December 16th, 2008
12:55 PM ET

Obama names education secretary

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2008/POLITICS/12/16/transition.wrap/art.tue.afp.gi.jpg caption="Arne Duncan listens Tuesday as President-elect Obama announces him as his choice for education secretary."]

President-elect Barack Obama on Tuesday nominated Arne Duncan, the head of the Chicago public schools, to serve as his administration's Secretary of Education.

"When it comes to school reform, Arne is the most hands-on of hands-on practitioners," Obama said. "For Arne, school reform isn't just a theory in a book - it's the cause of his life."

"When faced with tough decisions, Arne doesn't blink. He's not beholden to any one ideology - and he doesn't hesitate for one minute to do what needs to be done," Obama stated.

The president-elect made the announcement at a news conference in Chicago, Illinois. He was joined by Duncan and Vice President-elect Joe Biden.

Duncan has headed the Illinois city's public schools district since 2001. It's the third-largest in the nation.

Like Obama, he is a graduate of Harvard University.

Duncan also worked for six years with the Ariel Education Initiative, which tried to create educational opportunities for inner-city students on Chicago's South Side.

Obama and Duncan often play basketball together, and Duncan was one of those who played with the president-elect in a game on Election Day.

Also Tuesday, the president-elect planned to meet with key members of his economic team.

Keep Reading...

Filed under: Barack Obama • Raw Politics
December 16th, 2008
12:04 PM ET

The Shot: Paterson Impression

SNL did a pretty good impression of NY Gov. Paterson. But did they go too far?

Filed under: T1 • The Shot
December 16th, 2008
11:53 AM ET

Who plays...who pays?

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2008/POLITICS/12/15/kennedy.senate/art.kennedy.gi.jpg caption="Caroline Kennedy has her eyes on the New York Senate seat."]

Joe Klein

I've met Caroline Kennedy a few times and she seems like a good person. Compared to many children of the rich and famous, she has lived her life quietly, modestly, in exemplary fashion. She has worked hard for worthy causes; those who've worked with her say she is intelligent and self-effacing. Or was self-effacing. You can't really say that she is now, having thrust herself into the midst of the selection process for Hillary Clinton's Senate seat. By doing so, she has displayed an eminently New York quality: chutzpah.

Indeed, Kennedy's play seems very much of a moment recently passed–the dynasty years of American politics, when Kennedys, Clintons, Bushes (and other, less obtrusive dynasties–Udalls, Cuomos) cluttered our public life. There is nothing new about this. We've had our Adamses and Roosevelts in epochs past. But the combination of dynasty and celebrity in a too-hot media age has proved a diversion from good governance. That was part of the message sent by Barack Obama's victory over Hillary Clinton in the primaries–Clinton was, and is, a fine public servant, but she came attached to a moveable media carnival. There was, I think, a gnawing, somewhat subconscious sense that in this difficult time we needed to turn the page from the carnival years. The Era of Big Strange Political Families was over. (That goes for you, too, Jesse Jackson Jr.)

If nothing else, Barack Obama's transition demonstrates his intent to launch an era of Real Serious Governance. He has chosen well outside the standard political fast-food menu in some cases–James (OOPs: Steven) Chu, the Secretary of Energy comes to mind. And I'd hope that Governor David Paterson might consider a similar sort of selection–an honorary, non-political (but Democratic) appointee, a person of real, world-class, distinction who would never normally serve in the Senate, to grace the seat until the next election–if he hasn't already been bum-rushed into the Kennedy coronation. Certainly, New York State is filled with extraordinary people. Here are four:

  • Dr. Harold Varmus, former head of the National Institutes of Health, now director of the Memorial Sloan Kettering cancer hospital. He could add real value to the Senate's health insurance debate.
  • Geoffrey Canada has spent his life doing extraordinary work with the young people, especially the young men, of Harlem. He would be a strong, African-American voice for the poor.
  • Vishaka Desai, president of the Asia Society would be the first member of the Senate born in India. She would bring great knowledge about the world's hottest hot-spot to the Senate, plus great expertise in the areas of education and culture.
  • Judge Judith Kaye, the brilliant chief justice of New York's highest court, soon to retire.


Filed under: Raw Politics
December 16th, 2008
11:32 AM ET

Ponzi schemes: the good and the bad

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2008/images/12/15/art.fraud.jpg]

Justin Fox

Bernard Madoff appears to have operated a Ponzi scheme, in which money from new investors was used to pay off those who got in earlier. But there are other, perfectly legitimate financial endeavors that share this same basic model.

The most obvious is Social Security (and James Pethokoukis has already nominated Madoff for Social Security Commissioner). Today's taxpayers contribute money that is funneled to today's Social Security recipients, and hope that tomorrow's taxpayers will put in enough money to fund their retirements. Something similar is true of government finance in general: Those who buy Treasury securities and municipal bonds do so on the assumption that future taxpayers (and bond investors) will keep pouring in enough money to allow governments to make good on their commitments.

This applies not just to government finance. Wall Street too depends on a continual stream of new investors appearing on the scene to take securities off the hands of today's investors. And when everybody tries to take their money back at once, the system stops functioning—as we've seen over the past few months.

So what's the difference between these widely accepted arrangements and the reviled Ponzi scheme? Well, one is that the government can compel future taxpayers to contribute more if things aren't working out so well—which has happened repeatedly with Social Security. But there are limits to this approach. Raise taxes high enough and either the economy suffers or taxpayers find ways to avoid paying—or both.


December 16th, 2008
11:08 AM ET

Afghanistan today: Q&A

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2008/WORLD/asiapcf/12/14/bush.afghanistan/art.bush.bagram.afp.gi.jpg caption="U.S. President George W. Bush speaks to U.S. troops at Bagram Air Base in Afghanistan on Monday."]

Michael Yon
National Review Online

Michael Yon, an independent reporter and author of Moment of Truth in Iraq, has just returned to the United States from Afghanistan. National Review Online editor Kathryn Jean Lopez checked in with him about the president’s trip there this weekend and his own findings (more of which he will be writing about on his website).

KATHRYN JEAN LOPEZ: You just got back from Afghanistan with Defense Secretary Gates and I know you have a lot of writing to do. But to give us a preview: What were you most struck by there?

MICHAEL YON: Yes, there is much writing to do, but there is always time for NRO. What struck me about the trip was the straight talk from Secretary Gates — in a bit of a contrast with the administration's typical cautiousness in discussing the situation there. On this trip, I found his assessments on Iraq entirely consistent with my observations — and I have been saying and writing for months that the Iraq war is over. Neither Secretary Gates nor Generals Petraeus or Odierno have put it so flatly, of course — and one can understand that they have good reasons for speaking conservatively. But the war is over nevertheless. At Manama, in Bahrain, I spoke for a couple hours with Fred Kagan, whose observations on Iraq I greatly respect. I don't want to put words into Mr. Kagan’s mouth, but I suspect he would likely agree that the war in Iraq is over.

Iraq is now an ally of the United States. (Proof positive: Prime Minister Maliki tried to block that second shoe that was thrown at President Bush at their joint press conference over the weekend.) In Manama, Secretary Gates was advocating for lender countries to dismiss Saddam-era debt. The days are gone when Iraq and the United States shoot missiles at each other. The days of cooperation have already begun. I am very optimistic about our current relationship with Iraq.

On Afghanistan, I found Secretary Gates to be just as forthcoming and honest, as I am working hard to firm up my understanding of that war. But at this point, I am less optimistic about our prospects there. I’ll likely spend most of 2009 in that region, and will be watching closely.

Secretary Gates talked with me privately, and over the course of that conversation, my confidence grew that we have the right leadership team in place — leaders who will make the wise and often difficult decisions that are based on facts on the ground, rather than political realities back at home. I am confident in Secretary Gates and his top generals.

LOPEZ: In his press conference there, George Bush made reference to the potential for a flourishing democracy in Afghanistan. Is that remotely possible?

YON: Well . . . I’ve found President Bush’s recent comments on Iraq to be accurate. But I remain uneasy about Afghanistan, and my visit did not make me feel any better about the place, though it’s clear that our soldiers think they are making progress. I think this issue is one of framing: I see Afghanistan as a century-long effort, because Pakistan and the region as a whole need to be brought forward. On the military side, we’ve got the right general in charge — General Petraeus. I heard him speak last week in Manama and had a chance to ask a couple of questions, and he demonstrated a nuanced understanding of our problems there. His team is working on solutions. In the short term, I think the fighting will greatly increase during 2009, at a minimum. One thing is certain: NATO is proving largely worthless.

LOPEZ: What’s your best assessment of “Bush’s legacy” vis-à-vis Afghanistan?

YON: That Afghanistan is more akin to Jurassic Park than a modern country is not the fault of President Bush. I sounded the alarm from Afghanistan in 2006 that we were starting to lose the war, but at the time, Iraq was going so poorly that we did not seem to have the assets or attention span for the growing problems in Afghanistan. I would have blamed President Bush if we failed in Iraq, but we are succeeding. Afghanistan will be up to our new president — which is fitting enough, since Obama has expressed his opinion that that war is the one we should be fighting. Obama will have the troops at his disposal, and he’s already made a wise decision by asking Secretary Gates to stay on. So we’ll see. But Afghanistan will be Obama’s baby.

LOPEZ: What ought to be Barack Obama’s first priority there?

YON: Firstly, listen very closely to his military advisers, including Generals McKiernan and Petraeus. They don’t put lipstick on the pig, as it were. I see General McKiernan as a realistic commander and a truth-teller. Secretary Gates will tell you that we need more trainers to train the Afghan army and police, and our commanders on the ground will say the same. We need more money for infrastructure and development. We need roads, roads, roads. And more roads. We need to more vigorously address the poppy economy and find alternative livelihoods for the Afghan people. We need to work to not alienate the Afghan people because if we lose the wide approval that we still have, we likely will lose the war.

LOPEZ: Can you give us any insight into what Secretary Gates is thinking as he moves from serving President Bush to President Obama?

YON: Secretary Gates gets widespread approval from our military, and this is helpful in whatever he does. But I can say that he is definitely concerned about Iran. He is concerned about solidifying our progress in Iraq, and making a turnaround in Afghanistan. Piracy is a relatively farcical threat. Secretary Gates is concerned about getting more ISR [intelligence, surveillance, and reconnaissance] and UAV [unmanned aerial vehicle] assets in the field — and we need those badly. He did not seem concerned that budget cuts would undermine the fabric of the military, but leaders will have to make some tough decisions on big new weapon systems while we ramp up our efforts in Afghanistan while our economy continues to struggle.

It’s clear that Secretary Gates is working hard to make a smooth transition, so that there is no period when we let down our guard during the interregnum; and it’s also clear that if someone decides to test President Obama, Secretary Gates is prepared to make them wish they had not.


Filed under: Afghanistan • Iraq • Pakistan • President George W. Bush
December 16th, 2008
10:51 AM ET

Financial Dispatch: rate cut expected

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2008/images/12/16/art.market.anon.jpg]

Andrew Torgan
CNN Financial News Producer

The Fed today is widely expected to lower its key shot-term interest rate by a half point to 0.5%, the lowest level on record. It would be the 10th rate cut since Sept. 2007 as the central bank continues the most sweeping effort to stabilize the economy in its history. The decision is expected around 2:15 p.m.

Consumer prices plunged in November by the largest amount on record as energy costs posted nearly double the decline of the previous month. The Consumer Price Index - a key reading of inflation - fell 1.7% last month, surpassing the previous record decline of 1% set in October. Both drops were the largest one-month declines on record dating to February 1947, reflecting the effects of the recession gripping the country.

Construction of new homes plummeted in November by the largest amount in nearly a quarter-century, as builders slashed production in the face of an economy in recession. Housing starts fell nearly 19% last month, the steepest drop since March 1984.

Former Wall Street powerhouse Goldman Sachs posted its first loss as a publicly traded company, serving as yet another reminder that no corner of Wall Street has escaped the ongoing financial crisis. The investment bank said it lost $2.1 billion during the fourth quarter - its first loss since it went public in 1999. Rival Morgan Stanley reports earnings on Wednesday.


Filed under: Andrew Torgan • Economy • Finance • Housing Market • Oil • U.S. Federal Reserve
December 16th, 2008
10:32 AM ET

Paying down the deficit with whizzing shoes

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2008/WORLD/meast/12/15/shoe.reporter.profile/art.shoe.suspect.bgdtv.jpg caption="TV reporter Muntadhar al-Zaidi, in a file photo, was jailed after throwing his shoes at President Bush."]

Nicholas Kristof
The New York Times

A Saudi reportedly has offered $10 million for just one of the shoes thrown at President Bush in Iraq. That got me thinking. The journalist who threw the shoes no longer possesses them, of course, but hopefully some member of the White House staff picked them up and will do a deal with the Saudi buyer. The second one could be put on Ebay to defray the White House travel costs.

But that got me thinking. The Times article about the Saudi offer says that the shoe-thrower is a hero around Iraq, and indeed in much of the Arab world. That suggests that the resale market for shoes thrown at Mr. Bush is fairly deep. And in this difficult economic environment, can we as a nation overlook any way of raising money?

Couldn’t we trot out Mr. Bush before a series of, er, unfriendly audiences, with a White house aide then designated to collect the shoes and auction them off? (To protect Mr. Bush, we could insist that attendees wear only slippers, but in any case he seems to have excellent reflexes and is a pretty good sport.) My own research suggests that a three-week presidential tour of the Islamic world, Latin America and Western Europe would generate a considerable number of flying shoes. Even if there are diminishing returns and we can sell them for an average of only $3 million each, that could bring hundreds of millions of dollars into the Treasury. If a Saudi will pay $10 million for a single shoe that missed the president, consider the income-earning potential of a pair of slippers that actually grazed a presidential ear, perhaps autographed by him as well? Given that a lame-duck president doesn’t have much else to do, Mr. Bush might as well spend his final weeks raising money to pay for a fiscal stimulus, and the United States might capitalize on his global unpopularity.

Any thoughts for how we could refine the business model?


Filed under: Iraq • President George W. Bush
December 16th, 2008
10:20 AM ET

Explosives found at Paris store

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2008/WORLD/europe/12/16/paris.department.store.explosives/art.printemps.store.paris.lights.gi.jpg caption="Paris's Printemps department store, which has been hit by a security alert, pictured last month."]

Police evacuated a major department store in central Paris Tuesday after finding five sticks of dynamite inside, French police told CNN.

CNN affiliate BFM-TV reported the dynamite was not rigged to explode, but police did not immediately confirm the report.

French news agency AFP said it received a letter in the mail Tuesday morning, claiming to be from an Afghan revolutionary group and saying that a bomb was at the renowned Printemps department store. The news agency alerted the police, who evacuated the store, AFP told CNN.

The bomb squad found the suspicious package around 11 a.m. (5 a.m. ET) and were still investigating nearly two hours later, police said.

Filed under: Global 360° • Terrorism
December 16th, 2008
10:11 AM ET

Digger Deeper: Madoff Fraud

Anderson and panel discuss the ramifications of the arrest of Bernard Madoff.

Filed under: 360° Radar • Anderson Cooper • Finance • Jeffrey Toobin • Wall St.
December 16th, 2008
09:51 AM ET

Fed action expected today

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2008/images/12/16/art.fed.meeting.jpg caption="The Fed began its last meeting of 2008 today, where it is expected to announce another reduction in the key interest rate."]

Ali Velshi | Bio
CNN Chief Business Correspondent

The Federal Reserve is widely expected this afternoon to cut interest rates for the 10th time in just over a year, driving the rate it controls close to zero as it continues the most sweeping effort to stabilize the economy in the history of the central bank.

The federal funds rate, at which banks lend to each other, is already at 1 percent. The Fed is expected to drop it to half a percent, or even lower, at the end of its policymaking meeting today. That would be the lowest U.S. rate on record.

Here are some bullet points:

The Fed's extraordinary measures to calm the economy:

  • Cut interest rates
  • Inject funds into system
  • Buy up short-term debt
  • Bail out financial firms

Why does a rate cut matter?

  • Money is cheaper to borrow
  • Businesses expand, hire more
  • People save on lower rates
  • Consumers able to spend more

Interest rates right now:

  • Fed Funds Rate: 1.0%
  • Prime Rate: 4.0%

Filed under: Ali Velshi • Economy • Finance • U.S. Federal Reserve
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