Dark Times Digest #7
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Terrorists Play Trump Card In Mumbai
In Crisis, Opportunity for Obama
George Soros: The Billionaire Chaos Merchant
Psychiatrist: Chaos Merchant with NPR:
Merchants Of Chaos by L. Ron Hubbard
DECEPTIVE News From the WSJ, Thursday, November 27, 2008, To Take Your Attention Off the Problems
New Rescue Plan and Falling Mortgage Rates?
Fed Aid Sets Off a Rush to Refinance
The Big Banks Get Bigger! Is This Good For You?
There is NOW Less Fear On Wall Street About Our Growing Debt
by Karl Loren
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Original Article By Karl Loren.
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Years ago I had no savings and a low paying job, even with my fresh new Harvard MBA degree. I talked myself, then my wife, into buying an IBM Selectric Typewriter, on credit, because I could be so much more productive with this new fancy typing machine.
I also secretly harbored the thought that I would "drive myself" to earn more money if I had more debt.
That thought lasted more than 30 years until I realized that my growing debt was for last year's consumption and for "tools" (toys?) I didn't use to increase my personal production -- I was the working to pay off the debt for past consumption and had to curtail expenditures for current expansion. I've learned my lesson, but the country has not learned that lesson.
I had filled out a busy life, after I earned my MBA degree from the Harvard Business School, to work in the Kennedy White House and to spend two vigorous years as an Infantry (Ranger) Officer at Fort Benning, Georgia. I then started my world travels - spending some time in each of some 35 countries, living in many of them, and finally settling in Canyon Country, California.
After I cured my wife of esophagus cancer we both decided to start a martial arts period of our lives. I have attended both private and group classes for several years, both my wife and I earning an orange belt, and then me being awarded an honorary black belt. I am semi-retired now, at 77, but still working some 50 to 60 hours per week on research and writing. My most exciting new subject is the publishing of the Dark Times Digest -- my personal effort to bring the torch of light to the pits of darkness in the fields of finance, morals and health.
I had started the research and writing of this Digest BEFORE the terrorists attached Mumbai, India. I happens that my very best friend is a Citizen of India and lives in Mumbai. We met 10 years ago, over the Internet -- with an exchange of eMails. After many eMails, we became such close friends that he came to my home for a visit. We signed a historic agreement between his Company and Vibrant Life.
He visited two more times, and this year, 2008, we invited him to visit again, bring his wife and stay for a full 10 days. He arrived at the beginning of November, left here for more visits in the US and his return to India just a very few days before the terrorists struck his home.
I wrote to him as soon as I heard the news. He replied on November 26th, with:
Dear Karl,
I was away last evening in dinner with some family guests from Dubai in another relatives home in "Napien Sea Road" .. a place 10 Mins drive from my home. There were 2-explosions - deafening - very close to where we were. We were inside a secure house. But got caught in police barricade - returned home only this morning ... after 14 Hrs.
Falling Ethics - Corruption - Incompetence - Terrorism ..... we have war on too many fronts in India.
His daughter was also a visitor in our home and returned to her post-doctoral research on the East Coast.
One of my staff is planning a business visit for us to India. We have many plans for cooperation with this great friend.
In fact we had a formal signing ceremony, he and I, our two spouses, and two witnesses:
So, I know this current disaster on a very close basis, and I know the financial melt-down from my undergraduate training as an accountant, work in a CPA firm, and an investment bank, then my MBA from Harvard. When I compare these two disasters, it is obvious that Mumbai is much more violent and heart-wrenching.
However, I don't think it was a coincidence that JUST as the Mumbai attacks came on the scene, with their 24-hour TV coverage, the Wall Street Journal was full of "good news headlines."
The bad news from India prevailed and the bad news from the financial turmoil was pushed out of sight. The truth is that this attack in India was a very convenient means of taking people's attention OFF the true long-term tragedy that we are facing.
The terrorists? I'll reveal a secret about them -- they have the exact same PURPOSE as those who have manipulated us into the financial turmoil. It is hard to believe, but BOTH of these evil groups want to create chaos. Their motivation is NOT money or power or even political.
Their motivation is destruction of society, and if that is difficult, they are ready to destroy mankind or the entire planet, if their hidden evil plans are to be achieved.
You cannot understand them, because "insanity" is, inherently, not understandable.
You can, however, DETECT them in our midst. Click here for an article that describes their character (on this same page).
I'll be covering this in much more detail in future editions, and also covering what you can DO to survive in a world with these (and others coming) disasters.
The financial turmoil is more dangerous to us because it is beyond the control of guns and armies. Police can't help because the evil-doers are in full control of entire countries, certainly including legislators and PRESIDENTS (!). They use one of their tools (psychiatry) to implant top political leaders (Manchurian Candidate, yes I am an expert on that too) to react like puppets to their puppet masters.
The purpose of the bankers who finance the terrorists is to consolidate control of all financial institutions world-wide, first, and then go on to take control of all governments. Mr. Obama is trying to achieve the Socialism in the US -- apparently by peaceful means, but the financial turmoil is NOT very peaceful to the millions of Americans and others whose lives will be destroyed as their assets disappear and taxes take their wages.
The Dark Times, indeed, are here and will be getting darker.
IT is necessary, too, for these evil-doers to take over all health control, to encourage use of drugs, to dumb down our educational system and more.
MOST of all, however, these evil-doers want to drive you into immorality -- for only people with high morals can even SEE what is happening here. Others do not observe, they listen to their opinion leaders, like the New York Times, believe the lies and go on their robotic way.
So, you will see a huge increase in immoral behavior in our leaders and in the people on your street -- even in your family.
The Dark Times Digest will give you more and more insight into this mess, and likewise, give you the remedy -- not easy, but powerful.
In all of this the one big problem for society is the sheer complexity of the financial melt-down. In order to make that easier to understand, I'd like you to read a story my father told me decades ago.
John was a traveling salesman. When his sales route took him through Willoughby, Ohio, he generally aimed at arriving there on a Friday. He had some good friends with whom he played poker on Friday nights when he was in town.
This Friday, he wanted to be careful, as he always was, to leave some of his money at the hotel -- not take it with him to play poker -- in case he got the itch to spend his last dollar.
So, on his way to the poker game he went to the clerk at the front desk. He said to the clerk, "Hi, Bill, you know the deal. I'm going out to play poker tonight and would like to leave this envelope containing $100 with you in case I lose all my other money at poker I can come back and have enough money to continue my route and get home." (This tale took place in the 40's.)
Bill took the envelope. He had done this countless times. "Sure, John, good luck at Poker and I'll have your money waiting for you if you need it."
John went out on his way to the poker game.
Bill put the envelope on the counter,. since the safe was closed just then. He decided he would put the money in the safe in a bit.
The cook came in from the kitchen, "Bill, we don't have enough steak for the dinner crowd tonight and the boss
forgot to buy more. Can you give me some money so I can go down the street to the butcher and get steak for our customers tonight?"
Bill said, "Sure, I happened to have $100 in this envelope. I'll give you that, and make up the money from the safe when I open it == the money in the envelope belongs to a hotel guest and he won't be asking for the money until tomorrow morning."
The cook took the envelop, went to the butcher shop, picked out the steaks he needed, said to the butcher, "I've got $100 here in this envelop. Is it OK to give you that. That's a bit of a tip for your quick help." The butcher was happy because this extra $100 made his sales higher than they had ever been for one day and he decided to celebrate with the extra money.,
The butcher said, "Yes, that's fine," took the envelop and gave the cook his steak.
Then the minister of the local church came into the butcher shop to buy some ribs, started some small talk with the butcher, and the butcher decided to just give the $100 to the minister as a donation for the Church then the minister said, "Say, you know that I am doing the wedding for Ken and Mary this next Sunday afternoon. I need some meat for the celebration after the wedding. Can I just give you this same $100 and you bring the food to the Church when you come that way?"
The butcher said, "sure," and took the envelop back into his hands.
As the butcher was going home that night, he remembered that his wife was also going to that same wedding, and that he had promised to buy her a special dress for the wedding. He just took the $100 in the envelop out the door, stopped at the dress shop, gave Mrs. Randall the $100 in the envelop and told Mrs. Randall that he would like to leave the $100 there and that his wife would come along the next day and get a dress. The
butcher felt like that $100 was almost like "found money" that he hadn't expected and was glad to use it to pay for his wife's dress.
Fine.
Mrs. Randall thought to herself, "Why, I'm going to that same wedding and I need to buy some flowers to leave at the hotel for the new bride and groom to enjoy after they go there for their honeymoon. My business is doing very well, so I'll just take this same $100 and leave it at the hotel for them to buy flowers for Sally and Ken." She also thought, "I probably wouldn't have bought the flowers except that the butcher gave me the $100 for the dress for his wife."
(The butcher's wife was happy too. She got a dress she didn't have to pay for with her own money.)
When Mrs. Randall arrived at the hotel, it was fairly late at night. John was still on duty at the hotel, but he had not opened the safe. When Mrs. Randall asked him to take the $100 in the envelop, and use the money to buy flowers for the new bride and groom, he said, "Sure." He took
the envelop, put it on the counter and then realized that it looked like the same envelope that he had given earlier in the evening to the cook for steak.
"That's odd," he said to himself, and he put the envelop on the counter, thinking to put it in the safe later.
He did put the envelop in the safe before he left for home.
The next morning Bill was on duty again when John came down from his room.
"Bill," he said, "you know that envelop I gave you last night?" Bill said, "Yes."
John said, "Well, I made a big mistake. I gave you the envelop before I had a chance to put the actual money in it. Fortunately I won at poker last night, so the extra $100 in my pocket was not at risk of loss. I had the money in my own pocket all the time. Had I lost at poker, I would undoubtedly also use up the $100, without knowing it -- and really then needed the money in the envelop. I might even have accused you of taking the money out of the envelop when, in fact, I had just not put it in there in the first place. Curious! So, Bill, you can just throw that envelop away. There is nothing in it!!"
Bill thought about that a bit and was a bit troubled. He had accepted the empty envelop as payment for flowers and he was now obligated to use his (or the hotel's) money to pay for those flowers.
And, Bill wondered, "What would have happened if John lost at poker, didn't know that the $100 had been in his pocket, lost it at poker, and thought his $100 was safe in that envelop, and had come down to get 'his $100;' would we have had a big argument??"
It didn't seem fair, the lady who gave him the envelop seemed so certain that the envelope had money in it, and she said that she got it in payment for the wedding dress she gave some lady. Also, he accepted the envelop,
even gave her a receipt for $100. He was obligated to buy those flowers.
Then Bill thought further, "Well," he said to himself, "I did get $100 worth of meat by 'paying' with an empty envelop, and if I owe that lady $100 worth of flowers, it will come out even," so Bill was happy enough.
Who got cheated in this?
If five hundred more people handled that envelop that day, making "fair exchanges, and fair profits," who would have been hurt? What if there are 10,000,000 home owners who default on their mortgages? How valuable are all those bundles of bad mortgages that have been traded all over the planet, with many of them now in the hands of China?
What if the envelop never got started on that long journey in the first place? Who would have lost out on that?
Is the moral of this story, "Don't open the envelop."
Is the question of the day, "What happens to the guy who DOES open the envelop?"
Or, is the moral, "Don't get stuck with the envelop when it is time to open it."
Or, is the moral, "I think I'll get in the business of distributing empty envelopes -- it seems to be good for everyone (except, maybe, the last guy)? I guess I'll go into the banking business."
Another question of the day, "What happens when the first guy is not the same guy who ends up with the empty envelop? Who got stuck for it?"
Overview
A Ponzi scheme usually offers abnormally high short-term returns in order to entice new investors. The high returns that a Ponzi scheme advertises (and pays) require an ever-increasing flow of money from investors in order to keep the scheme going.The system is doomed to collapse because there are little or no underlying earnings from the money received by the promoter. However, the scheme is often interrupted by legal authorities before it collapses, because a Ponzi scheme is suspected and/or because the promoter is selling unregistered securities. As more investors become involved, the likelihood of the scheme coming to the attention of authorities increases.
The scheme is named after Charles Ponzi, who became notorious for using the technique after emigrating from Italy to the United States in 1903. Ponzi was not the first to invent such a scheme, but his operation took in so much money that it was the first to become known throughout the United States. Ponzi's original scheme was in theory based on arbitraging international reply coupons for postage stamps, but soon diverted later investors' money to support payments to earlier investors and Ponzi's personal wealth. Today's schemes are often considerably more sophisticated than Ponzi's, although the underlying formula is quite similar and the principle behind every Ponzi scheme is to exploit investor naïveté.
Hypothetical example
[1920 police mugshot of Charles Ponzi.] An advertisement is placed promising extraordinary returns on an investment – for example 20% for a 30 day contract. The precise mechanism for this incredible return can be attributed to anything that sounds good but is not specific: "global currency arbitrage", "hedge futures trading", "high-yield investment programs", "Offshore investment", or something similar.With no proven track record for the investors, only a few investors are tempted, usually for smaller sums. Sure enough, 30 days later the investor receives the original capital plus the 20% return. At this point, the investor will have more incentive to put in additional money and, as word begins to spread, other investors grab the "opportunity" to participate. More and more people invest, and see their investments return the promised large returns.
The reality of the scheme is that the "return" to the initial investors is being paid out of the new, incoming investment money, not out of profits. No "global currency arbitrage", "hedge futures trading" or "high yield investment program" is actually taking place. Instead, when investor D puts in money, that money becomes available to pay out "profits" to investors A, B, and C. When investors X, Y, and Z put in money, that money is available to pay "profits" to investors A through W.
One reason that the scheme initially works so well is that early investors – those who actually got paid the large returns – quite commonly reinvest (keep) their money in the scheme (it does, after all, pay out much better than any alternative investment). Thus those running the scheme do not actually have to pay out very much (net) – they simply have to send statements to investors that show how much the investors have earned by keeping the money in what looks like a great place to get a high return. They also try to minimize withdrawals by offering new plans to investors, often where money is frozen for a longer period of time, for example 50% return per month for one year. They then get new cash flows as investors are told they could not transfer money from the first plan to the second.
The catch is that at some point one of three things will happen:
the promoters will vanish, taking all the investment money (less payout's) with them;
the scheme will collapse of its own weight, as investment slows and the promoters start having problems paying out the promised returns (and when they start having problems, the word spreads and more people start asking for their money, similar to a bank run);
the scheme is exposed, because when legal authorities begin examining accounting records of the so-called enterprise they find that many of the "assets" that should exist do not.Karl Loren: The billions and trillions of dollars floating around the planet are nothing more than a gigantic Ponzi scheme. If you manage to get your money back, plus some, before it is exposed and collapses it is a good deal for you.
But, even that is part of the plan. When you make a profit from a scam, while others lose their shirts, do you think your earnings are honest? The people manipulating the trillion dollar scams WANT you to sink down the morality scale -- so you will will be more willing to cheat others and accept welfare -- it is the debt, greed for things not earned, that ruins society.
Thus, there are millions of mortgages held by banks who bundled them up and got a fair exchange for the bundle when turning them over to Fannie Mae. Fannie, in turn, got a fair exchange for the even larger bundles it created to sell to China. The US Government has now pledged YOUR tax dollars to use to pay the Chinese if and when these bundles are unraveled and found to be empty.
China now owns some several trillion US Dollars. It KNOWS the envelops are empty, but it also expects to just push them off on people in the US who have no choice but to accept US dollars for their pay and profits.
When will th
is scheme explode? Not on my watch, and if you read all the Dark Times Digests carefully, not on yours.
MY FIRST LAW OF SURVIVAL IN THESE DARK TIMES: Get rid of any debt you have -- even better to default and accept bankruptcy than allow the merchants of chaos to control your life and sink your morality. It is VERY difficult for a man overburdened by debt to be live a moral life. Renounce your debt, pay the cost in hard and honest work to redeem yourself from past sins. When the credit card company comes, offering you more money -- run the other way. Free money is slavery. Whether you steal it or take "legal" welfare, it is still dishonest.
As the economic signs grow ever more grim, so do the problems facing the incoming Obama administration.
That's one way of looking at things. Here's another:
As the economic signs grow ever more grim, the opportunities for the Obama administration to drive through its agenda actually are getting better.
View Full Image
President-elect Barack Obama in Chicago on Nov. 7.
The thing about a crisis -- and crisis doesn't seem too strong a word for the economic mess right now -- is that it creates a sense of urgency. Actions that once appeared optional suddenly seem essential. Moves that might have been made at a leisurely pace are desired instantly.
Therein lies the opportunity for President-elect Barack Obama. His plans for an activist government agenda are in many ways being given a boost by this crisis atmosphere and the nearly universal call for the government to do something fast to stimulate the economy.
This opportunity isn't lost on the new president and his team. "You never want a serious crisis to go to waste," Rahm Emanuel, Mr. Obama's new chief of staff, told a Wall Street Journal conference of top corporate chief executives this week.
He elaborated: "Things that we had postponed for too long, that were long-term, are now immediate and must be dealt with. This crisis provides the opportunity for us to do things that you could not do before."
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Listen on source page, not available here.
[Rahm Emanuel addresses leaders at the Wall Street Journal CEO Council.]
He ticked off some areas where he thought new doors were opening: energy, health, education, tax policy, regulatory reforms. The current atmosphere, he added, even makes bipartisanship easier: "The good news, I suppose, if you want to see a silver lining, is that the problems are big enough that they lend themselves to ideas from both parties for the solution."
Mr. Emanuel noted, correctly, that the U.S. largely squandered the opportunity the oil shocks of the 1970s presented to make serious, long-term changes in its energy habits -- a failure that has returned to haunt the nation today.
Conversely, history points to examples of leaders who have used crises to seize opportunities. Most obviously, President Franklin Roosevelt took advantage of economic trauma in the 1930s to drive through a new economic agenda, as did President Ronald Reagan with his tax cuts in 1981.
The lesson holds true in foreign policy as well. Only the 1973 Arab-Israeli war, and its shock to the Middle East status quo, made it possible for President Jimmy Carter to move in and negotiate the historic Camp David peace accords between Egypt and Israel.
And so it is for Team Obama now. The risk, of course, is today's opportunities will tempt the administration to overreach, lifting government spending so high that the deficit hangover at the other end of the cycle is intolerable, or injecting government so far into the marketplace that bipartisan support evaporates.
But for now, the call for government action is so universal that the playing field is wide open. With interest rates approaching zero, the Federal Reserve Board is nearly out of interest-rate ammunition to stimulate an economy sinking into recession; Fed policy makers likely are quietly praying for fiscal stimulus to start filling the void.
The chief executives gathered at the Journal conference this week called for the new administration to enact a fiscal-stimulus package of at least $300 billion -- perhaps double the amount of stimulus such a group likely would have called for just a few weeks ago.
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That creates an opening through which Mr. Obama can drive a fair amount of his domestic agenda. Certainly the field is open for some immediate form of the president-elect's middle-class tax cut to become part of a stimulus package.
By the same token, the yearning for government spending on "infrastructure" to stimulate economic activity creates an opening for the new president to push the kind of green projects that fit his call for a transition to alternative energy sources, including new kinds of mass-transit systems. And the Obama call for government "investment" in alternative energies will be easier to turn into reality if it, too, can be cloaked as part of stimulus spending.
At the same time, as thousands of additional Americans lose jobs in the recession that lies ahead, they also will lose their employer-provided health insurance and swell the ranks of the nation's uninsured. That will add a bit of rocket fuel to the Obama call for universal health coverage. And certainly the broad dissatisfaction with the way financial markets were regulated will make it easier to rebuild regulatory structures.
The crisis also presents the Obama team with an opportunity that isn't so obvious: using economic distress to step back from the protectionist cliff Democrats edged toward during the election campaign.
A time of global economic distress isn't a good time to construct barriers to international trade. Conversely, it may be a good time to help both stressed American consumers and distressed developing-world economies by lowering tariffs on some goods made abroad. One test of the Obama administration's economic philosophy is whether it is as eager to take advantage of that opening as some of the others now before it.
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George Soros: The Billionaire Chaos Merchant
Source: WSJ: November 22, 2008
- POLITICAL DIARY
- NOVEMBER 22, 2008, 10:22 P.M. ET
The Apotheosis of Soros
The billionaire gets his moment in the sun.
By COLLIN LEVY
Hedge-fund billionaire and left-wing political activist George Soros has become one of the Democratic Party's most important players. Now that Barack Obama is in the White House, his influence is due to expand even further as the web of activist groups he funds becomes the new brain-trust of the incoming administration.
![[George Soros]](images/GeorgeSorosWSJ.gif)
Mr. Soros has been a friend to Barack Obama since Mr. Obama first ran for Senate in Illinois in 2004. Because of a special provision of the campaign finance law that allows greater contributions to candidates who are running against millionaires, Mr. Soros was able to donate $60,000 to Mr. Obama's campaign against primary opponent Blair Hull and then against Republican Jack Ryan. Four members of the Soros family also donated to Mr. Obama's Senate campaign, making Mr. Obama one of only a handful of candidates -- including Hillary Clinton, Tom Daschle and Barbara Boxer -- to receive the richest Soros nod.
Mr. Soros's influence on Democratic policy has been years in the making, through groups like the Center for American Progress, which he helped underwrite back in 2003 (along with film producer Stephen Bing) to the tune of several million dollars. CAP is currently headed by former Clinton Chief of Staff John Podesta, now Mr. Obama's transition team leader. With 180 staffers and a $27 million budget, the group is expected to play a role in the Obama administration similar to that played by the American Enterprise Institute during the Bush years, as a feeder for staff and a pusher of liberal ideas.
The problem for Mr. Obama, of course, is that not all Mr. Soros's ideas fly as well with voters as with the New York and D.C. cognoscenti. The Soros connection already created trouble for Mr. Obama last year over the billionaire's comment that Democrats should "liberate" themselves from the influence of the pro-Israeli lobby. Mr. Soros also is a prominent advocate of drug legalization. So while the hedge-fund legend may pour money and staffers into the Obama administration, Warren Buffett is likely to remain the billionaire Mr. Obama still prefers to share photo-ops with.
FAIR USE NOTICE: This may contain copyrighted (© ) material the use of which has not always been specifically authorized by the copyright owner. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. It is believed that this constitutes a 'fair use' of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. This material is distributed without profit.
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Psychiatry and other MD's as a BED of Chaos Merchants
[Karl Note: The two groups most responsible for creating chaos on the planet are those who defeat man's efforts to find spiritual freedom, by claiming that the "mind" is made up of brain cells and blood, all material, and thus remedied with chemical drugs that affect the brain, but have nothing to do with the "mind" a spiritual component of man.
Also very high on the list of planetary chaos merchants is the better-recognized "medical establishment" which promotes drugs and surgery as the remedy for the great bulk of man's ills that are proven to be caused by the mind and not susceptible to toxic chemicals for cure, but DO respond to various technologies of detoxification of the body of chemical toxins, certainly including street drugs and medical drugs. I, Karl Loren, have devoted my career and some 30 years of my life, up to even now, exposing the false data of the medical establishment and promoting the non-drug remedies that I have made known these 30 years.
Here is a description of the lobotomy that goes with the image on the left:
Medical horror story worth watching Monday night January 21 at 9:00 P.M., on WETA and other PBS Stations, is, as Washington Post put it “One of the most horrifying medical treatments of the 20th century was carried out not clandestinely, but with the approval of the medical establishment, the media and the public. Known as the transorbital or “ice pick” lobotomy, the crude and destructive brain-scrambling operation performed on thousands of psychiatric patients between the 1930s and 1960s was touted as a cure for mental illness.â€
The fact-based documentary, “The Lobotomist,” supports the overwhelming and sweeping anti-psychiatric movement today. (source)
]
The New York Times
November 22, 2008
By GARDINER HARRIS
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An influential psychiatrist who was the host of the popular NPR program “The Infinite Mind” earned at least $1.3 million from 200
0 to 2007 giving marketing lectures for drugmakers, income not mentioned on the program.
The psychiatrist and radio host, Dr. Frederick K. Goodwin, is the latest in a series of doctors and researchers whose ties to drugmakers have been uncovered by Senator Charles E. Grassley, Republican of Iowa. Dr. Goodwin, a former director of the National Institute of Mental Health, is the first news media figure to be investigated.
Margaret Low Smith, vice president of National Public Radio, said NPR would remove “The Infinite Mind” from its satellite radio service next week, the earliest date possible. Ms. Smith said that had NPR been aware of Dr. Goodwin’s financial interests, it would not have broadcast the program.
FAIR USE NOTICE: This may contain copyrighted (© ) material the use of which has not always been specifically authorized by the copyright owner. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. It is believed that this constitutes a 'fair use' of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. This material is distributed without profit.
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Merchants Of Chaos
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There are those who could be called “merchants of chaos.” These are people who want an environment to look very, very disturbing. These are people who gain some sort of advantage, they feel, if the environment is made to look more threatening.
An obvious example can be seen in newspapers. There are no good news stories. Newspapermen shove the environment in people’s faces and say, “Look! It’s dangerous. Look! It’s overwhelming. Look! It’s threatening.” They not only report the most threatening bits of news, but also sensationalize it, making it worse than it is. What more do you want as a proof of their intention? This is the merchant of chaos. He is paid to the degree that he can make the environment threatening. To yearn for good news is foolhardy in a society where the merchants of chaos reign.
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The chaos merchant has lots of troops among people with vested interests. 
And do not think it an accident that the current justice system will take a dangerous criminal, throw him into prison, make him more antisocial and more dangerous and then release him upon the society. The more crime, the more police are needed.
Here is a current news story about a man who threatened to kill every one in the Church, then was put in jail, then let out (with a psychiatric approval) and then actually attacked another church with swords and was shot dead by an armed security guard. "Justifiable killing" per the immediate police report. These police had such a close connection with the guard group that the police saw the crazy guy with swords on THEIR OWN TV monitors, patched in from the Church, as he approached with swords waving:
Swordsman man shot by Scientology guard identified
San Diego Union Tribune, United States - Nov 24, 2008
Majorski did not live in Southern California and detectives were trying to establish if he had come here to carry out the attack. ...
National Briefing | West California: Guard Kills Attacker New York Times
Scientology intruder had been in Lane jail
“It’s clear from looking at the video there’s mental health issues,” Detective Berndt said. “In talking with the jurisdiction in your area and hearing some of the incidents, it confirms the person did have mental health issues.” The Register-Guard
Security guard for Scientology building shoots, kills man Wikinews
Times of the Internet - The Oregonian - OregonLive.com
all 934 news articles »
Ideas of this kind are found in the society to a marked degree. It isn’t just the newspaper reporter or the politician; individuals here and there also engage upon this.
A lot of people spend their whole lives as professional chaos merchants; they worry those around them to death. The percentage who do this may be as high as one out of four. For example, a housewife, operating as a merchant of chaos in her sphere of influence, thinks of her husband, “If I can just keep Henry worried enough, he will do what I tell him.” She operates on the idea that it is necessary to spread confusion and upset. But along with this goes a concern, “I wonder why Henry doesn’t get ahead?” Naturally, she is making him sick.
The truth of the matter, however, is this: the environment is not as dangerous, ever, as it is made to appear. Instead, tremendous numbers of people and vast amounts of money are manufacturing a dangerous environment. In fact, in the 1960s a huge proportion of the national budget of the United States was dedicated to atomic war. But if they hadn’t developed the threat, there would not have been one. The money that financed the horror was busy supporting the horror.
It is not to the advantage of those who get their income, appropriations or public interest from the amount of disturbance to make a peaceful environment.
A Calming Influence
Anything that tends to pacify or bring a calmed environment is resisted by the vested interest that backs a disturbed environment.
To the degree Scientology progresses in an area, the environment becomes calmer and calmer. Not less adventurous, but calmer. In other words, the potential hostile, unreachable, untouchable threat in the environment reduces. Somebody who knows more about himself, others and life, and who gets a better grip on situations, has less trouble in his environment. Even though it may only be reduced slightly, it is reduced.
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Newspapers can have a depressing effect on a person.
Since they deal largely in bad news, they present a
generally bleak picture of the world.
One can carry the bad news around with him and get
a negatively distorted idea of his surroundings, which may, in reality, actually be quite calm.
Even somebody who has heard very little of Scientology has less turmoil in his environment. An individual, less threatened by the environment, tends to resurge. He gets less apathetic. He thinks he can do more about life. He can reach outward a little further; therefore he can exert a calming influence upon his immediate environment.
As that progressed forward, more and more individuals would be produced who could bring more and more calm to the environment or handle things better and better. It is only the things which aren’t handled which are chaotic. It would result in a situation where the threat of the environment would die out. This overwhelming, overpowering environment would be tamer and tamer. People would be less and less afraid. You would have more and more opportunity of handling the actual problems that exist instead of people dreaming up problems in order to make some money off of it. It would be a different society.
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The merchant of chaos does not like calming influences, however. He will fight anything which lessens disturbance in the environment.
For example, a wife has her husband completely under her thumb. She keeps him worried and upset morning, noon and night.
If the husband now engages in some activity which brings more calmness to the environment, there will be repercussions from the wife. If he is less disturbed, he is less under her control. She would naturally fight the thing that was making her husband more calm.
Yet disturbance and chaos fold up in the face of truth. It is lies which keep the universe continuously disturbed. The introduction of truth into a society would produce a calmer environment with less disturbance and therefore less that could be swindled out of that society by merchants of chaos.
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Terrorists Play Trump Card In Mumbai
Source: WSJ: November 27, 2008
Dozens of People Killed in Mumbai Attacks
![[Pigeons fly as the Taj Hotel continues to burn in Mumbai.]](http://s.wsj.net/public/resources/images/OB-CS916_mumbai_NS_20081127020211.jpg)
Associated Press Pigeons fly as the Taj Hotel continues to burn in Mumbai.
At least 101 people were reported killed in blasts and gun attacks across south-central Mumbai late Wednesday evening, as unidentified terrorists took hostages in two of the area's most popular hotels for business travelers and tourists.
Police and gunmen were exchanging occasional gunfire at Taj Mahal and Oberoi hotels and an unknown number of people were held hostage, said A.N. Roy, a top police official. Officials said at least six militants had been killed since the overnight attacks began around 9:30 p.m. Pradeep Indulkar, a senior official at the Maharashtra state Home Ministry said 101 people were killed and 287 injured.
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Thursday morning, police loudspeakers declared a curfew around Mumbai's landmark Taj Mahal hotel, and black-clad commandos ran into the building as fresh gunshots rang out from the area, apparently the beginning of an assault on gunmen who had taken hostages in the hotel. Ambulances were seen driving up to the entrance to the hotel and journalists were made to move even further back from the area.
A series of explosions had rocked the Taj Mahal just after midnight. Screams were heard and black smoke billowed from the century-old edifice on Mumbai's waterfront. Firefighters sprayed water at the blaze and plucked people from balconies with extension ladders. By dawn, the fire was still burning.
The attackers specifically targeted Britons and Americans at the hotels and restaurant, witnesses said.
An Indian media report said a previously unknown group calling itself the Deccan Mujahideen had claimed responsibility for the attacks in emails to several media outlets. There was no way to verify that claim.
The NDTV news channel showed several yellow and black rubber dinghies on a beach near the hotels, apparently used by the terrorists to reach the area.
[WSJ article, insert from November 29, 2008:
In sum, the Indian approach to terrorism has been consistently haphazard and weak-kneed. When faced with fundamentalist demands, India's democratically elected leaders have regularly preferred caving to confrontation on a point of principle. The country's institutions and culture have abetted a widespread sense of Muslim separateness from the national mainstream. The country's diplomats and soldiers have failed to stabilize the neighborhood. The ongoing drama in Mumbai underscores the price both Indians and non-Indians caught unawares must now pay.
[Karl Note: Compare, for instance, the approach used by a guard at a church in Los Angeles, when a crazy came after the guests with a sword. They shot him dead.]
Authorities had earlier believed seven to 15 foreigners were hostages at the Taj Mahal, said Anees Ahmed, a top state official. It was also unclear where the hostages were in the hotel, which is divided into an older wing, which was in flames, and a modern tower that was not on fire.
![[SB122773342581660785]](images/OB-CS881_1126mu_D_20081126162716.jpg)
Locals gathered near the site of an explosion near the airport on Mumbai's Western Express Highway late Wednesday.
Indian Hotels Co. Thursday said it is monitoring the situation in and around its Taj Mahal Hotel. The company is cooperating with the police and the government "to ensure the safety and security of all our guests and staff," it said in a statement.
The fire broke out on the top floor of the Taj Mahal hotel, spreading along the side of the old part of the building. The lobby of the Oberoi was also reported to be in flames. Mr. Roy told NDTV television that at least seven incidents had taken place. He said police were treating those responsible as terrorists who had "opened fire indiscriminately."
Indian Home Affairs Minister Shivraj Patil said the attackers had kept explosives in vehicles and had been firing at people in the hotels.
![[Mumbai attacks]](http://s.wsj.net/public/resources/images/OB-CS908_mumb_D_20081126171710.jpg)
Where the Attacks Took Place
Gunfire was reported at luxury hotels, a restaurant, police headquarters and a train station.
Shots were also fired at the Leopold restaurant, one of the most popular with foreign visitors to the city. Other incidents were reported at a cinema, a hospital and at the main train terminus in the area.
Mr. Roy said police continued to battle the gunmen. "The terrorists have used automatic weapons, and in some places grenades have been lobbed. The encounters are still going on and we are trying to overpower them," Mr. Roy said, according to the AP. India's army has been requested to be on stand by to help civilian authorities.
Media reports said gunmen seized the Mumbai headquarters of the ultra-orthodox Jewish outreach group Chabad Lubavitch overnight, and that shots were heard coming from the building Thursday. Representatives of the New York-based group referred questions to their Web site, which said the Israeli consulate had earlier been in touch with the rabbi who lived in the house, "but the line was cut in middle of the conversation. No further contact has since been established."
One guest at the Taj said the first incident began at about 9:45 p.m. local time when flashing lights and bangs were visible and audible outside the hotel. Taxi drivers, who wait in droves in front of the hotel, roared off. About 10:20 p.m., there were two loud explosions right outside the hotel, the guest said. "My instant reaction was, "It's a bomb,'" he said. A hotel representative later phoned, advising guests to remain in their rooms with the lights off and not to open the door until told by security that it was safe to do so. At 12:45 a.m. local time Thursday, another big blast was reported by a guest at the Taj.
Blasts Rock Mumbai Financial District
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WSJ's international editor Nik Deogun talks with Kelsey Hubbard about a series of coordinated attacks in Mumbai's financial district that were believed to have killed dozens. (Nov. 26)
In Washington, State Department spokesman Robert Wood said the U.S. is unaware of any American casualties at this point. "We strongly condemn the terrorist attacks" and stand ready to support India, he said.
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Indian television reports said a little-known outfit called Deccan Mujahideen had sent a letter claiming responsibility for the attacks but the reports could not be confirmed and no other information was immediately available. The Deccan Plateau is a plateau that covers a large part of southern India, including Maharashtra.
The attacks come after a series of blasts attributed to Islamist terrorists over the summer and autumn in other cities around India, including the capital, New Delhi. National security already was expected to be a major electoral issue when the nation goes to the polls early next year; elections must be held before May. The Congress Party, which leads coalition governments at the national level and in Maharashtra state, home to Mumbai, is already facing pressure to do more to staunch terrorism.
The attacks will put further pressure on the battered Indian rupee at a time when foreign fund inflows have dried up amid the escalating global financial crisis. The benchmark Sensex index on the Bombay Stock Exchange, which is in the area where the attacks took place, has fallen more than 50% from its peak foreign funds pulled out.
The 105-year-old Taj hotel is one of India's most iconic buildings, commissioned by the Tata family to counter the British colonists" exclusionary "whites only" policy at what was then the city's best hotel, Watson's Hotel. The hotel has been expanded to include a modern tower next to the old hotel. The hotel is owned by Taj Hotels, part of India's leading conglomerate, Tata Group.
Consular Call Center
The State Department has established a Consular Call Center for Americans concerned about family or friends who may be visiting or living in Mumbai, India. The number is (888) 407-4747.
Opened in 1903, the Taj Mahal Hotel overlooks the Arabian Sea. The hotel has 565 rooms and is home to some of the city's most exclusive, expensive restaurants as well as the popular Insomnia nightclub. Many dignitaries and celebrities visiting India stay there.
Mumbai is a frequent target of attacks. In March 1993, 13 explosions resulted in 257 deaths and over 700 injuries. The blasts were orchestrated by an organized crime syndicate. In March, 2003, a bomb attack on a commuter train in Mumbai killed 11 people. In August of that year, twin car bombings in Mumbai killed at least 52 people and injured 150. Indian officials blamed a Pakistan-based terror outfit for the crime. In July 2006, seven bomb blasts occurred at various places on the Mumbai Suburban Railway, killing 200 people.
—Paul Beckett reported from New Delhi; Geeta Anand, Abhijit Basu and Subhadip Sircar reported from Mumbai. The Associated Press contributed to this report.
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New Rescue Plan and Falling Mortgage Rates
Source: WSJ: November 27, 2008
Mortgage Rates Fall as U.S. Expands Rescue
Government Vows $800 Billion for Credit Markets in Fresh Salvo on Recession; Could Aid Students, Car Buyers, Small Businesses
By JON HILSENRATH and DEBORAH SOLOMON
U.S. officials pledged to pump another $800 billion into ailing credit markets, much of it directly from the Federal Reserve -- a move that makes the nation's central bank a lender to almost every corner of American life.
The Fed, whose traditional lending role has been to make emergency loans to banks, plans to purchase in coming months up to $600 billion of debt issued or backed by Fannie Mae, Freddie Mac, Ginnie Mae and Federal Home Loan Banks, all mortgage-finance businesses with close ties to the government.
Paulson Looking to Boost Lending
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Treasury Secretary Hank Paulson announces plans to try and help banks loan money out to people faster. But critics say that "throwing money at the problem" is what spurred the crisis to begin with. Video courtesy of Fox News. (Nov. 25)
In addition, with support from the U.S. Treasury, the Fed will provide up to $200 billion in financing to investors buying securities tied to student loans, car loans, credit-card debt and small-business loans.
The intervention, the latest in a series of unprecedented government actions, immediately pushed down rates on 30-year mortgages by as much as one-half percentage point. Lower rates could help borrowers looking to refinance or buy homes, and potentially bolster ailing housing markets.
The Dow Jones Industrial Average rose 36.08 points, or 0.43%, to 8479.47, posting its first three-day string of gains since August.
The moves are no guarantee of an end to the financial crisis, or to the recession that has gathered force in recent weeks. Since September, the Fed and the Bush administration have repeatedly changed course as they've attempted to navigate the financial storm.
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The latest action came just a few days after Treasury Secretary Henry Paulson had unnerved investors by suggesting he might hold off on making new commitments from the $700 billion Troubled Asset Relief Program approved by Congress in October.
![[rescue chart]](http://s.wsj.net/public/resources/images/P1-AN776B_newre_NS_20081125223520.gif)
The Fed's new $200 billion financing program for consumer loans is backed by $20 billion of Treasury funds. It was announced one day after a government rescue of Citigroup Inc.
The government has already made more than $4 trillion of financial commitments, ranging from direct investments to debt guarantees, through a wide range of rescue programs hatched by the Fed, Treasury and Federal Deposit Insurance Corp. That number could grow if markets worsen.
Other programs in the works, like a large fiscal-stimulus plan being worked out by president-elect Barack Obama, promise to push the government tab higher.
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Mr. Paulson said on Tuesday that market problems would have been much worse without the bailouts. He added that the latest moves were aimed at increasing the availability of lending to consumers and homebuyers.
"Nothing is more important to getting through this housing correction than the availability of affordable mortgage finance," he said. He added that the market for securities backed by consumer debt "came to a halt" last month, making it nearly impossible for millions of Americans to find affordable financing for everything from college to computers.
These markets have deteriorated sharply. Yields on mortgage debt have increased, raising borrowing costs to many households.
Last week, debt issued by Fannie Mae was yielding around 1.8 percentage points more than Treasury bonds of the same maturity. That compared to a 0.7 percentage point "spread" over Treasury bonds in September. Investors, including foreign central banks, have shunned Fannie and Freddie debt because of uncertainty about the government's backing, and because new forms of debt, such as bank borrowing backed by the Federal Deposit Insurance Corp., have gotten explicit government guarantees.
As Fannie Mae and Freddie Mac's borrowing costs have risen, so have mortgage rates.
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The Fed's traditional main mission is to set short-term interest rates. Its target interest rate, now 1%, is already low, and some officials are leaning toward reducing it again in December.
The Fed also lends to banks in need of short-term funding. The new programs transform the Fed into a mammoth lender with much broader scope.
Over the past few months, the Fed has expanded lending programs to brokers and to businesses. It has even announced plans to start buying some of the complex debt at the heart of the financial crisis -- instruments known as collateralized debt obligations -- through its rescue of American International Group Inc., the troubled insurance giant.
As its lending has expanded, the Fed's own balance sheet has also ballooned, from less than $900 billion in August to more than $2 trillion. With the new programs, it is likely to grow even more.
While the Treasury has to borrow money from the public to finance its rescue programs, the Fed doesn't. A central bank can effectively create new money by pumping funds, also known as reserves, into the banking system. The Fed is doing that now.
Its approach is similar to steps taken in Japan in the 1990s and earlier this decade, when the Bank of Japan pumped reserves into Japanese banks. The Fed is taking that process a step further. Not only is it pumping in reserves, it is deciding where that cash should go, through its own lending programs.
"The Fed is going market to market and saying, 'Where is credit clogged?' and trying to deal with that in a direct way," says Laurence Meyer, a former Fed governor and now vice chairman of Macroeconomic Advisers, an economic consulting firm.
There are many risks to this approach. Markets could become dependent on Fed financing, possibly slowing their own recovery. Fed officials are concerned about how they will exit from lending programs, but see that as a problem they'll have to confront when the crisis subsides, something that is still seen as far off.
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The Fed's approach, coupled with the fiscal stimulus planned by the incoming Obama administration, is also inflationary. But given a weakening economy, with unemployment rising and consumer spending slowing, Fed officials don't see inflation as a near-term risk.
There are other risks: that the new programs won't work, that more money will be needed, and that the Fed could suffer losses on all of this lending, particularly with the economy so fragile.
The central bank is taking several steps to avoid this. The Treasury has agreed to absorb the first $20 billion of losses on the new $200 billion lending program for car loans, student loans, and other consumer credit.
The structure of the program is complex. The central bank will lend money to investors via big banks known as primary dealers. Investors can use the money to buy AAA-rated securities tied to consumer debt.
The Fed's goal is to bolster those markets, sparking more lending to consumers and lower interest rates for students, car buyers and others. But if consumer-loan delinquencies rise sharply and these securities default, losses will ultimately fall to the Fed and Treasury.
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The program could grow beyond $200 billion, and be expanded to include other asset classes such as commercial real estate.
The mortgage program is more straightforward. Beginning next week, the Fed will start buying $100 billion of debt issued by Fannie Mae, Freddie Mac, and the other government-sponsored enterprises. It also plans to buy up to $500 billion of mortgage-backed securities that these firms guarantee. Private asset managers will be hired to manage this portfolio of investments.
By purchasing securities tied to mortgage debt, the Fed hopes to push up the price of the debt, thereby lowering yields. This maneuver, theoretically, should push down mortgage rates.
"We expect this action will measurably improve conditions in the mortgage markets and will have beneficial effects on housing and the broader economy," said Michael Feroli, an economist at J.P. Morgan Chase & Co., in a note to clients Tuesday.
With Tuesday's announcement, the Treasury has effectively committed $330 billion of the $700 billion rescue package. It needs to go to Congress to use any funds beyond the initial $350 billion authorization. Taking such a step could be politically difficult.
The law passed by Congress in October requires the administration to submit a report detailing how it plans to use the second $350 billion when it makes such a request. That would make an easy target for lawmakers critical of Treasury's frequent pivots on how it intends use the TARP program. Once a request is submitted, Treasury would then have to wait up to 15 days while lawmakers decide whether to vote to withhold the funds. Without a vote, the funds would be released.
There is growing sentiment that lawmakers should attach new restrictions on the second chunk of funds to reduce Mr. Paulson's leeway in implementing the program. Some Democrats and Republicans have pressed for Treasury to do more to avert foreclosures, as required in the legislation authorizing the financial rescue plan.
Separately, Treasury disclosed on Tuesday the criteria it is using when determining whether to bail out financial firms. Among the factors Treasury said it considers: the effect on creditors and counterparties if an institution is allowed to fail; whether the failure of the institution would lead to follow-on failures at similar institutions; and whether there's a high probability the failure of the firm would cause "major disruptions to credit markets."
Treasury said it would evaluate firms individually to determine whether they are "systemically significant." It said there are few, if any, limitations on the types of investments it can make if a key financial institution is failing.
Write to Jon Hilsenrath at jon.hilsenrath@wsj.com and Deborah Solomon at deborah.solomon@wsj.com
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Fed Aid Sets Off a Rush to Refinance
By RUTH SIMON and JAMES R. HAGERTY
The Federal Reserve's attempt to stabilize the housing market set off a chain reaction across the U.S. on Tuesday, dropping interest rates and quickly spurring a burst of refinancing activity by borrowers eager to lower their mortgage costs.
Some brokers said it was the most activity they've seen in at least one year, although there was no way to determine the volume of refinancing.
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At Bank of America Corp., call volume was roughly twice what was expected at call centers and via the Internet, said Matt Vernon, national sales executive. "It's the folks who have been sitting on the sideline. They're jumping in with this news."
Rates on 30-year fixed-rate mortgages dropped by roughly half a percentage point to about 5.5%, for borrowers with good credit scores and substantial equity in their homes, say mortgage brokers and lenders.
While the initial flurry of calls came from people seeking to refinance, economists predicted lower rates also will spur some home buying among bargain-seekers. The surge in refinancing will help the overall economy by putting more cash in consumers' pockets and reducing the pressure on some borrowers struggling to make payments.
"This is a win-win," said Susan Wachter, a professor of real estate at the University of Pennsylvania's Wharton School. "It will directly increase demand for housing and help with the downward spiral in home prices."
The positive response to the Fed action came amid grim news in the housing market. Home prices continued to fall as the economic downturn deepened in September, according data released Tuesday by S&P/Case-Shiller. For the third quarter, the S&P/Case-Shiller home price index posted a 16.6% decline from a year earlier, worse than the 15.1% drop recorded in the second quarter.
![[mortgage rates]](http://s.wsj.net/public/resources/images/P1-AN777B_mortg_NS_20081125213105.gif)
The government's latest plans won't fix all the problems bedeviling the housing and credit markets. And it's not clear whether the most recent initiative will keep mortgage interest rates down over the long run.
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Mortgage rates had dipped briefly in past weeks following previous government actions, including the takeover of Fannie Mae and Freddie Mac. But then rates creeped upward.
Tuesday's lower rates will for now only benefit borrowers who have the cash and credit rating to qualify for mortgages under current lending standards. The Fed's actions won't make mortgages any easier to get for homeowners or buyers who haven't been able to qualify in recent weeks.
Lower rates also won't help the roughly 11.8 million borrowers who are unable to refinance because they owe more than their home is worth, said Mark Zandi, chief economist of Moody's Economy.com
"I don't think it changes any of the underlying fundamentals to the mortgage-origination process," said Mr. Vernon, of Bank of America. "What it does do is help those who have the ability to refinance, because they will get a lower rate and will have some increased cash flow, if they can get through the process."
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Still, the government's latest action was expected to be welcomed by homeowners and potential homebuyers. "The biggest group of people that will benefit from this is that John Q. Citizen who was the responsible consumer in the first place -- the person who is the prime borrower who is starting to crack under the pressure of this bad economy," said Jeff Lazerson, a mortgage broker in Laguna Hills, Calif.
Some borrowers moved quickly to take advantage of the lower rates. Michael Menatian, president of Sanborn Mortgage Corp. in West Hartford, Conn., said his mortgage bank arranged for about 15 refinances of mortgages Tuesday as people rushed to lock in lower rates.
But he said about half-dozen other interested customers couldn't refinance because they had relatively low credit scores and too little equity in their homes. To get a rate of 5.5% Tuesday, he said, a customer would need a credit score of at least 720, about average, and home equity of 20%.
Chris Freemott, president of All American Mortgage in Naperville, Ill., said his firm locked in $4.5 million in deals on Tuesday. "It's easily been one year since we've seen that volume," he said.
Among those benefiting from lower rates was James Ramsey of Aurora, IL., whose mortgage rate, currently 5.625%, was slated to increase by as much as a percentage point in January. On Tuesday, Mr. Ramsey locked in a 5.5% rate on his $180,000 mortgage. The refinance "is going to let me pay off a couple of credit cards really quick," he said.
The government's action was also greeted with relief by Scott Davis, a telecommunications project manager for the city of Phoenix, and his wife, Denise, a school teacher. On Tuesday, the couple locked in a refinance that will lower their mortgage rate to 5.375% from $6.75%, said Steve Walsh, their mortgage broker.
The Davises, who bought their home in July, needed help. They haven't been able to sell their old house yet and so are renting it out, but for less than their mortgage payments. All told, housing costs are eating up nearly half of their after-tax income, Mr. Davis says. The couple has stopped eating out and putting money into retirement accounts; they have also taken on second jobs to keep afloat.
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Mortgage rates declined faster than yields on 10-year Treasury notes, which were quoted late Tuesday at 3.094%, down one-quarter of a percentage point from 3.342% on Monday. Mortgage rates tend to move in line with rates on 10-year Treasurys, but the gap between the two has widened recently.
That gap narrowed on Tuesday, which helped drive mortgage rates lower. The spread between rates on 30-year fixed-rate mortgages and 10-year Treasurys narrowed to 1.70 percentage points, compared with as much as 2.35 percentage points last week, said Credit Suisse Group mortgage strategist Mahesh Swaminathan.
Before credit markets seized up, the gap between the two averaged 1.23 percentage points, he said.
"Clearly, this is a major announcement," said Mr. Swaminathan, who expects mortgage rates to fall to as low as 5% over time. "It brings supply and demand into balance."
About $6 trillion of home mortgages were originated in 2005, 2006 and 2007, and interest rates on most of the fixed-rate loans in that period were 6% or more.
The $500 billion of Fannie, Freddie and Ginnie mortgage securities the Fed plans to buy accounts for a bit more than 10% of such securities outstanding, said Arthur Frank, head of mortgage-securities research at Deutsche Bank in New York.
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The Big Banks Get Bigger? Healthy For YOU?
Source: WSJ: November 26, 2008
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WASHINGTON -- The Federal Reserve Board officially approved Bank of America Corp.'s acquisition of Merrill Lynch & Co. on Wednesday in a deal that will make the country's largest depository institution even bigger.
Bank of American's plan to acquire Merrill Lynch in a $50 billion deal was first announced in September amid growing financial turmoil on Wall Street. Its announcement came on the same exact day that investment bank Lehman Brothers filed for bankruptcy.
In an order approving the acquisition, the Fed said it had carefully considered the proposal and decided it is "not likely to have a significantly adverse effect on competition in any relevant banking market or in any relevant market."
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Bank of America currently has $1.8 trillion in total consolidated assets and controls about $774.2 billion in deposits, which represents about 10.8% of the total amount of deposits at banks in the U.S., the Fed said.
Merrill Lynch, meanwhile, has total consolidated assets of about $875 billion and controls deposits of $77.8 billion.
The Fed said that Bank of America's acquisition of Merrill Lynch will bring the company's total consolidated assets to about $2.7 trillion and it would control about $852 billion in deposits.
The Fed's announcement came after Bank of America announced its leadership team for its global wealth and investment management unit once the acquisition is completed.
Bank of American's bid to take over Merrill Lynch came as a surprise move in September. Bank of America at one point had been in talks to buy Lehman Brothers, but later pulled out and went for Merrill instead.
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Financial "Experts" Are Less Fearful Of Our Growing Debt
Source: WSJ: November 26, 2008:
- NOVEMBER 26, 2008
Fear Recedes in the Debt Markets
Treasury's Plan to Boost Consumer Loans Helps to Push Down Yields
By MICHAEL ANEIRO
The government's $800 billion plan to bolster mortgages and other consumer loans pushed credit markets to their best day in weeks as yields fell on mortgages and corporate bonds, as well as Treasurys.
Persistently high yields and frozen markets have made it difficult and expensive for consumers to borrow to buy homes, cars and to pay for college. The plan, announced Tuesday, goes right to the heart of those issues by buying or lending money to buy securities tied to these loans.
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SUPPORT SYSTEM: Treasury Secretary Henry Paulson announces the latest lending plan on Tuesday.
"To the extent you're trying to help the credit markets I can't think of too many better ways you can do it than a direct injection like this," said Joseph Balestrino, fixed-income market strategist at Federated Investment Management Co.
The move in mortgage securities contributed to a rally in prices of 10-year Treasurys, pushing down the yield to 3.094% -- the lowest in at least 31 years.
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Under the twin plans, the Federal Reserve Bank of New York will create a Term Asset-Backed Securities Loan Facility, or TALF, that will lend as much as $200 billion to holders of certain high-grade securities backed by assets such as student loans, credit-card loans, auto loans and small-business loans. The Treasury will backstop $20 million of that through the $700 billion Troubled Assets Relief Program passed by Congress in September.
In addition, the Fed said it would buy as much as $500 billion of mortgage bonds guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae. The central bank also will buy $100 billion of the mortgage finance companies' debt securities, including that of the Federal Home Loan Bank, through reverse auctions starting next week.
The lending facilities "should theoretically be positive for the markets and help unfreeze the logjam, but it remains to be seen if the government will effectively soak up the supply of debt or whether it will help attract investors back to these markets," says Jon Thompson, vice president of structured finance at Advantus Capital Management in St. Paul, Minn.
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Treasury Secretary Hank Paulson announces plans to try and help banks loan money out to people faster. But critics say that "throwing money at the problem" is what spurred the crisis to begin with. Video courtesy of Fox News. (Nov. 25)
Over the past year, the gap between yields of triple-A-rated asset-backed securities and Treasury bonds jumped from 2 percentage points to 7.4 percentage points, according to data from Merrill Lynch. Before the credit crunch, that spread was less than half a percentage point and was a key factor that kept borrowing rates on auto loans and subprime mortgages relatively low.
By staying high, yields on these securities were making the economic slowdown worse. Normally Treasury yields fall during an economic downturn. That should pull down lending rates. But the yields of these securities remained high because investors were worried about rising loan defaults and demanding higher returns to hold the debt as a result. On Monday, triple-A asset-backed securities yielded 8.7%, versus 5.3% a year ago.
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Tuesday's Fed announcement brought back mortgage-debt buyers in force. The spread between mortgages and Treasurys fell from 2.09 percentage points to 1.86, the biggest drop since the government put Fannie and Freddie into conservatorship Sept. 8, said Art Frank, director and head of mortgage-backed securities research at Deutsche Bank. Normally, mortgage yields are 1 to 1.5 points over Treasurys.
The bond markets got another boost from a different government bailout program that was used for the first time Tuesday. This one allows financial firms to sell debt that is backed by the Federal Deposit Insurance Corp., and Goldman Sachs Group Inc. became the first beneficiary, selling $5 billion of three-year notes that yielded 3.25%, which is roughly half the rate Goldman would have had to pay if it borrowed without the government guarantee.
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