"Evil is powerless if the good are unafraid" - Ronald Reagan

New York

Fatwa issued against Pakistan President Zardari for “flirtatious” behaviour toward Sarah

From CFP.

Among his other problems, a fatwa has now been issued against “flirtatious” Pakistan President Asif Ali Zardari.

“The leader of the infamous Lal Masjid in Lahore, Pakistan has issued a `fatwa’ against Pakistan President Asif Ali Zardari for publicly making indecent gestures towards the American Republican vice presidential candidate Sarah Palin.” (Watch), (The Times of India, Sept. 29, 2008).

During his first Western mission since his election, Zardari seems to have run afoul of the clerics, who have dubbed his act upon meeting vice presidential Sarah Palin as “un-Islamic”.

The Pakistani elections saw not only the decline of Musharraf's PML-Q party, but also Islamist parties. These two facts taken together can only mean Pakistanis were not only tired of Musharraf's dictatorial tendencies, but also extremists too. To put it simply, Pakistanis did not want a dictatorship, whether headed by Musharraf or the Islamists. They wanted a democracy and voted overwhelmingly for one.

A fatwa issued against President Zardari will only cause more Pakistanis to turn against Islamists, not to mention the full weight of the PPP controlled government too.

For a full read, click here.

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Pakistan engages the tribes in effort to fight the Taliban

From Bill Roggio at the Long War Journal.

As the Taliban and al Qaeda insurgency rages in northwestern Pakistan, the Pakistani government has stepped up its efforts to engage the local tribes to battle the extremists.

The effort to gain the support of the Pashtu tribes in northwestern Pakistan was highlighted when General Ashfaq Pervez Kiyani, the Chief of Staff of the Pakistani Army visited the Bajaur tribal agency, where a two-month old offensive against the Taliban is still underway.

Kiyani "expressed his satisfaction that local tribesmen have risen against miscreants and are fully supporting the Army," Geo TV reported. Miscreant is a term often used by Pakistanis to refer to foreign or al Qaeda fighters. "He reiterated that success in this operation was directly linked with popular support" in the tribal areas and the settled districts of the Northwest Frontier Province.

As usual, Mr. Roggio does an excellent job at detailing the issues with bringing the tribes on board to assist the military in routing the Taliban/Al Qaeda in Pakistan.

For a full read, click here.

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In life, or death, Baitullah's fight endures

From Syed Saleem Shahzad writing for the Asia Times Online.

As reports swirl about the possible death by illness of Pakistani Taliban leader Baitullah Mehsud, 34, the fact is that as long as he is alive, no matter how sick, he will remain an inspiration for regional jihadis; should he die, he will be replaced and the battle that he fights will continue undiminished.

Baitullah died from kidney problems and high blood pressure, Pakistan's GEO Television reported this week. This is disputed in militant and Western circles.

The ethnic Pashtun guerrilla commander from the South Waziristan tribal area rose to prominence after Taliban leader Nek Mohammed was killed in a US Predator drone attack in 2004. In December 2007, a Taliban shura, a 40-member council, chose Baitullah to unify its operations in Pakistan under a united front called the Tehrik-i-Taliban Pakistan, or Pakistan Taliban Movement, which is fighting Pakistani security forces in the tribal areas. The area also serves as a haven for militants active in the Taliban-led insurgency in Afghanistan.

Another interesting article by Mr. Shahzad on the tribal make up in the FATA region.

For a full read, click here.

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Iraq civilian, U.S. troop deaths fall in September

From Reuters via Yahoo.

The number of civilians killed in Iraq last month more than halved to 359 compared to a year ago, Iraqi government figures showed, and the number of U.S. troops killed in action also fell dramatically.

U.S. combat deaths fell to eight in September, down from 12 last month and vastly reduced from 43 in September last year, statistics from independent Web site http://icasualties.org/oif/ showed.

I found this article interesting for a few reasons.

First, 25 US Servicemen died in September 2008. However, only 8 were combat related. Seventeen were from non-combat related incidents. To put another way, two times as many deaths were from non-hostile incidents as were from hostile incidents.

Second, in September 2007, there was 45 deaths from hostile action (not the 43 sited above) which was almost two times as high as the non-hostile deaths.

Third, other than May 2003 and September 2008, the amount of hostile deaths has always been greater than the non-hostile deaths. These two months are the only two months where non-hostile deaths have been greater than hostile deaths.

Finally, the Reuters article notes civilian deaths for September 2008 were 359, down from September 2007 of 884. What the article does not state, but the IBC site does, is beginning December 2007, IBC started to use single source incidents as valid. Therefore, it is expected that the September 2008 number of 359 is high compared to the the same standard applied from September 2007 number. From IBC,

These single-sourced incidents comprise a small proportion of overall incidents and an even smaller proportion of deaths (since these incidents mainly involve smaller numbers killed - two, on average). Such small incidents are rarely misreported: inconsistent reporting mostly applies to very large incidents where the exact death toll is difficult to determine. Further, these single-source reports stem from the same reputable media and primary sources which provide most of IBC's fully-corroborated data, and many of them are subsequently corroborated through later-released official cumulative totals.

While I concur, to some extent, with the paragragh from IBC when it was written in 2007, I do not necessarily concur with that statement now. Many of the current deaths now involve "small numbers" compared to the spectacular and deadly attacks in 2007 in which scored died vice a relatively small number of small attacks in which an average of two died. While I have not correlated the numbers, I would suspect a majority of the attacks now involve "small numbers", possibly inflating the September 2008 numbers when compared to the same 2007 standard. In fact, the number of civilian casualties in September 2008 reported at icasualties.org was 268. But, it is also noteworthy that icasualties.org September 2007 number was also 752, about a 130 less than IBC.

It would be nice to compare apples to apple here vice possibly comparing apples to oranges to get true relative data.

However, it is noteworthly that combat related deaths are now in the single digits, at 8. This has only occurred in three months since OIF began May 2003, July 2008, and September 2008. May 2003 was before the insurgency started. It appears, at least from these numbers, July 2008 is possibly the month the insurgency ended. Just a thought.

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Control of Awakening Councils transferred to Iraqi government

From M & C.

Full administrative control of some 54,000 Awakening Councils members in Baghdad was transferred from US forces to the Iraqi Shiite-led government effective Wednesday the al-Arabiya news channel reported.

The transition of the Awakening Councils to be under the control of Iraq's government was inevitable and was initiated by Baghdad, which will take over the payment of their contracts, US forces Deputy Commanding General William Grimsley said in a statement.

The Awakening Councils - also know as Sons of Iraq - are some 99,000 Sunni tribe members, who, repulsed by al-Qaeda's killings of civilians, allied themselves with US forces. They crushed al-Qaeda militants and have succeeded in driving out a large number of militants since 2005.

Time will tell how well this transfer goes.

For a full read, click here.

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Pakistan names new intelligence chief in military reshuffle

From M & C.

Pakistan has appointed a new chief of the country's main spy agency Inter-Services Intelligence (ISI) in a major reshuffle of the senior military leadership.

Lieutenant General Ahmed Shuja Pasha was appointed ISI director general, according to an army statement issued late Tuesday. He will replace Lieutenant General Nadeem Taj, a loyalist of former president Pervez Musharraf, who resigned in August to avoid impeachment.

Army Chief General Ishfaq Parvez Kayani also appointed, with the approval of Prime Minister Yousaf Raza Gilani, a new chief of general staff and replaced four of the nine corps commanders. The move is also to strengthen Kayani's grip over his forces.

The reshuffle comes at a time when Islamabad has intensified its push against the Islamist extremist Taliban and al-Qaeda militants in the lawless tribal region along the Afghan border.

One can only hope this reshuffle is intent on making the Pakistani military more prone to battle isurgents as opposed to siding with them. Given that these appointments were approved by PM Gilani, it appears they are being done to do just that, namely, weed out individuals supportive of isurgents and bring commanders in to battle insurgents. The US did something similar in Iraq until it came up with the Petraeus/Odierno combination in Iraq which changed the way American forces battled insurgents in Iraq.

For a full read, click here.

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New Lebanon War?

From Amir Taheri.

IS Syria preparing to seize the opportunity provided by the global financial crisis and the US presidential campaign to invade Lebanon?

For the last week or so, Syria has been moving heavily armed elite military units to the Lebanese border - with up to 25,000 massed there by early last week. Backed by tanks, armored vehicles and attack helicopters, the units were on "maximum war footing," eyewitnesses say.

Damascus says the build-up is a response to smuggling rings that run the black market in the Syrian capital and major provincial centers. My Lebanese contacts call that explanation "laughable" - noting that Syrian elite itself runs the black market in both countries through the security services.

The buildup covers only the northern portion of the Syria-Lebanon border, leaving the eastern portions in the hands of the Iran-financed (and thus Syria-allied) Hezbollah militia.

And Lebanese analysts say the type of force Syria is massing is better suited for a classical invasion than for chasing small and scattered groups of bandits along the border.

What will EU or America do to prevent a possible invasion?

President Assad might well be tempted to remedy his humiliation in 2005, when he was forced to withdraw his army from Lebanon after 29 years of occupation.

If so, he may well be eyeing a brief window of opportunity right now. America is preoccupied by the financial crisis and the presidential campaign. And Europe, led by Sarkozy, has just committed itself to rehabilitating Syria and doesn't want to jeopardize the supposed gains of its "positive dialogue" with Damascus.

Turkey would be in no position to criticize a Syrian incursion into Lebanon - Turkish forces have repeatedly entered Iraq, ostensibly to hunt down Kurdish rebels. And Russia - grateful for Syria's support in the recent war with Georgia - wouldn't frown at a Syrian move to topple the pro-Western regime in Beirut. Israel, politically paralyzed and possibly heading for early elections, is in no position to oppose a Syrian invasion.

So far, Syria's military gesticulations on the Lebanese border haven't elicited warnings from the United States or the European Union, encouraging the hard-line faction in Damascus that is pressing for a "return to Lebanon."

For a full read, click here.

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Assad warns North Lebanon has become base for extremism, poses danger to Syria

From The Daily Star.

Syrian President Bashar Assad told the head of Lebanon's Journalists Union Melhem Karam Monday that North Lebanon had become "a real base for extremism and constitutes a danger for Syria." Syria denounced the bomb attack in the restive Northern Lebanese city of Tripoli Monday that killed five soldiers, two days after a deadly car bombing in the Syrian capital.

"Syria condemns the terrorist and criminal act which targeted Lebanese soldiers and civilians," a Syrian official said, according to the state-run SANA news agency.

"Syria expresses its solidarity with brotherly Lebanon in the face of parties who are undermining the country's security and stability," the official said.

A few days ago, Syria deployed forces along the northern Lebanese border. One wonders if Syria will unilaterally go into northern Lebanon to "assist" Lebanon with it extremists in northern Lebanon and just stay in Lebanon since they are there?

For a full read, click here.

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Taliban, al-Qaeda fight to the death in Pakistan

From M & C, South Asia.

When thousands of Pakistani troops backed by tanks and artillery moved into Bajaur tribal district to retake a strategic checkpoint from Taliban and al-Qaeda fighters, many thought it would be a relatively easy walk for professional soldiers with huge fire power.

But the tenacious resistance the militants offered and the superb guerrilla warfare they used in the six-week pitched battles with government forces came as more than a surprise....

The commanding officer of Pakistan's paramilitary Frontier Corps, Major General Tariq Khan, told reporters early this week that if the insurgency was dismantled in Bajaur, 65 per cent of the militancy in the country's tribal areas would be brought under control.

The Taliban also realize this and have moved reinforcements of guerillas from across the border as well as from at least three neighbouring tribal districts. The main fighting from the rebel side is being led by an Afghan commander Qari Ziaur Rehman, who is assisted by well-trained al-Qaeda fighters of Arab, Chechen and Uzbek origin.

'There is substantial evidence that heavy weaponry is being moved into Bajaur from Afghanistan,' said Pakistani army spokesman Major General Athar Abbas, complaining that there was no serious effort by the International Security Assistance Force operating in Afghanistan to stop militant infiltration across the border.

Loses of 1000 militant is the reason why the Taliban are concripting males into fighting for the Taliban. While the fighting is intense, there are rays of hope.

However, back in Bajaur there are some positive signs of change, with locals in some areas defying Taliban terror and the Islamists' hard-line shariah law.

Emboldened members of three tribes - the Salarzai, Tarkhani and Utmankhel - last week announced that they would organize an army of volunteers to defend their respective areas against the Taliban.

'Many people still remain reluctant to support the government, because they are not sure whether (government) forces will fight the militants till the last or withdraw after a peace deal with them as they did in North and South Waziristan,' said a local journalist, who gave his name as Shah.

The fear for the civilians caught in the middle of this fighting is that as soon as the troops leave, the well-trained and well- organized Taliban army will settle in and create a new hell for them, he said.

Once again, fighting an insurgency is difficult.

The population must be secured so they stop sitting on the fence, tacitly supporting the insurgency, to supporting the government. As Pakistani forces continue their operations inside of Bajaur, the population is rising up against the Taliban.

Mandatory conscription, killing of innocent muslims, killing of tribal leaders, destruction of crops and electric powerlines, and other such indiscriminant violence which the Taliban and Al Qaeda use to subdue a population over time only causes the population to turn against them and to side with the government who brings law and order, peace and prosperity.

Al Qaeda did not want the democratic election in Pakistan to occur. To stop it, they killed Bhutto. However, the election happened. That fact cannot be changed. A democratic government is now in charge in Pakistan. With the democratic government, now the military has began to battle the Taliban/Al Qaeda in earnest.

As the battle wages, the population will rise up against the Taliban and Al Qaeda if the government can secure the population. This battle is now taking place in Bajaur. As MG Khan states, the outcome of Bajaur could quell 65 percent of the militancy in Pakistan. If Bajaur is successfully liberated from the Taliban/Al Qaeda and the population is secured, expect a rapid defeat of the Taliban/Al Qaeda in Pakistan.

While battles will continue to wage for a few years as the Taliban/Al Qaeda attempt to regroup, if the Pakistani Army is successful in Bajaur of routing the Taliban/Al Qaeda and securing the population while maintaining the strong tribal structure in the region, the Taliban's/Al Qaeda's defeat will be more rapid in this area than it was in Al Anbar in Iraq as the population in this region has long been relatively peaceful, orderly, and forgiving of other tribes resulting in much trade in this region. Al Qaeda/the Taliban has attempted to destroy this historic tribal structure and control all trade/commerce in the region just as Al Qaeda in Iraq attempted to do in Al Anbar.

Even Alexander the Great knew this was not the way to quell this region. Apparently, the Taliban/Al Qaeda have never read the history of this region. It is a lessen they are going to regret not learning.

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Saudi Mufti Criticizes Al-Qaeda


In an interview with the Saudi daily Al-Sharq Al-Awsat, Saudi Mufti Sheikh Abd Al-'Aziz Aal Al-Sheikh criticized Al-Qaeda, saying that it was sowing anarchy in the Muslim ummah and was serving the enemies of the ummah.

He also noted that the organization's discourse was based on killing, extortion, and anarchy in the Islamic world.

Intellectual turbulence continues within the salafist community over Al Qaeda's indescriminant killings, extortion, and anarchy it pursues.

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Iraq: Al-Qaeda suspects killed in military raid in Baaquba

From AKI.

Three suspected members of Al-Qaeda, including a leading operative, were killed in a raid conducted by Iraqi army forces outside Baaquba, north of Baghdad on Monday.

The raid, reported by the news agency Voices of Iraq, came after a dramatic resurgence of violence in Iraq at the weekend.

"Troops from the Iraqi army's 5th Division in Diyala raided some strongholds of Al-Qaeda in the area of Anjar, 45 km east of Baaquba, killing three members, including an emir (leader)," Brig. Khaled Jawad told VOI.

While insurgents try to regroup in Iraq, the Iraqi Army continues to pursue and kill or capture its leaders.

For a full read, click here.

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Battle with remote militants pivotal to beating al-Qaeda

From the Taipei Times.

A massive battle with Islamist militants in an obscure Pakistani tribal region is proving to be pivotal to the country’s fight against al-Qaeda and the Taliban, officials said.

The six-week army operation in the remote region of Bajaur on the Afghan border is suspected to have sparked furious extremists into bombing the Marriott Hotel in Islamabad just over a week ago, they said.

While Waziristan has captured most of the headlines about Pakistan’s tribal belt in recent years, the military says Bajaur is where it faces the stiffest resistance since joining the US-led “war on terror” in 2001.

Why have the Taliban/Al Qaeda put up such a defense in Bajaur?

The rebels cannot afford to lose Bajaur’s strategic location.

To the east is the restive former tourist region of Swat and trouble is flaring south, through the Mohmand tribal area and into the major city of Peshawar.

On the Afghan side is a long frontier with the Taliban hot spot of Kunar Province.

Pakistan's battle into Bajaur is significantly affecting the Taliban/Al Qaeda. They have mandated concription. They have recalled forces from Afghanistan.

The Marriott bombing has only caused Pakistani government and military forces to fight harder and to turn the population more against the Taliban/Al Qaeda. If the Pakistani forces can break defenses in Bajaur, the population may turn in earnest against the Taliban/Al Qaeda. With their defeat in Bajaur, Waziristan becomes the next target.

Let us hope the Pakistani government and military has the fortitude to continue this battle through completion.

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Militants pouring in from Afghanistan: Pakistan

From the Khaleej Times.

Militants battling Pakistani forces are getting weapons and reinforcements from Afghanistan, security officials said on Monday, vowing no let-up in their offensive in the northwest.

Government forces launched an offensive in the Bajaur region on the Afghan border in August after years of complaints from US and Afghan officials that Taliban insurgents in Afghanistan were getting help from Pakistani border areas such as Bajaur.

Now the tables have turned and the militants locked in heavy fighting with Pakistani forces are getting help from the Afghan side of the border, officials said.

This report along with the report of the Taliban transcripting sons from Pakistan families in the FATA/NWFP region make an interesting series of reports.

We are told the insurgency in Afghanistan is on the rise. Some point to the fact that our involvement in Iraq, at the expense of Afghanistan, has caused this rise in insurgency in Afghanistan. If true, then while this battle wages in Pakistan, we would expect to see the insurgency in Afghanistan continue to rise or at least stay the same. However, if this report is correct, we should see a decline in the Afghanistan insurgency due to forces being taken out from Afghanistan to Pakistan. I believe the latter will be the case.

If the insurgency is on the rise and the Taliban and Al Qaeda are resurgent, as is commonly reported by the MSM, then these groups should have enough forces to battle on both sides of the border. Pulling insurgents back from Afghanistan shows this theory is also not correct as does mandating concription of Pakistani sons. Therefore the Afghanistani insurgency is not on the rise given these two reports.

More correctly, over the last two years, Coalition forces have increased in siginificantly in Afghanistan as Iraq winds down and NATO members are putting more forces in Afghanistan. As such, Coalition forces are moving further out from city centers causing battles with insurgents which are being reported by the MSM as a growing insurgency. While insurgent forces have initiated more attacks, I venture to say it is because of a more robust coalition force presence outside of cities vice a resurgent insurgency.

Finally, Pakistan is the last unassailable base for Al Qaeda and the Taliban. They must keep the FATA/NWFP region if they hope to have their movement survive. Their unassailable base is now threatened and they are pulling forces out of Afghanistan to help in Pakistan. A similar pulling of forces was seen in mid 2007 from Iraq back to Pakistan/Afghanistan showing Al Qaeda's strength is not as reported.

Instead of losing the war in Afghanistan/Pakistan/Iraq, the surge defeated Al Qaeda in Iraq and began shaping operations for the Taliban's eventual defeat in Afghanistan where they are forced to withdraw to protect their last unassailable base in Pakistan. Surrounded, this shaping operation will soon beccome the decisive operation resulting in their defeat in Pakistan by a coalition of Pakistani and NATO forces.

This analysis is just another possible scenario not reported by the MSM. It may not be the exact scenario, but just another possible scenario, just as possible as the Coalition is losing Afghanistan.

Just putting out some food for thought.

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Taliban Conscripting Sons In Pakistan

From ThreatsWatch.

A Frontier Corps officer in the tribal region in Pakistan says that the Taliban has conscripted sons in the region, threatening families if they refuse to submit their male children.

On Friday, a Pakistani military commander accused insurgents of forced conscription.

“All families were asked to give their one male child to this (militant) movement, and this was done forcibly, and if somebody doesn’t do it, his house would be destroyed,” said Maj. Gen. Tariq Khan of the paramilitary Frontier Corps.

It is nearly impossible to independently confirm the details provided by Khan and others in the military.

Perhaps it may be difficult to confirm this particular instance, but this is one of the means by which al-Qaeda sought to bolster their forces in Iraq, and one which ultimately undermined their existence as the Iraqi people turned.

Long made short, this represents a few things.

1. A sharp fall in man power. Pakistan has claimed to kill 1,000+ in the area since August ops began.

2. Difficulty recruiting. Enticing the faithful followers has proven for the moment not enough.

3. A certain level of desperation. Such measures are not taken when a group senses imminent victory, but more so when holes need plugged.

This is as close to an admission that Pakistani military operations have met with some success as you are likely to ever see. An admission in actions, not words.

Interesting analysis. I remember in late 2006/early 2007 when Iraq was considered lost despite underlying signs to the opposite, namely, a population fed up with insurgents, but still sitting on the fence awaiting a strong military to secure them. Are we possibly seeing the same thing in Pakistan now?

I agree with ThreatsWatch's assessment. This act is not done by a group sensing imminent victory. This act will only make fence sitters go against the Taliban just as fence sitters in Al Anbar went against Al Qaeda in Iraq once a surge of American forces assured their security.

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5 top militants among 1,000 killed in Pakistan

From The Daily Star.

Pakistan said yesterday that troops have killed 1,000 Islamist militants in a huge offensive, a day after President Asif Ali Zardari lashed out at the US over a clash on the Afghan border.

Five top al-Qaeda and Taliban commanders were among the dead in a month-long operation in Bajaur district, currently the most troubled of Pakistan's unstable tribal areas close to the porous frontier, a top official said.

In a further sign of the instability gripping Pakistan since the bombing of the Marriott Hotel in Islamabad at the weekend, three suicide bombers blew themselves up in a shootout with police in Karachi.

Reporters were flown by helicopter to Khar, the main town in restive Bajaur, for a briefing on the military operation launched in August against Islamist militants who had taken control of most of the region."

The overall toll is over 1,000 militants," said Tariq Khan, inspector general of the paramilitary Frontier Corps, adding that 27 soldiers had also been killed in the fighting."This is a centre of gravity for the militants," Khan told journalists. "If they lose here they lose everything."

Pakistan is now beginning to battle insurgents in earnest within its own territory. While their numbers on enemy loses are often inflated and friendly loses often deflated, this article shows that Pakistan is now engaging the insurgents.

For a full read, click here.

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A good bank’s perspective on the bailout

From W.C. Varones at Pollipundit.

A letter to Congress from John Allison, CEO of BB&T:

1. Freddie Mac and Fannie Mae are the primary cause of the mortgage crisis. These government supported enterprises distorted normal market risk mechanisms. While individual private financial institutions have made serious mistakes, the problems in the financial system have been caused by government policies including, affordable housing (now sub-prime), combined with the market disruptions caused by the Federal Reserve holding interest rates too low and then raising interest rates too high.

2. There is no panic on Main Street and in sound financial institutions. The problems are in high-risk financial institutions and on Wall Street.

3. While all financial intermediaries are being impacted by liquidity issues, this is primarily a bailout of poorly run financial institutions. It is extremely important that the bailout not damage well run companies.

4. Corrections are not all bad. The market correction process eliminates irrational competitors. There were a number of poorly managed institutions and poorly made financial decisions during the real estate boom. It is important that any rules post “rescue” punish the poorly run institutions and not punish the well run companies.

5. A significant and immediate tax credit for purchasing homes would be a far less expensive and more effective cure for the mortgage market and financial system than the proposed “rescue” plan.

6. This is a housing value crisis. It does not make economic sense to purchase credit card loans, automobile loans, etc. The government should directly purchase housing assets, not real estate bonds. This would include lots and houses under construction.

7. The guaranty of money funds by the U.S. Treasury creates enormous risk for the banking industry. Banks have been paying into the FDIC insurance fund since 1933. The fund has a limit of $100,000 per client. An arbitrary, “out of the blue” guarantee of money funds creates risk for the taxpayers and significantly distorts financial markets.

8. Protecting the banking system, which is fundamentally controlled by the Federal Reserve, is an established government function. It is completely unclear why the government needs to or should bailout insurance companies, investment banks, hedge funds and foreign companies.

9. It is extremely unclear how the government will price the problem real estate assets. Priced too low, the real estate markets will be worse off than if the bail out did not exist. Priced too high, the taxpayers will take huge losses. Without a market price, how can you rationally determine value?

10. The proposed bankruptcy “cram down” will severely negatively impact mortgage markets and will damage well run institutions. This will provide an incentive for homeowners who are able to pay their mortgages, but have a loss in their house, to take bankruptcy and force losses on banks. (Banks would not have received the gains had the houses appreciated.) This will substantially increase the risk in mortgage lending and make mortgage pricing much higher in the future.

11. Fair Value accounting should be changed immediately. It does not work when there are no market prices. If we had Fair Value accounting, as interpreted today, in the early 1990’s the United States financial system would have crashed. Accounting should not drive economic activity, it should reflect it.

12. The proposed new merger accounting rules should be deferred for at least five years. The new merger accounting rules are creating uncertainty for high quality companies who might potentially purchase weaker companies.

13. The primary beneficiaries of the proposed rescue are Goldman Sachs and Morgan Stanley. The Treasury has a number of smart individuals, including Hank Paulson. However, Treasury is totally dominated by Wall Street investment bankers. They do not have knowledge of the commercial banking industry. Therefore, they can not be relied on to objectively assess all the implications of government policy on all financial intermediaries. The decision to protect the money funds is a clear example of a material lack of insight into the risk to the total financial system.

14. Arbitrary limits on executive compensation will be self defeating. With these limits, only the failing financial institutions will participate in the “rescue,” effectively making this plan a massive subsidy for incompetence. Also, how will companies attract the leadership talent to manage their business effectively with irrational compensation limits?

Another interesting perspective about the current financial crisis.


What Caused the Crisis on Wall Street?

From Poweline.

This video does a good job of explaining, in simple and accessible fashion, the origins of the current crisis:

I will let readers Google for themselves, as the video suggests, to make their own determination as to the root cause of the current financial crisis.

HT to John at Powerline.

Update: You Tube (America) has pulled the video. It can now be found here. It can also be found at Live Leak.