Liquidity Crisis - A Look From Inside

Introduction.

In the wake of the financial market turmoil that arose over the last few years and which already brought down some big financial institutions, the question remains what banks can and should do to protect themselves from the worst-case scenario.

This article describes how banks operate in time of crisis and what their instruments are in navigating in the stormy waters.

One day in life of a Risk Manager during the crisis time.

A. is a risk manager in a large European bank. One early morning he was awaken by his mobile phone. A colleague, a treasury manager has activated the red line to inform A. that he cannot get dollars from Asian market and that swap market is also dried up. It means that bank cannot get liquidity through the wholesale market because banks don't trust each other anymore.

Normally at this time his bank already has few billions through the money market, but today there is nothing yet. The worst-case scenario, that the bank might not meet its obligations, which will be due today, is not to be excluded.

A. begins to call traders in other European branches, there is the same situation. Fortunately, this scenario has been already simulated several times and everybody knows what to do. Firstly, bank has a buffer to deal with such situation; so to say there is no need to ask ECB for a credit facility. Asking for a credit facility could mean severe consequences for the bank's reputation and its credit rating (Think about what happened with Northern Rock bank when it asked for a credit facility from Bank of England). Treasury department around the globe works extra hours to provide dollars from different markets to the Head office, the price becomes less important. Other team members are responsible for checking the outflow of the retail deposits. The substantial outflow could mean big problems, but luckily this is not the case.

In this situation it becomes clear why Risk management has become banks' main business. Without clear policy and procedures, good systems and right people a bank might not survive the shocks.

How banks manage liquidity risk

Liquidity risk management is a crucial area of risk control that is not covered by the original Basel II accord. Liquidity Risk is the risk of not being able to meet obligations when they come due because it cannot:

1. Liquidate assets or obtain adequate funding, this is called "funding liquidity risk";

or

2. Easily unwind or offset specific exposures without significantly lowering market prices because of inadequate market depth or market disruptions, which is called "market liquidity risk".

The dual definition of the liquidity risk helps in understanding the nature of the risks; while funding liquidity risk focuses on company specific funding problems, market liquidity risk describes general market liquidity disruptions.

The core of the liquidity risk strategy of a commercial bank must include following main components;

· Regular monitoring of net funding position and net funding gap of the bank;

The Treasury monitors all maturing cash flows, replenishes existing funds as they mature, monitors expected withdrawals from retail current and savings accounts and makes additional borrowings and regularly issues new debt.

· Diversification of funding sources;

The bank should posses well diversified funding sources including customer current accounts credit balances, savings and retail deposits and inter-bank deposits.

· Broad portfolio of highly liquid assets;

The bank has to maintain a broad portfolio of highly liquid or marketable assets that can be easily used to obtain cash. These assets can provide liquidity through repurchase agreements or through sale.

· Matching long term funding (over 12 months).

Fixed rate funding over 12 months and/or interest swaps (converting fixed rate liabilities over 12 months in floating rate liabilities).

· Set up quantitative limits and the limit structure.

· Set up clear crisis organization structure and escalation procedure.

· Tested and up-to-date contingency funding plans;

The contingency plans should address temporary and long-term liquidity disruptions caused by a crisis. These plans ensure that all roles and responsibilities are clearly defined.

Several scenarios should be analysed, for example, a market event, a specific bank event (think of a downgrade by a rating agency) and a mixed event.

The real scenarios could be taken from the real past events like:

· Black Monday 1987 when on 19 October 1987 the Dow Jones Industrial index fell 22.6%;

· The Bond Market crisis from 18 February until 21 February 1994 when Fed unexpectedly increased key interest rates by 300 basis points;

· Emerging markets crisis 1997 originated in East Asia and caused global financial crisis;

· Financial Markets crisis 1998 when Russian rouble devaluation and default on August 17, 1998, and the near collapse of LTCM triggered the Financial Market Crisis:

· Major terrorist act scenario like on September 11, 2001 when bond and equity markets have been closed for four days.

· Current financial crisis has provided a wide range of information for scenario analysis ( collapse of Lehman Brothers, extensive risks taken by AIG, USB and other financial institutions)

How this policy works in the crisis time.

Scenario 1: a short-time funding crisis related to a market event.

The preferred order of generating liquidity in times of crisis is:

1. Determine per position the financial instruments available for generating liquidity during the crisis:

An important element in this determination is the collateral position that must be held in times of crisis at the different central banks for supporting the payments system. The following trade off should be considered:

a) Putting too much collateral at Central banks solves payment system issues but limits the secured funding possibilities with the money market.

b) Putting collateral at work through repo (repurchase agreement) keeps financing secured but risks the payment system.

DNB (De Nederlandsche Bank - the Dutch Regulator) is of the opinion that putting collateral for supporting the payment system is essential.

2. Unsecured professional funding.

3. Secured professional funding:

a. Non-eligible assets in the professional repo market or through sale

b. Eligible assets in the professional repo market or through sale

4. Central Bank funding (secured) through open market transactions (if available):

a. Main Refinancing Operations (short term)

b. Longer-term Refinancing Operations.

c. Ad-hoc 'fine-tuning' or 'structural operations' of Central Banks

5. Funding through the Standing Facilities of the Central Bank (Lombard rate)

6. Funding through 'emergency funding' possibilities with the Central Bank (non-eligible collateral)

Scenario 2: In case of liquidity crisis is more severe and when it lasts for a longer banks begin to

1. Price deposits more aggressively. (Watch out for the banks that promote their deposit products with unbelievable high interest rates)

2. Reduce asset origination.

3. Raise term debt.

4. Raise equity.

Conclusion.

Right policies, timely and correct risk management reporting combined with state of the art Information systems are keys in withstanding liquidity crisis.

Boris Agranovich Web site: http://www.globalriskconsult.com E-mail: info@globalriskconsult.com Article Source: http://EzineArticles.com/?expert=Boris_Agranovich http://www.pippoproducts.com/education/index.html

Solidarity With the First Black Republic of the World

The Haitian people live one of the worst nightmares on the Planet. The Island, a country in crisis for decades, was assaulted by an earthquake and has left much of Port-au-Prince's infrastructure in tatters. This metropolis is the capital and largest city, where there are up to four million people. There are not words to describe it. But is also the worst economic disaster to hit this Island since 1804. A country which is making enormous efforts to build a peaceful society, and where over 90 percent of the nation's population lives on less than one dollar a day.

The international organizations estimated that there are at least three million homeless and between 50, 000 and 100,000 persons dead. Over 10,000 buildings have been destroyed, including hospitals, schools, and hotels. In the last days, Haiti has moved from being one of the 25 poorest nations on Earth to being considered the world's poorest country, below many war-torn countries such as the Democratic Republic of the Congo, Afghanistan and Iraq.

From 1804 to the Present-day

The Republic of Haiti occupies the western third of Hispaniola, the second-largest island on the Caribbean (shares the Island with the Dominican Republic). It covers 10,700 square kilometers ( 27,750 km). This French-speaking Island is slightly larger than the state of New Hampshire. About 70 percent of the country's territory is made up of mountains. With over nine million inhabitants, it has one of the most ethnically homogeneous populations on the mainland of the Americas (98% of the population are of African descent). It is also one of the most densely populated countries in Latin America. More than 70 percent of Haiti's people live in rural areas.

Following more than 105 years under French rule, by the early 1800s, Haiti, led by Jean Jacques Dessalines, gained its national independence and was home to the first black republic in history. Soon afterwards, a monarchy was set up. Subsequently, it had been plagued by political violence and social instability. From the mid-1950s to the mid-2000s, the nation's post-independence history had been written by dictators and anti-democratic warlords, which had plundered the Island's economy. At the same time, the Caribbean Island had 19 presidents and seven coups (1950-1997). In 1957 there were six Heads of State: Joseph Nemours Piere-Louis, Frank Sylvain, Leon Cantave, Daniel Fignole, Antoine Kebreau, and Francois Duvalier (also known as "Papa Doc").

Haiti hence became one of the world's least-developed countries. As a result, the Island boasted one of the world's lowest standards of living in the latter half of the 20th century, along with Zimbabwe, Zaire and Liberia. But that was not all. There are other legacies from the past. Due to political corruption and economic mismanagement, this Caribbean Island is still considered among the world's three most corrupt nations. On the other side, by the 1980s, it boasted one of the world's highest rates of HIV/AIDS infection. In the 21st century Haiti holds one of the developing world's most fragile democracies. The Caribbean nation has received more money per capita to promote democracy than any country in the world (equivalent to $ 38 for each Haitian), including Sudan, Burma and Belarus.

International Solidarity

But the Island is not alone. This French-speaking country has a number of friends in the world. Having obtained the full support of the United States: more than $100 million in aid. In Peru, on January 14, 2010, the nation's ruler Alan Garcia Perez decreed a day of national mourning. In the meantime, Haiti and the People's Republic of China don't have diplomatic ties, but Beijing has sent economic aid to Port-au-Prince.

Finally, Haiti's architect Albert Magones once said: "Because independence came early Haiti is unique in history, going directly from slavery to nationhood. That achievement gave us a sense of knowing who we are. We joke about ourselves; we criticize ourselves; sometimes we even despite ourselves..."

Alejandro Guevara Onofre: Freelance writer. Alejandro is author of a host of articles/essays about over 220 countries and dependencies (and American States as well), from ecology, history, tourism and national heroes to Olympic sports, foreign relations, and wildlife. In addition, he has published some books on women's rights, among them "History of the Women in America" and "Famous Americans." Article Source: http://EzineArticles.com/?expert=Alejandro_Guevara_Onofre http://www.pippoproducts.com

The High Priestess of Personal Freedom Enjoys a 21st Century Rebirth in Popularity

As a young college student in the 1960's I was swept up in the exciting, confrontational political climate of that period. The Viet Nam War was raging, the military draft was still activated, John and Robert Kennedy and Martin Luther King had been taken from us by assassination. The Beatles changed rock 'n roll music forever and the movie "The Graduate" changed pop culture.

I graduated from school and began my career in business carrying; maybe burdened would be a better description, these influences at the core of my being. I was liberal without having enough of life's experiences to really know why I was liberal or what that meant. I saw the world as flawed and felt that collectively we could make things better, safer, more peaceful and fairer. It made me feel good to want these things, although I had no understanding of how to make these altruistic goals obtainable.

Winston Churchill once famously said, "A man who is conservative at the age of 20 is heartless, a man who is liberal at 40 is a fool". I was soon to cross the bridge from dreamer to realist, much as described by Churchill. I started my own business. That was when reality struck, and hit right between my eyes.

At about the time I made the leap into entrepreneurialism I was introduced to the writer, philosopher Ayn Rand. I read her monumental novel Atlas Shrugged. It was attitudinally, philosophically and politically a life changing experience for me.

Every idea I had nurtured from my formative years was called into question by the hero of Atlas Shrugged
, John Galt. Rand's libertarian philosophy, she called it "Objectivism", is on full display in this powerful, logically based tale of the benefits and pre-eminence of individual rights. In the story, the productive, creative, ambitious, driven class of individuals, lead by John Galt, essentially goes on strike. Quite the opposite of a mass union strike, this stoppage by the few brings crisis to the many and itemizes the reasons that capitalism is the only economic system that can benefit the most people most often.

The power of Ayn Rand's thinking, as evidenced by the characters and stories she wrote are enjoying a renaissance today. Born in Russia, she had fled that country after the rise of communism. Her experiences growing up in a totalitarian place made her a fierce opponent of all the "-ism's", communism, fascism, socialism, all forms of statism and collectivism.

At the core of the Rand philosophy was a concept based on limited government, laissez faire capitalism and individual rights. She believed that doing what was best for one-self was the only duty a person owed to society. Altruism was destructive to Ayn Rand. The modern liberal, now interestingly called "progressive", despises the Rand view of man and believes her views reflect selfishness. And yet, it is only through the "selfishness" of the productive, entrepreneurial, risk taking class that all of society reaps the benefits of their creative, industrious enterprise. Poor people do not create jobs, and thus income, and thus taxes that support all level of government altruism and waste.

In this belief, Ayn Rand was really a modern acolyte of Adam Smith, the original philosopher of capitalism. Smith popularized the "invisible hand", the concept that by profiting and seeking advantage for ourselves, we inadvertently provide benefit for others. America's Founding Fathers resoundingly agreed with this philosophy and incorporated this principal into the Bill of Rights and Constitution. Rule of law, private property rights, individual rights and limited government enjoyed supremacy in the Founder's eyes. These principles, so taken for granted and abused by government today, are the very glue that differentiates successful states from dysfunctional ones.

The early years of the 21st century will not be treated kindly by future historians. The lessons that history teaches are being ignored. Thomas Jefferson said, "He is governed best, who is governed least". Who amongst us can honestly say that we are well governed by our all intrusive welfare, nanny-state?

The lessons and philosophy crafted by Ayn Rand have never gone away. Atlas Shrugged
is the most popular book ever published, after the Holy Bible. Sales are again spiking for this, and all of Rand's books. Because of the awkward intrusiveness and overreaching hand of government, there seems to be a revival of interest in the ideas represented by John Galt and Howard Roark in "The Fountainhead".

Ayn Rand is the High Priestess of libertarian, free thought. As long as men seek to live free from the oppressive hand of tyranny and bungled government over-activism her place in history will be secure. There has never been a better time than 2010 to dust off old copies of Ayn Rand's thought provoking classic tales and rekindle the passion for freedom that she so passionately portrays in her works.

by: Geoff Ficke

Geoff Ficke has been a serial entrepreneur for almost 50 years. As a small boy, earning his spending money doing odd jobs in the neighborhood, he learned the value of selling himself, offering service and value for money. After putting himself through the University of Kentucky (B.A. Broadcast Journalism, 1969) and serving in the United States Marine Corp, Mr. Ficke commenced a career in the cosmetic industry. After rising to National Sales Manager for Vidal Sassoon Hair Care at age 28, he then launched a number of ventures, including Rubigo Cosmetics, Parfums Pierre Wulff Paris, Le Bain Couture and Fashion Fragrance. Geoff Ficke and his consulting firm, Duquesa Marketing, Inc. (http://www.duquesamarketing.com) has assisted businesses large and small, domestic and international, entrepreneurs, inventors and students in new product development, capital formation, licensing, marketing, sales and business plans and successful implementation of his customized strategies. He is a Senior Fellow at the Page Center for Entrepreneurial Studies, Business School, Miami University, Oxford, Ohio. Article Source: http://EzineArticles.com/?expert=Geoff_Ficke http://www.pippoproducts.com/familyfinance/index.html

Manufacturing Not Enough For US Recovery

The Institute for Supply Chain Management surprised the world on Monday morning, as they announced the results of their manufacturing managers survey. The report is essentially a survey where every manager is asked to respond to his own experience. Each manager states whether they see conditions improving, deteriorating or remaining constant, with respect to thirteen main criteria. The December survey's headline number at 55.9%, tells us that when all criteria responses were averaged, that 55.9% of respondents saw conditions as favorable.

The consumption of manufactured goods represented 1.59% of the revised 2.2% U.S. GDP growth in Q3 2009 and thus remains the center point of the economic recovery as we have known it thus far. The growth indicative ISM report booned U.S. markets in the first 2010 trading session, as the seemingly unbeatable 60.3 November New Orders component was crushed by a 65.5 stat in December. New Orders are the single most telling economic reading of future conditions in Manufacturing, perhaps making this month's strength unbeatable in January and ironically a curse on the effects of less positive results moving forward. Less discussed but also important, are increasingly slower deliver times that, if sustainable, should have positive effects on both transportation carriers' top lines and jobs in the industry.

Standing on the shoulders of a massive rally to start 2010, it is safe to say that the environment is still a wash of confusion. Inventory numbers from the report show that clients of manufacturers are becoming increasingly skeptical, where the Customers' Inventories number at 35 perpetuated a nine month trend of contraction during one of the highest consumer demand months of the year. These results suggest that inventory rebuilding hasn't occurred on par with headlines, and that instead the entire production chain has become extremely lean and risk averse. Should confidence return and consumers loosen their wallets, this would be a prime area of growth in the new year, but headwinds to such spending remain significant and could intensify. Partly frightening, is the component of higher input prices, continuing a six month trend of appreciation that is reflective of the commodity rally and U.S. Dollar weakness. While input prices have helped to raise the ISM headline number in recent months, U.S. Dollar strength will be discounted as having a negative effect on future reports.

Kicking the mud from our boots, let us shed the stats from our purview and think logically about the chances for economic success in the U.S. over the next year. 2010 estimates for U.S. GDP growth are floating in the mid 3% range, but where can we expect to find growth summing up to this handsome rate of expansion?

In the U.S. 24% of annual GDP dollars are rooted in manufactured goods, while the service industry brings in nearly twice that figure. In Q3 of 2009 we lost about 3% to our trade deficit, which should grow if consumers spend more, and the remaining 30% is split into one part domestic investment, two parts government expenditures. We can expect that the government isn't going to muster much more growth in 2010, due to it's bureaucratic inefficiencies and the Q3 2009 0.5% annual contributed GDP growth, despite $700 billion (5.3% x GDP) of stimulus.

For all intensive purposes we are left with the manufacturing and service industries to get us most of the way to 3% growth. "We did it in 2003, so it's just a matter of animal spirits... right?" Unfortunately, in our opinion, the game has changed significantly, making 2009 anything but 2003. First, there is not an abundant supply of new homes, and the supply we have aren't being bought, so the big new houses of Super Sized Suburbia30 miles from town won't have the same magnetic effects on consumption as were present in 2003-2006. Instead we're seeing strength in existing home sales and less confident builders realizing that bigger isn't better. Second, unemployment is expected to average 10% in 2010, according to Bloomberg economists, landing well above the worst case scenario for financial institutions outlined under the Stress Tests in April of 2009 and crippling to the financial strength of the government, as Washington continues to roll over benefits and pay to jobless individual. Third, the shadow inventory of homes, as described by Robert Shiller, will flood the market with more defaults as teaser rates reset higher, even as rates are low, while weakening bonds will inevitably send mortgage rates higher.

Some of the smartest guys in the room are beginning to make calls that hold viral ramifications for the economy. Robert Shiller is predicting higher rates of defaults in the prime mortgage category, while Bill Gross is liquidating most of his exposure to bonds, and still many see this scenario as a victory on il-applied grounds of historical market recoveries. Perhaps confident retailers and mid-chain distributors could lift inventory levels as consumers spend more of what they've saved, but there must be widespread consumer spending on services as well as goods, at magnitudes congruent with a boisterous labor market, for 3% GDP to become a reality. At minimal, do your homework before placing your bets on a recovery founded in manufacturing, and at best keep limber to capitalize on the self fulfilling prophecy that equity markets have become when sentiment changes yet again.

Article Source: http://EzineArticles.com/?expert=Robert_Eberenz http://www.pippoproducts.com/business/index.html

The Principles of Liberty - Principle 4

"Without Religion the Government of a Free People Cannot be Maintained."

Many people today fail to realize the importance that the Founding Fathers felt religion played in the structure of the American Civilization that they hoped would emerge as the first free people of modern times. They felt that religion would be as important to us today, as it was to them then.

In 1787, the same year that the Constitution was written and approved by congress, they passed the Northwest Ordinance, which emphasized the essential need to teach religion and Morality in schools. Here is how they worded it:

"Article 3: religion, Morality, and Knowledge being necessary to good government and the happiness of mankind, schools and the means of education shall forever be encourage."

George Washington, in his farewell address said, "Of all the dispositions and habits which lead to political prosperity, religion and morality are indispensable supports... And let us with caution indulge the supposition that morality can be maintained without religion...Reason and experience both forbid us to expect that national morality can prevail to the exclusion of religious principle. It is substantially true that virtue or morality is a necessary spring of popular government."

In order to avoid divisive religious teachings, Jefferson wrote a bill for Establishing Elementary Schools in Virginia that made religion a unifying cultural adhesive. It stated, "No religious reading, instruction, or exercise shall be prescribed or practiced inconsistent with any religious sect or denomination." So, the religious tenets in public schools would have been what was universally accepted by all faiths and fundamental in their premises.

Benjamin Franklin gave five fundamental points to be taught in the schools.

1. There is a Creator who made all things and mankind should recognize and worship Him.
2. The Creator revealed a moral code of behavior for happy living that distinguishes right from wrong.
3. The Creator will hold us accountable for how we treat each other.
4. All mankind live beyond this life.
5. In the next life mankind are judged for their conduct in this one.

The Founders often referred to these five fundamentals as the religion of America. Samuel Adams said that is group of basic beliefs constitute 'the religion of America and is the religion of all mankind." John Adams called these tenets the general principles on which the American Civilization was founded. America became great, because America was good. When America is no longer good then we can expect that the nation will cease to be great.

How can we insure that we are a free people? We elect leaders that are willing to support and defend religious freedom, that acknowledge that we are given our rights as a gift from God, and that they are not legislated away. We seek for those that are virtuous, lovely, have a good reputation, and have done much for liberty on their own, seeking not for power or money. Those who are already serving for FREE within our communities. George Washington served without pay because he knew how great a cause of liberty is. Not that our leaders should not have compensation, but we should seek for wise men and women to be our leaders, and not just accept the lesser of the two evils handed to us.

Charity Angel is an author, singer, political activist, small business owner, and an online business coach. Find more of her thoughts Here. Article Source: http://EzineArticles.com/?expert=Charity_Angel http://www.pippoproducts.com/business/index.html

Terrorism Remains a Political Issue For 2010 Elections

President Barrack Obama and his cadre of supporters are finding their worst nightmare coming true: the global war on terror is not going away.

The bad news for President Obama and the Democrats as the 2010 mid-term elections are not far away, and national security is gaining strength as a primary campaign issue, and one that will help Republicans.

This could force Democrats to defend their long-held belief that terrorism is more of a criminal justice issue than a military one. Republicans see it differently - they view the bad guys as military combatants, believe they should be treated as enemy soldiers, and processed through the military justice system.

President Obama established a new tone toward terrorism early in his Administration by quickly signaling that the U.S. would not use the term "global war on terror".

The President also gave an "all clear" signal to the Justice Department to investigate, and seek criminal prosecutions against, Bush Administration lawyers for legal advice they gave relative to enhance interrogation methods against terrorists in the aftermath of 9-11. This sent shivers up and down CIA headquarters in Langley, Virginia.

He kept his pledge to close the Guantanamo Detention Camp located in the southeast corner of Cuba - and plans to bring those terrorists to a federal facility in southern Illinois.

However, terrorism resurfaced in November with a shooting attack at a military base in Fort Hood, Texas. The public was alarmed when the Obama Administration - including the FBI - would not acknowledge the shootings as an act of terror, despite the attack resulting in 13 dead and 31 wounded.

On Christmas Day came yet another terrorist act, in an attempted bombing by a Nigerian man, with al-Qaida connections and training, of a commercial airliner headed for Detroit, Michigan.

While the attack failed - the Obama Administration once again bungled the aftermath. Homeland Security Secretary Janet Napolitano pronounced, "the system worked" in describing the near-miss attack which would have killed everyone on board the Northwest jet airliner.

During this time President Obama remained silent for three days- only to finally call the attacker "an isolated extremist" - despite the fact that he had been recruited and trained by al-Qaida in Yemen specifically for the Christmas Day bombing attempt.

Once arrested, he was placed in the criminal justice system where he was afforded a lawyer who immediately advised his client to stop co-operating with authorities. Thus, the U.S. lost any chance of gleaning intelligence from the terrorist about other al-Qaida sponsored attacks.

Meanwhile, John Brennan, Assistant to the President, Homeland Security, told Fox News Sunday that no one in authority within the government had been signaled that the Nigerian man was a potential terrorist threat. "There was no smoking gun. No piece of intelligence that said this guy's a terrorist. He's going to get on a plane. No, not whatsoever", he said.

That was not true as the man's own father reportedly warned U.S. officials that his son was someone who needed to be watched closely. President Obama has said they "screwed up" and that authorities had plenty of information to uncover the plot before it ever got off the ground.

The public did not have the patience for the all-out assault against terrorism that punctuated the Bush years - but the fact remains the country was kept safe for seven years following the horrific events of September 11.

People are nervous about that record continuing under President Obama.

Article Source: http://EzineArticles.com/?expert=Robb_Austin http://www.pippoproducts.com/gardening/index.html

The Children of This Country Are Getting an Inferior Education For the Money Spent

I have just been going over the facts and figures put out by the State department and the U S education dept for the amount of money we spend every year on education. Between the U S dept of education that contributes 8.2% of a budget of $555. billion for education, and the people of the country who pay school taxes in every town and city in America make up the difference. We do have the right to demand excellence. We have fallen behind the rest of the advanced countries of the world.

It seems to me that the money is divided into so many programs with wonderful sounding names that no one has any idea of the whole picture. The variety of loans and grants for students and teachers is so staggeringly complex that duplication and overlaps are increasing all the time. Their seems to be a program for every conceivable situation and problem that could arise. And every bureaucrat somewhere in Washington or from some union has their own pet project to advance. A lot of them include granting loans and grants to illegal aliens under so many programs it is staggering to try and track them all down.

The problem I see is that they are spending to much time and effort to make sure that every student, no matter how slow, is given a special teacher to help them through, inside a classroom filled with children of normal intelligence even though they hold back the class as a whole. Should children with special needs be placed into classes with so called normal children just to make the child's parents feel better? We seem to hear that from more and more people. We have become babysitters for working parents.

Federal law says that whenever possible children with special needs should be included into regular classrooms with other normal kids unless that would have a disruptive effect on the class as a whole.. This means a special paraprofessional aide has to be with them in class. It cannot help but to slow the whole class down. How many special aides can we put into an average class? More and more parents are turning to schools to take care of children instead of trying to place them into special programs to educate them. Who pays for all these extra aides and how many are their nationwide How can schools train and educate downs syndrome children to make their way in the world? They will always need supervising companions to help them cope for as long as they live. It will not work.

How disabled must a child be? What is the definition of special needs as it relates to inclusion with other non disabled children? What disability level must be included and what should not? It is a tough question. Mental disability or physical? How severe? Are schools becoming baby sitters for parents that cannot cope or afford special placement schools? The normal average child today needs every learning opportunity available. The schools today with its present systems are failing to keep up with the rest of the world. We are hiring inclusion specialists for placing children with special needs into regular classes and the result cannot help but slow the whole classes progress. Are we to take the place of special schools and programs just so parents can feel better and to relinquish responsibility for their children to others? I would love to have enough money to take care of every special needs child in America but it is not possible as of now. In today's economy every dollar must be used to full effect and placed where it does the most good.

I would accept the fact that some good comes out of mixing students with special needs children as it teaches acceptance and sympathy and a desire to help others less able than they. But how far are we willing to go and just how disabled should a child be to include them with normal children? In the 35 years since the disabilities act was enacted, the inclusion of special needs children has been tried in almost every state in the union and the scores of children overall in the nation have gone down. We are failing in the upper levels of math, science, chemistry, physics, and others in which we have historically been the leaders.

The dilution of educational programs that do not teach our real history in classrooms about how our country was founded and the truth about how slavery was really administered by people in the south. The watering down of any part of education by political correctness and leaving out history that offends some part of the population. The money spent on education must be spread over more and more programs that benefit fewer and fewer children because of special needs children being included in regular classes.

The work being done by groups for placing special needs children into class means that a lot of money is being spent to accomplish what should be up to local school boards with parental input and not bureaucrats in Washington or the teachers unions who only want to add more teachers to their ranks. I can really sympathize with parents that want to include their children into regular classes in school but that has not worked so far according to children test scores over the years and across the country.

It is a sad reality of life in America today that in our day and age both parents have to work to bring in an acceptable level of income to raise a family and do all the things our parents did with only one breadwinner. When I was discharged from the Marine Corps in 1958 I got a job and bought my own truck and drove cross country for a very large moving company as a leased owner operator and earned approx $200 to $300 a week and believe me, that was a lot of money then. I was able to get married and buy a house on the G I bill back then for only $20,000. and raise three children. My total mortgage including taxes and insurance was only $195 per month.

Life today is very different and the government has grown into a monstrosity with tentacles reaching into all our lives at every level telling us what we must do and not do. We have so many departments in education today that their is probably not one person anywhere that can tell us what they all are. The unions inside the government are so big and almost every union in our country is controlled by democrats.

To get back to school class sizes and the inclusion of developmentally disabled children in normal classes with children that are not. The money spent on aides for each child placed into class could be multiplied by how many disabled children their are and we could pay for separate classes where each child could be helped individually by several teachers in a group setting.

Teaching is one of the most admired professions because in their hands we place our children, to be taught the values of our country and its history and all the knowledge we have learned in the past. The math, science, chemistry, physics, and all avenues of higher learning. Especially the values we place on this country and its beginnings. Our constitution, written by our founders has been downplayed by our President but revered by our people. We have to get away from being afraid of political correctness and teach the truth about our history with all it warts and blemishes.

It is a hard nut to crack but on the one hand we have to protect teachers from indiscriminate firing by superiors to being able to get rid of bad teachers who are only their for a paycheck and are not doing their jobs. Their are far to many teachers being burned out by union policies and rules that discourage innovation and teachers feel left out and alone trying to fight a bureaucracy. Parents must have some say in the process whereby they are involved.

I can personally remember that my nephew was indoctrinated by a teacher who was very against the republican ideals of our nation and went on and on about socialist principals that were his agenda to teach and he battered these into the minds of children. Even today he still believes most of that hogwash. He is what I call a democratic demagog and a democrat through and through. The old school democrats like Roosevelt and Kennedy are nowhere to be seen today.

The old type democrat was a person who held to democratic principals and could be talked to and reasoned with but now the name democrat means the way out far left wing that includes every liberal group imaginable. They all want to have their special projects enacted for their special needs like gay rights among a long list of others. The democratic party today bears no resemblance to what it once was. Joe Lieberman is an example of a good old time democrat that people respected and admired and who was forced to remove himself from what the party has become.

Politics has become a dirty word for what Washington has become, bitter partisan conflicts on a scale that is very hard for us to comprehend. Their are signs of violence spreading from the top down trying to control dissent. The corruption and misuse of money and position are their for all to see. I have come far afield from where I started but it all seems to be tied together with the control by the teachers union and many other unions pitting their power under our new President against any outside interference. It seems to me that every union group, weather or not its members agree, is on the side of the democratic party leaders, and do what they believe will help them, and contribute union money to various political figures.

It starts with us all being informed about things that are happening all around us. In our schools, in our neighborhoods, in our places of work, and especially in Washington and each State government and town boards and local school boards are the place to start. Meet the teachers that teach our children and ask your children about what teachers tell them. It all starts with you being informed and it really only takes about two to four hours a week of REAL searching on the world wide web=WWW and you can put any question to it and get an answer.

I have looked up the history of the union organized by the United Federation of Teachers and its fight for the rights of teachers as a whole over this last 75 years or more. It was a fight that was needed against the powerful interests that held them practically enslaved to low salaries and few rights. The unions were desperately needed and the progress they made was commendable for teachers everywhere. The problems came in the late 1990s when they became so big and included so many other union groups that it seemed to become a political arm of the democratic party.

It became home to various groups that wanted a platform from which to demand attention for their own agendas. What have Nurses and medical personnel have in common with teachers that they should be included in the AFT union. Their are many various union groups being included into one big organization for the power they can exert although each has different aims and wants for its own people. We have to keep one fact in front of us at all times. Power corrupts and absolute power corrupts absolutely. Give any group total power over its subordinates and they will eventually misuse it.

It does not work anymore to say, I just do not have the time to spend looking into everything for myself. THE PRICE OF LIBERTY IS ETERNAL VIGILANCE. If you are to lazy or busy then remember and do not complain when things happen that you are against. wait for others to do everything and nothing will be done. Then you deserve what comes.

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