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America Must Pay Debts and Fix Infrastructure

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Guest Tracey Roulhac

God help those who worked all their lives, paid into the system, only to be told thanks for your money, grow old, now die. Basically, this is what's happening! The egotistical, disrespectful good ole boys would have never pulled this with Bush or even Clinton for that matter. It's no longer even about the parties or the people, it's an all out political travesty. People March to Washington.

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Guest Barbara Stowe

US Senate votes 59-41 to table House debt bill. Only one bill left. What does it mean. I don't know.


I tell you what it means Republicans are going to filibuster the bill. Senator McConnell is on record as saying that the debt ceiling MUST be raised by August 2. Now he is trying to maneuver away from a majority up-or-down vote like the House just did to 60 votes to pass the bill. Shame on all of you Republicans, putting the country at long term risk.

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Guest ThinkSpeak

It is not all bad as everyone thinks. Reid and McConnell are in the final stages negotiating a trigger mechanism that would force both sides to reduce the debt. The sticky point is that Democrats want to include revenue taxes. Republicans are against it. I am optimistic it will all work out.

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It does appear that a compromise is coming closer together.


Democrats get what they want by raising the borrowing authority through the next presidential election.


Republicans get what they want with immediate $1 trillion in spending cuts and a automatic trigger to trim cuts in medicare.


Democrats get a concession that Medicare cuts would only effect providers, not recipients.


The rest of the trimming would be government departments and agencies. This includes defense spending.


Removing corporate tax loop holes is the issue that remains.


I hope the two sides meet half way. Corporations should not be taxed if they bringing jobs and investment to the USA. Corporations should be taxed if they are foreign investments.



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Guest LAW

This deal is a tough pill for both sides to swallow. The House still needs to embrace it. If they do, then there will be more of the battling all the way to November.


President Obama Delivers a Statement on Deficit Agreement



July 31, 2011


Good evening. There are still some very important votes to be taken by members of Congress, but I want to announce that the leaders of both parties, in both chambers, have reached an agreement that will reduce the deficit and avoid default -- a default that would have had a devastating effect on our economy.


The first part of this agreement will cut about $1 trillion in spending over the next 10 years -- cuts that both parties had agreed to early on in this process. The result would be the lowest level of annual domestic spending since Dwight Eisenhower was President -- but at a level that still allows us to make job-creating investments in things like education and research. We also made sure that these cuts wouldn’t happen so abruptly that they’d be a drag on a fragile economy.


Now, I've said from the beginning that the ultimate solution to our deficit problem must be balanced. Despite what some Republicans have argued, I believe that we have to ask the wealthiest Americans and biggest corporations to pay their fair share by giving up tax breaks and special deductions. Despite what some in my own party have argued, I believe that we need to make some modest adjustments to programs like Medicare to ensure that they’re still around for future generations.


That's why the second part of this agreement is so important. It establishes a bipartisan committee of Congress to report back by November with a proposal to further reduce the deficit, which will then be put before the entire Congress for an up or down vote. In this stage, everything will be on the table. To hold us all accountable for making these reforms, tough cuts that both parties would find objectionable would automatically go into effect if we don’t act. And over the next few months, I’ll continue to make a detailed case to these lawmakers about why I believe a balanced approach is necessary to finish the job.


Now, is this the deal I would have preferred? No. I believe that we could have made the tough choices required -- on entitlement reform and tax reform -- right now, rather than through a special congressional committee process. But this compromise does make a serious down payment on the deficit reduction we need, and gives each party a strong incentive to get a balanced plan done before the end of the year.


Most importantly, it will allow us to avoid default and end the crisis that Washington imposed on the rest of America. It ensures also that we will not face this same kind of crisis again in six months, or eight months, or 12 months. And it will begin to lift the cloud of debt and the cloud of uncertainty that hangs over our economy.


Now, this process has been messy; it’s taken far too long. I've been concerned about the impact that it has had on business confidence and consumer confidence and the economy as a whole over the last month. Nevertheless, ultimately, the leaders of both parties have found their way toward compromise. And I want to thank them for that.


Most of all, I want to thank the American people. It’s been your voices -- your letters, your emails, your tweets, your phone calls -- that have compelled Washington to act in the final days. And the American people's voice is a very, very powerful thing.


We’re not done yet. I want to urge members of both parties to do the right thing and support this deal with your votes over the next few days. It will allow us to avoid default. It will allow us to pay our bills. It will allow us to start reducing our deficit in a responsible way. And it will allow us to turn to the very important business of doing everything we can to create jobs, boost wages, and grow this economy faster than it's currently growing.


That’s what the American people sent us here to do, and that’s what we should be devoting all of our time to accomplishing in the months ahead.


Thank you very much, everybody.

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Guest mal2cats

I think the behavior demonstrated by the American leaders has been nothing short of shameful. Our chaotic dirty laundry has been aired for the entire world to see. US citizens struggling to find jobs, feed their families and survive the tough economic times will be hurt the most by the inexcusable events taking place in Washington. Very simply this shows me, THEY DON'T CARE ABOUT US!

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Guest LAW

Progressive Democrats will not be happy about this. There is no removing tax loopholes for the rich.


The Congressional Budget Office (CBO) has estimated the impact on the deficit of the Budget Control Act of 2011, as posted on the Web site of the House Committee on Rules on August 1, 2011. The legislation would:


Establish caps on discretionary spending through 2021;

Allow for certain amounts of additional spending for "program integrity" initiatives aimed at reducing the amount of improper benefit payments;

Make changes to the Pell Grant and student loan programs;

Require that the House of Representatives and the Senate vote on a joint resolution proposing a balanced budget amendment to the Constitution;

Establish a procedure to increase the debt limit by $400 billion initially and procedures that would allow the limit to be raised further in two additional steps, for a cumulative increase of between $2.1 trillion and $2.4 trillion;

Reinstate and modify certain budget process rules;

Create a Congressional Joint Select Committee on Deficit Reduction to propose further deficit reduction, with a stated goal of achieving at least $1.5 trillion in budgetary savings over 10 years; and

Establish automatic procedures for reducing spending by as much as $1.2 trillion if legislation originating with the new joint select committee does not achieve such savings.


If appropriations in the next 10 years are equal to the caps on discretionary spending and the maximum amount of funding is provided for the program integrity initiatives, CBO estimates that the legislation—apart from the provisions related to the joint select committee—would reduce budget deficits by $917 billion between 2012 and 2021. In addition, legislation originating with the joint select committee, or the automatic reductions in spending that would occur in the absence of such legislation, would reduce deficits by at least $1.2 trillion over the 10-year period. Therefore, the deficit reduction stemming from this legislation would total at least $2.1 trillion over the 2012–2021 period.


Those amounts are relative to CBO's March 2011 baseline adjusted for subsequent appropriation action. CBO has also calculated the net budgetary impact if discretionary savings are measured relative to its January baseline projections. Relative to that baseline, CBO estimates that the legislation would reduce budget deficits by at least $2.3 trillion between 2012 and 2021.

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The House voted 269 - 161 to raise the debt limit. Rep. Gabrielle Giffords made a surprise visit to chamber to vote.


The Tea Party has made history. They did what they promised voters. If they the debt rating does not go down from AAA to AA they will look like heroes. If the debt rating does go down and inflation begin, they will have alot of explaining to do.


Congrats to the Speaker for rounding up support on a compromised bill.

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Guest Blue Dog

The downgrade of America's coveted AAA rating is still possible. Stuart Gulliver, chief executive of HSBC, said the progress made over the US debt ceiling was "very welcome", but also warned that America could have its credit rating cut anyway. It all depends on whether Standard & Poor's will pull the trigger. The other rating agencies will quickly follow their decision. A downgrade would likely raise the nation's borrowing costs by increasing Treasury yields by 60 to 70 basis points over the "medium term," which will cost taxpayers an extra 100 billion dollars in tribute to the bankers every year.

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Guest cbpp

Statement: Robert Greenstein, President, on New Debt Ceiling Agreement


By Robert Greenstein


The new debt ceiling agreement will achieve the essential goal of avoiding a potentially catastrophic default in the days ahead. But to say that the deal is likely to lead to highly unbalanced results would be an understatement. The deal places the nation on a disturbing policy course and sets what may become important precedents that are cause for serious concern.


The agreement starts with nearly $1.1 trillion (or $840 billion, depending on the budget baseline used) in discretionary (i.e., non-entitlement) spending cuts over ten years, enforced by binding annual caps through 2021. It also calls for a Joint Select Committee on Deficit Reduction to propose, by November 23, steps to reduce the deficit by at least another $1.5 trillion over ten years, and for the House and Senate to consider the proposal under fast-track procedures that guarantee an up-or-down vote in both bodies, with a simple majority needed for passage. If policymakers achieve less than $1.2 trillion in deficit reduction through this process, an automatic across-the-board cut in non-exempt discretionary and entitlement programs will take effect to make up the difference between what they accomplished and the $1.2 trillion target.


Multi-year discretionary caps were included in the major 1990 and 1993 deficit reduction agreements — but as part of larger deals that also included revenue increases. As we have noted repeatedly in recent years, establishing multi-year discretionary caps without an agreement on increased revenues makes it even harder to secure revenue increases for deficit reduction in the future. That's because the only way to secure a bipartisan agreement that includes increased revenues is to provide anti-tax policymakers with significant spending cuts in return, likely including substantial savings from imposing discretionary caps. With 10-year discretionary caps already in place (and with the potential for across-the-board cuts that would further cut discretionary programs), there will be little prospect to exchange substantial discretionary cuts in return for revenue increases unless policymakers who support a meaningful federal governmental role are willing to accept even deeper, more draconian cuts in discretionary programs than the $1.1 trillion in such cuts the agreement already requires.


To be sure, the joint committee will have the legal authority to produce a balanced package that includes revenue increases as well as program cuts. But House Speaker John Boehner, in an effort to secure votes for the deal, is undermining the joint committee before it's even established. Boehner has circulated documents to his caucus claiming the agreement requires the use of a "current-law revenue baseline," thus "making it impossible for Joint Committee to increase taxes." That's not true. Even with such a baseline, policymakers could choose from among numerous tax proposals — such as the President's proposals to end special tax preferences for corporate jets and tax breaks for oil and gas companies — that would produce deficit reduction. Moreover, the agreement does not require the joint committee to use a current-law baseline. The legislation to implement the agreement would allow the joint committee to elect to use another baseline, such as the "plausible" revenue baseline that the President's 2012 budget, the Bowles-Simpson commission, the Rivlin-Domenici commission, and the Gang of Six all used, or the current-policy baseline that was used in the earlier negotiations between the President and Speaker Boehner. This would allow the joint committee to consider tax reform such as the Senate's Gang of Six proposal, which would not raise revenues relative to a current-law baseline but would raise revenues relative to either the "plausible" baseline or a current-policy baseline.


That one party is being led to believe that the deal does bar the joint committee from raising tax revenue is not helpful, to say the least. Coupled with Speaker Boehner's pledge not to name any members to it who will raise any tax revenue at all and to defeat any joint committee-produced package on the House floor if it raises any revenue, this interpretation of the agreement seems to give the joint committee only three places to go — severe cuts in entitlement programs, deep cuts in entitlements coupled with even deeper cuts in discretionary programs (i.e., cuts on top of the at-least $1.1 trillion in discretionary cuts that the annual caps will produce), or a failure to meet its target.


If the joint committee were only to cut entitlement programs to reach its target, how deep would those cuts be? The deal that President Obama and Speaker Boehner were negotiating several weeks ago would have raised Medicare's eligibility age, raised Medicare cost-sharing charges, shifted significant Medicaid costs to states, modified cost-of-living adjustments in Social Security and other benefit programs (and in the tax code), and instituted other entitlement savings. Those steps would have saved $650 billion to $700 billion over ten years. The joint committee would have to produce cuts twice as deep — and roughly twice as deep as those in the Gang of Six plan.


Democrats on the joint committee would not conceivably agree to entitlement cuts, or a mixture of entitlement and deeper discretionary cuts, that deep. Hence, if Speaker Boehner honors his pledge to keep revenue increases off the table, the committee will surely fail — and gridlock and policy warfare will continue.


The joint committee could agree on a much smaller amount of savings without revenues, but nothing close to $1.2 trillion to $1.5 trillion. Thus, unless Republicans back off their refusal to consider any increase in revenues, the joint committee will fail to produce savings anywhere close to $1.2 trillion — triggering across-the-board cuts that are of unprecedented depth and will remain in place for nine years.


In key respects, then, this deal postpones the biggest battle over deficit reduction, creating an even more cataclysmic clash that would occur most likely in a lame-duck congressional session after the 2012 election. At that point, three huge events will loom:


1) across-the-board cuts in January 2013, with half of them coming from defense (amidst likely charges that they will jeopardize national security.


2) the scheduled expiration of President Bush's tax cuts at the end of 2012


3) the renewed specter of default if policymakers do not raise the debt ceiling quickly again by early 2013. Where all of that will lead policy debates and outcomes is impossible to predict at this point.


Anticipating the policy battles to come, we should not lose sight of an alarming development. Those who have engaged in hostage-taking — threatening the economy and the full faith and credit of the U.S. Treasury to get their way — will conclude that their strategy worked. They will feel emboldened to pursue it again every time that we have to raise the debt limit in the future.


They also will likely continue insisting, in future hostage-taking efforts, that for every dollar we raise the debt ceiling, we must cut spending by a dollar, with no revenue allowed. When one considers that even the harsh budget plan of House Budget Committee Chairman Paul Ryan would require policymakers to raise the debt limit by nearly $9 trillion over the coming decade, one begins to understand the extraordinary results such a policy path would produce over time. Substantial parts of the federal government, including important parts of the Great Society and even the New Deal, would be cut sharply or eliminated. That would put us on a path toward achieving anti-tax activist Grover Norquist's vision of shrinking government to the point where "we can drown it in the bathtub."


Having said all this, the agreement has some partially — but important — redeeming features. For one thing, the Administration ensured that half of the automatic cuts that could be triggered will come from defense programs, and that basic entitlement assistance programs for low-income Americans, as well as Social Security, will be exempt from such cuts. This could provide helpful leverage for a more balanced solution in the showdown likely in the 2012 lame-duck session. For another, the deal raises the debt ceiling until about early 2013, so the nation's credit will not be threatened in coming months by election-year politics. (On a smaller front, the Administration secured beneficial provisions related to Pell grants.)


Our grim assessment of the agreement, its very disturbing implications, and the policy and political trajectory that we now face are not arguments for defeating the agreement on Capitol Hill. There is an adage that, as bad as things get, they can always get worse. If Congress defeats the package, one or both of two very troubling developments may well occur: we may experience a default, with potentially catastrophic consequences for the economy and the nation's future; or policymakers may quickly rejigger the deal, making it still more unbalanced in order to secure more arch-conservative votes. These are risks that are simply too dangerous to take — despite the deeply troubling problems that this deal poses.

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Guest Enron Ex

The Dow Jones industrial average dropped more than 265 points Tuesday. The Nasdaq saw the steepest decline on a percentage basis, tumbling 75 points, or 2.8%, to settle at 2669. The yield on the 10-year Treasury again fell to a new low for the year of 2.61 percent from 2.75 percent Monday. The yield on the 30-year Treasury bond skidded below 4%, falling to 3.90% from 4.08%. It was at 4.28% a week ago. Yields fall when bond prices rise. Gold, another asset investors buy when they're worried about the direction of the economy, gained 1.4 percent to $1,645 an ounce.


Growth in China and India also has slowed recently after their central banks raised interest rates due to the economic uncertainty in the United States. Mei Xinyu, a researcher at China's Ministry of Commerce, told Dow Jones that the U.S. can't restore confidence in Treasury bonds or the dollar even with the deal and that the world's biggest economy deserves a credit rating downgrade. China needs to reduce amount of U.S. assets it acquires, he said. The People's Daily resonated that the past week has created "more doubts about America's political direction, its foreign policy, and even its 'leadership.'"



American corporations have counted on increasing sales in Asia as a way to make up for slower revenue growth in the U.S.

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Guest Democracy NOW

A new study by the Economic Policy Institute has found that U.S.-based companies created more jobs overseas this year than they did inside the United States. Overseas, 1.4 million jobs were created, versus less than one million within the United States. At the firm DuPont, the number of U.S. employees has shrunk by nine percent since 2005, while its work force grew by 54 percent in Asia-Pacific countries. At Caterpillar, more than half of the 15,000 people hired this year were outside the United States.

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Guest Honen

Many foreign countries serve as offshore tax havens, which can facilitate both tax evasion and tax avoidance.


This serves as an invitation for U.S. corporations to shift their profits to subsidiaries in the tax haven country. A U.S. corporation might do this by using accounting gimmicks and transactions that exist only on paper to make it appear that the U.S. corporation has lower U.S. taxable profits because of payments it made to an offshore subsidiary (i.e., to itself), which may be a shell corporation incorporated in a tax haven country.


Foreign countries can facilitate tax evasion when they adopt secrecy rules that make it impossible for U.S. tax enforcement authorities to find out whether Americans are hiding their income there. These crimes are typically committed by individuals using foreign bank accounts that are not reported to the U.S. or shell companies incorporated in the tax haven country.

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Guest Dale 48

I am ticked off that our Congress is taking a month long vacation on our dime. We still have all these problems and they get to take the rest of the Summer off. They make way to much and never do anything but fight. Makes me wonder if Old Glory means anything to anyone.

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Guest TLG

The 2011 Offshore Voluntary Disclosure Initiative (OVDI) is based on the previous disclosure program that ran through October of 2009. The OVDI provides an opportunity for taxpayers with undisclosed offshore accounts to benefit from structured penalties without criminal exposure but only if the taxpayer comes forward before the deadline.


Recently, the Department of Justice opened a formal investigation into the banking practices of another Swiss bank, Credit Suisse. Based on the government’s investigation into Credit Suisse, many believe the bank may have a larger problem than UBS did two years ago. On another front, HSBC India has taken action to limit a continued investigation as well. Recently, HSBC India has informed all their U.S. clients that they will no longer be able to maintain any form of investment relations and will be transferring them to the HSBC USA branch.


Kevin E. Thorn, Managing Partner of Thorn Law Group, a law firm that represents many taxpayers throughout the U.S. and around the world with many undisclosed offshore accounts at Credit Suisse and HSBC states, “The U.S. government is taking quick action to bring taxpayers into compliance by means of opening investigations into offshore banks suspected of aiding in tax evasion and it is believed the U.S. government will eventually obtain the names of those taxpayers with undisclosed offshore accounts.” Thorn continues, “U.S. taxpayers with undisclosed offshore accounts should come forward through the 2011 IRS Amnesty Program while there is still time, in order to limit substantial civil and criminal liabilities.”


The general 2011 OVDI terms include: a 25 percent maximum penalty on the taxpayers’ undisclosed offshore accounts with the highest aggregate account balance over an eight year period, 2003 through 2010; participants must pay back taxes and interest for up to eight years as well as accuracy related and/or delinquency penalties; and participants must file all original and amended tax returns and include payments for taxes, interest and accuracy related penalties. The deadline to enter a complete submission into the 2011 OVDI is August 31, 2011, only one month remains and time is running out.


Mr. Thorn encourages all U.S. taxpayers with undisclosed offshore bank accounts to, “contact a tax controversy attorney immediately in order to assess and possibly minimize their civil and criminal exposure by possibly entering into the current IRS Voluntary Disclosure Program.”


For additional information on the news that is the subject of this release, contact Kevin E. Thorn, Managing Partner of Thorn Law Group at 202-270-7273 or visit us at



About Thorn Law Group, PLLC:


Thorn Law Group, PLLC is a law firm dedicated to helping clients resolve complicated tax, criminal tax, and international tax problems.



Kevin E. Thorn, Managing Partner

Thorn Law Group, PLLC



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Guest Derek

I am ticked off that our Congress is taking a month long vacation on our dime. We still have all these problems and they get to take the rest of the Summer off. They make way to much and never do anything but fight. Makes me wonder if Old Glory means anything to anyone.


People are figuring out what Republicans are up to. It was their decision to take a vacation. They are a joke.

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Guest LPAC

Just as the rating agencies are now serving their masters in London and Wall Street to impose dictatorship upon the United States under Obama, so also they were central to the creation of the speculative bubble and the subsequent crash under GW Bush and Tony Blair. As reported in the Angelides and the Levin-Coburn (FCIC) reports:


The rating agencies were paid by the banks in return for ratings on the Mortgage Backed Securities (MBS) and Collatoralized Debt Obligations (CDO, which packaged MBSs). Thus, "The rating agencies weakened their standards as each competed to provide the most favorable rating to win business and make greater market share. The result was a race to the bottom." [Angelides]


Moody's and S&P issued AAA ratings for tens of thousands of MBS and CDOs in the 2000s, while their profits soared. For example, "Moody's rated 230 deals in 2004, 363 in 2005, 749 in 2006, and 717 in 2007.... The reported revenues of Moody's from the structured products grew from $199 million in 2000, or 33% of Moody's revenue, to $887 million in 2006, or 44% of revenue." [Levin]


When these derivatives showed signs of collapse in 2006, the agencies continued rating them at AAA for six more months. Then, in July 2007, when the collapse hit, they suddenly pulled the plug on most of them, forcing many banks, pension funds, and others to dump their holdings onto the market at huge losses, because of laws requiring that they hold only AAA-rated securities. (The government then stepped in to take over the junk, as collateral, in exchange for real money, at 100% of face value.)


"Analysts have determined that over 90% of the AAA ratings given to subprime MBS securities originated in 2006 and 2007 were later downgraded by the credit rating agencies to junk status.[Angelides]

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Guest Fedup

Moody’s Corp. (MCO) investors can’t sue as a class over claims the company made false statements to investors about its credit-rating practices, a judge ruled.


U.S. District Judge George B. Daniels in New York today said that the question of whether investors relied on allegedly false statements by Moody’s involves too many individual issues to try all the claims in one case.




It is sometimes good to look at the invisible hand that controls everything.


Warren Edward Buffett is an American investor, industrialist and philanthropist. He is widely regarded as one of the most successful investors in the world. The CEO of Berkshire Hathaway has said very little about his 12.4% stake Moody's Corp.


Cornelius Alexander McGillicuddy III has been a Director of Moody's Corp. since December 2001. Popularly known as Connie Mack, is a former Republican politician. He served as a member of the United States House of Representatives from Florida from 1983 to 1989 and then as a Senator from 1989 to 2001. He served as chairman of the Senate Republican Conference, 1997–2001. He was considered by Bob Dole to be the Vice-Presidential nominee on the GOP ticket in 1996 though Jack Kemp was chosen instead.


Basil L. Anderson has been a Director of Moody's Corp. since April 27, 2004 and serves as Director of Moody's Investors Service, Inc. Mr. Anderson has served as an independent director of Staples, director of Hasbro, and Chief Financial Officer of Campbell Soup Company


Nancy S. Newcomb is a member of the Board of Directors of Moody's Corp since February 2005. Ms. Newcomb has served as a director of Sysco since February 2006. She served as Senior Corporate Officer, Risk Management, of Citigroup from May 1998 until her retirement in 2004. She served as a customer group executive of Citicorp (the predecessor corporation of Citigroup) from December 1995 to April 1998.


Ewald Kist has been a member the Board of Directors of Moody's Corporation since July 2004. Mr. Kist, 60, retired on June 1, 2004 from his position as Chairman of the Executive Board of ING Groep N.V. (ING Group). Mr. Kist served in a variety of capacities at Nationale Nederlanden beginning in 1969, including Chairman from 1991 to 1992, and General Management - the Netherlands from 1989 to 1991. As President of Nationale Nederlanden U.S. Corporation from 1986 to 1989. Mr. Kist also serves as a Director of The DSM Corporation, the Dutch chemical company, and Royal Philips Electronics, one of the world's largest electronics companies.


Robert R. Glauber has been a member the Board of Directors of Moody's Corporation. He is the former Chairman, President, Board Member and Chief Executive Officer of NASD (National Association Of Securities Dealers), director of Northeast Bancorp, and the Federal Home Loan Mortgage Corp. ("Freddie Mac") and a trustee of the International Accounting Standards Committee Foundation. Under Secretary of the Treasury for Domestic Finance from 1989 to 1992. Glauber was Executive Director of the Task Force appointed by President Reagan to report on the 1987 stock market crash. He is a trustee of the International Accounting Standards Committee Foundation; and director of XL Capital Ltd. Glauber has been a Senior Advisor at Peter J. Solomon Co., an investment bank, since November 2006 and is a current member of the Committee on Capital Markets Regulation. He previously served on the boards of Quadra Realty Trust, the Federal Reserve Bank of Boston, a number of Dreyfus mutual funds and the Investment Company Institute.


There are more. I leave it to you the reader to search out the truth. Here is a link to help you.



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Guest Derek

I am focusing on Mr. Glauber. He is the head of Freddie Mac, Moody's, and NASD. He knew before anyone.





Bob Glauber's entire career has been devoted to improving capital formation and the health of our securities markets.


on October 30, 1987, he was drafted from his Department Chairmanship at Harvard Business School to serve as the Executive Director of the Presidential Task Force on Market Mechanisms — better known as the Brady Commission, which was eponymously named for its Chairman, Secretary of Treasury Nick Brady, who is with us here this evening. That Commission, which as Bob has told you I was involved with as a member of the President's White House staff, provided the definitive autopsy on what happened to the markets 20 years ago this month. So, happy 20th anniversary to both of you, Bob and Nick.







MARCH 5, 6, 14, 19, 20, AND 21, 2002


Robert Glauber, who is the Chairman and Chief Executive Officer of the NASD, a self-regulatory organization for securities broker-dealers. Mr. Glauber was Under Secretary for Finance at the Treasury Department from 1989 to 1992. He was the Executive Director of the Brady Commission Task Force which studied the 1987 stock market crash and had a very distinguished academic career on the faculty at the Harvard Business School, and also at the Kennedy School of Government.


The National Association of Securities Dealers is not a trade association, but rather, the largest self-regulatory organization, or SRO, in the world. Under Federal law, every one of the roughly 5,500 brokerage firms and almost 700,000 registered representatives in the U.S. securities industry comes under our jurisdiction. For more than six decades, our mission and our mandate from Congress has been clear—to bring integrity to the markets and confidence to investors. We do this by writing rules to govern the conduct of brokerage firms and their employees, licensing industry participants, and maintaining a massive registration data base of

brokers and firms, educating our members on legal and ethical standards, examining them for compliance with the NASD rules and the Federal securities laws, investigating infractions, and disciplining any members who fail to comply.


The NASD's history is to a large degree the history of successful self-regulation in the United States. Every brokerage firm in the country that does business with the public must, by law, be a member of the NASD. With a staff of 2,000, 15 district offices, and an annual budget of some $400 million, we touch virtually on every aspect of the securities business and monitoring all trading on Nasdaq and on selected other markets.


By providing this layer of private-sector regulation between the SEC and the industry, the NASD is not only a guardian for investors, but also a bargain for taxpayers. If we did not exist, the SEC would have to increase its budget by roughly two-thirds and its staff by about half, just to pick up all the regulatory duties now performed by the NASD.


In 1996, the SEC, in its Section 21( a ) report, criticized the NASD in part for putting its interests as the operator of Nasdaq ahead of its responsibilities as the regulator of the entire industry. The NASD responded promptly by carving out NASD regulation and Nasdaq as two distinct corporate entities with separate boards, management, and staff. And since then, we have spun off Nasdaq entirely, selling our last 27 percent stake in the company earlier

this year.


As a result, NASD over the past half-dozen years has returned to its regulatory roots with greater independence, resources, and focus than ever before. And I believe that we are in a unique position to contribute to the vital national discussion this Committee is helping to lead on how to strengthen investor protection by improving accounting industry regulation.


The right people pay for the NASD's services. Namely, the brokerage firms who know that market integrity leads to investor confidence, which is good for their business. This steady and sufficient funding means that we can afford the sophisticated technology, techniques, and infrastructure it takes to regulate a fast-charging, technology-intensive industry. NASD's

technology budget alone is $150 million per year. No private-sector regulator can succeed without sufficient ways and means.


Next, I cannot overstate the importance of the NASD being empowered to discipline our members with tough public sanctions. Last year, we brought more than 1,200 disciplinary actions resulting in over 800 expulsions or suspensions from the industry. It is a big stick—the ability to bar someone from earning a livelihood in their chosen field.


Chairman SARBANES. Mr. Glauber, would you just outline the

funding mechanism for the NASD?

Mr. GLAUBER. Certainly. Essentially all of our funding comes

from the broker-dealer community. Most of it is raised by assessments

on broker-dealers which reflect their size.

Chairman SARBANES. Okay. Now the broker-dealer is required to

be a member of the NASD. Is that correct?

Mr. GLAUBER. That is correct.

Chairman SARBANES. And if he is evicted by membership under

your disciplinary procedures, he can no longer be a broker-dealer.

Is that right?

Mr. GLAUBER. He cannot be a broker-dealer that deals with the

public, that is correct.

Chairman SARBANES. So, you levy a fee on each firm.

Mr. GLAUBER. On each firm.

Chairman SARBANES. Related to the size of the firm?

Mr. GLAUBER. Related to its size, related to its trading operations,

as well as we levy some user fees that cover the cost of

maintaining our central depository of registration information. And

we levy user fees on actually new issues. When a company files a

new issue, we have to read the prospectus and we levy a user fee

on that.

Chairman SARBANES. So that is all an automatic process. They

have to pay that as, in a sense, the cost of doing business. Is that


Mr. GLAUBER. Absolutely.


Chairman SARBANES. Nasdaq does set out standards for behavior

and the rules with which markets operate, if I am not mistaken.

Is that true, Mr. Glauber?

Mr. GLAUBER. It does, indeed. Since we have just sold our last

shares in Nasdaq and are now completely separate from Nasdaq,

I want to emphasize that it is the NASD that does the regulation

of broker-dealers and, in fact, sets out a group of rules that deal

with conduct.


would like.

Chairman SARBANES. Now, Mr. Glauber, you all combine the two,

don't you?

Mr. GLAUBER. We write rules which are mainly rules of behavior

and ethics. We do not have something which is equivalent to a

standard setting like the accountants. If you look at the kinds of

rules that we write, they are rules of quality control and behavior,


Chairman SARBANES. Well, who writes the standards?

Senator CORZINE. That is not entirely true, is it? If I go back to

my experience of 1996 and 1997, we set up some specific rules in

NASD with regard to both standards and procedures, with regard

to spreads and over-the-counter markets and how they actually operate.

It is very much similar in some ways to the kinds of standards

that one might put down with regard to accounting rules. It

wasn't law. It was sort of——

Mr. GLAUBER. Rules.

Senator CORZINE. They were rules that people had to abide by,

unless I am mistaken.

Mr. GLAUBER. No, that is perfectly correct, Senator. They are.

And if you want to characterize those as standards, then I think

you are quite right. I think they are not quite the same thing as

accounting principles, and that is why it is very difficult.

Senator CORZINE. I am quite in concurrence that we have different

functionalities going on here, so you are going to have little

differences in analogy.


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Guest Derek








Congress decided to out-source corporate auditing back in 1933 to independent public accountants rather than have somebody else do it, particularly the SEC.


independent accountants were paid for their opinions by the firms that they evaluate and that they provided a wide range of consulting services for these firms, lead inevitably to conflicts of interest. The parallels for example, to rating agencies, are obvious and indeed, Arthur has written about that on occasion, but the point I want to make is the conflicts in interest exist everywhere.


Many of them simply can't be eliminated and the challenge is to manage them effectively.

In this industry the choice was self-regulation.


And I believe obviously, and I'm very biased, that self-regulation can work. It needs to be independent and I think in the late `90s there was some evidence that it didn't work as well as it could and the result, of course, the answer was SOX. Sarbanes-Oxley, I think, clearly produced market benefits.


I think everybody would agree that the quality of audits is just much better now than it ever was before. Certainly, the number of earnings restatements has decreased markedly. But to put it a bit politely, I suppose, there were a number of unintended and often times negative consequences of SOX for its costs.


I recall your memory back to the SEC's statement on the cost of SOX and particularly Section 404.


The estimate was $91,000.00 per firm. It turned out to be something of an under-estimate. Auditors clearly expended far more resources to do their job than was anticipated. As a consequence and despite the elimination of many of the consulting services auditing firms provided or were permitted to provide, clearly audit firm revenues have gone up dramatically. And despite PCAOB inspection, there is still serious concerns, I think, with auditor internal

organization in governance.


Why these outcomes? Obviously, a number of reasons.


Audit costs and resources used have been so high because first of all, the ambiguity of the PCAOB audit rules.

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Guest Fedup

Robert R. Glauber was part of Freddy Mac's Finance and Capital Deployment Committee which was responsible for the oversight of ( i ) funding, investment and hedging activities associated with Freddie Mac's retained and sold portfolios, credit risk arising from the guarantee portfolio, and the mortgage and non-mortgage investment portfolios, ( ii ) the content and implementation of Freddie Mac's Asset/Liability Management Policy and Plan, ( iii ) management of Freddie Mac's capital, and ( iv ) management of Freddie Mac's credit risk, market risk and operational risk.


Freddy Mac falsely and continually assured investors that Freddie Mac did not have significant subprime exposure, that they knew how to and were managing risks effectively, that they were continuing to improve their internal control policies and procedures, and that they had adequate disclosure policies and procedures.


Freddy Mac was not implementing sufficient risk management controls to protect the Company from acquiring billions of dollars worth of mortgages with poor underwriting standards and the Company's internal controls and business methods were incapable of managing, identifying and guarding against massive losses in subprime investments and guarantee exposure, causing the Company to have an untenable amount of risky loans.


Freddy Mac was not implementing controls to ensure that appraisals were done appropriately and to prevent collusion between lenders and appraisers, increasing the risk of defaults.


Freddy Mac was not adequately reserving for uncollectible loans, causing its financial results to be misleading.


Freddy Mac had invested, for its own portfolio, in billions of dollars of high risk, low quality mortgages that carried extraordinarily high credit risks which it would eventually have to write off, causing losses and capital deficiencies.


Freddy Mac had guaranteed billions of dollars of subprime, high risk mortgages sold to others, which it would eventually have to write off.


Freddy Mac guarantee exposure was not protected or properly transferred to credit-worthy mortgage insurers and that many of its third party mortgage insurers were not finally able to meet their insurance contracts – the very contracts that were supposed to protect sizeable portions of Freddie Mac's mortgage investment holdings and guarantee exposure.


Freddy Mac intentionally and/or recklessly:


( a ) Did not oversee the integrity of Freddie Mac's financial statements and, permitted the false and/or misleading earnings and other press releases and quarterly, annual and other financial reports to be distributed;

( b ) Did not ensure that Freddie Mac's disclosure controls and procedures, including internal controls over financial reporting, were adequate;

( c ) Did not ensure that management developed and implemented adequate systems and programs for the detection and prevention of fraud; and

( d ) Did not ensure that management had appropriate guidelines and policies governing processes for assessing and managing Freddie Mac's risks and did not monitor and control Freddie Mac's major financial risk exposures.


Robert R. Glauber was one of the members responsible for and controlled Freddie Mac, its investments and risk strategies, and its financial statements and public disclosures. Each of them directly participated in the management of the Company and was directly involved in the day-to-day operations of the Company at the highest levels.


Throughout the Class Period, Glauber intentionally, or at the very least recklessly, made materially false and misleading statements and/or failed to disclose material adverse information known to them concerning the Company's subprime and other exposures, internal controls, risk policies and procedures, financial condition and results and operations, as detailed herein.


It is all there for the world to read:




Freddie Mac is owned by its shareholders and its common stock is listed and publicly traded on the New York Stock Exchange ("NYSE") under the ticker symbol "FRE."




Currently the stock is worth 0.329 -0.014 (-4.08%)


This begs the question of why I should trust Moody's when they are part of the problem. Notice nothing was done to either Freddy Mac or Fannie Mae during the debt ceiling talks when the two have sucked 130 billion plus since the housing crash. That is why I do not believe either party has the working man's interest in mind.

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Have any dirt on S&P?


On Aug. 5, 2011, Standard & Poor's Ratings Services lowered its long-term sovereign credit rating on the United States of America to 'AA+' from 'AAA'.


The outlook on the long-term rating is negative. At the same time, Standard & Poor's affirmed its 'A-1+' short-term rating on the U.S. In addition, Standard & Poor's removed both ratings from CreditWatch, where they were placed on July

14, 2011, with negative implications.


The transfer and convertibility (T&C) assessment of the U.S.--our assessment of the likelihood of official interference in the ability of U.S.-based public- and private-sector issuers to secure foreign exchange for debt service--remains 'AAA'.




We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the

growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal

consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade.

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Guest Dixie

It makes no sense why they would lower us because we waited until the deadline. Something is fishy.

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