• SUPPORT CATO
• FOR STUDENTS
• FOR MEDIA
• FREE NEWSLETTERS

• HOME

• ABOUT

• BLOG

• BOOKSTORE

• EVENTS

• EXPERTS

• MULTIMEDIA

• PUBLICATIONS

Books

Reviews & Journals

Public Filings

Policy Studies

Opinion & Commentary

• RESEARCH AREAS

• SPEAKERS BUREAU

• SUPPORT CATO

• CATO UNBOUND

• DOWNSIZING
  GOVERNMENT.ORG

• ELCATO.ORG

Cato Daily Dispatch for July 25, 2003

Subscribe to the Daily Dispatch via email

(Links to outside sources were active as of the date of this dispatch; however, not all news sources maintain links to current stories indefinitely. Some links also may require registration.)

September 11 Report Raises Saudi Questions

According to the Financial Times, "The September 11 hijackers received foreign-government support while they were in the US plotting the attacks on New York and Washington, the leader of a congressional inquiry charged on Thursday.

"The conclusion, which is hinted at in the declassified parts of the inquiry's 900-page report released on Thursday, will raise new questions about the role of Saudi Arabia in particular."

Shortly after September 11, in "Quit Turning the Other Cheek with Saudi Arabia" the Cato Institute's vice president for defense and foreign policy studies, Ted Galen Carpenter, and Jerry Taylor, director of natural resource studies, wrote that "almost every day we read another galling story in the press about our 'allies' in Saudi Arabia. It's time for the United States to take the diplomatic gloves off.

"The Saudi government has resisted our requests to use their bases for military operations against Osama bin Laden and the Taliban. They've dragged their heels when it came to freezing the assets of those Saudis bankrolling Al Qaeda. They've lectured New Yorkers through Crown Prince Abdullah about how it's our fault that the attacks have come in the first place. And they refuse to fully share information about terrorist suspects. Then it comes out that the Saudi monarchy has been the principal financial backer of the Taliban since at least 1996 and that Saudi sources have channeled funds to Hamas and other groups that blow away Israeli civilians day after day in acts of terrorism that are as chilling and morally repellent as those that killed Americans last September. That's all on top of the Saudi monarchy's long-standing policy of funding radical Islamic schools and 'charities' throughout the world, fronts for incubators of Islamic revolution and anti-Western fanaticism.

"The common wisdom is that we must turn the other cheek and stay on friendly terms with the Saudi autocrats because we need their oil. Nonsense. They need our money more than we need their oil. Repeat after us: 'There is no oil weapon.'"

Cato's Handbook for Congress contains several policy recommendations to change U.S. foreign policy towards Saudi Arabia, including:

1. Forcefully press Riyadh to aid American efforts to investigate terrorist activities and cut off private funding for terrorist groups, even at the cost of today's cozy relationship.

2. Use visa and transportation rules to encourage release of captive American citizens by, for instance, denying U.S. visas to men who have abused their power under Saudi law to prevent wives and children from leaving the country.

3. Put greater official distance between itself and the Saudi Arabian regime, thereby reducing Washington's identification with a corrupt kleptocracy.

4. End training of the Saudi national guard, a force directed at suppressing domestic unrest rather than guarding against external enemies.

5. Withdraw U.S. military forces from Saudi Arabia; and recognize that the feared Saudi 'oil weapon' is a myth.

House Votes to Overhaul Head Start in Eight States

The New York Times reports that "after a tense and bitter debate that ended a 38-year history of bipartisan cooperation on Head Start, the House of Representatives narrowly passed a bill early this morning that would allow eight states to take over Head Start, the largest federal program for nearly 1 million preschool children in poverty."

In "It's Time to Stop Head Start", former Cato Institute child and educational policy analyst Darcy Olsen presents evidence that the beleaguered federal program provides children no benefits in the long run. She writes, "In 1985 the Department of Health and Human Services undertook the first meta-analysis of Head Start research and shook the establishment with its dire findings: 'In the long run, cognitive and socio-emotional test scores of former Head Start students do not remain superior to those of disadvantaged children who did not attend Head Start.' In other words, Head Start was a false start--the net gain to children was zero.

"But the establishment has clung to the study's remnants: Although gains were not maintained over time, some children had experienced short-term boosts. This, they argued, was Head Start's job. If schools couldn't maintain gains, that reflected a problem with the schools, not the program. That certainly sounds reasonable. But it's also reasonable for people to question Head Start's utility. If students test the same with or without Head Start after a year or two, what's the point of sending them through the program in the first place?"

Fannie Mae to Offer Mortgages to Home Buyers near Transit

"Area home buyers who purchase houses that are close to public transportation can qualify for larger mortgages under an initiative announced yesterday by lending giant Federal National Mortgage Association, two local banks and a regional smorgasbord of elected officials," reports The Washington Post.

The low-down-payment mortgages being offered are known as "location-efficient mortgages" (LEMs), and are designed to allow families who want to live in densely populated, transit-rich communities to obtain larger mortgages with smaller down payments than traditional underwriting guidelines allow. But according to an article in the Cato Institute's Regulation magazine by Allen Blackman, Fannie Mae is assuming substantial financial risks by offering LEMs.

"...The LEM (location-efficient mortgage) hypothesis boils down to the contention that location efficiency significantly reduces mortgage default risk," writes Blackman. "That is a testable hypothesis because it necessarily implies that, if one analyzes historical records of repayment on virtually any type of mortgage product, homeowners in location-efficient areas should default less frequently than similar borrowers with similar mortgages and similar properties who live in location-inefficient areas.

"Because we found no demonstrable relationship between location efficiency and the probability of default, we would argue that making low-down-payment loans available to borrowers in location efficient areas is tantamount to making such loans available to a random sample of borrowers. That, in turn, means that the loans will exacerbate default risk."

Christopher Kilmer, editor, ckilmer@cato.org