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Gray Days Are Ahead

Predictably, Gray Davis’ $12.5B plan to bail out the utility companies at the expense of the tax payers has taken yet another turn for the worse, and Kalifornia may see tremendous problems as a result. With lawsuits and delays holding things in check, the sale of bonds just isn’t turning out the way the good governot planned it.

On Oct 2, the state PUC rejected the proposal which ensures repayment of the bonds, raising doubts among investors and analysts that the deal would ever be completed. Anxious to maintain a good image, PUC President Loretta Lynch and others familiar with the deal said the bond sale isn't dead, that the PUC, Gov. Gray Davis and the Legislature have months to come up with a consensus on how to structure the bond repayment, they said.

Experts however, said the political uncertainties could make bond buyers demand higher interest rates. That would raise the burden on customers of Pacific Gas and Electric Co., Southern California Edison and San Diego Gas & Electric Co., although state officials say a hike is unlikely. If the bonds don't sell, the state will face a "freight train of fiscal chaos" in the form of a multibillion-dollar budget deficit, said state Treasurer Phil Angelides, who's in charge of selling the bonds. And if the bonds do come to market -- next year at the earliest -- the cost to utility ratepayers could be significantly higher than if the bonds were sold as scheduled this fall, market analysts said. Interest rates go up "anytime an investor is doubtful; there's something in the background that's doubtful," said Zane Mann, publisher of 'California Municipal Bond Advisor' newsletter. "It will take a real selling job."

Potential bond buyers are likewise worried. "It's definitely more and more of a concern whether they can actually do the deal," said Daniel Solender, a municipal bond portfolio manager at Vanguard Funds in Pennsylvania.

Angelides, though, said that the political differences will all be resolved when -- and if -- the bonds go to market. Then investors will find the bonds attractive, he says. The main question is, will the state be able to get its act together to get this issue to market? Then of course, there’s the simple issue of timing. With the state of the financial market right now, interest rates are at an all-time low. By next year, that could all change, and we’ll see long-term interest rates back up and investors flocking back to the stock market.

Angelides said the state could face a $9.3 billion deficit if the bonds aren't sold, or are delayed past the start of the next fiscal year, beginning July 1.

"The state could be plunged into a dramatic fiscal crisis..." Angelides said. He warned of substantial cutbacks in government services and added, "We'll have deficits akin to the early 1990s." Back then, the state made deep budget cuts and imposed substantial tax increases.
(More taxes? Now THERE'S a stunner!)

The bond sale was originally scheduled for July. It was postponed because Republican lawmakers wouldn't give Davis the two-thirds majority needed to make the bond authorization law take effect right away. To ride out the interim, the state took out a $4.3 billion "bridge loan", which is due Oct. 31. Unfortunately, that loan is supposed to be repaid with cash from the bond sale. If the bonds aren't sold by then, the interest rate on the bridge loan will jump from 4 percent to 5.5 percent, adding several million dollars a month to the state's costs. Next April, if the bonds are still unsold, the bridge loan rate would rise again and the state would have to start making principal payments, Angelides said.

Angelides was pressing the PUC to adopt an agreement that commits the PUC to approve the water department's purchases and to raise customer rates, if necessary, whenever the department needs additional money for electricity. Analysts said the agreement was necessary to assure bond buyers of repayment. But on Tuesday, after nearly two months of delay, the PUC rejected the accord on a 4-1 vote. Lynch and other commissioners said the agreement would have locked ratepayers into high electric bills for years because customers would have been committed to paying off $43 billion worth of long-term energy contracts authorized by the water department. The contracts -- signed when wholesale power markets were out of control -- have been criticized by Lynch and others as too costly. Lynch said she preferred an alternative bond structure embodied in Senate President Pro Tem John Burton's bill, SB 18xx, which passed the Legislature. That bill would carve out separate revenue sources to pay bond holders before power generators. Lynch says these features would make the bonds easier to sell. Unfortunately, Wall Street doesn't see it that way. By paying bond holders first, the bill could violate some of the long-term power contracts, triggering lawsuits by power generators, according to a letter to Davis from J.P. Morgan Chase, which is underwriting the bonds.

Morgan, who is urging Davis to veto the bill, said the potential generator lawsuits could imperil or delay the bond sale. That in turn could delay repayment of the bridge loan, whose lenders include a Morgan subsidiary, the letter says. If that happens, the state could breach the bridge loan agreement and lenders could tack another 2 percent on the loan's interest rate. Another complication, Morgan officials said, is that the bill places a new ceiling on customer rates, possibly inviting fresh litigation from the utilities.

Davis -- who appointed the inexperienced and unqualified Lynch to the presidency of the PUC -- vowed to veto the Burton bill and blasted the PUC vote as an "irresponsible act."

Amazingly, things don’t even end there... PG&E has sued the water department, saying its power purchases must be subject to a public hearing. Otherwise, PG&E's customers would be issuing the agency "a blank check for literally billions of dollars," the utility said. Also, PG&E is preparing to fight the PUC's proposed formula for charging the utilities for the water department's power purchases. The PUC proposes that PG&E customers pay about 40 percent more than Edison and San Diego. Although the plan wouldn't raise PG&E rates, it would make it less likely that PG&E rates would fall if the cost of electricity stays low. The PUC said the difference is justified because it costs more to deliver electricity to PG&E's territory.

But wait a minute… does it truly cost FORTY percent more to deliver power to PG&E’s customers? Who has determined these figures? Where’s the data, and why didn’t PG&E bill its own customers 40% more in the first place? Somewhere, something isn’t adding up… But then again, it's the Governot we're talking about...

More? Click HERE

Without a doubt, the growing focus of policy debate in Washington and around the world is whether, and if so, when, President Bush will launch phase two of the war on terrorism Iraq. While there is a growing appreciation that Saddam Hussein must be removed from power, there is considerable uncertainty about – and in some minds adamant opposition to the United States launching military operations for that purpose in the foreseeable future.

Fortunately, there is much that Washington and the Bush administration could do, short of open hostilities, to begin the necessary effort to liberate the people of Iraq and remove the threat of Iraqi-based terrorism, as has recently been done for most of the people of Afghanistan.

A blueprint outlining such steps was provided to President Bush's predecessor in February 1998 by the Committee for Peace and Security in the Gulf. Needless to say, little came from this presentation...

Fortunately, many of the authors of this plan are now senior members of the Dubya team – including Secretary of Defense Donald Rumsfeld, Deputy Secretary of Defense Paul Wolfowitz and Deputy Secretary of State Richard Armitage – its early adoption and implementation should be accomplished without further undue internal debate or delay.

Clearly, Iraq's position is unacceptable. While Iraq is not unique in possessing biological weaponry, it is the only country which has used them – not just against its enemies, but its own people as well. We must assume that Saddam is prepared to use them again. This poses a danger to our friends, our allies, and to our nation.

It is equally clear that this danger cannot be eliminated as long as our objective is simply "containment," and the means of achieving it are limited to sanctions. As recent weeks have demonstrated, these static policies are bound to erode, opening the way to Saddam's eventual return to a position of power and influence in the region. Only a determined program to change the regime in Baghdad will bring the Iraqi crisis to a satisfactory conclusion.

For years, we’ve tried to remove Saddam by encouraging coups and internal conspiracies. These attempts have all failed. Saddam is more wily and brutal than any likely conspiracy the United States might mobilize against him. Saddam must be overpowered; he will not be brought down by a coup d'etat. But Saddam has an Achilles' heel: lacking popular support, he rules by terror. The same brutality which makes it unlikely that any coups or conspiracies can succeed, makes him hated by his own people and the rank and file of his military. Iraq today is ripe for a broad-based insurrection. We must exploit this opportunity.

Saddam's long record of treaty violations, deception, and violence shows that diplomacy and arms control will not constrain him. In the absence of a broader strategy, even extensive air strikes would be ineffective in dealing with Saddam and eliminating the threat his regime poses. The problem is not only the specifics of Saddam's actions, but the continued existence of the entire regime. For more on Iraq, visit this news link

Tribunals - The Big LIE

If one were to listen to the liberal media, you’d think President Bush, was re-writing the Constitution. Both the New York Times and Washington Post were outraged. Senators, comparing the plan to justice in a Third World republic, scheduled Attorney General Ashcroft for hearings this week, while 39 congressional members signed a strongly worded letter of opposition. All of this, in site of the fact that 59 percent of Americans support the use of military tribunals, and the number increased to 64 percent when participants learned that President Bush favored the measure. These figures even held broadly across political lines, from 52 percent of liberals to 58 percent of moderates and 66 percent of conservatives.

In spite of what the liberal media will tell you, military tribunals represent just one of many legitimate forms of justice available in particular circumstances. The real question is what form of justice is truly appropriate and logical for trying non-U.S citizens accused of terrorist attacks. The first and most obvious option is, of course, to try the terrorists in ordinary American courts. This presents an interesting dilemma - would we establish the U.S. District Court for Afghanistan, or bring the terrorists to America for trial? Then there is the question of proceedings. How could the crowded courts of our country handle the thousands of new cases at one time? Additionally, there are the multitudes of requirements and legalities for a standard bread and butter trial. We all saw the old episodes of Adam-12 when any suspect had to be advised of their rights when they were arrested. Can you just see it? Our troops enter a Taliban cave, accompanied by marshals, and attorneys, and begin to read the rights to hundreds or thousands of prisoners who don’t understand the English language. Interpreters? Not likely… Then there are the prosecutors, judges and jurors whose lives would be at risk, perhaps forever, in carrying out such trials. Not a good scenario!

A different solution could be a criminal tribunal, as has been done in the past. Unfortunately the success rate of these tribunals is not real good. Even the assembly and staffing of such a court is subject to the vagaries of international politics and their results have been quite expensive. In Yugoslavia and Rwanda, over a half-billion dollars has been spent to indict some 150 individuals through painfully slow processes. Ironically, international criminal courts, often supported by American media and political elites, do not provide many of the civil liberties that concern them about military tribunals.

The third and most logical choice is the military tribunals. These have been used from the Civil War through World War II, and are designed to provide justice under the difficult circumstances of war. They allow for expedited and private proceedings before three military judges. These courts provide safeguards for the defendants, but certain protections, such as the hearsay rule, or a public trial, are not guaranteed.
Chief Justice William Rehnquist was right when, in his book on wartime civil liberties, he wrote: "In any civilized society the most important task is achieving a proper balance between freedom and order. In wartime, reason and history both suggest that this balance shifts in favor ... of the government's ability to deal with conditions that threaten the national well-being."

While Military tribunals may scare some and provide fodder for the media, they are a legitimate means of achieving that task and they would provide all the justice the terrorists deserve, and then some.