Treasury Seeks Power To Seize Failing Companies

Despite the repeated failings of Treasury Secretary Tim Geithner to produce a coherent policy for months on how to deal with the credit markets and the Obama Administration's inability to find qualified people to even nominate for the Treasury Department to assist Geithner in his duties, the Treasury Department is now demanding the authority to seize companies that are failing?

The Obama administration is renewing calls for Congress to provide new authority to take over financial institutions in distress, expanding its existing powers to include insurance companies and other less-regulated market players.

“The United States government does not have the legal means today to manage the orderly restructuring of a large, complex non-bank financial institution that poses a threat to the stability of our financial system,” the Treasury secretary, Timothy F. Geithner said in a statement prepared for delivery before the House Financial Services Committee.

The proposal could help deflect some criticism of the government’s handling of A.I.G., which is not a bank but an insurance company, including allowing the company to pay big bonuses to executives after receiving government financing as part of the bailout of financial institutions.

Had the Treasury Department had the expanded authority last fall, administration officials have said, the government could have seized A.I.G. and more efficiently wound down its operations in a less-costly manner. At the hearing, Ben S. Bernanke, the chairman of the Fed, said that he had wanted to sue A.I.G. to prevent the bonus payments but was talked out of it by lawyers who warned that if the lawsuit failed, the government might have to pay double or triple damages in addition to the bonus.

Wait a second? You mean to tell everyone that AIG should have been shut down, not fed hundreds of billions, including billions as a conduit to avoid the TARP limitations? If AIG should have been shut down, why did it getting the bailout in the first place (although the AIG lobbyists and those politicians receiving lobbyist dollars goes a long way to explaining that)? Why not demand that it liquidate its assets via bankruptcy? Why isn't the new CEO, which the government demanded, not taking the necessary steps to liquidate the company and instead operating AIG as though it will eventually recover?

Why is the government demanding that AIG come under government control for the liquidation process when bankruptcy courts handle such liquidations on a regular basis? The size may be large, but this isn't the first large entity to face bankruptcy before.

There is absolutely no reason for Congress to extend this power to Treasury when there are already mechanisms in place to provide for the orderly liquidation of companies that are failing. This is a ticking fiscal time bomb and the Obama Administration is demanding it obtain the power to decide which companies live or die, even though there are repeated examples of how the government has failed to adequately figure out what these companies are worth.

Does everyone have such a short memory to forget that the government sought to push Wachovia into Citigroup's open arms despite Wells Fargo valuing Wachovia billions more than the government did? Does anyone remember that days after the feds tried that maneuver, Citigroup revealed that it was in serious financial trouble and required a bailout of its own?

Does anyone remember that the government forced the marriage of Washington Mutual to JP Morgan Chase for a bargain basement $1.9 billion and that WaMu is now suing the feds because they believe that had the government allowed WaMu to properly and orderly liquidate its assets, the value would be billions higher?

Yet, we're told that this is absolutely necessary?

I think not.

It's only absolutely necessary if one wants to further eviscerate the financial markets and further dependency on the government for all aspects of capital creation.

UPDATE:
Hot Air has much more on this naked power grab and move towards nationalization of industries. The key graf:

However, people do not deposit cash in hedge funds or insurance companies. They invest in them, and assume certain risks when they do. The Obama administration wants to socialize the risk by placing the government as a guarantor of sorts for the investors, but that will make people less likely to invest rather than more likely. Part of the lure of investing comes from the potential reward of greater growth of funds than what can be found in bank accounts and bonds. Limiting risk means limiting gains, and we can expect investors to shield themselves further than they may have in the past under those circumstances, while government spends more money in regulatory activity and the economy sags from lack of capital investment.

Ameripundit, Stop the ACLU, Sister Toldjah, and AJ Strata also weigh in.

Also, where exactly in the US Constitution does Congress or the Administration have the right to seize companies, even ones that show signs of being at risk of defaulting or going bankrupt? One can claim that Congressional power under Article 1, Sec. 18, Clause 18 (the catchall provision that Congress relies upon to regulate interstate commerce) might apply, but the Treasury Department is part of the Executive Branch. Somehow, if Congress and the Administration want this to happen, they'll find a way to pass it regardless of whether it should pass Constitutional muster. After all, they're all too happy to find that the Constitution is a living and breathing document that means whatever it is they want it to say.

Then again, the real toxic assets that ought to be treated as such are the very members of Congress that spewed this mess in the first place with their ill-advised policies.

UPDATE:
Meanwhile, another Nobel Prize winning economist, Joseph Stiglitz has slammed Obama's toxic bailout plan.

"The Geithner plan is very badly flawed," Stiglitz told Reuters in an interview during a Credit Suisse Asian Investment Conference in Hong Kong.

U.S. Treasury Secretary Timothy Geithner's plan to wipe up to US$1 trillion in bad debt off banks' balance sheets, unveiled on Monday, offered "perverse incentives," Stiglitz said.

The U.S. government is basically using the taxpayer to guarantee against downside risk on the value of these assets, while giving the upside, or potential profits, to private investors, he said.

"Quite frankly, this amounts to robbery of the American people. I don't think it's going to work because I think there'll be a lot of anger about putting the losses so much on the shoulder of the American taxpayer."

The other Nobel Prize winning economist to come out against the plan so far? Paul Krugman.

UPDATE:
James Pethokoukis provides several reasons why the left isn't jumping on board the Obama bailout plan. Many are angry at who Obama has chosen to include in the bailouts, including hedge funds and private entities, while others think that the plan doesn't go nearly far enough, that the mess will be repeated down the road, and would rather that the industries and businesses be nationalized altogether. Of course, other economists point out that if the latest plan doesn't work, nationalization may be forthcoming in any event.

Washington Mutual Sues Feds Over Firesale

Washington Mutual's holding company is suing the FDIC over its seizure and subsequent sale to JPMorgan Chase at a bargain basement $1.9 billion. The company argues that the actual value of the company was worth far more than that had the company been properly liquidated.

I tend to agree.

It isn't the first time that the government screwed up in this arena. They tried to force the sale of Wachovia to Citigroup. Wells Fargo proffered a far higher bid ($2.2 billion versus the Wells Fargo $15.1 billion) for the company and the government sought to block the acquisition and lost. Weeks later, we came to learn that Citigroup was in dire fiscal shape and needed a bailout of its own (that came with executive compensation strings attached unlike the AIG bailout that got Congressional approval and broke out the phony outrage this past week).

The government has consistently gotten the value of these companies wrong, and attempted to force transactions that would have been bad for the taxpayer. They clearly underestimated the severity of problems at Citigroup and severely undervalued the price of Wachovia.

Taken together, and one sees clear problems with further interference in the markets by the government. They are bound to make the situation worse, not better by meddling in the markets and interfering with the market valuations of these companies.

NJ Transit Does It Again

I've railed on about the Secaucus boondoggle for years now. That white elephant cost taxpayers and commuters hundreds of millions more than originally estimated because NJ Transit had to build a gold plated facility that is severely underutilized.

Now, we learn that NJ Transit spur line to the new Giants Stadium/Xanadu complex is costing far more than it should have, and that had NJ Transit opted for a different route it could not only have saved millions of dollars, but it would have avoided purchasing land that is part of a Superfund site.

But that did not stop the state from making the site the cornerstone of a $182 million project to bring rail service to Giants Stadium, Xanadu and the rest of the Meadowlands Sports Complex.

A review of the rail project shows that the New Jersey Sports and Exposition Authority in December 2006 spent $6.2 million to buy 56 acres of the site from its current owner, Honeywell International.

At about $108,000 an acre, that's roughly five times the price the state charged a private developer for 785 acres of contaminated land at the nearby EnCap Golf project site.

Six alternative routes considered for the rail line, built as a spur off NJ Transit's Pascack Valley Line, would have allowed the state to buy much less land — only about 3 acres — and avoid Superfund-style contamination.

Additionally, all of the competing rail alternatives would have been built off the much more widely used Bergen Line, which also would have served Pascack Valley riders.

The state says the Honeywell option, with its proximity to the Pascack Valley Line, was the most cost-effective and useful for New Jersey mass-transit users. They also note that their deal with Honeywell makes the Morristown-based conglomerate solely responsible for the costs of the cleanup.

Someone was profiting from that choice, despite the fact that it makes little sense for the trains to operate from the Pascack Valley line and not the Bergen line.

The link project was originally supposed to cost $150 million. Its current cost is $182 million, and growing. Here are the alternatives.

Even as the project was being debated in 2005, there were questions over how and why this particular right of way was chosen.

This is the way NJ Transit does business. They are not fiscally responsible, and despite their claims that the route chosen was the best and most cost effective choice and that alternative routes might have not been cost effective for obtaining easements and/or necessitated construction of elevated rail lines, the cost for obtaining the easements is significantly higher than it should have been. Why did the state pay far more for the Honeywell land purchases, than private developers received for the Encap deal? That raises questions about both deals; namely that the developer in Encap got a sweetheart deal and/or NJ Transit got gouged in the Honeywell deal.

UPDATE:
EnCap has declared bankruptcy after failing to reorganize. It also means a boon to lawyers:

The end of the bankruptcy case, EnCap attorneys have warned, could lead to years of expensive and time-consuming litigation among more than a dozen entities, with at least 200 unsecured creditors now left to look to parties other than EnCap for compensation.

The hearing began with attorneys for the New Jersey Meadowlands Commission and insurance giant AIG telling Winfield that negotiations had broken down over a disputed $148 million insurance policy to finish cleanup of the landfills at the EnCap site. That led the commission for the first time to side with Wachovia Bank — which wants to foreclosure on the property — in asking the judge to dismiss the case.

Citigroup Gets a Bailout

$20 billion to bail out the company.

Under the deal, the government will have the right to slash the huge pay packages and bonuses that Citi's executives had long enjoyed, and cap stockholder dividends at only 1 cent per share.

The sweeping plan is designed to stem a crisis of confidence in the once-mighty financial institution, whose stock lost 60 percent of its value last week on worries about its fiscal health.

"With these transactions, the US government is taking the actions necessary to strengthen the financial system and protect US taxpayers and the US economy," the three agencies said in a statement.

"We will continue to use all of our resources to preserve the strength of our banking institutions, and promote the process of repair and recovery, and to manage risks."

The $20 billion cash injection comes in the form of a purchase of Citigroup preferred stock by the Treasury Department.

The funds to buy the shares will come out of the $700 billion financial rescue package already in place.

The new capital infusion follows an earlier one - of $25 billion - in which the government also received an ownership stake in Citigroup.

Let's not forget that the feds thought that Citigroup was in a better position to buy Wachovia than rival Wells Fargo. Now, they're busy bailing out Citigroup.

I understand that there are good reasons that bailouts are necessary to maintain the stability of the banking system since it represents the foundation of the economy with providing credit to all other sectors for r&d, growth, business operations, etc.

If banks go under, especially those that are large, it makes it more difficult for businesses to operate and a credit squeeze will send smaller companies and those that have already tight credit over the brink into bankruptcy.

The automakers are a case where bad business decisions have saddled the domestics with huge losses and bailing them out will not address the underlying problems.

The problem is that the banks made bad business decisions that should not be rewarded with bailouts either. This mess is due largely to subprime borrowing and the repackaging of paper that hid the true risk of that paper. They have no one to blame but themselves, and Congress, for this mess.

Turnabout at Citigroup

It was only a few short weeks ago when the federal government was pushing for Citigroup to take over the failing Wachovia, claiming that it was the superior option to Wells Fargo offer to buy the bank.

Well, imagine my surprise when we now hear that the federal government may have to bail out Citigroup because the company is teetering on the brink of going belly up.

Citigroup has more than $2 trillion of assets, dwarfing companies such as American International Group Inc. that got U.S. support this year. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke may favor a rescue to avoid the chaotic aftermath of Lehman Brothers Holdings Inc.’s bankruptcy in September.

“There is no question that Citi is in the category of ‘too big to fail,’” said Michael Holland, chairman and founder of Holland & Co. in New York, which oversees $4 billion. “There is a commitment from this administration and the next to do what it takes to save Citi.”

While Citigroup executives say the company has adequate capital and liquidity to ride out the crisis, its tumbling share price may shake the confidence of creditors, clients and rating agencies. A similar scenario played out at Lehman, when Chief Executive Officer Richard Fuld declared the firm was “on the right track” five days before the firm went bankrupt.

“The market may be implying some sort of regulatory intervention,” Jason Goldberg, a former Lehman analyst who now works at Barclays Capital in New York, wrote in a note to clients today. “In situations where the government has stepped in, the equity holders have not fared well.”

Citigroup CEO Vikram Pandit told employees today that he doesn’t plan to break up the company, aiming to reassure workers as the stock resumed its skid. Citigroup shares dropped 94 cents, or 20 percent, to $3.77 at 4:08 p.m. in New York, giving the company a market value of about $21 billion. The stock pared its loss after the close of official trading, fetching $4.07 as of 4:35 p.m.

Pandit and Chief Financial Officer Gary Crittenden, speaking on a worldwide conference call this morning, also said they don’t expect to sell the Smith Barney brokerage unit, according to two people who listened to the call and declined to be identified because it wasn’t open to the public.

How is that possible? How could the federal government have been so wrong about Citigroup's viability when they were pushing Citigroup to buy Wachovia, which was in even more dire straits a few weeks back? Did they know and figured that they would bail them out eventually anyways? Did they not know? Answering yes to either of those questions raises serious questions about the whole idea of bailing out entities and what the government really knows about the situation, let alone what kind of guidance it is receiving from the Treasury Department and the Federal Reserve.

It's a smart idea to keep in mind that there really aren't any entities that are truly too big to fail. While real estate assets may not be worth what the paper says they are, they still have value, which can be unwound through actual market sales. Papering over the failure of Citigroup with a bailout doesn't actually establish value for the toxic paper, it only delays the reckoning, and while that's good for politicians, it's bad for taxpayers and everyone else since the markets simply don't know what anything is worth and delays and changes of tactics by the government on how to deal with the crisis inserts still more uncertainty and volatility to the markets.

Ahistoric

The definition of ahistoric is quite befitting the current financial crisis on Wall Street. I'm not even talking about how nations dealt with the Great Depression or even the recession of the late 1970s and early 1980s, or even the recession that took place at the start of the 1990s.

No, I'm talking about the failure to recall history from a few weeks ago.

Citigroup is now on the brink of going under, especially as its share price hovers near $5 per share. Below that amount, and you might see institutional investors selling in bulk.

Yet, it wasn't more than a few weeks ago that the federal government was pushing Citibank to take over Wachovia, another failing bank. The feds were doing so despite a far better offer from the solvent Wells Fargo bank.

At that time, I was questioning everyone's numbers. After all, why would the feds be pushing Citigroup over Wells Fargo to take over a failing multibillion dollar bank unless they thought that Citigroup was in a better position to do so.

Well, it now appears that the feds had no clue what they were doing and were simply running with whatever was available on hand. Citigroup's financial position could not have changed so suddenly in the matter of a month that it is now in the same position that Wachovia was just a few months ago. In other words, the feds seriously miscalculated on the Citigroup solvency, and had they pushed ahead with their plan to have Citigroup take over Wachovia, we might be seeing an even worse situation.

The moral of that story? The federal government doesn't know what to do any more than investors, but the market does seem to have a better grasp than the feds do. A federal intervention to force the sale of Wachovia would have had disastrous consequences.

Meanwhile, you're now watching the market volatility jump all over the map as the automakers have their hands out for a bailout in the same scenario that played out before the mother of all bailouts was approved. When the markets saw that Congress was going to pass the bailout, the markets all rose on the news, but when they had second thoughts and the House rejected the initial bailout proposal, the markets tanked in a big way.

We're now witnessing the exact same scenario play out over the auto bailout. I happen to oppose both bailouts as they remove risk from the market, and reward bad business decisions. That's precisely what providing billions of dollars to automakers who have made decades worth of bad business decisions will mean. It will only allow these companies to limp along for a few more months or even a few years before they come back and ask for more. There are fundamental problems with the domestic automakers, and reorganization is the best way to handle the situation, not a massive bailout. It's one thing to provide bridge loan guarantees so that the companies can have financing during reorganization, but it's quite another to give them the money, even with preconditions on its usage (again requiring them to follow government advice which may result in more harm than good by distorting the markets still further).

The moral here is that the government doesn't have the answers, and throwing money at the symptoms isn't going to be beneficial for long term economic recovery. The structural and underlying problems with the automotive industry have to be addressed, but doing so would mean serious problems for a Democratic party controlled Congress, which relies heavily on unions for support.

UPDATE:
Citi's slide continues. The share price is below $5, and trading as low as $3.91 this afternoon. Not a good sign at all.

Judge Blocks Wells Fargo Takeover of Wachovia

You knew this was coming the moment that Citigroup claimed that that it had exclusivity to deal with Wachovia once it was announced that Wells Fargo put together a sweetened deal that eclipsed Citi's bid.

New York State Supreme Court Justice Charles Ramos issued the order late Saturday, saying that Citigroup and Wachovia must appear before him on Friday, Citigroup said, adding that the order was granted over the objection of Wachovia.

In a deal struck last Monday with the assistance of the Federal Deposit Insurance Corporation (FDIC), Citigroup had offered to take over the Wachovia's retail banking operations for $2.2 billion.

But four days later, Wells Fargo said it was buying all of Wachovia - including its asset-management business - for approximately $15.1 billion in stock.

The battle also has implications for taxpayers.

The Citigroup offer had come with a backstop from the Federal Deposit Insurance Corporation (FDIC), would cover any losses on Wachovia's $300 billion loan portfolio beyond the first $42 billion. The Wells offer does not ask for FDIC assistance.

Wachovia spokeswoman Christy Phillips-Brown said in a statement the company believes its agreement with Wells Fargo is "proper, valid and ... in the best interest of shareholders, employees and the American taxpayers," the Associated Press reported. She said Citigroup is free to make a better offer to Wachovia under that agreement.

As of Friday, Citigroup still had support of industry regulators. "The FDIC stands behind its previously announced agreement with Citigroup," Federal Deposit Insurance Corporation Chairman Sheila Bair said in a statement, adding that it would pursue a resolution with all three companies.

This mess will end up costing both banks millions of dollars in fees to address the case, but in the end, I think Wells Fargo will win out but have to pay millions to Citigroup in the process to acquire Wachovia, even though the FDIC is backing Citigroup's offer.

Depositors at any of the banks involved aren't going to see any differences and the FDIC insurance limits were increased to $250,000 by the bailout bill, which may help forstall further runs on banks (though the first bank run of the year came when Sen. Charles Schumer initiated one when publicly questioning the solvency of IndyMac).

The Battle For Wachovia

First, it appeared as though Citibank would win the rights to take over Wachovia. Now, we learn that Wells Fargo has made a more lucrative bid for Wells Fargo. Wells Fargo is looking to buy Wachovia for $15.1 billion.

Citibank isn't liking this one bit, and claims that they had an exclusivity arrangement with Wachovia.

The Wells Fargo offer sent markets higher, since it shows confidence in the market to sort things out, but Citibank isn't likely to let this issue rest.

UPDATE:
The FDIC is now announcing that they are backing Citigroup in their bid to buy Wachovia. This is going to head to court, which is the last thing that the financial markets need right now. It also begs the question as to why FDIC is pushing Citi over Wells Fargo and how and why Wells Fargo thought that Wachovia was worth more than Citi was proposing. If Wachovia is as bad off as claimed, why the higher bid? Someone's accounting is off here - and it could be any of the following: Citi, FDIC or Wells Fargo.

I don't like the idea of having the FDIC dictate who gets Wachovia, seeing how they pushed WaMu to be bailed out by JPMorgan Chase.

UPDATE:
MSNBC has more on the bank brawl.

The Rematch - UConn v. UAlbany

The Albany Great Danes are meeting the UConn Huskies this afternoon in a rematch of their encounter in the first round of the NCAA Basketball Tournament last season. When I was at Albany, the Danes were never considered a powerhouse, let alone worthy of being on the floor with a team like UConn. The game last season showed just how far Albany has come, and how much further the team wants to go.

It set a benchmark by which Albany will judge its future seasons. The team can take a huge step forward today in its meeting with UConn. The national exposure has resulted in season ticket sales doubling.

The University at Albany has turned a memorable loss on the basketball court last March into a resounding long-term victory for the school, according to university officials.

The UAlbany men's basketball team meets 18th-ranked Connecticut today in Storrs, Conn., a rematch from that riveting night eight months ago when the Great Danes caught the attention of sports fans all over America.


On St. Patrick's Day, the Great Danes were poised to pull off the greatest upset in NCAA Division I Tournament history. They led top-seeded UConn of the Big East Conference by 12 points with 11 minutes, 34 seconds remaining before a CBS regional television audience and a crowd of 19,990 at Wachovia Center in Philadelphia.

Gradually, UConn's superior talent took over and UAlbany ran out of gas in a 72-59 first-round defeat that ended the school's first appearance in the tournament known as March Madness.

But the national exposure the school received from that game helped contribute to an increase in student applications, greater alumni support and, say university officials, an overall better atmosphere on campus.

"The tournament had a huge effect on the university," UAlbany officer-in-charge Susan Herbst said. "It galvanized alumni around the country who saw the game, and it kind of re-opened their loyalty channels back to the university."

Herbst said she'll try to attend today's game, which coincidentally was scheduled before UAlbany and UConn played last March.

The tangible results of the previous meeting are obvious at UAlbany's SEFCU Arena, where season-ticket sales have nearly doubled from about 600 last year to almost 1,200 this year in the 4,538-seat building.

UPDATE:
The rematch wasn't nearly as close as last year's matchup. UConn won 86-55.

Diplomacy and the Hounds of Hell, Part VII

Condi Rice is in Beirut, a surprise stop in her Middle East diplomacy tour that will next visit Jerusalem. This stop has mostly symbolic significance. The Lebanese are incapable of fighting Hizbullah, let alone Israel, so they need outside support. Condi visiting the Lebanese Prime Minister shows support to the democratic process and the Lebanese people, but the real power brokering will come in Jerusalem. For now the Bush Administration is resisting calls for an immediate ceasefire.

Hizbullah rockets continue to rain down on Haifa, bringing death and destruction. Rockets are also raining down on Akko (Acre). When the Israelis hear the airraid sirens, it's to the bunkers, no questions asked. And Safed. Hizbullah vows to leave no place in Israel safe. They made that statement in Iran. Heavy fighting continues in Lebanon. And Hizbullah is steadily losing ground, though they're downplaying the significance of their losses.

One has to wonder if Nasrallah fully in charge of Hizbullah, when information about the two Israeli soldiers taken by Hizbullah was leaked by the Lebanese. Nasrallah calls the information released unauthorized. It's nice to see that even terrorists have problems with leakers. Let's hope for lots more leaks.

I draw your attention in this photo (via the Gothamist) to the poster at the feet of the guy in the middle. It states:

Any treaty with Israel is not binding on Islamic states.

Let this be a lesson to all those who think that a ceasefire with terrorists will be worth the paper it's written on. It means absolutely nothing to the terrorists, even less to the Iranians, despite the fact that the diplomats think that getting signatures on a piece of paper is everything.

Can you say lying and deception in order to further the Islamist agenda, which is the destruction of Israel, the reestablishment of the caliphate, and submission of infidels to Islam or face death.

That goes for all those diplomats shuttling around the Middle East claiming that they're trying to solve the problem. That includes Condi Rice, who at least understands that a return to the situation before this latest round of fight began will not happen.

Dr. Sanity has a special Middle East edition of the carnival of the insanities. Well worth reading for the overview.

I'm toying with an idea that terrorists are akin to the Men in Black (MIB). Terrorists engage in the MIB theory of warfare. It's the MIB theory of warfare. The terrorists are outside the law, above it, beyond it, over it. They simply don't exist. That's how the media can breathlessly report about Lebanese casualties without mentioning a single terrorist killed.

Israel looks like its trying to hit ghosts, but that isn't the reality. Israel is doing fearsome damage to the terrorist infrastructure although Hizbullah still has a capability to strike at Israel.

Iran, meanwhile, which is trying to expand its influence in the Middle East is engaging in more projection - claiming that the US planned this conflict. That's right, fighting terrorist-supporting countries in the Middle East is all part of the grand scheme to control oil.

Hamas is still busy in Gaza, and they're firing rockets into Israel as well. Guess they want to stay relevant, despite the claims that they want to broker a deal. Three more terrorists were killed in Gaza as well.

The primary bloggers to check with are Carl in Jerusalem, Israellycool, Dave Bender, Meryl Yourish, Euphoric Reality, Pajamas Media, and Hot Air. Check back with them regularly for updates.

UPDATE:
Do you still think that Iran isn't fully involved in the conflict in Lebanon? Maybe this will change your mind:

The bodies of Iranian Revolutionary Guard soldiers killed by the Israeli army in Lebanon have been transported to Syria and flown to Tehran, senior Lebanese political sources said.

Israeli and Egyptian security officials confirmed the news, which follows a report that first appeared in The New York Sun, that Iranian forces posted to southern Lebanon have been aiding Hezbollah terrorists in their attacks against Israel, including helping to fire rockets into Israeli population centers.

The Lebanese sources said between six and nine dead Iranian Revolutionary Guard soldiers were brought in trucks last week into Syria for a flight back to Iran. They said the bodies were transported along with the tens of thousands of Lebanese civilians fleeing to Syria.

UPDATE:
Is Hizbullah running low on men and weapons? That appears to be the thrust of this article. By cutting off the roads, highways, bridges, and ports in Lebanon, Hizbullah is unable to be resupplied from Syria. Indeed, Israeli forces have interdicted Syrian convoys trying to do precisely that. With Hizbullah expending hundreds of rockets per day, they're running through their supplies far quicker than they could hope to be resupplied, which means that they'll be reaching a breaking point within a matter of weeks, if not sooner. When that happens, even the Lebanese military could deal with the situation.

Ed Morrissey has more on the situation with Hizbullah.

For a laugher, check out John Kerry's claims that things would be different had he been President. Oh, and he'd call for Hizbullah's destruction.

Israel has that well in hand, as long as the diplomats stay out of the way. Chester looks at what diplomats have in mind for Syria, and plays out a variety of scenarios.

Scrappleface responds by saying President Bush will send Kerry to the Middle East to solve the problem directly. Mr. Wolf, he isn't.

UPDATE:
Vital Perspective has more footage of the IAF eliminating Hizbullah terrorists in Lebanon.

Paul at Powerline has a good article dispensing with the idea of putting Israel on the clock to eliminate (or at least seriously degrade) Hizbullah. How come the world isn't putting Hizbullah, Syria, and Iran on the clock? Stop your violence or all your base belong to us in 72 hours...

Hot Air has more on the Hizbullah resupply issues, and the diplomatic efforts to force a ceasefire resulting in a victory for Hizbullah.

UPDATE:
The UN is calling for $150 million to rebuild infrastructure in Lebanon. No word on what aid will be provided to Israel - considering that Northern Israel's economy has been a virtual standstill since the rocket attacks started.

A British backbencher says that weapons transfers to Israel must be stopped. Britain, and the world for that matter shouldn't mind those weapons being delivered to Hizbullah, the real threat is Israel. Eyes on the prize people.

Israel, meanwhile, says that Hizbullah will never be allowed to reconstitute its missile stockpiles. Eyes on the prize indeed.

An Arab-American advocacy group is going to sue the US government over its evacuation of US citizens from Lebanon. If you don't agree with the Administration, it appears that the recourse is to sue. Never mind the merits, or the fact that the State Department has long warned US citizens to stay away from Lebanon. It's the Administration's fault that the response wasn't quicker.

It looks like Haniyeh is about ready to cry uncle. He wants the US to force Israel to stop killing his terrorist minions in Gaza. If Haniyeh wants a way out, here's a very simple solution - release Shalit with no conditions. Period. As head of a terror organization, that's still far too charitable, but it would end the Israeli pushback in Gaza for now.

Another Israeli helicopter crashed, killing the two crewmembers.

And if you want to see a video of a rocket attack on Israel up close and personal, don't miss this. It's of a camera crew trekking to Haifa to do an interview in the train depot where a rocket launched by Hizbullah killed eight workers. What happens next is even more astounding.

Hot Air also points out a MEMRI posting of a video in which Nasrallah states that the Lebanese government knew in advance of Hizbullah's plans to attack Israel. If that is indeed the case, then the Lebanese government is truly complicit in the violence and their complaints about the Israeli response should fall on deaf ears. They truly did bring this situation upon themselves for lying in bed with Hizbullah.

UPDATE:
Concept Wizard has an impressive set of updates on the situation in Lebanon and Israel, including some neat flash animations.

Jeff Goldstein takes on the rampant anti-Semitism springing forth from the left in the wake of Israel's newfound respect for defense of its national existence against Islamic terrorists. Not everything is a Rovian plot to further GOP interests. Sometimes anti-Semitism springs forth from the usual suspects because they are anti-Semitic at their core. Kesher Talk also wades into the fever swamps to report on the rampant anti-Semitism. The problem though is that one doesn't have to cherry pick comments to find anti-Semitic rants. They're the norm.

Is the US concerned that the Israeli reports about damaging Hizbullah is exaggerated or that Israel is quickly getting bogged down? The truth, as always, is somewhere in between the claims of quagmire and swift victory. Trying to compare the current conflict to the Six Day War is disingenous - especially because Hizbullah has had six years to plan for this conflict, and chose the time and place of the attack. Israel was forced to respond. In 1967, it was the Israelis who dictated the conflict's course by eliminating the Egyptian and Syrian air force while they were still on the ground.

And it appears that even the Israelis are going to be willing to accept Hizbullah as an ongoing political actor in Lebanon, which shouldn't make anyone happy, except Iran and Hizbullah - who will crow about their victories once again.

Others blogging the conflict and Israel's ongoing pushback against Islamic terrorism in Lebanon and Gaza, the diplomatic efforts, or Kerry's nonsensical ravings: Below the Beltway, Rick Moran, AJ Strata, Kim at Wizbang, Sister Toldjah, Flopping Aces, Texas Rainmaker, and Pajamas Media.

UPDATE:
The Lebanese have rejected Rice's suggestion for ending the crisis in Lebanon. So does Hizbullah. That figures.

Michael Barone has a very good overview of the situation in the Middle East. He notes that the whole concept of land for peace is essentially dead, considering that Israel has ceded both Gaza and South Lebanon and gotten absolutely nothing in return except rockets, missiles, and misery on both sides of the border.

Meryl Yourish notes that the heavy resistance isn't so heavy once Israeli force of arms comes to bear on Hizbullah terrorists who much rather hide behind civilian populations than face Israeli forces straight up. Hizbullah terrorists continue to die, but not fast enough to resolve the conflict quickly and end the suffering on both sides of the border.

It will take defeat to make Hizbullah to cry uncle. And as I've noted before, Hizbullah will claim victory even if Nasrallah is the last man standing.

More rocket launchers continue to be destroyed.
How do Israelis cope with life under fire from katuyshas? Here's a glimpse. 30% of Haifa residents have travelled elsewhere in Israel. Does that count as refugees or do Israelis not count at all in the media reporting on civilian suffering? I keep reading about how 500,000 Lebanese have become refugees. What about the hundreds of thousands of Israelis who are similarly displaced? *crickets* That's an afterthought.

Israel continues to push deeper into Lebanon to silence those rockets once and for all.

Joem suggests the following additional bloggers to get a wider exposure to the conflict: Jameel at the Muqata, Greetings from the French Hill, R'Lazer, and Live from an Israeli Bunker.

Via NBC News [link added], among the targets being hit in Lebanon are banks and other financial institutions to eliminate Hizbullah's financial backing. Eight offices of Hizbullah's 'treasury' were hit throughout the country. Three foreign banks were also hit. Middle East and Africa Bank (MEAB) was also implicated, and there are apparent ties to Wachovia Bank as well. The bank denies any ties, but Hizbullah commercials tell viewers to call the bank to wire them money.

UPDATE:
Via Blue Crab Boulevard, have we had a frozen in Hell moment?

But a day after criticizing Israel for "disproportionate" strikes against civilians, U.N. humanitarian chief Jan Egeland accused Hezbollah of "cowardly blending" among Lebanese civilians.

"Consistently, from the Hezbollah heartland, my message was that Hezbollah must stop this cowardly blending … among women and children," Egeland said. "I heard they were proud because they lost very few fighters and that it was the civilians bearing the brunt of this. I don't think anyone should be proud of having many more children and women dead than armed men."

Kofi Annan asks to extend the UNIFIL mandate by one month. Why? They failed miserably to take note of the Hizbullah buildup, let alone stop it, and now they're in the middle of the fighting and calls for a ceasefire only give aid and comfort to terrorists. Well, at least Annan's mandate will be up soon enough (but not soon enough for many around the world). Today alone, 81 rockets hit Israel, with 50 injured. 11 Israeli soldiers were wounded fighting the terrorists, though no one has any idea how many terrorists were returned to sender.

Israel hit a warehouse in Gaza, and things go boom. Bigtime. Secondary explosions wounded seven people. Guess who gets blamed - Israel - not the terrorists who were storing the weapons. And that's after Israel essentially broadcast that they were going to attack these targets.

Technorati: terrorism, fatah, Gilad, Shalit, Olmert, Eliyahu, Asheri, Ashri, Abbas, Rains, Summer, cavaliers, wrath, PRC, Hamas, Gaza, palestinian, Israel, hizbullah, hezbullah, lebanon, syria.

Gambling on Gulf Coast Recovery

Casinos are helping Biloxi rise from the ruins. While only a fraction of the casinos have reopened for business, the three that have opened thus far are doing very good business, both from curious tourists and workers who have come into the casinos to blow off a little steam.

Amid the monumental wreckage of the Gulf Coast, gambling is up and running. The Mississippi State Tax Commission posted encouraging numbers for the three casinos that have opened late last December on its website. The Isle of Capri, along with the IP Hotel & Casino and the PalaceCasino, took in approximately $63 million in gross gambling revenue in January, exceeding expectations. (Before Katrina, nine casinos averaged about $80 million a month in gross.) Four more casinos, including the high-end Beau Rivage Hotel & Casino, are scheduled to reopen in 2006, and the Hard Rock Hotel & Casino is expected to follow in late 2006 or in 2007. Harrah's plans to reopen two casino hotels in Biloxi. Post-Katrina Biloxi has the feel of HBO's "Deadwood," a gambling town at a crossroads, facing great challenges and the siren's call of great rewards. Adding to the boomtown feel is a change in the state's gambling laws to allow land-based casinos as well as floating ones. The legislation has spurred a real estate surge, according to an article last week in The Clarion-Ledger in Jackson.

The Administration is going to be releasing a report of its own on the Katrina response. 125 separate findings.

But the document — which a congressional aide said approaches 200 pages — proposes sweeping changes to federal response plans. These include making the military the lead agency to coordinate immediate relief when state and local resources are overwhelmed, one official said.

That would only happen in the worst of catastrophic disasters, such as storms of Katrina's magnitude and terror attacks, the official said. Currently, the Homeland Security Department coordinates federal disaster relief missions under a national response plan it issued last year.

A second administration official said Chertoff would keep his job under the review despite recent calls — mostly by Democrats — for the security chief's resignation.

That official said FEMA will remain under Chertoff's control, even though critics have called for the agency to be removed from Homeland Security and answer directly to the president.

Both administration officials spoke on condition on anonymity because the report had not yet been released. Bush will host a Cabinet meeting Thursday morning to discuss the review, which will be released shortly afterward.

The Senate is finishing its own investigation of the failed response, due next month.

Meanwhile, the New Orleans City Council is doing its level best to tell the poorest former residents of the city that they're not welcome back unless they're willing to work.

New Orleans doesn't want its poorest residents back — unless they agree to work.

That was the message from three New Orleans City Council members who said government programs have "pampered" the city's residents for too long.

The news that some New Orleans City Council members weren't keen on the city's poorest returning home added another layer of discomfort in Houston, where local residents and elected officials alike have stretched to meet the needs of thousands of Louisiana residents in the months after Hurricane Katrina.

Since most of the displaced residents ended up in Houston, you can be sure that Houston isn't liking this turn of events very much. It isn't a question of if New Orleans is going to try to go down this route, the question is how quickly they're going to flip flop on the issue. People have an innate and natural urge to return to their homes. Most of the most severely damaged homes are uninhabitable unless you're going to start from scratch. Many are economically unable to undertake such an endeavor. Those that are may move back, but will find a very changed community.

Others blogging the NOLA City Council maneuverings: LaShawn Barber who wonders who came up with the novel idea of people working in exchange for aid and also notes that these are African Americans telling those African Americans who want to return that they're going to have to work, Laurence Simon, Say Anything who notes that Houston and other cities accepted displaced New Orleans residents without question and New Orleans should get them back - taking the wheat with the chaff, and Daily Pundit who notes that this move would shift an unending economic burden on other jurisdictions.

And the ACLU wants a probe into the Gretena bridge incident, where Gretna police officers prevented New Orleans evacuees from crossing the Crescent City Connection days after Hurricane Katrina.

UPDATE:
Fixed the posting time.

The Mississippi Dept. of Transportation is considering a couple of options for rebuilding the US 90 bridge - one would let the contract with 85 foot clearance and then negotiate with the winning bidder to bring the clearance up to 95 feet, or delay the bidding for a couple of months and then let the contract with a 95 foot clearance. This bridge project would cost nearly $300 million but the suggestion of a drawbridge was shelved - that would have cost another $80 million and incurred additional delays. The problem is that the drawbridge would have permitted taller ships to cross the channel, whereas the static span would have limited height. That's affect some of the businesses along the channel that hoped for no height restrictions.

Wachovia, the financial services company, has donated another $800,000 for Katrina relief efforts in the Mississippi area for education related needs.

Mississippi is also facing a cash crunch that may soon force schools to lay off teachers and administrators. The culprit? The lack of tax revenues. Since the tax base was devastated along the Gulf Coast, the revenues simply aren't there to restore services to prior levels or to even minimal levels. Many municipalities are looking to the state and federal government for assistance:

The Bay-Waveland School District usually receives about $5 million from the city's annual tax revenue to help pay teachers, coaches, counselors and principals, and to buy textbooks.

Katrina washed away about 85 percent of Bay St. Louis' taxable income, and Mayor Eddie Favre said the school district would only receive about 15 percent - or $750,000 - of its usual $5 million next year.

It's too early to know how many jobs will be lost in the district, but local officials agree unless financial help arrives fast, Katrina's long-term effect on some Coast schools and cities could be crippling.

"We need to be federally subsidized to get through this local tax-base dilemma," Superintendent Kim Stasny said. "That would stabilize the district and help us keep our teachers."

Most property owners in Hancock County will not be taxed for the last four months of the year, and because just eight months of tax revenue was generated in the district last year, Favre said the Bay-Waveland schools would only receive about $3 million this year to meet payroll - $2 million short of last year's funding.

Technorati: flood aid; hurricane katrina; katrina aid; kanye west; impeach bush; slidell; biloxi; gulfport; pascagoula; nagin; blanco; barbour.