AviationRegister                        E-Xpert Witness Journal
September 29, 2008

McCain claimed
Obama "will deepen recession,"

COLUMBUS, Ohio - Lagging in the polls, Republican presidential candidate John McCain unleashed a blistering attack on his Democratic rival, saying the race comes down to a simple question: "Country first or Obama first?"

McCain aides said he signaled he would likely vote in favor of the bail out measure, which gave the Treasury authority to spend up to $700 billion to purchase distressed assets on the books of financial institutions.

In a public appearance McCain said Democrat Barack Obama advocates tax-and-spend policies that "will deepen our recession," and voted against funding for equipment needed by troops in Iraq and Afghanistan.

McCain stressed his own record of opposing Republicans on key issues, and said, "When it comes time to reach across the aisle and work with members of both parties to get things done for the American people — my opponent can't name a single occasion in which he fought against his party's leadership to get something done for the country. That is not putting the interests of the country first."

Obama's campaign issued a swift rebuttal that accused McCain of an "angry diatribe" that it said "won't make up for his erratic response to the greatest financial crisis of our time."

The Arizona senator spoke at a joint rally with running mate Sarah Palin.

"I've been hearing his speeches since I was in the second grade," the 44-year-old Alaska governor said of her counterpart, who is 65 and a veteran of more than 35 years in the Senate.

McCain's suspended his presidential campaign to concentrate on helping Congress agree on a bailout for the troubled financial industry. He drew heated criticism from Democrats who accused him of nearly derailing negotiations that were headed for success, and even some Republicans conceded privately he appeared impetuous and had not helped his own cause.

McCain's choice of Palin as is VP nominee energized conservatives and led to a short-term surge in his poll ratings.

The Obama campaign said McCain was untruthful in describing Obama's record on taxes, "and the lie he told the American people today is all the more outrageous a day after he admitted that his health care plan will increase taxes on some families."

The votes in question occurred on a Democratic budget outline that set tax and spending outlines for the future, but did not actually raise taxes.

McCain sought to turn the tables on his rival. "Senator Obama took a very different approach to the crisis our country faced. At first he didn't want to get involved. Then he was "monitoring the situation." That's not leadership, that's watching from the sidelines," he said.

In the early days of the economic crisis, McCain seemed uncertain how to react. His first response was to say the fundamentals of the economy were strong. Then he backtracked, saying the workers form the foundation of the economy and they are strong. Then he called for a blue-ribbon commission to study the root causes of the debacle on Wall Street. Then he called for the ouster of Securities and Exchange Commission Chairman Christopher Cox, with each shift drawing ridicule from Obama.

Several Republicans said House GOP leaders had asked McCain to make phone calls to wavering rank-and-file lawmakers to


try and persuade them to support the bill. Campaign aides did not immediately say whether any of the calls had been made. The fate of the package remained in doubt Monday as the House rejected the bill with more than two-thirds of Republicans voting against it.

McCain broadened his attack on Obama to include spending.

The Democrat "has proposed more than $860 billion in new spending," McCain said. "He was asked in our debate Friday to name a single program he would consider cutting to help our country through this crisis, and he struggled to name a single program!"

In the debate, McCain suggested a partial freeze on government spending, excluding defense, veterans and other programs he did not identify. In reply, Obama said the problem with a freeze is that it short-changes programs which deserve an increase. He mentioned early childhood education as an example.

© 2008 The Irish Times
This article appears in the print edition of the Irish Times

The Political Consequences
as viewed from Abroad.

POLITICAL HISTORIES, with their clear before-and-after dates, are so much neater to write about than their rather more tortuous economic cousins. On December 21st, 1991, the representatives of all member republics of the Union of Soviet Socialist Republics, with the exception of Georgia, signed the Alma-Ata Protocol, dismembering the USSR. Just five days later, on St Stephen's Day 1991, the Supreme Soviet dissolved both itself and the country it had once ruled. One of the two great political and economic theories of the 20th century, Soviet communism, ceased to exist.

The year 2008 will enter our history books as the year when the rival 20th century theory of unbridled capitalism passed away. As this demise is an economic one, we lack an equivalent before-and-after date.
Perhaps historians with a sense of symmetry will select December 26th, 2008? Such a selection would allow us to write that unbridled capitalism outlived its communist rival for exactly 17 years.

Over a period of weeks the Republican administration of George Bush, which can reasonably be described as the national government that most zealously believed in the mantra of unfettered capitalism, has carried out the greatest wave of nationalizations our modern world has seen.

One major source of economic inspiration for the Bush Republicans had been (the past tense is now obligatory) Grover Glenn Norquist, leader of Americans for Tax Reform and a board member of both the National Rifle Association and the American Conservative Union.

Norquist once famously remarked: "I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub." Mr Norquist would now need a bathtub the size of the Pacific Ocean were he to realize his ambition.

On Sunday, September 7th 2008, the US treasury secretary, Henry Paulson, announced that his government was effectively nationalizing the mortgage giants Freddie Mac and Fannie Mae.The US Federal Housing Finance Agency took them into "conservatorship" - nationalization being an unacceptable term - to underwrite their ballooning debts of around $800 billion. The two companies were already semi-public, and between them underwrote over $5 trillion of the US's $12 trillion mortgages. The market was about to devour them, and in the process destroy itself. The market had failed and only the state could save it.
Heresy metamorphosed in the blink of an eye into orthodoxy.

One week later, unfettered capitalist orthodoxy briefly reappeared when Paulson allowed the 158-year-old Lehman Brothers investment bank to collapse. Paul Krugman of Princeton University and the New York Times suggested Paulson felt "that playing Russian roulette with the US financial system was his best option". The odds in Russian roulette are five-to-one in your favor as only one of the revolver's six chambers actually has a bullet in it. The odds against Henry Paulson's last free market hurrah turned out to be considerably shorter than that. On the following Wednesday the penultimate nail was hammered into the coffin of financial orthodoxy when the Federal Reserve lashed out $80 billion to take over the troubled insurance giant American International Group, and fired its management. The Fed then asked the treasury to borrow more money to help it handle the strain of shoveling over $220 billion into sandbags to shore up the crumbling levees of the US financial system.

Two realities, one potentially lethal, the other painful, made this borrowing possible. The potentially lethal one is the drying up of credit in the US economy. On September 18th, the US interbank rate, or what banks charge other banks for borrowing stood at 3.25 per cent. The return on short term treasury bonds was 0.05 per cent, but lenders preferred the security of government bonds to the risks of lending to their fellow bankers.

The painful reality was that the rest of the world has effectively said was is no longer prepared to lend money to US companies and individuals. It is still prepared to lend money to the US government, but that is a willingness which will be increasingly conditional on Washington abandoning its unfettered free market zeal. The rest of the world's profits and savings have funded US consumption and its housing boom during a period when Americans had simply stopped saving. That party is now effectively over as Lehman Brothers discovered when they went looking for foreign buyers.

There is now a growing consensus in Washington that the federal government needs to remove all the toxic financial instruments from the market by purchasing everything unsalable at a knockdown price - the final nail in financial orthodoxy's coffin. Blind faith in the ability of markets to regulate themselves, and in the infallibility of complex mathematical formulae to dilute and spread the risk element of investments has brought the US financial system to its knees. There is more than an element of delicious irony in the fact that the trumpet of doom first sounded from Paris when BNP Parisbas announced in August 2007 that its highly qualified staff could not put a price on the US asset-backed bonds it held.

The US, with a lot of help from the rest of the planet, will eventually sort out its financial mess and its inherent inventiveness will re-launch its economy. It will, however, be a version of the mixed economic model the rest of us have long come to accept as a reasonable compromise. Economic commentator Nouriel Roubini of New York University, also known as Dr Doom, sums it up: "Zealots of any religion are always pests that cause havoc with their inflexible fanaticism - but they usually don't run the biggest economy in the world." This time they did and they ran it into the ground.

© 2008 The Irish Times
This article appears in the print edition of the Irish Times

October 1, 2008
Bush Administration
has no legal authority
to auction airport slots


The Associated Press reports from Washington that U.S. aviation officials had no legal authority to auction takeoff and landing slots at New York City airports, a scheme the government devised to try to curb crippling traffic jams at major airports, congressional investigators said.

The legal opinion from the Government Accountability Office came amid a legal fight among airlines, airport operators and the Federal Aviation Administration over the Bush administration's plan to trim flight delays by auctioning off slots at New York City-area airports.

The opinion was another blow to Bush administration officials who have hoped to get their air traffic experiment off the ground before they leave office in four months.

"We conclude that FAA may not auction slots under its property disposition authority, user fee authority, or any other authority, and thus also may not retain or use proceeds of any such auctions," GAO general counsel Gary Kepplinger said in a letter to lawmakers who had sought the legal opinion.

The GAO's top lawyer concluded that for the first time in 40 years, the FAA claimed it may assign airspace as its "property," but the laws covering the FAA were never written to include such a definition of property.

Then Transportation Department spokesman Brian Turmail said the GAO was unfamiliar with aviation law, and had little time to study it before reaching its conclusion.

"Should Congress give the agency an opportunity to conduct a more thorough review, we are confident that GAO will better understand both the validity and the effectiveness of our approach," Turmail said in a statement.

A number of congressional lawmakers had requested the legal opinion as they tried to stop the FAA's limited tryout of a slot auction this fall at Newark Liberty International Airport.

"This once again shows that the DOT needs to put a stop to this ideological battle that would cause chaos at New York airports. The administration has tried to jam through a half-baked plan that can't even be implemented," said Sen. Charles Schumer (D-N.Y)., one of the agency's biggest critics.

Then Transportation Secretary Mary Peters proposed the auction plan after widespread complaints last year about rampant flight delays across the country. The government says two out of three flights delayed 15 minutes or more were due to cascading backups beginning at one of the New York metropolitan area's three airports: Newark, Kennedy and LaGuardia.

Trying to fix the problem, the government imposed new limits on the airports and announced plans to auction off some takeoff and landing slots to control the crushing demand for time and space. By auctioning slots, the government reasons, market forces will help restrain such demand and make the system operate more efficiently.

Opponents sued.

Airlines and airports contend the auction proposal will add new costs and make a mess of day-to-day airport operations.

The government pressed ahead with a trial effort at Newark to auction off just two slots, but an internal FAA agency told them to wait.

An agency order lifting that stay was issued after the GAO legal finding yesterday, meaning the agency can in theory proceed with its trial auction in Newark.
Aviation Politics in action

Source:New York Times.


Author: STEPHEN LABATON, New York Times.

Date:Published: July 25, 2009

Subject:Christine A. Varney of the Justice Department’s antitrust division has stepped up
enforcement.

Related:Times Topics: Antitrust Actions and Laws

WASHINGTON — President Obama’s top antitrust official and some senior Democratic lawmakers are preparing to rein in a host of major industries, including airline and railroad giants, moving so aggressively that they are finding some resistance from officials within the administration.

The official, Christine A. Varney, the antitrust chief at the Justice Department, has begun examining complaints by the phone companies Verizon and AT&T that their rivals — major cable operators like Cablevision and Cox Communications — improperly prevent them from buying sports shows and other programs that the cable companies produce, industry lawyers said.

At the request of some lawmakers, notably Senator Bernard Sanders, independent of Vermont, Ms. Varney is examining whether small agricultural operations are being hampered unfairly by large food processors, particularly in the milk industry, congressional aides said.

Ms. Varney has also challenged agreements that the Federal Trade Commission and consumer groups say discourage pharmaceutical companies from marketing more generic drugs. And she is examining a settlement between Google and book publishers and authors to make more books available online.

The more aggressive antitrust policy was described in interviews with officials at the White House, the Justice Department, other agencies and Congress. It is a major policy reversal from the Bush administration, which did not prosecute cases in which some dominant companies engaged in potentially anticompetitive behavior, often because those officials maintained such behavior was not harmful to consumers.

Democrats have spent years trying to gain the support of businesses, and the policy changes under way may have long-term political implications for their party. Some companies would like to see more aggressive antitrust enforcement against their rivals, while others could be hurt by it.

In some cases, though, the new approach is being opposed by administration officials. Some fear that the crackdown is coming at a bad time, as corporate America reels from the recession. Other officials embrace the Bush administration’s view that larger companies and industry alliances can provide consumer benefits by making their businesses more efficient.
One clash played out recently when the Transportation Department, rejecting many of Ms. Varney’s recommendations, approved an antitrust immunity request involving a global alliance of nine airlines; Continental Airlines wanted to join the alliance to share routes, marketing and revenue.

The antitrust division argued the immunity was unnecessary for approving the newly reconstituted alliance and that it could lead to rates rising from 6 to 15 percent for many routes, according to public filings. The Transportation Department rejected that analysis for most of the routes and instead endorsed a policy popular during the Bush administration that favored such industry agreements out of a desire for efficiency.

The disagreement became so heated that the president’s chief economic adviser, Lawrence H. Summers, was called in to mediate.

Administration officials said that Mr. Summers did not take sides in the dispute but urged the two agencies to reach an agreement as they sought to balance the interests of the industry against those of consumers.

In a second area, senior Democrats are proposing legislation to eliminate an exemption from antitrust law for commercial railroad companies. It would give the antitrust division the authority to scrutinize the railroads for anticompetitive practices.

The proposal, by Senator Herbert Kohl of Wisconsin, who heads the antitrust subcommittee, and Senator John D. Rockefeller IV of West Virginia, the chairman of the Senate Commerce Committee, has been sought by a coalition of railroad shippers. But so far the administration has not taken a position on the measure.

In a third area, a White House effort to overhaul financial regulation, officials weighed but rejected a significant antitrust role as a way to reduce the size of large companies considered too big to be allowed to fail.

“The struggles between the expert agencies and the Justice Department get to the heart and soul of exactly what the competition policy of the Obama administration will be,” said Mark Cooper, an antitrust expert and director of research at the Consumer Federation of America, an advocacy group.

He added: “Now you have an antitrust division that cares about competition, and it is running up against the expert agencies that haven’t changed their attitudes yet.”

Ms. Varney returned to government after working as a partner at Hogan and Hartson, a Washington law firm. During the Clinton administration she served in the White House as Cabinet secretary and a commissioner at the Federal Trade Commission.

The antitrust division under Ms. Varney scrapped the Bush administration’s monopoly guidelines, which had sharply limited the government’s ability to prosecute large corporations that used their market dominance to elbow out competitors.

Now the division has opened inquiries in the financial services and wireless phone industries. The division’s wireless inquiry is looking at, among other things, whether it is legal for phone makers to offer a particular model, like the iPhone or the Palm Pre, exclusively to one phone carrier. It is examining the sharp increase in text-messaging rates at several phone companies. And it is scrutinizing obstacles imposed by the phone companies on low-price rivals like Skype.
Though Ms. Varney has the backing and encouragement of senior Democratic lawmakers in the House and Senate, some agencies have been less open to the change in policy.

In the case of the airline alliance, the Justice Department and consumer groups had maintained that it was potentially harmful to customers to grant such immunity and that it would not promote the opening of new markets because the flights involved routes to countries that had already approved “open skies” agreements. But Transportation officials sided with the airlines for many of the routes and criticized the department’s antitrust analysis.
In its July 10 order, the Transportation Department criticized the approach of the Department of Justice: “Were we to suddenly change our antitrust immunity and public interest approach, as D.O.J. suggests, the credibility of the U.S. government with its international aviation partners would be significantly compromised and our ability not only to reach new Open-Skies agreements but also to maintain those agreements that we have already achieved would be undermined.”

Senior Democrats on the House Judiciary Committee, concerned that the order gave short shrift to rigorous antitrust analysis, are preparing to hold a hearing soon. A pending major expansion of a different airline alliance, involving American Airlines, British Airways and Iberia Lineas Aereas de Espana SA, is expected to provoke further disagreement between the agencies.
Justice Department officials have also been urged by major commercial shippers to examine the potentially anticompetitive practices of the highly concentrated commercial railroad industry. But the department’s authority to examine that industry is curtailed by a law that gives such authority to another agency affiliated with the Transportation Department. That agency, the Surface Transportation Board, has traditionally been sympathetic to industry concerns.

A version of this article appeared in print on July 26, 2009, on page A1 of the New York edition of the New York Times.