Mario L. Soto

You asked me to provide you with comments to your friend's e-mail putting blame on Bush on what has happened in the housing market and the current financial crisis. For the last couple of years, I have studied and researched the negative trends in the housing market and the banking system, so I feel like I'm a little qualified to provide you with my input. However, rather than limiting my input to just that subject, I'm going to take the liberty to comment on your friend's entire e-mail.

I also want to apologize for having taken so long to respond but, unlike your friend who just states things as facts without anything to back them up, I wanted to make sure that whatever I said in my response I could back up and could be easily checked and double-checked. So, I will provide you with quite a few facts. I will try to keep this as simple as I can so I don't "lose" her but economics is a complicated subject and unfortunately not a precise science.

First let me say that she's correct in that Americans should be sending each other facts (she says "real facts" but all facts are real) and not jokes. However, except for a couple of her comments, the rest of her e-mail is long on opinions and Obama campaign "sound-bites" but totally lacking in facts. Sadly, like many people, she's appallingly gullible or misinformed or both, and she just repeats Obama campaign sound-bites like a parrot.

Before I start, I want to make it clear that I'm not trying to fully exonerate the Bush administration. So, let's get that out of the way. In my opinion, Bush has made three major mistakes during his administration:

1. The response to 9/11 and the "War on Muslim Extremism:" Immediately after 9/11, the US should have gone into a full war footing and started a gradual increase in the size of the Armed Forces as John McCain called on many occasions following 9/11. We are short-handed in fighting a two-front war in Afghanistan and Iraq (which Obama mistakenly argues that they are separate wars); and heaven help us if we have to go to war with Iran over their nuclear program because we simply do not have enough troops.

2. The number of combat troops that were initially deployed in Iraq: they were not enough. History has shown us that it is a lot easier to invade a country than to occupy one. A recent example is what happened to the Germans about sixty years earlier when they occupied Europe during WWII. They tied down nearly twice as many divisions in the countries they occupied than it took them to defeat the armies defending those same countries.

3. Cutting taxes and running budget deficits at a time of war: while President Bush had no choice but to cut taxes early in his administration in response to the recession caused by the burst of the "Internet Bubble" at the end of the Clinton administration and what happened to the economy after 9/11 (eight months into his administration) but tax revenues should have been increased and/or government spending cut in other areas once the economy started to expand again. Incidentally, Lyndon Johnson and the Democrats did the same thing during the Viet Nam War and it had a disastrous impact on the economy in later years. In addition to not raising tax revenues, Johnson increased the size of government by funding the "Great Society." Jimmy Carter got blamed for the "stagflation" that happened during his administration but that was nothing but the result of horrendous economic policy by the Johnson administration 8 to 12 years earlier. In defense of Bush and Johnson, raising taxes to fund unpopular wars would have required the cooperation of Congress, which more than likely would not have occurred. However, Bush and the Republicans in control of Congress, much like Johnson and the Democrats at the time of the Viet Nam war, let government spending increase without any regard to what these deficits might do to the economy in later years. Sadly, though, now that Democrats have controlled Congress for the last two years, budget deficits and “pork barrel” spending continue to grow out of control.

· "it has been proven that Bush is at fault for the housing market (sic) as he demanded very early in his presidency that the banks find some way to put a large number of people in homes to realize the American Dream in order to make his time in office look good. No restrictions on the banks and how they screwed the public (who also should have known better themselves) - government knew exactly what was going on."

That statement is not only factually incorrect, it is totally wrong. Where is her proof and where are her facts? These are the facts:

The housing crisis has its origins in the Community Reinvestment Act (“CRA”), passed into law by the Democratic controlled 95th United States Congress in 1977 and signed by then president Jimmy Carter. Following the Watergate scandal, the Democrats had a stranglehold on Congress with huge majorities in both the House (293 Democrats to 143 Republicans) and the Senate (61 Democrats to 39 Republicans). The intent of the act was to make housing and commercial loans more affordable to minorities or so called “under-served” populations. The act requires banks and savings and loan associations to offer credit through an entire market area and prohibits the practice of “red-lining” which occurs when these institutions target their services to only the wealthier neighborhoods.

During the congressional hearings held for this piece of legislation every banking representative that testified before Congress opposed the legislation, except for a banker representing a bank (ShoreBank) in Chicago. The reason was obvious; they did not want to subject their institutions to the higher risk of lending money to much riskier clients. Nonetheless, the Democratic controlled Congress passed the law.

Another important point on the bill is that it encouraged lending by two Government Sponsored Enterprises (“GSEs”): the Federal National Mortgage Association (“Fannie Mae”) which enabled mortgage companies, savings and loans, commercial banks, credit unions, and state and local housing finance agencies to lend to home buyers; and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) which buys mortgages on the secondary market and sells them as mortgage-backed securities on the open market. The bill also required that the record of financial institutions be evaluated to determine if they had met the needs of the entire community. These evaluations are then used by the government when an institution applies for deposit facilities, or when it wants to merge with or acquire another institution.

By the way, community organizations, such as ACORN (the same organization that is being investigated in over 12 states for allegations of voter fraud) provide feedback to regulators in evaluating the financial institutions. ACORN and similar ultraliberal community organizations not only provide input to regulators but they actually have intimidated banking officials (by demonstrating in front of their banks and even banking officials’ homes) into lending money to very risky potential clients.

ACORN not only intimidated banks into lending to “credit challenged” clients but they also intimidated Congress. As ACORN ran its campaigns against local banks, it quickly hit a roadblock. Banks would tell ACORN they could afford to reduce their credit standards by only a little - since Fannie Mae and Freddie Mac, the federal mortgage giants, refused to buy up those risky loans for sale on the "secondary market."

That is, the CRA wasn't enough. Unless Fannie and Freddie were willing to relax their credit standards as well, local banks would never make home loans to customers with bad credit histories or with too little money for a down payment.

So ACORN's Democratic friends in Congress moved to force Fannie Mae and Freddie Mac to dispense with normal credit standards. Throughout the early '90s, they imposed ever-increasing subprime lending quotas on Fannie and Freddie.

But then the Republicans won control of Congress - and Rep. Marge Roukema (R-NJ) scheduled a hearing to make changes to the CRA and to examine bank lending practices to risky clients. ACORN went into action to protect its golden goose.

It struck as Roukema aired her concerns at that hearing. A mob of about 200 thugs, led by ACORN President Maud Hurd, stood up and began chanting, "CRA has got to stay!" and "Banks for greed, not for need!" The “protesters” then demanded the microphone.

With the hearing interrupted and the demonstrators refusing to leave, Roukema called the Capitol Police, who arrested Hurd and four others for "disorderly conduct in a Capital building" - a charge carrying a penalty of a $500 fine, six months in prison or both. As the police arrived, two of the protesters menacingly approached Roukema's desk, still demanding the hearing microphone.

Requests to the Capital Police to release the activists from Sen. Ted Kennedy (D-Mass.) and Rep. Joe Kennedy (D-Mass.) failed. Then ultraliberal Rep. Maxine Waters (D-Calif.) showed up at the jail and refused to leave until the protesters were released; the Capital Police relented. This is the same Maxine Waters who just a few years ago kept stating that there were no problems with Fannie Mae and that Congress and regulators should not waste time investigating it.

Until 1995, the law was loosely enforced and financial institutions were only required to advertise in local minority newspapers or sit on the boards of local community groups. However, in 1993 Bill Clinton ordered that new regulations for the CRA be drafted. The purpose of the new rules was to loosen mortgage credit for inner city and distressed rural communities. Additionally, the new rules intended to racially integrate up until then predominantly white neighborhoods by lowering credit requirements for minorities that otherwise would not have qualified for a mortgage loan, either because of a lower credit score or lower income. The new regulations went into effect on January 31, 1995. The new regulations require numerical assessments to get a satisfactory CRA rating; using federal home-loan data broken down by neighborhood, income group, and race; encouraged community groups to complain when banks were not loaning enough to specified neighborhood, income group, and race; and allowed community groups that marketed loans to targeted groups to collect a fee from the banks (See The Trillion-Dollar Bank Shakedown That Bodes Ill for Cities by Howard Husock, Winter 2000, in the City Journal, publication of the Manhattan Institute for Policy Research).

As a result of these new regulations, CRA loans increased by 39% between 1993 to 1998 while other loans increased by only 17% during the same time period (See “Treasury Department Releases CRA Study” dated April 19, 2000 by the US Treasury Department).

Interestingly, the liberal newspaper New York Times published an article written by Steven Holmes in 1999, which expressed concern about the risky loans being made by Fannie Mae in response to pressure by the Clinton administration. Here is a copy of that article (you may need to click here to see it):

In 2002, there was an interagency review of the CRA regulatory changes implemented by the Clinton administration. The review proposed a relaxation of the regulations implemented during the Clinton administration; so that lending institutions would not be forced to make riskier loans to riskier clients. The new rules went into effect in September 2005. These new rules were opposed by a contingent of Democrats led by Barney Frank (D – Mass), who is now the chairman of the House Financial Services Committee (this is also the same Barney Frank who about 20 years earlier had his male prostitute lover, Steve Gobie, conducting a male prostitute escort business from Frank’s apartment). Frank and other Democrats in the Committee wrote a letter to the Office of Thrift Supervision (one of the many governmental agencies charged with enforcing the CRA) protesting the changes (See Press release and letter released by a contingent of "House Democrats").

In the meantime in 2003, Frank also opposed Bush administration and Congressional Republican efforts for the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis. Under the plan a new agency would have been created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac who were the two largest players in the mortgage lending industry. During congressional hearings conducted at the time, Frank said: "These two entities, Fannie Mae and Freddie Mac, are not facing any kind of financial crisis." He added, "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing." (See “New Agency Proposed to Oversee Freddie Mac and Fannie Mae,” New York Times article dated September 11, 2003. Here is the link: http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63&sec=&spon=&pagewanted=2 ). Also see the following link for an excerpt of Frank’s comments during those hearings: http://www.taxfoundation.org/blog/show/23617.html

Additionally, in 2005, the Senate Banking Committee, then under Republican control, adopted a strong reform bill, introduced by Republican Sens. Elizabeth Dole, John Sununu and Chuck Hagel, and supported by then chairman Richard Shelby. The bill prohibited the GSEs from holding portfolios, and gave their regulator prudential authority (such as setting capital requirements) roughly equivalent to a bank regulator. All the Republicans on the Committee supported the bill, and all the Democrats voted against it. John McCain endorsed the legislation in a speech on the Senate floor. Barack Obama, like all other Democrats, remained silent. The following is the text of the McCain speech:

“Mr. President, this week Fannie Mae’s regulator reported that the company’s quarterly reports of profit growth over the past few years were “illusions deliberately and systematically created” by the company’s senior management, which resulted in a $10.6 billion accounting scandal.

The Office of Federal Housing Enterprise Oversight’s report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae’s former chief executive officer, OFHEO’s report shows that over half of Mr. Raines’ compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac.

The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator’s examination of the company’s accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform.

For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac–known as Government-sponsored entities or GSEs–and the sheer magnitude of these companies and the role they play in the housing market. OFHEO’s report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO’s report solidifies my view that the GSEs need to be reformed without delay.

I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.

The bill never made it out of committee; it was blocked by the Democrats led by Sen. Chris Dodd (D-Conn). Chis Dodd, the ranking member of the Banking Committee and now its chair, was in the middle of receiving preferential loan treatment for his Connecticut and Washington homes from Countrywide Mortgage, one of the companies gaming the system in the credit crisis (See “Angelo's Angel”, Wall Street Journal article published June 19, 2008).

Note that in his speech Mr. McCain mentions Franklin Raines. Mr. Raines was Bill Clinton’s Budget Director between 1996 and 1998. Bill Clinton later appointed him to the post of Fannie Mae president in 1999. He served in that position until 2004 when he was forced to take “early retirement” at the time the 2004 Fannie Mae accounting scandal unraveled; and while under investigation by the Securities and Exchange Commission. Mr. Raines made about $90 Million in compensation for his five years at Fannie Mae. Most of Mr. Raines’ compensation, and that of other executives, was based on how well Fannie Mae performed financially which provided an incentive to distort the company’s financial results. Mr. Raines and two other Fannie Mae executives were later fined a combined $3M. In addition to the fines paid by the three executives, Fannie Mae itself paid $300M in fines (The link to the charges brought forth against Mr. Raines and the other two Fannie Mae executives is: http://fl1.findlaw.com/news.findlaw.com/usatoday/docs/employ/raines121806charges.pdf).

The following is a link to video clips made during the 2004 Congressional hearings investigating the bookkeeping practices of Fannie Mae and Freddie Mac. The video concludes with some recent comments made by Bill Clinton pointing the finger at the Democrats in Congress for failing to heed the Republicans’ concerns. You and your friend can draw your own conclusions: http://es.youtube.com/watch?v=_MGT_cSi7Rs&NR=1

Incidentally, on July 16, 2008, the Washington Post reported that Franklin Raines had "taken calls from Barack Obama's presidential campaign seeking his advice on mortgage and housing policy matters." (See

Also, in an editorial in August 27, 2008 titled "Tough Decision Coming", the Washington Post editorial staff wrote: "Two members of Mr. Obama's political circle, James A. Johnson and Franklin D. Raines, are former chief executives of Fannie Mae.” At the time the Washington Post articles were published, the Obama campaign did not contradict the articles. However, the Obama campaign now denies the claims when the corruption at Fannie Mae has come to light.

The other character, James Johnson, who led Mr. Obama’s vice-presidential search committee, was Fannie Mae’s chairman and chief executive officer from 1991 to 1998. An Office of Federal Housing Oversight (OFHEO) report from September 2004 found that, during Johnson's tenure as CEO, Fannie Mae had improperly deferred $200 million in expenses. This enabled top executives, including Johnson and his successor, Franklin Raines, to receive substantial bonuses in 1998 (See ^{http://en.wikipedia.org/wiki/James_A._Johnson_(businessman) -
cite_note-1#cite_note-1}). A 2006 OFHEO report found that Fannie Mae had substantially under-reported Johnson's compensation. Originally reported as $6-7 million, Johnson actually received approximately $21 million (See High Pay at Fannie Mae For the Well-Connected, Washington Post, December 23, 2004).

Moreover, the non-partisan Center for Responsive Politics lists Barack Obama as the second highest recipient of Fannie Mae and Freddie Mac contributions from 1989 to 2008 with a total of $126,349 (this sum applies only to the four years that Obama has served as a US Senator). Only Chris Dodd, who has served as a US Senator through the entire period, has received more contributions at $165,400 (See http://www.opensecrets.org/news/2008/09/update-fannie-mae-and-freddie.html).

Opinions/Comments: this doesn’t defend or criticize the merits of the Community Reinvestment Act but it shows that sometimes what may be well intended legislation has horrific consequences, especially when not well thought-out and when administered by corrupt government officials, politicians, businessmen, organizations gaming the system and plain individuals. Let’s not forget the mortgage lenders and financial institution executives who benefited from making these risky loans by earning steep bonuses, or the mortgage brokers and real estate agents who also benefited and encouraged borrowers in many cases to commit fraud, or the borrowers who knowingly or unknowingly lied in the mortgage applications. They all share blame. However, most of the blame rests squarely on the shoulders of the Democrats in Congress and appointees of the Clinton administration. Let’s not forget either the role that some of Obama’s acquaintances also had on this debacle (I will provide your friend with additional details later on how Obama was and is still linked to ACORN).

Your friend stated: “I can't respect my President or any office holder for screwing the public.” Well, I guess she’s going to start losing respect for a lot of former, current and potentially future Democratic office holders who have thoroughly screwed the public.

· “The gas situation is the same - the good old boys are all oil men and are pocketing a big share of those windfall profits.”

The Democrats led by Obama as well as some Republicans like to beat up on the oil companies for the high oil prices and “windfall profits.” This is a great populist slogan that resounds well with the poorly informed and the very gullible but let’s first analyze the real reason for the high oil prices.

Let’s start with the very basics. This is simple Economics or Economics 101: in free markets, the “law of supply and demand” sets prices. In simple terms, the higher the demand of a product (with everything else held constant), the higher its price. Conversely, lower demand sets a lower price. On the other side, increases in supply (with everything else held constant) will bring a lower price; and decreases in supply bring higher prices. Without getting too deep into this: the price of a product is the point of intersection of its demand curve and its supply curve. Over time, these curves and the point of intersection (i.e., the price of the product) change as consumers and suppliers adjust to each other. These adjustments occur only when there are many suppliers (on the supply side) and many consumers (in the demand side) in the marketplace.

The problem with oil is essentially two-fold: 1. Domestic supply is limited (thanks to the efforts of most Democrats led by Gore, Kennedy and Obama; radical environmentalists; and some Republicans, including McCain at one time) and 2. OPEC controls foreign imports. OPEC is a cartel (they essentially act as a monopolist or single supplier). Therefore, the adjustments on the supply side that I mentioned above do not occur since OPEC does not let the free market move the supply curve. OPEC moves it at will at their convenience. As a result, unless OPEC makes a change in the world’s oil supply, prices are determined by changes in demand. That’s why as world oil demand has increased, so have prices.

So, how about “windfall profits?” Well, they can be curved one of two ways: by controlling price, which Richard Nixon did in the 1970’s after the Arab Oil embargo. Because at the time the government artificially held down prices, all that the price controls produced were gasoline shortages and long lines at the pump (the artificially low price for oil produced higher demand for the product while supplies were lower). The second method is by imposing a tax on the so called “windfall profits.” That also was tried before with similar bad results. Jimmy Carter did it in the early 1980’s. Since oil production became less profitable to American oil companies, they produced less oil concentrating their efforts in other activities (i.e., marketing and distribution) that were free of the “windfall” tax. So, instead of producing more oil domestically, we became even more dependent on foreign oil.

While these were popular measures at the time they were implemented, it was obvious that both Presidents received bad economic advice. I distinctly remember the long lines during the Nixon years. I also remember well that what the Carter “windfall profit tax” accomplished was increased dependence on foreign oil. This over time has proven disastrous for the American economy.

It is true that Exxon’s profits have been at record highs; but it is also true that the taxes they have paid have also been at record highs. In fact, the taxes Exxon has paid have been greater than Exxon’s profit after taxes (between 2003 and 2007, Exxon paid $64.7 billion in U.S. taxes, exceeding its after-tax U.S. earnings by more than $19 billion). Additionally, these profits are absolute numbers based on increased American consumption of oil (i.e., the more one sells, the more one’s profits increase in total dollars). However, Exxon’s profit margins (profit as a percent of sales revenue) have remained fairly reasonable at around 10% compared to those of other major corporations.

This also brings up the question of what constitutes a “windfall profit.” Is it what some government bureaucrat or some politician decides? And if one really believes that the government should control a corporation’s profits, then why stop with the oil companies only?

Let’s compare the oil and gas industry average profit margin in 2007 with that of other industries:

Industry	Profit Margin Percentage
Oil and Gas	8.3
Manufacturing (excluding Auto Makers)	8.9
Chemical	12.7
Computers	13.7
Electronics and Appliances	14.5
Pharmaceuticals	18.4
Tobacco and Beverages	19.1

So, Exxon’s 10% doesn’t seem that unreasonable. But letât™s not stop there. Let’s compare Exxon with other corporations. Berkshire Hathaway’s (Warren Buffet’s corporation) profit margin was 11.47% the same year; Google’s was 25%. Should these companies have an excessive profits tax imposed on them as well? All this begins to smell to me as being UNAMERICAN.

You should also ask your friend a philosophical question: Obama and the Democrats started mentioning windfall profit taxes when oil was selling around $150 per barrel in world markets. Today oil futures are sitting around $60/bbl and dropping. Recently, I saw an interview in Bloomberg TV where Francisco Blanche, a commodities expert with Merrill Lynch, was predicting that oil could hit about $50/bbl in the next few months due to the problems with the economy. So, the philosophical question is: should the government give Exxon and other oil companies a “low profit” tax credit when oil hits that low mark because their profits at that point would be too low?

The answer to high oil prices is not arbitrary taxation of the oil companies or any other business; it’s more domestic oil production (drilling and refining) in an environmentally prudent manner. Obama and the Democrats keep harping, as they have for the last 30 years, that it would take another 10 years before any oil could be produced from the new domestic oil fields even if we started drilling today. The problem with that argument is that if we had started drilling in those oil fields 30 years ago, even 10 years ago, we wouldn’t be in the mess that we are today. On the other side of the coin, the other oil alternatives that the Democrats and radical environmentalist have been talking about for the last 30 years are not here either because so far they have not been good economic (i.e., less costly) alternatives to oil.

If Exxon and other oil executives have broken the law by conspiring to keep oil prices artificially high, then they should be tried and convicted under antitrust laws but it would be a major mistake if the government starts intervening in a free market every time someone thinks that “profits are too high.”

The role of government in a free democratic and capitalist system is to set rules that level the playing field so that everyone has the same chance to succeed or fail but not to set rules that predetermine how successful an individual or a corporation should be.

One final point concerning oil prices: your friend was quick to blame the Bush administration and the “good old boys” for the rise in gasoline prices. Well, now that these prices are falling and falling quickly, is she going to give Bush and the “good old boys” credit for the fall in oil prices?

I also would like to point out something else to your friend: corporations don’t pay taxes; at the end of the day, people do. People pay them by way of paying higher prices (as corporations raise their prices to cover their higher tax costs; or in lost jobs (as corporations try to cut costs on other things to make up for the higher tax costs); or in lower return on their investments. Let’s not forget that most Americans own stock, either directly or indirectly, on most major American corporations. Their mutual funds in their 401(k) plans or their IRA’s or their companies’ pension funds own these stocks. When the government starts “monkeying around” with corporate taxes, it is indirectly affecting the retirement and future of most Americans.

I believe that a lot of the uncertainty today in the stock market, in addition to the financial crisis, is the worry by most investors concerning the impact of Obama’s tax plan on corporate profits, capital gains, and dividends. Certainly, in the air of fear and uncertainty in which we are living, Obama’s tax plan has not helped matters any. At a time when stock prices have plummeted and in which many investors would be looking for “stock bargains,” they still sit on the sidelines waiting for the election to get a clear read on what Obama might do.

· “Can't argue with proof nor can we argue with the fact that Congress believes he should be impeached for his lies about the war and a host of other facts.”

What proof? And does Congress really believe Bush should be impeached? Ten ultra-liberal Democrats do not a “Congress” make; if the Democrat controlled Congress had proof that Bush had committed an impeachable offense, he would have been impeached a long time ago. Also, what are the “host of other facts” she mentions? Where are they, in a vacuum?

The fact is that Saddam Hussein did have weapons of mass destruction at one time. He used them against the Iranians AND USED THEM ON HIS OWN PEOPLE: the Kurds. He first used poison gas in November 1980 against Iran during the Iran-Iraq War and continued to use them against the Iranians all throughout the war. He then used them again in 1988 in Halabja, Kurdistan in Iraq, killing an estimated 7,000 Kurds and injuring over 20,000. I can write several pages about Iraq’s WMD program but suffice to say that many experts concluded that Iraq had them at the time of the invasion; and many countries, including Great Britain, believed that Iraq had them as well.

We did have faulty intelligence but your friend has to remember that the nation’s intelligence budget was decreased significantly during the Clinton administration years. It is hard to gather good intelligence without funding. According to the Aspin-Brown Commission on Intelligence (See “Preparing for the 21st Century: An Appraisal of U.S. Intelligence,” report of the Commission on the Roles and Capabilities of the United States Intelligence Community, March 1, 1996, chapter 13), Intelligence spending grew by 125% from 1980 to 1988 (i.e., during the Ronald Reagan years). However, according to the Clinton administration own 1995 projections; Intelligence spending would have dropped 45% percentage points by the end of his administration.

Additionally, no matter how the Democrats want to twist the truth, they or their leadership sat on the same briefings with intelligence officials that the Bush administration sat in; and they saw the same reports and intelligence information. Not only that, Bush’s predecessor (Bill Clinton) commented many times while he was President that Sadam Hussein did possess weapons of mass destruction. Clinton was not the only one in his administration to make these statements. Just about every member of his cabinet that dealt with national security issues made similar statements. The only difference was that they governed in a pre-9/11 environment. The Clinton administration may have done exactly the same thing had it being in power post-9/11. Even Hillary Clinton, who I’m pretty sure had access to very privileged information as Fist Lady when Bill was President, voted in favor of the Iraq invasion when Bush brought this issue before Congress prior to the invasion.

I’m just going to leave your friend with these remarks made by Bill Clinton on December 16, 1998 following the first air strike on Iraq about eight years after the conclusion of “Operation Desert Storm” (First Iraq War):

“Good evening. Earlier today, I ordered America's armed forces to strike military and security targets in Iraq. They are joined by British forces. Their mission is to attack Iraq's nuclear, chemical and biological weapons programs and its military capacity to threaten its neighbors.”

I also suggest that she takes a look at the following websites for more statements of the Clinton administration and other leading Democrats, including Joe Biden, on Iraq’s WMD program:

· “Unfortunately, McCain voting 90% of the time with him indicates nothing will change.”

There is no denying that McCain voted with the Bush administration at least 90% of the time. However, that is not a full explanation. It is just a partial truth. According to the Congressional Quarterly’s Voting Studies, that happened once in 2007. By comparison, in 2005, his voting record shows that he voted with the Bush administration 77% of the time and with the Republican position 67% in 2001. The same publication shows that Obama voted with the Bush administration 49% in 2006 while siding with Senate Democrats a whopping 97% in 2005 and 2007, and 96% in 2006.

McCain is a Republican and a conservative and he has voted with the President on many issues, like the invasions of Afghanistan and Iraq (which were also supported by most Democrats, including Hillary Clinton, John Edwards and John Kerry, among others. Obama was not in the US Senate at the time and not in a position to cast a vote); the nomination of Supreme Court, Circuit Court and District Court Justices; free trade agreements (which Bill Clinton and his administration also supported); Social Security reform; veteran affairs; support for Israel (which most Democrats and Republicans also support); anti-abortion legislation; etc.

Like him or not, McCain is pretty much his own man. On many issues, he has rebuked the President and his own party. He may have lost the Republican Party’s nomination for President in 2000 precisely for voting against his Party on many occasions.

McCain even voted against the famous Bush tax cuts that he now supports. The big difference is that McCain opposed the Bush tax cuts because there was not a corresponding decrease in the size of the federal government which he thought was fiscally irresponsible. He now supports the tax cuts because he will have some control over the budget if he is elected President.

But this is not the only instance in which McCain has opposed the Bush administration. He was an early critic about the conduct of the “Iraq War” and called for an increase in troops (a surge, if you will) soon after the invasion (as early as 2003 after his first visit to Iraq). McCain opposed Bush on interrogation methods (some call it torture) on terrorists (see the McCain Detainee Amendment to the Defense Appropriation bill of 2005). He sponsored the McCain-Feingold Act, enacted on March 27, 2002, which infuriated many Republicans. He and Sen. Joe Lieberman (D/I-Ct.) wrote the legislation that supported the creation of the “9/11 Commission,” which originally was opposed by the Bush administration. McCain also sided with the Democrats in Congress and co-sponsored the Climate Stewardship Act that would have introduced a cap and trade system aimed at returning greenhouse gas emissions to 2000 levels; the bill was defeated with 55 votes to 43 in the Senate. He and Joe Lieberman reintroduced modified versions of the Act two additional times, most recently in January 2007 with the co-sponsorship of Barack Obama, among others.

Ironically, McCain also sponsored the McCain-Kennedy Immigration Reform Bill (which failed in the House), granting amnesty to illegal immigrants that was vehemently opposed by most Republicans and strongly supported by the Bush administration, Barack Obama and all the liberal Democrats.

In contrast, there is not a single major issue in which Barack Obama has voted against the ultra-liberal positions of his own party led by Harry Reid and Nancy Pelosi. I challenge your friend to name just one single major issue in which Barack Obama has voted against the ultra-liberal positions within his own party. That is hardly the record of a man who is supposed the unite this country.

Ok, your friend says that she wants to “send each other the real facts.” Well, you need to ask her what McCain campaign lies is she talking about? Ask her to name them and then we can prove them to be true or not. I‘ve seen and heard many rumors and jokes about Obama, some of which are true and others not, but to my knowledge none have come from the McCain campaign. Now, they may have taken some of Obama’s words out of context but I’ve seen the same come from the Obama camp (e.g., “we may be in Iraq for one-hundred years”). That statement was taken totally out of context by the Obama campaign. I can cite others. Let’s also not forget the Obama campaign attempts to tie McCain to every mistake made by the Bush administration, even when McCain was the first one to oppose them or to criticize them (e.g., the execution of the War on Terrorism; the “Surge;” the size of the Armed Forces, Guantanamo, torture of enemy combatants, McCain-Feingold Campaign Reform Act) or even trying to tie McCain to things that Bush had little to do with (e.g., the energy shortage, the housing crisis, etc.).

Again, dealing in facts, where are the statistics that show that in typical “campigning” (sic) Republicans are known to lie and Democrats are known to tell the truth? Where are those statistics? I’d like to see them. Where are her facts?

Talking about Americans preferring “dirty pool to honesty,” I’m not sure that is what Americans prefer but certainly it appears that some Democrats and Obama supporters are trying to steal the election. Has your friend heard of a “community activist” organization called ACORN. Well, ACORN is supposed to be a “non-partisan” organization acting as an advocate for low-income families. One of the things they do is organize and conduct voter registration drives. They have also endorsed Barack Obama for President and are under investigation in just about every battleground state for voter fraud. The list is increasing just about every day. Among things that they are alleged to have done is submit voter registrations with the entire “Dallas Cowboys” team roster, register the same person “Monica Ray” at least twelve times. I even saw a teenage kid testify the other day in Ohio that he had registered 73 times. I have heard Ohio election officials comment that in some of their districts there are now more registered voters than there are people living in some polling districts. A similar thing has happened in 12 voting districts in Alabama. The number of fraudulent registrations appears to be in the thousands. Let’s not forget that Barack Obama at one time was a lawyer for ACORN; he also trained many of their “community organizers” and he is directly tied to their registration efforts when he was director of “Project Vote” in 1992. Finally, the Obama campaign has “donated” nearly a million dollars to one of ACORN’s front organizations. Can your friend deny any of this with a straight face?

One of the things that has separated the United States of America from many other countries was the “sanctity” of the American vote: “one person, one vote.” That sanctity appears to have been violated and trampled on in this election by the Obama supporters. We, as a country, are on the verge of becoming just like a “Third World Country” as far as presidential elections are concerned. Also, notice how quiet Obama has remained on this issue. He has not repudiated any of the ACORN actions like he should have. This follows a very similar pattern in Obama’s character; he failed to repudiate the Reverend Jeremiah Wright until it became politically untenable for him not to do it; same with William Ayers and Louis Farrakhan, just to name a few.

Also talking about dirty pool in politics: isn’t it dirty pool when Democrats and the liberal press have not only assailed Sarah Palin (which is fine, she’s running for office) but her husband and her children? Isn’t it even worse when they have assailed “Joe the Plumber,” a private citizen, for simply asking a question of a person running for the highest office in this country. It turns out that they have investigated Joe the Plumber more than they have investigated the man running for office? Isn’t that ironic and sad? Could it be that in their view Joe the Plumber had the audacity to ask a question for which their candidate simply fumbled the response and exposed his true Socialist colors?

· “Finally, frankly, it scares me to think that if McCain should die in office, and at 72 could easily happen, that Palin would become President - she is not Presidential material and can barely hold her own which, of course, is why they've kept her out of the public eye until they can teach her what to say and do. A very sad state of affiars (sic).”

It is equally scary to have someone like Obama, with zero experience on anything except running for office, to be potentially our next President. If the Democratic ticket wins the presidency, Obama would not be a heartbeat away from the office of the President. He would be “in it right away.” Let’s not forget that Palin is McCain’s understudy or the “second string quarterback” of the team. The Democratic ticket is inverted. The guy with all the experience, Biden, is on “the bench.” The rookie with no experience, Obama, is the starting quarterback. Let me draw a simple example: If you had two teams playing in the Super Bowl. One team has Payton Manning as its starting quarterback with some unknown rookie as his backup. The other team has a fast talking rookie quarterback (who has never thrown a touchdown pass) as its starting quarterback with another Payton Manning sitting on the bench. Neither team can play the backup quarterback unless something really bad happens to the starter. Which team would your friend put her bet on? The one “with the fast talking, no touchdown passing” first-string quarterback? I’d like to take that bet and give her 30 points.

On a serious matter, while Palin has no experience in foreign affairs, she at least has had about two years of executive experience as the governor of Alaska. Let’s not forget that Obama has a very thin record in Congress and even in the Illinois state legislature, and no executive experience. Again, while Obama has been running for President for over three years or ever since he arrived in Washington, Palin has been running for Vice-President for a couple of months at the very most.

That’s it; and let’s not forget that as a state legislator he voted “present” approximately 160 times or every time a controversial bill came up for a vote. As President, he will not be able to just vote present when a controversial decision needs to be made. He will need to lead and take action.

It is true that McCain is 72 but Biden is nearly as old. The Obama camp always points out to Biden’s experience as the reason for the strength of their ticket and they point out that he can counsel Obama on tough issues. However, it is also true that Joe Biden in addition to being old has a history of aneurisms. So, Biden or his brain can go at any minute as well. The question then would be: Who would give Obama cousel and advice; would it be the Rev. Jeremiah Wright, Muslim Nation leader Louis Farrakhan or the terrorist William Ayers?

I completely share your friend’s concern but part of that problem rests on the shoulders of the Democrats. Again, we can look at our energy policy of the last 30 years, which prevented domestic drilling for oil in new oil fields. The dollars we pay the Arabs for imported oil find their way to the World money markets where they are purchased by the Chinese.

Secondly, Republicans and Democrats alike are all responsible for our Chinese trade deficit. The last year the US had a trade surplus with China was in 1985. Our trade deficit has increased ever since, except for 2001 in the first year of the Bush II administration when it posted a small decrease.

However, let’s not put all the blame on just the politicians. All Americans bear responsibility on this issue and it all starts with “personal responsibility and accountability.” The Chinese are able to hoard all these American dollars because they are a “savings” nation (i.e., they save more money than they spend or consume). Compare this to the American economy. In 2006, the US had the following debt: national debt ($9 trillion), non-bank corporate debt ($9 trillion), mortgage debt ($9 trillion), financial institution debt ($12 trillion), unfunded Medicare liability ($30 trillion), unfunded Social Security liability ($12 trillion).

But this is not as bad as it seems. Now, our economy and the Chinese economy are closely intertwined. If the Chinese dump our dollars in the World money markets they will be hurt as well. First, if the Chinese dump American dollars in the World money markets, they will create an oversupply of dollars at the same time they are trying to get rid of them. The result will be a loss in value of their investment (again, this goes back to the Law of Supply and Demand). Secondly, by hurting our economy, they will be hurting theirs as well, perhaps even more since Americans will not have the money to buy goods manufactured in China. We have seen evidence of that already with the downturn of the American economy. So, unless the Chinese are totally insane, they will continue to support the dollar.

At the same time, I’m surprised that your friend is concerned about America being taken over by the “Yellow Race.” She should be; or perhaps, she forgets or plain doesn’t know that Obama’s stepdaddy, Lolo Soetoro, is Indonesian (last time I looked in the map, Indonesia was located in Asia) and is ethnically Japanese. He was also a Muslim. Obama’s half-sister, Maya Soetoro-Ng is half white and half ethnic Japanese. Additionally, most (if not all) of Obama’s relatives in Kenya are Muslims (whether Barack is or isn’t is another issue). So, it is not inconceivable that the White House may soon be crawling with people from the Yellow Race and Muslims, at the same time.

Just a side observation, even though Obama’s mother was “secular” (which is another code word for atheist) as Obama narrates in his autobiographies, it is an undeniable truth that she had an affinity for Muslim men given that both of her husbands (who abandoned her and their children after short marriages) practiced that religion. It also appears that Obama’s mother had an attraction for alcoholics as Obama’s father (Barack Hussein Obama, Sr.) and stepfather were alcoholics. That is not a great environment in which to bring up the potential next President of the United States of America.