In 2008, then-candidate Barack Obama promised to create 5 million “green jobs” if elected president. However, an analysis by the Institute for Energy Research (IER) finds that since 2009, the Department of Energy’s (DOE) $26 billion loan program created just 2,298 permanent jobs, at a cost of $11.45 million per job created.
http://www.breitbart.com/Big-Government/2013/05/08/Report-Obama-Spent-11-45-Million-Per-Green-Job-Created
Pages 43 and 44 of the bill detail what one conservative blogger, Javier Manjarres of Shark Tank, has already described as the “ObamaPhone” from Sen. Marco Rubio (R-FL). That section reads:
SEC. 1107. ACCESS TO EMERGENCY PERSONNEL.
(a) SOUTHWEST BORDER REGION EMERGENCY COM- MUNICATIONS GRANTS.—
(1) IN GENERAL.—The Secretary, in consultation with the governors of the States in the South- west Border region, shall establish a 2-year grant program, to be administered by the Secretary, to im- prove emergency communications in the Southwest Border region.
(2) ELIGIBILITY FOR GRANTS.—An individual is eligible to receive a grant under this subsection if the individual demonstrates that he or she—
(A) regularly resides or works in the Southwest Border region;
(B) is at greater risk of border violence due to the lack of cellular service at his or her residence or business and his or her proximity to the Southern border. (3) USE OF GRANTS.—Grants awarded under
this subsection may be used to purchase satellite telephone communications systems and service that—
(A) can provide access to 9–1–1 service;
and
(B) are equipped with global positioning systems.
(4) AUTHORIZATION OF APPROPRIATIONS.— There is authorized to be appropriated such sums as may be necessary to carry out the grant program established under this subsection.
http://www.breitbart.com/Big-Government/2013/04/17/Immigration-bill-contains-free-cell-phone-handouts-dubbed-MarcoPhones
House Minority Leader Nancy Pelosi (D-Calif.) said Thursday that she opposes a cut in congressional pay because it would diminish the dignity of lawmakers’ jobs.
“I don’t think we should do it; I think we should respect the work we do,” Pelosi told reporters in the Capitol. “I think it’s necessary for us to have the dignity of the job that we have rewarded.”
Read more: http://thehill.com/homenews/house/283341-pelosi-congressional-pay-cut-undermines-dignity-of-the-job-#ixzz2KynxRBV2
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The White House has informed House Budget Committee Chairman Paul Ryan (R-Wis.) that it will miss the legal deadline for sending a budget to Congress.
Acting Budget Director Jeff Zients told Ryan (R-Wis.) late Friday that the budget will not be delivered by Feb. 4, as required by law, a House aide said.
Barack Obama saved General Motors with his words—and you paid for it with your money. The Obama administration said the government will sell 40% of its ownership, amounting to 200 million shares, back to GM, and will exit ownership by March 2014.
http://www.breitbart.com/Big-Government/2012/12/20/Taxpayers-Take-Hit-On-GM-Buyback
California’s economy is going south at a dizzying rate, but not everyone is suffering, especially in the government. The former city manager of Indian Wells, a town near Palm Springs with a population of 5,000, made a nice chunk of change last year.
Well, perhaps more than a nice chunk. Would you believe a gargantuan chunk? A chunk worth $677,172?
http://www.breitbart.com/Big-Government/2012/12/19/CA-City-Manager-Paid-677K-To-Manage-City-of-5-000
Deep-pocketed environmental groups are collecting millions of dollars from the federal agencies they regularly sue under a little-known federal law, and the government is not even keeping track of the payouts, according to two new studies.
Under the Equal Access to Justice Act, or EAJA — which was signed into law by President Carter in 1980 to help the little guy stand up to federal agencies — litigants with modest means who successfully show government agencies wronged them can get their legal fees back from the taxpayer.
But the act also covers 501(c)(3) nonprofits, including environmental groups that aggressively sue the feds to enforce land-use laws, the Clean Water and Clean Air acts and laws protecting endangered species. Their lawyers are getting reimbursed at rates as high as $750 an hour, sources tell FoxNews.com.
“It was intended for helping our nation’s veterans, seniors and small business owners, but environmental groups have hijacked the so-called Equal Access to Justice Act and abused it to fund their own agenda,” Sen. John Barrasso, R-Wyo., told FoxNews.com. “Then you have small businesses and the American taxpayers left to foot the bill.”
Environmental groups, however, argue that the act is an important tool in their efforts to protect the public’s interest in conservation, fighting pollution and ensuring the federal government follows its own rules.
“Litigation is not a moneymaker, and the litigation is being done to make a difference and make the world a better place,” Erik Molvar, executive director of the Wyoming-based Biodiversity Conservation Alliance, told FoxNews.com.
The exact taxpayer cost of the Equal Access to Justice Act remains unclear. The General Accounting Office, or GAO, tracked 525 legal fee reimbursements that totaled $44.4 million from 2001 through 2010, but found that only 10 of 75 agencies within the U.S. Department of Agriculture and Department of Interior could provide data on cases and attorney fee reimbursements.
“As a result, there was no way to readily determine who made claims, the total amount each department paid or awarded in attorney fees, who received the payments or statutes under which the cases were brought for the claims [for fiscal years 2000 through 2010],” the GAO report reads.
Barrasso fears that is only the tip of the iceberg.
“You’re talking about millions and millions of dollars,” Barrasso said. “There is a pressing need for more accountability and transparency. Even the government doesn’t know how much it’s paying out — it’s disturbing.”
[pullquote]
A recent Notre Dame Journal of Legislation article said the law had a noble purpose once, but has produced an “incalculable waste of taxpayer money.”
“It is among the most wide-reaching statutes in the U.S. Code, and what it attempts to do is as complex in execution as it is simple in concept: to aid those who would otherwise be truly hurt by fighting the government when it acts without justification,” wrote Lowell Baier, author of the article and president of the Boone and Crockett Club, a Montana-based conservationist group. “But it is clear that EAJA is in need of reform.”
Critics say the act needs to be reformed in order to serve its original purpose. Baier calls for limiting it to small businesses and individuals and withholding or at least limiting payments where plaintiffs prevail on “process instead of substance.”
In May, Barrasso and Rep. Cynthia Lummis, R-Wyo., jointly introduced the Government Litigation Savings Act to reform the Equal Access to Justice Act. If passed, the bill would cap reimbursements at $200 per hour. It would also limit repetitive lawsuits and require full accounting of payments authorized by the Equal Access law, the GAO report found.
“Obviously it’s a David and Goliath situation when a senior citizen, small business or veteran takes on the federal government,” Lummis told FoxNews.com. “When money is being spent trying to practice the equivalent of defensive medicine, the money is not going to the environment — it’s just going to lawyers. And that was never the intent of those dollars.”
But environmental groups say the law is working just fine, and proving the government’s position was not “substantially justified” — the standard for reimbursement — can be difficult. They say the reimbursements don’t come close to covering their expenses, much less provide incentive to bring frivolous cases.
Molvar, of the Biodiversity Conservation Alliance, told FoxNews.com that his organization, which has a $250,000 annual budget, received an average of $1,000 in Equal Access reimbursements in each of the past five years.
“And that was unusually high compared to previous years,” Molvar said. “We have spent far more litigating than we have gotten back.”
Molvar said it’s important to remember that his organization — which he characterized as one of the more litigious conservation groups in the country — only receives funds if it wins.
“You only get them when you win and prove that the federal government has broken the law,” he said.
Aggressive reforms could wind up preventing parties — environmental groups included — from challenging unjust decisions made by the federal government or enforcing laws that benefit the public, according to a July 2011 analysis of the bill by the Brennan Center for Justice
Kieran Suckling, executive director of the Center for Biological Diversity, said in statement issued in October that environmental groups collect only a small portion of overall fees under the Equal Access to Justice Act. He said his own group receives only a tiny fraction — less than 0.5 percent, on average — of its annual revenue of about $8 million from those attorney fees recovered.
“No one’s getting rich by making the government follow the law,” Suckling said in the written statement. He declined to be interviewed for this article. “Republicans are using this bill as a back-door attack on environmental laws they don’t like. The end result will be restricting citizen access to the court system and a federal government that’s less accountable to the people.”
Lawmakers aghast over report of lavish conference footed by taxpayers
Lawmakers are voicing outrage following a government report that found the General Services Administration held a blowout $820,000 conference near Las Vegas which grossly exceeded what the planners were allowed to spend. The employees dropped thousands of dollars on luxury items and convention giveaways — including more than $6,000 on commemorative coins, $8,000 on a “yearbook,” and $3,200 for an in-house mind reader.
“It’s unbelievable that red flags didn’t immediately go up well before this junket,” Sen. Susan Collins, R-Maine, said. In the wake of the report, the White House accepted the resignation of General Services Administration chief Martha Johnson. Johnson also dismissed two deputies and suspended other career employees over the affair.
A chilling new report from Citizens for Responsibility and Ethics in Washington shows that this member of Congress’s campaign committee and PAC paid out a total of $304,599 in salaries and $48,742 for services during the 2008 and 2010 election cycles to his daughter, daughter’s mother-in-law, brother, grandson, granddaughter [*PAUSES FOR BREATH*] another granddaughter and a grandson-in-law, making this Representative the most nepotistic member of Congress by volume of family members on the campaign dole. And that’s only from 2008 and 2010! Who is it!? Don’t forget to scribble down your guesses on the back of your unemployment check stubs!
Hooray, and the Oscar goes to Doctor Congressman Ron Paul. Now we know why Ron Paul is always running for president: So that his family members always have jobs, what a guy. But Ron Paul is far from alone — in fact, his entry takes up only four out of three hundred and forty-three pages of this campaign expenditure report. Congress seems to be much better at job creation than they are letting on! Here are some more shining examples:
Top five representatives paying the most money in salaries or fees to family members: • Rep. Alcee Hastings, (D-FL) paid his girlfriend $622,574. • Rep. Jerry Lewis (R-CA) paid his wife $512,293. • Rep. Maxine Waters (D-CA) paid her daughter and grandson a combined $495,650. • Rep. Ron Paul (R-TX) paid six different relatives a combined $304,599. • Rep. Buck McKeon (R-CA) paid his wife $238,438. • In total, representatives paid $5,575,090 in salaries or fees directly to family members.
The company that sells ground beef treated with ammonia proclaims their meat mixture is good for America’s schoolchildren, even though parents across the country are seriously questioning the safety of what has been dubbed “pink slime.”
Beef Products Inc. (BPI) made the declaration about its “lean finely textured beef” or LFTB over the weekend to The Daily, which broke the news that the federal government plans to buy ground beef that contains 7 million pounds of the product in the coming year. After the report, “pink slime” became the most searched topic on the internet.
“Including LFTB in the national school lunch program’s beef products accomplishes three important goals on behalf of 32 million kids,” BPI spokesman Rich Jochum said. “It 1) improves the nutritional profile, 2) increases the safety of the products and 3) meets the budget parameters that allow the school lunch program to feed kids nationwide every day.”
Extracting beef remnants from fat and trimmings, where pathogens such as E. coli and salmonella are found in markedly higher concentrations, is a cost effective way to increase overall yields — shaving an estimated three cents off the cost of making a pound of ground beef.
Critics, though, contend South Dakota-based BPI has made millions off “pink slime” over the past decade, and that its safety and nutritional claims about the treated beef are dubious at best.
“Not only is this product a potential source of killer pathogens if the ammonia levels are not controlled properly, but that the overall protein quality of the beef hamburger is compromised by the inclusion of LFTB,” former US Department of Agriculture microbiologist Gerald Zirnstein said.
Zirnstein, who worked in the agency’s Food Safety and Inspection Service, coined the term “pink slime” after touring a BPI production plant.
The former director of food safety for BPI, Kit Foshee, maintains that the company’s CEO routinely told fast-food companies that the inclusion of treated beef would help kill pathogens when mixed with other ground beef.
“BPI is marketing themselves as a pinnacle of safety,” Foshee said. “It’s all lies. It’s all marketing.”
In less than a week, Houston food columnist and mother Bettina Siegel collected 200,000 petition signatures, mostly of parents, who object to the meat mixture being served to children. She plans to present the petition to the USDA.
The House Committee on Oversight and Government Reform asked Energy Secretary Steven Chu to explain how the solar panel manufacturer had qualified for the loan after the ratings firm Fitch had determined the company would make a “highly speculative” investment.
“Fitch describes Abound as lagging in technology relative to its competitors, failing to achieve stated efficiency targets, and expecting that Abound will suffer from increasing commoditization and pricing pressures,” wrote Rep. Darrell Issa, R.-California, the committee chairman. “DOE’s willingness to fund Abound, despite these concerns, calls into question the merits of this loan guarantee.”
Issa’s letter to Chu, dated January 30, came just weeks before the company announced it would lay off 180 of its 400 workers as it tries to retool to produce a more efficient type of solar panel in order to keep a technological edge on Chinese manufacturers who are flooding the market with less expensive models. So far Abound has drawn down $70 million of its $400 million federal loan.
It remains way too early to determine whether Abound is poised to follow the trajectory of the best-known solar manufacturer to receive a sizeable government loan — Solyndra, the California firm that filed for bankruptcy in September after having burned through the bulk of its $535 million federal loan.
Abound’s chief executive, Craig Witsoe, told ABC News he hated “to see politicians [comparing Abound to] Solyndra to score political points.”
“Obviously, any big failure like that, a lot of people don’t know the details of the different technologies,” he said. “Our technology is very, very different from Solyndra. Solyndra didn’t have a competitive, cost-effective technology. Our strategy is to create a most cost-effective solar module.”
U.S. Energy Department officials were also quick to note differences between the two companies, most notably that Abound Solar also had strong backing from Republicans in Indiana who shared the hope that it could be a catalyst for new manufacturing jobs. The state’s GOP governor, Mitch Daniels, even supported an $11.85 million tax credit for the firm. Energy officials also said that two Abound investors were major Republican donors who have given more than $100,000 to Republicans in the last few years.
“The Department’s decisions about Abound were made on the merits,” said Damien LaVera, a DOE spokesman. “Abound is an innovative domestic start-up company with a history of bipartisan support, including from the Governor of Indiana.”
Energy officials also maintain hope that Abound will find its way in a tough solar energy market. “While the challenges facing solar manufacturers have been widely reported,” said LaVera, “we continue to believe that supporting innovative companies like this is important to ensuring our nation has the ability to compete for the clean energy jobs of tomorrow.”
Pattern to Energy Loans?
Issa’s letter, however, suggests that House Republicans believe the DOE loan to Abound Solar follows a troubling pattern. In addition to raising questions about the degree of risk involved in putting taxpayer funds into Abound, Issa also inquires about the company’s political ties to the Obama administration. Namely, Issa notes that a major investor in Abound Solar, the Bohemian Companies, is run by Pat Stryker.
Forbes puts Stryker’s net worth at more than $1.3 billion, and Stryker has donated nearly $500,000 to Democrats in the past five years, including $50,000 to Obama’s inaugural fund and $35,800 to his victory fund, according to the Center for Responsive Politics.
A message left at Stryker’s office in Colorado has not been returned.
Energy Department officials reiterated that the decisions made by loan officials were based on the merits, and never on political considerations.
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Two Republican-led House committees have been investigating the Obama administration’s green energy loan program, and to date, no evidence has emerged showing loan recipients used political influence to secure their money.
Click Here for the Blotter Homepage.
A chunk of an $11 million stimulus grant meant to provide low-income Detroit residents with clothing for job interviews reportedly aided just two people — far short of the 400 job-seekers the money was meant to help.
The findings were part of a new audit on the city’s Department of Human Services, according to The Detroit News.
The 2009 grant in question was used to start a service center — which included among other features a call center for families in need and a clothing boutique.
However, the audit reportedly found the department did not safeguard the funding for that boutique, which was run by a contractor. According to the report, the contractor advanced nearly $150,000 to a city clothing store without involving the city government.
While the department was supposed to help 400 job-seekers with clothing between the fall of 2010 and 2011, the boutique instead came up with two documented cases where clients received clothing.
“The potential loss of thousands of dollars exists because controls have not been established for the boutique,” the audit said, according to The Detroit News.
The department reportedly has undergone heavy scrutiny since an internal probe was launched last year
Ronald Ratner is the president and chief executive of Cleveland-based real estate giant Forest City Enterprises. His cousin, Deborah Ratner Salzberg, is the president of the company’s Washington D.C. office. Together, the two bundled between $200,000 and $500,000 for the 2008 Obama campaign. They’ve bundled another $200-500,000 for his reelection campaign as well, as of the fourth quarter of last year.
Since Obama took office, the Ratners have seen millions in taxpayer money funneled to the real estate company at which they are top executives. They are the latest in a long line of Obama supporters who have received taxpayer money, been appointed to federal posts, or enjoyed significant access to administration officials.
Ron Ratner hosted a fundraiser for the 2008 campaign featuring then-Vice Presidential candidate Joe Biden. He also hosted Obama at his home for a meeting with Jewish leaders of Ohio.
The fundraisers have continued this election cycle: in September, Ratner again hosted Biden at his home for a fundraiser for the Democratic National Committee’s Obama Victory Fund. Tickets to the event cost between $1,000 and $5,000.
Barely two weeks after Ratner hosted Biden for the DNC event, Forest City announced that it had signed a 50-year privatization deal with the Air Force “for the development and management of 2,185 family homes at four U.S. Air Force bases in the Southeast.”
The developments are valued at more than $300 million. Forest City “will also earn an on-going fee,” the company said, though it declined to specify what the fee would be.
The Air Force contract was not the first time Forest City received taxpayer dollars. According to data obtained through USAspending.gov, the company and its subsidiaries have received at least $4.9 million in 40 different federal grants, contracts, and other payments since fiscal year 2010.
The Ratners are not the only high-profile Obama supporters to receive federal money in one form or another. The Center for Public Integrity documented that nearly 200 Obama bundlers had received direct payments from the federal government, access to federal officials, or appointments to key administration positions.
In addition to Forest City’s federal payments, Ron Ratner was also appointed by President Obama to the council of the U.S. Holocaust Memorial Museum.
WASHINGTON – Cost estimates for a key part of President Obama’s health care overhaul law have ballooned by $111 billion from last year’s budget, and a senior Republican lawmaker on Friday demanded an explanation.
House Ways and Means Committee Chairman Dave Camp, R-Mich., wants to know by Monday why the estimated ten-year cost of helping millions of middle-class Americans buy health insurance has jumped by about 30 percent.
Administration officials say the explanation lies in budget technicalities and that there are no significant changes in the program.
The revised numbers, buried deep in the president’s budget, stumped lawmakers and some administration officials for most of the week. At a congressional hearing Tuesday, Health and Human Services Secretary Kathleen Sebelius, who is in charge of carrying out the health care law, indicated she was unaware of the changes.
At issue are subsidies that will be provided under the health care law to help middle class people buy private coverage in new state insurance markets that will open for business in 2014.
Last year’s budget estimated the cost of the aid to be $367 billion from 2014-2011. This year’s budget puts it at $478 billion over the same time period.
“This staggering increase … cannot be explained by legislative changes or new economic assumptions, and therefore must reflect substantial changes in underlying assumptions regarding the program’s … costs,” Camp wrote Friday in a letter to Sebelius and Treasury Secretary Tim Geithner.
Republicans say they’re concerned that either the estimated cost of the insurance has gone up, or that the administration has determined many more people will be losing employer coverage and going into the new government-subsidized markets, which will be called exchanges.
Administration officials say the big increase from last year’s estimates is no cause for alarm and that the administration is not forecasting an erosion of employer coverage or higher insurance costs.
About two-thirds of the increase is due to effects of newly signed legislation that raises costs for one part of the health care law, but still saves the government money overall. The rest is due to technical changes in Treasury assumptions about such matters as the distribution of income in America.
“The estimates do not assume changes in what exchanges look like, the cost of insurance, or the number of Americans who will get their insurance in this new marketplace,” Treasury spokeswoman Sabrina Siddiqui said in a statement Friday.
That explanation has drawn skepticism from Ways and Means Committee Republican staff members
Remember that eye-popping $110 million bill taxpayers are on the hook for in defending former Fannie Mae and Freddie Mac execs since 2004?
The total bill is actually even higher – and the worst part is that, by law, taxpayers shouldn’t have to pay it at all.
Taxpayers have footed the bill for $194.4 million on legal fees to defend former executives like Franklin Raines and the companies themselves over accounting frauds that boosted bonuses and predated the government takeover of the companies, as well as for their role in the housing collapse. And that’s money spent only since the government seized them in 2008.
The new figures come from the office of Rep. Randy Neugebauer (R-Tex.), whose House oversight subcommittee oversees Fannie and Freddie. The figures are based on confidential government documents FOX Business has reviewed.
Rep. Neugebauer now has a bill cosponsored by Reps. Spencer Bachus (R-Ala.), Scott Garrett (R-NJ) and three other Congressmen that will attempt to minimize the impact on taxpayers, his office says.
Fannie and Freddie have also spent another $272 million for general legal costs since their government takeover, for things like bringing actions against banks to take back bad mortgage bonds the two had bought, Rep. Neugebauer’s office says.
Veering Towards Half a Billion Dollars
That brings the total Fannie and Freddie have spent on legal costs to $466.4 million since the government took them over through July 2011, “a number that is now rising well above a half a billion dollars, because we are still awaiting a document dump for a year’s worth of data,” says a Congressional official close to the matter.
The controversy raises anew the question whether the government should have restructured them instead by placing the two into receivership, since a bankruptcy trustee would have been legally free to nix these legal fees.
And under the 2008 federal law letting the government seize Fannie and Freddie, the former executives would be prohibited from suing the companies’ bankruptcy estate—they’d have to get in line with other unsecured creditors, and possibly end up with nothing.
“Seems a Little Fishy”
Moreover, Fannie signed agreements with its former executives in 2004 stipulating it would refund their legal fees—well after the companies’ government regulator had launched an investigation into its accounting fraud engineered by these officials. ”It seems a little fishy that we had to renew the contracts in 2004,” Mr. Neugebauer has said.
Taxpayers are paying a virtually open-ended legal bill for an army of lawyers and expert witnesses to defend former Fannie and Freddie executives and their increased compensation, which they got through orchestrating accounting frauds that helped destroy their companies and drove the two into the arms of the U.S. government in September 2008.
Fannie and Freddie execs routinely donated to Congressional campaigns. Countrywide Financial was one of Fannie’s biggest clients, providing about 28% of all the mortgages Fannie guaranteed. Fannie in 1999 backed Countrywide’s “Fast and Easy” program to give buyers loans without proof of their income or assets.
Because of their unlimited pipeline into the U.S. Treasury, taxpayer costs for Fannie and Freddie continue to mount, with Fannie yesterday asking another $4.57 billion, bringing their total taxpayer cost to nearly $190 billion.
The FHFA, the regulator for both, is charged with “minimizing taxpayer losses” at the two. Today, Fannie and Freddie guarantee an estimated three out of every four new mortgages.
“A Feeding Frenzy”
And because of that unlimited Treasury pipeline, the government has created a perverse incentive for outside lawyers for Fannie and Freddie to delay and not settle, and to run up colossal legal bills footed by U.S. taxpayers, says Rep. Neugebauer, with no end in sight.
“This is a feeding frenzy,” Ohio’s attorney general has testified–his state’s public pension system is suing Fannie Mae.
It’s the equivalent of betting against the house, having the house fall down not on you, but on taxpayers–and letting your lawyers charge taxpayers legal fees into infinity to defend you for the collapse you created.
The inspector general for the Federal Housing Finance Agency (FHFA) has reported that Fannie and Freddie spent $110 million to defend former executives since 2004.
That includes $37 million shelled out since the government took them over in September 2008—and all of that money was spent on just the three former Fannie execs, an official with the FHFA’s inspector general’s office confirms to FOX Business.
The actual $194.4 million number breaks down to an estimated $159.7 million for Fannie and its execs since September 2008, and an estimated $34.7 million for Freddie and its execs for that time (factor in the $73 million paid for just the executives legal fees since 2004, and the total number rises to $267.4 million).
Fannie did not return calls for comment. Freddie Mac spokesman Michael Cosgrove emailed FOX Business to say such payments are “in accordance with Virginia law and our bylaws and indemnification agreements.”
An Army of Lawyers and Experts
Tens of millions of dollars in taxpayer money has been flying out the door for an army of outside lawyers, consultants and troves of expert witness to defend the former executives, and their increased compensation, as well as for things like computer data services.
Fannie and Freddie are also reimbursing lawyers for their copying costs, long distance phone calls, and travel expenses, government documents show.
Based on info from the FHFA, and according to analysis by Rep. Neugebauer’s office, an army of lawyers has racked up an astonishing 159,000 billable hours for just the three former Fannie executives since the government took them over.
There are only 8,760 hours in a year.
That means these lawyers somehow packed in 18 years worth of round the clock work, wall to wall, 24/7 legal work in just four years’ time.
Also, the government lets the former executives’ lawyers bill for charges at every one tenth of an hour (six minutes), says the new report from the inspector general for the FHFA.
A Fannie case “ongoing since 2004 has included over 120 fact depositions, various expert depositions and millions of discovery documents. Unfortunately, no end is in sight,” Rep. Neugebauer says.
Ohio attorney general Michael Dewine notes that, even just for short routine conferences, “where nothing substantive is discussed,” Fannie Mae typically brings a crowd of 35 to 40 attorneys and paralegals, “costing taxpayers over $600 per hour for some of these lawyers.”
For example, Raines’ deposition held in April 2010 “lasted 12 hours, covering two days,” Dewine says, adding that “the Fannie Mae defendants brought 13 lawyers,” including five for Raines, two each for the former CFO and controller, and one for Daniel Mudd, a former Fannie Mae official, “who isn’t even a defendant in the case.”
What did taxpayers get for these 13 lawyers?
“None of these 13 lawyers asked a single question at this particular deposition,” Dewine testified.
Just as bad are the taxpayer-paid for “expert” witnesses hired to defend the former executives against their accounting fraud — and to defend their compensation rigged higher by the frauds.
At one point in the Ohio suit, defendant KPMG had five experts. But the Fannie Mae defendants had “25 experts, costing taxpayers an astounding $600 to $1500 an hour,” Dewine testified.
Moreover, Raines had “nine experts just for himself, including four to say essentially that he fulfilled his job as CEO by properly relying on others,” and “two to say that his $91 million in compensation over five years was justified,” the Ohio attorney general says.
Dewine noted that at a later hearing, the judge on the case said there is absolutely no way that so many experts would actually testify at trial, “admonishing Fannie Mae defendants: ‘so you don’t need to have five experts say the same damn thing…the costs are just staggering.’”
The problem is, the Ohio case has been going on now for over seven years. There are other lawsuits as well, involving even more lawyers.
Dewine has warned: “It’s really easy to hold up the resolution of a lawsuit, when you’ve got a seemingly bottomless coffer of U.S. taxpayer dollars from which to pay your legion of lawyers to engage in wasteful delay tactics.”
Ignoring Efforts to Settle
Dewine noted that, although his office is trying to settle its class action suit, their “efforts, at every turn, have been ignored, with no meaningful conclusion in sight.”
Dewine also has testified that Fannie Mae “is doing everything in its power to delay and stall, all while racking up astronomical legal costs and sticking America’s taxpayers with the bill,” because they continue to use “U.S. taxpayer dollars to pay their highly compensated cadre of lawyers to over-lawyer their indefensible actions.”
The judge on the Ohio class action suit has also commented in court that “I am not so sure the taxpayers are doing pretty well, but the lawyers are doing pretty well in this deal.”
Shangri-La for Lawyers
And the Ohio attorney general has noted: “If, what Supreme Court Justice David Brewer once said is true — that ‘America is the paradise of lawyers’ — then counsel for Fannie Mae, Raines, Howard, and Spencer have found Shangri-La!”
Dewine notes that in his experience, “98% of all securities cases reach a conclusion in far less time — and with far less cost,” adding that even a similar June 2003 securities fraud class action case against Freddie Mac “was resolved in a little under three years.”
The bottom line, as Judge Leon put it, is this: “The more this litigation is protracted and prolonged, the greater the risk that..pensioners and the shareholders will not have as much or will have markedly less and the taxpayers will be out millions and millions and tens and tens of millions of dollars for legal fees that can’t be recouped.”
Taxpayers Still Kept in the Dark
And after all these payments are shelled out by taxpayers, Fannie and Freddie still must abide by the executives “attorney client privileges.”
Meaning, the lawyers don’t have to disclose any further evidence they uncover that the executives knowingly and willingly broke the law–and thus broke the companies’ indemnification standards.
Here’s What Happened
In 2006, the federal government found that Fannie’s former head, Raines, and two other executives put their own personal interests ahead of Fannie’s when they engineered a $10.6 billion accounting fraud to manipulate earnings, and their bonuses, higher over a six-year period, from 1998 to 2006. The moves smoothed Fannie’s earnings so as to hit Wall Street earnings targets.
Freddie, too, was found to have manipulated its profit figures from 2000 to 2002; the company later revised its results by $5 billion.
Raines and the executives could not be reached for comment.
That fraud resulted in Fannie Mae overstating reported income and capital by an estimated $10.6 billion, said the Office of Federal Housing Enterprise and Oversight, Fannie and Freddie’s federal overseer at the time, in a May 2006 report. The fraud triggered a restatement and losses.
Fannie Mae admitted its wrongdoing in May 2006, when it paid a record $400 million total to the SEC and OFHEO for violating more than two dozen generally accepted accounting principles and a variety of OFHEO rules, among other things.
Former OFHEO head James Lockhart described Fannie as having an “arrogant and unethical corporate culture where Fannie Mae employees manipulated accounting and earnings” which in turn “maximized the bonuses” for Raines, which totaled over $90 million from 1998 through 2003. Of Raines’ total, “over $52 million was directly tied to achieving earnings per share targets,” OFHEO said.
Neither Admit Nor Deny = Refunded Legal Fees
However, the trio neither admitted nor denied the charges—which means taxpayers have to keep on paying. “They did not admit to offenses that would have cost them their indemnification,” Edward J. DeMarco, Acting Director Federal Housing Finance Agency, testified last year.
It is standard practice for executives to settle cases neither admitting nor denying culpability, although the SEC is now trying to curtail this practice.
In addition, the executives got their total settlement fines of $31 million covered by Fannie’s insurance policies, and paid via forfeiture of stock options, pension and bonuses, among other things.
Taxpayers Foot Fannie’s Legal Bills for Housing Collapse
And taxpayers are now footing the legal bills for class action and other law suits, legal fights between Fannie and its auditor KPMG, as well as government investigations that are nearly a decade old, including probes by the Securities and Exchange Commission, the FBI, and other Congressional probes.
Taxpayers are also footing legal bills to defend the Fannie and Freddie for their outsized role in the housing crisis—where they took on an estimated $1.7 trillion in high risk mortgages.
The two are now stuck with trillions of dollars in mortgages and securities, including fraudulent liar loans and fraudulent subprime liar’s loans, which they took on so as “to increase profits and regain market share,” guaranteeing even fatter bonuses and more fatal losses, noted Armando Falcon, Lockhart’s successor at OFHEO.
Both of their balance sheets combined now total $5.4 trillion—equal to the gross domestic product of Germany and the United Kingdom–combined.
Paying Cash Advances, Too
Moreover, both Fannie and Freddie are paying cash advances to former executives to cover their legal fees ahead of time with little oversight—which means they face “no expense in just running up the tab for the U.S. taxpayers,” says Rep. Neugebauer.
Moreover, Fannie’s board sped up the time of that payment, a deadline of just 20 days for executives like Raines to get their taxpayer funded cash advances. Freddie, too, pays after 45 days time.
This practice, too, is causing taxpayer costs to soar.
Moreover, the FHFA has not independently certified whether the internal systems that Fannie and Freddie use to pay these cash advances for legal bills protect taxpayers, government documents show.
On Feb. 29, 2008, Fannie Mae’s board adopted a policy allowing for the advancement of cash to current and former board directors and executives for these costs.
The board suddenly decided that, if an executive was in compliance with its indemnification standards, “Fannie Mae will pay to directors and officers expenses incurred in advance of the final disposition of a proceeding,” an internal company document says.
Fannie didn’t return calls asking how the board determined Raines and the execs were “in compliance” with these standards.
Also, all Raines and the executives have to do is send a letter of request to Fannie’s general counsel, which is then supposedly put to a vote by the board.
And in a confidential, internal document, Freddie’s bylaws prohibit payment of legal fees if an employee “knowingly engaged in certain conduct and knowingly or recklessly caused a substantial loss to Freddie Mac or a substantial pecuniary gain or other benefit.”
It goes on to say that any employee “who has engaged in misconduct resulting in a loss to Freddie Mac or who has improperly received benefits as a result of such misconduct” may be subject to “legal action by Freddie Mac for restitution or reimbursement.”
Frannie and Its Regulator Say “We Have to Pay”
But instead of minimizing taxpayer losses–as the FHFA is charged with doing–by fighting to void these legal fees, Fannie and Freddie now argue, along with the FHFA, that their options are limited; that court cases enforcing payment for legal bills take precedent; that the executives could sue them and win; and that they need to keep paying these fees to keep existing employees on staff and attract skilled workers.
Cosgrove adds that “if FHFA or we were to cut off these payments, the officers could sue us to enforce their rights to such payments, which could subject us to additional costs.”
However, efforts to save taxpayers money are spotty. Fannie merely questions bills if more than one lawyer attends, says the FHFA IG, while Freddie does not.
Taxpayers Should Not Have to Pay
Trouble is, the 2008 federal law sanctioning their government takeover and even the companies’ own bylaws let the two repudiate these legal fees if their executives act against the companies’ best interests, engage in intentional misconduct or breach their duty of loyalty to their companies.
The inspector general for the FHFA also noted that the FHFA could have voided these legal fees under the 2008 law authorizing their government takeover.
An outside law firm has confirmed these findings, noting that the FHFA “has express statutory authority to repudiate or disaffirm” the refunding of these legal fees, which come as part of what are called standard, corporate indemnification agreements.
Nothing to Lose By Nixing These Fees
However, an outside law firm which has reviewed the contractual agreements says the government should take a shot at this and not pay, because if it lost, taxpayers would only have to pay their legal fees anyway if Raines and the other executives turn around and sue for breach of contract.
That’s because under a worst case scenario, in the 2008 law letting the government seize Fannie and Freddie, the law says the government would only have to pay the legal fees.
The 2008 law says the costs “should not exceed what the FHFA would have paid if it had continued to pay the former employees’ legal fees under the indemnification agreements.”
The 2008 law also says the damages would only equal “actual direct compensatory damages,” not punitive damages, damages for lost profits or pain and suffering.
Meaning, “the former executives’ incurred legal fees and expenses” the government would have paid in the first place if it didn’t try to void them, the legal analysis shows.
And taxpayer costs for a lawsuit nixing these legal fees would be low, since the FHFA could use its own legal staff, and not a phalanx of outside lawyers.
Fannie’s Legal Fees Contravene SEC Order
And Fannie’s payment of these legal fees for the 2004 accounting fraud contravenes a consent order it entered into with the SEC earlier last decade when it settled its accounting charges.
According to FOX Business’s review of its SEC consent order, Fannie Mae agreed to “not take any action or to make or permit to be made any public statement denying, directly or indirectly, any allegation in the [SEC’s] complaint or creating the impression the [SEC’s] complaint is without factual basis.”
However, by continuing to pay to defend these executives, Fannie Mae is doing just that, as its lawyers are “dragging out” litigation “billable hour by billable hour — and bleeding Americans,” Ohio Attorney General Dewine has testified to Congress last year.
Why the Sudden Indemnification?
Executives can get indemnification “only if the officers and directors were acting within the scope of their authorities, the FHFA IG’s report says.
Is securities fraud and cooking the books “in the scope of their authorities?”
Plus Fannie mysteriously, and suddenly, offered its executives indemnification well after the government had started probing its accounting fraud.
Another internal Fannie Mae document that Raines signed on Nov. 12, 2004 entitled “undertaking to repay indemnification expenses” noted that he agreed to reimburse Fannie Mae “for all expenses paid” by Fannie for his defense in any civil or criminal action if it’s determined he is “not entitled” to be indemnified.
The indemnification sets for “rights” AND “obligations” of these executives in order to be “indemnified.”
The document notes they must act “in good faith and in a manner he or she reasonably believed to be in or not opposed to Fannie Mae’s best interests.”
Being involved in an accounting fraud is not acting in the best interests of any company.
Also, according to their bylaws, payment of legal bills must be “reasonable” expenses.
Are 40 lawyers and paralegals for one short courtroom conference, and a phalanx of experts defending fat cat pay rigged by accounting frauds “reasonable”?
As lawmakers across the Capitol hear appeals Tuesday from Obama administration secretaries pleading for their budgets, duplication and overlap in dozens of areas of government is wasting “tens of billions of dollars annually,” a new government report shows.
According to the Government Accountability Agency’s 2012 annual report, nearly every department of the Executive Branch has room for improvement.
The report, which gives 51 areas and recommends 130 actions, follows a 2011 GAO report that showed 81 areas and 176 actions to be taken to “reduce or eliminate unnecessary duplication, overlap, or fragmentation or achieve other potential financial benefits.”
“Collectively, these reports show that, if the actions are implemented, the government could potentially save tens of billions of dollars annually,” Gene Dodaro, comptroller general for the U.S., said in remarks prepared for Tuesday’s hearing in the House Oversight and Government Relations Committee.
Sen. Tom Coburn, R-Okla., also a witness Tuesday, estimated that waste and duplication costs taxpayers more like $100 billion per year.
“Not one corner of our daily life remains untouched by a government program or federal effort,” Coburn said in testimony being delivered Tuesday. “From what we eat and drink, to where we live, work, and socialize, nearly every aspect of human behavior and American society are addressed by multiple government programs.”
Coburn said last year’s report listed more than 100 surface transportation programs; 88 economic development programs; 82 teacher quality programs; 56 financial literacy programs; 47 job training programs; 20 homelessness prevention and assistance programs; 18 food for the hungry programs; and 17 disaster response and preparedness programs.
He said government’s duplication in nutritional programs alone — worth $62.5 billion in 2008, according to GAO — have burned taxpayers over items as simple as potato chips.
“While many of these programs, such as the Supplemental Nutrition Assistance Program (SNAP) allow federal funds to purchase potato chips, dozens of other government-wide initiatives, are aimed at keeping Americans healthy, specifically suggesting food like potato chips should be limited in intake, and perhaps even taken out of public schools all together,” he said.
“At the same time, just this year the Department of Agriculture announced a nearly $50,000 federal grant was being doled out to a private potato chip company in New York. According the proposal, this money would be used to overhaul their media strategy and raise brand awareness and consumer knowledge — essentially encouraging people to buy and consume potato chips,” he said, noting that potato chips sales in the United States exceed $6 billion annually.
Coburn said that sales level “begs the question why the taxpayers are now asked to subsidize promotion and marketing for the industry.”
Click here to read Dodaro’s testimony.
Click here to read the GAO report.
Click here to read Coburn’s testimony.
GAO categorizes the areas for improvement into a dozen specialty areas. For the Justice Department, for instance, GAO says $3.9 billion is offered in 11,000 grant awards where there is a “risk of potential unnecessary duplication.”
The Defense Department, he said, needs a department-wide strategy for spending $37.5 billion on unmanned aircraft over the next five years. Dodaro offered the example of the Navy spending $3 billion to create its own version of an Air Force surveillance program that is already operational.
“According to program officials, no analysis was conducted to determine the cost effectiveness of developing the Broad Area Maritime Surveillance UAS to meet the Navy’s requirements versus buying more (Air Force) Global Hawks,” Dodaro said.
GAO also lists areas for improvement in science, engineering, transportation, food safety and security clearances, among others.
On housing, Dodaro said the Treasury and Federal Reserve invested more than $1.67 trillion in Fannie Mae and Freddie Mac in 2010, while GAO identified “20 different entities that administer 160 programs, tax expenditures and other tools” designed to support home ownership and rental housing while another “39 programs, tax expenditures, and other tools” offered help in buying, selling or financing a home. Eight more programs and tax expenditures were designed for rental property owners.
Meanwhile, Dodaro noted, 56 percent of Rural Housing Service loan guarantees were for urban properties in 2009 while the Federal Housing Administration insured eight times as many single-family loans in rural counties as RHS did.
Writing on the White House blog on Tuesday, Danny Werfel, controller of the Office of Federal Financial Management, said that GAO’s 2012 report was finished before the release of President Obama’s 2013 budget, which includes additional measures to those already taken by the administration since the prior GAO report.
Werfel said consolidation is already taking place without Congress’ sign-off, including the merger of six business and trade agencies into one, consolidation of 1,200 data centers by 2015 — 100 of which have already closed and 500 of which are already slated to close — and the reduction of agency real estate costs by $3 billion by the end of the year.
Werfel wrote that “nearly 80 percent of the issue areas for which GAO recommended action last year, and more than three-quarters of the recommendations for Executive Branch actions associated with those areas (76 percent) were addressed in some way.”
He said Congress, which addressed less than 40 percent of the recommendations requiring congressional action in some way, could do more by passing the president’s budget as well as the Reforming and Consolidating Government Act, which he said the administration sent to Capitol Hill earlier this year as a plan to set up an expedited process to review government consolidation proposals.
Dodaro said much of the the low-hanging fruit outlined in last year’s report has been addressed in the latest budget but there “needs to be more assertive action” from the Office of Management and Budget.
He said one easy fix would be to eliminate differences in the coding practices for Medicare Advantage versus traditional Medicare.
Diagnostic coding for Medicare Advantage estimated a 3.41 percent higher risk scores for beneficiaries, totaling about $2.7 billion in greater payments. The reason for that, he said, is because Medicare Advantage providers get paid by the diagnostic code while traditional Medicare providers are paid by the services rendered.
“We estimated that a revised methodology that addressed these shortcomings could have saved Medicare between $1.2 billion and $3.1 billion in 2010 in addition to the $2.7 billion in savings that CMS’s 3.41 percent adjustment produced,” he said.
Committee Chairman Darrell Issa, R-Calif., said in a statement before the hearing that taxpayers deserve more “modern, efficient and cost-effective operations” in government, especially in times of fiscal crisis.
“I have always said that the enemy isn’t the Democrats, the enemy isn’t the Republicans — it’s the bureaucracy. A bureaucracy that inherently resists change and adaptation,” he said.
But while Issa said the hearing was not convened to cast blame, Coburn said “Congress is the main offender” allowing runaway spending.
“We set the budget, we pass the appropriations bills and we authorize new activities at the federal agencies. We refuse to apply metrics and standards to the programs we create. We ignore our duty to conduct oversight. And we choose to remain uninformed about existing efforts before creating new ones,” he said.
In January and February of this year, the Internal Revenue Service began sending out letters to various local Tea Parties across the country. Mailed from the same Cincinnati, Ohio IRS office, these letters have reached Tea Parties in Virginia, Hawaii, Ohio, and Texas (we are hearing of more daily). There are several common threads to these letters: all are requesting more information from these independent Tea Parties in regard to their nonprofit 501(c)(4) applications (for this type of nonprofit, donations are not deductible). While some of the requests are reasonable, much of them are strikingly onerous and, dare I say, Orwellian in nature.
What are local Tea Partiers to think with requests like “Please identify your volunteers” or “are there board members or officers who have run or will run for office (including relatives)”? What possible reason would the IRS have for Tea Parties to “name your donors” when said donations are non-deductible? These are just a few of the questions asked by the IRS in these letters, and one cannot help but suspect an intrinsic threat encompassing all these demands.
The other question is the timing of these IRS letters requesting reams of copies and hundreds of hours of work and potentially thousands of dollars in accounting/legal fees (all due in two weeks). Some of these Tea Party groups have not received anything concerning their nonprofit status since 2010 prior to these letters.
These documents are further undermined by a letter sent to the IRS Commissioner Shulman. Signed by six Senators, it requests that the commissioner investigate 501(c)(4) groups to determine whether they are engaging in substantial campaign activity, including opposition to any candidate. Who signed this letter? Senators Schumer, Franken, Udall, Shaheen, Whitehouse, Merkley and Bennet — all Democrats.
Could it be that these Senators want the IRS to investigate the nonprofit status of Media Matters and its coordinated political activity with the White House? Or perhaps they are concerned with nonprofit ACORN groups’ record of voter fraud, and other previous campaign abuses including alleged close ties with President Obama’s Project Vote? No, when these Senators sent this letter to the IRS commissioner, the message would be very clear. The 501(c)(4) groups they want investigated are not those with Democratic liberal ties.
But why would a department like the IRS cave to Democrat demands? Could it be because this Democratic administration proposed a budget earlier this month that would result in “$1.1 billion in new funds for the Internal Revenue Service… that would translate to 5,112 new hires, or a 5 percent expansion of enforcement operations”? Colleen Kelley, president of the National Treasury Employees Union, couldn’t contain her glee at the prospect of over 5,000 new union hires, exclaiming in response to the announcement that “the administration’s 2012 funding level for the IRS would permit the agency to improve services through increasing response rates to inquiries, deploying enforcement resources to what the White House called high-return integrity activities and by modernizing information technology systems.”
The IRS is already focusing on “deploying enforcement resources,” as Kelley put it, toward targeting small, local Tea Parties; we’re sorry to report that these “high-return integrity activities” are generating a higher fear factor, not necessarily higher returns.
In the near future, the Affordable Healthcare Act mandate and all things related to healthcare are to be policed and enforced by the IRS. This means thousands more IRS agents will be added, but the actual number is yet unknown. Considering that healthcare accounts for 1/6th of the U.S. economy, it will probably be a significant number of additional agents. According to the tax administration inspector general, Russell George, “The new Affordable Care Act provisions represents the largest set of tax law changes in 20 years.” That’s an overwhelming thought considering there are over 70,000 pages of federal tax code.
The Tea Party movement is well known for wanting to shrink the size of government and decrease government spending because of the ballooning deficit. This means that unionized government employees that may be out of a job if the Tea Party is successful also have the power to choose whether or not Tea Party groups get nonprofit status. And those same employees are also requesting names and information of board members, volunteers, donors, invited speakers(and party affiliation) and just about anyone that has had any association with the Tea Party.
It is apparent that there is a potential conflict of interest and it could be used to stifle the right to free speech of the Tea Party members, or any other citizen willing to question the system and powers that be.
Many Tea Party boards are afraid to speak out publicly about these intrusive requests because of fear of being personally targeted and singled out by the IRS. This is especially scary to citizens of modest incomes that don’t have the financial means to hire accountants or tax attorneys. And that is probably the point. Cower and fade away, or face possible persecution at the hands of government bureaucrats.
Some people may read this article about this possibly-coordinated effort against Tea Parties and be glad. But, the tables can easily be turned if and when another party takes control. The potential of using the IRS as a weapon against those that disagree with the people in power is exactly why the Tea Party fears the growth of government.
If your Tea Party has received similar letters, please let me know (Colleen Owens, citizenczar@gmail.com) and I will put you in contact with other Tea Parties that have also received them. I will not publish your Tea Party or names publicly.
Remember the words of Ben Franklin, “We must all hang together, or assuredly we shall all hang separately.”
A Saul Alinsky-tied group has been awarded a $56 million federal loan to start up a nonprofit health insurance company — one of several organizations across the country this week tapped to launch a new network of insurers under the sponsorship of the federal health care overhaul.
The Wisconsin group, Common Ground Healthcare Cooperative, was awarded the funding on Tuesday. According to the Department of Health and Human Services, the group is expected to provide coverage statewide within five years after starting on a smaller scale in early 2014.
But Americans for Limited Government President Bill Wilson questioned the group’s credentials — given its affiliation and lack of experience in the insurance field.
“The indisputable fact is that Common Ground was an outgrowth of the Alinsky operation in Chicago,” Wilson said. “We’re not giving money to a group with experience in health care issues or in setting up exchanges. … We’re handing the money to people who have been trained by arguably the single most expert individual on community organizing in the last 100 years.”
Common Ground, a Milwaukee group that dates back to 2004, is an affiliate of the Alinsky-founded Industrial Areas Foundation.
Alinsky, who died in 1972, is regarded as the godfather of community organizing but has also emerged as a bogeyman of the right. Republican presidential candidate Newt Gingrich has weaved Alinsky’s name into his campaign message, repeatedly hammering President Obama as an “Alinsky radical.” Like Alinsky, Obama traces his political and activist beginnings to the Chicago world of community organizing.
Alinsky, author of “Rules for Radicals,” began as a trained archeologist and criminologist but made his name by working with low-income minority communities for better working and living conditions — with a distinctly anti-establishment message which called on the masses to seize power from those who held it.
Common Ground, which focuses on social issues in the Milwaukee area, does claim experience in the health care field. The group’s top three issues, according to its website, are education, foreclosures and health care.
Common Ground Healthcare Cooperative, an offshoot which technically is independent from Common Ground, is new. According to state records, it incorporated in August 2011, just a few months before the loan applications were due. The group announced its formal launch on Tuesday, along with the $56 million loan decision.
In a statement, the group said it would bring a “new approach to affordable, quality health insurance.” The organization said it researched possible health insurance solutions for three years before deciding to apply for the Affordable Care Act funding.
“As a small business owner, I grew tired of the exorbitant increases in health insurance costs with no real additional value. Common Ground Healthcare is a solution to the region’s cry for help,” board President Bob Connolly said in a statement.
The statement said the organization would start enrolling people in fall 2013 and plans to hire 30 employees over five years.
A representative from the group has not responded to a request for comment from FoxNews.com.
The federal loans announced this week were worth a total of nearly $640 million. Six other organizations in seven states received them. The money is meant for the creation of so-called Consumer Operated and Oriented Plans, which will serve as nonprofit, cooperative-style insurance groups which will offer an alternative to other private plans. The goal is to eventually fund one of these groups in every state and the District of Columbia.
The latest loans will cover start-up costs and cash reserve requirements. Start-up money must be repaid with interest over five years — the “solvency loans” must be repaid within 15 years. The Centers for Medicare & Medicaid Services stressed in its announcement that the funds can only be tapped “incrementally as milestones are met,” and that the program has “extensive provisions to protect against fraud.”
CMS said the loans were awarded “on a competitive basis through external and independent expert objective reviews,” and following approval by officials with private insurance experience.
But Wilson said some of the other groups awarded appear to have more experience in the field than the Wisconsin organization. He said his group would file a Freedom of Information Act request to the government to find out more about the process.
Wilson described the transaction as a “huge wad of money in a swing state.”
Republican Rep. Dave Camp’s office also complained that another group, the Freelancers Union, was awarded more than $340 million via federal loans in three states as part of the same program.
In a statement, Camp questioned whether the group was even eligible, describing the loan as a “reward” for “political friends.”
The Heritage Foundation has issued a new report that charges the Obama administration sent presidential earmarks, taxpayer dollars, to Democratic lawmakers to help convince them to vote for controversial proposals such as cap and trade and the health care bill.
“When you examine the recipients of those grants, there were at least 32 vulnerable house Democrats who received significant federal grant money during the run-up or directly after the votes on those pieces of legislation,” says Lachlan Markay, one of the authors of the report.
Cap and trade was tough for many Democrats, especially in the Midwest, because even the president acknowledged it would, as he put it, cause energy prices to “skyrocket.”
The health care law remains controversial even today, with many polls showing majority of Americans oppose to it.
On their websites, lawmakers didn’t advertise their votes, but did tout at length the money they’d gotten for various local projects.
“As a way to counteract the negative voter sentiment that would come from voting for unpopular legislation,” says Markay. “These were attempts to make sure that constituents knew they were bringing money home to their district.”
Nevertheless, the White House argued today nothing was amiss.
“The president’s opposition to earmarks is well known. The fact of the matter is I’m confident the issuance of grants from agencies are done … in a merit based way,” White House spokesman Jay Carney said.
President Obama didn’t invent the practice. FDR used it to great effect and President Nixon is reported to have used earmarks to help win support for re-election by sending funds to key states or voting blocs.
But President Obama has vastly expanded the practice.
Numbers from the non-partisan Congressional Research Service show that the value of administration earmarks under President Obama increased by a 126 percent in his first two years in office and the actual number of administrative earmarks increased by 54 percent.
Those are dramatic increases that are 11 times more than Congress itself increased earmarks, which the White House did not explain today.
It also does not square with statements the president is against earmarks, which he and his administration appear to have used to great effect and with increasing frequency.
As Americans sit down to file their federal tax returns, a simple question comes to mind — what’s a “fair share” to give the federal government in taxes?
For half the working population, fair means paying almost no income taxes at all.
“The top 10 percent income earners pay about 70 percent of federal income taxes,” says Will McBride of the Tax Foundation. “The bottom 50 percent of tax filers have, they pay almost no federal income tax. They pay about 3 percent of federal income taxes.”
President Obama’s phrase that everyone should “pay our fair share of taxes” has become something of a political mantra. He has used the expression in dozens of speeches, beginning back in his State of Union address in January. More recently, he told University students in Virginia, “we do expect everyone to do their fair share.”
But for many of the people who pay no taxes, the government also allows tax credits, which end up providing refunds.
“Close to a hundred billion in checks sent out by the IRS (go) to folks who have no tax liability,” McBride said. “So the IRS is becoming a spending agency.”
Arthur Brooks, head of the American Enterprise Institute, put it this way: “Half of the people who don’t pay anything in federal income taxes — about half of them pay less than zero.”
But Brooks says the system is tilted even more toward those in the middle class and below because they also get services from the federal government. As a result the per capita value of government spending exceeds what those individuals pay in federal taxes.
“Right now about 70 percent of Americans take more out of the tax system than they put into it, according to the Tax Foundation,” Brooks said.”That’s something that should really alarm a lot of Americans.”
The policies that left so many people paying no income taxes have been supported by presidents of both parties, and despite what Americans tell pollsters they believe is fair, that’s not how it shakes out.
“The interesting thing is that about two-thirds of Americans think that everybody should pay something,” Brooks said, “so they remember that our government isn’t free.”
If the taxpayers of Delaware aren’t startled by the following news, nothing will bother them:
The University of Delaware – which recently increased tuition by 7% on students – has just spent what we can only assume was a great deal of money to complete a “major survey” of how little Fox News viewers understand the Occupy Wall Street movement.
The earth-shaking evidence provided by this survey tells us that Fox viewers are the least likely among consumers of various media outlets to understand the “central message” of the Occupy movement: “Too few people control the majority of the nation’s wealth and power.” Viewers of the Daily Show and the Colbert Report – both Comedy Central shows – know the most, according to the intrepid research.
But is that really the main message of the movement? From what we can tell, Occupy has been a largely violent, disorganized and hyper-emotional mess that has conveyed many strange and frightening messages.
We’ve heard various Occupy crowds chanting for the overthrow of the government. We’ve seen them waving signs suggesting that wealthy Americans should be murdered and eaten. We’ve heard Occupiers suggest that the U.S. should be a lot more like totalitarian Cuba. More than anything, we’ve had the impression that Occupy is largely a bunch of unproductive people searching for a free meal and a tent to sleep in.
But the University of Delaware says it’s about the concentration of wealth. For the sake of argument, we can accept that.
The question is, so what?
Is it worth spending tax dollars to “prove” to the nation that Fox viewers don’t share the liberal professors’ passion and empathy for the Occupy movement? We could have told you that for free. The Marxist professors who dominate our public universities hate Fox News, and will take any opportunity to publicly insult it. But that has more to do with their own political viewpoint than public policy. How can they get away with using tax dollars to attack their personal political enemies?
Perhaps we shouldn’t be surprised. Dannagal Young, an assistant professor of communications and lead researcher of this study, recently wasted even more tax dollars to tell us that viewers of “The Daily Show” and “The Colbert Report” – both satirical programs that lean to the left – are intellectually “deep.”
It sounds to us like Young is more interested in angling for the presidency of the Colbert Report fan club than providing any worthwhile research.
As for Young’s politics, there’s no surprise there. She’s a personal contributor to Barack Obama’s presidential campaign.
If we were residents of Delaware, we would march up to the statehouse this afternoon and demand a full refund of our misused and wasted tax dollars.
Three years after being rescued by a taxpayer bailout, General Motors (GM) last week announced some rather ambitious profit targets for 2012. But even if it meets these targets — a big if — taxpayers should not wait on one foot to recover their remaining “investment” in the company.
There is no doubt that GM has returned from the brink. It made $8 billion last year, a record high, and regained enough global market share to once again become the world’s biggest automaker, a title it had lost to Toyota. More impressive, it is planning to bump its profit margins from 6 percent last year to 10 percent this year, on par with its best-in-class rivals such as Hyundai and BMW. This, it hopes, will allow it to post $10 billion in profits this year, something that only 17 public companies managed to do in 2010.
How did investors react to all this hope and cheer? With a giant yawn: GM’s stock price, which has been hovering around $25 for months, barely budged. That’s $8 below GM’s IPO price. And it’s $30 below what’s needed for taxpayers to recover the $30 billion they still have stuck in the company.
If investors aren’t buying GM’s rosy scenarios, it’s for some good reasons. Peter De Lorenzo, editor of Auto Extremist, notes that GM is facing the most competitive market in history and investors are dubious that it can deliver. GM’s $8 billion in profits last year resulted partly from the tsunami in Japan that disrupted Toyota and Honda’s global supply chain.
Both are back this year and more formidable than ever. While GM reported a 6 percent drop in January sales in North America from a year earlier, its foreign competitors posted impressive gains. GM will have a hard time matching last year’s performance, let alone upping it if it has even one more month like January, De Lorenzo notes.
Tougher competition in North America is not GM’s only worry. Its sales in China are slowing. Also, Europe will probably remain a trouble spot. GM suffered $2 billion in losses in Europe last year, thanks to Opel, its hopelessly bloated German brand. But GM has been unable to obtain permission from the German government to restructure its labor costs, even as European sales plummet in an economic meltdown.
Toyota (TM) and Honda don’t have the same exposure in Europe and hence have less to worry about. What’s more, GM’s global pension obligations are underfunded to the tune of $22 billion, about $10 billion in the United States alone.
If GM manages to address all these issues, notes Sean McAlinden of the Center for Automotive Research, its share price might go up $40 to $45, leaving taxpayers still $5 billion to $8 billion in the red. But that’s under the best scenario. If stock prices remain at the current $25 level, the losses could mount up to $15 billion. That’s not counting the $15 billion in tax write-offs that GM got as part of the bankruptcy deal. All in all, taxpayers are facing somewhere from $20 billion to $30 billion in losses.
That’s not all the exposure that taxpayers will have going forward. The GM bailout has distorted the playing field so badly that its competitors are demanding their own handouts to even things out.
For example, McAlinden notes, the administration gave GM about $10 billion more than was strictly necessary to finance its bankruptcy. The money contributed to GM’s nice $33 billion cash cushion right now. GM could use this money to buy its own stock and bid up prices, mitigating taxpayer losses — or pay dividends. But McAlinden doesn’t believe that’s what GM will do. It could use the money to pay off its obligations to the union health-care trust fund, making this a direct infusion of cash from taxpayers to unions.
Or it will use the money toward product development, putting its competitors at a disadvantage. Moreover, because all but $10 billion of the bailout money GM got was in the form of equity, the company has no debt service costs. Ford (F), by contrast, is still servicing the $23 billion in debt it took to avoid a bailout.
This is unfair, and the Obama administration knows it, which is perhaps one reason it quickly approved a $5.6 billion retooling loan for Ford. That, in turn, elicited howls of protest from Chrysler’s Sergio Marchionne. The administration gave Marchionne’s parent company, Fiat, the majority stake in Chrysler without asking Fiat to contribute a single euro of its own.
Yet Mr. Marchionne complains that the administration hasn’t been generous enough. In contrast with GM, it forced Chrysler to service the bailout loan. Now it’s dragging its feet in approving Chrysler’s new retooling loans, he claims.
Bailout supporters maintain that it was a one-time deal necessary to shore up companies in acute economic times. In reality, the rush for the bailout’s spoils has produced ripple effects that may well haunt the economy for a long time.
As President Barack Obama campaigns to keep his job, he will spin the bailout as a success story that saved millions of American jobs. But taxpayers should bear in mind that the hit to their wallets will be substantial and will probably grow in years to come.
(Shikha Dalmia is a senior analyst at Reason Foundation and a columnist at The Daily. The opinions expressed are her own.)
Read more opinion online from Bloomberg View.
To contact the writer of this article: Shikha Dalmia at shikha.dalmia@reason.org.
To contact the editor responsible for this article: Katy Roberts at kroberts29@bloomberg.net.
The American Airlines bankruptcy reveals the scope of President Obama’s political payback to the UAW. Unlike General Motors and Chrysler, American Airlines is undergoing a “normal” Chapter 11 bankruptcy according to the rule of established law. The GM (and Chrysler) bankruptcies of 2009 were directed by a White House task force that upended regular bankruptcy procedures. The White House objective was not to create a competitive new GM, but to get the best deal possible for the UAW and make GM a de facto “Government Motors.”
It’s not that the airline unions failed to deliver for Obama and the Democrats in 2008. The Airline Pilots Association contributed three quarters of a million dollars – small change compared to the UAW’s more than four million to Obama and the Democratic Party. Apparently you have to pony up big to get a deal from Obama.
The White House Auto Task Force and its Czar spared UAW the dismay and outrage of renegotiated union pay scales, revised work rules, and loss of defined-benefit pensions that American Airlines union members face. American’s anticipated fifteen percent job loss is about the same as GM’s, but without a dime of taxpayer money. Obama did not save GM jobs, he saved UAW pay scales and pensions. UAW members left their jobs with a $25,000 new car and $20,000 cash. (Chrysler employees left with much more). Laid-off American Airlines pilots, mechanics and flight attendants will likely leave with little or nothing.
I can imagine the UAW’s unspoken message for the White House in June of 2009: “Mr. President, in a normal bankruptcy, we might end up with the same wages as those scabs at Toyota and Volkswagen in the South. The court might order cuts in our pensions. We gave you our money, and you protect us. You can claim you are doing it for the middle class. That story might sell.”
Critics of congressional “earmarking” maintain that it’s a mechanism used to haul a lot of pork-barrel spending home to the representatives’ districts. Defenders of the practice counter with the argument that putting a stop to earmarks would place too much authority over spending in the hands of the executive.
An amendment to eliminate earmarks was proposed for the STOCK Act, which is intended to restore public faith in Congress by cracking down on methods for using congressional power for personal enrichment. The amendment was defeated, but the controversy surrounding earmarks continues.
The Washington Post added some fuel to the fire Monday, as it published the results of what it bills as “the first systematic effort to examine the alignment of earmarks with lawmakers’ private interests.” Specifically, the Post discovered that some congressional earmarks have been used to fund public improvements located suspiciously close to property owned by the sponsoring representative:
A U.S. senator from Alabama directed more than $100 million in federal earmarks to renovate downtown Tuscaloosa near his own commercial office building. A congressman from Georgia secured $6.3 million in taxpayer funds to replenish the beach about 900 feet from his island vacation cottage. A representative from Michigan earmarked $486,000 to add a bike lane to a bridge within walking distance of her home.
Thirty-three members of Congress have directed more than $300 million in earmarks and other spending provisions to dozens of public projects that are next to or within about two miles of the lawmakers’ own property, according to a Washington Post investigation.
Under the ethics rules Congress has written for itself, this is both legal and undisclosed.
The Post put its discoveries into context:
Earmarks are a fraction of the federal budget, and the numbers uncovered by The Post are relatively small in the scheme of the overall Congress, but the behavior by lawmakers from both parties points to a larger issue at a time when confidence in Capitol Hill is at an all-time low.
The congressional financial disclosure system obscures certain relationships. Lawmakers are not required to disclose the addresses of their personal residences or the employment of their children and parents. The lawmakers are also allowed to put properties in holding companies without disclosing the properties’ locations. Current versions of the Stock Act would not change that. To provide a fuller portrait of congressional connections, The Post compared the financial disclosure forms with the public record to track spending on projects near legislators’ properties or on programs employing their relatives.
As the article goes on to note, there isn’t necessarily rank corruption involved in locating a public-works project close to a representative’s home. Would it make any sense to forbid the expenditure of federal money on any project located near property owned by the local congressperson?
In a similar vein, it’s not always corruption when a federal contract goes to a company that employs relatives of a representative. What if Congressman Bedfellow’s cousin just happens to work at the best company for the job? Would it make sense to forbid corporations with even the slightest personal connection to Congress, or the Administration, from accepting government contracts? Besides putting illogical limits on the pool of contractors available to the government, that would be brutally unfair to the highly-qualified relatives of elected officials (and, if we were to apply this standard vigorously enough, their high-ranking staffers) as they would suddenly find themselves about as welcome as bird flu at large corporations.
What the Post investigation highlights is the intrinsic corruption of Big Government. As it becomes larger and more remote, the shadow of corruption falls across more of its actions, and infuses a greater portion of the overall economy.
There would be considerably less suspicion surrounding the decision to construct a particular public-works project if the funds were raised locally, and allocated by local government. You would still have such, suspicions, of course. The history of my own town is riddled with some epic tales of good-old-boy networking. Your hometown probably has a few such tales as well.
But when the size, and distance, of government is elevated to the level of Congress parceling out billions of dollars, you end up with people all over the country paying for earmarked projects they have absolutely no control over, and derive no personal benefit from. There is little chance that individual representatives will be held accountable at the ballot box for particular spending decisions. In fact, if a voter in Colorado doesn’t like the way a representative from Tennessee is spending federal money for his own personal benefit, or to please his big contributors, the Colorado voter has no electoral recourse at all.
That sense of lost control, and electoral helplessness, probably has more to do with public distrust of Congress than representatives using earmarks to build up the airports located closest to their summer homes. Who knows what they’re up to on Capitol Hill? The folks in “flyover country” just know it’s costing them, and their children, a whole lot of money.
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