Grover Norquists bailout letter to Presdient Bush

OH PLEASE - Ethanol Bailout Coming?

Hat Tip to Chuck Angier @ The Truth Hurts




by Chuck Angier
(Libertarian)
Sunday, December 14, 2008

A couple of weeks ago, I started hearing "rumors" in my circle about the recent (and not unexpected) financial struggles and closings of ethanol facilities. It was time to revisit ethanol.

It doesn't take a rocket scientist to understand the futility of ethanol and the even more offensive taxpayer sponsorship of such irresponsibility. Never mind how ethanol might be affecting the food supply. After pouring billions of taxpayer dollars into a politicized pipe dream, our "chickens are coming home to roost".

On October 31st, VeraSun Energy, Inc , the nations 2nd largest producer of ethanol with a capacity of 1.64 billion gallons per year , announced that it had filed for Chapter 11 bankruptcy. This was after collecting revenues of $1.084 billion and a net loss of $476.1 million in the 3rd quarter ending September 30th. According to the press release, it intended to continue operations but since that time has closed 2 plants and has delayed indefinitely the opening of it's 110 million gallons per year (MMGY) facility in Janesville, MN.

On November 26th, Boot Hill Biofuels was taken into involuntary bankruptcy by a creditor. Construction of the 110 MMGY plant, scheduled to begin in June of 2007, was still on hold. (Wichita Eagle, Dec. 9, 2008, "Involuntary Bankruptcy Sought Against Boot Hills Biofuels")

On November 28th, Pine Lake Corn Processors of Iowa ceased production at its 30 MMGY facility in Steamboat Rock.

On Friday December 12th, Gateway Ethanol's 55 MMGY plant in Pratt, KS went into bankruptcy after no bidders could be found. (Hutchinson News Online, Dec.12, "Ethanol Plant In Pratt Up For Sale") Gateway filed for Chapter 11 protection in October estimating that it owes between $50 and $100 million. (Associated Press, October 7, 2008)

In early December, Altra Biofuels of California, after securing over $250 million in debt and equity financing to build facilities capable of producing 500 MMGY of ethanol, shut down its Coshocton, OH (50-100 MMGY) facility after only 10 months of production. It also closed its Cloverdale, IN plant at about the same time. (Hoosier Ag Today, Dec. 8, 2008)

So what happened?

Cellulosic ethanol
is still unproven on a commercial scale.

Ethanol from corn is questionable at best.

Even at a just $2.00 per bushel, feedstock cost alone for a gallon of ethanol (at 2.8 gal/bu.) would be $0.71 per gallon BEFORE adding any other costs of production, refining or distribution.

Thanks to a number of factors including the adulterated demand for corn created by ethanol, corn skyrocketed to more than$7.00/bu. this past summer. That places feedstock cost at $2.50/gal or more.

Many refiners, expecting high corn prices to continue, forward-contracted corn at those inflated prices.

Corn at this writing is down to about $3.00 (still 50% higher than its historical average). Oil is down to the $40 range from $140 and gasoline is retailing for a $1.50 after adding all the costs, taxes and profit to it. $2.50 ethanol can't and won't pencil.

Corn growers planted their crop at a time when input costs were driven by the $7.00 market price of corn. Many covered their investment by forward contracting the sale of at least part of their crop. When corn and oil collapsed, refiners were unable to honor their commitments to the growers and the grower has gotten stuck sitting on a $7.00 crop in a $3.00 market.

Can we not comprehend how
government intrusion has so
corrupted these markets?

On December 19th, 2007 President Bush signed HR 6, "The Energy Independence and Security Act" which calls for usage of at least 36 billion gallons of ethanol per year by 2022. To add insult to injury, it also authorizes a "new" $200 million to install blender pumps. (ACE Press Release, December 19, 2007)

36 billion gallons of ethanol from corn would consume ALL of our corn crop (over 12 billion bushels, 78 million acres, in a GOOD growing year).

36 billion gallons of ethanol from much haloed Switchgrass at 1,150 gallons per acre would require 31 million acres. (DOE Bioenergy Feedstock Development Program).

36 billion gallons of ethanol represents 25% of our 2007 Motor Gasoline Consumption of 142 billion gallons and 11% of our 317 billion gallons of total petroleum consumption (DOE - EIA).

The United States has 343.521 million acres of arable land (excluding Alaska, 2008 CIA Factbook).

No matter how you figure it we're being asked to convert AT LEAST 10% of our arable land to biofeedstocks, disrupting the economy for 25% of our gasoline and 11% of our total petroleum.

The much referenced Billion Ton Vision is a study published by the DOE in April 2005. It concludes that we need (and can) produce 1 billion tons annually of sustainable biomass to displace 30% of our petroleum. It goes on to state explicitly that the purpose of the study was NOT to:

"assess the economic competitiveness of a billion-ton bioenergy and bioproducts industry, and its potential impacts on the energy, agriculture (food and feed production), and forestry sectors of the economy"

Short version? Yeah, we can find a billion tons of biomass, but we can't say that it's feasible. I submit that we would be astounded at what it will take to gather, store, process and dispose of a billion tons of biomass, much of it subject to the fickleness of nature, and all for (only) a theoretical 30% of our petroleum usage, never mind the disruption to the environment and economy.

For the 6 years ended in 2007, the taxpayer has provided an excise tax exemption of $12.03 billion on production of 23.589 billion gallons of ethanol (51 cents/gallon), (Renewable Fuels Association). It is impossible to calculate how much funding has been provided for Research and development, but I venture to say that it is much more than the tax exemption. We've been subsidizing for over 30 years and it is still not viable.

On December 4th, the American Coalition for Ethanol, a trade group of 1,500 advocates asked Congress to include text in the "Auto Bailout Bill" that would "guarantee that fuel retailers can dispense 15 percent ethanol blends and require auto companies to stand by warranties for car owners that choose to use such blends". Fortunately, it was not inserted.

Secretary of Agriculture Ed Schafer has already said that he would consider using USDA Rural Development Funds to assist ethanol producers that have "suffered losses in the volatile corn futures markets". Rural Development funds have been used in the past to promote ethanol and biodiesel plants. (DesMoines Register, Oct. 18, 2008

After pouring 10's (maybe 100's) of billions into a political pipe dream, that has brought the grain industry to the brink of collapse; considering the "no mis-managed, corrupt, government regulated, collapsing industry left behind" policies that have been implemented in the last few months, it is safe to say that there will be some kind of effort to save an industry that nobody wants. not even the environmentalists! But, then again, whatever the people want, Congress is going to do the opposite. (Can we say TARP?)

The USDA, on November 12th announced it was accepting applications for the Biorefinery Assistance Program.

"The Biorefinery Assistance Program provides loan guarantees for the development, construction and retrofitting of viable commercial-scale biorefineries producing advanced biofuels. The maximum loan guarantee is $250 million per project subject to the availability of funds. Preference will be given to projects where first-of-a-kind technology will be deployed on a commercial scale. Advanced biofuels are defined as fuels that do not rely on corn kernel starch as the feedstock." (USDA Press Release 0298.08)

Wow, $250 million per project. Non-corn starch. I bet that made the corn growers real happy!.

The futility of it all can be illustrated by a statement from American Corn Grower's Association (ACGA) President Keith Bolin at the ACGA Convention on January 18th, 2008 defending the 54 cent per gallon tariff on imported ethanol:

"The $0.54-per-gallon tariff on ethanol imports is the only way to recoup the $0.51-per-gallon blender's tax incentive which is paid to the petroleum companies to use ethanol."

Did I miss something?

George Washington on a Bailout

"No pecuniary consideration is more urgent, than the regular redemption and discharge of the public debt: on none can delay be more injurious, or an economy of time more valuable."

--George Washington, Message to the House of Representatives, 3 December 1793

Thomas Jefferson on Bailout's...

"The same prudence which in private life would forbid our paying our own money for unexplained projects, forbids it in the dispensation of the public moneys."

--Thomas Jefferson, letter to Shelton Gilliam, 19 June 1808

James Madison on bailout's...

"There is not a more important and fundamental principle in legislation, than that the ways and means ought always to face the public engagements; that our appropriations should ever go hand in hand with our promises.

To say that the United States should be answerable for twenty-five millions of dollars without knowing whether the ways and means can be provided, and without knowing whether those who are to succeed us will think with us on the subject, would be rash and unjustifiable.

Sir, in my opinion, it would be hazarding the public faith in a manner contrary to every idea of prudence."

--James Madison, Speech in Congress, 22 April 1790

Red State Update: Washington Fights Over Bailout Plan

Major "Earmark" in Democrat Bailout Agreement

Hat Tip to my friend and OU Grad Dr. Bill Smith @ ARRA

Breaking News - Bill Smith, ARRA Editor. I received a copy of "Agreement in Principle" relative to the $700 billion "bailout" being proposed and supported by Senate Democrats.

The one page agreement from the U.S. Senate Banking Committee details guidelines to be put in place relative to taxpayer protection, oversight and transparency, home ownership preservation and Funding Authority.

While on the surface the agreement looks generic and positive, However, the "devil is in the detail." There is one detail that Democrats are concerned that Republicans will not agree to in the bailout agreement. That is if the Republicans even see the item. It seems that this issue may be one reason that many Democrats have hounded Sen. John McCain and pushed for his speedy approval. Senate Majority Harry Reid (D-NV) has already identified that it is Sen. John McCain's approval, not Barack Obama approval, that is needed to secure the agreement of Senate Republicans. In fact, the questioned provision indirectly focus on some prior concern regarding Sen. Barack Obama involvement with various organizations. Maybe that is why Obama would prefer being at a debate in Mississippi than being in Washington D.C.

House Speaker Nancy Pelosi's (D-CA) cohorts are also hounding Sen. McCain to agree. They know that neither the House Republicans nor the House Blue Dog Democrats are going to sign on easily to an agreement extending $700 billion "bailout" if Sen. McCain disagrees. Pelosi does not have control of the fiscally conservative Blue Dogs who are not happy with committing $700 billion to the "bailout" effort.

In the "agreement in principle," there is the effect of a major "earmark" which commits money from future "profits" to be given to nonprofits organizations like ACORN, National Council of La Raza and potentially the National Urban League. This agreement clearly evidences that the Government expects to benefit in the future from the bailout when the values of property rises and mortgages or properties are then sold by the Federal government. The agreement --

"Directs a certain percentage of future profits to the Affordable Housing Fund and the Capital Magnet Fund to meet America's housing needs."

In the proposed bailout agreement, Sen. Christopher Dodd, the Senate Banking Committee and other Democrats desire to pre-direct that future funds (profits) not be returned to the taxpayers via the treasury but that they be used to underwrite potential questionable (maybe even illegal activities) of certain nonprofits which have had a hand in promoting and expanding access to "no money down" loans for minorities, illegal voter registrations and extensive lobbying activities.

Let’s examine the connection of the Affordable Housing Fund and the Capital Magnet Fund with the various nonprofit groups mentioned above. In July, 2008, a Wall Street Journal article addressed the previous housing bill signed into law:

Provide[d] a stream of billions of dollars for distressed homeowners and communities and the nonprofit groups that serve them. One of the biggest likely beneficiaries, despite Republican objections is Acorn, a housing advocacy group that also helps lead ambitious voter-registration efforts benefiting Democrats. Acorn -- made up of several legally distinct groups under that name -- has become an important player in the Democrats' effort to win the White House. Its voter mobilization arm is co-managing a $15.9 million campaign with the group Project Vote to register 1.2 million low-income Hispanics and African-Americans, who are among those most likely to vote Democratic. Technically nonpartisan, the effort is one of the largest such voter-registration drives on record.

The organization's main advocacy group lobbied hard for passage of the housing bill, which provides nearly $5 billion for affordable housing, financial counseling and mortgage restructuring for people and neighborhoods affected by the housing meltdown. A third Acorn arm, its housing corporation, does a large share of that work on the ground. Acorn's multiple roles show how two fronts of activism -- housing for the poor and voter mobilization -- have converged closely in this election year. The fortunes of both parties will hinge in part on their plans for addressing the fall of the nation's housing market and the painful economic slowdown. . . .

Partly because of the role of Acorn and other housing advocacy groups, the White House and its allies in Congress resisted Democrats' plans to include money for a new affordable-housing trust fund and $4 billion in grants to restore housing in devastated neighborhoods. In the end, the money stayed in the bill; the White House saw little choice. What most riles Republicans about the bill is the symbiotic relationship between the Democratic Party and the housing advocacy groups, of which Acorn is among the biggest. Groups such as the National Council of La Raza and the National Urban League also lobby to secure government-funded services for their members and seek to move them to the voting booth. Acorn has been singled out for criticism because of its reach, its endorsements of Democrats, and past flaws in its bookkeeping and voter-registration efforts that its detractors in Congress have seized upon. . . .

Sen. Obama is especially reliant on registration drives, such as Acorn's with Project Vote, to help him win the White House. The Illinois Democrat draws his strongest support from blacks, Hispanics and young people, groups that are among the least likely to be registered. After law school, Sen. Obama was the director of Project Vote in Chicago. . . .

Democrats on Capitol Hill have helped to steer millions of dollars in housing and other grants from the federal government toward Acorn and groups like it. The groups must qualify and compete for the money, which is typically doled out from the federal government to states and municipalities. The housing package includes a new, permanent source of affordable-housing money that congressional Democrats and grassroots groups have sought for years. The Affordable Housing Trust Fund and the Capital Magnet Fund will be funded by a tax on mortgages backed by Fannie Mae and Freddie Mac, the government-sponsored mortgage titans.

That tax eventually will channel upwards of $600 million annually in grants for developing and restoring housing, mostly as low-income rentals, available to Acorn and other groups. Democrats on Capitol Hill and housing groups say the housing-assistance money is vital to helping Americans hit hardest by what some call the largest drop in home values since the Great Depression. But they acknowledge the perception of political conflict in giving federal funds to an organization that does political work. "We are guarding against it," said Massachusetts Rep. Barney Frank in an interview. He secured the Affordable Housing Trust from his seat as chairman of the House Financial Services Committee. . . .

Acorn describes itself as the nation's largest grassroots community organization, with more than 400,000 families organized into 1,200 neighborhood chapters in 110 cities. Over four decades, Acorn has turned its broad membership into a powerful lobbying tool. Its representatives are well-known in the marble halls of the Capitol, and press local, state and federal governments . . .

ACORN is the agency where Sen. Barack Obama worked as a trainer for the Association of Community Organizations for Reform (ACORN), whose affiliate, Project Vote, is known for voter fraud. It is this same organization from which a large part of the mortgage mess has grown.

After Harvard Law School, Obama provided legal representation for ACORN. Obama sat on the boards of the philanthropic Woods Foundation and the Joyce Foundation which both funneled millions of dollars to ACORN.

In 2006, the Wall Street Journal addressed Acorn Indictments. In a recent article, additional complaints, indictments and arrests and conviction of ACORN members for voter fraud have been detailed for Colorado, Florida, Missouri, Ohio, Pennsylvania, Washington State, and Wisconsin. Democrats on Capitol Hill have steered billions of the taxpayer monies to risky ventures and to nonprofits organizations like ACORN, National Council of La Raza through the government’s Affordable Housing Fund and the Capital Magnet Fund. As a result groups like ACORN have developed powerful lobby groups to secure tax money for their organizations. Now the proposed "agreement in principle" for the $700 Billion "bailout" seeks to continue the protection of this process. In another article by James H. Walsh, a former federal prosecutor, it was noted that:

ACORN Housing Corporation (AHC) was instrumental in its passage of the Community Reinvestment Act (CRA) which has plagued the mortgage markets since 1977. The U.S. Congress through the CRA compelled banks and lending institutions to make loans to “communities of color” disregarding sound economic and risk guidelines. CRA encouraged the relaxing of “outdated” risk-management protocols and underwriting obligations by lending institutions. In the name of ending discrimination, no longer were “communities of color” required to provide verification of income, employment, credit history, ability to pay homeowner bills, or down payment. In response, many banks and mortgage groups bundled trillions of dollars of “subprime” loans and sold them to investors here and abroad. It is these bundled Community Reinvestment Act mortgages, doomed to fail, that are today causing financial strain in U.S. and global financial markets.

In short, a Democrat Congress and President demanded that banks change the rules of good bankinACORN, agreement earmark, bailout, Barack Obama, Chris Dodd, Democrats, Harry Reid, John Mccain, La Raza, Nancy Pelosi, profits, Republicans, US Congress, US House, US Senateg and open the Pandora’s Box of mortgage defaults and foreclosures now coming to a head. This home-parity concept of the radical left was mobilized by ACORN resulting in a purchase of a property without any credit, income, employment, and a zero down payment.

In 2003, Fannie Mae home-parity funding in Chicago reached $600 billion. When Franklin Raines, former chair and CEO of Fannie Mae, stepped down in 2004 but managed to take with him a multimillion-dollar parachute and a monthly pension of $114, 393 for life, and should he die, for his wife’s lifetime. Until recently, Raines was an advisor to Obama.

Open Secrets reveals the investment made by Fannie Mae and Freddie Mac in Democrats and details the Top 25 Democrat Recipients of Fannie Mae and Freddie Mac contributions in 1989-2008. The top three in order were Senators Christopher Dodd, John Kerry and Barack Obama.

When government tries to fix social issues through the use of the taxpayers’ money, there are consequences. Now the American taxpayers are being called upon again to underwrite the problems exacerbated by the prior actions of former and the current Congress and past administrations. It is hoped that Senators and Representatives will avoid this massive "earmark." All "future profits" from the resolution and disposition of the alleged current bad mortgages ("bad paper"), should accrue to the American taxpayers as a whole and be returned to the Treasury. Any determination as to the use of "future profits" should be determined by those elected and representing the people at that future point in time. No agreements should include an obligation on the potential "future profits." No agreements should support questionable programs that support organizations that contributed to the failures of mortgages or to the bad lending practices promoted by prior Congresses and administrations.