I had indicated I was going to send a letter to Obama including the diary with the idea that he might get a clue about ‘the lack of enthusiasm’ he was opining about regarding this November’s elections.
So here is the letter:
Dear President Obama;
You have expressed concern or disputation about the media’s reporting a "lack of enthusisiasm" amongst those who voted for you in the 2008 election.
I attach a blog I wrote and published on the internet that I hope will provide you insight into the "lack of enthusiasm".
And, as you are finding out, the so called ‘healthcare reform’ has numerous problems which could have all been avoided by your Administration simply opening up Medicare to all with qualifying being tied to income.
Which leads to the so called ‘poverty guidelines’; why is it so hard to see that the minimum wage is a poverty wage?
Especially given the current state of the economy? If someone in a minimum wage job happens to have a fulltime job (2080 hours a year), they will earn $15,080 before taxes. Yet, Federal poverty guidelines put ‘poverty’ as being an income of $10,830.
AND, while the ‘poverty guidelines’ make exceptions for Hawaii and Alaska, nothing is factored for either the poverty level or minimum wage based on regional differences. Yet the ‘cost of living’ is much higher in the more populous States than in the less populated States.
Maybe part of the solutions necessary to address the current and future problems facing the U.S. is a requirement that citizens vote like is done in Brazil and other S.American nations (who now seem to be the bastion(s) of democracy the U.S. used to be held out as).
And since people are being forced to buy so called health insurance in a non-competitive environment -and without a ‘public’ option for people being able to choose, it IS non-competitive-, I don’t see why it would be ‘unconstitutional’ to have a requirement to vote with small penalties for not voting, just like being penalized for not buying health insurance.
What I -and many others- see out of the political class (which is definitely NOT what the Founding Fathers envisioned for this country) is a lack of courage to be honest and forthright with those governed and to truly stick by principles stated in campaigns.
Personally, I’m waiting for someone of the political class to have the guts to level with the U.S. public what the convergence of a lack of fossil fuels, climate change, and increased population will mean for the genus homo sapiens. And while others may be ‘banking’ on human ingenuity, it is human ingenuity that has led us to the current situation.
I read where you said "I’d rather be a really good one-term president than a mediocre two-term president," to ABC’s "World News" anchor Diane Sawyer.
Yet it appears as though you are satisfied being a mediocre one-term President.
I know you inherited an aircraft carrier worth of bovine excrement and I’ve heard the refrains about ‘what’s possible’ and ‘sacrificing the good for the perfect’ and ‘looking forward,not back’ more times than I can remember BUT such refrains strike me and others as an excuse for not ‘going out on a limb’ and using the political capital you had upon election. And squandering ANY ‘moral imperative’ that could have arisen if you had used the bully pulpit to rally the people around your campaign perspectives.
In closing, I wish this correspondence -including blog- clarifies for you why there IS an enthusiasm gap by your ‘supporters’; simply stated, you did NOT "change Washington" despite your campaign rhetoric.
In fact, it appears as though you have simply adopted the modus operandi you campaigned against and further entrenched the the rightful cynicism of the American public.
I had written a few diaries regarding the part of the First Amendment that has to do with the "right to petition for redress of grievances".
http://seminal.firedoglake.com/diary/39313
http://seminal.firedoglake.com/diary/40805
http://seminal.firedoglake.com/diary/44345
This diary is a report on my efforts and the results.
But first a little history; "Yet despite its social benefits, the First Amendment right of petition has not been developed as a doctrine or championed as a cause. Few scholars or courts have fully appreciated the importance of the right to petition and its more contemporary applications."
AND "the Supreme Court explained in Minnesota Board for Community Colleges v. Knight (1984): "[N]othing in the First Amendment or in this Court’s case law interpreting it suggests that the rights to speak, associate, and petition require government policymakers to listen or respond to individuals’ communications on public issues."
And a wonderful example of this lack of requirement is the over 300,000 signatures submitted to the FCC demanding net neutrality; ignored in favor of the corporations and politics.
So while the issue of having the petition for redress being ignored by King George lead to a revolution, nowadays there is The Alien Registration Act or Smith Act (18 U.S.C. § 2385).
So since there is no requirement for Congress to act on a petition for redress of grievances, I created what I thought would be legislation that would require a response from Congress while anticipating the resistance and claims for legitimacy of signatures on such a petition:
"Upon presentation to a Senator or Representative or branch of U.S. Government, of a petition seeking a redress of grievance consisting of the signatures of 100,000 registered voters, such an individual or branch of U.S. government shall and must take action to redress and/or respond to such a petition within 120 days of the submission of such a grievance, inclusive of the days deemed for verification of such signatures being those of a registered voter. Such registered voter signatures shall and must be verified by the registered voter’s Secretary of State regarding the validity of the signature being that of a State’s registered voter within 30 days of such a request by a Representative,Senator, or branch of the U.S. government or be cited for Contempt of Congress and the established procedure associated with such a citation be followed. In the case where petitions are submitted that are diametrically opposed to one another, the petition with the larger number of signatories will be higher in priority for redress and/or response but in no instance will such opposing petitions not be acted upon within the 120 day time limit. Failure of a Senator or Representative or branch of the U.S. Government to redress and/or respond to such a petition shall be guilty of violating Title 18 U.S.C. § 241, Conspiracy against rights of citizens, and subject to the penalties associated with such code infraction."
So I then sent a letter (certified mail,return receipt) to the following:
U.S. Representative Brian Bilbray (my rep)
2348 Rayburn House Office Building
Washington, D.C. 20515
————-
U.S. Representative John Conyers, Jr.
2426 Rayburn H.O.B.
Washington, DC 20515
——————
U.S. Representative Dennis J. Kucinich
2445 Rayburn HOB
Washington, DC 20515
—————-
U.S. Representative Alan Grayson
1605 Longworth HOB
Washington, DC 20515
——————–
U.S. Representative Bob Filner
2428 Rayburn House Office Building
Washington, DC 20515
————————-
Senator Barbara Boxer (one of my Senators)
112 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
——————-
Senator Dianne Feinstein (the other Senator)
331 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
———————
Senator Russell Feingold
506 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
——————-
Senator Sherrod Brown
713 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
——————–
Senator Bernard Sanders
332 DIRKSEN SENATE OFFICE BUILDING WASHINGTON DC 20510
———————–
asking "First, will you sponsor or co-sponsor the following legislation (or introduce your own that achieves the same purpose)?" and "If you will not sponsor or co-sponsor such legislation, please state why you will not.alt="" />
Secondly, will you support such legislation if it is introduced?"
Realizing that the Congress critters usually don’t respond to those who aren’t constituents (even though they are happy to send you emails about themselves and solicitations for money), I wrote the following: "I look forward to your response and, iterating, request a written response even if I am not a constituent of your district or State."
And the adventure began.
First let me speak to the return receipts(green cards on the letter where the person receiving the letter signs for it). Turns out both the Senate and the House do NOT receive mail directly. It goes to a Pitney Bowes center that scans the letters for ‘hazards’(such as anthrax for instance). Then a Pitney Bowes employee takes the letters around to the House addresses and gets a signature on an electronic tablet(like UPS does for packages).
Something a bit different takes place for Senators but I wasn’t able to ascertain that as the return receipt green cards from ALL the Senators came back within 2 weeks of sending the letters.
Since the USPS has a tracking system and I hadn’t received any responses from the House members, I went on the USPS site to try and figure out why I wasn’t getting any green cards back from the letters I sent to House members. What showed up was indications of some deliveries but no green cards were being returned to me.
The next day a green card showed up from Rep. Bob Filner BUT the USPS tracking indicated he had never received my letter.
So that’s when I got on the phone and started calling the USPS. First I called my local USPS station who told me the problem was in the D.C. office and gave me the phone number to call.
Which I did and received the case number CA102270949 upon explaining what I had done in using the USPS tracking system and seeing that the tracking system indicated that the letters had been delivered but that the only green card received back from the Representatives I had sent my letter to was from a Representative’s office which the tracking system said HAD NOT been delivered yet.
The next thing that happened is I received a phone call from my local USPS station informing they had this case assigned to them. I iterated what the locals already knew; this was a problem in D.C.
So back on the phone to the D.C. post office for the Rayburn HOB (since that was where most of Rep’s letters were sent. And they again referred me to Pitney-Bowes. And,again, I called Pitney-bowes’ D.C facility and ,again, explained what the situation was (no green cards returned, no indication of delivery in the USPS tracking system).
Fortunately I ended up talking to someone who completely explained the process by which mail from the USPS is delivered to them and what Pitney-Bowes does in delivering the mail. Specifically, there was an acknowledgement that despite Federal regulations of the USPS, they don’t often get signatures on the green cards, just getting the signatures of who accepted delivery on a tablet device like UPS uses for deliveries.
And the Pitney-Bowes person then agreed to send me their copies of the signatures they had obtained in delivering my letters.
So after examining the signatures provided by Pitney-Bowes. it turns out the only person who didn’t receive my letter -or for which there was no record at Pitney-Bowes- was Rep. Alan Grayson who happened to have the one Longworth HOB address amongst all addressed.
So back on the phone to D.C. USPS about that. Turns out that the USPS mail facility in D.C. for Rayburn HOB is NOT the same USPS facility that handles the Longworth HOB. So I called that USPS facility for the Longworth HOB and received a recorded message that allowed for leaving a message. I explained in the voice mail message the situtation and case number and waited to be called back.
A couple of days passed and I hadn’t received a call from the Longworth HOB USPS facility. So I called again and again just got a recorded message and ,again, left a message requesting a call about the the delivery failure to Rep. Grayson.
More time passed and while I kept checking to see notice of delivery, nothing showed up and no calls were forthcoming from the Longworth HOB USPS facility.
So I contacted my local USPS office, explaining that what I had paid for -a certified delivery, return receipt requested letter to Rep.Grayson- never occurred. The only alternative solution presented was the USPS refunding my money and re-sending of the letter to Rep.Grayson. Which is what occurred.
Time ‘went by’ and still no indication of delivery. Again, I called that USPS facility for the Longworth HOB and ,again,received a recorded message that allowed for leaving a message. I explained in the voice mail message the situation and waited to be called back.
A couple of days passed and I hadn’t received a call from the Longworth HOB USPS facility. So I called again and again just got a recorded message and ,again, left a message requesting a call about the the delivery failure to Rep. Grayson.
More time passed and I still had not received a response ,still no indication of delivery, and given that I wasn’t one of Rep. Grayson’s constituents and had not heard from ANY of the Senators or Representatives for which I was not a constituent, I gave up on trying to get a letter to Rep. Grayson.
I had not received any replies from my Senators or Representative despite proof of the letters being received so ,again, back on the phone.
Given that my Rep. -Bilbray- is a supposedly a big supporter of citizen involvement, I first called his office and asked to speak with the person who signed for the letter. The last name was scribbled so all I had was the first name of ‘Joe’ to go on. The staffer who answered indicated Joe wasn’t available but did acknowledge that the office had received my letter and that he would relay my concerns about not receiving a reply.
Well , a couple of weeks went by and lo and behold, a letter from Rep. Bilbray shows up. In the letter -in which he misspells my name- Rep.Bilbray states ""I was interested to read your proposal for a referendum system at the Federal level,etc". Which is NOT what my letter was about, it was about having the Government forced to respond to citizens’ ‘petition for redress of grievances’, NOT a referendum system(which leads to direct democracy and which is not what the Founding Fathers intended).
And then he goes on about the Federal deficit and House Republicans’ creating a website "designed specifically to seek ideas and input from all Americans". basically telling me to participate in the forum Republicans have set up for ‘citizen involvement’.
So, again, on the phone to Representative Bilbray’s office where I find out that there is a person named Joe Williamson who answers the letters sent to the Representative. I was given Mr. Williamson’s email address and told to write him directly with my complaint that Rep. Bilbray did not answer the questions posed in my letter and that what he wrote back about a referendum system is NOT what I was calling for in my letter.
Well, here it is 3 months later since writing/emailing Joe Williamson and I STILL haven’t heard anything.
I started on calling my Senator’s offices as I hadn’t received any reply from them either.
Senator Feinstein’s office indicated that all letters were answered out of the San Francisco office and that only emails were handled by the D.C. office and that they do automatically trace such correspondence BUT they do NOT track USPS mail like they do emails. And that there was someone in the SF office named Cody Gray in the SF office to query about a response. So I emailed Mr. Gray on 6/29/2010.
Long story short about Senator Feinstein is that I received a letter from her SF office, dated August 31,2010 -2 months after my email-,( I guess, no postmark on the letter) indicating "I appreciate receiving your input about requiring legislators to respond to constituents petitions". Again no response to the questions I posed in my letter which for refresher sake I again post: "First, will you sponsor or co-sponsor the following legislation (or introduce your own that achieves the same purpose)?" and "If you will not sponsor or co-sponsor such legislation, please state why you will not.
Secondly, will you support such legislation if it is introduced?".
Well, another non-response from someone who supposedly represents me. Another legislator who apparently is ok with Congress not having either a moral or legal obligation to respond to citizen petitions for redress of grievances.
Which only left Senator Boxer’s office for which I hadn’t received a reply.
On the phone again; Senator Boxer’s office says a similar statement to Senator Feinstein’s: USPS letters are not answered in D.C. but, in Senator Boxer’s case, out of the Los Angeles office. The D.C. office for Senator Boxer told me I would have to fax my letter to the Senator’s L.A. office which I did on July 2, 2010.
I still haven’t received any reply from Senator Boxer though I have received repeated email solicitations for funds for the re-election campaign.
And ,obviously, I have saved all records (phone,USPS,fax) related to this story in case anyone questioned my veracity in these efforts to have Congress address the fact that they have neither ‘moral or legal’ obligations to respond to citizen’s ‘petition for redress of grievances’.
To me it’s obvious that the Founding Fathers never imagined the impact of a change from an agrarian society to an industrialized one (and now moving to an ‘information’ society). BUT their intention was -and is- VERY clear, just as it is now clear to me that a ‘professional’ political class has arisen that has no intention whatsoever of citizen’s actually having a say in their governance.
From not being able to actually see how votes are counted, to the media dictating how and when election results are reported, to media charging for political speech despite them only leasing what belongs to the people, to the ongoing efforts to privatize the ‘commons’ and legislators going along with such efforts, to Congress not being able to figure how how to provide what the Founding Fathers intended even with all the technology now available, to Presidents who don’t use the power granted them by the SCOTUS to direct the House to increase it’s representation, the evidence is clear that "We the People" means nothing anymore.
As I have stated before, we have the same number of Representatives as after WWII despite the population being 3 times larger. For contrast, Brazil has a population of about 190 million(note the ‘color/race breakdown), the U.S. has 307 million.
AND the Representatives (Deputies) are elected according to proportional electoral system (state’s population) as contrasted to Senators which are elected by majority vote.
So you can see some of the why GlennG lives there.
Between failure to prosecute those responsible for the financial fraud perpetuated on this Country, the failure to prosecute those responsible for war crimes and torture, the continuation of ‘permanent war’ as the basis for a Foreign policy that serves not the ideals of the Founding Fathers but as a means to promote U.S. business interests, the outrageous disparity of wealth which legislators are afraid to address because of the desire for campaign funds, the apparent willingness of those who wish this nation to be a ‘christian’ nation to throw the poor and disadvantaged ‘under the bus’ (just some of the problems not being address by the government), and my experience in seeking ‘change’, excuse me if I no longer consider the U.S. as anything but a parody of representative democracy.
I am also sending this diary on to Obama; maybe he’ll get a clue why there is an ‘enthusiasm’ gap except for those who are comfortable with a semi -if not wholly- fascistic nation.
I wrote a diary awhile ago that I thought, naively I guess, that might start a movement to address the goings on of our government and the anger and frustration most of the U.S. public feels.
Obviously, from the comments -or lack thereof-, I was not very successful. BUT I still think it is one avenue that must be explored if the First Amendment is to have real meaning. And Jane’s announcement of a progressive movement being dead leads me to again offer up my suggestion and to provide an example that others might find affordable and in the interests of seeing just who in Congress thinks the people have a right to say what their government does or does not do.
"Dear Representative xxxxx(or Senator xxxxx);
I am writing to you requesting a written response to a few questions.
First, will you sponsor or co-sponsor the following legislation (or introduce your own that achieves the same purpose)?
"Upon presentation to a Senator or Representative or branch of U.S. Government, of a petition seeking a redress of grievance consisting of the signatures of 100,000 registered voters, such an individual or branch of U.S. government shall and must take action to redress and/or respond to such a petition within 120 days of the submission of such a grievance, inclusive of the days deemed for verification of such signatures being those of a registered voter. Such registered voter signatures shall and must be verified by the registered voter’s Secretary of State regarding the validity of the signature being that of a State’s registered voter within 30 days of such a request by a Representative,Senator, or branch of the U.S. government or be cited for Contempt of Congress and the established procedure associated with such a citation be followed. In the case where petitions are submitted that diametrically opposed to one another, the petition with the larger number of signatories will be higher in priority for redress and/or response but in no instance will such opposing petitions not be acted upon within the 120 day time limit. Failure or a Senator or Representative or branch of the U.S. Government to redress and/or respond to such a petition shall be guilty of violating Title 18 U.S.C. § 241, Conspiracy against rights of citizens, and subject to the penalties associated with such code infraction."
If you will not sponsor or co-sponsor such legislation, please state why you will not.
Secondly, will you support such legislation if it is introduced?
I find it ludicrous and abhorrent that the Rules of the House of Representatives, the body of Congress most closely related to representing the people, indicate that while every citizen has the absolute right to petition Congress for redress of grievance, Congress is neither morally nor legally obligated to respond.
Given the anger and frustration citizens feel towards Congress -and government as a whole- and questioning if Congress really represents the people any longer, such legislation is absolutely necessary if the idea of a representative democracy is to be of any real meaning.
I look forward to your response and, iterating, request a written response even if I am not a constituent of your district or State.
Sincerely,
signature
address
City,State,zipcode"
I’ll be sending this letter via certified (making sure it gets there), registered (I want to see who signs for it so I can do a follow up if no response if forthcoming) to the following Congress members:
U.S. Representative Brian Bilbray
2348 Rayburn House Office Building
Washington, D.C. 20515
————-
U.S. Representative John Conyers, Jr.
2426 Rayburn H.O.B.
Washington, DC 20515
——————
U.S. Representative Dennis J. Kucinich
2445 Rayburn HOB
Washington, DC 20515
—————-
U.S. Representative Alan Grayson
1605 Longworth HOB
Washington, DC 20515
——————–
U.S. Representative Bob Filner
2428 Rayburn House Office Building
Washington, DC 20515
————————-
Senator Barbara Boxer
112 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
——————-
Senator Dianne Feinstein
331 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
———————
Senator Russell Feingold
506 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
——————-
Senator Sherrod Brown
713 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
——————–
Senator Bernard Sanders
332 DIRKSEN SENATE OFFICE BUILDING WASHINGTON DC 20510
———————–
Please feel free to copy the letter and send it to your Senators and Representative if you wish to see whether they actually have the idea that representative democracy is something they truly support.
Last week I wrote a diary about an idea to bring about change. This is the follow-up to that diary.
Borrowing from that diary, "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof,or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances."
The FIRST Amendment !!
BUT the Rules of the House of Representatives indicate that while every citizen has the absolute right to petition Congress for redress of grievance, Congress was neither morally nor legally obligated to respond.
So I proposed that "each Senator and Representative be asked to introduce a law requiring that whomever is petitioned for a redress of grievance (and in the case of Congress, such petitions be presented by a Representative or Senator to the Speaker of the House or Senate majority and minority leaders) to take action to redress/respond to such grievances within 120 days of the receipt of such a petition."
Here is the letter I will be sending to my Representative and Senators and to other Representatives and Senators I wish to have respond.
I urge everyone to copy my letter and send it to your Representative and Senators (and others you wish a response from) and make note of whether a response is received and ,if a response is received, what the response said.
"Dear Representative xxxxx(or Senator xxxxx);
I am writing to you requesting a written response to a few questions.
First, will you sponsor or co-sponsor the following legislation given the anger and frustration citizens feel towards Congress -and government as a whole- and questioning if Congress really represents the people any longer:
"Upon presentation to the individual or branch of U.S. government of a petition seeking a redress of grievance consisting of the signatures of 100,000 registered voters, such an individual or branch of U.S. government shall and must take action to redress and/or respond to such a petition within 120 days of the submission of such a grievance, inclusive of the days deemed for verification of such signatures being those of a registered voter. Such registered voter signatures shall and must be verified by the registered voter’s Secretary of State of the validity of the signature being that of a State’s registered voter within 30 days of such a request by a Representative,Senator, or branch of the U.S. government or be cited for contempt of Congress and the established procedure associated with such a citation be followed."
If you will not sponsor or co-sponsor such legislation, please state why you will not.
Secondly, will you support such legislation if it is introduced?
I find it ludicrous and abhorrent that the Rules of the House of Representatives, the body of Congress most closely related to representing the people, indicate that while every citizen has the absolute right to petition Congress for redress of grievance, Congress is neither morally nor legally obligated to respond.
I look forward to your response and, iterating, request a written response.
Sincerely,
xxxxxxxxxx"
I will be sending this to my Senators Feinstein and Boxer and Representative Bilbray (a true Rethug).
I’ll also be sending this to Grijalva, Kucinich, Pelosi, Barbara Lee, Bob Filner, Alan Grayson, Jesse Jackson, Jr.,Barney Frank,Jerry Nadler, Pete Stark, Sherrod Brown, Tom Udall, Russ Feingold, Bernie Sanders,Jim Webb, and Harry Reid.
I will add the following to the letter for those congress critters whose State/District I don’t live in -and I suggest others do the same- because they tend to ignore correspondence from other than their constituents:
"While I recognize that I am not a constituent of yours, I am hoping you will reply given the disgust most American’s have towards Congress and government and in recognition that sooner or later a constituent of yours WILL be asking you the same questions."
It will cost about $5 per letter but given that change doesn’t come easily, such seems a small price to pay if such legislation can get enacted. Otherwise we’ll be stuck in the current situation we have. Just imagine if such legislation had been in place before "healthcare" became ‘enacted’.
"Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances."
All well and good BUT despite the SCOTUS ruling that the right to petition includes under its umbrella the right to sue the government,and the right of individuals, groups, and possibly corporations to lobby the government, the Rules of the House of Representatives indicate that while every citizen has the absolute right to petition Congress for redress of grievance, Congress was neither morally nor legally obligated to respond.
And THAT is what MUST end. To such an end I propose that FDL sponsor a campaign where each Senator and Representative be asked to introduce a law requiring that whomever is petitioned for a redress of grievance (and in the case of Congress, such petitions be presented to the Speaker of the House and Senate majority and minority leaders) to take action to redress/respond to such grievances within 90 days.
As an example of such a law: "Upon presentation to the individual or branch of U.S. government of a petition seeking a redress of grievance consisting of the signatures of 50,000 registered voters, such an individual or branch of U.S. government shall and must take action to redress and/or respond to such a petition within 90 days of the submission of such a grievance, inclusive of the days deemed for verification of such signatures being those of a registered voter. Such registered voter signatures shall and must be verified by the registered voter’s Secretary of State of the validity of the signature being that of a State’s registered voter within 30 days of such a request by an individual or branch of U.S. government or be cited for contempt of Congress and established procedure associated with such a citation be followed.
50,000 is a far greater number than that used for polls citing one thing or another in terms of the public’s perspectives and certainly would be reflective statistically of a far greater number having such a grievance.
If nothing else, such a campaign would allow citizens to see just exactly where a Congress person stands on the idea that they are there to represent the people, not just large campaign contributors.
On other matters……I received the following from a newsletter I get.
So the Fed stopped buying Mortgage Backed Securities, and people are wondering if this will affect mortgage rates. There’s been plenty of whistling past the graveyard, guesswork and denial, where so-called experts have been trying to tell us that there will be minimal – if any – change to rates.
That pipe dream is just nonsense.
Let’s look at what we can expect for mortgage rates and the overall Bond market in the months ahead. During the past fifteen months, the Fed purchased $1.25 Trillion in MBS, which represented 80% of the mortgage market. Prior to this program, mortgage rates were above 6%. Now that the Fed program has ended, it’s reasonable to assume that mortgage rates will rise back towards those levels.
Just How Much Money is $1.25 Trillion?
In today’s financial headlines – the word Trillion is often casually thrown around. So much so, that it’s easy to lose perspective on how much money this really represents. Picture a stack of $100 bills. It might surprise you to know that it only takes a stack four inches high to be worth $100,000. So $1,000,000 would be a stack of $100 bills 40 inches tall. How about a Billion? Well, you would have to stack $100 bills up to the top of the Empire State Building…twice…in order to reach a Billion. So to picture $1.25 Trillion represented by a stack of $100 bills – that stack would be 850 miles high. If you could turn that stack on its side and were able to drive alongside it, it would take you longer than 14 hours to reach the end. If you laid those $100 bills down side by side, they would travel around the world 50 times. We’re talking about a lot of money here.
The Fed’s purchasing influence has been significant. And now in the absence of this safety net, Bond prices and mortgage rates will experience greater volatility and a gradual worsening. Adding to this is the fact that the Fed will, albeit gradually, begin to sell some of their mortgage holdings, as they reverse their quantitative easing measures. It doesn’t take a rocket scientist to see that this will pressure Bond prices…but read on, because there are additional factors at play, which will influence Bond prices lower (the ‘yield’(return on investment) will go higher) and mortgage rates higher.
WHAT MOVES MORTGAGE RATES?
Mortgage Rates are not pegged to the 10-year Treasury Note, as some have reported in the media. Those in the know do understand that mortgage rates are based on the pricing of Mortgage Backed Securities (MBS)…and these Mortgage Bonds are influenced by many different factors.
They respond quite well to technical signals as well as Stock market volatility, as money can be drawn from or parked into Mortgage Bonds. Certainly, the news and inflation implications also play a heavy role in influencing Mortgage Backed Securities.
And just like the aforementioned influential factors, Treasuries can also play a role in the price direction of Mortgage Bonds. Last year, the 10-year Treasury Note was at approximately 2.2% and has since moved towards 4%. During this time, mortgage rates have been virtually unchanged. But now, Treasuries are offering yields that are close to the current Mortgage Backed Security rates, which are offered to investors.
Let’s take a moment to understand the difference between the mortgage rate a borrower pays and the coupon yield on a Mortgage Backed Security that an investor receives. If a borrower pays 5.25% on their loan, only 4.5% of that is passed on as a coupon yield to the investor. This is because the mortgage loan servicer (that’s who you make your payment to) takes a piece of the action. Additionally – the aggregators of these loans, like Fannie Mae and Freddie Mac take a piece as well. And let’s not forget the folks on Wall Street, who need to get paid for underwriting, securitizing and selling this paper.
We know that Treasuries are backed by the full faith and credit of the US Government and are free from state income tax. And the 10-Year Treasury Note, while clearly not pegged to Mortgage Backed Securities, does offer investors a competitive alternative with a similar maturity period to Mortgage Backed Securities. But because of greater safety and tax advantages, the 10-Year Note will always trade at a lower yield than Mortgage Backed Securities, and therefore put a floor beneath how low Mortgage Backed Security coupon yields and corresponding home loan rates for borrowers can go.
The US is spending at an unprecedented rate – and its spending money it doesn’t have. This means that more and more Treasuries will continuously need to be auctioned off. And in order to entice buyers to keep absorbing this supply, yields will very likely need to continue higher, just as they have for over the past year.
Additionally – sovereign debt has come into question. Downgrades in the sovereign debt of both Greece and Portugal are a warning to the US that the same can happen here, which would drive the cost of borrowing much higher. Our government currently spends $1.49 for each $1.00 it brings in. Our debt is now 57% of GDP…and rising. Does anyone really believe that Treasury yields are headed lower? As Treasury yields move higher from their current levels, mortgage backed security coupon yields will also need to move higher in order for investors to want to purchase them.
THE EVER-IMPORTANT CARRY TRADE
While the Fed’s end of the MBS purchase program and eventual selling of MBS – along with an almost certain move higher in Treasury yields – all tell us that mortgage rates are headed higher, there is another important element that could have an even greater influence in moving yields higher and prices lower throughout the Bond market. It’s called an unwinding of the "carry trade." The low interest rate environment in the US has provided fertile ground for the carry trade, where large investors can borrow at very low rates, and leverage into higher yields, resulting in huge returns. (WHICH IS EXACTLY WHAT THE BANKS HAVE BEEN DOING !!)
Let’s take an example: An investor wishes to purchase $1M in Mortgage Bonds yielding 4.5%. This would provide $45,000 as an annual return. In order to make the purchase, the investor puts up only 10% of $1M, or $100,000 in cash – and borrows the other $900,000 at the Fed Funds Rate + 2%, for example – which would be a borrowing cost of 2.25% or $20,250. This investor receives a $45,000 return, but subtracts a $20,250 cost to borrow $900,000 – leaving them with a net return of $24,750. Remember, the investor needed only to invest 10% of the $1M purchase – or $100,000 in cash. This gives the investor a whopping 24.75% return on their investment in a boring little old Mortgage Bond. And of course, this "carry trade" can be used in other securities as well.
While the investor understands that there are always market risks at play – the juicy 24.75% yield cushion gives them much added comfort to stay in the trade. But the biggest risk for the investor is if their borrowing costs – which are based on the Fed Funds Rate – were to rise.
When the Fed starts to hike rates, it will signal the beginning of a tightening cycle. A few Fed hikes can cause the yield cushion to quickly evaporate…and the decline in Bond values from overall higher yields could turn the trade from highly profitable to highly costly in a very short period of time. So why do these carry trade investors have such a care free attitude and confident air? It’s because Ben Bernanke and the Fed have assured them that there is nothing to fear. How did the Fed do that?
Via "Fed Speak," these carry trade investors hear that "conditions warrant exceptionally low rates for an extended period of time." Translation: your biggest fear – that a hike in the Fed Funds Rate, which increases your borrowing costs and wipes out your gains – won’t happen anytime soon. It’s this "extended period" verbiage that is keeping the carry trade in place. When the Fed removes the "extended period" language, this will signal that hikes will begin in the near future, and that risk will prompt investors to begin to "unwind" their carry trade holdings. This will include the selling of Mortgage Backed Securities, which will assuredly push yields higher still.
When will the Fed remove the "extended period" language? It may happen sooner than you think. Kansas City Fed President Thomas Hoenig has officially dissented to the "extended period" language at the last two Fed meetings. And recently, St. Louis Fed President James Bullard, while yet to officially dissent, has stated that he feels "extended period" is inappropriate language and should be replaced by "data dependent." And there have been grumblings from other Fed members, who are growing more concerned that leaving rates too low for too long can spawn asset bubbles or inflation down the road.
WHAT IT ALL COMES DOWN TO
When all the factors are considered – the chances of higher interest rates are a virtual lock. And anyone in the market to borrow should consider acting sooner rather than later. With such low rates still in our hands…and all these various factors pointing at the inevitable fact of rates moving higher…you have to wonder what people sitting on the sidelines are waiting for?
It brings to mind the closing scene of the movie "Dumb and Dumber," where two good-hearted but incredibly stupid heroes Lloyd and Harry are hitch-hiking, when along pulls up a bus full of beautiful Hawaiian Tropic models in bikinis. The models tell Lloyd and Harry that they are looking for two "oil boys" to lube them up before each of their photo shoots on the tour. Lloyd and Harry explain that there is a town down the road, where they should be able to find two lucky guys to help them out. As the bus pulls away, Lloyd and Harry look at each other and declare that one day their opportunity will come – they just have to keep their eyes open.
Here’s hoping you have your eyes wide open to take advantage of this fleeting opportunity…before it’s gone."
Add to that information this news story:
"The U.S. dollar’s share of global currency reserves rose to 62.1 percent in the fourth quarter of 2009 while the euro’s share dropped to 27.4 percent, the International Monetary Fund said March 31 in a quarterly report. The two-year Treasury yield rose 0.19 percentage point to 1.14 percent and the dollar advanced 2.2 percent to $1.4321 per euro during the period.
Interest-rate futures traded at the CME Group exchange show that expectations for an increase in the central bank rate by November have risen to 71 percent from 62 percent a month ago. Of the 18 primary dealers that serve as counterparties to the Fed in open market operations, 10 are forecasting an increase in the central bank’s target rate by the end of the year."
and you can see the validity of the argument for higher interest rates and how the banks are playing the system to further enhance their balance sheets on the backs of taxpayers.
AND LASTLY, "The social media clouds of cyberspace we rely upon today have a dark, hidden core," said Professor Ron Diebert, director of the Citizen Lab at the University of Toronto’s Munk Centre, launching the report.
"There is a vast, subterranean ecosystem to cyberspace within which criminal and espionage networks thrive."
He said the network had reached into the "upper echelons of the Indian security establishment" and should act as a "wake up call" to governments to co-operate on cybersecurity."
"She added the researchers have not formally contacted China, although the researchers said they had contacted the country’s Computer Emergency Response Team (Cert)."
"We would expect that kind of statement," said Professor Diebert.
"Have a look at that report and make up your mind whether you think it is groundless."
The researchers said that the network – known as a botnet – exploited social networking and cloud computing platforms, "including Google, Baidu, Yahoo, and Twitter" to infect computers with malicious software, or malware.
This allowed hackers to take control of the PCs of several foreign ministries and embassies across the world.
A more complex network of "command and control" computers was used to control the infect computers."
I hope letsgetitdone, masaccio, hugh, rayne,etc. chime in on the financial aspect of this diary and that the FDL powers that be seriously consider the redress of grievance petition idea.
The First Amendment to the United States Constitution is the part of the Bill of Rights that expressly prohibits the Congress from making laws "respecting an establishment of religion", prohibiting the free exercise of religion, infringing the freedom of speech, infringing the freedom of the press, limiting the right to peaceably assemble, or limiting the right to petition the government for a redress of grievances.
Yet, what happens when one does "petition the government for a redress of grievances"?????
Robert L. (Bob) Schulz, the founder of We the People Foundation for
Constitutional Education and We the People Congress.
(www.wethepeoplefoundation.org and www.wethepeoplecongress.org/index.php)
is the organizer. For 14 years, Bob has been petitioning the government for Redress of Grievances – as per our First Amendment Right – and demanding that the government obey the Constitution and be accountable to the people.
With few exceptions, none of our "elected" officials have responded.
Bob also filed the 50 state NCEL (National Clean Election Lawsuit)
against all 50 states and Boards of Elections in 2007 for violating citizens’ Constitutional right to know with certainty that their vote was properly counted through the use of electronic voting machines.
*This case will be going to jury trial in 2010 in New York! *
As a result of the governments’ continued Constitutional violations, Bob has organized *Continental Congress 2009* which will occur from November 9 – 22, 2009 in St. Charles, Illinois, at Pheasant Run. There, three delegates elected from each state (as well as Washington D.C.) will gather to document the violations of our law, debate the options the People possess to peacefully resist the tyrants, and emerge with a plan for The People to restore Constitutional Order and the Light of Liberty, as Bob describes:
In our hearts, we know something is very, very wrong with America. Most people are too involved with the burdens of work and everyday life.
Beyond this, we are afraid for our country, our future, our families, and our values as a People. The truth, however, is that [our] problems are the natural result of decades of many violations of the Constitution, all of which have had devastating impacts on The People.
*The delegate election for this historic event will occur in most major cities on October 10th with hand-counted paper ballot elections. CC2009 organizers in each state are currently looking for help in staffing their "Voting Centers".*
To guide all election volunteers, VoteRescue has written the "Election Procedures Handbook for the Election of Delegates to the Continental Congress 2009 which can be found for reading and/or downloading at http://www.cc2009.us/resources/election-handbook .
The Handbook details, step-by-step, election procedures that are quite simple, easily understood and totally verifiable, the polar opposite of our "official" public elections which have been hijacked for years by a handful of corporations through the use of their electronic voting systems which can be tampered with undetectably and which count all our votes in secret, hidden from any public scrutiny whatsoever.
We hope you will join with your fellow citizens to help make the CC2009 Hand-Counted Paper Ballot Delegate Election an enormous success and an example for future elections in our country!
If anyone on this list is willing to help at a CC2009 Voting Center in their area of the country, we ask that they please contact us by email or phone as soon as possible – and we will connect you to a CC2009 volunteer near you.
With our sincerest thanks,
Vickie Karp and Karen Renick, Co-Directors, VoteRescue,www.voterescue.org
MyFDL is the community site of progressive political blog Firedoglake. Anyone can participate by writing a diary, commenting on others’ diaries, or joining groups to find other people in your area. Content posted to MyFDL is the opinion of the author alone, and should not be attributed to Firedoglake.