Sunday, October 6, 2013

Mark Levin warns: Obama preparing country for coup against Constitution

OH WELL WHEN OUR MILTARY LEADERS DO NOTHING TO STOP HIM AND JUST SIT AND LET THIS ISLAMIC TERRORIST DESTORE OUR NATION WHO CARES

Mark Levin warns: Obama preparing country for coup against Constitution

October 6, 2013
Earlier this week, conservative talk show host Mark Levin warned that Barack Obama is campaigning and preparing the country for what amounts to a coup against the Constitution over the debt ceiling, Breitbart.com reported Sunday.
Levin said that it's clear Obama has moved on from the shutdown and is now focused on the debt ceiling, paving the way for low-information liberals to support him as he bypasses Congress and unilaterally seizes control of the nation’s economy, Dr. Susan Berry wrote..
"Default, default, default…why is he saying that? Just to scare people?" Levin asked. "Well, that’s part of it, obviously. But, it’s more than that, ladies and gentlemen. Barack Obama is plotting, that if he can’t get what he wants out of the House Republicans, that if he can’t get his Plan A, and get Boehner and the Republicans to buckle - not just on the Continuing Resolution – but on the debt ceiling, then he’s got his Plan B."
And what, exactly is "Plan B?"
According to Levin, that plan involves Obama unilaterally raising the debt ceiling by citing the 14th Amendment.
In essence, Levin said, Obama effectively plans to "seize from Congress the power of the purse" in what he called "the most egregious attack on our Constitution by a President" in all of U.S. history.
Examiner's Anthony G. Martin said the 14th Amendment does not give Obama the authority to usurp Congress' role regarding the debt ceiling.
"Nowhere does the Amendment mandate that overall federal spending be increased at the whim of a president, or anyone else in government, not even Congress," he wrote.
Levin went further, saying that Obama is being encouraged "by Marxists dressed up as Constitutionalists, by people in his own party, he’s being encouraged to conduct himself as a dictator, and to bypass Congress and to bypass the Constitution."
"They want a full-blown Constitutional crisis. Please, listen to me, this is what they want! So they can continue to shred it!" he added.
This isn't the first time the subject has been brought up.
Last December, House Minority Leader Nancy Pelosi said Obama should be given dictatorial power to unilaterally raise the debt ceiling to infinity.
In July 2011, Rep. Sheila Jackson Lee, D-Texas, urged Obama to rule like a dictator on the debt ceiling. Other Democrats, like James Clyburn and former President Bill Clinton, have also suggested Obama bypass Congress and unilaterally raise the debt ceiling.
Levin went on to warn listeners of dire consequences to the nation if Obama acts unilaterally.
"So, it is he who is prepared to extort and blackmail in ways that most of you, and most of my colleagues in this business can’t even imagine, or don’t even understand," he said. "And, if the President of the United States unilaterally lifts the debt ceiling, you can kiss the core functions of Congress goodbye, you can kiss this Republic goodbye, once and for all."
Indeed, it would be the ultimate “fundamental transformation” Obama promised at the beginning of his presidency.
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Where leadership is needed, Obama stays on the sidelines—except when he's attacking Republicans.

Fred Barnes: The President's Shutdown

Where leadership is needed, Obama stays on the sidelines—except when he's attacking Republicans.


    By
  • FRED BARNES
President Obama is sitting out one of the most important policy struggles since he entered the White House. With the government shutdown, it has reached the crisis stage. His statement about the shutdown on Tuesday from the White House Rose Garden was more a case of kibitzing than leading. He still refuses to take charge. He won't negotiate with Republicans, though the fate of ObamaCare, funding of the government and the future of the economic recovery are at stake. He insists on staying on the sidelines—well, almost.
Mr. Obama has rejected conciliation and compromise with Republicans. Instead, he attacks them in sharp, partisan language in speech after speech. His approach—dealing with a deadlock by not dealing with it—is unprecedented. He has gone where no president has gone before.
Can anyone imagine an American president—from Lyndon Johnson to Ronald Reagan, from Harry Truman to Bill Clinton—doing this? Of course not. They didn't see presidential leadership as optional. For them and nearly every other president, it was mandatory. It was part of the job, the biggest part.
LBJ kept in touch daily with Everett Dirksen, the Republican leader in the Senate, and never missed an opportunity to engage him in reaching agreement on civil rights, taxes, school construction and other contentious issues. Mr. Obama didn't meet one-on-one with Mitch McConnell, the Senate GOP leader, until 18 months into his presidency and doesn't call on him now to collaborate.
Associated Press
Heading to the Oval Office after speaking Tuesday about ObamaCare and Congress.
Presidents have two roles. In the current impasse, Mr. Obama emphasizes his partisan role as leader of the Democratic Party. It's a legitimate role. But as president, he's the only national leader elected by the entire nation. He alone represents all the people. And this second, nonpartisan role takes precedence in times of trouble, division or dangerous stalemate. A president is expected to take command. Mr. Obama hasn't done that.
The extent to which he has abdicated this role shows up in his speeches. On the eve of the shutdown, he warned that a government closure "will have a very real economic impact on real people, right away." Defunding or delaying his health-care program—the goal of Republicans—would have even worse consequences, he suggested. "Tens of thousands of Americans die every single year because they don't have access to affordable health care," Mr. Obama said.
In an appearance in the White House pressroom, he said that "military personnel—including those risking their lives overseas for us right now—will not get paid on time" should Republicans force a shutdown. At an appearance in Largo, Md., the president accused Republicans of "threatening steps that would actually badly hurt our economy . . . Even if you believe that ObamaCare somehow was going to hurt the economy, it won't hurt the economy as bad as a government shutdown."
Yet as he was predicting widespread suffering, Mr. Obama steadfastly refused to negotiate with Republicans. He told House Speaker John Boehner in a phone call that he wouldn't be talking to him anymore. With the shutdown hours away, he called Mr. Boehner again. He still didn't negotiate and said he wouldn't on the debt limit either.
Mr. Obama has made Senate Majority Leader Harry Reid his surrogate in the conflict with Republicans. Mr. Reid has also declined to negotiate. In fact, Politico reported that when the president considered meeting with Mr. Boehner and Mr. McConnell, along with the two Democratic congressional leaders, Mr. Reid said he wouldn't attend and urged Mr. Obama to abandon the idea. The president did just that.
By anointing Mr. Reid, President Obama put power in the hands of the person with potentially the most to gain from a shutdown. Mr. Reid's position as Senate leader is imperiled in next year's midterm election. Republicans are expected to gain seats. They need a net of six pickups to take control and oust Mr. Reid. His strategy is to persuade voters that the shutdown was caused by tea-party crazies in the GOP, and that turning over the Senate to them would be foolhardy. If Mr. Reid's claim resonates with voters, it might keep Republicans from gaining control of the Senate.
Mr. Obama insists that he is ready to discuss tweaks in ObamaCare "through the normal democratic processes." But, he said last week, "that will not happen under the threat of a showdown."
It probably won't happen in less frantic situations either. The president in the past has proved to be a difficult negotiating partner. In his first term, he blew up a "grand bargain" on taxes and spending with Mr. Boehner by demanding even higher taxes at the last minute. Without what Mr. McConnell calls a "forcing mechanism," no major agreement on domestic issues has been reached.
The three deals that Mr. Obama has signed off on—all negotiated by Vice President Joe Biden—were forced. The president agreed in 2010 to extend the Bush tax cuts for two years as they were about to expire. In 2012, he made the Bush cuts permanent except for the wealthiest taxpayers. In 2011, he agreed to spending cuts in exchange for an increase in the debt limit as it was close to being breached.
The president's tactic of attacking Republicans during a crisis while spurning negotiations bodes for a season of discord and animosity in the final three-and-one-quarter years of the Obama presidency. That he has alienated Republicans doesn't seem to trouble Mr. Obama.
"He's been a terrible president, just awful," Mr. McConnell told me. The McConnell agenda consists of stopping the president from raising taxes and boosting spending. And the focus on ObamaCare will continue. "The ObamaCare fight is not over," Mr. McConnell says. "This is the gift that keeps on giving."
Mr. Boehner has vowed to stay away from efforts to come to terms with the president on deficit reduction. Mr. Obama says he is willing to curb spending by reforming entitlements, but Republicans no longer believe him. They've given up on the possibility of a grand bargain.
Today the buzz in media circles in Washington is that the shutdown is a defining moment for Mr. Boehner. It may well be. But it's also a critical test of Mr. Obama's leadership. And by declining to lead, so far, he has failed that test.
Mr. Barnes, executive editor of the Weekly Standard, is a Fox News commentator.
A version of this article appeared October 2, 2013, on page A13 in the U.S. edition of The Wall Street Journal, with the headline: The President's Shutdown.

White House's Hard Line on Shutdown, Debt Ceiling Has Risks Attached

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European Pressphoto Agency
President Obama, speaking Thursday in Rockville, Md., ruled out any negotiations over the debt ceiling.
President Barack Obama is sticking to his stance that he won't negotiate with Republicans over the government shutdown or the higher-stakes fight over the federal debt ceiling.
The question, for Republicans and White House allies alike: How long will that resolve last?
Mr. Obama spoke Thursday at a construction company just outside Washington and held fast to his view that Republicans must not attach conditions to bills that underpin the functioning of government.
"There is one way out," he said: Republicans must relent and reopen the government.
Alice Rivlin, who was the Office of Management and Budget Director during the 1995 government shutdown, joins the News Hub to explain why this one is different – and more dangerous – than the last. Photo: AP
The White House has insisted it won’t negotiate on the debt ceiling, and there is tons of bad blood with the GOP, but it may be forced to do a deal nonetheless. Will there be a breakthrough? Can Democrats stay united? WSJ’s Carol E. Lee and Patrick O’Connor explain.
White House officials believe they have the upper hand, citing evidence that some Republicans are buckling under public pressure. Mr. Obama invited the four congressional leaders to the Oval Office Wednesday, and despite the show of engagement made no concessions, according to people familiar with the meeting.
House Speaker John Boehner (R., Ohio) left the White House and said Mr. Obama "reiterated one more time tonight that he will not negotiate."
Terry Holt, a longtime Republican strategist, said Mr. Obama's strategy rests on a cold-eyed calculation that Republicans are the ones with the most to lose. "As long as the president thinks his poll numbers are going to be good, I don't expect the government to reopen," he said.
Said a senior administration official: "We are winning...It doesn't really matter to us" how long the shutdown lasts "because what matters is the end result."
White House allies, however, say a long shutdown could make the White House's position less tenable. Mr. Obama is the most visible symbol of the U.S. government, they say, and will inevitably share in the blame as hardships mount and people weary of the infighting.
Already, the shutdown has produced images of inconvenience, lost pay, and disruptions in wedding and vacation plans. The Republican National Committee has offered to cover the cost of keeping open the World War II memorial for the next month after a group of veterans toured the site even though it was closed due to the shutdown.
"To the extent that any blame washes onto the Democrats and the president, it's going to be from the sense that this town is just completely dysfunctional and it's everybody's fault," said Matt Bennett, senior vice president of Third Way, a center-left think tank.
Brendan Buck, a spokesman for Mr. Boehner, said: "Ultimately, politics in Washington is a reflection of the president's leadership. People expect their president to be the grown-up in the room, and he's not even in the room."
Mr. Obama said Thursday people should resist the impulse to blame both sides equally.
A new CBS News poll showed 44% blame congressional Republicans for the shutdown; with 35% blaming Mr. Obama and Democratic lawmakers. Every day, White House officials tweet fresh reports of new GOP House members who are breaking with their leadership and calling for the government to reopen.
Another risk for Mr. Obama is that people may not sympathize with his refusal to negotiate over the debt ceiling. The Treasury Department has said that no later than Oct. 17 it will only have $30 billion in cash—a sum that will be exhausted in one or two weeks, according to the Congressional Budget Office. After that point, Treasury is expected to start falling behind on its bills.
Again, Mr. Obama has vowed not to negotiate, saying the consequences of default would be so severe the matter can't be held hostage to political negotiations. "There will be no negotiations over this," he said Thursday.
Hoping to drive home that point, Mr. Obama and his White House team have been sounding alarms, warning there are no guarantees that lawmakers will raise the debt ceiling and avoid default. Mr. Obama has been trying to enlist outside allies with ties to Republicans. He met with top CEOs this week to discuss the shutdown and the need for Congress to lift the debt ceiling, and he plans more outreach with other business leaders and various public officials.
Shaping the White House's hard line are bitter lessons learned from a standoff in 2011 over the debt ceiling, which resulted in a last-minute budget deal. People close to the president said the White House was too flexible in its dealings with Republicans during that episode.
"Looking back on it, we probably did too much accommodating to them," said David Plouffe, a senior White House adviser during the 2011 fight. "The only way this is going to be resolved, both the shutdown and the next round, the debt ceiling, is going to be [Republicans] relenting."
—Colleen McCain Nelson contributed to this article. Write to Carol E. Lee at carol.lee@wsj.com and Peter Nicholas at peter.nicholas@wsj.com

Niall Ferguson: The Shutdown Is a Sideshow. Debt Is the Threat An entitlement-driven disaster looms for America, yet Washington persists with its game of Russian roulette.

    By
  • NIALL FERGUSON
In the words of a veteran investor, watching the U.S. bond market today is like sitting in a packed theater and smelling smoke. You look around for signs of other nervous sniffers. But everyone else seems oblivious.
Yes, the federal government shut down this week. Yes, we are just two weeks away from the point when the Treasury secretary says he will run out of cash if the debt ceiling isn't raised. Yes, bond king Bill Gross has been on TV warning that a default by the government would be "catastrophic." Yet the yield on a 10-year Treasury note has fallen slightly over the past month (though short-term T-bill rates ticked up this week).
Part of the reason people aren't rushing for the exits is that the comedy they are watching is so horribly fascinating. In his vain attempt to stop the Senate striking out the defunding of ObamaCare from the last version of the continuing resolution, freshman Sen. Ted Cruz managed to quote Doctor Seuss while re-enacting a scene from the classic movie "Mr. Smith Goes to Washington."
Meanwhile, President Obama has become the Hamlet of the West Wing: One minute he's for bombing Syria, the next he's not; one minute Larry Summers will succeed Ben Bernanke as chairman of the Federal Reserve, the next he won't; one minute the president is jetting off to Asia, the next he's not. To be in charge, or not to be in charge: that is indeed the question.
© Images.com/Corbis
According to conventional wisdom, the key to what is going on is a Republican Party increasingly at the mercy of the tea party. I agree that it was politically inept to seek to block ObamaCare by these means. This is not the way to win back the White House and Senate. But responsibility also lies with the president, who has consistently failed to understand that a key function of the head of the executive branch is to twist the arms of legislators on both sides. It was not the tea party that shot down Mr. Summers's nomination as Fed chairman; it was Democrats like Sen. Elizabeth Warren, the new face of the American left.
Yet, entertaining as all this political drama may seem, the theater itself is indeed burning. For the fiscal position of the federal government is in fact much worse today than is commonly realized. As anyone can see who reads the most recent long-term budget outlook—published last month by the Congressional Budget Office, and almost entirely ignored by the media—the question is not if the United States will default but when and on which of its rapidly spiraling liabilities.
True, the federal deficit has fallen to about 4% of GDP this year from its 10% peak in 2009. The bad news is that, even as discretionary expenditure has been slashed, spending on entitlements has continued to rise—and will rise inexorably in the coming years, driving the deficit back up above 6% by 2038.
A very striking feature of the latest CBO report is how much worse it is than last year's. A year ago, the CBO's extended baseline series for the federal debt in public hands projected a figure of 52% of GDP by 2038. That figure has very nearly doubled to 100%. A year ago the debt was supposed to glide down to zero by the 2070s. This year's long-run projection for 2076 is above 200%. In this devastating reassessment, a crucial role is played here by the more realistic growth assumptions used this year.
As the CBO noted last month in its 2013 "Long-Term Budget Outlook," echoing the work of Harvard economists Carmen Reinhart and Ken Rogoff: "The increase in debt relative to the size of the economy, combined with an increase in marginal tax rates (the rates that would apply to an additional dollar of income), would reduce output and raise interest rates relative to the benchmark economic projections that CBO used in producing the extended baseline. Those economic differences would lead to lower federal revenues and higher interest payments. . . .
"At some point, investors would begin to doubt the government's willingness or ability to pay U.S. debt obligations, making it more difficult or more expensive for the government to borrow money. Moreover, even before that point was reached, the high and rising amount of debt that CBO projects under the extended baseline would have significant negative consequences for both the economy and the federal budget."
Just how negative becomes clear when one considers the full range of scenarios offered by CBO for the period from now until 2038. Only in three of 13 scenarios—two of which imagine politically highly unlikely spending cuts or tax hikes—does the debt shrink from its current level of 73% of GDP. In all the others it increases to between 77% and 190% of GDP. It should be noted that this last figure can reasonably be considered among the more likely of the scenarios, since it combines the alternative fiscal scenario, in which politicians in Washington behave as they have done in the past, raising spending more than taxation.
Only a fantasist can seriously believe "this is not a crisis." The fiscal arithmetic of excessive federal borrowing is nasty even when relatively optimistic assumptions are made about growth and interest rates. Currently, net interest payments on the federal debt are around 8% of revenues. But under the CBO's extended baseline scenario, that share could rise to 20% by 2026, 30% by 2049, and 40% by 2072. By 2088, the last date for which the CBO now offers projections, interest payments would—absent any changes in current policy—absorb just under half of all tax revenues. That is another way of saying that policy is unsustainable.
The question is what on earth can be done to prevent the debt explosion. The CBO has a clear answer: "[B]ringing debt back down to 39 percent of GDP in 2038—as it was at the end of 2008—would require a combination of increases in revenues and cuts in noninterest spending (relative to current law) totaling 2 percent of GDP for the next 25 years. . . .
"If those changes came entirely from revenues, they would represent an increase of 11 percent relative to the amount of revenues projected for the 2014-2038 period; if the changes came entirely from spending, they would represent a cut of 10½ percent in noninterest spending from the amount projected for that period."
Anyone watching this week's political shenanigans in Washington will grasp at once the tiny probability of tax hikes or spending cuts on this scale.
It should now be clear that what we are watching in Washington is not a comedy but a game of Russian roulette with the federal government's creditworthiness. So long as the Federal Reserve continues with the policies of near-zero interest rates and quantitative easing, the gun will likely continue to fire blanks. After all, Fed purchases of Treasurys, if continued at their current level until the end of the year, will account for three quarters of new government borrowing.
But the mere prospect of a taper, beginning in late May, was already enough to raise long-term interest rates by more than 100 basis points. Fact (according to data in the latest "Economic Report of the President"): More than half the federal debt in public hands is held by foreigners. Fact: Just under a third of the debt has a maturity of less than a year.
Hey, does anyone else smell something burning?
Mr. Ferguson's latest book is "The Great Degeneration: How Institutions Decay and Economies Die" (Penguin Press, 2013).

Troops Forage for Food While Golfers Play On in Shutdown


Troops Forage for Food While Golfers Play On in Shutdown

Grocery stores on Army bases in the U.S. are closed. The golf course at Andrews Air Force base is open.
All 128 employees of the Saint Lawrence Seaway Development Corp. are working, while 3,000 safety inspectors employed by the Federal Aviation Administration are off the job.
Pedestrians walk past a barricade preventing them from entering the World War II Memorial in Washington, on Oct. 2, 2013. Photographer: Susan Walsh/AP Photo
Oct. 3 (Bloomberg) -- Bart Chilton, a commissioner at the U.S. Commodity Futures Trading Commission, talks about the partial government shutdown and its impact on markets and the economy. Chilton, speaking with Tom Keene, Sara Eisen and Scarlet Fu on Bloomberg Television's "Surveillance," also discusses financial regulations. Kamran Ansari, a senior associate at Greycroft Partners, also speaks. (Source: Bloomberg)
The Food and Drug Administration is reviewing new pharmaceuticals. The National Institutes of Health is turning away new patients for clinical trials.
The seeming randomness of the U.S. government’s first shutdown in 17 years can be explained in part by anomalies in the spending Congress does and doesn’t control. Activities funded by fees from drug, financial-services and other companies are insulated from year-to-year budget dysfunction. The ones that get a budget from Congress get hit.
“What’s really happening in America is that the appropriations process has completely failed,” said Elaine Kamarck, a senior fellow in governance at the Brookings Institution in Washington who worked in the White House during the last shutdown in 1995-96.
This isn’t government according to U.S. civics textbooks. Government is supposed to collect taxes, the president is supposed to propose each year how to spend the money, and Congress has the final say with the constitutional power of the purse.

Passports, Patents

Instead, Congress has had to resort to a so-called continuing resolution -- a catchall bill to keep the government operating on life support while negotiations continue -- in each of the past 16 years.
There have been 93 continuing resolutions passed since 1998, covering operations for as little as 21 days in 1999 to the full years of 2007 and 2011, according to the Congressional Research Service.
Since the standoff between President Bill Clinton and Congress that last shut down most of the government, funding of more functions has shifted to means outside the appropriations process, Kamarck said.
Passport applications are paid for by fees. The FDA is funded through assessments on companies like Bristol-Myers Squibb Co. (BMY) and Pfizer Inc. (PFE) The U.S. Patent and Trademark Office, which has said it can operate for at least four weeks, has been funded by user fees since 1993. The Federal Highway Administration is funded by taxes on gasoline and diesel fuel, not income taxes, so its 2,914 employees are on the job.

Wildlife Refuges

Other agencies can keep operating with multiyear funding or reserves. Visitor centers and public facilities at U.S. Fish and Wildlife Service refuges are closed, while construction and land acquisition continues because those activities have long-term funding. The Saint Lawrence Seaway agency is using a revolving account containing $12.8 million to stay fully operational.
Closures can seem arbitrary as agencies define what’s necessary for life, health, safety and safeguarding of property.
While many functions at Army bases continue, commissaries in the U.S. are closed, forcing troops and their families to shop at local stores that cost about 30 percent more, Lieutenant General Raymond Mason, the service’s deputy chief of staff for logistics, said yesterday at a House hearing.
“For the soldiers and their families, that’s very difficult,” Mason said.
The Andrews Air Force Base golf course is funded through user fees and that’s why it remains open, said Air Force Captain Lindy Singleton, chief of public affairs for the 11th Wing at Andrews.

JetBlue’s Plane

In Rock Creek Park, the urban forest in Washington where Theodore Roosevelt used to ride his horse, cars made their morning commute along a well-traveled parkway while hikers were prohibited to walk.
Numbers of furloughed employees vary dramatically from agency to agency. The Agriculture Department is furloughing 84 percent of its staff, while the Veterans Affairs Department is keeping 96 percent of its workers on the job.
In the Bureau of Indian Affairs, 38 percent of the 4,113 employees are still on the job, including those that provide water, fight fires or are building roads or bridges. Suspended activities include payments of financial assistance to needy individuals, and to vendors providing foster care.
The shutdown of FAA aircraft-certification activities prevented JetBlue Airways Corp. (JBLU) from taking delivery yesterday of its first Airbus A321 jetliner, the airline said. The plane is stranded at a factory in Germany.
The U.S. Census Bureau has kept nine employees in Indiana on the job for three days to print furlough notices and send them out.
“The reason you’re seeing such irregular things is because everyone knows it’s going to have to end,” Kamarck said. “They also know that when it ends the government is going to pay its bills, one way or the other.”
To contact the reporters on this story: Jeff Plungis in Washington at jplungis@bloomberg.net; Mark Drajem in Washington at mdrajem@bloomberg.net; David Lerman in Washington at dlerman1@bloomberg.net
To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

Journalists Complain: Obama Administration 'Control Freaks'

Journalists Complain: Obama Administration 'Control Freaks'

Sunday, 06 Oct 2013 10:01 AM
By Elliott Jager
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The work of journalists in the United States has become more difficult because of the Obama administration's aggressive anti-leak crusade that has "chilled certain kinds of reporting," Joel Simon, director of the Committee to Protect Journalists says.

Government tactics are increasingly impeding journalists' work and if unchecked could endanger our democracy, Simon warned.

Though it has been in business for decades, the Committee to Protect Journalists will on October 10 issue its first comprehensive report ever – "The Obama Administration and the Press" – focusing on press freedom conditions inside the United States.

Leonard Downie, a former executive editor of The Washington Post, previewed the Committee to Protect Journalists Report in a Post opinion article on Friday.
Downie quotes David E. Sanger of the New York Times Washington bureau as saying, "This is most closed, control-freak administration I've ever covered."
"Will Obama recognize that all this threatens his often-stated but unfulfilled goal of making government more transparent and accountable? None of the Washington news media veterans I talked to were optimistic," Downie concludes.
New York Times executive editor Jill Abramson told a New York audience Saturday: "It's just a fact that the Obama administration has initiated seven criminal leak investigations which is more than double the number of these investigations in all of the previous administrations combined, so that's a large increase," she said.

"Having been Washington bureau chief, having lots of detailed conversations with our reporters who cover national security there is no argument whether these investigations have a chilling effect. It's made the normal discourse between journalists and government officials very tamped down and uncomfortable," Politico quoted her as saying.
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Read Latest Breaking News from Newsmax.com http://www.newsmax.com/Newsfront/journalists-leaks-obama-control/2013/10/06/id/529502#ixzz2gycEf0HE
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Wall Street Aristocracy Got $1.2 Trillion in Secret Loans


Wall Street Aristocracy Got $1.2 Trillion in Secret Loans

Citigroup Inc. (C) and Bank of America Corp. (BAC) were the reigning champions of finance in 2006 as home prices peaked, leading the 10 biggest U.S. banks and brokerage firms to their best year ever with $104 billion of profits.
By 2008, the housing market’s collapse forced those companies to take more than six times as much, $669 billion, in emergency loans from the U.S. Federal Reserve. The loans dwarfed the $160 billion in public bailouts the top 10 got from the U.S. Treasury, yet until now the full amounts have remained secret.
Chief executive officers from eight of the largest U.S. banks receiving government aid testify at a House Financial Services Committee hearing in Washington, D.C on Feb. 11, 2009. Photographer: Brendan Smialowski/Bloomberg
Aug. 22 (Bloomberg) -- The Federal Reserve's unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money. The largest borrower, Morgan Stanley, got as much as $107.3 billion, while Citigroup Inc. took $99.5 billion and Bank of America Corp. $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress. Erik Schatzker and Sara Eisen report on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Aug. 22 (Bloomberg) -- Robert Eisenbeis, chief monetary economist at Cumberland Advisors Inc., talks about $1.2 trillion of public money the U.S. Federal Reserve secretly loaned to Wall Street banks and other companies. Eisenbeis, speaking with Mark Crumpton on Bloomberg Television's "Bottom Line," also discusses the outlook for Fed monetary policy and the U.S. economy. (Source: Bloomberg)
Aug. 21 (Bloomberg) -- Robert E. Litan, a former Justice Department official who in the 1990s served on a commission probing the causes of the savings and loan crisis, now vice president at the Kansas City, Missouri-based Kauffman Foundation, Richard Herring, a finance professor at the University of Pennsylvania, Roger Lister, a former Fed economist who’s now head of financial-institutions coverage at credit-rating firm DBRS Inc., and Kenneth Rogoff, a former chief economist at the International Monetary Fund and now an economics professor at Harvard University, talk about the U.S. government's $1.2 trillion bailout of the banking system and the outlook for regulatory overhaul of the industry. (Source: Bloomberg)
Aug. 22 (Bloomberg) -- Neil Barofsky, former special inspector general for the Troubled Asset Relief Program and a Bloomberg Television contributing editor, talks about the Federal Reserve's emergency loans during the financial crisis. Fed Chairman Ben S. Bernanke’s effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress. Barofsky speaks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Aug. 22 (Bloomberg) -- Charles Peabody, an analyst at Portales Partners LLC, and Bloomberg reporter Bradley Keoun discuss the Federal Reserve's emergency lending programs and the capital position of U.S. banks. They speak with Erik Schatzker and Michael McKee on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
To view the Bloomberg interactive graphic of the Fed's financial bailout, click on the link in the seventh paragraph of the story. Source: Bloomberg
Citigroup Inc. and Bank of America Corp. were the reigning champions of finance in 2006 as home prices peaked, leading the 10 biggest U.S. banks and brokerage firms to their best year ever with $104 billion of profits. Source: Bloomberg
Lloyd Blankfein, CEO of Goldman Sachs; Jamie Dimon, CEO of JPMorgan Chase and Co.; Robert P.Kelly, CEO of the Bank of New York; Ken Lewis, CEO of the Bank of America; Ronald E. Logue, CEO of State Street; John Mack, CEO of Morgan Stanley; Vikram Pandit, CEO of Citigroup; and John Stumpf, CEO of Wells Fargo, testify during the House Financial Services oversight hearing of the Troubled Assets Relief Program (TARP). Photographer: Scott J. Ferrell/Congressional Quarterly/Getty Images
Two weeks after Lehman Brothers Holdings Inc.'s bankruptcy triggered a global credit crisis, Morgan Stanley countered concerns that it might be next to go by announcing it had 'strong capital and liquidity positions.' Photographer: Jeremy Bales/Bloomberg
A Wall Street sign stands outside the New York Stock Exchange in New York, U.S. The loans dwarfed the $160 billion in public bailouts the top 10 got from the U.S. Treasury, yet until now the full amounts have remained secret. Photographer: JB Reed/Bloomberg
Citigroup Inc., along with Morgan Stanley and Citigroup Inc., were the biggest borrowers under seven U.S. Federal Reserve emergency-lending programs. Photographer: Robert Caplin/Bloomberg
The Federal Reserve provided as much as $1.2 tillion in public money to banks and other companies from August 2007 through April 2010 to head off a depression. Source: Bloomberg
Morgan Stanley, along with Citigroup Inc., and Bank of America Corp., were the biggest borrowers under seven Fed emergency-lending programs. The three banks' combined $298.2 billion in hidden Fed loans was triple what they received in publicly disclosed bailouts from the U.S. Treasury. Photographer: Peter Foley/Bloomberg
Bank of America Corp., along with Morgan Stanley and Citigroup Inc. was one of the biggest borrowers under the U.S. Federal Reserve's emergency-lending programs. The three banks' combined $298.2 billion in hidden Fed loans was triple what they received in publicly disclosed bailouts from the U.S. Treasury. Photographer: Jeremy Bales/Bloomberg
The Royal Bank of Scotland took $84.5 billion in loans from the U.S. Federal Reserve's emergency-lending programs. Photographer: Simon Dawson/Bloomberg
UBS AG, Switzerland's biggest bank, got $77.2 billion in loans from the U.S. Federal Reserve's emergency-lending programs. Photographer: Gianluca Colla/Bloomberg
Goldman Sachs Group Inc., the fifth-biggest U.S. bank by assets. Photographer: Scott Eells/Bloomberg
U.S. Federal Reserve borrowings by Societe Generale SA, France's second-biggest bank, peaked at $17.4 billion in May 2008, four months after the Paris-based lender announced a record 4.9 billion-euro ($7.2 billion) loss on unauthorizedstock-index futures bets by former trader Jerome Kerviel. Photographer: Judith White/Bloomberg
U.S. Federal Reserve borrowings by Societe Generale SA, France's second-biggest bank, peaked at $17.4 billion in May 2008, four months after the Paris-based lender announced a record 4.9 billion-euro ($7.2 billion) loss on unauthorized stock-index futures bets by former trader Jerome Kerviel. Photographer: Antoine Antoniol/Bloomberg
Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley (MS), got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.
“These are all whopping numbers,” said Robert Litan, a former Justice Department official who in the 1990s served on a commission probing the causes of the savings and loan crisis. “You’re talking about the aristocracy of American finance going down the tubes without the federal money.”
(View the Bloomberg interactive graphic to chart the Fed’s financial bailout.)
Foreign Borrowers
It wasn’t just American finance. Almost half of the Fed’s top 30 borrowers, measured by peak balances, were European firms. They included Edinburgh-based Royal Bank of Scotland Plc, which took $84.5 billion, the most of any non-U.S. lender, and Zurich-based UBS AG (UBSN), which got $77.2 billion. Germany’s Hypo Real Estate Holding AG borrowed $28.7 billion, an average of $21 million for each of its 1,366 employees.
The largest borrowers also included Dexia SA (DEXB), Belgium’s biggest bank by assets, and Societe Generale SA, based in Paris, whose bond-insurance prices have surged in the past month as investors speculated that the spreading sovereign debt crisis in Europe might increase their chances of default.
The $1.2 trillion peak on Dec. 5, 2008 -- the combined outstanding balance under the seven programs tallied by Bloomberg -- was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg.
Peak Balance
The balance was more than 25 times the Fed’s pre-crisis lending peak of $46 billion on Sept. 12, 2001, the day after terrorists attacked the World Trade Center in New York and the Pentagon. Denominated in $1 bills, the $1.2 trillion would fill 539 Olympic-size swimming pools.
The Fed has said it had “no credit losses” on any of the emergency programs, and a report by Federal Reserve Bank of New York staffers in February said the central bank netted $13 billion in interest and fee income from the programs from August 2007 through December 2009.
“We designed our broad-based emergency programs to both effectively stem the crisis and minimize the financial risks to the U.S. taxpayer,” said James Clouse, deputy director of the Fed’s division of monetary affairs in Washington. “Nearly all of our emergency-lending programs have been closed. We have incurred no losses and expect no losses.”
While the 18-month U.S. recession that ended in June 2009 after a 5.1 percent contraction in gross domestic product was nowhere near the four-year, 27 percent decline between August 1929 and March 1933, banks and the economy remain stressed.
Odds of Recession
The odds of another recession have climbed during the past six months, according to five of nine economists on the Business Cycle Dating Committee of the National Bureau of Economic Research, an academic panel that dates recessions.
Bank of America’s bond-insurance prices last week surged to a rate of $342,040 a year for coverage on $10 million of debt, above where Lehman Brothers Holdings Inc. (LEHMQ)’s bond insurance was priced at the start of the week before the firm collapsed. Citigroup’s shares are trading below the split-adjusted price of $28 that they hit on the day the bank’s Fed loans peaked in January 2009. The U.S. unemployment rate was at 9.1 percent in July, compared with 4.7 percent in November 2007, before the recession began.
Homeowners are more than 30 days past due on their mortgage payments on 4.38 million properties in the U.S., and 2.16 million more properties are in foreclosure, representing a combined $1.27 trillion of unpaid principal, estimates Jacksonville, Florida-based Lender Processing Services Inc.
Liquidity Requirements
“Why in hell does the Federal Reserve seem to be able to find the way to help these entities that are gigantic?” U.S. Representative Walter B. Jones, a Republican from North Carolina, said at a June 1 congressional hearing in Washington on Fed lending disclosure. “They get help when the average businessperson down in eastern North Carolina, and probably across America, they can’t even go to a bank they’ve been banking with for 15 or 20 years and get a loan.”
The sheer size of the Fed loans bolsters the case for minimum liquidity requirements that global regulators last year agreed to impose on banks for the first time, said Litan, now a vice president at the Kansas City, Missouri-based Kauffman Foundation, which supports entrepreneurship research. Liquidity refers to the daily funds a bank needs to operate, including cash to cover depositor withdrawals.
The rules, which mandate that banks keep enough cash and easily liquidated assets on hand to survive a 30-day crisis, don’t take effect until 2015. Another proposed requirement for lenders to keep “stable funding” for a one-year horizon was postponed until at least 2018 after banks showed they’d have to raise as much as $6 trillion in new long-term debt to comply.
‘Stark Illustration’
Regulators are “not going to go far enough to prevent this from happening again,” said Kenneth Rogoff, a former chief economist at the International Monetary Fund and now an economics professor at Harvard University.
Reforms undertaken since the crisis might not insulate U.S. markets and financial institutions from the sovereign budget and debt crises facing Greece, Ireland and Portugal, according to the U.S. Financial Stability Oversight Council, a 10-member body created by the Dodd-Frank Act and led by Treasury Secretary Timothy Geithner.
“The recent financial crisis provides a stark illustration of how quickly confidence can erode and financial contagion can spread,” the council said in its July 26 report.
21,000 Transactions
Any new rescues by the U.S. central bank would be governed by transparency laws adopted in 2010 that require the Fed to disclose borrowers after two years.
Fed officials argued for more than two years that releasing the identities of borrowers and the terms of their loans would stigmatize banks, damaging stock prices or leading to depositor runs. A group of the biggest commercial banks last year asked the U.S. Supreme Court to keep at least some Fed borrowings secret. In March, the high court declined to hear that appeal, and the central bank made an unprecedented release of records.
Data gleaned from 29,346 pages of documents obtained under the Freedom of Information Act and from other Fed databases of more than 21,000 transactions make clear for the first time how deeply the world’s largest banks depended on the U.S. central bank to stave off cash shortfalls. Even as the firms asserted in news releases or earnings calls that they had ample cash, they drew Fed funding in secret, avoiding the stigma of weakness.
Morgan Stanley Borrowing
Two weeks after Lehman’s bankruptcy in September 2008, Morgan Stanley countered concerns that it might be next to go by announcing it had “strong capital and liquidity positions.” The statement, in a Sept. 29, 2008, press release about a $9 billion investment from Tokyo-based Mitsubishi UFJ Financial Group Inc., said nothing about Morgan Stanley’s Fed loans.
That was the same day as the firm’s $107.3 billion peak in borrowing from the central bank, which was the source of almost all of Morgan Stanley’s available cash, according to the lending data and documents released more than two years later by the Financial Crisis Inquiry Commission. The amount was almost three times the company’s total profits over the past decade, data compiled by Bloomberg show.
Mark Lake, a spokesman for New York-based Morgan Stanley, said the crisis caused the industry to “fundamentally re- evaluate” the way it manages its cash.
“We have taken the lessons we learned from that period and applied them to our liquidity-management program to protect both our franchise and our clients going forward,” Lake said. He declined to say what changes the bank had made.
Acceptable Collateral
In most cases, the Fed demanded collateral for its loans -- Treasuries or corporate bonds and mortgage bonds that could be seized and sold if the money wasn’t repaid. That meant the central bank’s main risk was that collateral pledged by banks that collapsed would be worth less than the amount borrowed.
As the crisis deepened, the Fed relaxed its standards for acceptable collateral. Typically, the central bank accepts only bonds with the highest credit grades, such as U.S. Treasuries. By late 2008, it was accepting “junk” bonds, those rated below investment grade. It even took stocks, which are first to get wiped out in a liquidation.
Morgan Stanley borrowed $61.3 billion from one Fed program in September 2008, pledging a total of $66.5 billion of collateral, according to Fed documents. Securities pledged included $21.5 billion of stocks, $6.68 billion of bonds with a junk credit rating and $19.5 billion of assets with an “unknown rating,” according to the documents. About 25 percent of the collateral was foreign-denominated.
‘Willingness to Lend’
“What you’re looking at is a willingness to lend against just about anything,” said Robert Eisenbeis, a former research director at the Federal Reserve Bank of Atlanta and now chief monetary economist in Atlanta for Sarasota, Florida-based Cumberland Advisors Inc.
The lack of private-market alternatives for lending shows how skeptical trading partners and depositors were about the value of the banks’ capital and collateral, Eisenbeis said.
“The markets were just plain shut,” said Tanya Azarchs, former head of bank research at Standard & Poor’s and now an independent consultant in Briarcliff Manor, New York. “If you needed liquidity, there was only one place to go.”
Even banks that survived the crisis without government capital injections tapped the Fed through programs that promised confidentiality. London-based Barclays Plc (BARC) borrowed $64.9 billion and Frankfurt-based Deutsche Bank AG (DBK) got $66 billion. Sarah MacDonald, a spokeswoman for Barclays, and John Gallagher, a spokesman for Deutsche Bank, declined to comment.
Below-Market Rates
While the Fed’s last-resort lending programs generally charge above-market interest rates to deter routine borrowing, that practice sometimes flipped during the crisis. On Oct. 20, 2008, for example, the central bank agreed to make $113.3 billion of 28-day loans through its Term Auction Facility at a rate of 1.1 percent, according to a press release at the time.
The rate was less than a third of the 3.8 percent that banks were charging each other to make one-month loans on that day. Bank of America and Wachovia Corp. each got $15 billion of the 1.1 percent TAF loans, followed by Royal Bank of Scotland’s RBS Citizens NA unit with $10 billion, Fed data show.
JPMorgan Chase & Co. (JPM), the New York-based lender that touted its “fortress balance sheet” at least 16 times in press releases and conference calls from October 2007 through February 2010, took as much as $48 billion in February 2009 from TAF. The facility, set up in December 2007, was a temporary alternative to the discount window, the central bank’s 97-year-old primary lending program to help banks in a cash squeeze.
‘Larger Than TARP’
Goldman Sachs Group Inc. (GS), which in 2007 was the most profitable securities firm in Wall Street history, borrowed $69 billion from the Fed on Dec. 31, 2008. Among the programs New York-based Goldman Sachs tapped after the Lehman bankruptcy was the Primary Dealer Credit Facility, or PDCF, designed to lend money to brokerage firms ineligible for the Fed’s bank-lending programs.
Michael Duvally, a spokesman for Goldman Sachs, declined to comment.
The Fed’s liquidity lifelines may increase the chances that banks engage in excessive risk-taking with borrowed money, Rogoff said. Such a phenomenon, known as moral hazard, occurs if banks assume the Fed will be there when they need it, he said. The size of bank borrowings “certainly shows the Fed bailout was in many ways much larger than TARP,” Rogoff said.
TARP is the Treasury Department’s Troubled Asset Relief Program, a $700 billion bank-bailout fund that provided capital injections of $45 billion each to Citigroup and Bank of America, and $10 billion to Morgan Stanley. Because most of the Treasury’s investments were made in the form of preferred stock, they were considered riskier than the Fed’s loans, a type of senior debt.
Dodd-Frank Requirement
In December, in response to the Dodd-Frank Act, the Fed released 18 databases detailing its temporary emergency-lending programs.
Congress required the disclosure after the Fed rejected requests in 2008 from the late Bloomberg News reporter Mark Pittman and other media companies that sought details of its loans under the Freedom of Information Act. After fighting to keep the data secret, the central bank released unprecedented information about its discount window and other programs under court order in March 2011.
Bloomberg News combined Fed databases made available in December and July with the discount-window records released in March to produce daily totals for banks across all the programs, including the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, Commercial Paper Funding Facility, discount window, PDCF, TAF, Term Securities Lending Facility and single-tranche open market operations. The programs supplied loans from August 2007 through April 2010.
Rolling Crisis
The result is a timeline illustrating how the credit crisis rolled from one bank to another as financial contagion spread.
Fed borrowings by Societe Generale (GLE), France’s second-biggest bank, peaked at $17.4 billion in May 2008, four months after the Paris-based lender announced a record 4.9 billion-euro ($7.2 billion) loss on unauthorized stock-index futures bets by former trader Jerome Kerviel.
Morgan Stanley’s top borrowing came four months later, after Lehman’s bankruptcy. Citigroup crested in January 2009, as did 43 other banks, the largest number of peak borrowings for any month during the crisis. Bank of America’s heaviest borrowings came two months after that.
Sixteen banks, including Plano, Texas-based Beal Financial Corp. and Jacksonville, Florida-based EverBank Financial Corp., didn’t hit their peaks until February or March 2010.
Using Subsidiaries
“At no point was there a material risk to the Fed or the taxpayer, as the loan required collateralization,” said Reshma Fernandes, a spokeswoman for EverBank, which borrowed as much as $250 million.
Banks maximized their borrowings by using subsidiaries to tap Fed programs at the same time. In March 2009, Charlotte, North Carolina-based Bank of America drew $78 billion from one facility through two banking units and $11.8 billion more from two other programs through its broker-dealer, Bank of America Securities LLC.
Banks also shifted balances among Fed programs. Many preferred the TAF because it carried less of the stigma associated with the discount window, often seen as the last resort for lenders in distress, according to a January 2011 paper by researchers at the New York Fed.
After the Lehman bankruptcy, hedge funds began pulling their cash out of Morgan Stanley, fearing it might be the next to collapse, the Financial Crisis Inquiry Commission said in a January report, citing interviews with former Chief Executive Officer John Mack and then-Treasurer David Wong.
Borrowings Surge
Morgan Stanley’s borrowings from the PDCF surged to $61.3 billion on Sept. 29 from zero on Sept. 14. At the same time, its loans from the Term Securities Lending Facility, or TSLF, rose to $36 billion from $3.5 billion. Morgan Stanley treasury reports released by the FCIC show the firm had $99.8 billion of liquidity on Sept. 29, a figure that included Fed borrowings.
“The cash flow was all drying up,” said Roger Lister, a former Fed economist who’s now head of financial-institutions coverage at credit-rating firm DBRS Inc. in New York. “Did they have enough resources to cope with it? The answer would be yes, but they needed the Fed.”
While Morgan Stanley’s Fed demands were the most acute, Citigroup was the most chronic borrower among the largest U.S. banks. The New York-based company borrowed $10 million from the TAF on the program’s first day in December 2007 and had more than $25 billion outstanding under all programs by May 2008, according to Bloomberg data.
Tapping Six Programs
By Nov. 21, when Citigroup began talks with the government to get a $20 billion capital injection on top of the $25 billion received a month earlier, its Fed borrowings had doubled to about $50 billion.
Over the next two months the amount almost doubled again. On Jan. 20, as the stock sank below $3 for the first time in 16 years amid investor concerns that the lender’s capital cushion might be inadequate, Citigroup was tapping six Fed programs at once. Its total borrowings amounted to more than twice the federal Department of Education’s 2011 budget.
Citigroup was in debt to the Fed on seven out of every 10 days from August 2007 through April 2010, the most frequent U.S. borrower among the 100 biggest publicly traded firms by pre- crisis market valuation. On average, the bank had a daily balance at the Fed of almost $20 billion.
‘Help Motivate Others’
“Citibank basically was sustained by the Fed for a very long time,” said Richard Herring, a finance professor at the University of Pennsylvania in Philadelphia who has studied financial crises.
Jon Diat, a Citigroup spokesman, said the bank made use of programs that “achieved the goal of instilling confidence in the markets.”
JPMorgan CEO Jamie Dimon said in a letter to shareholders last year that his bank avoided many government programs. It did use TAF, Dimon said in the letter, “but this was done at the request of the Federal Reserve to help motivate others to use the system.”
The bank, the second-largest in the U.S. by assets, first tapped the TAF in May 2008, six months after the program debuted, and then zeroed out its borrowings in September 2008. The next month, it started using TAF again.
On Feb. 26, 2009, more than a year after TAF’s creation, JPMorgan’s borrowings under the program climbed to $48 billion. On that day, the overall TAF balance for all banks hit its peak, $493.2 billion. Two weeks later, the figure began declining.
“Our prior comment is accurate,” said Howard Opinsky, a spokesman for JPMorgan.
‘The Cheapest Source’
Herring, the University of Pennsylvania professor, said some banks may have used the program to maximize profits by borrowing “from the cheapest source, because this was supposed to be secret and never revealed.”
Whether banks needed the Fed’s money for survival or used it because it offered advantageous rates, the central bank’s lender-of-last-resort role amounts to a free insurance policy for banks guaranteeing the arrival of funds in a disaster, Herring said.
An IMF report last October said regulators should consider charging banks for the right to access central bank funds.
“The extent of official intervention is clear evidence that systemic liquidity risks were under-recognized and mispriced by both the private and public sectors,” the IMF said in a separate report in April.
Access to Fed backup support “leads you to subject yourself to greater risks,” Herring said. “If it’s not there, you’re not going to take the risks that would put you in trouble and require you to have access to that kind of funding.”
To contact the reporters on this story: Bradley Keoun in New York at bkeoun@bloomberg.net; Phil Kuntz in New York at Pkuntz1@bloomberg.net.
To contact the editor responsible for this story: David Scheer in New York at dscheer@bloomberg.net.