had been sent back to the taxpayers, every U.S. household would have received over a $1,000. Disgraceful.

- A June 8, 2011 news report from Kevin Drawbaugh of Reuters was titled, "Prisoners, The Dead Got 2009 Car Tax Break, Report Shows." The Qualified Motor Vehicle (QMV) program was better know as Cash For Clunkers. People could trade in their older cars and get a government rebate and other tax benefits relative to the purchase of a new vehicle. The two fold purpose of the program was to jump start the auto industry and get people into more fuel efficient vehicles.

However, according to the report, it does not appear the IRS ran a very tight operation. According to the article, taxpayers who claimed the deduction were not required to provide the independent proof that an auto had actually been purchased. Obviously, a criteria like this opens up the entire program to fraud. The Inspector General for the program found the following:

• The IRS failed to qualify 4,257 individuals who made QMV claims.
• These 4,257 claims were for $151.1 in QMV benefits. 
• 439 claimants were actually prisoners in jail when they claimed a total of $955,843 in sales tax as part of the program in 2009,  "even though they were behind bars for a full year in 2009 when the vehicle was purportedly purchased."
• Another $36,490 worth of claims were for people who were dead before the start of the program.
• And adding insult to injury, 18 people who were under the age of 15 also got $31,139 in QMV benefits.

While these are smaller numbers relative to $125 billion, it is still waste. And this is what the Inspector General has somewhat confidently identified. Who knows how much other waste in this program exists that was not identified.

- Speaking of autos, consider another wasteful auto government program that involves the General Motors Volt electric car. General Motors convinced the political class to basically subsidize the purchase of a Volt since the company could not make the electric car cost efficiently. Thus, they got a corporate welfare benefit from Washington in the form of a taxpayer funded rebate. Theoretically, an American who buys a Volt will get $7,500 Federal tax credit.

Sounds simple enough, buy a Volt and the taxpayer rewards you with $7,500. But nothing is simple when it comes to wasteful government bureaucracies and programs. According to an LA Times article that appeared in the June 4, 2011 edition of the St. Petersburg Times, General Motors dealers are scamming the process in two ways. The most egregious scam involves the dealerships actually selling the car to themselves and keeping the $7,500 tax credit for themselves. They then sell the Volt to regular customers as a used car.

Since the rebate applies to only first time buyers of the Volt, the regular customers cannot now claim the rebate since the car is technically "used" even though the mileage is minimal. Thus, a government program designed to help an American own a new electric car, essentially funnels free taxpayer money to dealers, not end users, defeating the whole purpose of the rebate.

The second scam regarding the Volt is the rebate itself. If a product cannot stand on its own in the marketplace, it does not deserve to exist in that marketplace. General Motors should be making cars that can successfully compete on their own features, quality, and price, not on the generosity of the political class to waste taxpayer dollars on a private company's inferior products. All corporate welfare such as the Volt rebate is waste, pure and simple.

- In a June 3, 2011 report from CNN, it was reported that a new government report from the Commission on Wartime Contracting warned that billions of taxpayer money may be wasted because of the inability of both Iraq's and Afghanistan's governments to keep American financed programs and projects operating. Specifically, the Commission chairman, Christopher Shays stated in the report: "Unless government officials identify and address sustainment requirements and change or kill doomed programs, an enormous amount of taxcpayers' money will turn out to have been wasted.

After ten years in Afghanistan and eight years in Iraq, we still do not know how to effectively spend taxpayer dollars in a non-wasteful manner?  Apparently that is a correct assumption. The CNN report goes on to state that over the past decade, wartime contracting in both countries has already identified specific programs that have wasted tens of billions of dollars. The investigation forecasts  that past billions of waste "could pale in comparison to additional waste developing from [current and future] unsustainable projects and programs."

Over a hundred billion dollars from domestic Federal programs wasted annually, tens of billions of dollars already wasted in Iraq and Afghanistan with the potential for much more waste ever present, government programs that incorrectly pay benefits to dead people, imprisoned people, and underage people for their non-purchase of a car. It never ends.

There are several drivers behind this waste. The failures of these programs sometimes happen because the host country cannot supply trained personnel to continue the program, the host country may not be able to financially support the program, or the host country does not have the ability to perform essential maintenance on the bridges, schools, or other such efforts.

They also fail because of the standard government waste causes: incomplete analysis, overly ambitious objectives, poor planning, weak coordination, and inadequate follow up. Sound familiar? Probably the same reasons why Cash For Clunkers and waste in SSA programs exist. But as the title today says, you cannot spell w-a-s-t-e without a lot of W-a-s-h-i-n-g-t-o-n.

How do we get Washington out of the waste business? A number of recommended steps from "Love my Country, Loathe My Government" would go a long way:

- Step 1 - this step would reduce government spending in all entities by 10% a year for five years. Included in this step is a ground up, zero based approach of looking at every facet of every government operation in order to wring out waste, look for expense synergies, and kill unsuccessful or unneeded embedded government programs, projects, and departments. If government operations were streamlined and simplified, the chance of lowering waste, defining accountability for waste, and eliminating waste is greatly increased.

- Step 34 - hold members of  Congressional committees accountable for waste in their areas of control and responsibilities, removing them from their committee posts for their inability to rein in wasteful spending.

- Step 37 - base annual pay treatment for Congressional members for their actual performance during the year, with a major part of their annual performance review being a component on how well they did or did not eliminate wasteful spending.

- Step 44 -  do not use Federal tax dollars for any program or project that does not substantially affect a significant number of Americans from at least five states. Anything less than this criteria becomes the responsibility of the state governments.

This step would downsize and focus the Federal government to a much smaller set of programs and projects, hopefully saving money on local pork barrel programs and focusing attention on a smaller set of more important priorities.

- Step 46 - impose strict accounting, accountability, and audit procedures on every facet of the Federal government's budget, much like the Federal government has imposed on private industry under the Sarbanes-Oxley legislation, with the same penalties for not fulfilling these rather strict reporting and budget management duties including fines, imprisonment, and termination from their job.

Wouldn't it be nice if w-a-s-t-e was not such a big part of  W-a-s-h-i-n-g-t-o-n?  H-a-s-t-e is also a big part of Washington, it's about time that the political class used a little haste within Washington to finally get the TRILLIONS of dollars of wasteful spending under control.





Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at http://www.loathemygovernment.com/. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.



Please visit the following sites for freedom:

http://www.loathemygovernment.com/
http://www.cato.org/
http://www.robertringer.com
http://realpolichick.blogspot.com
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment.com

What Do Professional Wrestlers And Washington Politicians Have In Common?

Old saying: What do professional wrestlers and Washington politicians have in common? Answer: They are mostly overweight white guys pretending to hurt each other.

Now, I have nothing against overweight white guys. And I am not claiming that overweight white guys do not make good politicians or leaders. This beef is strictly a "what is good for the goose is good for the gander argument." Most businesses and corporations in this country have to abide by affirmative action guidelines and rules established by the political class through the Federal government or face stiff fines and other penalties. The intent of these affirmative action guidelines was to ensure that women and minorities got a fair share at the job and housing opportunities in this country. Thus, everyone running some kind of enterprise has to conform to these guidelines, laws, and rules.

All except the two major political parties who get to ignore the very guidelines that they see fit to impose on the rest of us. Consider the following composition of Congress vs. the general population:

• About 51% of the country's population is female but only 18% of the Senate and only 22% of the House Of Representatives is female.
• About 13% of the country's population is African-Americans but only 1% of the Senate and only 10% of the House of Representatives is African-American.
• About 15% of the country's population is Hispanic but only 2% of the Senate and only 6% of the House Of Representatives is Hispanic.
• About 5% of the country's population is Asian but only 2% of the Senate and only 1% of the House Of Representatives is Asian.

Again this is not to say that an older white gentleman could not adequately serve a Congressional district that was mostly Asian females. However, if Congress, and the two major parties were a private business, they would be in serious violation of the nation's anti-discrimination laws and affirmative action policies. Thus, just another hypocrisy of the political class where we are told what to do while the politicians of this country get to do whatever they want.

But we shouldn't be surprised by this hypocrisy considering:

• While most people working in the private sector can no longer receive a traditional pension, those in the Federal government and the ruling politicians continue to enjoy robust traditional pensions in addition to Social Security and 401-k like programs.
• While most people in the private sector are happy just to have a job these days, members of Congress not only have a job but they secretly vote themselves annual pay increases regardless of poorly they perform while in office.
• It seems like paying taxes is optional with the political class but mandatory for the rest of us if you look at the tax evasion history of Geithner, Daschle, Rangle (alleged) and many others that have and who have not yet been caught scrimping on their tax payments.
• The political class submits most of American business to the cumbersome but useless Sarbannes-Oxley act but have virtually no budget and quality controls when it comes to Federal government accounting, resulting in hundreds of billions of wasted taxpayer dollars over the years.

The above list could go on for a while but you get the idea and the inspiration for the book title, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom and Destroying The American Political Class." Yes, we have allowed a class of people to evolve in this country that I call the political class. They are career politicians, almost all lawyers (which puts them in conflict with the professions of most Americans), whose primary goal in life is to remain in office at all costs and enjoy the perks of the office, perks that they bestow upon themselves. Rules and laws that they develop are below them to observe and follow, these laws are just for the rest. It is elitism, pure and simple.

If you look around the country you can see what this ruling class has done to the nation. Unemployment, deep national debt, unsolved national problems, a divided nation against itself, and foreign affairs policies that are a disaster. That is why three steps from "Love My Country, Loathe My Government" are necessary:

• Step 39 - would institute term limits so that people going to Washington to serve us see it as a privilege and short term honor and not a career so that they too can join the "ruling political class."
• Step 45 - would hold the political class and the two major parties to the same employment standards that the rest of American has to abide by, fining the parties for not fulfilling the affirmative action standards they themselves have enacted.
• Step 43 - would eliminate the "Senator only" elevator in the Capital building. This special elevator is really owned by the taxpayers who paid for it, but since it can only be used by Senators, it is a very in-your-face symbolic form of elitism that says "as Senators, we are special and no one else can ride on our elevator." Since riding the elevator does not make the Senators any smarter or wiser or even better looking, then scrap the elitism and let anyone ride on it.

The next time see members of the political class together, imagine them in wrestling leotards and rolling around with each other and you will understand that both groups, pro wrestlers and politicians, are not much different from each other and that makes for a very ugly sight.

Our new book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Also visit the following sites for freedom:

http://www.cato.org/
http://www.reason.com/
http://www.robertringer.com/
http://www.realpolichick.blogspot.com/
http://www.flipcongress2010.com/

Bad Laws Behaving Badly

One of the biggest myths that Americans need to overcome before they can restore their freedom is that when politicians pass a law, than all is well in the world, the assumptions being that 1) the intended consequences of the law will actually materialize and 2) there will be unintended (usually bad) other consequences. If one takes the time to consider laws from various areas and levels of government, it becomes obvious that the intended benefits of the laws written by our current politicians rarely materialize and there is usually negative unintended consequences. Consider the following examples:

• It is against Federal law to use marijuana for any purpose. However, if you search the Internet for current usage levels of marijuana, you get estimates, that while inconsistent in actual estimates, all agree that millions and millions of Americans have and are currently using marijuana. What good is a law if millions of citizens flaunt it and are unlikely to suffer an consequences from flaunting it?
• Yesterday we reviewed a report by Steve Chapman from the Chicago Tribune that claimed that the United States is the biggest online gambling country in the world (estimated at $6 billion a year) despite the fact that the Bush administration outlawed online gambling at the Federal level several years ago. Thus, outlawing online betting could not stop it from becoming bigger than ever, certainly an unintended consequence.
• It is illegal at the Federal level to enter the United States without proper credentials and permission but by most estimates, over 10 million non-Americans have flaunted that law. Another bad law that has not performed as advertised.
• A recent article in Reason magazine pointed out the fact that a recently repealed state law in Utah made it illegal to collect rain water for personal use, certainly a bad law behaving badly, criminalizing the collection of falling rain water. Unfortunately, Utah could not quite get totally out of the bad area in this matter since the replacement law said it was no longer illegal to collect rain water, Utah residents now have to report to the state government how much water they collect. Can you imagine having the state government job of collecting and tracking collected rain water? Talk about a bad use of taxpayer money.
• Early in the Bush administration's tenure, Congress almost unanimously passed the Sarbanes-Oxley legislation. The purpose of this law was to clean up the accounting and financial reporting requirements of public companies in the wake of a handful of accounting scandals (e.g., Enron, Worldcom, etc.). The purpose of the law was to force every public company in America to have transparent and accurate financial statements and behavior in order to protect stockholders and other investors from investing in companies that were providing bogus financial statements and provide an accurate picture of the companies financial health. Sounds like a good bill but it quickly became evident that while the intent was good, the behavior was bad.

1. First, while it was true that there were some companies that had fudged their numbers, the vast majority of American companies were never implicated or accused of putting forth bogus numbers. Thus, the law became an onerous and waste of money and resources for all American businesses even though only a small handful of businesses had behaved criminally badly. This waste of time and resources takes away resources that could be better spent on competing in the world marketplace.
2. Second, early last year, all of the major banks and financial institutions in the United States were put through so-called "stress tests" to determine what their financial health was after the recession had started. But wait a minute, wasn't the Sarbanes-Oxley supposed to provide accurate and transparent accounting and financial statements? Why did we have to do these additional extensive stress tests to find out how stable these financial institutions were? Wasn't Sarbane-Oxley enough? And if the law was not enough in this case, how can we be sure that it is even worthwhile having if additional tests and analyses had to be done? Seems like a bad bill behaving badly if additional effort was needed to determine what Sarbanes is supposed to do on its own.
3. Third, two of the biggest casualties of the economic downturn were Bear Stearns and Lehman Brothers. These two companies were once two of the largest investment banks on Wall Street, having been in business for many, many decades. However, consider a short timeline of their demise. In February, 2008, Lehman Brothers had a stock price of over $50 per share and Bear Stearns had a stock price over $80. By the middle of March, 2008, both companies were gone, with Lehman Brothers disappearing completely and Bear Stearns being bought by JP Morgan for $2.00 a share. Thus, another example of how bad the Sarbanes-Oxley law performed. An established company cannot go from having share prices over $50 a share one month and than be out of business the next month without there being some major structural problems, problems that should have been evident in its financial statements. However, no where could I find a source that said how well Sarbanes-Oxley worked by providing protection for investors In these two companies. here today, gone tomorrow and the Sarbanes-Oxley processes never had a clue of the problem.
4. The biggest accounting and fraud scandals of the past few years were Ponzi scams operated by shady characters such as Bernie Madoff that fleeced many, many people for millions of dollars. However, Sarbanes-Oxley was not good enough to see the next generation of accounting fraud, it was just poorly fighting the last generation of accounting fraud and is not even doing a good job at that, given the stress tests. Just four instances (Lehman/Stearns, stress tests, wasting every U.S. public company's resources) where a Federal law was another failure of delivering what it was supposed to do.

• And finally, consider the recently passed financial markets regulatory reform law. Politicians would make you think that they just passed the perfect law to protect America from the next "great recession." However, a review of the media accounts of the reform law described the new law in various ways including calling it an empty "shell bill," the law did not fix the problem. consumers are still unprotected, the politicians punted the hard decisions, the politicians kicked the can down the road, etc. You cannot have a good bill, only a bad bill, when you delay making the hard decisions, which many feel this bill does, and when you exclude two of the biggest financial areas in the economy, auto loans and Freddie Mac/Fannie Mae. Looks like this will be another bad law behaving badly.

Four steps from "Love My Country, Loathe My Government" would address this problem of politicians passing bad laws. First, Step 1 would start downsizing the Federal government by 10% a year for the next five years. The only hope for getting good laws that work well is by having our politicians work on fewer but more important issues. Hopefully, the would get them right. Second, Step 14 would put an end to the gerrymandering of Congressional districts in order for us to get politicians in Congress that are more likely to compromise and incorporate others' worthwhile ideas into our laws going forward. Third, Step 39 would implement term limits so that we continually to get a fresh set of ideas into Washington that may be more in tune with reality outside of DC, as compared to politicians that have been in office for decades. More importantly, this step would eliminate the taint of campaign donations that distort and weaken laws before they are passed as politicians trade favors for donations. And finally, Step 48 would repeal Sarbanes-Oxley since it makes no sense to have a useless law on the books if it does not do what is is supposed to do but wastes American corporate resources in the process.

The bigger issue is that if we keep passing bad laws that people realize are bad, stupid, wasteful, or unlikely to be enforced, the more likely citizens are to ignore or break all laws, both good and bad. Fewer laws that are better and fairer and actually work: what a concept.

Our new book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Also visit the following sites for freedom:

http://www.cato.org/
http://www.reason.com/
http://www.robertringer.com/
http://www.realpolichick.blogspot.com/
http://www.flipcongress2010.com/

Political Class Financial Follies

As the country slowly moves out of the "Great Recession" the political class has suddenly taken an interest in financial markets and reforms to avoid what we just went through from an economic perspective. As we discussed yesterday, the St. Petersburg Times reported this past weekend that Congressional hearings were held to try and find a preventive solutions to the last downturn. Also, the Senate Finance Committee, spearheaded by Senator Chris Dodd is trying to get a new financial markets regulatory bill passed.

The question is whether we really think Dodd and the rest of the fools in Congress and the administration really have any chance of getting this right. Or is it just another charade of follies that we will all go through, pretending that all is well until the next blowup takes the political class and the Federal government's regulatory agencies by surprise. Consider:

• Bernie Madoff was a suave, smooth talking con man that ran one of the biggest pyramid schemes ever, defrauding his clients of close to $50 billion over a long stretch of years. No one in the government, Congress, the SEC, the Treasury Department, the Federal Reserve Board, etc. had any idea of the ongoing fraud until it was much too late. Thus, thousands of people with the responsibility of protecting investors got it wrong. However, according to any number of news sources, Harry Markopos, an investment analyst with a Boston financial firm, unmasked the fraud about five minutes after his boss assigned him the task of figuring out how Madoff continued to get great returns. Confident of his findings, he sent detailed analyses to the SEC five times, starting in May, 2000, years before the Madoff scheme collapsed. If the government and political class could not do this simple analysis to figure out what was going on when a single person (Markopos) could, what makes us think Dodd and the rest of them have gotten any smarter?
• Speaking of Dodd, he was a member, and later committee chairman, of the Senate Banking Committee for several years and never saw the second biggest financial collapse of all time coming until it hit him in the face. What makes us think that he can reform the financial markets now? He obviously did not understand the financial markets before, since he missed the collapse, I doubt he got so smart that now understands what needs to be done.
• A recent New York Times article, that was reprinted in the St. Petersburg Times, by Michael J. Burry outlined another tale similar to the Markopos story. Burry ran a hedge fund until 2008 and was one of the subjects of Michael Lewis' new book, "The Big Short." According to the article, Burry became suspicious of many facets of the housing market, e.g. very low interest rates, subprime mortgages, etc., and aggressively sent letters to clients of his hedge fund, correctly predicting a housing market collapse in the second half of 2007. Assuming that he was right, Burry made a lot of money for his clients by understanding how things work in the financial market and anticipating the housing and mortgage crash. Thus, Burry did a little analysis and was correct in his conclusions while "our leaders in Washington either willfully or ignorantly aided and abetted the (housing) bubble. And even when the full extent of the financial crisis became painfully clear early in 2007, the Federal Reserve chairman, the Treasury secretary, the President and senior members of Congress underestimated the severity of the problem." Thus, much like Markopos and the Madoff scheme, Burry did a simple analysis to understand the problem while the "best" brains in Washington could not figure it out.
• After the Enron, Worldcom and other financial accounting scandals of the late 1990s, the political class passed the Sarbanes-Oxley Law that was supposed to tighten up accounting standards and regulation so that investors would have a clear view of a company's financial health. Step 48 in "Love My Country, Loathe My Government" calls for the repeal of that law for a number of reasons, not the least of which is the fact that mountains of data and reports are created that are virtually never read by anybody in government. This wastes in incredible amount of American business resources that could be better spent improving our competitive position in the international business market. The "Great Recession" provides another reason for repealing this bill, i.e. it does not work. Two of Wall Street's biggest financial firms collapsed as a result of the housing and mortgage market meltdown. Bear Sterns was formed in 1923 and Lehman Brothers was formed in the early 1860s. These were large, prominent firms that had been successful for decades and decades. However, they went belly up (Lehman disappeared, remnants of Bear Sterns were picked up by JP Morgan) almost over night. Thus, the Sarbanes-Oxley was a total failure here in that it provided no indication of how dire these firms' accounting and financials were until they went poof. Another political class "financial reform" that did not work.

As you can see, the political class financial reforms over the years of just been follies of hope without any understanding of the underlying root causes of the crisis of the moment. Without understanding how things work and what the root causes are, the chance the government can solve any financial markets problem is next to nothing.

Our new book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble.

Tim Geithner, AIG, and Sarbanes-Oxley For The Feds

Today we will try and link together three rather diverse concepts: the Treasury Secretary, an insurance company, and an accounting law. The Treasury Secretary is Tim Geithner, formerly the head of the Federal Reserve Board Of New York and one of the many Obama Cabinet nominees that had failed to properly pay his taxes. Recent reports from the Associated Press and other sources have shown that there may have been some shady dealings going on between the Federal Reserve Board of New York and an insurance company, AIG, during the frenzy of giving away taxpayer money to financial institutions last year. The details include the following:

• AIG was one of the biggest insurers in the world and was positioned by those in political power to be "too big to fail," i.e. if AIG went under, a single company, all of the world's financial markets would crumble.


• The American taxpayer is on the hook to AIG's survival for about $180 billion. Put another way, each American household donated about $1,400 to keep AIG afloat.


• Many of the financial assets that the big banks purchased through the years were bonds backed by subprime mortgages and other questionable loans. These banks bought insurance from AIG as a precaution in case the loans went bad.


• The majority of the loans went sour, causing the great financial losses for most banks. This meltdown in assets lead to TARP and the giveaway of billions of dollars to the banks, rewarding them for making horrible investments. As we have discussed this past week, the fact that most of these bailouts have already been repaid just months after having been received indicates that the danger to the banking system was grossly exaggerated.

This is where Geithner and the New York Fed comes into play. As the investments went bad, the banks came to AIG to exercise their insurance policies. However, AIG was no longer financially sound either and could not cover the entire value of the insurance policies they had sold to the banks. In cases like this, negotiations are usually started with a bankrupt-approaching company by its creditors to see what percentage of their stake they can get back. For example, let's assume that AIG could only cover 20% of the face value of its policies. After much negotiation, probably some lawsuits, the plaintiffs, i.e. the banks, would have to reach a settlement, picking over the 20% carcass that was once AIG.

However, it appears that the Fed and possibly Geithner did not allow this negotiation process of downgrading the returns to the banks to occur, using taxpayer money to pay out the AIG insurance policies at 100% of face value. This is in contrast to the Bush bailout of GM and Chrysler, both of which had to make many concessions from both management and the unions before they could receive any taxpayer money. There were no concessions from the banks holding AIG policies, they just got everything they wanted.

And it gets worse. According to a January 8, 2010 Associated Press report, email exchanges between lawyers for the New York Fed and AIG show that "the New York Fed wanted AIG to withhold information about deals that sent billions from the taxpayer bailout of AIG to Goldman Sachs, Inc., Societe Generale and other major banks." Thus, not only was there possibly a big and unnecessary giveaway of taxpayer dollars, there may be a cover up to the giveaway. Congress, as always late to the party, is scheduling hearings to address both the lack of negotiations and the suppressing of information. Congressman Darrell Issa correctly questions the lack of transparency and accountability regarding taxpayer assets in this matter.

Which leads us Sarbanes-Oxley. This bill was passed as a result of the gross accounting violations that occurred during the Clinton administration that resulted in a few people getting very rich, but eventually going to jail, and causing companies to fail, employees to lose both their jobs and their pension investments, and the passage of an onerous bill that does nothing but waste American business resources. Sarbanes-Oxley requires that a public company produce a ton of backup accounting materials attesting to the accuracy of their corporate books. These reporting requirements take up a lot of personnel and other corporate resources that could be better deployed by making American business more competitive. The tragedy of this law is twofold:

• First, the vast majority of the materials are never reviewed by anyone. They have to be produced but do not have to be reviewed by the government. What a waste.


• Second, the law apparently does not work. It did not produce the right documents and accounting indicators for companies such as AIG, Lehman Brothers, Bear Sterns, and other financial firms that quickly went out of business. One would think that an accounting law supposedly designed to provide investors a true picture of a firm's financial health would have been able to flag the horrible financial status of those Wall Street firms that went belly up so quickly.

Thus, we have a government running amok and wasting taxpayer money without any accounting and transparency controls in place and we have a Federal law with too many of the wrong controls in place since they do not work, as witnessed by the sudden bankruptcies of the financial firms. Thus, we did need to do two things with the Sarbanes Oxley principles as outlined in "Love My Country, Loathe My Government:"

Step 46 - Subject all government agencies, including Congress, to a strict auditing process, similar to Sarbanes-Oxley procedures, to ensure prudent use of taxpayer assets and funds. In this step we are hoping for accounting procedures that work, i.e. they are rigid, thorough and identify fraud and waste, as opposed to the current Sarbanes-Oxley law for businesses that is rigid, thorough and does not identify fraud and waste. "Love My Country, Loathe My Government" has numerous examples of where this step might have save billions of dollars of taxpayer taxes if in place. This current Geithner/AIG situation would also lend itself to Step 46 by providing the details, transparency, and accountability that Congressman Issa laments is lacking.

Step 48 - Repeal the Sarbanes-Oxley law for American business immediately. The vast majority of companies in this country have never been found guilty of corporate accounting malfeasance and those that have been accused have been convicted. The recent failures of financial institutions are proof the law does not work and just wastes resources. You cannot say you have a viable accounting tracking law if a company is in business today and out of business tomorrow, e.g. Lehman Brothers, and nobody sees it coming, including the government which is supposed to track the output of Sarbanes-Oxley activities.

Another step from "Love My Country, Loathe My Government" is also applicable here:

Step 34 - Hold House and Senate committees and subcommittees accountable for their respective areas of responsibilities and remove committee members from committee posts if they do not meet minimal performance criteria. If the accusations are right and AIG did improperly funnel taxpayer dollars to healthy banking firms, those members of Congress that sit on those Congressional committees responsible for the funneling should be held accountable for the waste and be replaced immediately on the committee.

The political class needs to be introduced and subjected to the concept of accountability. They have wasted enough of our tax dollars already without any ramifications to anyone who should have known better. By making them accountable, maybe the politicians in Washington might finally anticipate a problem for once and save us all a few dollars.

Visit our website at www.loathemygovernment.com to order an autographed copy of the book, "Love My Country, Loathe My Government -Fifty First Steps To Restoring Our Freedom and Destroying The American Political Class" and to sign up for the cause. The book is also available online at Amazon and Barnes And Noble.