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Jennifer Rubin posts on a Sunday debate between George Will and Newt Gingrich on the president’s right to an awful defense secretary. Pickerhead thinks it is good to have a clear match between the two. At the beginning of this administration the well qualified Bob Gates was clearly mismatched. Now we can watch as the fools compliment each other. Rubin disagrees.
… we’ve never had a nominee for a top national security post with so many problems in his record, possessing so little acumen and so incapable of responding sensibly to Senate committee members. Usually, if the president has goofed in nominating such a character, he pulls the nomination. This president has not. In such an instance, the obligation to protect the Constitution from enemies, foreign and domestic, falls to the Senate.
The GOP senators need to keep in mind that the phrase is not to “support and defend the Constitution of the United States against all enemies, foreign and domestic, unless I have to block someone unfit to run the Pentagon.” There is no “comity” exception to their oath, and they risk losing their own standing as defenders of defense by rubber-stamping what Ruth Marcus (on the same roundtable) rightly called an “appalling” performance. (“I was going to go with execrable, but I’ll settle for appalling. It was an appalling performance.”)
Really, why have hearings if you can turn in a performance such as Hagel’s and still get the job?
Melody Petersen, a reporter for the Orange County Register, reveals the details of the capital appreciation notes being issued by CA school districts. Pickings of February 12th led with the story of these frauds with this headline – The NY Times says the spirit of barack obama lives in CA school districts.
In early 2008, residents of Placentia and Yorba Linda approved a $200 million school construction bond after reading those fliers and being assured repeatedly that “their money will be spent wisely.”
What happened instead was that Measure A led to a debt so large and long lasting that it mortgaged the future of their children’s children.
With no public discussion, the school board had hired George K. Baum & Co. and its staff of political strategists to help push the measure through so the district could continue an ambitious building spree.
After the election, the board allowed the bank to sell some of the costliest bonds ever issued by a California public agency. Just one $22 million borrowing from 2011 will cost taxpayers nearly 13 times that amount – $280 million – to repay.
Those bonds, known to Wall Street traders as capital appreciation bonds, are like a loan for which no principal or interest payments are made for 35 years. Interest is charged on a growing pile of unpaid interest, causing the balance to balloon.
“It’s another method of pushing debt to future generations,” said state Treasurer Bill Lockyer, who compares the bonds to “payday loans.”
“I just don’t understand how these board members got away with this,” said Alexandria Coronado, a former member of the Orange County Board of Education. “These people need to be recalled.”
Placentia-Yorba Linda Unified is hardly alone. Bankers from Stone & Youngberg, Piper Jaffray and other firms have traveled all over California in recent years, pushing capital appreciation bonds as a tool to vault over legal debt limits. Hundreds of school districts, including 14 in OrangeCounty, signed up.
But Baum’s deals stand out. According to an analysis of data from the state treasurer’s office, Baum has issued more than 60 capital appreciation bonds for California school districts since 2007, including the single most expensive such loan. That debt – $283,612 borrowed by San BernardinoCounty’s Rim of the World – will cost future taxpayers 23 times the principal. …
… “Who borrows money thinking you don’t have to even begin to pay interest for 20 years?” asked Kevin Graves of LakeArrowhead, whose two children graduated from Rim of the World. “The board members knew what they were doing. They did it because there were no consequences.”
The story of how Baum pushed California schools into complex bond deals that charged payments to future taxpayers is one of naïve public officials, sophisticated financiers, and laws, rules and guidelines ignored: …
… They designed capital appreciation bonds so the district could receive funds but pay nothing until 2031. Most of the money – both principal and interest – is not due until the six-year period ending in 2049 – 38 years after the bonds were sold.
Capital appreciation bonds, or CABs, have been used in government financing for decades. Experts say they can be useful in cases where a government expects sharply higher revenues in the future, but needs money upfront to build a project. For example, a school district in a fast-growing community where large tracts of homes are planned might use such debt to build a school.
But recently, investment banks have promoted these delayed-payment bonds to California schools that do not expect such a homebuilding boom. Executives have told school officials that they need not worry about the higher debt payments in the future. They predict that real estate values will appreciate faster in the future, keeping tax rates from escalating.
“Long-term CABs help a school district better manage its annual tax by shifting debt payments to future years when assessed values are likely to be higher,” advises Stone & Youngberg, a San Francisco investment bank, in an online guide for California schools.
At the same time, Wall Street analysts have been promoting these bonds to investors.
In June 2011, Vikram Rai, an analyst at Citigroup, advised the bank’s clients to invest in capital appreciation bonds issued by California schools because of their high interest rate. Rai said last fall that the bonds were so attractive that even foreign investors were buying them.
The result of Wall Street’s promotion: an increasing demand and supply of the bonds that have benefited banks and investors while costing future Californians billions. …
Andrew Malcolm with late night humor.
Letterman: The Westminster Dog Show was in town this week. Very exciting. The winning dog got a blue ribbon and a toilet full of champagne.
Leno: When you think about it, Tiger Woods and President Obama have something in common. Both got in trouble because of their stimulus package.
Letterman: Show of hands, everyone. How many of you watched President Obama’s State of the Union speech just for the commercials?
Leno: President Obama visited a pre-school in Georgia the other day. And all the kids had the same question, “Shouldn’t you be working?”