Freddie and Fannie – Has Everyone Gone Postal?

Between Freddie and Fannie’s latest woes and the United States Postal Service teetering on collapse, it’s been a bad week or so for quasi-governmental agencies.

 

Late last week the United States Postal Service (USPS) announced that it was facing a shortfall of approximately $5.5 billion in terms of its obligations in the month of September, and that without Congressional action it might have to cease operations entirely during the winter of 2011. In a week that was also marked by hurricanes, earthquakes and gigantic wildfires, how could one miss the irony that while neither snow nor rain nor heat nor gloom of night can stay these couriers from the swift completion of their appointed rounds, a lack of cash certainly can?

 

[Article: Medication for Middle-Class Mortgage Mania]

 

Before 1970, the post office was an agency of the United States government, like any other, providing an important and truly national service, while losing a whole bunch of money doing so. It was bleeding then, and hemorrhaging today, because the USPS—though now “quasi-governmental”—is still required to fulfill the established policy of the United States to ensure frequent and efficient mail service at a very low cost to the consumer. In theory, the post office is supposed to be revenue neutral, i.e., neither losing nor making money. It provides service and pays for itself through the sale of stamps and other like products and services.

Ah well. Man plans, God laughs.

Given the dramatic decline in the utilization of conventional postal services—thanks to email, UPS and FedEx, not to mention the new world of social networking—there really is no way for the USPS to break even without radically reinventing itself and ending certain services like Saturday delivery, closing many post offices and raising the price of a first-class stamp to a dollar or so.

In the face of freewheeling competition, huge labor costs and truly astounding pension liabilities any non-quasi-governmental organization (i.e., a real business) would do whatever it had to do to survive. Unfortunately, the USPS can’t curtail services without Congressional approval (universal peace might be easier to achieve these days), and it can’t make use of bankruptcy provisions, because it is “quasi-governmental.” So one way or another the USPS must rely on yet another “bailout,” probably in the form of a large injection of cash from Washington.

It sounds so 2008, doesn’t it?

What happened to Freddie and Fannie last week further illustrates that (among many other things) quasi-governmental organizations just don’t work. On Friday, the federal government, in the form of The Federal Housing Finance Agency, sued 17 large banks claiming that the defendants sold $200 billion worth of fraudulently overpriced mortgages to Fannie Mae and Freddie Mac. Paradoxically, many of the defendants who are suffering the wrath of these suits were also beneficiaries of the largesse of the bank bailouts just a few years ago. Apparently, the left hand of the government hasn’t seen its right hand for some time.

 

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One Electrical Worker Blamed for Leaving Millions Without Power in California, Arizona and Mexico

A single worker’s error led to a massive power outage that swept across Arizona, Southern California and Mexico, left millions of people in the dark and brought major West Coast cities to a standstill, according to a local power company.

 

The North Gila-Hassayampa 500 kV transmission line near Yuma, Ariz. was tripped offline when a single APS employee was carrying out a procedure in the North Gila substation, according to Arizona Power Service.

 

Typically, in such an instance, the outage would be isolated to the Yuma area. The investigation is now focusing on the reason that did not occur in this case, APS said Thursday.

 

San Diego Gas & Electric Co. president and CEO Michael Niggli earlier said that 1.4 million affected customers could be without power through the night and into Friday.

 

A multi-stage restoration plan was begun to get power back to everyone, according to the San Diego Gas & Electric Co. Power reportedly was back in some areas, including Orange County, Calif.

 

Two million more people were reported to be without power in Mexico.

 

There was “no indication that this event was caused by terrorism,” Niggli said earlier today, adding that the agency was working with the California Independent System Operator to bring them back online.

The outage, which started at 4 p.m. PST, appeared to stretch west from Yuma to San Diego, as far north as San Clemente, Calif., and as far south as the Baja peninsula in Mexico.

Earlier, authorities said that the outage most likely had to do with the power line that connects Arizona and California. Both major connections that bring power to the region have been disconnected.

Viewers of ABC affiliate KESQ in Palm Springs, Calif., called in to say they heard a massive explosion at a substation in Coachella. Those reports could not be immediately confirmed.

The loss of power led to a shutdown of two reactors at the San Onofre nuclear power plant. Officials from the U.S. Nuclear Regulatory Agency said it appeared to have shut down automatically at 3:38 p.m. because of the change in the power grid — as it is designed to do, kind of like a circuit breaker. Officials are working now to reconnect the reactor so that it can help restore power to some of the many people affected.

Grocery stores across San Diego that have back-up generators are filled with people grabbing non-perishable food, water and ice. Lines are reportedly backed up everywhere.

Most of the gas stations are closed, as people are being advised to use as little gas and water as possible. There are people stranded whose gas has run out, and all landline phones aren’t working.

Some hospitals that usually provide urgent care are closed, while some were under emergency lock down — frustrating and frightening many.

Non-functioning traffic lights have caused delays everywhere, making it difficult for ambulances to get to where they needed to go.

All flights out of San Diego International Airport have been suspended, and the airport is currently running on generators.

San Diego Gas & Electric Co. also sent out a barrage of alerts on its Twitter feed, warning customers without power to “drive safety” on roads where street lights are out and “if you have a personal family emergency plan, please activate it now.”

 

President Obama Pushes $447 Billion Jobs Plan in Address to Congress

President Obama took the bully pulpit tonight before a divided Congressand disillusioned electorate, laying out a $447 billion legislative package meant to spur job creation and put more money in the pockets of consumers, and do it quickly.

 

In what has become a familiar refrain, Obama exhorted lawmakers to “stop the political circus and actually do something to help the economy.” And he said his plan — the American Jobs Act — is ready for a vote and could be passed right away.

 

“There should be nothing controversial about this piece of legislation,” Obama said. “Everything in here is the kind of proposal that’s been supported by both Democrats and Republicans, including many who sit here tonight. And everything in this bill will be paid for. Everything.”

 

The president’s plan, aimed at answering his critics’ recent calls for boldness, follows the same contours of the $825 billion economic stimulus package he signed into law three years ago.

 

This new, second stimulus of sorts features a mix of tax cuts for businesses and workers, billions in new infrastructure spending and aid to states, and an infusion of aid for the long-term unemployed.

 

“It will provide a jolt to an economy that has stalled, and give companies confidence that if they invest and hire, there will be customers for their products and services,” he said.

 

The speech, Obama’s fifth before a joint session of Congress, comes at a politically crucial point for a president who has faced a steep erosion of support amid persistently high unemployment and sluggish economic growth.

 

An ABC News-Washington Post poll released earlier this week found that 43 percent of Americans approve of the job Obama is doing as president, with 53 percent disapproving.

Meanwhile, 62 percent of Americans say they disapprove of Obama’s handling of the economy, including 47 percent who do so “strongly.”

“I think he’s a very sincere person, but I don’t see him as being very much of a fighter,” said Jim Bonner, 32, anunemployed worker from Pittsburgh.

“President Clinton had that ability to fight, but this man [Obama] is a lot more laid back, he’s a lot more accommodating. When you have millions of people out of work, you can’t be accommodating,” he said. “You have to be the warrior.”

Speaking for a little more than 30 minutes, Obama used tough and impassioned rhetoric, calling on lawmakers 16 separate times to “pass this bill.” And he called out Republicans specifically to consider aspects of the plan he believes are hard to refuse.

“Every proposal I’ve laid out tonight is the kind that’s been supported by Democrats and Republicans in the past,” he said. “I know there’s been a lot of skepticism about whether the politics of the moment will allow us to pass this jobs plan – or any jobs plan, but know this: The next election is 14 months away and the people who sent us here — the people who hired us to work for them — they don’t have the luxury of waiting 14 months.

“They need help, and they need it now,” Obama said, drawing resounding applause.

Obama used tough and impassioned rhetoric to challenge his Republican colleagues to accept the deal he has put on the table, one he said includes many ideas that have a history of bipartisan support and would be difficult to refuse.

The fine print of the Obama plan relies heavily on tax cuts and credits to stimulate economic growth. The president proposes halving the payroll taxes paid by employers, and implementing a complete employer payroll tax holiday for new workers or higher wages.

He wants to provide tax credits of up to $5,600 for businesses that hire unemployed veterans, $4,000 for hiring workers unemployed for more than six months, and up to $9,600 for companies that hire unemployed workers with service-connected disabilities who have been looking for work for more than six months.

The administration also wants to extend the current payroll tax cut for workers, which it estimates will leave $1,500 more in the pocket of the average working family earning $50,000 a year.

Obama’s plan calls for more than $140 billion in direct aid to states meant to keep teachers and first responders on the job, modernize public schools, build roads, railways and airport facilities and put construction workers on the job rehabilitating hundreds of vacant and foreclosed homes and businesses.

The president would allocate more than $50 billion for the extension of unemployment insurance benefits and the creation of new training programs for workers akin to a popular and successful initiative underway in Georgia called “Georgia Works.”

The total $447 billion price tag would be “fully paid for” if enacted in its entirety, the White House says. But the burden for covering the cost largely falls on the new congressional super committee already tasked with finding $1.5 trillion in deficit reduction before the end of the year.

Obama tonight he would release a blueprint for reaching roughly $2 trillion in cuts by Sept. 19, and urged the committee to include closure of corporate tax loopholes and higher taxes on wealthier Americans as part of that effort.

But both proposals have faced fierce resistance from Republicans, as seen in the debt-ceiling debate earlier this summer.

“This isn’t political grandstanding. This isn’t class warfare. This is simple math,” Obama said of the need to raise revenue. “These are real choices that we have to make. And I’m pretty sure I know what most Americans would choose.”