Presidential Porn

Gerald Celente: The Recession is

Heading Toward Depression
By Daniel Tencer
Aug 22, 2010 -- Raw Story" -- Collapse of middle class
means there's no fuel for recovery, Gerald Celente argues
The US economic recovery in recent quarters is little more
than a "cover-up" and the world is headed for a "Greatest
Depression," complete with social unrest and class
warfare, says a renowned economic forecaster.
Gerald Celente, head of the Trends Research Institute, told
Yahoo!News' Tech Ticker that there's no risk of a "double-
dip recession" because the first "dip" never ended.
"We're saying there's no double dip, it never ended,"
Celente said. "We're looking at the Greatest Depression.
There's no way out of this without [rebuilding] productive
capacity. You can't print [money to get] out of it."
Celente, who has been credited with predicting the 1987
stock market crash, the collapse of the Soviet Union and
the subprime mortgage crisis of recent years, said the US
and other developed countries can expect to see the sort
of social unrest the world witnessed in Greece this year
once government attempts to shore up the economy fail
and lawmakers turn to "austerity measures" to plug
gaping budget holes.
"You're going to see it all over the world," Celente said.
"What they call austerity programs ... What are they
doing? They're bailing out the banks and they're making
the people pay for it. And the people don't like that."
Celente pointed to a near-riot that took place last week in
Atlanta when 30,000 people showed up to be put on a
housing waiting list, saying that the event is a harbinger of
what's to come.
He also argued that the way unemployment is measured
today masks a much larger joblessness crisis because
"once you're off the unemployment rolls, you're no longer
unemployed."
Celente said the current unemployment rate, if it were
measured as it was measured during the Great
Depression, would be around 17.5 percent. And he
expects that number to rise to around 22 percent in the
coming years.
"One of the good businesses to get in to may be
guillotines," Celente quipped. "Because there's a real off-
with-their-heads fever going on. People are really fed up."
Celente argued that the conditions needed for an
economic recovery simply don't exist. "Let's go back to
the 1990s. We're in a recession. What got us out of it? The
Internet. It wasn't a government policy, and Al Gore didn't
invent it."
But today, Celente argued, there are no new booming
industries pushing towards economic expansion. And the
US middle class may not have the right skills to take up
the challenge.
"We went from a country that used to be merchants,
craftspeople, manufacturers, to clerks and cashiers,"
Celente said. "We have to bring manufacturing back to
America."
Celente agreed with his Tech Ticker interviewers that the
green economy, which seeks to replace fossil fuels with
alternative and renewable energy sources, is a good place
to start on an economic recovery, but he said the Obama
administration's handling of the issue was misguided.
Celente pointed out the US has committed $54 billion for
nuclear power expansion, and has also committed to
"clean coal" -- neither of which he sees as being large
drivers of the green economy.
The government is "not putting money where it should
go," he said.

Presidential Porn
“What Obama’s doing out there is he’s hustling a
confidence game. It really is presidential porn, that if you
just wait until election day and have confidence, they’ll be
an economic orgasm at the end of the day.”
Celente calls the stimulus a “money drug” and points out
that the two-big-to-fails got even bigger and the
production jobs we need are overseas. He says the
economy is similar to the wars, in that no progress is
being made.
“We are not pulling out of this recession. We haven’t left
it. It’s not a double dip recession. It’s not a ‘W’, it’s not a
‘V’, it’s not an ‘L’, it’s a recession heading toward
depression.”
15 Mind-Blowing Facts About Wealth And Inequality
In America

By Gus Lubin

May 07, 2010 "SFGate" -- Real average earnings have

not increased in 50 years
The rich are getting richer and the poor are getting poorer.
Cliché, sure, but it's also more true than at any time since
the Gilded Age.
The poor are getting poorer, wages are falling behind
inflation, and social mobility is at an all-time low.
The gap between 1% and everyone else hasn't been
this bad since the roaring Twenties

Source: The Nation

Half of America has only 2.5% of the wealth

Source: Institute for Policy Studies

Half of America has only 0.5% of the stocks and

bonds

Source: Institute for Policy Studies

Look at the gap grow!

Source: Professor G. William Domhoff

The last two decades were great... except for

American workers

Real average earnings have not increased in 50

years
But savings rates are sinking

Poor Americans have a SLIM CHANCE of rising to

the upper middle class
Source: NBER

Republican tax cuts have significantly increased the

gap

Source:

Taxes get better and better for the rich

America spreads the wealth FAR LESS than other
developed countries

America's income spread is nearly twice the OECD

average
Source: Economist

The gap is NOT growing in many countries, like

France

Inequality is worst around Wall Street and Oil Land

If you aren't in the top 1%, then you're getting a
bum deal
Is It Time for Law Abiding American Citizens
to Stop Paying Their Taxes and Start a New
Government?

Posted on Wednesday, March 31st, 2010 at 11:50 am,

Filed under Activism, Economy, Hot List, News, Politics & Government, Pop Cult, War .
Follow post comments through the RSS 2.0 feed. Click here to comment,
ortrackback.admin

By David DeGraw, AmpedStatus Report

The evidence is now overwhelming. The United States
government has facilitated the theft of trillions of dollars
of national wealth and 99% of the US population no longer
has political representation.
——-I: The Ongoing Theft of Trillions
——-II: Off-the-Books, Off-the-Record
——-III: Osama bin Bank of America
——-IV: New Mafia World Order
——-V: The Goldman Sachs Obama Illusion
——-VI: American Heroes Speak Out on the Financial
Reform Ruse
——-VII: Economic Weapon of Mass Destruction (WMDs)
——-VIII: Hank “Pentagon Sachs” Paulson
——-IX: $5.4 Trillion a Year Bullion Market Ponzi Scheme
——-X: Ponzi Nation: Welcome to America, Sucker
——-XI: Economic Shock and Awe
——-XII: Time for a Second American Revolution - The 99%
Movement
——-XIII: How You Can Get Involved
> Download printer-friendly version of full report .
> Download full report with graphics and links.
> Support this work by ordering The Economic Elite Vs.
The People of the USA.
Now that I have your attention, I want to make it clear to
you that I am being rational and serious when I ask this
question: Is it time for law abiding American citizens to
stop paying their taxes and start a new government?
Before you roll your eyes and dismiss me as some
“extremist,” let me explain the situation to those who are
unfamiliar with my past reports. In my report on
the Economic Elite Vs. The People of the United States, I
lay out the case proving that our economy and tax system
has become an organized criminal operation. I defy
anyone who spends time researching and analyzing the
facts and overwhelming evidence to support this claim to
prove otherwise. I invite anyone who thinks I’m wrong to a
debate on national television. I’m talking to you, Tim
Geithner, Ben Bernanke, Larry Summers, Lloyd Blankfein,
Jamie Dimon and President Obama!
I torturously spend 60 plus hours a week researching this
and the torrent of devastating news and evidence is
mounting by the minute. The staggering level of theft
continues unabated. As I am watching this unfold, I am
horrified thinking about the severe consequences that
have only just begun to reap their toll. Our nation is being
raped and pillaged. Our future is going up in flames and
our government isn’t even making the slightest effort to
put out the fire. In fact, they are purposely pouring
gasoline all over it.
“There’s a time when the operation of the machine
becomes so odious—makes you so sick at heart—that you
can’t take part. You can’t even passively take part. And
you’ve got to put your bodies upon the gears and upon
the wheels, upon the levers, upon all the apparatus, and
you’ve got to make it stop. And you’ve got to indicate to
the people who run it, to the people who own it that… the
machine will be prevented from working at all.”
– Mario Savio
So let me take a deep breath and back up for a minute…
and explain the urgent gravity of our current crisis.

I: The Ongoing Theft of Trillions

The first thing people need
to understand is that the
economic crash wasn’t a
crash for the people who
caused it. In fact, these
financial terrorists are now
doing better than ever. In
a recent report, titled “Social Inequality in America:
Widening Income Disparities,” more evidence of the
unprecedented transfer of wealth was revealed:
“As of late 2009, the number of billionaires soared from
793 to 1,011, and their total fortunes from $2.4 trillion to
$3.6 trillion…. Despite the crisis, the list of billionaires has
grown by 218 people and their aggregate capital has
expanded by 50%. This may seem paradoxical, but only at
first glance. This result was predictable, if we recall how
governments all over the world have dealt with the
economic crisis.”
The inequality of wealth in the United States between the
economic top 0.5% and the remaining 99.5% of the
population is now at an all-time high. The economic top
1% of the population now controls a record 70% of all
financial assets. The point here is that while the economic
crisis has been devastating for 99% of America, the Wall
Street elite are awash in record breaking profits. The most
profitable firm in Wall Street history, Goldman Sachs, just
had their most profitable quarter in their 140-year history
and Wall Street firms issued an all-time record breaking
amount in bonuses.
All of this is occurring after giving these firms $14
TRILLION in taxpayer support - that works out to be
$46,662 of your hard-earned money. That’s $46,662 for
every man, woman and child in this country. If you have a
family of four, sorry, your future just got robbed and you
and your children just lost $186,648!
So what are all these firms doing with these record-
breaking profits? Are they returning them into the tax
system in which they came from, the tax system that was
looted just to keep their scam running?
No!
Let’s start with Wells Fargo. After being bailed out with our
money in 2008, their top five executives DOUBLED their
compensation and each one of them made over $11
million in 2009. Wells Fargo CEO John Stumpf made off
with a cool $21.3 million last year.
And now comes news that Bank of America and Wells
Fargo will pay zero, yes ZERO in federal taxes for 2009.
Bank of America will net a $3.6 BILLION benefit from the
federal government in 2009. Wells Fargo, after $8 BILLION
in earnings for 2009, will net $4 BILLION from the federal
government.
So you and I are working our asses off just to make ends
meet, paying 30% of our limited income in taxes, and
gizillionaire John Stumpf’s company is paying ZERO in
taxes so that he can personally swipe another $21.3
million of tax payer funds.
Al Capone is a dime store thief compared to this guy!
Well, to be fair, Mr. Stumpf is just a small-timer himself in
this all-time greatest heist.
JP Morgan Chase made $12 BILLION in profit in 2009, as a
direct result of our tax money - yes, I need to keep
repeating this fact. These are profits that would not exist if
it weren’t for our tax dollars.
It’s also important to point out that this is just the level of
theft that has already occurred. However, as I also can’t
stress enough, the theft still continues without any let-up.
Now comes news that JP Morgan is on the verge of getting
a $1.4 BILLION tax refund! Yes, you heard me right, a $1.4
BILLION TAX REFUND. But JP is not alone in this latest
theft. In total, the financial terrorists are due to
receive $33 BILLION IN TAX REFUNDS!
Do you comprehend how depraved it is to give these
people another $33 billion in tax refunds? I assume that
they’re thinking that after stealing $14 TRILLION, another
$33 billion really isn’t all that much. After all, last year,
Goldman Sachs, the most profitable firm Wall Street
history, only paid 1% in taxes, so what’s another $33
billion kickback among friends?
Let’s be clear about this latest $33 billion of which the US
tax system is being robbed. What could we do with $33
billion?
For one, we could put over one million unemployed people
back to work and pay them the average national median
wage for the next year. Add the record-breaking $150
billion in bonuses (our tax money) that Wall Street handed
out this past year to the $33 billion and guess what? We
can now put over six million people back to work making
the average annual wage! Do you think that would
stimulate the economy? Green shots galore.
But why do that? Jamie Dimon needs another new 40,000
square foot mansion and Goldman Sachs needs to
upgrade their fleet of luxury jets filled with the finest wine,
champagne, cigars and hot tubs.
Maybe we could use that $33 billion to save some of the
hundreds of schools that are being forced to close this
year due to devastating State budget deficits. Or maybe
pay the thousands of teachers who just found out that
their jobs have been cut. How about using that money to
feed the 50% of US children who need to use food stamps
during their childhood to eat? How about using it to give a
raise to the 15 million US workers who work 40 hours or
more a week and still fall below the poverty line.
Wait, I know, how about helping the millions of Americans
who have been foreclosed upon due to JP Morgan’s
predatory lending schemes and illegal subprime “liar’s
loans.”
And don’t even get me started again on how we
can better use the $14 TRILLION that Wall Street made off
with…
People of the United States to Obama: Hello! This is
happening on your watch!
Change We Can Believe In!
Oh, but wait… it gets even better. This just in from the
Roosevelt Institute:
De facto bailout for Freddie and Frannie
Did the Fed and the Treasury orchestrate a de facto
bailout of Fannie Mae and Freddie Mac — at public
expense and sans Congressional approval? John Hussman
thinks so. He provides a detailed account of just how 1.5
trillion dollars got diverted to Freddie and Fannie — money
that we can all kiss goodbye. American taxpayers, it
seems, have gotten the middle finger once again.
And then in comes this little known, highly underreported
news item: U.S. Taxpayers on Hook for $5 Trillion of
Fannie, Freddie Debt
“After years of winks and nods, there’s no doubt that
Fannie and Freddie now enjoy an explicit guarantee,
according to most observers. The U.S. government placed
Fannie Mae and Freddie Mac in conservatorship in
September 2008: ‘This means that the U.S. Taxpayer now
stands behind $5 trillion of GSE debt,’ according to the
Congressional Research Service.”
Hank “Pentagon-Sachs” Paulson’s right-hand man Tim
Geithner, now Obama’s hand-picked Treasury Secretary
and point man for the continued looting, recently
assured his friends on the Financial Services Committee:
“We will do everything necessary to ensure these
institutions have the capital they need to meet their
commitments.” Geithner then acknowledged that US
taxpayers will take “very substantial” losses on this
bailout.
Yep, Obama’s Chief-of-Theft, Rahm “Freddie Mac Daddy”
Emanuel’s former company now has unlimited ability to
rob taxpayer money and is making off with $5 TRILLION.
And I thought Cheney’s Halliburton was as bad as it could
get.
Yes We Can… Get Robbed Even More!
But don’t worry, if you thought the past two years were
bad, the history books will recall them as a walk in the
park compared to what is coming our way. You don’t have
trillions looted from the economy and continue to just
keep going about your life business as usual. I wish I was
wrong, and I wish this was just my opinion, but facts are
facts and every societal and economic indicator says
things are going to get worse, MUCH WORSE.

II: Off-the-Books, Off-the-Record

Did you happen to catch
the underreported news
about the Lehman
Brothers’ bankruptcy? Turns out that Lehman Brothers’
was playing Enron-style accounting games and hid
BILLIONS of dollars of debt using a “gimmick” called “repo
105″ to keep losses off their balance sheet.
If you haven’t read the 2000 page report yet, you might
want to, because the Lehman Brothers scandal is not an
isolated incident by any means. It is a revealing look into
“standard” and “routine” accounting practices used by all
the large politically-connected Wall Street firms. It
is standard operating procedure in this organized criminal
enterprise that poses as free enterprise - a rigged market
that pretends to be a free market.
The theory that people didn’t know about Lehman’s
accounting scam is, to put it kindly, not based in reality.
Financial reporter Max Keiser revealed Wall Street’s
accounting scams, back in July of 2008, in a report titled,
“Peek-A-Boo Accounting and the Crash of Financial Stocks
on Wall Street.” Here’s how Max put it almost two years
ago:
“Since it was discovered that Enron was hiding debt off
their balance sheet to make their earnings, stock and
stock options go up, Wall Street has decided they can’t
get enough of this neat trick and every quarter we see
more of it.
It’s peek-a-boo accounting where debts are removed from
the balance sheet during the period when disclosure is
needed (for quarterly earnings reports) and the debt is
temporarily parked back onto the company’s balance
sheet, or parked on another bank’s balance sheet with an
implied reciprocal agreement. (Enron had hundreds of
shell companies that served as ‘debt parking lots’ to avoid
having to include any liabilities on their quarterly earnings
statement).
Lehman Brothers looks like they are trying to out-Enron
Enron in the peek-a-boo accounting department.”
Eliot Spitzer, once known as the Sheriff of Wall Street, and
white-collar crime expert William Black released a report
calling the accounting tricks on Wall Street a three card
Monte scam for suckers. While calling for an “immediate
Congressional investigation,” they explained:
“Our investigations have shown for years that accounting
is the ‘weapon of choice’ for financial deception…. As our
December co-author Frank Partnoy recently explained as
part of a major report of the Roosevelt Institute, ‘Make
Markets Be Markets’, such abusive off-balance accounting
was and is endemic. It was a major cause of the financial
crisis, and it will lead to future crises….
The Valukas report also exposes the dysfunctional
relationship between the country’s main regulatory bodies
and the systemically dangerous institutions (SDIs) they
are supposed to be policing. The NY Fed, the regulatory
agency led by then FRBNY President Geithner, has a clear
statutory mission to promote the safety and soundness of
the banking system and compliance with the law. Yet it
stood by while Lehman deceived the public through a
scheme that FRBNY officials likened to a ‘three card monte
routine’.…
The FRBNY remained willing to lend to an institution with
misleading accounting and neither remedied the
accounting nor notified other regulators who may have
had the opportunity to do so.
The Fed wanted to maintain a fiction that toxic mortgage
products were simply misunderstood assets, so it allowed
Lehman to maintain the false pretense of its accounting.”
Here’s another highly important fact that has been left out
of media reports concerning Lehman’s scam: The Federal
Reserve not only hid the information on the massive scam,
they most likely taught these companies how to do it! A
very important piece of this puzzle was revealed to me in
a discussion I had with Larry Park, the founder of The
Foundation for the Advancement of Monetary Education
(FAME). Former Federal Reserve Chairman Paul Volcker
wrote a book called “ Changing Fortunes” back in 1993. In
the book, Volcker talks about inventing this same scam by
manipulating the Bank of Mexico’s books:
“… it was a matter of buying time. In an effort to hold
things together psychologically, we agreed with
considerable unease to extend overnight swap credits
once or twice to the Bank of Mexico to bolster the month
end figures for their dollar reserves. We would transfer the
money each month on the day before the reserves were
added up, and take it back the next day. Our unease did
not arise from any fear of financial loss, but because the
‘window dressing’ disguised the full extent of the
pressures on Mexico from the bank lenders and from the
Mexicans themselves.”
So there you have it, another devil child spawn from the
Federal Reserve… “peek-a-boo” voodoo accounting.
By the way, Bank of (Zero Taxes) America also used
“peek-a-boo” voodoo to hide debt. So to sum this up in
plain English, the government looks the other way as they
illegally hide massive debt and then doesn’t even bother
collecting any taxes from them. Did you get that, people?
Just burn your mortgage and credit card bills, get one of
your close friends (Ernst and Young) to say the debt on
them doesn’t exist and then you won’t have to pay off any
of your debt or have to pay any taxes. In fact, just
incorporate yourself and tell the government to give you a
couple billion in tax dollars. It works for the thieves on
Wall Street!
Before moving on, I must also mention that Bank of (Zero
Taxes) America has been caught robbing people and
committing fraud repeatedly, as Gary Null revealed, they
have spent “$14.9 billion to settle 15 [court] cases.”
Which is just part of the “over $430 billion [that] has been
paid to parties by Wall Street firms in over 1500 cases.”

III: Osama bin Bank of America

Let’s also not forget that Bank of
America kept pumping money
into the terrorist financing bank,
Bank of Credit and Commerce
International (BCCI), as I detailed
in a report I put together back in
2004. Bank of America single-
handedly kept BCCI alive by
secretly funneling them a BILLION
dollars a DAY, even after BCCI
was caught funding Pakistan’s
nuclear weapon’s project,
Saddam Hussein’s chemical weapons, Osama bin Laden’s
al Queada network, the Palestinian Liberation
Organization, Manuel Noriega’s drug trade, the drug war
in Nicaragua, the Iran-Contra Affair, along with the vast
majority of the world’s largest drug dealers and terrorists.
BCCI also pioneered most of the tricks used on Wall Street
that led to the economic crisis. They were a significant
player in the Savings and Loan scandal as well, and were
the financing arm for the largest covert operations in the
CIA’s history.
The harsh truth is that most of today’s biggest terrorist
networks wouldn’t even exist if it wasn’t for Bank of
America’s support of BCCI. In “ The Outlaw Bank,”
investigative reporters Jonathan Beaty & S.C. Gwynne
revealed the significant role Bank of America played:
“Five of Bank of America’s senior officers were either on
BCCI’s board of directors or helped to manage Abedi’s
bank. For the next decade the two banks would move
billions of dollars a week through each other’s
international offices, and the Bank of America would be an
invaluable, if hidden, ally, since it would continue to
accept BCCI’s letter-of-credit business after virtually no
other Western bank would touch it. Indeed, it could be
argued that Bank of America became the single most
important financial institution helping BCCI stay afloat.
In the United States alone, Bank of America transferred
more than $1 billion a day for BCCI until the moment of
BCCI’s global seizure in July 1991.
Thus Bank of America acted as a sort of global vacuum
cleaner, sucking up many BCCI branch deposits and
thereby providing the fuel Abedi needed to keep his Ponzi
scheme alive….”
Most everyone on the planet, thanks to a “news” system
that has no memory of these issues, seems to have
conveniently forgotten that BCCI was, literally, al Queada.
How is it that our multi-million dollar “news” operations
can’t seem to connect these dots and don’t have any
memory of this highly significant chapter in US history?
This proves that these media companies are in the
business of propaganda, not informing the public as they
are legally obligated to do. Bank of America surrogate,
Khalid bin Mahfouz, who is a Saudi and was known as the
most powerful banker in the Middle East, also was
business partners with Dick Cheney, George Bush, Enron’s
Ken Lay and 9/11 Commission Chairman Thomas Kean - so
it’s not surprising that this was all left out of the 9/11
commissions report.
Here’s some more significant information that seems to
have been redacted from the history book…
Mahfouz was BCCI’s Chief Operating Officer and also Bin
Laden’s main money man. He was intimately involved with
James Baker and Dick Cheney’s “Strategy of the Silk
Route” plan to build an oil pipeline through Afghanistan in
a joint venture called CentGas. Hamid Karzai,
Afghanistan’s current Prime Minister, was a lobbyists for
the CentGas venture with close ties to the Pakistani ISI
and was a key CIA asset at the time. When the US-funded
Taliban was unable to gain control of the region by force,
which is what Ken Lay’s feasibility study demanded, the
CentGas pipeline deal fell through. Cheney knew control of
the Caspian oil basin was of the highest geo-strategic
value in securing control of the earth’s remaining oil
supply, so he drew up plans for an invasion of Afghanistan.
Then, of course, 9/11 happened, and all of this significant
history was buried in the rubble of the World Trade Center.
I don’t want to get side-tracked into Bank of America’s
scandalous past involvement in US intelligence, so I’ll get
back to the current Wall Street accounting racket.
As Max Keiser’s report makes clear, the accounting scam
works by keeping massive losses off-the-books. This way,
they can report huge profits, which of course leads to
them being able to give themselves huge bonuses. There
is still well over a trillion more in hidden off-the-
bookslosses, “toxic” debt yet to fall and be made public.
The first debt bomb went off in 2008, the second BIGGER
one is ticking away right now, and it will be a much more
devastating blast when it goes off. This global Ponzi scam
has gone on for years with no one regulating or enforcing
the law to stop them. It’s going to blow and take us all
down with it. That’s why they are dishing out record
bonuses now, they know we are on the Titanic and they
are stepping on us and jumping into the lifeboats.

IV: New Mafia World Order

But wait, I hear skeptics
say, “How is it possible
that they could steal
trillions and not get caught
or be held accountable?”
Which is a very logical
question. Well, when you
have trillions of dollars you can easily grease the wheels,
fund political campaigns at every level, and buy off all the
regulators. The SEC knew about Bernie Madoff for years,
but didn’t do anything about it, and he was a small-timer.
The SEC and The Federal Reserve also obviouslyknew
about Lehman’s accounting games long before they went
bankrupt and actively worked to hide the information from
the public.
For another current example of how the wheels are
greased, let’s look at this, just in off the AP wire…
“Government rewarded bank auditors with big bonuses.”
“As banks gambled on the risky mortgages that helped
create the worst financial crisis in generations, the U.S.
government handed out millions of dollars in bonuses to
regulators at agencies that missed or ignored warning
signs that the system was on the verge of a meltdown.
The bonuses, detailed in payroll data released to The
Associated Press, are the latest evidence of the
government’s false sense of security during the go-go
days of the financial boom. Just as bank executives got
bonuses despite taking on dangerous amounts of risk,
regulators got taxpayer-funded bonuses for doing
“superior” work monitoring the banks.
The bonuses, released in response to a Freedom of
Information Act request, were part of a reward program
little known outside the government. Some government
regulators got tens of thousands of dollars in perks,
boosting their salaries by almost 25 percent.”
Do you see this? Major bonuses for looking the other way!
What the New Mafia World Order calls “superior work.”
To get a further understanding of how this banking cartel
operates and handles people who are in a position to stop
their plunder, consider the case of American hero Bradley
Birkenfeld. Democracy Now covered his case with this
report:
Why Is the Whistleblower Who Exposed the Massive UBS
Tax Evasion Scheme the Only One Heading to Prison?
A former banker for the Swiss giant UBS who blew the
whistle on the biggest tax-evasion scheme in US history is
preparing to head to prison tomorrow to begin serving a
forty-month federal sentence. Bradley Birkenfeld first
came forward to US authorities in 2007 and began
providing inside information on how UBS was helping
thousands of Americans hide assets in secret Swiss
accounts.
As Jesselyn Radack wrote on Common Dreams, “Birkenfeld
is the only person in the scandal (which resulted in the
Treasury’s recouping $780 million) to be sentenced to
prison. Not a single one of the 52,000 American tax cheats
who had UBS accounts faces jail time.” In other words, as
this case demonstrates, if you’re rich enough, it’s legal to
steal tax money, but illegal to point out that the money
was stolen. How is that for sending out a message to let
the world know who is in charge? Welcome to the New
Mafia World Order.
And to think, this theft is peanuts compared to the trillions
stolen through market manipulationand the bailout, but
as National Whistleblowers Center summed it up: “Mr.
Birkenfeld’s voluntary disclosures also led to: The
shutdown of the entire $20 billion UBS program that
existed to solicit and encourage wealthy Americans to
hide their money in secret, offshore accounts.”
Well, the billionaire pirates who looted our economy can’t
have something like this happen, so send that confused
servant who thinks laws apply to them to jail!

V: The Goldman Sachs Obama Illusion

We all seem to forget that President
Barack “Business International”
Obama was hand-picked and funded
by Goldman Sachs just before he
sprung to popularity when he won the
Iowa caucus. There is no question,
these are some highly intelligent,
mastermind criminals we are dealing
with. Goldman Sachs knew a great
communicator when they saw one.
Obama is a masterful propagandist. I know many
Democratic friends of mine get upset when their beloved
Obama is implicated in all this. And I completely
understand why a record-breaking number of people came
out and gave him time they didn’t have and money they
couldn’t afford, and worked tirelessly on his campaign,
giving all to support the man who was going to bring
change and economic justice. If he was working on the
issues he campaigned on, I would be supportive too.
However, the evidence is now clear and the jury is in, as I
explained in more detail in my Financial Coup d-
Etat and Af-Pak War Racket reports, Obama and Congress
are the ones allowing this to happened and are absolutely
vital in facilitating the greatest theft of wealth in history.
Just to quickly sum up, to this day, John Dugan, the most
powerful bank lobbyist alive, who played a pivotal role in
the theft of trillions is STILL running the federal Office of
the Comptroller of the Currency. As Zach Carter wrote in
a recent report, “as the chief regulator for the largest US
banks, Dugan and his staff are one of the most powerful
engines of economic policy in the world…. given Dugan’s
record, it’s hard to see why he has been allowed to stay
on the job for Obama’s first year.” Zach is putting this
very politely, given Dugan’s record it is hard to see how he
is not serving a life sentence in prison. On top of this,
Obama put Tim Giethner IN CHARGE of the US Treasury! In
the most pivotal moments of the bailout (coup), Geithner
served as Hank “Pentagon-Sachs” Paulson’s covert
operations director as the head of the NY Federal Reserve.
And the icing on the cake, Obama boldly backed the
reconfirmation of Ben Bernanke as Federal Reserve
Chairman. The list of criminals who remain in power with
the direct blessing of Obama is long.
Given this very obvious information, the argument that
Obama is just naïve to all this doesn’t hold water, not even
a single drop.
I understand that fixing an economy that has been
systematically built on theft and corruption is an incredibly
difficult task, but there are obvious first steps that need to
be taken. Being that Obama loves to name Czars, how
about naming white-collar crime expert William K. Black as
the Czar of Economic Security. Black released a very short
statement detailing his “Top Ten Ways to Crack Down on
Corporate Financial Crime.”
Number one: Fire Treasury Secretary Timothy Geithner,
Office of Thrift Supervision chief John Bowman, Fed chief
regulator Patrick Parkinson, and Office of the Comptroller
of the Currency Chief John Dugan.
Number two: Create a consumer financial protection
agency headed by Harvard Law School professor Elizabeth
Warren.
Number three: Get rid of too big to fail.
Number four: Get rid of Ben Bernanke as chair of the Fed.
Replace him with Nobel prize winner Joseph Stiglitz.
Number five: Bust up the FBI partnership with the
Mortgage Bankers Association.
Number six: Regulate first.
Number seven: Target the top 100 corporate criminals.
Number eight: Fix executive compensation.
Number nine: Appoint a chief criminologist at each of the
financial regulatory agencies.
Number ten: Hire 1,000 FBI agents.
Looking at William Black’s last point, consider what he had
to say in an interview with Bill Moyers about Bush and
Obama’s stunning lack of investigation and enforcement:
“After 9/11, the attacks, the Justice Department transfers
500 white-collar specialists in the FBI to national terrorism.
Well, we can all understand that. But then, the Bush
administration refused to replace the missing 500 agents.
So even today, again, as you say, this crisis is 1000 times
worse, perhaps, certainly 100 times worse, than the
Savings and Loan crisis. There are one-fifth as many FBI
agents as worked the Savings and Loan crisis.”

VI: American Heroes Speak Out on the Financial

Reform Ruse
If you think the new
“financial reform” bill
about to be rushed
through Congress and
signed by Obama is going
to do anything to change
the game, you need to
turn off your propaganda machine (television), put down
the Kool-Aid and WAKE UP. This is not some political
abstraction that you can avoid thinking about. This is a
direct attack on us. Our future is being ripped away from
us and destroyed while we watch American Idol and sit
back hoping and waiting for change. There is major
change coming, no question about that, but the change is
going to be for the worse, much worse.
The Obama-Summers-Bernanke-Geithner doctrine has
been to keep hiding debt and losses, and allow continued
theft, by just kicking the can further down the road. This is
only going to make things worse in the long run. The fat
lady has already sung, they’re just delaying the inevitable
and stealing everything they can still get their hands on in
the meantime.
The corrupt SEC is still trying to further ease any
remaining regulations on the major banks, and the sham
that is being called “historic financial reform” is a massive
con job. Even though you don’t see it on your nightly
“news” or the 24 hour propaganda outlets, experts have
been bravely speaking out about it and reporting their
findings. TARP Congressional Oversight Panel Chairwoman
Elizabeth Warren has been tirelessly fighting for a
Consumer Protection Agency that is now going to be
tossed aside into the Federal Reserve. Putting the
Consumer Protection Agency in the Federal Reserve is like
saying you are going to protect children by locking them
in a room with a serial child molester. Apologies for
making these vulgar analogies, but people need to
understand the depravity of what is happening here.
Dodd’s entire bill gives even more power to the thugs who
are running the heist. As Andy Kroll wrote in a recent
report called, “The Fed’s Spectacular Comeback:”
“When Sen. Chris Dodd (D-Conn.) unveiled his long-
awaited version of a Wall Street reform bill on Monday,
two unlikely winners emerged: the Federal Reserve and its
chairman, Ben Bernanke. The Fed, according to Dodd’s
plan, would retain some of its most crucial regulatory
powers, like overseeing the 40 or so big banks with more
than $50 billion in assets. But it would also gain more
regulatory muscle. A new consumer-protection agency
would be housed within its walls, and the Fed chairman
would sit on a council of regulators created to tackle
banks that are too big or too interconnected to fail.
Bernanke and his team would also be empowered to
regulate large non-banking financial firms—like subprime
mortgage companies—if the council of regulators deem
that they threaten the economy.”
That’s right, let’s put the thieves in charge of policing the
thieves. Sounds like a brilliant, mentally sound plan,
doesn’t it? But their extraordinary audacity and arrogance
doesn’t stop there!
Another person to bravely speak out, FDIC Chairman
Sheila Bair, revealed her “serious concerns” that the
Senate’s new bill will allow “backdoor bailouts of the
largest financial firms.” Yep, “backdoor bailouts,” very
aptly titled. The Wall Street elite, knowing that there are
still massive debts/liabilities to be placed on the books,
want to continue to give themselves huge bonuses and
keep their scam rolling along, so they want to keep the
already plundered taxpayer lifeline open. They are like
heroin junkies trying to tap the vein just one more time.
And that vein isn’t theirs; it’s yours!
Former IMF chief economist Simon Johnson has testified
before Congress stating that the bill is a sham, and has
released many reports exposing the bill to be a mere
charade. He recentlyraised this alarm: “The indications are
that some version of the Dodd bill will be presented to
Democrats and Republicans alike as a fait accompli – this
is what we are going to do, so are you with us or against
us in the final recorded vote? And, whatever you do – they
say to the Democrats – don’t rock the boat with any
strengthening amendments.”
Johnson followed that report up with this one: “Senator:
Which Part Of ‘Too Big To Fail’ Do You Not Understand?”
Mike Konczal of the Roosevelt Institute also went through
the bill looking for things a Goldman Sachs lobbyist might
object to and didn’t find any reason for Goldman Sachs to
not support it. Even the Troubled Assets Relief Program
(TARP) Inspector General Neil Barofsky has been
courageously railing against the “lack of any meaningful
reform.” And these people are hardly radicals. They are all
American heroes who are risking their careers and
livelihoods to blow the whistle on this sham.
The fact that this has all happened is beyond
comprehension. The only thing that is more mind-boggling
is that all-out plunder
continues to escalate.

VII: Economic
Weapon of Mass
Destruction (WMDs)
Even the most lethal
financial Weapon of
Mass Destruction, as
Warren Buffet called derivatives and Credit Default Swaps,
haven’t been banned. They continue to grow even more
ominous. Goldman Sachs, the ultimate terrorist, has a
“derivative liability equal to 33,823% of assets.” That, my
friends, is an atomic bomb sitting on the backbone of the
global economy. In total, there is an astounding $610
TRILLION in derivatives just ticking away, waiting to blow.
Shockingly, two years after the tip of the derivative
iceberg was hit and blew major holes into the economy
that we are still reeling from, current legislation STILL does
little to address this. On Bank Watch, Colin Henderson
reported:
“The data on derivatives is impressive. JPMorgan Chase,
for example, held derivatives worth 6,072 percent of its
assets at the peak of the bubble in 2007. The other two
giants, Citigroup and Bank of America, although still far
behind Chase, had 2,022 percent and 2,486 percent
respectively. Goldman Sachs, the other giant, had an
astonishing amount of derivatives on its balance sheets:
25,284 percent of assets in 2008 and 33,823 percent as of
June 2009. Citigroup and BOA now have more of this risk
on their books than before the crisis (FDIC SDI database)
….
This simply adds to the point that despite all the
histrionics and efforts in Washington, nothing has been
learned and the American Banking system is now at least
at as much risk now as in 2007, pre crash.”
Let me put this in a way that is easy to understand.
Imagine if Osama bin Laden went to Congress and the
President and said, “I know 9/11 was bad, but to remedy
the situation, how about you let me put some nuclear
weapons in Times Square? Don’t worry, I promise I won’t
set them off.” This is exactly what Goldman Sachs did with
derivatives, aka financial WMDs. How insane do you have
to be to let this happen?
To back up for a minute for a little recent history lesson,
let’s get some background insight on the economic crash
and severe danger posed by derivatives from Columbia
Law Professor John Coffee:
“When the SEC relaxed its net capital rule in 2004 and
gave the industry—that is, the big 5 investment banks—an
alternative net capital rule that had no ceiling on debt-to-
equity ratios, this meant that overnight the major
investment banks were freed of the traditional net capital
rule’s requirement of a basically 12-1 debt-to-equity ratio.
Instead, the investment banks were able to leverage up to
their eyeballs, so long as they could point to Basel II-style
internal models that arguably demonstrated that they
were sufficiently diversified. Now that’s a game at which
the industry is much faster and better than the regulators.
The investment banks were miles ahead of the SEC in
developing computer models with all their Monte Carlo
simulations, showing that these assets were never going
to deteriorate in value. But of course they failed.
The regulators—basically the SEC—never really had the
capacity to stay even with the industry once they moved
from a world of simple prophylactic rules (such as a fixed
leverage ratio) to a model in which you employ computer
simulations to determine how much was at risk. So we
have a regulatory failure here. The real lesson is that the
optimal regulatory model for risk management will not
work if it is too complex for regulators to implement. We
also have a Congressional failure. A lot of these problems
go back to decisions Congress made back in 2000 when
Congress deregulated over-the-counter derivatives in the
Commodities Modernization Act.”

VIII: Hank “Pentagon Sachs” Paulson

To be sure, there is a list
of about 50 pivotal players
in all who had a significant
hand in the creation of
these fraudulent and
deceptive trading schemes
and the removal of laws
and oversight to keep these financial WMDs developing to
the point where they were able to steal trillions of dollars.
After all, this is not about a few individuals, this is about a
systemic organized criminal operation on a massive scale.
However, in my analysis, the one person who has the most
smoke around him is Hank Paulson. People need to look at
the 50 pivotal players who caused the crash of the
economy, and then benefited greatly from it, as a Wall
Street al Queada network with Paulson being the
equivalent of Bin Laden. Actually, Paulson is much worse
than Bin Laden. Analyzing the devastation from the
economic attack thus far, it has been equivalent to a 9/11
attack every single week. And these attacks continue
unabated.
Evidence shows that Paulson was the mastermind behind
this engineered crisis. As I detail in my Financial Coup
d’Etat report, this is demonstrated by some of the pivotal
and unilateral moves that Paulson made in the run-up to
the crisis and during the bailout.
When Paulson became CEO of Goldman Sachs in 1999,
one of his first orders of business was to come out strongly
in favor of the Commodities Modernization Act, which, as
Professor Coffee stated, “deregulated over-the-counter
derivatives.” In 2000, Paulson’s next move was to have
Goldman Sachs, along with the largest Wall Street firms,
join with the largest oil companies to form
the InterContinental Exchange (ICE). ICE “is an American
financial company that operates Internet-based
marketplaces which trade futures and over-the-counter
(OTC) energy and commodity contracts as well
as derivative financial products.” Since ICE was started,
the price of oil has skyrocketed and profits have exploded
for the oil companies and firms trading on this exchange.
For an example, in 2000, when ICE was formed, the
average American family spent 7% of their income on food
and fuel. Today, under the pricing set by ICE, the average
American family now spends a record 20% of income on
food and fuel. As I wrote in my Af-Pak War Racket: Masters
of War report:
“A Congressional investigation into this exchange found
that these companies were fraudulently inflating the price
of oil by executing ’round-trip’ trades where one company
would sell shares in oil to another company who would
then sell the shares right back. This would drive the price
of oil to however high they wanted it to go to. ‘No
commodity ever changes hands. But when done on an
exchange, these transactions send a price signal to the
market and they artificially boost revenue for the
company. This is nothing more than a massive fraud, pure
and simple.’
So when oil was selling at $147 a barrel, the actual worth
was most likely closer to half that price.”
After establishing ICE, in 2004, Paulson led the infamous
“Gang of Five CEOs” who demanded that the SEC get rid
of the Net Capital Rule. This further opened the derivative
floodgates and eventually unleashed the first financial
WMD upon the US economy. Paulson personally made
$700 million while building his ticking time bomb. After
cashing out, he then moved to the US Treasury, where he
was conveniently placed, just as his bomb went off, to
have the lead role and almost complete control of the US
economy when it all crashed.
With military precision, he maneuvered his operatives into
key positions, often former employees of his at Goldman
Sachs. His moves were so riddled with egregious conflicts
of interest, it’ll make your head spin. The assassinations of
his key rivals, Bear Stearns and Lehman Brothers, the
unilateral decision to put Goldman’s Audit Committee
Chairman Edward Liddy in charge of AIG, placing
Goldman’s Dan Jester and Neel Kashkari in pivotal bailout
roles, turning Goldman Sachs into a bank holding
company - this list goes on and on.
For another history lesson that the “news” media seems to
have forgotten, we have to look further into Paulson’s
background. Paulson began his career in the Pentagon and
worked for former Defense Secretary Melvin Laird. Laird is
at the top of the food chain when it comes to the military
industrial complex and US intelligence. There are a lot
more details here that I will follow up with at another time,
but to quickly get to the point: if you understand how US
intelligence works, you don’t just work hand-in-hand with
Melvin Laird and then cut ties, and independently end up
as CEO of Goldman Sachs, and then (what do you know?)
just before the economy is about to blow, Paulson is
appointed Czar of the Bailout by Bush/Cheney.
On top of this, we also need to remember that Paulson
was intimately involved in Watergate. Yes, you heard me
right… Watergate. Working for the Nixon Administration,
Paulson was the assistant to John Ehrlichman during the
Watergate scandal. Ehrlichman was “convicted of
conspiracy, perjury, and obstruction of justice for his part
in the Watergate break-in and cover-up.” Just to add one
more layer to Paulson’s shady background, another highly
unreported fact is that while leading Goldman Sachs,
Paulson developed very intimate relations with members
of the Chinese elite, visiting the country over 70 times.
For now, I am going to leave my Paulson detour and get
back to Goldman’s current shenanigans.
The two terrorists with the biggest derivative bombs are
now throwing their ever-growing power around like drug
addicts on a bender. As Bloomberg recently reported:
Goldman Sachs Demands Collateral It Won’t Dish Out
Goldman Sachs Group Inc. and JPMorgan Chase & Co., two
of the biggest traders of over-the-counter derivatives, are
exploiting their growing clout in that market to secure
cheap funding in addition to billions in revenue from the
business. Both New York-based banks are demanding
unequal arrangements with hedge-fund firms, forcing
them to post more cash collateral to offset risks on trades
while putting up less on their own wagers.
As an ironic side note, in Italy, the birth place of Mafia
rule, they are taking the lead in fighting back by charging
JP Morgan and co-conspirators with derivatives fraud. They
fraudulently robbed the city of Milan by misleading them,
as Bloomberg put it, “over swaps that adjusted interest
payments on 1.7 billion euros ($2.3 billion) of bonds sold
in 2005.” This is just a tiny drop in the global theft bucket.
I mention it just because it is nice to see a country actually
making an effort to recoup some of the theft.
While we are in Europe… Greece, which was looted and
plundered by Goldman Sachs and friends, now faces
draconian austerity measures and major cuts in social
programs with drastically increased taxes. The people are
taking to the streets and fighting back. They have been
rioting and storming Parliament, they even blew up a JP
Morgan office and tried to blow up several Citigroup
banks. Unfortunately, Greece is a canary in the coal mine
when it comes to the future of the United States.
And guess what, passive US taxpayers? With the people in
Greece and Europe actually standing up to their
governments, Greece will be bailed out, not by Europeans,
but by… us… yes, the US taxpayer. Uncle Sam’s economic
imperialism arm, the International Monetary Fund (IMF),
isriding in to the rescue. Of course, the Greek public would
be wise to rebel against this idea as well, because any
country that makes a deal with the IMF ultimately ends up
as a debt-slave nation.
Getting back to the derivates scheme, a recent McClatchy
report titled, “Enabling Wall Street’s secret gambling
problem” explained how Wall Street firms spent $200
million of our own tax dollars to fend off any regulation
and summed it up this way:
“If you’d just driven the economy off a cliff, wouldn’t you
be embarrassed to show your face on Capitol Hill? And
surely, I thought, these firms wouldn’t spend their
taxpayer bailout money on high-priced lobbyists.
Boy, was I naive. Last year alone, Wall Street spent more
than $200 million to block efforts to rein in their
recklessness. And the investment is paying off. The
financial reform bills moving through Congress are full of
holes for greedy bankers to exploit.
Just look at the Senate Democrats’ new bill. One place you
can see the Wall Street lobbyists’ handiwork is in all the
exemptions for derivatives, the complicated financial
instruments blamed for accelerating the crisis.
Analysts say the bill would exempt up to 40 percent of
derivatives from being traded on open exchanges. This
means that high flyers could still do their riskiest gambling
in secret - far from the eyes of any regulator cops.
This type of over-the-counter trading is kind of like
backroom poker. In most cases, it adds no value to the
real economy, so it’s exactly like betting. Except if the
game goes really badly, it’s not one unlucky gambler who
stands to lose his shirt - it’s the entire economy.”
When the derivatives bell tolls, which is inevitable, the
stock market will not only plummet, it will cease to exist.
The derivatives market is the biggest Ponzi scheme in
history, and we all know what eventually happens in Ponzi
schemes. Speaking of backroom poker and Ponzi
schemes, have you seen the latest news…

IX: $5.4 Trillion a Year Bullion Market Ponzi Scheme

Similar to the Inter
Continental Exchange,
the London Bullion
Market (LBMA), also
known as the precious
metal market (PM), is a
multi-trillion over-the-counter (OTC) market for gold and
silver. Also similar to the hundreds of billions, possibly
trillions, stolen through fraudulent transactions on the ICE
market, a whistleblower named Andrew Maguire just came
forward to expose JP Morgan’s manipulation of the PM
market. As Tyler Durden put it on his brilliant website Zero
Hedge:
“At this point none of this should be at all shocking, and
the only thing that matters is when CFTC’s ex-Goldmanite
Gary Gensler will be fired for allowing hundreds of billions
of dollars to be sucked out of the PM market on behalf of
such major market manipulating entities as JP Morgan and
the New York Federal Reserve, for whom it transacts.
Don’t worry - the answer to that rhetorical question is
‘never’, as it is the administration’s goal to make all the
millionaires among the bulge bracket firms billionaires, via
legalized theft from honest investors.”
Patrick A. Heller, writing on the NumisMaster
website, summed it up this way:
CFTC Gets Facts of Bullion Manipulation
… On March 23, 2010, GATA Director Adrian Douglas was
contacted by a whistleblower by the name of Andrew
Maguire. Maguire is a metals trader in London. He has
been told first-hand by traders working for JPMorganChase
that JPMorganChase manipulates the precious metals
markets, and they have bragged to how they make money
doing so.
In November 2009 Maguire contacted the CFTC
enforcement division to report this criminal activity. He
described in detail the way JPMorgan Chase signals to the
market its intention to take down the precious metals.
Traders recognize these signals and make money shorting
the metals alongside JPM. Maguire explained how there
are routine market manipulations at the time of option
expiry, non-farm payroll data releases, and COMEX
contract rollover, as well as ad-hoc events….
Now that this information about silver price manipulation
and about the massive shortage of physical gold and silver
on the London exchange is part of the official record, I
expect huge fallout. Remember, after the five men were
arrested for breaking into the Democratic headquarters in
Watergate in June 1972, it took more than two years for
President Nixon to resign. I don’t think it will take
anywhere near this long for last Thursday’s revelations to
blow back against the U.S. government and the U.S.
dollar. Once the public realizes the extent of the
manipulation, gold and silver prices are likely to skyrocket.
I think this hearing will be the beginning of the end for
those trying to suppress gold and silver prices….”
Adrian Douglas, director of the Gold Anti-Trust Action
Committee (GATA) recently described this Ponzi scheme:
“LBMA trades over 100 times the amount of gold it
actually has to back the trades…. the giant Ponzi trading
of gold ledger entries can be sustained only if there is
never a liquidity crisis in the REAL physical market. If
someone asks for gold and there isn’t any the default
would trigger the biggest ‘bank run’ and default in
history…. Almost every day we hear of a new financial
fraud that has been exposed. The gold and silver market
fraud is likely to be bigger than all of them. Investors in
their droves, who have purchased gold in good faith in
‘unallocated accounts’, are going to demand delivery of
their metal. They will then discover that there is only one
ounce for every one hundred ounces claimed. They will
find out they are ‘unsecured creditors’…. It is, as I
asserted before the Commission, a giant Ponzi Scheme.”
So you better hurry up and claim your gold, because
everyone knows what happens to the last people in on a
Ponzi scheme, they always get screwed and lose
everything.

X: Ponzi Nation: Welcome to America, Sucker

And when it comes to the
Ponzi US economy, the
last people in are
American taxpayers, you
and I. As Andy Kroll
correctly put it in his
Tom’s Dispatch report,
“Ponzi Nation: Welcome to America, Sucker.”
“Ours is now a Ponzi nation. There is a new mood in the
land. Just how it will play out is unknown, but a sense of
having been conned is still spreading — as if not just
surprising numbers of investors, but the whole country
had experienced the last days of a giant Ponzi scheme.
With it goes a feeling that what we’ve been living through,
even in “the best of times,” wasn’t an American dream,
but pure nightmare. Welcome to America, sucker.”
Knowing now how the market has been rigged to loot
taxpayers and honest investors, let’s view these recent
news items:
Public Pension Funds Are Adding Risk to Raise Returns
“States and companies have started investing very
differently when it comes to the billions of dollars they are
safeguarding for workers’ retirement…. states and other
bodies of government are seeking higher returns for their
pension funds, to make up for ground lost in the last
couple of years and to pay all the benefits promised to
present and future retirees. Higher returns come with
more risk…. public pension funds are trying a wide range
of investments: commodity futures, junk bonds, foreign
stocks, deeply discounted mortgage-backed securities and
margin investing. And some states that previously
shunned hedge funds are trying them now.”
Steep Losses Pose Crisis for Pensions
“The financial crisis has blown a hole in the rosy forecasts
of pension funds that cover teachers, police officers and
other government employees, casting into doubt as never
before whether these public systems will be able to keep
their promises to future generations of retirees.
The upheaval on Wall Street has deluged public pension
systems with losses that government officials and
consultants increasingly say are insurmountable unless
pension managers fundamentally rethink how they pay
out benefits or make money or both….
After losing about $1 trillion in the markets, state and local
governments are facing a devil’s choice: Either slash
retirement benefits or pursue high-return investments that
come with high risk.”
FDIC wants pension funds to prop up failed banks
“Over 140 U.S. lenders folded in 2009 alone. To remedy
the financial void left in their wake, the Federal Deposit
Insurance Corporation wants public pension funds, which
safeguard the retirement funds of millions, to buy in part
or in whole the banks that couldn’t manage to keep their
depositors’ funds…
Bloomberg News notes that pension funds in Oregon, New
Jersey, California and New York may participate. The wire
service also reported that firms being targeted for the plan
control over $2 trillion in retirement funds.”
Corporate America’s 401(k) Plan Managers: In Bear
Market, Shareholders Lost 37%, Managers Gained a Billion
“Perhaps the biggest enemy is your 401(k) plan manager.
Wolman and Colamosca say investors are making a huge
mistake letting employers, Corporate America, Wall Street
and politicians do your thinking for you. Why? Because
they’re your enemy, they created and they control the
401(k) for their benefit, not yours. The fact is, 401(k)
managers get rich off naïve investors.
How bad is it? A recent Forbes article, ‘Retirement Rip-
Off,’ lambasted the industry. Using data from Dr.
Mundell’s Center for Retirement Research at Boston
College: ‘Even as 401(k) balances grow in size and
importance, fees remain high and poorly disclosed.’ There
are $2.9 trillion savings in 401(k)-type accounts. Fees on
these 401(k)’s are estimated to exceed those of traditional
pension funds by 1%. That means 401(k) savers are
paying $29 billion in excess fees to the fund industry. And
in a Bloomberg Markets report, retirement planning
consultant Stephen Butler says, ‘Hidden fees of 1% can
reduce a workers 401(k) returns by 15% over 30 years.’”
It’s Time to Tap the Empty Social Security Trust Fund
What it all boils down to is that, in order to pay full
benefits this year, Social Security will have to come up
with an extra $29 billion to supplement the inadequate
payroll tax revenue. Where will that money come from? It
will have to come from increased taxes or from borrowed
money. ‘Wait a minute!’ some readers will say. Hasn’t
Social Security been receiving surplus revenue ever since
the 1983 payroll tax hike? Isn’t there supposed to be
approximately $2.5 trillion in the Social Security trust
fund? The answer to both questions is yes. But there is a
problem. Every dollar of that surplus Social Security
revenue has already been spent by the government. Much
of it went to fund wars in Afghanistan and Iraq. The rest
has been spent on other government programs.
The American people were not supposed to find out about
the great Social Security scam for another six years, and
the government was hoping to continue to receive surplus
money from the Social Security contributions of working
Americans for at least that long. But the inevitable day of
reckoning has come, six years sooner than anybody
expected, because of the severe recession. And the
government of the United States has been caught with its
hand still in the empty Social Security cookie jar.
For more than a decade, I have been trying to expose the
Social Security scam just like Harry Markopolos was trying
to expose the Bernie Madoff scam. But nobody would
listen…. If there was any doubt remaining, with regard to
whether or not the trust fund contains any real assets,
that doubt should have been removed by the following
words in the 2009 Social Security Trustees Report:
‘Neither the redemption of trust fund bonds, nor interest
paid on those bonds, provides any new net income to the
Treasury, which must finance redemptions and interest
payments through some combination of increased
taxation, reductions in other government spending, or
additional borrowing from the public.’
There is nothing ambiguous about the above words.”
IMF Austerity Arriving in America
“It’s not coming. It’s here, being incrementally rolled out,
including painful structural adjustments - some legislated,
others unavoidable like the possibility suggested in
Jonathan Laing’s March 15 Bloomberg.com article, titled
“The $2 Trillion Hole” in public-employee retirement
plans….
Washington may impose higher taxes and devalue the
dollar, but mostly expect benefit cuts, the idea being to
end core ones including Medicare, Social Security,
eventually Medicaid, plus others millions rely on but won’t
get if tough measures are enacted. Expect them. Some
are here. Others are coming through the same structural
adjustments imposed on developing countries and just as
painful and destructive….
Overall, the effects are devastating, including growing
poverty, inequality, the destruction of the middle class
and unions, hunger, homelessness, environmental harm,
and police state measures to quell dissent - the essence of
tyranny showing up in America and arriving at a fast clip.”
The IMF “Structural Adjustment Programs” (SAPs) that
have devastated countries worldwide (correctly
referenced above by Stephen Lendman) are the very
programs that have been launched upon us, as I described
in my report on the Economic Elite. We are already seeing
the effects of this hostile takeover. I won’t recount all the
horrific societal and economic statistics that I have
reported on in detail in my report, “Casualties of Economic
Terrorism, Surveying the Damage,” but the economic
attack on the United States has already resulted in the US
having the highest poverty rate in the industrialized world,
with a stunning 50 million citizens now living in poverty. It
has also given us the highest inequality of wealth in our
nation’s history. Step aside Robber Barons! America now
has a much more powerful and depraved criminal class. Vi
Ransel recently described the bailout-coup-structural-
adjustment-program like this:
“This is the result of a deliberate strategy, one
Washington has executed many, many times, though
usually in ‘Third’ World nations, by using ‘Free’ Trade
Agreements (FTAs) and its front groups, the International
Monetary Fund, the World Bank, and the World Trade
Organization. Purchased politicians plunge their countries
into unsustainable debt. Under Structural Adjustment
Programs (SAPs), national industries are sold to
transnational corporations and privatized. Social programs
are cut to the bone or eliminated altogether. Interest rates
are ratcheted up and the economy collapses on itself like
the World Trade Center while banks and corporate
buzzards fight each other to pick the carcass clean.”
On a personal level, we have all been feeling the
increased stress and early tightening effects on our own
financial situations already. However, on the state and
federal levels, we are just beginning to see the utter
devastation that lies ahead of us.

XI: Economic Shock and Awe

Here are some recent underreported headlines that you
may have missed:
* Underemployment Hits 20% in
Mid-March
* Millions of Unemployed Face
Years Without Jobs
* As economic fears rise, families on verge of unraveling
* Bad economy blamed for high suicide rate in U.S.
* Arizona budget cuts education, health care for the poor
* Kansas City closing nearly half its schools
* Illinois budget crisis sharpens - measures being planned
will severely impact students, teachers
* US food charities overwhelmed by demand
* ‘I Borrow Money to Buy Food,’ Says City Employee as
Detroit Mayor Prepares for Draconian Pay Cuts
* Small town must choose between cops and bankruptcy
* Social Security Payout to Exceed Revenue This Year
* Are Pension Liabilities Set to Explode?
* Obama Packs Debt Commission with Social Security
Looters
* Nevada budget cuts worsen the social crisis
* Vallejo, California struggles to keep city safe during
bankruptcy, heavy cuts to police force
* More than 40 Detroit schools to close in June
* Los Angeles sends layoff notices to 5,200 teachers
* Illinois stops payments to university system, mass
furloughs result
* Boston cuts target community centers, libraries
* Florida, nine other states are barreling toward economic
disaster, report says
* Mountains of Student Debt
* Tight job market is squeezing out young workers
* Homeowners Facing Foreclosure Take Own Lives
* New Foreclosure Initiative Huge Bonanza for Banks
* Prison Industry: More African American Slaves in the
United States Today Than in 1850
* Unemployment on the rise in virtually every US urban
area
* 2.4 Million Jobs Lost to China, New Trade Battle Begins
* The Off-Shored Economy: The Ruins of Detroit
* Recession hitting returning vets hard
* Senator Blocks Jobless-Benefits Extension
* Over 5 million homes lost to foreclosure
* 13 million total foreclosures expected by 2014
* Wall Street profit from utility shutoffs
* U.S. Risks AAA Rating
* States’ jobless funds are being drained in recession
* 29 States Now in the red, As Kansas and Vermont Are
the Latest Unemployment Insurance Debtors, total to rise
to 40 States
* Budget cuts could cost Texas consumers millions
* Without more federal help, states might cut Medicaid
* Half of commercial RE mortgages to be underwater
* 702 banks with a total $400 billion in assets could fail,
says FDIC
* State Debt Woes Grow Too Big to Camouflage
* US Congress allows jobless benefits to expire
* US now has biggest prison population in the world
* 180 million Americans now live paycheck to paycheck
* Economists Predict Cutbacks, Tax Increases That ‘Aren’t
Even Imaginable’
I could go on and on and on with this list of news reports,
but let me cut this short and turn to Bob Herbert who
recently summed it all up in a NY Times piece titled, “A
Ruinous Meltdown.”
“A story that is not getting nearly enough attention is the
ruinous fiscal meltdown occurring in state after state, all
across the country. Taxes are being raised. Draconian cuts
in services are being made. Public employees are being
fired. The tissue-thin national economic recovery is being
undermined. And in many cases, the most vulnerable
populations — the sick, the elderly, the young and the
poor — are getting badly hurt.”
Are you getting it now? Do you understand what we are
facing? This is just the first phase of the economic Shock
and Awe campaign being unleashed on an unsuspecting
US public.

XII: Time for a Second American Revolution - The

99% Movement
The Economic
Elite have
seized our
economy, tax
system and
government.
These people
are the most
depraved
terrorists on the
planet and they have viciously attacked us and launched
an all-out economic war on the American public. We have
to get serious about defending ourselves and fighting
back.
“This situation continues only because the mass of the
people refuse to look facts in the face and prefer to feed
on illusions produced and circulated by those in power
with a profusion that contrasts with their withholding the
necessities of life. The day that the mass of the American
people awake to the realities of the situation, that day the
restoration of democracy will commence, for power and
rule will revert to the people.” — John Dewey
Which brings us back to my original question: Is It Time for
Law Abiding American Citizens to Stop Paying Their Taxes
and Start a New Government?
When it comes to the overwhelming evidence of
unpunished theft, and the process of paying taxes into
that organized system of theft, there comes a point when
exploited people need to ask the question: Why should
hardworking Americans continue to contribute to our own
demise?
This is the same question that led to the first American
Revolution when Thomas Jefferson wrote the following
Declaration:
“Governments are instituted among men, deriving their
just powers from the consent of the governed, — That
whenever any Form of Government becomes destructive
of these ends, it is the Right of the People to alter or to
abolish it, and to institute new Government, laying its
foundation on such principles and organizing its powers in
such form, as to them shall seem most likely to effect their
Safety and Happiness. Prudence, indeed, will dictate that
Governments long established should not be changed for
light and transient causes; and accordingly all experience
hath shewn that mankind are more disposed to suffer,
while evils are sufferable than to right themselves by
abolishing the forms to which they are accustomed. But
when a long train of abuses and usurpations, pursuing
invariably the same Object evinces a design to reduce
them under absolute Despotism, it is their right, it is their
duty, to throw off such Government, and to provide new
Guards for their future security. — Such has been the
patient sufferance of these Colonies; and such is now the
necessity which constrains them to alter their former
Systems of Government.”
And dare I say, with ample evidence to back up this claim,
the level of “abuses and usurpations” inflicted upon the
American people is much greater today than it was in
1776. Despite an omni-present propaganda (mainstream
media) system — which is the greatest weapon of
oppression humanity has ever known, which has also
obscured, isolated and suppressed dissent and
understanding of our present tyrannical forces — recent
public opinion polls have produced stunning results:
* Only 21% of American voters believe the government
has the consent of the governed.
* 82% want an aggressive crackdown on the criminal class
that looted our economy.
* 86% feel the system of government is broken.
* 79% think the economy will collapse.
These are amazingly positive signs, because this means
that the propaganda system is collapsing. These results
show that only 15-20% of the population is still
successfully propagandized, and this number will
obviously keep falling as the economic attack continues to
escalate.
The Economic Elite are hoping that our propagandized
population will just sleepwalk to extinction and passively
accept a slow death. Those of us who are aware need to
sound the alarm! Where are the modern-day Paul
Reveres? We need one on every street corner, at every
shopping mall and coffee shop, on every online social
network. In our nation’s history, the stakes have never
been higher.
If you are reading this right now, and understand that
what I’m saying is true, how can you continue to remain
passive? I know that just ignoring this report is the easy
thing to do, but ask yourself, look in the mirror and ask
yourself: Will ignoring this today make my future any
better? Or will it make things much worse? Paid-off
politicians will not protect your future. Your house is on
fire and no one is coming to put it out. Are you going to, or
are you going to let it burn to the ground?
Only you can protect your future. Your inaction makes you
complicit in your own demise.
As the late Howard Zinn once put it: “You can’t be neutral
on a moving train.”
And the train is moving at a quickened pace. Analyzing the
devastation from the economic attack thus far, it has been
equivalent to a 9/11 attack every single week. And these
attacks continue without any significant measures taken
to defend against it.
Our politicians won’t defend us and exercise the will of the
people, so we must. It’s time to get moving, start
organizing and to form a new government that is, as the
Constitution states: of, by and for the people.
We will restore a rule of law. The second America
Revolution has now begun!
We are US soldiers, policemen, firemen, teachers,
students, business owners, postal workers, transit
workers, construction workers, union members, artists,
journalists, doctors, nurses, lawyers, social service
workers, factory workers, farmers, we are 99% of the
population and we will not stand by and let our country be
destroyed like this!
We are launching a 99% Movement and all the
propaganda and labels that are used to divide us will fall
to the wayside. We are not just Republicans and
Democrats, or Tea Party and Coffee Party people, we are
Americans and we are uniting against our common
enemy.
“All men recognize the right of revolution; that is, the right
to refuse allegiance to, and to resist, the government,
when its tyranny or its inefficiency is great and
unendurable. And oppression and robbery are organized, I
say; let us not have such a machine any longer. I think
that it is not too soon for honest men to rebel and
revolutionize.”
– Henry David Thoreau, On the Duty of Civil Disobedience
“The civilization may still seem brilliant because it
possesses an outward front, the work of a long past, but is
in reality an edifice crumbling to ruin and destined to fall
in at the first storm.”
– Gustave Le Bon, The Crowd: A Study of the Popular Mind
“All countries are basically social arrangements,
accommodations to changing circumstances. No matter
how permanent and even sacred they may seem at any
one time, in fact they are all artificial and temporary.”
– Strobe Talbott
“First Ray of the New Rising Sun”
– Jimi Hendrix
“Rise like Lions after slumber
In unvanquishable number
Shake your chains
to earth like dew
Which in sleep
had fallen on you
Ye are many
they are few”
– Percy Bysshe Shelley
The illusion being thrust upon us, by the mainstream
media and current politicians, that leaves us feeling
powerless to create change, is crashing down. As millions
of Americans begin to realize the power we have in
numbers and opt-out of this unconstitutional government
that is currently in place, we will restore a rule of law and
secure our freedom, liberty and future.
We look forward to
proving the criminal
misconduct rampant
throughout our
government and economic
system in court. We will
prove that the
Government has acted against our interests, in an
unconstitutional manner on many fronts and has actively
facilitated the theft of taxpayer funds. It is beyond any
legal doubt, as will be proven in courtrooms across the
country. In fact, we are requesting a six-hour block of
national primetime television programming to present our
evidence directly to the American public. We expect the
major networks to comply with our request, as the
national broadcast television stations are licensed by the
FCC to use the Public airwaves and are required by law to
inform and serve the Public interest.

XIII: How You Can Get Involved

“Are you brave enough to see?
Do you want to change it?”
Trent Reznor
Anyone with a general interest in taking part in this 99%
movement, please sign up here.
If you are a lawyer who would like to participate in this
effort, please emailLaw@AmpedStatus.com.
We are also assembling a production team for our
television and film public awareness campaign. If you
have skills in this area, or would like to help fund this
project, please emailMedia@AmpedStatus.com.

Email This Post

Related posts:
1. The Great American Bubble Machine: Goldman
Sachs’ Market Manipulation By Matt Taibbi, Rolling
Stone In Rolling Stone Issue 1082-83,...
2. A New Player in the Banking Reform Fight:
Citizens By Mike Elk The fact that regular citizens
have been...
3. The Wall Street Economic Death Squad By David
DeGraw, AmpedStatus Recent Headlines: $140
billion! Record Payday...
4. As the Middle Class Collapses and the American
Poverty Rate Soars, the Economic Elite Have Never
Had It Better [Audio & Transcript] David DeGraw
recently gave a speech to World War II...
5. Torture Lawyer John Yoo Admits He Fixed Law Around
Bush’s Policy By Jason Leopold, Public Record John
Yoo, the former Deputy...
100 Responses to “Is It Time for Law Abiding American
Citizens to Stop Paying Their Taxes and Start a New
Government?”

1.
wanda said:
I believe that many, quietly, have already come to this
conclusion out of basic necessity. I think we will next be
witnessing how TPTB will deal with these “dissidents”.
The first shots were fired when they decided that they
could force upon the people a “tax” for “manditory” health
insurance that amounted to more money in premiums
than many people even earn per year while actively
insuring further destruction of jobs and resultant earnings.
The system is, sadly, not a joke, it is nefarious.
March 31st, 2010 at 1:06 pm

2.
Drew said:
DAVID, YOU ARE SENT FROM HEAVEN!! ABSOLUTELY
BRILLIANT! YOUR KNOWLEDGE IS SO VAST IT IS THE MOST
ENCOURAGING THING I HAVE EVER COME ACROSS! SIGN
ME UP!!!!!!!! 99%!!!!!!!!!!!!!!
March 31st, 2010 at 1:48 pm

3.
Karen said:
Umm… I don’t know how anyone can read this all the way
through and not have their life altered. This is not just a
report, this is an historic event! The moment in which the
scam was exposed in plain english for all to see.
I will print this and give it to everyone I know.
Thank you!
Go 99%!
March 31st, 2010 at 1:52 pm

4.
Henry said:
Oh my goodness. I’m an old hedge fund manager and
when I just heard about the Gold & Silver market
manipulations, I thought to myself that this is the biggest
theft/scandal in the history of the global economy! I
thought I would check out Amped to see what you guys
were saying about it and low and behold, I read this!
You don’t miss a fucking trick! Great work… that’s all I can
say… great, great fucking work
HS
March 31st, 2010 at 2:00 pm
 5.
Jerry said:
“Is it time for law abiding . . . . ” is brilliant. I’ve read many
of the sources DeGraw linked to but pulling the
information together is like having all of the clues
analysed and organized so that the crime and perps are
more fully known.
I’ve forwarded the link widely.
Thank you, thank you, thank you.
March 31st, 2010 at 2:02 pm

6.
Erica said:
David,
You are the very essence of a game-changer. If Tom Paine
was alive today, he would stop writing and start hand out
your material. I know I’m just another commenter giving
you praise, but I just can’t help but be awed by your work.
You, my friend, will go down in the history books!
Thank you, Keep up the fight. You are right, once people
realize that they have the power, the Hank Paulson’s of
this world will be remember just like King George.
99%
March 31st, 2010 at 2:11 pm

7.
Paul Revere said:
Count me in. Spreading the word as far and wide as I
can…
March 31st, 2010 at 2:14 pm

8.
glensandbergsaid:
Lets go viral!
March 31st, 2010 at 2:14 pm

9.
Katie said:
Holy shit dude, this is serious, serious information. an
indictment of the highest order for sure. i can just imagine
all the people who will read this and then try to sleep each
night without waking up screaming “OMG I’m skipping AI
tomorrow night and going to a town hall meeting to hand
this shit out.”
it looks like you’ve delivered your own Shock and Awe
campaign here.
March 31st, 2010 at 2:20 pm

10.
Tim said:
This is so hardcore, yet in completely in layman’s terms,
for the most part. Not sure how you pull that off, but my
guess is that the sheep who stumble upon this will read a
quarter of it and their head’s will either explode all over
the computer screen or they will run screaming for their
lives.
Beware, you poor bastards. LOL
March 31st, 2010 at 2:27 pm

11.
Sammy said:
I have to admit. I was a person who read your headline,
rolled my eyes and thought that you’ve gone to far with
this one. But after reading this I think you should have
removed the question mark.
Knowing as much as you know, just put an exclamation
mark and lose the “Is it time?” You prove clearly that it is,
so make it: “It is Time!”
Loving this 99% Movement idea
March 31st, 2010 at 2:33 pm

12.
Janis said:
David,
Do you work alone or do you have a team of researchers?
I know you say you work 60 hours a week, but this isn’t
knowledge that you can just get as one person. How helps
out with these?
March 31st, 2010 at 2:38 pm
 13.
Aaron said:
I love the things you just pick up while skimming through
this.
* The InterConExchange has robbed 13% of every
Americans income.
* The Gold market is rigged.
* Goldman Sachs is sitting on 33,000% derivative liability.
* Obama is is on the racket.
Each one of these facts is a stop the presses run wall to
wall coverage historically HUGE event. Yet… the MSM
doesn’t even cover it. What is going on around here?
the patients are running the asylum!
March 31st, 2010 at 2:49 pm

14.
Matt said:
how can someone be smart enough to write this yet cool
enough to drop one of the best Nine Inch Nails Quotes
ever?!?!
What if this whole crusade’s a charade
And behind it all there’s a price to be paid
Just how deep do you believe?
Will you bite the hand that feeds?
Are you brave enough to see?
Do you want to change it?
So naive to keep holding on to what I want to believe
And I can see
but I keep holding on and on and on and on
Will you bite the hand that feeds you
Or will you stay down on your knees?
Are you brave enough to see?
Do you want to change it?
March 31st, 2010 at 3:05 pm

15.
Alvin said:
Great article with a significant amount of research -
though feel the need to share a thought I’ve observed -
you are many times more likely to reach a LARGE
audience with a single piece of devastating news than
with a dozen at once - when the “way things are” conflict
to much with “the way things ought to be” there is a
common trait to close ones eyes, and start chanting “no
see, no hear, no say” while reaching for a beer, a
hamburger, and the remote control
just my 2 cents - I wish you luck reaching the masses
March 31st, 2010 at 3:19 pm

16.
Joost said:
This just proves to you how awful the mainstream media
is, as you say, they are most definitely: “the greatest
weapon of oppression humanity has ever known, which
has also obscured, isolated and suppressed dissent and
understanding of our present tyrannical forces.”
The pic of Giethner’s face when confronted by Warren is
classic. Good luck getting a debate with any of these guys,
they would never agree, all they have is bold face lies that
would be destroyed when confronted with someone who
actually knows the game/score.
fabulous work, as always.
March 31st, 2010 at 3:58 pm

17.
Bill said:
On a scale of 1 to 10. I give this report a 99!
99% in the house! Not foreclosed on yet!
March 31st, 2010 at 4:07 pm

18.
Is It Time for Law Abiding American Citizens to Stop Paying
Their Taxes and Start a New Government? By David
DeGraw « Dandelion Saladsaid:
[...] ——-I: The Ongoing Theft of Trillions ——-II: Off-the-
Books, Off-the-Record ——-III: Osama bin Bank of America
——-IV: New Mafia World Order ——-V: The Goldman Sachs
Obama Illusion ——-VI: American Heroes Speak Out on the
Financial Reform Ruse ——-VII: Economic Weapon of Mass
Destruction (WMDs) ——-VIII: Hank “Pentagon Sachs”
Paulson ——-IX: $5.4 Trillion a Year Bullion Market Ponzi
Scheme ——-X: Ponzi Nation: Welcome to America, Sucker
——-XI: Economic Shock and Awe ——-XII: Time for a
Second American Revolution – The 99% Movement ——-
XIII: How You Can Get Involved [...]
March 31st, 2010 at 4:10 pm

19.
Wendall said:
The report is a WMD! Truth is blowing up all over the
place… BOOM… Know you know
March 31st, 2010 at 4:14 pm

20.
www.buzzflash.netsaid:
Is It Time for Law Abiding American Citizens to Stop Paying
Their Taxes and Start a New Government?…
"The evidence is now overwhelming. The United States
government has facilitated the theft of trillions of dollars
of national wealth and 99% of the US population no longer
has political representation. ——-I: The Ongoing Theft of
Trillions —…
March 31st, 2010 at 4:15 pm

21.
iamurme said:
I feel like the guys in “Red Dawn” when the commies
started dropping out of the sky. Holy cow I’m terrified! I
feel a responsibility to act now that I have been given this
information in such a succinct and understandable format.
The life implications are potentially massive. This is like
finding out I have cancer and that if I want to fight it I have
to be willing to turn my life and the lives of my family
upside down. What if they don’t understand that while
things appear to be OK, we are sitting on a bomb? I can’t
just say “Yeah! 99%!” and then move on to browsing the
web for my next vacation destination, car, big screen or
whatever. I need to jump in. If I find out that this was BS,
then GREAT! It would be the best news ever to find out
that David is full of it. But I’m afraid that is not the case.
His work ties together too many things to be mentally
avoidable. I’m signing up.
March 31st, 2010 at 5:11 pm

22.
perfectclue1said:
All 3 branches of govt. & judicial nazis are legalizing
fascism (also on Afterdowningstreet)
It seems the rednecks, tea party, fascists, corporate
media, and all three branches of government have failed
to understand the purpose of the Enlightenment, Age of
Reason, democratic revolutions, and principles of
Democracy and Justice.
The American revolution was part of the Western social
movement against class tyranny, despotism and
enshrined the concept, under John Locke, popular will, and
in the Declaration of Independence, worldwide, inherent
human rights that were NOT EXCLUSIVE, but INCLUSIVE,
indivisible, and part of an international, universal
movement, and concept, that often used phrases like
“citizens of the world”
The American revolution, of course, immediately
compromised these rights, as Obama does incessantly, to
their property rights, class rights that corrupted, the intent
of all Western democratic revolutions, signaling their
historical failures. When slavery, property rights over ruled
human rights, the despotic capitalism with its class law
emerged, as duplicitous, criminal enforcement, there for
all to see. Democracy, civil society degenerated into class
deformed regimes, which ultimately moved towards class
tyranny, class tyrant, class Empires and corporate fascism,
the norm for Western decadence, criminality.
When the Executive, Legislative and Judicial branches
openly violate their own laws, break international and
constitutional laws, selectively enforce laws, they
ultimately completely break down, as Bush, Obama, and
Eric Holder have done with no RULE OF LAWS for the worst
crimes, of wars against aggression, torture etc.
The idiot fascists in all three branches represents are no
more logical than the tea baggers, when Judicial Nazis
justify EXCLUSION, DOUBLE STANDARDS, LEGALIZED
FASCISM because the victims are not “Americans”, hence
not “humans”. Such Nazi, twisted morality, which always
was there in the class laws of all Western regimes has
finally caught up with NATO NATIONS, EUROPEAN UNION,
AMERICAN EMPIRE, AND ZIONIST FASCISTS… where
criminality is being enshrined, now routinely, with twisted
class logic, imperial logic of class tyrants in all class
institutions. THE SYSTEM IS BROKEN AND WE ARE MOVING
TOWARDS A GLOBALIZED POLICE STATE SYSTEM.
The level of immorality, duplicity, hypocrisy, and
criminality has finally caught up with all class elites,
servile middle class whores, and class thugs, that its social
system has no legitimacy left and could see an open
global revolt against all Western criminals, by its popular
masses……..NATIONAL STRIKE, INTERNATIONAL STRIKE
AND RESIST THIS FASCISM….and PUT INTO PLACE SOCIAL
JUSTICE, SOCIAL PARTIES WITH SOCIAL
AGENDAS….BACKED BY MAJORITY RULE against class
TYRANTS.
Here are two stories that reflect where we are heading…IT
IS NOT PRETTY….IT IS FASCISM, CLASS TYRANNY OR
INTERNATIONAL DEMOCRACY AND SOCIAL ECONOMIC
JUSTICE.
The Israel Lobby’s Curious Defense of an Alleged Somali
War Criminal
Strange Alliance at the Supreme Court
http://www.counterpunch.org/singer03312010.html
AND:
Is-it-time-for-law-abiding-american-citizens-to-stop-paying-
their-taxes-and-start-a-new-government
http://ampedstatus.com/is-it-time-for-law-abiding-
american-citizens-to-s...
THE QUESTION OFTEN ASKED BY THE WORLD TO GERMAN
NAZIS IS WHY THEY DID NOT RESIST THEIR CRIMINAL ELIT
The Financial Terrorists Who Destroyed Our
Economy Will Pay Zero in Taxes and Get $33 Billion
in Refunds

You and I are working our asses off, paying 30% of our
limited income in taxes. Not the banks that triggered the
financial crisis.

By David DeGraw
Journalist David DeGraw has put together a
devastating report detailing how Wall Street
continues to pillage the economy with the
government's help. "The staggering level of
theft continues unabated," writes DeGraw.
"Our future is going up in flames and our
government isn’t even making the slightest
effort to put out the fire. In fact, they are
purposely pouring gasoline all over
it." DeGraw's investigation is a follow up to his
previous report The Economic Elite Vs. The
People of the United States of America
April 19, 2010 "Amped Status" -- The first thing people
need to understand is that the economic crash wasn’t a
crash for the people who caused it. In fact, these financial
terrorists are now doing better than ever. In a recent
report, titled “Social Inequality in America: Widening
Income Disparities,” more evidence of the unprecedented
transfer of wealth was revealed:
“As of late 2009, the number of billionaires soared from
793 to 1,011, and their total fortunes from $2.4 trillion to
$3.6 trillion…. Despite the crisis, the list of billionaires has
grown by 218 people and their aggregate capital has
expanded by 50%. This may seem paradoxical, but only at
first glance. This result was predictable, if we recall how
governments all over the world have dealt with the
economic crisis.”
The inequality of wealth in the United States between the
economic top 0.5% and the remaining 99.5% of the
population is now at an all-time high. The economic top
1% of the population now controls a record 70% of all
financial assets. The point here is that while the economic
crisis has been devastating for 99% of America, the Wall
Street elite are awash in record breaking profits. The most
profitable firm in Wall Street history, Goldman Sachs, just
had their most profitable quarter in their 140-year history
and Wall Street firms issued an all-time record breaking
amount in bonuses.
All of this is occurring after giving these firms $14
TRILLION in taxpayer support - that works out to be
$46,662 of your hard-earned money. That’s $46,662 for
every man, woman and child in this country. If you have a
family of four, sorry, your future just got robbed and you
and your children just lost $186,648!
So what are all these firms doing with these record-
breaking profits? Are they returning them into the tax
system in which they came from, the tax system that was
looted just to keep their scam running?
No!
Let’s start with Wells Fargo. After being bailed out with our
money in 2008, their top five executives DOUBLED their
compensation and each one of them made over $11
million in 2009. Wells Fargo CEO John Stumpf made off
with a cool $21.3 million last year.
And now comes news that Bank of America and Wells
Fargo will pay zero, yes ZERO in federal taxes for 2009.
Bank of America will net a $3.6 BILLION benefit from the
federal government in 2009. Wells Fargo, after $8 BILLION
in earnings for 2009, will net $4 BILLION from the federal
government.
So you and I are working our asses off just to make ends
meet, paying 30% of our limited income in taxes, and
gizillionaire John Stumpf’s company is paying ZERO in
taxes so that he can personally swipe another $21.3
million of tax payer funds.
Al Capone is a dime store thief compared to this guy!
Well, to be fair, Mr. Stumpf is just a small-timer himself in
this all-time greatest heist.
JP Morgan Chase made $12 BILLION in profit in 2009, as a
direct result of our tax money - yes, I need to keep
repeating this fact. These are profits that would not exist if
it weren’t for our tax dollars.
It’s also important to point out that this is just the level of
theft that has already occurred. However, as I also can’t
stress enough, the theft still continues without any let-up.
Now comes news that JP Morgan is on the verge of getting
a $1.4 BILLION tax refund! Yes, you heard me right, a $1.4
BILLION TAX REFUND. But JP is not alone in this latest
theft. In total, the financial terrorists are due to
receive $33 BILLION IN TAX REFUNDS!
Do you comprehend how depraved it is to give these
people another $33 billion in tax refunds? I assume that
they’re thinking that after stealing $14 TRILLION, another
$33 billion really isn’t all that much. After all, last year,
Goldman Sachs, the most profitable firm Wall Street
history, only paid 1% in taxes, so what’s another $33
billion kickback among friends?
Let’s be clear about this latest $33 billion of which the US
tax system is being robbed. What could we do with $33
billion?
For one, we could put over one million unemployed people
back to work and pay them the average national median
wage for the next year. Add the record-breaking $150
billion in bonuses (our tax money) that Wall Street handed
out this past year to the $33 billion and guess what? We
can now put over six million people back to work making
the average annual wage! Do you think that would
stimulate the economy? Green shots galore.
But why do that? Jamie Dimon needs another new 40,000
square foot mansion and Goldman Sachs needs to
upgrade their fleet of luxury jets filled with the finest wine,
champagne, cigars and hot tubs.
Maybe we could use that $33 billion to save some of the
hundreds of schools that are being forced to close this
year due to devastating State budget deficits. Or maybe
pay the thousands of teachers who just found out that
their jobs have been cut. How about using that money to
feed the 50% of US children who need to use food stamps
during their childhood to eat? How about using it to give a
raise to the 15 million US workers who work 40 hours or
more a week and still fall below the poverty line.
Wait, I know, how about helping the millions of Americans
who have been foreclosed upon due to JP Morgan’s
predatory lending schemes and illegal subprime “liar’s
loans.”
And don’t even get me started again on how we
can better use the $14 TRILLION that Wall Street made off
with.
People of the United States to Obama: Hello! This is
happening on your watch!
Change We Can Believe In!
Oh, but wait… it gets even better. This just in from the
Roosevelt Institute:
De facto bailout for Freddie and Frannie
Did the Fed and the Treasury orchestrate a de facto
bailout of Fannie Mae and Freddie Mac — at public
expense and sans Congressional approval? John Hussman
thinks so. He provides a detailed account of just how 1.5
trillion dollars got diverted to Freddie and Fannie — money
that we can all kiss goodbye. American taxpayers, it
seems, have gotten the middle finger once again.
And then in comes this little known, highly underreported
news item: U.S. Taxpayers on Hook for $5 Trillion of
Fannie, Freddie Debt
“After years of winks and nods, there’s no doubt that
Fannie and Freddie now enjoy an explicit guarantee,
according to most observers. The U.S. government placed
Fannie Mae and Freddie Mac in conservatorship in
September 2008: ‘This means that the U.S. Taxpayer now
stands behind $5 trillion of GSE debt,’ according to the
Congressional Research Service.”
Hank “Pentagon-Sachs” Paulson’s right-hand man Tim
Geithner, now Obama’s hand-picked Treasury Secretary
and point man for the continued looting, recently
assured his friends on the Financial Services Committee:
“We will do everything necessary to ensure these
institutions have the capital they need to meet their
commitments.” Geithner then acknowledged that US
taxpayers will take “very substantial” losses on this
bailout.
Yep, Obama’s Chief-of-Theft, Rahm “Freddie Mac Daddy”
Emanuel’s former company now has unlimited ability to
rob taxpayer money and is making off with $5 TRILLION.
And I thought Cheney’s Halliburton was as bad as it could
get.
Yes We Can… Get Robbed Even More!
But don’t worry, if you thought the past two years were
bad, the history books will recall them as a walk in the
park compared to what is coming our way. You don’t have
trillions looted from the economy and continue to just
keep going about your life business as usual. I wish I was
wrong, and I wish this was just my opinion, but facts are
facts and every societal and economic indicator says
things are going to get worse, MUCH WORSE.
© 2010 Amped Status All rights reserved.
'The Fourteenth Banker, Anonymous Bank
Insider, Describes His Moral Crisis
'The System Is Built To Be Gamed'

By Ryan McCarthy

April 13, 2010 "HuffPost" -- "The system is built to be

gamed."
"The voices of dissent are not being heard."
These are the words of an anonymous executive at one of
America's 10 largest banks, who after many years of
watching the worst of Wall Street's ethics transform his
company, has decided to speak out.
(Scroll down for the Q&A)
Despite the obvious risks to his banking career, the
executive, who's been in the industry for more than 20
years, says he can't bear to keep quiet any longer: "I
decided that I cannot live with the extent of the
compromises to my value system."
In early April, the executive in question started the
anonymous blog, The Fourteenth Banker. Intended as
forum for bank insiders who feel muzzled by industry gag
orders, the blog gets its name from a now infamous March
2009 White House meeting with the heads of the nation's
largest banks. (It's also a reference to the book, "13
Bankers: The Wall Street Takeover and The Next Financial
Crisis" by Simon Johnson and James Kwak.)
HuffPost recently spoke over the phone with "14" -- for
lack of a better name -- about what exactly pushed him to
speak out and why he thinks his industry is in dire need of
reform. He agreed to speak on the condition that certain
aspects of his career and employment were left out.
The executive, who currently works in a management role
at a U.S. bank that took TARP funds, described the rapid
dissolution of the traditional banking functions at his
company in favor of short-term fixes and often
exaggerated profits. He described a flawed incentive
system that produced generous salaries for many of his
colleagues, while reducing lending to credit-worthy Main
Street borrowers. That system, he says, has caused his
own moral crisis.
A self-described former disciple of the "Adam Smith,
conservative lassez-faire school of thought," he has spent
most of his career dealing with what's typically considered
the backbone of banking: lending to small and medium-
sized businesses. (It is also, incidentally what bailed-out
banks have been widely criticized for reducing.)
As his industry experienced a wave of consolidation and
mergers over the last few decades, he says his bank has
become fully committed to the strategies that were once
reserved for investment banks. In short, the money
culture of Wall Street began to transform the familiar
world of branch-based banking.
"Incentive is everything," he says of the changes. "The
same sort of ethical and questions and compromises seen
at investment banks have that infected the whole
organization."
At the heart of the executive's moral crisis is his bank's
compensation structure, which has come to resemble the
pay schemes of bank trading operations. Though he hasn't
been explicitly told to stop making loans, he says the retail
banking industry's compensation systems have come to
put an outsized emphasis on selling fee-based products
(think credit cards) and acquiring deposits.
In other words, at his own bank it no longer pays for him
to actually lend money to the kind of businesses that
create 75 percent of jobs in America.
Since the downturn began, he says his bank overreacted
to lagging profits by squeezing the availability and cost of
loans for small and medium-sized companies. The
simplistic argument, he says, is that the downturn has
meant lower profits for businesses and therefore lending
needed to fall. But the losses in business banking, he says,
are only running between 1 and 2 percent a year -- a far
cry from the massive losses suffered by banks' credit card
portfolios.
When he talks about his "personal journey," 14 says that
he's had to sit across from loyal clients and had to deliver
the hard news that his bank is raising their interest rate --
or as he called it "squeezing profits out of relationships."
He's been threatened with lawsuits, yelled at and he's
observed how interactions with deflated customers have
taken their toll on him. "They'll say, 'Why are you kicking
me when I'm down? 2009 is the one year in which I have
had really bad results which, by the way, big bank, you
had bad results too.'"
Like a pre-crisis mortgage brokerage who pays its
employees only on volume, but not on the quality of loans,
he says his bank openly sponsors a compensation system
that is actively manipulated by his peers. "People can
game the system and receive large payoffs, and in my
view those are violations of ethics."
He says he's raised these complaints with his bosses --
even providing proof, in at least one case. But he has been
either politely brushed off, or told not to raise specific
issues. Worse, his daily interactions with clients have
begun to feel like just another opportunity to drain money
from them. "The thing that I enjoy in my day-to-day work
is dealing with businesses and individuals and in a way
that helps them. And I can say that it is much more
difficult to do that today."
Among the latest calls for financial reform, he thinks
breaking up "Too Big To Fail" banks is one of the crucial
steps. Reducing the size of America's megabanks, he says,
would decrease systemic risk -- and he believes it would
begin to shift resources away from trading operations and
back to productive entrepreneurial businesses.
Whistleblower protection, 14 argues, should be included in
any reform bill. "They don't want you to be heard, but the
truth of the matter is you might be the canary in the coal
mine."
He's seen fellow longtime bankers who've become
depressed or dispirited by the new world of banking and
the "severing" of the banker-client relationship. But
changing his industry, he says, is what motivates him. "I
really have a general faith that if I do the right thing, that
I'm going to be OK," he says.
Which isn't to say he shares his colleagues' tendency to
look the other way.
"When we're trained about the Patriot Act and money
laundering, every year we have to take new training
courses and sign off that we understand. And we're all told
that willful blindness is not acceptable, that you cannot be
aware that there might be money laundering and not
bring it to the attention of the company. And yet in our
incentive programs and in the way credit is given for
things, willful blindness is tolerated."
HuffPost Q&A With the anonymous bank industry veteran
behind The Fourteenth Banker blog.
Why did you choose to speak up now?
If you read some of the comments on the blog, there's a
lot of passion coming there. I was trying to think about
where does that come from. And I think it happens when
you work in an organization [that] comes into conflict with
your value system. There are things you are either asked
to participate in or you observe that are in conflict with
your value system -- and that creates a reaction.
People then begin to consider for themselves the risk
versus the reward. There's a reward for your work. You
have your job, your security, your personal income and in
some cases generous compensation. And then, and in a
sense that's reward, but that's what also at risk. When you
speak out, the reward you've been getting is also the risk.
You have to have strong enough feelings to take that risk.
I decided that I cannot live with the extent of the
compromises to my value system. My choices then are to
leave or to try and change things. But when you leave,
then you leave behind the system intact, you leave behind
your customers, your fellow employees and you leave
behind the system. The reason I'm choosing to speak out
now is that neither of those are acceptable choices to me.
And I'm willing to take the risk that I'm unemployed in
order to effect some change.
Do you get a sense that there are others out there in your
profession who share your feelings?
Yes, a whole host of people. I think there's internal conflict
[at large banks]. The truth in this industry is that people
have the ability to individually make massively higher
amounts of money than they could, say, in some other
profession. If you've got that on the one hand, and on the
other, then you've got the fact that they don't like a lot of
the way things are done -- and those two things are in
conflict.
There are a lot of morale issues. Yet [many people]
continue to choose to please the organization. I'm
beginning to see some cracks in the system. There's
turnover. And this leads into the way incentives have been
put in place. I've seen where people are having to choose
between being pretty honest and being somewhat
dishonest. And this all goes into the way incentives are put
in place...
Much of the focus of the press and the Congress is always
on the CEO, and CEO pay and investment bank's pay. And
those things are huge issues, and absolutely going to
contribute to systemic risk.
The other side of it, is that this investment bank thinking
has trickled down to some extent all the way through the
organization. There are the same sort of ethical and
questions and compromises that investment banks have
that have infected the whole organization. This is where
you see more people who will be motivated to speak out.
I guess I just generally believe people have some good
aspects to them. They have an innate value system and
when the organization crosses that line, then some of
them want to speak out.
Can you pinpoint a time in your career or a moment when
you first realized you needed to speak out?
With my particular organization in the last few years, there
has been change in management in the particular
business and that I've seen several layers of management
have come to embrace the whole ethic of "incentive is
everything." That money is everything.
Over that period of time there's been an Implementation,
a series of steps, which turned the whole organization to
this whole philosophy.
In my part [of the bank] we had different people with
different values. The Wall Street mentality has been
pushed into the traditional bank, and it's not always
welcome there. It's welcome to the extent that people can
make a lot money, but it's not welcome to the extent that
it becomes all about money.
Can you give me some idea of the specific role you play at
your job?
I deal [in] traditional bank branch activities, commercial
lending and lending to businesses below the large
corporate level.
It would be what banks did 30 years ago. We've gotten
more sophisticated products now, but I still handle the
traditional bank activities that involve getting money out
into the community.
Over time, [securitized products and credit cards] were
profitable and therefore it led to a diversion of resources
away from the core business. And, in my view, and if you
look at the at the growth of manufacturing and
entrepreneurship versus the growth of the financial sector,
clearly, if money had not been diverted to the financial
sector, if those more resources and intellectual capital
hadn't been allocated to sectors that don't create benefit
for the society at large, you'd have more funding available
now. And maybe we'd have more jobs now.
Is that dispiriting to you to see your industry drained like
that?
The thing that I enjoy in my day-to-day work, is the thing
is dealing with businesses and individuals and in a way
that helps them. And I can say that it is much more
difficult to do that today.
It sounds like there's a mandate to change the way you've
been loaning money. Are you told to not make loans?
They're not being told not to make loans. However, the
difficulty of making loans has gone up several magnitudes.
And the metrics have changed. In the past the
organization has valued loans, now the organization
values deposits and fee-based products... The question is
what does that mean? There may not be a directive given
that you will make fewer loans, but the practical effect is
the you will make fewer loans. But also the skill set of your
people will change to being skilled at loans to being skilled
at other things.
Are there fewer loans because of the downturn, or is this
aversion to lend money a structural change prior to the
recession?
There was a structural change prior to the downturn. In
the downturn, two things have happened. One is there's
less loan demand, because when the future is uncertain,
small businesses are less likely to make commitments. But
loan demand is not down as much as lending is down. So
there are people who are qualified, and the fact is that it is
much more difficult for them to find credit. There's also
been an overreaction within the part of the bank...
Someone can make a simplistic argument that, well,
there's an economic tightening going there and therefore
it was appropriate to tighten credit standards. And that's
true. But if you got more granular about it there are areas
where there are losses and areas where the losses are
[relatively small.]
Take small business. The losses in loans to traditional
businesses are, as a percentage, a fraction of what they
are in other areas. You can take credit cards, which is a
high-profit area that you can do all sorts of things with --
securitize it, take them off balance -- those losses are now
massive... Losses in small business or business banking
are probably running between 1 and 2 percent per annum.
So you're saying that during a time when banks have been
struggling to get back on their feet, they're actually
looking to move away from low-risk products like
traditional lending?
Nobody would ever say that. But what would happen [is]
that you would begin to do [certain things to earn more
profit]. There's a lot of other ways to effect that same
result.
A company's relationship with it's bank is usually pretty
sacrosanct. Have you had a real visceral reaction from
clients when you've been forced to raise their rate or
otherwise increase their costs?
Yes, there are surveys out there that show that more
business clients are prepared to change banks than at any
time in which it's been measured. So why would that be?
It's because they feel like that relationship has had
somewhat of a severing. That can happen in a number of
ways. I mean, I've sat across from people that have talked
about "we're going to sue you." I've sat with people been
who've been deflated. They'll say, "Why are you kicking
me when I'm down? 2009 is the one year in which I have
had really bad results which, by the way, big bank, you
had bad results too, and yet you're in the position of
power and you're kicking me when I'm down?" That's a
natural human reaction...
But those kind of conflicts are now coming up more often
then they should. [It happens] where really the risk of loss
is not that different. You could have a well-capitalized
business and they still had a down year... But it's a
temporary condition.
There's a centralization of decision-making, and the
people that make the decisions are very often removed
from the client. They don't have to sit across the table
from the client. They don't have to engage in that
personal emotional interaction. They're not invested in it,
therefore it's easier to make decisions that are strictly
objective. Objective in the sense that they're based on
numbers. They're not objective in the sense that they
make for good logic.
What sort of holes do you see in the regulatory reforms
that have been put out there? The issue of "Too Big To
Fail" is a big part of this, but may not be fixed
I'm not 100 percent sure that Too Big To Fail [reform] isn't
going to happen. There's a lot of people that are beginning
to say, 'This is an absolute requirement.' If the politics can
change then... and that's one of the reason for the blog
too. Can it get to enough people where it changes the
political balance?
It's not impossible. This is going to take a while for this
legislation to happen. It's not impossible that TBTF is going
to be entrenched -- or if the economy starts to slip again,
that might reopen the whole discussion.
The other part as far as reform goes, when I spoke about
the incentive plans have been pushed down throughout
the bank, I don't think [regulators] have really tackled at
all the motivational systems. They haven't looked at the
incentive systems, the behavioral economics of how these
basic decisions are made.
The industry made decisions based on mathematical
projections and that turned out to be a faulty way of
making decisions. Then the question is what other ways
are there of making decisions that might have worked?
And this is a really big one for financial reform. The voices
of dissent aren't being heard. I believe any legislation
should have strong whistleblower protection. I have done
things in my company and kind of been pushed back, but I
haven't spoken so loudly that I get myself fired because I
know I would have been fired.
There should be protections for people that have a
different point of view from management. The
psychological environment in most banks is that if you
speak against the prevailing belief system, you're
perceived to have attitude, and that attitude is going to be
infectious. And they don't want you to be heard, but the
truth of the matter is you might be the canary in the coal
mine.
What's your sense of the top management at your
company?
I think they're largely captured by the whole [Wall Street]
mentality. And I don't know enough to say that it's all out
of certain business schools, but I sort of suspect it its. The
"Art of War" philosophy that business is a battle, that it's
us versus them. That it's a win-lose kind of proposition. I
think that kind of prevails... the preeminence of money in
the way individual compensation is structured. I think
they're captured by that whole mentality.
I don't think that they tend to see the whole picture. You
have to have curiosity about a lot of different things and
have been exposed to a lot of different things in order to
have a perspective. And a lot people because they're so
specialized they're narrowly focused, so they don't really
think how what's going on in their day-to-day world what
that might mean for a different part of the organization.
What has happened to you when you've spoken up at your
job?
Well, there's been more than one occasion [laughs]...
One thing I have brought up is that the system is built to
be gamed. People can game the system and receive large
payoffs, and in my view those are violations of ethics. I've
called those to attention of supervisors... But then I see
the behavior being allowed to continue. The reasons in my
opinion are that I don't think these people really grasp
what this really is and, two, they benefit. The numbers
that are created by the gaming of the system make you
look really good. Any incentive system based only on
production statistics can be gamed.
I put in my blog the term willful blindness. When we're
trained about the Patriot Act and money laundering every
year we have to take new training courses and sign of and
sign off that we understand it and all that. And we're all
told that willful blindness is not acceptable, that you
cannot be aware that there might be money laundering
and not bring it to the attention of the company. And, yet,
in our incentive programs and in the way credit is given
for things, willful blindness is tolerated.
Ryan McCarthy - rmccarthy@huffingtonpost.com
Geithner and Bernanke's Possibly Criminal
Roles

Lehman Brothers Scandal Rocks the Fed

By Mike Whitney

March 15, 2010 "Information Clearing House" --

After a year-long investigation, court-appointed bank
examiner Anton Valukas has produced a deadly 2,200
page report which details the activities that led to the
Lehman Brothers bankruptcy. The report is a keg of
dynamite. The question now is whether anyone in
government has the nerve to light the fuse. Valukas
provides powerful evidence that Lehman executives were
involved in “balance sheet manipulation” by implementing
an arcane accounting procedure called “Repo 105” which
masked the bank's true financial condition from investors
and regulators.
According to Valukas, Lehman was “Unable to find a
United States law firm that would provide it with an
opinion letter permitting the true sale accounting
treatment" using Repo 105. So, Lehman executives went
outside of the country in an effort to enlist the support of a
London law firm that would approve the procedure.
It is impossible to overstate the significance of Valugas's
findings. The report exposes the opaque but central role of
the repo market which provides essential short-term loans
for financial institutions. (Lehman used repos to conceal
the full extent of its collapse, by dint of the amount of
leverage it was using, meaning the pitiful asset anchor
tethered to a vast zeppelin of debt) More importantly, it
shows the cozy and, very probably criminal relationship
between the country's main regulatory bodies and the
Wall Street behemoths. The activities of the New York Fed
(NYFRB), which at the time was headed by Timothy
Geithner, is particularly suspect in this regard. The report
should trigger an immediate Congressional investigation,
probing the whole affair and most importantly the role of
the Fed.
Naked Capitalism's Yves Smith, who has apparently sifted
through all 2,200 pages of the report, has done some first-
rate analysis of the details. Here's an excerpt from her
Friday posting:
"Quite a few observers... have been stunned and
frustrated at the refusal to investigate what was almost
certain accounting fraud at Lehman. ....The unraveling
isn’t merely implicating Fuld (Lehman’s CEO) and his
recent succession of CFOs, or its accounting firm, Ernst &
Young, as might be expected. It also emerges that the NY
Fed, and thus Timothy Geithner, were at a minimum
massively derelict in the performance of their duties, and
may well be culpable in aiding and abettingLehman in
accounting fraud and Sarbox violations....
“We need to demand an immediate release of the e-mails,
phone records, and meeting notes from the NY Fed and
key Lehman principals regarding the NY Fed’s review of
Lehman’s solvency. If, as things appear now, Lehman was
allowed by the Fed’s inaction to remain in business, when
the Fed should have insisted on a wind-down .....
“…at a minimum, the NY Fed helped perpetuate a fraud
on investors and counterparties. This pattern further
suggests the Fed, which by its charter is tasked to
promote the safety and soundness of the banking system,
instead, via its collusion with Lehman management,
operated to protect particular actors to the detriment of
the public at large.
“And most important, it says that the NY Fed, and likely
Geithner himself, undermined, perhaps even violated,
laws designed to protect investors and markets. If so, he is
not fit to be Treasury secretary or hold any office related
to financial supervision and should resign immediately."
(Naked Capitalism)
Repeat: "Accounting fraud", "collusion", "aiding and
abetting." This is strong language from a woman who
spent than 25 years in the financial services industry,
alternately working at Goldman Sachs, McKinsey & Co.,
and Sumitomo Bank. Smith typically chooses her words
carefully and is not easily given to hyperbole. Yves Smith
again: "Here is the part of the report that discussed how
the Fed aided and abetted Lehman misconduct:
“The Examiner [that’s Valukas] questioned Lehman
executives and other witnesses about Lehman’s financial
health and reporting, [and] a recurrent theme in their
responses was that Lehman gave full and complete
financial information to Government agencies, and that
the Government never raised significant objections or
directed that Lehman take any corrective action.
“So get this: even though Lehman dressed up its accounts
for the great unwashed public, it did not try to fool the
authorities. Its games playing was in full view to those
charted with protecting investors and the financial system.
"So what transpired? The SEC (which has never had much
expertise in credit markets -- a major regulatory problem)
handed assessing Lehman over to the Fed, which bent
over backwards to give it a clean bill of health." (Naked
Capitalism)
What did Geithner and Bernanke know, and when did they
know it. It appears that they either knew what was going
on at Lehman and looked the other way or acted as the
"chief enablers" of accounting fraud. (ie--The Repo 105-
charade) Here's an excerpt from the New York Times
which clarifies the point:
"Newly released report on the collapse of Lehman
Brothers ... sheds surprising new light on Lehman’s
dealings with the New York Fed. Lehman engaged in a
series of transactions with the New York Fed that were
similar to the ones that drew criticism from the bankruptcy
court examiner who investigated its collapse. The
examiner, Anton R. Valukas, drew no conclusions about
the transactions with the Fed, and focused instead on
deals that were known inside Lehman as “Repo 105.”
But the report by Mr. Valukas nonetheless raises fresh
questions about the role of the New York Fed in supporting
Lehman during the frantic months leading up to its
collapse. It suggests that Lehman executives believed the
Fed would be able to help the bank avert disaster and
provide it with a business opportunity.
“Bernanke and Co. may have ‘saved the day’ ” a Lehman
executive, Geoffrey Feldkamp, wrote in an e-mail message
to a colleague in March 2008, according to the report.
Neither Ben Bernanke, the chairman of the Federal
Reserve, nor Treasury officials saved Lehman, of course.
But it was that month that the Fed started a special
lending program open to Wall Street banks like Lehman
that could not borrow directly from it. The Fed also
lowered its standards for the kinds of collateral that it
would accept against such short-term loans.
“Lehman, desperate for financing, seized its chance. It
packaged billions of dollars of troubled corporate loans
into an investment called Freedom CLO. Then, in a series
of transactions, it shifted Freedom back and forth to the
New York Fed, in exchange for cash. Those moves helped
make Lehman look healthier.
“Essentially, Lehman was able to temporarily warehouse
illiquid investments that were worrying its investors at the
New York Fed in return for cash. The Fed created this
facility immediately after the near collapse of Bear
Stearns. Some suspect that other banks engaged in
similar maneuvers.
A spokesman for the New York Fed said the loan facility
was created to help the entire financial system and
prevent the problems at one bank from cascading. The
collateral accepted from Lehman met the Fed’s standards,
he added. A third party valued it, the Fed accepted it and
then reduced prices to limit the risk." ("Fed Helped Bank
Raise Cash Quickly", Eric Dash, New York Times)
The excerpt from the NY Times deserves a second
reading. The so-called lending facility that the Fed set up
was called the Primary Dealer Credit Facility or PDCF. It
was established to provide short-term lending for financial
institutions after the secondary market froze and banks
became reluctant to lend to each other. The Fed arbitrarily
(and, perhaps, illegally) expanded the rules for "only"
accepting the highest rated bonds and securities as
collateral, and became (what zero hedge calls) "the
enabler of last resort". The Fed's willingness to take any
manner of mortgage-backed sludge in exchange for US
Treasuries turned out to be the lifeline for underwater
banks whose vaults were loaded with the worthless paper.
This is why Fed keeps resisting demands for an
independent audit, because it would prove that Bernanke
"knowingly" paid huge sums of money for dodgy assets.
When the PDCF first opened for business, the Wall Street
tycoons could see that their friend at the Fed was riding to
the rescue. Lehman boss Dick Fuld, who could not conceal
his delight, crowed, “The Federal Reserve’s decision to
create a lending facility for primary dealers and permit a
broad range of investment-grade securities to serve as
collateral improves the liquidity picture and, from my
perspective, takes the liquidity issue for the entire
industry off the table.”
Indeed. Economist and author Michael Hudson summed it
up like this for CounterPunch:
"Today, there’s only one market for junk: the Federal
Reserve, which has lent $1.3 trillion in cash for trash, no
questions asked. This amount exceeds the forecast
Obama medical care plan for the next decade. No money
for health insurance, but all for the junk-mortgage
lenders."
Is there really any doubt that Tim Geithner at the New
York Fed, or Bernanke knew that Lehman was trading its
junk assets to finance its ongoing operations? Doesn't that
in-itself constitute a cover up or "intentionally" misleading
investors? And, if Lehman was exchanging garbage to
feign solvency, then it seems likely that the other
investment giants were engaged in the same type of
charade. (Which implies that the ratings agencies were
culpable, as well)
Here again is the crucial excerpt from the Valukas report
which suggests that--at the very least--the NY Fed
(Geithner) was involved in a vast cover-up which
eventually ended in the nation's largest bankruptcy
followed by a global market crash.
"The Examiner questioned Lehman executives and other
witnesses about Lehman’s financial health and reporting,
a recurrent theme in their responses was that Lehman
gave full and complete financial information to
Government agencies, and that the Government never
raised significant objections or directed that Lehman take
any corrective action.......Although various Government
agencies had information that raised serious questions
about Lehman’s reported liquidity and about the
sufficiency of its capital and liquidity to withstand stress
scenarios, the agencies generally limited their activities to
collecting data and monitoring.
“After March 2008 when the SEC and FRBNY BEGAN
ONSITE DAILY MONITORING of Lehman, the SEC deferred
to the FRBNY to devise more rigorous stress-testing
scenarios to test Lehman’s ability to withstand a run or
potential run on the bank.5753 The FRBNY developed two
new stress scenarios: ‘Bear Stearns’ and ‘Bear Stearns
Light.’ 5754 Lehman failed both tests.5755 The FRBNY
then developed a new set of assumptions for an additional
round of stress tests, which Lehman also failed.5756
However, Lehman ran stress tests of its own, modeled on
similar assumptions, and passed.5757 It does not appear
that any agency required any action of Lehman in
response to the results of the stress testing." (My
emphasis.)
This is the huge scandal: collusive government officials
who operate as de facto agents for an industry saturated
with corruption and conflicts of interest. Connived at the
coverup of Lehman’s true position because he doesn't
work for the 10 million people who are now standing in
unemployment lines, or the 35 million people who are now
on food stamps, or the 6 million people who have lost their
homes to foreclosure, or the hundreds of millions of
people who have seen the home equity evaporate, their
retirement funds plunge and their hopes for the future
dashed so that a handful of insatiable landsharks could
fatten their bank accounts in the Cayman Islands.
Michael Hudson, the ex-Wall Street economist and author
of Super Imperialism: The Economic Strategy of the
American Empire put the Lehman case into perspective
with observations he made to me via e mail on Sunday. I
think it summarizes the big picture admirably:
“When predators have exhausted the economy, they turn
on each other. The result is financial cannibalism. After all,
who else is it possible to get money from in today's
negative equity environment?

“If the media are missing anything, it’s that the game is
over. The financial institutions are taking their money and
running. They know it's over. And the only source of
cashing out is the US Treasury and Fed.
“My solution:There is an easy place to start, that can take
only a few weeks. That is to look at the Fed's $1.3 trillion
in cash-for-trash swaps. If these prove to be junk
mortgages for which the Fed has given good US Treasury
bonds, at the proverbial taxpayer expense, then the Fed
and Treasury administrators should have criminal charges
brought against them, the accounting firms of the
companies pledging these junk mortgages and other
financial junk should be closed down and RICO charges
brought, and the banks themselves should be wiped out. I
have urged the appropriate Washington oversight
committee to open an investigation along these lines."
Well said, Dr Hudson! If investigators can prove that the
Fed exchanged US treasuries for MBS securities and other
toxic assets that they knew were worth less than the
amount they provided via short-term loans,(repos) then it
is reasonable to assume that the Bernanke's quantitative
easing (QE) program operated under the same guidelines.
That means, that the $1.25 trillion QE program--which was
supposed to extend credit to consumers and businesses--
was actually a scam designed to transfer a gigantic load of
capital to the very people who gamed the system and
precipitated the biggest financial meltdown since the
Great Depression. Without question, that misallocation of
capital has deepened the recession and sent
unemployment skyrocketing. We need to get to the
bottom of this.
Stiglitz, Nobel Prize-Winning Economist, Says
Federal Reserve System 'Corrupt'

By Shahien Nasiripour

March 06, 2010 "Huffington Post" -- One of the world's

leading economists said Wednesday that the very
structure of the Federal Reserve system is so fraught with
conflicts that it's "corrupt."
Nobel laureate Joseph Stiglitz, a former chief economist at
the World Bank, said that if a country had applied for
World Bank aid during his tenure, with a financial
regulatory system similar to the Federal Reserve's -- in
which regional Feds are partly governed by the very
banks they're supposed to police -- it would have raised
alarms.
"If we had seen a governance structure that corresponds
to our Federal Reserve system, we would have been
yelling and screaming and saying that country does not
deserve any assistance, this is a corrupt governing
structure," Stiglitz said during a conference on financial
reform in New York. "It's time for us to reflect on our own
structure today, and to say there are parts that can be
improved."
Stiglitz made the remarks at a conference held by the
Roosevelt Institute. He and other speakers, including
Harvard Law Professor and federal bailout watchdog
Elizabeth Warren and legendary investor George Soros,
had bold ideas about reforming the nation's financial
system.
After the conference, Stiglitz said that his remarks on the
Fed were "maybe a little hyperbole," but then again made
the case that if another country had presented a plan to
reform its financial system, and included a regulatory
regime that copied the makeup of the Federal Reserve
system, "it would have been a big signal that something is
wrong."
To Stiglitz, the core issue is that regional Fed banks, such
as the New York Fed, have clear conflicts of interest -- a
result of the banks being partly governed by a board of
directors that includes officers of the very banks they're
supposed to be overseeing.
The New York Fed, which was led by current Treasury
Secretary Timothy Geithner during the time leading Wall
Street firms like Citigroup, JPMorgan Chase, AIG, and
Goldman Sachs were given hundreds of billions of dollars
in taxpayer bailouts, presently has on its board of
directors Jamie Dimon, the head of JPMorgan Chase. He's
been there for three years. He replaced former Citigroup
chairman Sanford "Sandy" Weill.
"So, these are the guys who appointed the guy who bailed
This Is One of the Biggest Wall Street
Frauds Ever...
By Porter Stansberry:

February 26, 2010 "S&A Digest"- February 25, 2010-- One of the best
lessons I've learned over my career as an investment analyst is the myth of
excellent management or "great execution" is really just that – a myth.

When I see companies in troubled industries reporting quarter after quarter

of great results, while all of their peers are getting killed, I know a fraud is
going on. I remember in the early 2000s, WorldCom kept reporting profits
when all of the other long-distance carriers were getting killed. I knew it
couldn't last. And it didn't. WorldCom's accounting was revealed to be a
fraud – the company was counting its network access costs as capital
expenses. Once the real numbers came out, the company collapsed in what
was the largest bankruptcy in American history at that point.

About three years ago, I saw Goldman Sachs reporting quarter after quarter
of unbelievable results when all of the other investment banks were hurting.
I spent a lot of time looking at its numbers – which didn't make any sense. It
reminded me of Enron. It kept reporting bigger and bigger profits, but lost
more money every year in cash. And its debt balances kept growing.

I wrote a lot about this in The Digest, but I never officially recommended
shorting Goldman in my newsletter because I literally couldn't figure out
how Goldman Sachs was doing it. I couldn't find the smoking gun... but I
knew a giant fraud would be discovered there, eventually.

In October 2008, I figured out part of the big secret: Goldman had insured
all of its subprime exposure via AIG. This allowed it to book huge profits on
its subprime investments long before they were actually paid off because the
bonds were insured. Of course, it was all a sham – AIG didn't have nearly
enough money to pay off any of the insurance. (See the October issue of
PSIA for more details.) A source close to the company even told me how
big the exposure to AIG really was – $20 billion. That's roughly 100% of the
profit Goldman claimed in 2006 and 2007, at the height of the credit bubble.
Goldman completely denied my report and claimed it had zero exposure to
AIG.

As was subsequently revealed in the spring of 2009, my report was right on

the money. Goldman had roughly $20 billion in exposure to AIG and
received roughly $14 billion of money the federal government used to bail
out AIG.

But I completely missed one big part of the story... And once this fact
becomes common knowledge, it will probably mean jail time for several
leading Goldman executives and the end of the firm. What did I miss? The
entire Goldman-AIG relationship was a complete sham. Let me explain...

Goldman eventually admitted it had insured roughly $20 billion worth of

subprime CDOs with AIG and had major exposure to the firm. But the New
York Federal Reserve and Goldman Sachs never revealed this critical fact:
Goldman didn't merely buy insurance on a bunch of random subprime
CDOs. It actually bought insurance on special CDOs it had put together and
sold to its own clients. In other words, Goldman knew more about these
CDOs than anyone else. Goldman bought insurance on these CDOs because
it knew they'd collapse.

This is tantamount to building a house, planting a bomb in it, selling it to an

unsuspecting buyer, and buying $20 billion worth of life insurance on the
homeowner – who you know is going to die!
These facts all came to light because of research done by the office of
Darrell Issa, the ranking Republican on the House Committee on Oversight
and Government Reform. These new documents will certainly lead to a full
investigation of the Goldman-AIG dealings and the subsequent $180 billion
bailout led by the New York Federal Reserve. My bet? Heads will roll. If
you own Goldman Sachs, you'd better sell.
Secret Banking Cabal Emerges From
AIG Shadows: David Reilly
By David Reilly

Jan. 29 2010 - "Bloomberg" -- The idea of secret

banking cabals that control the country and global
economy are a given among conspiracy theorists who
stockpile ammo, bottled water and peanut butter. After
this week’s congressional hearing into the bailout of
American International Group Inc., you have to wonder if
those folks are crazy after all.

Wednesday’s hearing described a secretive group

deploying billions of dollars to favored banks, operating
with little oversight by the public or elected officials.

We’re talking about the Federal Reserve Bank of New

York, whose role as the most influential part of the federal-
reserve system -- apart from the matter of AIG’s bailout --
deserves further congressional scrutiny.

The New York Fed is in the hot seat for its decision in
November 2008 to buy out, for about $30 billion,
insurance contracts AIG sold on toxic debt securities to
banks, including Goldman Sachs Group Inc., Merrill Lynch
& Co., Societe Generale and Deutsche Bank AG, among
others. That decision, critics say, amounted to a back-door
bailout for the banks, which received 100 cents on the
dollar for contracts that would have been worth far less
had AIG been allowed to fail.

That move came a few weeks after the Federal Reserve

and Treasury Department propped up AIG in the wake of
Lehman Brothers Holdings Inc.’s own mid-September
bankruptcy filing.

Saving the System

Treasury Secretary Timothy Geithner was head of the New

York Fed at the time of the AIG moves. He maintained
during Wednesday’s hearing that the New York bank had
to buy the insurance contracts, known as credit default
swaps, to keep AIG from failing, which would have
threatened the financial system.

The hearing before the House Committee on Oversight

and Government Reform also focused on what many in
Congress believe was the New York Fed’s subsequent
attempt to cover up buyout details and who benefited.

By pursuing this line of inquiry, the hearing revealed some

of the inner workings of the New York Fed and the
outsized role it plays in banking. This insight is especially
valuable given that the New York Fed is a quasi-
governmental institution that isn’t subject to citizen
intrusions such as freedom of information requests, unlike
the Federal Reserve.

This impenetrability comes in handy since the bank is the

preferred vehicle for many of the Fed’s bailout programs.
It’s as though the New York Fed was a black-ops outfit for
the nation’s central bank.

Geithner’s Bosses

The New York Fed is one of 12 Federal Reserve Banks that

operate under the supervision of the Federal Reserve’s
board of governors, chaired by Ben Bernanke. Member-
bank presidents are appointed by nine-member boards,
who themselves are appointed largely by other bankers.

As Representative Marcy Kaptur told Geithner at the

hearing: “A lot of people think that the president of the
New York Fed works for the U.S. government. But in fact
you work for the private banks that elected you.”

And yet the New York Fed played an integral role in the
government’s bailout of banks, often receiving surprisingly
free rein to act as it saw fit.

Consider AIG. Let’s take Geithner at his word that a failure

to resolve the insurer’s default swaps would have led to
financial Armageddon. Given the stakes, you might think
Geithner would have coordinated actions with then-
Treasury Secretary Henry Paulson. Yet Paulson testified
that he wasn’t in the loop.

“I had no involvement at all, in the payment to the

counterparties, no involvement whatsoever,” Paulson said.

Bernanke’s Denials

Fed Chairman Bernanke also wasn’t involved. In a written

response to questions from Representative Darrell Issa,
Bernanke said he “was not directly involved in the
negotiations” with AIG’s counterparty banks.

You have to wonder then who really was in charge of our

nation’s financial future if AIG posed as grave a threat as
Geithner claimed.

Questions about the New York Fed’s accountability grew

after Geithner on Nov. 24, 2008, was named by then-
President- elect Barack Obama to be Treasury Secretary.
Geither said he recused himself from the bank’s day-to-
day activities, even though he never actually signed a
formal letter of recusal.

That left issues related to disclosures about the deal in the

hands of the bank’s lawyers and staff, rather than a top
executive. Those staffers didn’t want details of the swaps
purchase to become public.

New York Fed staff and outside lawyers from Davis Polk &
Wardell edited AIG communications to investors and
intervened with the Securities and Exchange Commission
to shield details about the buyout transactions, according
to a report by Issa.

That the New York Fed, a quasi-governmental body, was

able to push around the SEC, an executive-branch agency,
deserves a congressional hearing all by itself.

Later, when it became clear information would be

disclosed, New York Fed legal group staffer James Bergin
e-mailed colleagues saying: “I have to think this train is
probably going to leave the station soon and we need to
focus our efforts on explaining the story as best we can.
There were too many people involved in the deals -- too
many counterparties, too many lawyers and advisors, too
many people from AIG -- to keep a determined Congress
from the information.”

Think of the enormity of that statement. A staffer at a

body with little public accountability and that exists to
serve bankers is lamenting the inability to keep Congress
in the dark.

This belies the culture of secrecy obviously pervasive

within the New York Fed. Committee Chairman Edolphus
Towns noted during the hearing that the bank initially
refused to disclose even the names of other banks that
benefited from its actions, arguing this information would
somehow harm AIG.

‘Penchant for Secrecy’

“In fact, when the information was finally released, under

pressure from Congress, nothing happened,” Towns said.
“It had absolutely no effect on AIG’s business or financial
condition. But it did have an effect on the credibility of the
Federal Reserve, and it called into question the Fed’s
penchant for secrecy.”

Now, I’m not saying Congress should be meddling in

interest-rate decisions, or micro-managing bank
regulation. Nor do I think we should all don tin-foil hats
and start ranting about the Trilateral Commission.

Yet when unelected and unaccountable agencies pick

banking winners while trying to end-run Congress, even as
taxpayers are forced to lend, spend and guarantee about
$8 trillion to prop up the financial system, our collective
blood should boil.
(David Reilly is a Bloomberg News columnist. The opinions
expressed are his own.)
85,000 lose jobs in Dec.; US govt. could hire for
infrastructure, education, but chooses poverty
January 11, 8:34 PM LA County Nonpartisan Examiner Carl Herman
Previous
Comment Print Email RSS Subscribe

Subscribe
Top of Form
Get alerts when there is a new article from the LA County Nonpartisan Examiner. Read Examiner.com's terms of
use.

1
Bottom of Form

We hold these Truths to be self-evident...

Over four million Americans lost jobs in 2009, with

December adding 85,000 to this unnecessary economic
and social tragedy. Unemployment is falsely claimed at
10%; it doesn’t count those forced into part-time jobs and
those “discouraged” who do not regularly submit new job
applications. Including those categories is how
unemployment was measured in the Great Depression.
Adding those categories today puts unemployment at
22%; worse than all years of the Great Depression except
for 1932 and 1933 at 24.9% and 23.6%.
I wrote on this topic in November 2009, including statistics
of staggering US poverty, and the empty policy of only
symbolic help and rhetoric from government who could
end the financial crisis with relative ease, as I’ll explain. I’ll
continue to remind readers of the tragic-comedy of our
economy, manipulated and controlled by a few parasites
at the top, and the good news that our solutions are
structurally simple, with the creative power of American
workers, technology, and resources intact and ready to be
unleashed.

Fortunately, the structural solutions to our crisis are

simple to enact and obvious to understand:
 1. Over $1 trillion in annual public benefits from ending
banks creating bank credit as debt for our monetary
system, and enacting monetary reform for public-
created money for the direct payment of public
goods and services. This idea was supported by 86%
of teaching economic professors and many of
America's brightest historical minds. Nobel Prize-
winning economist Milton Friedman was among the
supporters, envisioning less inflation than our current
monetary system.
2. Paying our $12 trillion national debt easily and
without inflation as new money is created as the
banks’ ability to create credit from nothing is slowed.
The savings of the annual interest payment to
taxpayers is over $400 billion every year.
3. Full employment. The government becomes the
employer of last resort for infrastructure
improvement that returns more than the cost of the
projects, and thereby lowing prices.
4. 2% mortgages, 6% credit cards, 5% interest paid on
deposits from state-owned banks.
5. A Truth and Reconciliation process would have us
discover other areas of suppressed economic
breakthroughs, likely including pollution-free energy
generation.

As a professional teacher of economics, our experience is

that the above information is best communicated with a
visual aid, such as through the video Money as Debt in my
article on monetary reform and/or Zeitgeist Addendum.

Instead, we have economic policy that creates protected

parasites that collect unregulated and illegal gambling
profits on the way up (the FBI reported 80% of the
subprime mortgage fraud came from lenders), subsidized
losses through “bailouts” on the way down, and then
celebrate with unprecedented bonuses to themselves
while publicly claiming to be doing “God’s work.” Future
bailouts get guaranteed in advance without questions
while the symbolic program to help struggling
homeowners has not yet been launched.
Professional economists and journalists are voicing their
disgust in unprecedented harsh terms. A few examples:

MIT's Simon Johnson, former chief economist at the

International Monetary Fund, wrote in The Quiet Coup that
the US economy is managed by short-sighted oligarchs
typical of “banana republics.”

Chris Hedges and David Cay Johnston, with Pulitzers in

2002 and 2001 respectively, write that American
taxpayers are on the road to permanent serfdom under a
police state from oligarchs’ “rapacious looting” and their
purchase of a politically-protected luxurious lifestyle and
business style at the expense of the exploited slave-labor
class the American public has become (Hedges: "Resist or
Become Serfs" and Johnston: “Free Lunch”).

William Black, the senior government regulator of the S&L

crisis, who Economics Nobel Laureate George Akerlof
hailed as the world’s leading expert for understanding how
the banking and financial oligarchs loot the public, was
interviewed by 30+ Emmy-winning journalist Bill Moyers.
Black poignantly labeled the bailout as “criminal fraud”
and “the entire strategy is to keep people from getting the
fact,” and that the Bush and Obama Administrations are
blatantly breaking the law by refusing to enforce bank
insolvency laws. Transcript.

Former Assistant Secretary to the Treasurer and Wall

Street Journal Editor Paul Craig Roberts blasts government
disinformation on employment statistics, calling the US an
oligarchy ruled by banksters, with warmongers, war
criminals, and “whores” in government looting America
into serfdom.

Bank bailout overseer and Harvard law professor Elizabeth

Warren called the so-called “bailout” as “unaccountable”
by design, and created with conscious intent to reward
banks’ “reckless gambling” by having every intention to
always bail them out.
Renowned futurist Gerald Celente calls the transfer of
taxpayer wealth to “fascist oligarchs” as “financial rape”
and “mafia economics.”

Bestselling author John Perkins calls the US economy,

“corporatism” and “predatory capitalism.”

The US Senate called US banking practices the “new

Enron,” parasitizing $2-$4 trillion from Americans every
year (a staggering $20,000 to $40,000 per household on
average). Nobel Laureate Joseph Stiglitz and eminent
economist Jeffrey Sachs run the numbers of the current
so-called bailout plan and point out the unprecedented
transfer of wealth from taxpayers to oligarchs.

Catherine Austin Fitts, former Assistant Secretary of

Housing and Urban Development and President of Solari,
and Vladimir Yuri, author of one of the most
comprehensive and insightful economics papers I’ve read,
“Fractional Reserve Banking as Economic Parasitism: A
Scientific, Mathematical & Historical Expose, Critique, and
Manifesto,” write specifically in emphasis of parasitism
as the defining concept in modern US economics.

Importantly, despite the logic of monetary reform,

historical performance and agreement of our many of our
brightest minds, failure of our current system, so-called
“mainstream” media will not bring these ideas sharply into
focus. Indeed, evidence is strong that these very ideas are
suppressed by corporate media as a logical strategy of
financial oligarchs to remain undetected as parasites.

So there you have a summary of my contribution to a

brighter future in the creation of money, goods, and
services: economics. The crimes we endure are
transparent, the solutions obvious, the possibilities such
as suppressed energy breakthroughs are unimaginably
bright. I invite you to embrace our current disturbing
present and optimize your unique, beautiful and powerful
expressions to help build our bright future.
I leave you with PuppetGov’s 8-minute video, “America’s
controlled economic implosion.”

As always, please share this article with all who can

benefit. If you appreciate my work, please subscribe by
clicking under the article title (it’s free). Please use my
entire archive of work to help build a brighter future.

America's Controlled Economic Implosion from PuppetGov

on Vimeo.

More About: economics · politics

Top of Form
w w w .examiner.c 18425 Carl Herman LA County Nonpa January 11, 8:34

85,000 lose jobs 913269 Politics Los Angeles National

{ts '2010-01-12 0 110.37.39.57

Bottom of Form
ShareThis
Related Articles:
RedState's Morning Briefing for Tuesday, January 12, 2010
Sarah Palin says she is excited to join 'fair and balanced' Fox News network
Arizona SWAT raid victim faces no charges, plans to sue
If racist Reid was Republican, he’d be gone already
What are the best places to do the most good for gun rights?
Add a Comment
Top of Form
EX2289 EX2289 913269

Name:

1
Comments:

100
characters left

NOTE: Do Not Alter These Fields:

EX2289
Contact Email: Contact Email: Contact Url:
Subscribe to Blog: Remember my Info:
addcomment
Bottom of Form
Year in Review
What will you remember from 2009? See the Politics Year in Review.

New Year, New You

From battling the bulge to beating debt, Examiners guide you to success in 2010.

Popular Articles
A global warming food fight, Part 1
What are the best places to do the most good for gun rights?
Racist Republicans attack Hispanic Judge
RedState's Morning Briefing for Tuesday, January 12, 2010
U.S. military is liaising with extraterrestrial life according to independent
sources
Recent Articles
Pakistan: unlawful US drone war kills 140 innocent civilians for 1 CIA-alleged
terrorist
Friday, January 8, 2010
Pakistan’s government reported US drones killed only civilians in 39 of 44 attacks on
their country in 2009; with over 700 innocent civilians …
Afghan govt. demands arrest of US "death squad" who handcuffed, executed 8
children. US refuses
Thursday, January 7, 2010
Kai Eide, UN Representative to Afghanistan confirmed the Afghan government’s
investigative conclusions that US troops handcuffed and then …
All Articles »
The Economic Crisis And What Must Be Done
By Richard C. Cook

November 27, 2009 "Information Clearing House" --

The United States does not control its own destiny. Rather
it is controlled by an international financial elite, of which
the American branch works out of big New York banks like
J.P. Morgan Chase, Wall Street investment firms such as
Goldman Sachs, and the Federal Reserve System. They in
turn control the White House, Congress, the military, the
mass media, the intelligence agencies, both political
parties, the universities, etc. No one can rise to the top in
any of these institutions without the elite’s stamp of
approval.

This elite has been around since the nation began,

becoming increasingly dominant as the 19th century
progressed. A key date was passage of the National
Banking Act of 1863, when the system was put into place
whereby federal government debt was used to
collateralize bank lending. Since then we’ve paid the
freight through our taxes for bank control of the economy.
The final nails in the coffin came with the passage of the
Federal Reserve Act of 1913.

In 1929 the bankers plunged the nation into the Great

Depression by constricting the money supply. With
Franklin D. Roosevelt as president, the nation struggled
through the decade of the 1930s but did not pull out of the
Depression until the industrial explosion during World War
II.

After the war came the Golden Age of the U.S. economy,
when the working man, protected by strong labor unions,
became a true partner in the prosperity of the industrial
age. That era lasted a full generation. The bankers were
largely spectators as Americans led the world in exports,
standard of living, science and space exploration, and
every measure of health, longevity, and culture.

Roosevelt had kept the bankers subservient to the

interests of the economy at large. The Federal Reserve
was part of the New Deal team, and interest rates were
held at historic lows despite a large federal deficit. One
main impact was the huge increase in home ownership.
After World War II, the G.I. Bill allowed home ownership to
grow further and millions of veterans to attend college.
The influx of educated graduates led to productivity
growth and the emergence of new high-tech industries.

But the bankers were laying their plans. In the early 1950s
they got the government to agree to allow the Federal
Reserve to escape its subservience to the U.S. Treasury
Department and set interest rates on its own. Rates rose
throughout the 1950s and 1960s. By the time of the
interest rate hikes of 1968, the economy was slowing
down. Both federal budget and trade deficits were
beginning to replace the post-war surpluses. High interest
rates were the likely cause.

In 1971, President Richard Nixon removed the dollar’s gold

peg, allowing the huge inflation resulting from oil price
increases that the international bankers engineered
through control of U.S. foreign policy when Henry
Kissinger was national security adviser and secretary of
state. Nixon’s opening to China resulted in early
agreements, also overseen by banking interests, to begin
to transfer U.S. industry to overseas producers like China
which had cheap labor costs.

By the mid-1970s, the U.S. had been taken over by a

behind the scenes coup-d’etat that included events in
1963 when President John F. Kennedy was assassinated by
a conspiracy that could only have been instigated by the
highest levels of world financial control. In the election of
1976, David Rockefeller succeeded in placing fellow
Trilateral Commission member Jimmy Carter in the White
House, but Carter upset the banking community,
thoroughly Zionist in orientation, by working toward peace
in the Middle East and elsewhere.

I was working in the Carter White House in 1979-80.

Unbeknownst to the president, Federal Reserve Chairman
Paul Volcker, another Rockefeller protégé, suddenly raised
interest rates to fight the inflation the bankers had caused
by the OPEC oil price deals, and plunged the nation into
recession. Carter was made to look weak and uninformed
and was defeated in the election of 1980 by Republican
candidate Ronald Reagan. It was through the “Reagan
Revolution” that the regulatory controls over the banking
industry were lifted, mainly in allowing the banks to use
their fractional reserve privileges in making mortgage
loans.

Volcker’s recession shattered American manufacturing

and hastened the flight of jobs abroad. Under the “Reagan
Doctrine,” the U.S. military embarked on an
unprecedented mission of world conquest by attacking
one small nation at a time, starting with Nicaragua. Global
capitalism was also on the march, with the U.S. armed
forces its own private police force. With the invasion of
Iraq under George H.W. Bush in 1991, mainland Asia was
revealed as the principle target.

The economy was floated by productivity gains through

computer automation and a huge sell-off of assets through
the merger-acquisition bubble of the late 1980s which
ended in a recession. This resulted in the defeat of Bush
by Bill Clinton in the election of 1992. Clinton was able to
create another bubble through a strong dollar policy that
attracted foreign capital.

The dot-com bubble that resulted lasted all the way

through to the crash of December 2000. Meanwhile, the
U.S. Air Force led the way in the destruction of the
sovereign state of Yugoslavia, whereby the international
bankers took over the resource wealth of the entire Balkan
region, and the U.S. military gained forward bases for
further incursions into Asia.

Do we need to say that none of this was ever voted on by

the American electorate? But they bought into it
nevertheless, both with their silence and through
participation in a generally favorable job market in the
emerging service occupations, particularly finance.

By the time George W. Bush was inaugurated president in

January 2001, the U.S. was facing a disaster. $4 trillion in
wealth had vanished when the dot.com bubble collapsed.
NAFTA caused even more American manufacturing jobs to
disappear abroad. The Neocons who were moving into key
jobs in the Pentagon knew they would soon have new wars
to fight in the Middle East, with invasion plans for
Afghanistan and Iraq ready to be pulled off the shelf.

But the U.S. had no economic engine available to generate

the tax revenues Bush would need for the planned wars.
At this moment Chairman Alan Greenspan of the Federal
Reserve stepped in. Over a two year period from 2001-
2003 the Fed lowered interest rates by over 500 basis
points. Meanwhile, the federal government removed all
regulatory controls on mortgage lending, and the housing
bubble was on. $4 trillion in new home loans were pumped
into the economy, much of it through subprime loans
borrowers could not afford.

The Fed began to put on the brakes in 2003, but the

mighty work of re-floating a moribund economy had been
accomplished. By late 2006 another recession loomed, but
it would take two more years before the crisis of October
2008 brought the entire system down.

The impact on the job market was immediate and

profound. By the time Barack Obama was elected
president in November 2008, the U.S. was mired in
seemingly endless wars in Afghanistan and Iraq, and the
worst recession since the Great Depression was picking up
speed. In order to prevent total disaster, the Bush
administration ended its eight years of catastrophic
misrule with a flourish, by allocating over $700 billion in
financial system bailouts to cover the bad loans the banks
had been making since Greenspan gave the housing
bubble the green light.

It is now November 2009. Since Barack Obama was

inaugurated in January, unemployment has soared from
7.9 percent to 10.2 percent. A few hundred billion dollars
were allocated for “stimulus” purposes, but most of that
went to pay unemployment benefits and to keep state and
local governments from laying off more employees.

A fraction has been distributed for highway improvements,

but largely through the bank bailouts the federal deficit
has been running at an annual rate of $1.5 trillion, by far
the largest in history, with the national debt now topping
$12 trillion. Ironically, those Americans who still have
productive jobs continue to grow in efficiency, with
productivity up over five percent in the last year.

So much federal money has been spent that the Obama

administration has been struggling to make its health care
proposals budget-neutral through a raft of new taxes,
fees, and penalties, and by announcing in recent days that
the government’ first priority must now shift to deficit
reduction. The word “austerity” has been mentioned for
the first time since the Carter administration. Yet Congress
voted $655 billion in military expenditures to continue
fighting in the Middle East. A U.S. military attack on Iran,
possibly in conjunction with Israel, would surprise no one.

So where do we now stand?

At present, the Federal Reserve is trying to prevent a total

economic collapse. Interest rates are near-zero, to the
chagrin of foreign investors in U.S. Treasury securities,
and close to half of new Treasury debt instruments have
been bought by the Federal Reserve itself as a way of
providing free money for federal government
expenditures.

But the U.S. economy shows no signs of coming back, with

no economic driver emerging that could bring it back. For
all the talk about alternative energy, there has been no
significant growth of any home-grown industry that could
possibly make up so much lost ground in either the short
or the long-term.

The industries in the U.S. that are holding up are the

military, including arms exports, universities that are
attracting large numbers of students from abroad,
especially China, and health care, especially for the aging
baby boomer population. But the war industry produces
nothing with a long-term economic benefit, and health
care exists mainly to treat sick people, not produce
anything new.
None of this provides a foundation that can bring about a
restoration of prosperity to 300 million people when the
jobs of making articles of consumption are increasingly
scarce. On top of everything else, since government
inevitably looks to its own requirements first, the total tax
burden continues to increase to the point where the
average employee now pays close to 50 percent of his or
her income on taxes of all types, including federal and
state income taxes, real estate taxes, payroll taxes, excise
taxes, government fees, etc. Plus the cost of utilities
continues to rise steadily and threatens to skyrocket if
cap-and-trade legislation is passed.

The Obama administration has no plans to deal with any

of this. They have projected a budget for 15 years hence
that shows the budget deficit decreasing and tax revenues
going way up, but it is all lies. They have no roadmap for
getting us there and no plans for following the roadmap if
it portrayed a realistic goal. And yet the U.S. military is still
trying to conquer Asia. It is madness.

And it is madness because the big decisions are not made

by the U.S., by Congress, or by the Obama administration.
The U.S. has, for half-a-century, been marching to the
tune played by the international financial elite, and this
fact did not change with the election of 2008. The
financiers have put the people of this nation $57 trillion in
debt, according to the latest reports, counting debt at the
federal, state, business, and household levels. Interest
alone on this debt is over $3 trillion of a GDP of $14
trillion. Failure of our political leadership to deal with this
tragedy over the past three decades is nothing less than
treason.

But then again, at some point the decision was made that
the U.S. and its population would be discarded by history,
the economic status of the nation reduced to a shadow of
what it once was, but that its military machine would be
used for the financial elite’s takeover of the world until it is
replaced by that of some other nation. All indications are
that the next country up to bat as military enforcer for the
financiers is China.

There you have it. That, in my opinion, is the past,

present, and future of this nation in a nutshell. Great evils
have been done in the world in the last century, and there
is nothing anyone can do about it.

Except…. and that’s what each person caught up in these

travesties must decide. What are you going to do about it?

In mulling over this question, it would be wise to recognize

that the dominance of the financial elite has largely been
exercised through their control of the international
monetary system based on bank lending and government
debt. Therefore it’s through the monetary system that
change can and must be made.

The progressives are wrong to think the government

should go deeper in debt to create more jobs. This will just
create an even deeper hole of debt future generations will
have to crawl out of.

Rather the key is monetary reform, whether at the local or

national levels. People have lost control of their ability to
earn a living. But change could be accomplished through
sovereign control by people and nations of the monetary
means of exchange.

This control has been stolen. It is time to take it back. One

way would be for the federal government to make a relief
payment to each adult of $1,000 a month until the crisis
lifted. This money could be earmarked for goods and
services produced within the U.S. and used to capitalize a
new series of community development banks. I have
called this the “Cook Plan.”

The plan could be funded through direct payment from a

Treasury relief account without new taxes or government
borrowing. The payments would be balanced on the credit
side by GDP growth or be used by individuals to pay off
debt. It would be direct government spending as was done
with Greenbacks before and after the Civil War without
significant inflation.

Another method increasingly being used within the U.S.

today is local and regional credit clearing exchanges and
the use of local currencies or “scrip.” Use of such
currencies could be enhanced by legislation at the state
and federal levels allowing these currencies to be used for
payment of taxes and government fees as well as
payment of mortgages and other forms of bank debt. The
credit clearing exchanges could be organized as private
non-profit regional currency co-operatives similar to credit
unions.

These would be immediate emergency measures. In the

longer run, sovereign control of money and credit must be
returned to the public commons and treated as public
utilities. This does not mean exclusive government control
to replace bank control. As stated previously, it would be
done in partnership between government and private
trade exchanges. Nor does it mean government takeover
of business, industry, or the banking system, though all
should be regulated for the common good and fairly
taxed.

This program would lead to a new monetary paradigm

where money and credit would be available by, as, when,
and where needed, to facilitate trade between and among
legitimate producers of goods and services. In this way
trade and commerce will come to serve human freedom,
not diminish it as is done with today’s dysfunctional
partnership between big government trillions of dollars in
debt and big finance with the entire world in hock.

Such a change would be a true populist revolution.

Why Capitalism Fails
The man who saw the meltdown coming had another
troubling insight: it will happen again

By Stephen Mihm

September 14, 2009 "Boston Globe" -- Since the

global financial system started unraveling in dramatic
fashion two years ago, distinguished economists have
suffered a crisis of their own. Ivy League professors who
had trumpeted the dawn of a new era of stability have
scrambled to explain how, exactly, the worst financial
crisis since the Great Depression had ambushed their
entire profession.

Amid the hand-wringing and the self-flagellation, a few

more cerebral commentators started to speak about the
arrival of a "Minsky moment," and a growing number of
insiders began to warn of a coming "Minsky meltdown."

"Minsky" was shorthand for Hyman Minsky, a hitherto

obscure macroeconomist who died over a decade ago.
Many economists had never heard of him when the crisis
struck, and he remains a shadowy figure in the profession.
But lately he has begun emerging as perhaps the most
prescient big-picture thinker about what, exactly, we are
going through. A contrarian amid the conformity of
postwar America, an expert in the then-unfashionable
subfields of finance and crisis, Minsky was one economist
who saw what was coming. He predicted, decades ago,
almost exactly the kind of meltdown that recently
hammered the global economy.

In recent months Minsky's star has only risen. Nobel Prize-

winning economists talk about incorporating his insights,
and copies of his books are back in print and selling well.
He's gone from being a nearly forgotten figure to a key
player in the debate over how to fix the financial system.

But if Minsky was as right as he seems to have been, the

news is not exactly encouraging. He believed in
capitalism, but also believed it had almost a genetic
weakness. Modern finance, he

argued, was far from the stabilizing force that mainstream

economics portrayed: rather, it was a system that created
the illusion of stability while simultaneously creating the
conditions for an inevitable and dramatic collapse.

In other words, the one person who foresaw the crisis also
believed that our whole financial system contains the
seeds of its own destruction. "Instability," he wrote, "is an
inherent and inescapable flaw of capitalism."

Minsky's vision might have been dark, but he was not a

fatalist; he believed it was possible to craft policies that
could blunt the collateral damage caused by financial
crises. But with a growing number of economists eager to
declare the recession over, and the crisis itself apparently
behind us, these policies may prove as discomforting as
the theories that prompted them in the first place. Indeed,
as economists re-embrace Minsky's prophetic insights, it is
far from clear that they're ready to reckon with the full
implications of what he saw.

In an ideal world, a profession dedicated to the study of

capitalism would be as freewheeling and innovative as its
ostensible subject. But economics has often been subject
to powerful orthodoxies, and never more so than when
Minsky arrived on the scene.

That orthodoxy, born in the years after World War II, was
known as the neoclassical synthesis. The older belief in a
self-regulating, self-stabilizing free market had selectively
absorbed a few insights from John Maynard Keynes, the
great economist of the 1930s who wrote extensively of the
ways that capitalism might fail to maintain full
employment. Most economists still believed that free-
market capitalism was a fundamentally stable basis for an
economy, though thanks to Keynes, some now
acknowledged that government might under certain
circumstances play a role in keeping the economy - and
employment - on an even keel.

Economists like Paul Samuelson became the public face of

the new establishment; he and others at a handful of top
universities became deeply influential in Washington. In
theory, Minsky could have been an academic star in this
new establishment: Like Samuelson, he earned his
doctorate in economics at Harvard University, where he
studied with legendary Austrian economist Joseph
Schumpeter, as well as future Nobel laureate Wassily
Leontief.

But Minsky was cut from different cloth than many of the
other big names. The descendent of immigrants from
Minsk, in modern-day Belarus, Minsky was a red-diaper
baby, the son of Menshevik socialists. While most
economists spent the 1950s and 1960s toiling over
mathematical models, Minsky pursued research on
poverty, hardly the hottest subfield of economics. With
long, wild, white hair, Minsky was closer to the
counterculture than to mainstream economics. He was,
recalls the economist L. Randall Wray, a former student, a
"character."

So while his colleagues from graduate school went on to

win Nobel prizes and rise to the top of academia, Minsky
languished. He drifted from Brown to Berkeley and
eventually to Washington University. Indeed, many
economists weren't even aware of his work. One
assessment of Minsky published in 1997 simply noted that
his "work has not had a major influence in the
macroeconomic discussions of the last thirty years."

Yet he was busy. In addition to poverty, Minsky began to

delve into the field of finance, which despite its seeming
importance had no place in the theories formulated by
Samuelson and others. He also began to ask a simple, if
disturbing question: "Can ‘it' happen again?" - where "it"
was, like Harry Potter's nemesis Voldemort, the thing that
could not be named: the Great Depression.

In his writings, Minsky looked to his intellectual hero,

Keynes, arguably the greatest economist of the 20th
century. But where most economists drew a single,
simplistic lesson from Keynes - that government could
step in and micromanage the economy, smooth out the
business cycle, and keep things on an even keel - Minsky
had no interest in what he and a handful of other dissident
economists came to call "bastard Keynesianism."

Instead, Minsky drew his own, far darker, lessons from

Keynes's landmark writings, which dealt not only with the
problem of unemployment, but with money and banking.
Although Keynes had never stated this explicitly, Minsky
argued that Keynes's collective work amounted to a
powerful argument that capitalism was by its very nature
unstable and prone to collapse. Far from trending toward
some magical state of equilibrium, capitalism would
inevitably do the opposite. It would lurch over a cliff.

This insight bore the stamp of his advisor Joseph

Schumpeter, the noted Austrian economist now famous
for documenting capitalism's ceaseless process of
"creative destruction." But Minsky spent more time
thinking about destruction than creation. In doing so, he
formulated an intriguing theory: not only was capitalism
prone to collapse, he argued, it was precisely its periods of
economic stability that would set the stage for
monumental crises.

Minsky called his idea the "Financial Instability

Hypothesis." In the wake of a depression, he noted,
financial institutions are extraordinarily conservative, as
are businesses. With the borrowers and the lenders who
fuel the economy all steering clear of high-risk deals,
things go smoothly: loans are almost always paid on time,
businesses generally succeed, and everyone does well.
That success, however, inevitably encourages borrowers
and lenders to take on more risk in the reasonable hope of
making more money. As Minsky observed, "Success
breeds a disregard of the possibility of failure."

As people forget that failure is a possibility, a "euphoric

economy" eventually develops, fueled by the rise of far
riskier borrowers - what he called speculative borrowers,
those whose income would cover interest payments but
not the principal; and those he called "Ponzi borrowers,"
those whose income could cover neither, and could only
pay their bills by borrowing still further. As these latter
categories grew, the overall economy would shift from a
conservative but profitable environment to a much more
freewheeling system dominated by players whose survival
depended not on sound business plans, but on borrowed
money and freely available credit.

Once that kind of economy had developed, any panic

could wreck the market. The failure of a single firm, for
example, or the revelation of a staggering fraud could
trigger fear and a sudden, economy-wide attempt to shed
debt. This watershed moment - what was later dubbed the
"Minsky moment" - would create an environment deeply
inhospitable to all borrowers. The speculators and Ponzi
borrowers would collapse first, as they lost access to the
credit they needed to survive. Even the more stable
players might find themselves unable to pay their debt
without selling off assets; their forced sales would send
asset prices spiraling downward, and inevitably, the entire
rickety financial edifice would start to collapse. Businesses
would falter, and the crisis would spill over to the "real"
economy that depended on the now-collapsing financial
system.

From the 1960s onward, Minsky elaborated on this

hypothesis. At the time he believed that this shift was
already underway: postwar stability, financial innovation,
and the receding memory of the Great Depression were
gradually setting the stage for a crisis of epic proportions.
Most of what he had to say fell on deaf ears. The 1960s
were an era of solid growth, and although the economic
stagnation of the 1970s was a blow to mainstream neo-
Keynesian economics, it did not send policymakers
scurrying to Minsky. Instead, a new free market
fundamentalism took root: government was the problem,
not the solution.

Moreover, the new dogma coincided with a remarkable

era of stability. The period from the late 1980s onward has
been dubbed the "Great Moderation," a time of shallow
recessions and great resilience among most major
industrial economies. Things had never been more stable.
The likelihood that "it" could happen again now seemed
laughable.

Yet throughout this period, the financial system - not the

economy, but finance as an industry - was growing by
leaps and bounds. Minsky spent the last years of his life, in
the early 1990s, warning of the dangers of securitization
and other forms of financial innovation, but few
economists listened. Nor did they pay attention to
consumers' and companies' growing dependence on debt,
and the growing use of leverage within the financial
system.

By the end of the 20th century, the financial system that

Minsky had warned about had materialized, complete with
speculative borrowers, Ponzi borrowers, and precious few
of the conservative borrowers who were the bedrock of a
truly stable economy. Over decades, we really had
forgotten the meaning of risk. When storied financial firms
started to fall, sending shockwaves through the "real"
economy, his predictions started to look a lot like a road
map.

"This wasn't a Minsky moment," explains Randall Wray. "It

was a Minsky half-century."

Minsky is now all the rage. A year ago, an influential

Financial Times columnist confided to readers that
rereading Minsky's 1986 "masterpiece" - "Stabilizing an
Unstable Economy" - "helped clear my mind on this crisis."
Others joined the chorus. Earlier this year, two economic
heavyweights - Paul Krugman and Brad DeLong - both
tipped their hats to him in public forums. Indeed, the
Nobel Prize-winning Krugman titled one of the Robbins
lectures at the London School of Economics "The Night
They Re-read Minsky."

Today most economists, it's safe to say, are probably

reading Minsky for the first time, trying to fit his
unconventional insights into the theoretical scaffolding of
their profession. If Minsky were alive today, he would no
doubt applaud this belated acknowledgment, even if it has
come at a terrible cost. As he once wryly observed, "There
is nothing wrong with macroeconomics that another
depression [won't] cure."

But does Minsky's work offer us any practical help? If

capitalism is inherently self-destructive and unstable -
never mind that it produces inequality and unemployment,
as Keynes had observed - now what?

After spending his life warning of the perils of the

complacency that comes with stability - and having it fall
on deaf ears - Minsky was understandably pessimistic
about the ability to short-circuit the tragic cycle of boom
and bust. But he did believe that much could be done to
ameliorate the damage.

To prevent the Minsky moment from becoming a national

calamity, part of his solution (which was shared with other
economists) was to have the Federal Reserve - what he
liked to call the "Big Bank" - step into the breach and act
as a lender of last resort to firms under siege. By throwing
lines of liquidity to foundering firms, the Federal Reserve
could break the cycle and stabilize the financial system. It
failed to do so during the Great Depression, when it stood
by and let a banking crisis spiral out of control. This time,
under the leadership of Ben Bernanke - like Minsky, a
scholar of the Depression - it took a very different
approach, becoming a lender of last resort to everything
from hedge funds to investment banks to money market
funds.

Minsky's other solution, however, was considerably more

radical and less palatable politically. The preferred
mainstream tactic for pulling the economy out of a crisis
was - and is - based on the Keynesian notion of "priming
the pump" by sending money that will employ lots of high-
skilled, unionized labor - by building a new high-speed
train line, for example.
Minsky, however, argued for a "bubble-up" approach,
sending money to the poor and unskilled first. The
government - or what he liked to call "Big Government" -
should become the "employer of last resort," he said,
offering a job to anyone who wanted one at a set
minimum wage. It would be paid to workers who would
supply child care, clean streets, and provide services that
would give taxpayers a visible return on their dollars. In
being available to everyone, it would be even more
ambitious than the New Deal, sharply reducing the welfare
rolls by guaranteeing a job for anyone who was able to
work. Such a program would not only help the poor and
unskilled, he believed, but would put a floor beneath
everyone else's wages too, preventing salaries of more
skilled workers from falling too precipitously, and sending
benefits up the socioeconomic ladder.

While economists may be acknowledging some of Minsky's

points on financial instability, it's safe to say that even
liberal policymakers are still a long way from thinking
about such an expanded role for the American
government. If nothing else, an expensive full-
employment program would veer far too close to socialism
for the comfort of politicians. For his part, Wray thinks that
the critics are apt to misunderstand Minsky. "He saw these
ideas as perfectly consistent with capitalism," says Wray.
"They would make capitalism better."

But not perfect. Indeed, if there's anything to be drawn

from Minsky's collected work, it's that perfection, like
stability and equilibrium, are mirages. Minsky did not
share his profession's quaint belief that everything could
be reduced to a tidy model, or a pat theory. His was a kind
of existential economics: capitalism, like life itself, is
difficult, even tragic. "There is no simple answer to the
problems of our capitalism," wrote Minsky. "There is no
solution that can be transformed into a catchy phrase and
carried on banners."

It's a sentiment that may limit the extent to which Minsky

becomes part of any new orthodoxy. But that's probably
how he would have preferred it, believes liberal economist
James Galbraith. "I think he would resist being
domesticated," says Galbraith. "He spent his career in
professional isolation."

Stephen Mihm is a history professor at the University of

Georgia and author of "A Nation of Counterfeiters"
(Harvard, 2007).

© 2009 The Boston Globe

The Creeping Financial Lock-Up

By Jeff Snyder

August 12, 2009 "Lew Rockwell" -- J.H. Huebert had an excellent

article last Friday about the US attempts to force the Swiss bank,
UBS, to divulge information about US account holders to the IRS.
These efforts are nothing less than an attack on Switzerland’s
sovereignty in the form of its ability to establish and maintain its
own banking laws.
This is the kind of arcane financial news that is easy to disregard.
When people hear "Swiss bank accounts," they may brush off the
attacks as the problems of the ultra rich. If only we were so
"unfortunate" to have this kind of problem to worry about, right?
Unfortunately, however, I think we do. I believe that there is far
more to this than a temporary, one-time money grab by the IRS
from tax evaders. I believe this is also very bad news even for us
"wage slaves."
The day Mr. Huebert’s article appeared, the Justice Department
announced that the US and Switzerland had reached an
agreement in principle to settle the US lawsuit against UBS AG
seeking the names of 52,000 account holders. No details of the
agreement were released but, given the amount of leverage that
the US can bring to bear on UBS’s operations in the United States,
it would be astounding if UBS had not agreed to some major
accommodation to US demands.
Let’s go back and supply a little context about how we get to this
issue in the first place.
Like most countries, the US taxes its residents on income that they
earn outside of the US. Unlike most countries, the US also taxes
its nonresident citizens on their worldwide income. Solely by virtue
of being born here, the US claims lifelong rights to your earning
stream even if you take up permanent residency in another
country. As a result, the US is constantly seeking ways, through
treaties, laws or, now we see, international strong arm measures,
to track the international financial transactions of its citizens,
whether in the name of preventing drug trafficking, money
laundering, tax evasion or other crimes.
US taxpayers are required to report, and pay taxes, on interest or
other earnings derived from foreign accounts. Unlike US banks,
which will send you and the IRS a Form 1099 each year, foreign
banks do not have an obligation to report your earnings to the IRS.
Accordingly, the IRS is keenly interested in finding out from you
whether or not you have any such foreign accounts.
Schedule B to Form 1040 (used for reporting interest and
dividends) asks, "At any time during (the previous year), did you
have an interest in or a signatory or other authority over a financial
account in a foreign country, such as a bank account, securities
account, or other financial account?" As described by the law firm
of Bove & Langa in an on-line article about this matter, the answer
to this question has serious potential consequences:
The question calls for nothing more than checking a "yes" or "no"
box in response, but most taxpayers (and many tax preparers) just
ignore it. The yes box or the no box, that’s it. There are no boxes
that say, "maybe" or "I don’t understand the question," or "I decline
to answer on the grounds that an answer may incriminate me."
Maybe there should be such choices, since there are many who do
not fully understand the serious implications of ignoring the
question when such an account exists, or worse, of intentionally
providing an incorrect answer, which, surprisingly, may include no
answer at all. That is to say, intentionally leaving both boxes blank
could be deemed a false answer by the IRS or a court."
In addition to this reporting obligation on Form 1040, a U.S. citizen,
resident alien and even certain persons who are not resident but
are doing business in the US with no other connection are also
required, by the Bank Secrecy Act, to report the existence of a
foreign account to the IRS on Treasury Department Form 90-22.1
if the combined total value of all such accounts exceeds $10,000
at any time during the year. The definition of the type of accounts
that must be reported is very broad and includes even prepaid
credit card and debit card accounts. The report must be filed even
if the accounts generate no interest or other taxable income. As
described by Bove & Langa, the penalties for a willful failure are
quite severe:
"[t]he civil penalties for failing to report the account on the
prescribed form . . . can range from up to $10,000 for a "non-
willful" failure, and for a willful failure the greater of $100,000 or
half the balance in the foreign account. [emphasis supplied.] If
criminal activities are involved, the monetary penalties are
increased and may be accompanied by possible imprisonment for
up to ten years.[footnote omitted] . . . [F]ailure to maintain
adequate records of the foreign account may result in additional
civil and criminal penalties. The IRS states that records should be
kept for five years."
As Mr. Huebert pointed out, while the IRS is seeking information
about approximately some $20 billion in UBS accounts, because of
the possibility that most people with these accounts may have
been accurately reporting all earnings and paying all applicable
income taxes on those earnings, it is possible that the IRS will not
obtain all that much money, especially when judged against the
current federal deficit. However, since the intentional failure to
report an account can result in loss of one-half of the entire
account, the IRS does indeed have a very strong financial
motivation to obtain the UBS information, because even a
relatively small number of noncompliant taxpayers with very large
foreign accounts could generate sizable revenues. The threat of
this penalty alone will give the IRS considerable leverage for
nonreporting taxpayers to settle somewhere between the penalties
for unintentional and intentional failure, likely resulting in
considerable tax revenues from persons who honestly didn’t know
they were violating the law.
More importantly, the IRS’s highly visible targeting of the
"establishment" Swiss banking system will likely garner much
greater future compliance with these reporting obligations, so that
the IRS and US government will likely obtain detailed information
about many more foreign accounts from people who have either
intentionally hidden these accounts or who just want to "play it
safe." In this regard, please note that TDF-90-22.1 requires the
reporting individual to provide the account number of the account
itself, as well as the names of the account holders and name and
address of the financial institution, thus providing all the
information necessary to enable the governmental to file tax liens,
seek the freezing of accounts or other enforcement actions
available to it under tax treaties or applicable foreign laws.
Still, it is very likely that these consequences will fall predominantly
upon very high-income taxpayers. Unfortunately, the US strong
arm tactics to compel foreign banks to disclose US account
holders’ information are having an additional, and more disturbing
effect on a far greater number of people, and one that is quite
possibly also intended by our lords and masters. And that is this: to
make it extremely difficult for Americans to have accounts abroad,
and therefore to prevent both the safeguarding of wealth outside
the United States and living outside of the United States.
According to this Forbes article, Americans are fast becoming
pariahs of foreign banks. Because of US demands and pressures,
foreign banks in countries around the world are deciding to close
Americans' accounts, or are not permitting Americans to open new
ones. In some cases, the banks are not terminating or rejecting
new applications for just securities or investment accounts, but
also current accounts, i.e., the standard checking accounts people
use for their living expenses. In other words, the US is making it
more difficult for you to live in another country, by creating
international difficulties that, in the end, will seriously obstruct your
ability to conduct everyday financial transactions in a foreign
country. By creating high costs for foreign banks to permit US
citizens to open and maintain even checking and savings accounts
in foreign countries, US citizens will be unable to have the normal
banking services they need to live in a foreign country, and will not
be able to do things like pay rent, utilities, travel on public
transportation and buy groceries.
Possibly the most unequivocal sign that distinguishes a totalitarian
system from a relatively free society is the simple right to leave. In
totalitarian societies, the "iron curtain" falls, and "citizens" are not
free to leave. The people and their assets are effectively property
of the state. They, and everything they produce, are "human
resources" that belong to the government. The "citizens" are more
accurately described as prisoners confined within their national
borders.
The US government’s attacks on foreign financial institutions are
one more means by which the US is slowly establishing controls
that will prevent the populace from escaping their indentured
servant status here, or just escaping, period. One of the effects of
these attacks will be, to some extent, to lock American assets into
American banks and keep funds here, onshore, where they are
readily controllable, seizable and debasable. These attacks are a
way of closing the borders, are the makings of a banking "Berlin
Wall."
Slowly and methodically, we are being locked in. gust 11, 2009
Jeff Snyder [send him mail] is an attorney who works in
Manhattan. He is the author of Nation of Cowards – Essays on the
Ethics of Gun Control, which examines the American character as
revealed by the gun control debate. He occasionally blogs at The
Shining Wire. Read this interview with him.
Copyright © 2009 by LewRockwell.com
The Bastards Never Die
By Joe Bageant
(With Running Commentary by Screaming Man)
August 04, 2009 "Joe Bageant" -- Well, for starters,
the above title is a damned lie, since this little screed is
not a history. It's just rumination on the tilting point at
which Americans started the slide into the deepest sort of
cultivated consumer consciousness -- which is to say our
corporate managed engorgement and swinedom at the
service of the rich.
Very rich families and corporatists, to whom, as in earlier
articles, we shall refer to as "the bastards," have always
been with us. Even Tom Jefferson thought periodic
revolution against wealth and authority was desirable to
keep these bastards in check. Which implies that he
figured they would inevitably get us by the throat down on
the floor from time to time.
But the bastards scared the hell out of later presidents
too. Abe Lincoln feared the large corporations born of
business profiteering during the U.S. Civil War -- the
military industrial complex of the day -- easily constituted
the greatest threat to the American republic. Being
president and all, he couldn't call them what they were,
and settled for the term "money power," and predicted
that, "money power will … work upon the prejudices of the
people until all wealth is aggregated in a few hands and
the Republic is destroyed."
And as everyone knows, Dwight Eisenhower famously
feared the same military-industrial complex was busy
taking over the nation. What we never hear about though,
is that Eisenhower's definition of the complex included
among the bastards, not only the military defense industry
corporations, but also right alongside them the news
media and the university and private research
establishments.
If nothing else can be said for the bastards, we must admit
they do plan far ahead, (or seemed to anyway, before the
latest meltdown) even if only to screw us blind, which is
usually the case. Since the early robber baron era of John
D. Rockefeller's Standard Oil, just after the turn of the
century, the bastards understood that the key to national
domination was oil -- creating an economic culture based
on petroleum -- and planned toward that end. Big corps su
ch as E.I. DuPont had invested heavily in the oil industry
since the turn of the century, and especially since the
1930s creating synthetic materials such as plastics, in
which the public was decidedly uninterested in buying.
Then World War II came along, creating big demand for
synthetics such as nylon for parachutes, tires, tents,
ropes. DuPont and similar bastards had drawn a royal
flush.
SCREAMING MAN HERE!: RIGHT! IT'S THE ONLY SURE
RACKET. ASK ICE MAN CHENEY. YOU MAKE STUFF, SELL IT
TO THE PENTAGON MOB AND RAM THE PRICE CLEAR UP
THEIR ASSES. THEN THEY BLOW THE STUFF UP,
INCENERATE IT, AND COME BACK FOR MORE AT DOUBLE
THE PRICE BECAUSE NOW THERE'S A SHORTAGE! FOR A
FAST DEPENDABLE BUCK, YOU CAN'T BEAT INDUSTRIAL
SCALE WARFARE WITH A GODDAMNED STICK!
(Ahem!)
Unfortunately all good things end, no matter how bloody
profitable. But those super-expanded wartime
corporations that had cranked out planes and tanks were
not going to downsize just because we had run out of
Dresdens to bomb. They intended to remain dominant and
even expand. With the war drawing to a close, and with
fewer burning jeep tires on the battlefields and fewer
parachutes left dangling in the trees of Belgium, American
citizens were going to have to eat the slack. The bastards
would have to stuff'em fuller than a Christmas goose; ma
ke them eat petroleum based synthetics, if it came down
to that. Which it eventually did of course, in the form of
petrochemical agriculture, food dyes, etc.
SCREAMING MAN: YOU GOTTA A FUCKING PROBLEM WITH
NUMBER TWO RED DYE OR SOMETHING, ASSHOLE? DON'T
BULLSHIT THESE PEOPLE, YOU FLAMING OLD FRAUD! I'VE
SEEN YOU EAT A WHOLE BOX OF PINK HO-HOS BEHIND A
BOTTLE OF JAY DEE AND SOME COLUMBIAN BUD! AM I
GONNA HAVE TO TAKE MY NEEDLE NOSED PLIERS TO
YOUR LYING ASS?
Plastics, heralded as durable and everlasting (and today
lamented for the same reason) eventually gobbled up
nearly every other material market, in the from of jewelry,
dashboards, dishes, clothing, napkin rings, perfume
bottles, knickknacks, flooring and carpeting, resin building
materials, vinyl raincoats and boots, molded furniture,
radio sets … America was remade in the image of open
chain hydrocarbons. That nine tenths of what was
produced and marketed was unnecessary, and downright
shitty did not go unnoticed by the American public, which
had been deeply distrustful of plastics and synthetics from
the time they were first ballyhooed at the 1933 Chicago
World's Fair. People were just not buying the sales job. But
the combination of wartime shortage frustrations and
massive industrial public relations delivered the one-two
punch, and the consumer knuckled under. Or perhaps
they were just worn down by indu stry PR, which enlisted
the help of trusted figures such as Frank Capra and Walt
Disney, among others, along with in-school industry
propaganda for the next generation: "Our story of the
miracle of plastics starts with an oil well in a faraway place
by the Persian Gulf … "
AND IT GODDAMNED WELL IS GONNA END THERE TOO! IN
ABOUT 15 MINUTES, IF IT HASN'T ALREADY! DOES
ANYBODY REALIZE THE NUMBER OF SARAH PALIN BLOW-
UP DOLLS SHIPPED TO THE TROOPS IN IRAQ? IF THAT'S
THE KIND OF ARMY WE'RE SENDING TO KILL OFF THE
PALM VERMIN, THEN WE'RE GONERS ALREADY!
As I was saying, the bastards not only created an economy
by and for themselves, based on the black sticky stuff,
they also built a civilization. From the tallest building right
down to the petrochemical soaked dirt in which the food
supply is grown, and all along the chain through
processing and plastic packaging and distribution, The
black stuff was cheap and it was plentiful, so long as the
bastards were willing to buy off the top dog sheiks like ibn
Saud, who would in turn keep the dusky peasantry in line
through good old perennials such as beheadings and
public stonings.
SCREAMING MAN MISSES THOSE POST 9/11 BEHEADING
VIDEOS, DON'T YOU? IT WAS SO EASY TO TELL WHO
AMERICA'S ENEMIES WERE THEN. BUT AT LEAST WE'VE
STILL GOT BEN BERNANKE AND BILL GATES.
During the 1940s AND '50S while ibn Saud was fathering
some 60 children by 22 wives in Arabia and dishing out
corporeal punishment to the far flung wretches of his
kingdom, here at home the corporations were doing their
own hit jobs on the this nation's peasantry -- the farmers.
Petroleum based synthetics, with legislative help, wiped
out one quarter of the domestic cotton market in the first
few years following the war, along with flax for linen, and
hemp fiber, replacing them with ugly but profitable
synthetic nylon and polymer textiles. Not to mention
replacement of literally hundreds of farm produced natural
organic materials for medicines, cosmetics, milk by
products such as casein for glues and paints, with
synthetic petro-based commodities, all of which were
mercilessly hammered into the populace as "miracles of
modern science."
Kings may croak, but cash lives forever
The fact that the bastards were corporate entities made
them more powerful than any robber baron's best wet
dream, because their power and reach extended beyond
human mortality. Deathless corporations and trusts
replaced the mortal thieves such as Rockefeller and
Morgan; and despite the advent of income taxes, capital
continued to aggregate in the bastards' coffers,
particularly financial bastards, at what was seen then as
an unimaginable scale. "Money for nothin' and chicks for
free ..."
Powered entirely by balance sheets, and existing for the
sole le purpose of wealth accumulation, parting with any
assets was antithetical to their very purpose. Not to
mention the logic of the wealth based stockholders. The
majority of assets were held by elite, whose main
accomplishment was then and still is coming from families
that commandeered some substantial portion of the public
medium of exchange in order to derive more wealth.
WHOA THERE FATSO! WHOSE FAMILY ARE WE TALKING
ABOUT HERE? PARIS HILTON'S? OR MAYBE ALICE
WALTON'S? PARIS HILTON HAS EARNED EVERY JEWEL
ENCRUSTED THONG IN HER CLOSET! FROM TUSH TO
TITTIES, WE'VE SEEN EVERYTHING PARIS HILTON HAS TO
OFFER. AND IT'S WORTH A FEW BILLION TO KEEP HER IN
CIRCULATION. GIVES THE MEN OF THIS MISERABLE
WORKHOUSE NATION SOMETHING TO BELIEVE IN.
SOMETHING TANGIBLE. SOMETHING THEY CAN ACTUALLY
SEE AND WHACK OFF TO. HER DIRTY FLICK, "1 NIGHT IN
PARIS" WAS A GIFT TO ALL MANKIND. LET THE LESBIANS
FIND THEIR OWN PARIS HILTON … BUT ALICE WALTON?
SCREAMING MAN WOULDN'T FUCK HER WITH YOUR
WHANG, BUSTER! THAT MISERABLE DRUNKEN BITCH RAN
DOWN AND KILLED A FIFTY YEAR OLD WOMAN IN TEXAS.
WHAT'D SHE GET? A $925 FINE! SHE HAS 20 BILLION
DOLLARS AND GETS OFF FOR LESS THAN A THOU. AND
WHAT DOES ALICE GIVE US? CHINK MADE FLIPFLOPS AND
GODDAMNED PLASTIC PATIO CHAIR S THAT BUCKLE LIKE
OBAMA AT A BAILOUT PARTY! GIVE THE SCREAMING MAN
PARIS HILTON ANY DAY. NOW, FATSO … YOU WERE
SAYING?
Hell, I can't remember. Oh yes, the bastards. Once you are
born into the Royal Court of the Kingdom of Bastardy and
are issued your caviar spoon, no further effort is required
to amass capital. You simply keep on withholding capital
from those who had create it -- the working masses --
keep captive the economic lifeblood upon which all others
depend. Observe, for instance, the banking industry's
present refusal to unass any money for credit, despite the
hundreds of billions handed to them as a taxpayers' gift, a
bailout AFTER they'd ripped off their shareholders and
customers, and looted their own institutions from the
inside.
UPSET ARE YOU, FATSO? LET THE SCREAMER TELL YOU
HOW IT REALLY IS. IT WAS ALL AN ACT. THE FED WAS JUST
PRINTING AND HANDING OUT WORTHLESS WALLPAPER --
WHICH THE BANKING BASTARDS, WITH ALL DUE APLOMB,
WILL PAY BACK IN KIND. THEN THE BASTARDS WILL BE
DECLARED SOLVENT, FAT AND HEALTHY AS A BUNCH OF
PARK BEARS. MEANWHILE, YOU GODDAMNED PEASANTS
WILL CONTINUE TO ANGUISH OVER THE BAILOUTS LONG
AFTER THE REAL RIP-OFF IS IN. THE ONE YOU NEVER SAW
AND CAN'T EVEN WRAP YOUR SORRY POINTED FUCKING
HEADS AROUND. THE REAL DOUGH IS SPREAD ACROSS
DUBAI, MONACO, LONDON, AND FOR SAFETY'S SAKE,
BEIJING. WHILE YOU ANGUISH, PAT E OF UNBORN VEAL
CALF IS BEING SERVED TO THE REAL BASTARDS UP ON
THE 50th FLOOR. THEY POUR ANOTHER GLASS OF 1999
PERRIER-JOUET, AND CHORTLE AT THE DISMEMBERMENT
OF A NO-TALENT HACK LIKE BERNIE MADOFF. THAT
HAPLESS SMALLTIME JEW GREASEBALL WHO CAME INTO
THE GAME WITH $5,000 IN PENNY STOCKS THAT HE
BOUGHT WITH MONEY HE MADE INSTALLING SPRINKLERS.
NEVER A REAL PLAYER LIKE US, EVEN WITH HIS BULLSHIT
WALL STREET TITLES. JUST A DUMB FUCK FROM QUEENS
WHO DIDN'T KNOW WHEN TO QUIT A SCAM. LET THE
SERFS GNAW AT HIM. KEEPS 'EM BUSY AND OUT OF OUR
HAIR. LOOK, THEY'VE PULLED ONE OF HIS ARMS OUT OF
ITS SOCKET. CHRIST, NOW THEY'VE RUINED LUNCH."
THAT'S WHAT'S REALLY GOING ON, FATSO.
The bastards. Why have they lasted this long? Purely on
their own merits, most American corporations probably
would not have survived the 1930s. By then our wildly
fluctuating economy was already demonstrating the folly
of overly concentrated capital and power. What was
needed, said the big players who'd wrecked the economy
with their uncontrolled speculation and greed, was, lo and
beshit, a controlled economy! One even more controlled
by corporations. Problem was, the only entity capable of
such control was the government. And unfortunately, the
Constitution of the United States was founded on a
separation of business and state to the same degree as
that of church and state.
If the bastards were to run the economy, if Americans
were going to be pistol whipped down the road to
"prosperity through unprecedented consumption," then
government authority by Constitutional law would be
necessary. As a 1937 shareholder's report of the E.I.
DuPont Company "the revenue-raising power of
government [taxation] must be converted into "an
instrument for forcing acceptance of sudden new ideas"
and a "social reorganization." Uh oh! Just whose sudden
new ideas? And what kind of social reorganization?
The report stated bluntly that to realize further extensive
profit from its wartime investments, the U.S. government
"must be the primary tool." While their plans to use the
government were put into the shareholder's report, they
were never publicly discussed.
FDR saves the bastards' bacon
The chance to pull it off came ironically or maybe not so
ironically, with Roosevelt's New Deal. FDR was, contrary to
the subsequent hagiography that has grown up around his
grave, was first and foremost a capitalist and was
determined to save capitalism. Given his affluent
background and times, he, like everyone else, could not
imagine anything but capitalism as the nation's economic
system. Yet nowhere in the Constitution is capitalism
specified as America's preferred economic system. His
lifelong circle of fr iends and associates consisted entirely
of the elites of family and corporate wealth, which meant
that it also included some of his enemies. But together
they created a host of "emergency legislation," in much
the same fashion as 911 let George W. Bush get away
with so much under the excuse of a national threat. Even
allowing for the resistance of some wealthy elites, FDR
favored the bastards' plans toward a thoroughly
corporatized national economy.
The Supreme Court, however, a stickler for details such as
the U.S. Constitution, did not see things Roosy's way. It
would take a rewriting of the U.S. Constitution for the
government to crawl into bed with the corporations. So
every piece of legislation FDR and his cohorts created got
snagged in Supreme Court and just kept piling up.
The key for FDR and the Princes of Bastardy turned out to
be taxation. To control society means to control individual
behavior. The Constitution prohibits that, except for those
few powers granted in the Constitution, such as the
coinage of money or declaring war. Throughout the 1930s
the public watched FDR and the corporatists duke it out
with the Supreme Court. While the public was engaged in
the debate over FDR's threatened stacking of the court,
FDR and the bastards managed to accomplish their
agenda in controlling opposing social behavior -- taxing it
to death. The government is granted the power to tax by
god! And=2 0the Roosevelt era saw the art of behavior
modification through taxation perfected.
Now in changing American social behavior through
taxation there are two rules. The first tax must be a very
logical one. And the second must be one created of whole
cloth, a manufactured one to counter a manufactured
threat. So after the Supreme Court knuckled under to
FDR's threat to divide up the judicial limelight by
appointing more justices, a more compliant court happily
passed a $200 tax on machine guns -- the equivalent of
$3,000 today -- the same tax, incidentally, that allowed
the ATF (Alcohol, Tobacco and Firearms division) and the
FBI to invade the Branch Davidians at Waco. It was
unconstitutional as hell. But the court understood public
relations. What kind of deranged fucker needed a machine
gun anyway? Well, there was There was John Dillinger
(whose penis was 14 inches long, according to folk legend
of the day, which was either threatening, or vastly
intriguing, depending upon one's sex or moral perspective
on life). There was Seymour "Blue Jaws" Magoon, Bonnie
and Clyde, Pittsburg Phil, Baby Face Nelson, Al Capone,
Bummy Davis. And if there was any further doubt, there
was also the fact that the members of Murder
Incorporated were Jewish, Italian or Irish. Ah ha! More
proof to the then-majority Anglo Americans of naked
immigrant depravity. So two hundred bucks per tommy
gun it would be under the 1937 Machine Gun Tax Act.
The second tax the court upheld was the 1937 Marijuana
Tax Act. Most Americans had never heard the word
marijuana. The tax act had adopted a little known Mexican
street term as a name in order to demonize it, and
differentiate it from the thousands of acres of government
hemp being grown for naval ropes, etc. Never mind that in
the entire previous year only a couple of pounds of the
stuff were seized by border police. A $200 an ounce tax
had worked on machine guns, so a $200 tax per ounce
was placed on hemp cultivation without permit, and no
permits were issued. And so as an added bonus -- or
maybe intentionally -- the synthetic fiber industry and the
plastics industry saw its most threatening long term
competitor, hemp, eliminated.
And for the first time in the history of the United States
the bastards could use the government to tell farmers
what seeds they could put into the earth. In short order by
way of the New Deal, through various agricultural acts,
corporatists, through government policy, had control over
the land even though they did not own it. The chief
competitors to industrial food giants and synthetics
industry, the small farmer producers of thousands of
natural goods and raw materials, were eventually taxed or
regulated out of existence. At the same time, subsidies for
big-time agri-biz producers started snowballing. A nation
of consumers of synthetics was cultivated in the next
generation. The result we see around us,20obese
Americans willingly wearing the bastards' brands on
acrylic clothing … and guzzling synthetic soft drinks,
Americans who've never once considered that the pizza
crusts they gnaw at start out with a grain crop called
wheat.
Ten thousand years of agriculture was synthesized into
money. The soil-to-city chain of small farms, villages, and
towns to the great city markets was destroyed. Those ever
more profitable compressed gobs of humanity in the cities
and suburbs could be cultivated for maximum productivity
and profit as the bastards increased their domination of
the needs hierarchy. If you made a movie of this,
swapping out the humans for some sort of large intelligent
rodent or insect, and left everything else as it really is in
American life, people would call it chilling science fiction.
Long story short: The bastards won.
This distillation of how they won, this little piece of feral
scholarship, is sure to be disputed by hairsplitting
pinheads in political science and history departments. The
"Oh but …" crowd. Which is OK with me. Everybody needs
a job, I suppose. But that's the view from here in the
cheap seats among the non-players, the fuckees in the
great fuck-the-proles game of bastard politics and ever
bigger money. Call this a pulp comic summary of post war
history. It's not a very damned funny history. Maybe that's
why we cho ose not to remember it. Here in the United
States of Amnesia. We cannot retain what happened last
week, much less history. But I'm trying here folks. I really
am.
SCREAMING MAN: BULLSHIT FOLKS! DON'T BELIEVE A
WORD FROM THIS GODDAMNED BEER SOAKED, REDNECK
WHO CAN'T SPELL AND THINKS HE'S A GENIUS BECAUSE
HE KNOWS HOW TO BRING UP WIKIPEDIA ON HIS
BROWSER. IF AND WHEN HE'S SOBER ENOUGH. THE
SCREAMING MAN HAS BEEN TRAPPED INSIDE BAGEANT'S
BLOATED, DISEASED CARCASS FOR SIXTY TWO YEARS,
AND THE SCREAMER CAN TELL YA THIS: IF BRAINS WERE
DYNAMITE BAGEANT WOULDN'T HAVE ENOUGH POWER
TO BLOW OFF A GOOD FART. YOU'VE JUST WASTED
TWENTY FUCKING MINUTES OF COMPANY TIME. NOW GO
TAKE UP SOMETHING USEFUL, LIKE NARCOTICS. FOR
CHRISSAKE GET A LIFE!
Goldman Sachs Posts Record Profits

Matt Taibbi Probes Role of Investment

Giant in US Financial Meltdown
By Democracy Now

Broadcast July 15, 2009

Goldman Sachs, the nation’s most powerful financial company, has reported the
richest quarterly profit in its 140-year history: $3.44 billion between April and June.
Goldman’s record profits come just one month after it repaid $10 billion of TARP
money to the US Treasury, freeing itself from restrictions on year-end bonuses. We
speak to Matt Taibbi, whose new Rolling Stone article argues that “Goldman Sachs
has engineered every major market manipulation since the Great Depression.”

Real Video Stream - Real Audio Stream -

MP3 Download

TRANSCRIPT:
AMY GOODMAN: We turn now to the situation right down the street here, on Wall
Street. While the US deficit topped one trillion dollars for the first time in the nation’s
history, the blowout bonuses are back on Wall Street. Well, not all of Wall Street, just
at Goldman Sachs, the nation’s most powerful financial company, which reported the
richest quarterly profit in its 140-year history: $3.44 billion between April and June.

Goldman Sachs announced Tuesday that it would set aside nearly $11.4 billion from
its profits to pay bonuses. If Goldman continues to earn profits at the same level, its
employees could each earn, on average, close to $770,000 this year, with senior
executives and bankers being paid much more. The average compensation amount is
close to what it was during the boom in 2007, when Goldman set a Wall Street pay
record.
Goldman’s record profits come just one month after it repaid $10 billion of TARP
money to the US Treasury, and in so doing, freed itself from restrictions on year-end
bonuses. Last year the firm also received $13 billion as part of the bailout of the failed
insurance giant AIG and $28 billion in low-interest loans.
Well, we’re joined right now by Matt Taibbi. He’s a contributing editor at Rolling
Stone and author of the new article “The Great American Bubble Machine.” The
article examines Goldman Sachs’s role in the current economic crisis.
So, welcome to Democracy Now!, Matt.
MATT TAIBBI: Thanks for having me back.
AMY GOODMAN: Were you surprised when the profits were just posted yesterday
of Goldman Sachs?
MATT TAIBBI: I was a little surprised that the number is a little higher than
everybody expected, but I wasn’t surprised that they made an enormous profit. They
had—they were the beneficiaries of massive government subsidies in the last year or
so. And it would be actually kind of a surprise if they didn’t come out with a big
number in this quarter, just because they’ve had such an enormous advantage. Not
just this bank, but all the banks on Wall Street have had so much access to cheap
money since the bailouts have started that it would be a surprise if they didn’t start
making money.
AMY GOODMAN: So, let’s talk about the bailouts and the bonuses and how this
happened for Goldman Sachs. That’s what you lay out in a remarkable article that
you’ve just written.
MATT TAIBBI: Right. Well, one of the things that people have to remember is, how
do banks make their money? They have to pay depositors, normally, to get their
money, and then they try to invest that money and make money, make their profits on
the spread between those two costs.
Goldman has access to an enormous amount of cheap money from the government,
because they have asked—because they converted to a bank holding company status
last year. That made them eligible for about $28 billion in federally backed loans, as
you—sorry, in federally backed debt, as you mentioned in your intro, which means
that they have access to money that is incredibly cheap, so their cost of capital is
incredibly low. And they take that cheap money, and they lend it back to the economy
at higher rates, and they make money on the spread. And because so many of their
competitors, like Lehman Brothers and Bear Stearns, are now no longer in existence,
they’re able to dominate the market in ways that they never were before.
So they’re taking all these advantages, and instead of—you know, the implicit idea
last year with the bailouts was that these banks would take these advantages and that
they would use that money to kickstart the economy. Instead, they’ve just decided to
keep all the money and turn it into bonuses. And I think that’s something that
everybody has to examine now.
AMY GOODMAN: Talk about how Goldman Sachs played what you call the key
role in the bubble, in the financial bubble.
MATT TAIBBI: Well, in the housing/credit bubble, they played a key role. They
may not have played the key role. But they—it’s important to remember that the last,
the current—that disaster with housing would not have taken place had not investment
banks like Goldman Sachs found a way to take bad mortgages, subprime mortgages
and non-prime mortgages, dice them up into securities, and sell them off to secondary
investors in a process called securitization. Without that process, there would not have
been a market for those bad mortgages. And Goldman Sachs, at the height of the
boom, was underwriting between seven and eight percent of those non-prime
mortgages. So they were a major player in the mortgage market.
And what’s important to remember about Goldman, in particular, is they were alone
on Wall Street in appearing to know that what they were selling was toxic and was
bad, because they were betting heavily against this stuff as they were selling it on the
market. And they made an enormous profit, whereas Bear and Lehman thought they
had something good, and they ended up being taken down by their own investments.
AMY GOODMAN: One of the most riveting parts of your article, Matt, are your
descriptions of the Goldman Sachs alum and the role they played in determining the
government response to the crisis.
MATT TAIBBI: Right. Well, the number of Goldman Sachs—former Goldman
Sachs employees who are in the government is so—it’s so enormous that it would be
impossible to list on this program. But just briefly, you know, there were two
Treasury secretaries who were very important: Bob Rubin during the Clinton
administration and Hank Paulson during the Bush administration. Bush’s Chief of
Staff, Josh Bolten, was a former Goldman Sachs banker. The guy who administered
TARP, Neel Kashkari, was a Goldman banker. The current head of the NYSE, the
World Bank, the Canadian National Bank, the number two guy at the Treasury, the
head of the Commodity Futures Exchange Commission, which regulates the
commodities market—all these people are ex-Goldman bankers. And because of that,
they have access to these, you know, contacts in government, and they’ve always
been able to get whatever they want from government, whenever they want, the key
example being the AIG bailout last year, when they got so much money through that.
AMY GOODMAN: Explain that.
MATT TAIBBI: Well, when—if AIG had been allowed to proceed to an ordinary
bankruptcy without government intervention, Goldman Sachs might actually have
gone out of business, because AIG owed Goldman about $20 billion at the time. But
what happened instead, you know, Goldman was able to appeal to its former chief,
Hank Paulson in the Treasury, who engineered an $80 billion taxpayer-funded bailout
of AIG, and immediately about 13 billion or 14 billion of those dollars went directly
to Goldman Sachs. So this was really Goldman Sachs bailing out Goldman Sachs in
the middle of the bailout.
What’s important to remember is that that same week that the AIG bailout happened,
Hank Paulson elected not to rescue Lehman Brothers. So Goldman Sachs went from
facing almost certain disaster to seeing their primary competitor leave the market and
getting $13 billion in money from the taxpayer.
AMY GOODMAN: How much money did Goldman Sachs pay in taxes in 2008?
MATT TAIBBI: They paid $14 million in taxes last year, which is an effective tax
rate of about one percent, which means that they paid in taxes about a third of what
CEO Lloyd Blankfein actually made in compensation last year. And that sounds like
an amazing number. And if you—their excuse for why that is is because they had
changes in their so-called geographic earnings mix, which basically means that they
moved all their revenues to foreign countries, where the tax rates were lower. And so,
Goldman, which was, again, the beneficiary of massive subsidies during the bailouts,
you know, paid really just a pittance in taxes last year.
AMY GOODMAN: Goldman Sachs’s Lucas van Praag, the global head of Corporate
Communications, responded to your article, said your “bubble case doesn’t stand up
to serious scrutiny…[To give just] two examples, even with the worst will in the
world, the blame for creating the internet bubble cannot credibly be laid at our door,
and we could hardly be described as having been a major player in the mortgage
market, unlike so many of our current and former competitors.”
MATT TAIBBI: Well, as to the former—I mean, I’m sorry, as to the latter, I mean,
again, I mentioned at the height of the boom they were underwriting seven to eight
percent of the non-prime market, which, to me, sounds like a major player.
As to the internet business, they underwrote about one our of every five internet IPOs
throughout that entire period, and they were the single largest underwriter of internet
and tech IPOs. So it would be impossible to imagine who would be a bigger
contributor to the internet mess than Goldman Sachs, since they were the major player
[inaudible].
AMY GOODMAN: How might Goldman Sachs profit off global warming?
MATT TAIBBI: Well, Goldman Sachs is positioned in a number of different ways.
They are a part owner of the Chicago Climate Exchange, which is where the carbon
credits will be traded if this legislation goes through. They’re also heavily invested in
a number of companies that deal in carbon credits. And again, this is another kind of
commodities market, like the oil commodities market, which exploded last summer
and is exploding again now. And Goldman and banks like Morgan Stanley are poised
to make an enormous amount of money if these carbon credits end up getting traded.

AMY GOODMAN: Finally, Matt Taibbi, explain the latest news about Stephen
Friedman and how he did, one of the former heads of Goldman Sachs, also a director,
chair of the New York Federal Reserve Bank, in which he helped work out the deal
for the Wall Street bailout.

MATT TAIBBI: Well, Stephen Friedman last year was the chairman of the New
York Fed when Goldman Sachs converted to bank holding company status, which
again made—when Goldman did that, when they changed their status, it made the
New York Federal Reserve their primary supervisor, which meant that Stephen
Friedman would have been regulating Goldman Sachs. The former head of Goldman
Sachs would have been regulating Goldman Sachs. Friedman asked for a waiver to
keep his shares in Goldman Sachs, even as he was regulating Goldman Sachs, and he
actually got that waiver, because, again—
AMY GOODMAN: From?
MATT TAIBBI: From—actually, I’m not really sure who it’s from. From the board,
I believe. And—
AMY GOODMAN: But didn’t Tim Geithner—
MATT TAIBBI: Right, from Geithner. That’s right. That’s right. It was from
Geithner. But then he went out again, and he bought more shares in Goldman, even
after he got that waiver, without permission, and he eventually had to step down from
his role as chairman of the New York Fed. But what’s interesting about that is that the
guy who is now the president of the New York Fed, Dudley, is another former
Goldman Sachs banker. So it’s like, you know, you can’t get rid of these guys.
AMY GOODMAN: Well, Matt Taibbi, I want to thank you very much for being with
us, editor at Rolling Stone. His latest piece in Rolling Stone, “The Great American
Bubble Machine.”
 Global Economic Crisis, Healthcare, US
Foreign Policy and Resistance to
American Empire
April 14, 2009 By Noam Chomsky
Source: Democracy Now!

Noam Chomsky's ZSpace Page

AMY GOODMAN: Today, a conversation with one of the

most important dissident intellectuals of our time, Noam
Chomsky, on the global economic crisis, healthcare, the
media, US foreign policy, the expanding wars in
Afghanistan and Pakistan, and resistance to American
empire. Noam Chomsky is a world-renowned linguist,
philosopher, social critic, and Institute Professor Emeritus
at the Massachusetts Institute of Technology.
Among his many books over the past few decades are
Hegemony or Survival: America's Quest for Global
Dominance, Manufacturing Consent: The Political
Economy of the Mass Media, Profit over People:
Neoliberalism and Global Order, and Human Rights and
American Foreign Policy. There's a great collection of his
work, just out now, edited by Anthony Arnove, called The
Essential Chomsky.
I spoke to Noam Chomsky earlier this month when we
were on the road in Boston. This is Part II of our
conversation. I began by asking him to talk about the
current economic meltdown.
NOAM CHOMSKY: Well, let's start with G20. If you
look at the Financial Times, the world's major
business journal, the day before the G20 meeting,
they had a section on it, and they pointed out, I think
correctly, that the main purpose is to present a
picture of harmony and agreement. It doesn't matter
what you do, but make it look as if we're all together
on this. Now, there are sharp splits about how to
approach the issue, but you have to make it look as if
we're all together. That's pretty much what
happened.
Now, in the communiqué, which you read before, the
crucial word was "voluntary." So, the countries there
are supposed to voluntarily choose to do x, y and z.
Well, that means we couldn't make an agreement. So
we'll call it voluntary agreement.
Now, there was one point on which they agreed: a
sharp recapitalization of the International Monetary
Fund; pour a lot of money into the IMF. That's a
pretty dubious move. I mean, the record of the IMF
has—the IMF is more or less a branch of the US
Treasury, even though it has a European director. Its
past role has been extremely destructive. In fact, its
American US executive director captured its role
when she described it as "the credit community's
enforcer," meaning if a third world dictator incurs a
huge debt—people didn't, but the dictator did; say,
Suharto in Indonesia—and then the debt defaults, the
lenders, who have made plenty of money because it
was a risky loan so they get high interest and so on,
they have to be protected, meaning not by the
dictator, by the people of Indonesia, who are
subjected to harsh structural adjustment programs so
that they can pay back the debt, which they didn't
incur, so that we can be compensated, rich
Westerners can be compensated. So that's the IMF,
the credit community's enforcer, a very destructive
role in the third world. Now it's to be recapitalized.
Now, there's discussion about this, and it's
interesting. You can read it in the financial pages.
The supporters of the recapitalization say, "Well, the
IMF has changed its spots. It's going to be different
from now on. We realize that it had this terrible role,
but now it's going to be different." Well, is there any
reason to believe it will be different? In fact, if you
look today, it's quite striking to see the advice that
the Western powers are following, the programs that
they're following, and compare them to the
instructions given to the third world.
So, say, take Indonesia again. Indonesia had a huge
financial crisis about ten years ago, and the
instructions were the standard ones: "Here is what
you have to do. First, pay off your debts to us.
Second, privatize, so that we can then pick up your
assets on the cheap. Third, raise interest rates to
slow down the economy and force the population to
suffer, you know, to pay us back." Those are the
regular instructions the IMF is still giving them.
What do we do? Exactly the opposite. We forget
about the debt, let it explode. We reduce interest
rates to zero to stimulate the economy. We pour
money into the economy to get even bigger debts.
We don't privatize; we nationalize, except we don't
call it nationalization. We give it some other name,
like "bailout" or something. It's essentially
nationalization without control. So we pour money
into the institutions. We lectured the third world that
they must accept free trade, though we accept
protectionism.
Take the "too big to fail" principle, which the House
committee is discussing today. But what does "too
big to fail" mean? "Too big to fail" is an insurance
policy. It's a government insurance policy.
Government means the public pays, which says, "You
can take huge risks and make plenty of profit, and if
anything goes wrong, we'll bail you out." That's "too
big to fail." Well, that's extreme protectionism. It
gives US corporations like Citigroup an enormous
advantage over others, like any other kind of
protection.
But we don't allow the third world to do that. I mean,
they've got to privatize, so that we can pick up their
assets. Now, these are happening side by side. Now,
here's the instructions for you, the poor people;
here's the policies for us, the rich people. Exactly the
opposite. Is there any reason to think the IMF is going
to change it?
AMY GOODMAN: Do you think President Obama is
any different than President Bush when it comes to
the economy? And if you were in the Congress, would
you have voted for the bailouts and the stimulus
packages?
NOAM CHOMSKY: He's different. I mean, first of all,
there's a rhetorical difference. But we have to
distinguish the first and the second Bush terms. They
were different. I mean, the first Bush term was so
arrogant and abrasive and militaristic and dismissive
of everyone that they offended, they antagonized
even allies, close allies, and US prestige in the world
plummeted to zero. Now, the second Bush
administration was more—moved more toward the
center in that respect, not entirely, but more, so
some of the worst offenders, like Rumsfeld, Wolfowitz
and others, were thrown out. I mean, they couldn't
throw out Dick Cheney, because he was the
administration, so they couldn't get rid of him. He
stayed, but the others, a lot of them, left. And they
moved towards a somewhat more normal position.
And Obama is carrying that forward. He's a centrist
Democrat. He never really pretended to be anything
else. And he's moving towards a kind of a centrist
position. He's very popular in Europe, not so much
because of him, but because he's not Bush. So there
is the kind of rhetoric that the European leaders and,
in fact, the European population tend to accept. In
fact, you know, even in the Middle East, where you'd
think people would know better, they accept the
illusions. And they are illusions, because there's
nothing to back them up. So, yes, he is different from
Bush.
Same—on the economy, well, you know, the current
Obama-Geithner plan is not very different from the
Bush-Paulson plan. I mean, somewhat different, but
circumstances have changed. So, of course, it's
somewhat different. But it's still based on the
principle that we have to—somehow, the taxpayer
has to rescue the institutions intact. They have to
remain intact, including the people who, you know,
destroyed the economy. In fact, they are the ones
who Obama picked to fix it up.
AMY GOODMAN: Explain.
NOAM CHOMSKY: Like Larry Summers, for
example, who is now his chief economic adviser. I
mean, he was Secretary of Treasury under Bill
Clinton. His great achievement was to prevent
Congress from regulating derivatives, exotic financial
instruments. Well, that's one of the main factors that
led to the crisis.
His kind of senior adviser, one of the first, was Robert
Rubin, who was Secretary of Treasury right before
Summers. His main achievement—many
achievements, like what he did to Indonesia and the
third world, but here, his main achievement was to
lead the way to revoke the Glass-Steagall legislation
from the New Deal, which protected commercial
banks from risky investments. It broke down those
barriers. Immediately after having done this, he left
the government, joined Citigroup as a director, and
they began to make huge profits, including him, from
picking up insurance companies and so on and
making very risky loans, relying on the "too big to
fail" doctrine, meaning if we get in trouble, the
taxpayer will bail us out, which is just what's
happening, taxpayers now pouring tens of billions of
dollars into rescuing Citigroup.
Well, these are the advisers who were supposed to
fix up the system. Tim Geithner was right in the
middle of this. He was head of the New York Federal
Reserve, so, yes, he was supervising these actions.
Now, you know, you can argue about whether they're
doing the right thing or the wrong thing, but are
these the people who should be fixing up the
system?
Actually, the business press just had some
interesting things to say about this. Bloomberg News,
you know, main business press, had an article in
which they reviewed the records of the people who
Obama invited to his economic summit. I think it
must have been last November or December. They
just reviewed the record. I think there were a couple
dozen of them. People on the—you know, people like,
say, Stiglitz, Krugman, they were never even allowed
close to it, let alone anyone from the left or labor and
so on, given token representation. So they went
through the records, and they concluded that these
people should not be invited to fix up the economy.
Most of them should be getting subpoenas because
 of their record of accounting fraud, malpractice and
so on, and helping bring about the current crisis.

AMY GOODMAN: Professor Noam Chomsky. We'll

continue the conversation in a minute. If you'd like a copy
of today's show, you can go to our website at
democracynow.org. Stay with us.
[break]
AMY GOODMAN: We return now to my conversation with
Noam Chomsky about the economic crisis and how the
Obama administration is handling it.
AMY GOODMAN: Why do you think Obama chose to
surround himself?
NOAM CHOMSKY: Because those are his beliefs. I
mean, his support comes from the—his constituency
is basically the financial institutions. Just take a look
at the funding for his campaign. I mean, the final
figures haven't come out, but we have preliminary
figures, and it seems to be mostly financial
institutions. I mean, the financial institutions
preferred him to McCain. They are the main funders
for both—you know, I mean, core funders for both
parties, but considerably more to Obama than
McCain.
You can learn a lot from campaign contributions. In
fact, one of the best predictors of policy around is
Thomas Ferguson's investment theory of politics, as
he calls it—very outstanding political economist—
which essentially—I mean, to say it in a sentence, he
describes elections as occasions in which groups of
investors coalesce and invest to control the state.
And he takes a look at the formation of campaign
contributors, and it gives you a surprisingly good
prediction of what policies are going to be. It goes
back a century, New Deal and so on. So, yeah, it can
predict pretty well what Obama is going to do.
There's nothing surprising about this. It's the norm in
what's called political democracy.
AMY GOODMAN: Would you have let Citibank,
would you have let Citigroup, would do have let the
AIG fail?
NOAM CHOMSKY: Well, there are other possibilities.
So, the government could just take over the viable
parts. And parts of them are functioning; parts are
dysfunctional, like the toxic—what they call the toxic
asset parts, you know, the financial manipulations.
Well, one thing you could do, which has been
suggested by a number of economists like Dean
Baker, just take over the good parts, essentially
nationalize them, put them under public control. And
"nationalize" means public control, at least if you
have a democracy. Not here, but if you had a
functioning democracy, it would mean let them be
under public control, and the parts that are
responsible for the huge losses, just let them go off
by themselves. In fact, that would be the way of
taking care of the AIG bonuses that everyone's
screaming about. In fact, as Baker pointed out, just
spin off the parts that were involved in financial
manipulations and caused the crisis, let them go
bankrupt and let the executives try to get the
bonuses from a bankrupt firm, OK, with no legislation
necessary. That's what should be done with
Citigroup.
And in fact, it's interesting, it's kind of happening.
You know, after the breakdown of Glass-Steagall,
they did bring in—they made use of it, under Rubin's
direction, among others, to take—bring in insurance
companies and other risky investors. Now they're
divesting them. And they're going in the direction of
becoming, you know, commercial bank.
Now, incidentally, this is not the first time this has
happened. Paul Volcker is on the news today, you
know, saying, "Let's slow down," and so on. Well, he's
the one who, under Reagan, who helped bail out
Citigroup last time they crashed. At that time they
were Citibank. They had followed World Bank and IMF
instructions and lent huge amounts of money to Latin
America and were assured by the World Bank that it's
all fine, you know, markets will take care of it, etc.
Well, in a crash, Paul Volcker came in. He raised
interest rates very sharply. Third world countries,
whose payments are tied to US interest rates,
couldn't pay their debts. The IMF moved in, took care
of it, and essentially recapitalized Citibank. That's the
way the system works: you make risky loans, you
make a lot of money, and if you get into trouble,
we're here to bail you out, namely the taxpayer.
AMY GOODMAN: And how do the Republicans differ
from the Democrats in this? What do you make of—
do you see it as just a minor footnote that
Republicans, or some of the governors like Palin, like
Jindal—
NOAM CHOMSKY: There's a difference.
AMY GOODMAN: —are saying they're not going to
take stimulus money?
NOAM CHOMSKY: There's a difference. I mean, we
basically are a kind of a one-party state. I think C.
Wright Mills must have pointed this out fifty years
ago. It's a business party, but it has factions—
Democrats and Republicans—and they're different.
They have somewhat different constituencies and
different policies. And if you look over the years, the
population has—the majority of the population has
tended to make out better under Democrats than
Republicans; the very wealthy have tended to make
out better under Republicans than Democrats. So
they're business parties, but they're somewhat
different, and the differences can have an effect.
However, fundamentally, they're pretty much along
the same lines.
So take, say, the current financial crisis. Actually, it
began under Carter. The late Carter administration is
the one that began—was pushing for financialization
of the economy, you know, huge growth of
speculative financial capital, deregulation, and so on.
Reagan carried it much further, and Clinton
continued it. And then, with Bush, it kind of went off
the rails.
So there are differences, but differences within a
pretty narrow spectrum. And anyone who's a little off
the spectrum, like Nobel laureates in economics who
are a couple of millimeters off the spectrum, they're
basically on the outside. You can interview them, but
they don't show up at the economic summit.
AMY GOODMAN: How does the global economy and
our own economy relate to the issue of war and US
foreign policy?
NOAM CHOMSKY: Well, actually, you had a pretty
good interview with Joseph Stiglitz about that a
couple of months ago, in which he discussed the
relationship of—he was talking about the Iraq war.
And as you'll recall, he pointed out correctly that the
Iraq war, which, first of all, is going to cost trillions of
dollars, also had the effect of sharply increasing the
price of oil, predictably. And as he pointed out, we
could sort of paper that over for a while by a housing
bubble, so there was a huge housing bubble which
anyone with eyes open could see. I mean, for a
century, housing prices had sort of tracked the
economy, GDP; then, all of a sudden, they shot way
beyond the trend line, which means there's a bubble,
and it's going to burst, and you get into trouble. But
the housing bubble, which was supervised by Alan
Greenspan and with the Democrats—actually, it
started under Clinton—it replaced the tech bubble
under Clinton, and it gave an illusion of prosperity,
which—so you didn't see the effects of the rise in oil
prices, which went very high. But if you trace all the
connections, yes, there's a clear connection, as he
pointed out, between the war and the economic
crisis.
And in fact, it's deeper than that. The US is just in a
class by itself in military expenses. It basically
matches the rest of the world, and it's far more
advanced. Well, that's drawn from somewhere. You
know, that's money that's not being used to develop
the economy.
Now, in fact, you have to add a footnote here,
because part of the very high level of US violation of
free trade principles is that the economy itself is
based on military spending to a substantial extent.
So the modern information revolution—computers,
the internet, fancy software and so on—most of that
comes straight out of the Pentagon. My own
university, MIT, was one of the places where all of
this was developed under Pentagon contracts in the
1950s and the 1960s.
In fact, that's another critical part of the way the
economy works. The public pays the costs and takes
the risk of economic development, and if anything
works, maybe decades later, it's handed over to
private enterprise to make the profits. And that's a
core element of the economy. Of course, we don't
permit the third world to do that. That's considered a
violation of free trade when they do it. But it's the
way our economy works. And it's kind of
complementary to the "too big to fail" doctrine of
protectionism for financial institutions. But the
general—we do not have a capitalist economy. We
have kind of a state capitalist economy in which the
public has a role: pay the costs, take the risks, bail
out if they get into trouble. And the private sector
has a role: make profit, and then turn to the public if
you get into trouble.
AMY GOODMAN: Would you extend that to
healthcare?
NOAM CHOMSKY: Well, healthcare is a dramatic
case. I mean, for decades, the healthcare issue has
been right at the top of domestic concerns, for very
good reasons. The US has the most dysfunctional
healthcare system in the industrial world, has about
twice the per capita costs and some of the worst
outcomes. It's also the only privatized system. And if
you look closely, those two things are related. And
the privatized system is highly inefficient: a huge
amount of administration, bureaucracy, supervision,
you know, all kinds of things. It's been studied pretty
carefully.
Now, the public has had an opinion about this for
decades. A considerable majority want a national
healthcare system, like other industrial countries
have. They usually say a Canadian-style system, not
because Canada is the best, but at least you know
that Canada exists. Nobody says an Australian-style
system, which is much better, because who knows
anything about that? But something like what's
sometimes called Medicare Plus, like extend
Medicare to the population.
Well, up until—it's interesting. Up until the year 2004,
that idea was described, for example, by the New
York Times as politically impossible and lacking
political support. So, maybe the public wants it, but
that's not what counts as political support. The
financial institutions are opposed, the pharmaceutical
institutions are opposed, so it's not—no political
support. Well, in 2008, for the first time, the
Democratic candidates—first Edwards, then the
others—began to move in the direction of what the
public has wanted, not there, but in that direction.
So what happened between 2004 and 2008? Well,
public opinion didn't change. It's been this way for
decades. What changed is that manufacturing
industry, a big sector of the economy, has recognized
that it's being severely harmed by the highly
inefficient privatized health system. So, General
Motors said that it costs them over a thousand
dollars more to produce a car in Detroit than across
the border in Windsor, Canada. And, you know, when
manufacturing industry becomes concerned, then
things become politically possible, and they begin to
have political support. So, yes, in 2008, there's some
discussion of it.
Now, you know, this is very revealing insight into how
American democracy functions and what is meant by
the term "political support" and "politically possible."
Again, this should be headlines. Will a proposal come
that approaches what the public wants? Well, we're
already getting the backlash, strong backlash. And
what private healthcare systems are claiming is that
this is unfair. The government is so much more
efficient that they'll be driven—there's no level
playing field if the government gets into it, which is
true.
AMY GOODMAN: If you had a public and a private
plan.
NOAM CHOMSKY: Yeah.
AMY GOODMAN: If it were like Medicare.
NOAM CHOMSKY: If you had them side by side—
AMY GOODMAN: Most people go for Medicare—
NOAM CHOMSKY: —they will.
AMY GOODMAN: —but if you wanted to go for a
private plan, you could.
NOAM CHOMSKY: Yeah, if you could. But they're
not—they say, "Well, we can't compete." For good
reasons. I mean, in every country except—industrial
country except the United States, the government
uses its massive purchasing power to negotiate drug
prices. That's one of the reasons prices are so much
higher in the United States than in other countries.
Well, they could—the Pentagon can use purchasing
power to negotiate prices for, you know, paper clips
or something, but, by law, the government is not
permitted to do that in the case of healthcare. Well, if
you had Medicare Plus, they would, and that would
drive down drug prices, and the private industries
can't compete.
AMY GOODMAN: FAIR, Fairness and Accuracy in
Reporting, did a study of the week leading up to the
White House healthcare summit of the networks and
how they were covering single payer, the issue of like
Medicare Plus, and I think they found that absolutely
—that almost—there was almost no representation in
the media of a single-payer advocate—
NOAM CHOMSKY: Yeah.
AMY GOODMAN: —and almost the only mention
was someone blasting single payer.
NOAM CHOMSKY: Yeah, yeah. That's because it has
no political support; only the majority of the public.
It's the same as the media commentary in 2004. In
fact, if you take a look back at the end of the last
electoral campaign, Kerry-Bush campaign, in October
2004, right before the election, there was a debate
on domestic issues. I think it was maybe October
28th or so. Just take a look—read the New York Times
report of it the next day. It was very dramatic. It said
Kerry never brought up the idea of any government
involvement in healthcare, not, you know, Medicare
Plus, but any government involvement, because it is
not politically possible and lacks political support—
just the population. Well, that—
AMY GOODMAN: What studies show you the
population wants this?
NOAM CHOMSKY: I mean, there's been poll after
poll, goes back, in fact—
AMY GOODMAN: So, what do you think is going to
break through?
NOAM CHOMSKY: Well, it's a problem of the
general dysfunction of formal democracy. I mean,
there's a very substantial gap between public opinion
and public policy on a host of major issues. And on
many of these issues, both parties are well to the
right of the public, international and domestic.
Incidentally, that's one reason why elections are run
the way they are. Elections are run as marketing
extravaganzas, and that's not kept secret. So the
advertising industry gives an award every year for
best marketing campaign of the year. For 2008, they
gave it to Obama. He beat out, I think, Apple
Computer. And if you look at the comments of
financial—of advertising executives, PR executives,
they were euphoric. In fact, they said—you can read
it in the Financial Times, business press—they said,
you know, "We've been marketing candidates like
commodities ever since Reagan, but this is the best
we've ever done. It's going to change the
atmosphere in corporate boardrooms. We have a
new style of selling things, you know, the Obama
style, you know, soaring rhetoric, hope and change,
and so on." Yeah, that's true.
 And if you look at the campaigns themselves, they're
designed essentially by the advertising industry to
sell the commodity—it happens to be a candidate—
and they're pretty carefully designed so that you
marginalize issues and you focus on what are called
"qualities." In Obama's case, you know, soaring
rhetoric and so on; in Bush's case, a nice guy and like
to have a beer with him and so on. That's the kind of
thing you focus on. Where do they stand on issues?
Well, the public is mostly uninformed. I haven't seen
current polls on 2008, but the 2004 election, where
there were polls shortly after, showed the public had
almost no idea what Bush's stand was. In fact, a
majority of Bush voters thought that he supported
the Kyoto Protocol, because they support it, and he's
a nice guy, so he must support it.
And elections are designed that way, and it makes
good sense. I mean, the people who run the
elections, they read the polls, and very carefully, in
fact. In fact, they mostly the design them for their
own interest. And they know that the parties are to
the right of the public, so you better—on a large
number of issues, including crucial ones like Iran and
others—so you better keep issues off the table, which
is what's done. So what the—healthcare is a dramatic
case of it, but it's only one instance.

AMY GOODMAN: Renowned linguist Noam Chomsky,

speaking to me in Boston last week. We will return to the
last part of our conversation after this break. You can get
a copy of the full two parts by going to democracynow.org.
Stay with us.
[break]
AMY GOODMAN: We return now to the last part of my
conversation with leading American intellectual and anti-
imperialist critic Noam Chomsky.
AMY GOODMAN: The whole issue of populist rage,
Noam Chomsky, actually, do you think that this rage
is going to boil over as the unemployment figures
rise?
NOAM CHOMSKY: It's very hard to predict those
things. I mean, it has a potentially positive side, like
it could be like the activism of the 1930s or the
1960s, which ended up making it a more civilized
society in many ways, or it could be like an
unfortunate precedent that quickly comes to mind.
I've written about it.
Take a look at Germany. In the 1920s, Germany was
the absolute peak of Western civilization, in the arts
and the sciences. It was regarded as a model of
democracy and so on. I mean, ten years later, it was
the depths of barbarism. That was a quick transition.
"The descent into barbarism" it's sometimes called in
the scholarly literature.
Now, if you listen to early Nazi propaganda, you
know, end of the Weimar Republic and so on, and
you listen to talk radio in the United States, which I
often do—it's interesting—there's a resemblance.
And in both cases, you have a lot of demagogues
appealing to people with real grievances.
Grievances aren't invented. I mean, for the American
population, the last thirty years have been some of
the worst in economic history. It's a rich country, but
real wages have stagnated or declined, working
hours have shot up, benefits have gone down, and
people are in real trouble and now in very real
trouble after the bubbles burst. And they're angry.
And they want to know, "What happened to me? You
know, I'm a hard-working, white, God-fearing
American. You know, how come this is happening to
me?"
That's pretty much the Nazi appeal. The grievances
were real. And one of the possibilities is what Rush
Limbaugh tells you: "Well, it's happening to you
because of those bad guys out there." OK, in the Nazi
case, it was the Jews and the Bolsheviks. Here, it's
the rich Democrats who run Wall Street and run the
media and give everything away to illegal
immigrants, and so on and so forth. It sort of peaked
during the Sarah Palin period. And it's kind of
interesting. It's been pointed out that of all the
candidates, Sarah Palin is the only one who used the
phrase "working class." She was talking to the
working people. And yeah, they're the ones who are
suffering. So, there are models that are not very
attractive.
AMY GOODMAN: And she very much is being talked
about as a leader, really, of the Republican Party.
NOAM CHOMSKY: Well, she was kind of a model.
You know, the talk radio mob went crazy over her.
And one shouldn't demean it. You know, they
describe themselves—it's really worth listening to:
"We're fly-by country. You know, they don't care
about us, those rich Democrats on the East Coast and
the West Coast who are all, you know, interested in
gay rights and giving things away to illegal
immigrants and so on. They don't care about us, the
hard-working, God-fearing people, so we've got to
somehow rise up and take over and elect Sarah Palin
or Rush Limbaugh or someone like that."
As I say, the precedents are not attractive. Now, if—
now even before the next presidential, if in the next
congressional election the economy has not begun to
recover, this kind of populist rage could boil over and
could have very dangerous consequences. This
country has a long history of being kind of ridden by
fear. It's a very frightened country. This goes back to
colonial times.
I mean, we're very lucky that we have never had an
honest demagogue. I mean, the demagogues we've
had are so corrupt that they never got anywhere—
you know, Nixon, McCarthy, you know, Jimmy
Swaggart and others. So they were kind of destroyed
by their own corruption.
But suppose we had an honest demagogue, you
know, a Hitler type, who was not corrupt. There's
probably—it could be unpleasant. There's a
background of concern and fear, tremendous fear,
and searching for some answer, which they're not
getting from the establishment. "Who's responsible
for my plight?" You know, and that can be exploited.
And unless there's active, effective organizing and
education, it's dangerous.
AMY GOODMAN: Your assessment of President
Obama so far?
NOAM CHOMSKY: Frankly, I never had any
expectations. I wrote about it over a year ago. I
thought then, and I think it's been confirmed, that
he's essentially a centrist Democrat. He's moving
back—I mean, the Bush administration was kind of
off the spectrum, especially the first term. So he's
moving things back toward the center with a kind of
a public posture, which was recognized by the
advertising industry. That's why they gave him the
award for best marketing campaign, which—but as
far as policy is concerned, unless he's under a lot of
pressure from activist sectors, he's not going to go
beyond what he's presented himself as in actual
policy statements or cabinet choices and so on: a
centrist Democrat, going to basically continue Bush's
policies, maybe in a more modulated way.
AMY GOODMAN: Do you see Afghanistan becoming
an ever-expanded war in the next decade or so? Do
you—now we're talking about doubling the US troops
there.
NOAM CHOMSKY: No, that's the way Obama and
the Pentagon see it. In fact, they say so: this is going
to be a long war, it's going to be extended, the US is
going to take over the military side, and it's going to
expand it, it's going to expand into Pakistan. And, I
mean, we'll talk about development, but the focus
will be on the military. Obama, right now, is trying to
get NATO to cooperate, but recognizing that they're
not going to send military forces. The populations are
opposed.
AMY GOODMAN: Canada is pulling out.
NOAM CHOMSKY: Yeah, Canada's pulling out, and
the others—maybe Holland has made a termination
date, but we'll at least ask them to come in and sort
of help out on the civilian side. That's their job. It's
the famous line of, I guess it was Robert Kagan: you
know, "they're Venus, we're Mars." So we'll move in
like Mars and take care of the military side. You
know, we're good at killing people. And they can
come in and sort of put on the band-aids and make it
look like something good is happening. It's not the
right direction.
AMY GOODMAN: The unmanned drones bombing
Pakistan?
NOAM CHOMSKY: Yeah, drones. And that has
effects. So a lot of the worst fighting recently has
been in the Bajaur province, right on the border. It's
in Pakistan's side. And militants in the area have
reported to the press that part of the reason is that
an American drone attack hit a madrasa, a school,
and killed about eighty people. Well, you know,
they're "uncivilized barbarians"; they sort of don't
like that. So they reacted. And now, one of the
militants has said, "OK, we're going to bomb the
White House," which is considered totally
outrageous. But, you know, if we kill as we like,
there's going to be a reaction.
AMY GOODMAN: Where do you see American
empire in ten, twenty, thirty years?
NOAM CHOMSKY: Prediction in human affairs is a
very low—has very little success, too many
complications. The United States, I think, will come
out of the economic crisis, very likely, as the
dominant superpower. There's a lot of talk about
China and India, and it's real, they're changing, but
they're just not in the same league. I mean, both
China and India have enormous internal problems
that the West doesn't face.
You get kind of a picture of this by looking at the
Human Development Index of the United Nations.
The last time I looked, India was about 125th or
something. And I think China was about eightieth.
And China would be worse, I think, if it wasn't such a
closed society. In India, you sort of get better data,
so you can see what's happening. China is kind of
closed. You don't see what's going on in the peasant
areas, which are in turmoil, you know. They have
environmental problems. They have huge—hundreds
of millions of people are kind of like at the edge of
starvation.
We don't have—you know, we have problems, but
not those problems. And even the industrial growth,
which is there—you know, for part of the population,
there's been improvement. But when you take, say,
India, where we know more, in the areas where high-
tech industries developed—and it's pretty impressive.
I've visited some of the labs in Hyderabad. You know,
it's as good or better than MIT. But right nearby, the
rate of peasant suicides is going up, very sharply, in
fact. And it's the same source. It's the neoliberal
policies, which privilege a certain sector of the
population and a certain—and let the rest take care
of themselves.
AMY GOODMAN: And yet, the rise of progressives in
Latin America?
NOAM CHOMSKY: That's important. I mean, Latin
America, for the first time in 500 years, is moving
towards a degree of independence and a kind of
integration, which is a prerequisite for independence,
and also at least is beginning to face some of its
massive internal problems. I mean, Latin America has
probably the worst inequality in the world. There's a
wealthy sector, small wealthy sector, which is
extremely rich, but they have—their tradition is that
they have no responsibility to the country, so they
send their capital to Zurich. You know, they have
their second homes in the Riviera, and their children
study in Oxford or whatever. This is beginning to be
faced in different ways, but it's sort of happening all
over the continent. And they are beginning to
integrate. The United States obviously doesn't like it.
In fact, it's barely reported most of the time.
So there was a very interesting case last September,
when President Morales in Bolivia—Bolivia is, in my
opinion at least, probably the most democratic
country in the world. Nobody says that, but if you
look at what happened in the last couple of years,
there were huge, popular, mass organizations of the
most repressed population in the hemisphere, the
indigenous population, which for the first time ever
has entered the political arena significantly and were
able to elect a president from their own ranks and
one who doesn't give instructions to his army, but
who's following policies that were largely produced
by the population. So he's their representative, in a
sense in which democracy is supposed to work.
And they know the issues. It's not like our elections.
They know the issues. They're serious issues: control
over resources, economic justice, cultural rights, and
so on. You can say they're right or wrong, but at least
it's functioning.
Now, the elites that have traditionally ruled the
country, of course, don't like it. And they're
threatening virtual secession. And, of course, the
United States is backing them, as the media are. And
it got to the point last summer, I suppose, where it
led to real violence.
Well, there was a meeting of UNASUR, the Union of
South American Republics—that's all of South
America—a meeting in Chile, Santiago, Chile. And it
came out with a declaration, important declaration,
in which it supported President Morales and opposed
the—condemned the violence being led by the quasi-
secessionist forces. And Morales responded, thanking
them for their gesture of support, but also saying,
correctly, that this is the first time in 500 years that
South America is beginning to take its affairs in its
own hands without the intervention of foreign
powers, primarily the US.
Well, that was so important that I don't think it was
even reported here. I mean, the meeting was known,
so you see vague references to it. But it's an
indication of developments that are taking place in
various ways.
AMY GOODMAN: Noam Chomsky, you've just hit
eighty. We just have a few minutes to go. And how
does it feel?
NOAM CHOMSKY: I have a few years to go. I don't
think about it much.
AMY GOODMAN: But as you reflect, talking about
these huge social movements, cataclysmic times in
the world, your life experience, what gives you hope?
NOAM CHOMSKY: Well, there's both hope and fear.
I mean, I'm old enough to have grown up in the
Depression. And some of my memories—I didn't
understand that much at the time—childhood
memories, are listening to Hitler's speeches. I didn't
understand them, but I could sense the reaction of
my parents, you know, and had a feeling of fear, you
know, a tremendous fear. In fact, the first article I
wrote was in 1939, when I was in fourth grade, and it
was about the expansion of fascism over Europe, a
kind of a dark cloud that may envelop everything.
And as I mentioned before, I have some of those
same concerns now.
On the other hand, there's been tremendous
progress. The country is far more civilized than it
was, say, forty years ago, thanks to the activism of
the '60s and its aftermath. And some of the most
important developments were after the '60s, like,
say, the feminist movement, which has probably had
more of an impact on this society than any other. It's
mostly post-'60s. The solidarity movements, which
are unique in the history of imperialism, there's never
been anything like them. That's from the '80s. The
global justice movements, what's called anti-
globalization—shouldn't be—that's, you know, the
'90s and this century. These were all very positive
developments.
They haven't changed the institutions. In fact, the
institutions have reacted by becoming harsher, not
surprisingly. But they've changed the culture. I mean,
take, say, the 2008 election. I mean, I didn't like the
candidates, as I've made clear. On the other hand,
forty years ago, or maybe ten years ago, you couldn't
have imagined that the Democratic Party would have
two candidates, an African American and a woman.
 OK, that's a sign of the civilizing effect of the activism
of the '60s and everything that followed.
Well, that can be mobilized. In fact, it's already. If you
count the number of activists in the country, it's, I
suspect, well beyond the '60s, except maybe for a
very brief moment at the peak of the antiwar
movement. OK, that can be a basis for proceeding
onward. So, that's a reason for hope.
AMY GOODMAN: And finally, our condolences on
the loss of Carol.
NOAM CHOMSKY: Thanks.
AMY GOODMAN: Your life partner, someone you
knew—well, you're eighty—what, for seventy-seven
years?
NOAM CHOMSKY: Yeah, actually. Not easy to face.
AMY GOODMAN: What gives you the strength to go
on after Carol?
NOAM CHOMSKY: Well, the kind of thing you do, for
example. That makes a difference.
AMY GOODMAN: And you have a wonderful family.
NOAM CHOMSKY: Yeah.
AMY GOODMAN: So, our condolences to you—
NOAM CHOMSKY: Thanks.
AMY GOODMAN: —and your kids. Noam Chomsky,
thanks so much.
NOAM CHOMSKY: Thanks.
AMY GOODMAN: Noam Chomsky, Professor Emeritus at
MIT, leading public intellectual of our day. If you'd like to
get a copy of the full interview, part one and today's part
two, with Noam Chomsky, you can go to our website at
democracynow.org.

The Looting of America

By Barry Grey

April 10, 2009 "WSWS" -- The New York Times on

Thursday published a front-page article that provides
further insight into the economic and class interests that
are being served by the Obama administration’s economic
“recovery” policies.

Headlined “Small Investors May Be Enlisted in Bank

Bailout,” the article outlines discussions between the
administration and Wall Street investment firms on
structuring the so-called “Public-Private Investment
Program” announced last month in a manner that will
allow people of modest means to invest in the scheme,
whose purpose is to enable the banks to offload their toxic
assets at public expense.

When the plan was announced March 23 by Treasury

Secretary Timothy Geithner, it sparked a wild rally on the
stock market. The Dow Jones Industrial Average rose 497
points when it became clear that the government was
offering to provide up to 95 percent of the capital, insure
almost all potential losses and virtually guarantee large
profits for hedge funds and other financial firms that agree
to purchase the bad debts of the banks at inflated prices,
with the taxpayers underwriting the windfall for Wall
Street and assuming virtually all of the risk.

Thursday’s Times article indicates that opening the

scheme up to small investors is seen as a way of providing
a “democratic” gloss to what is, in reality, a brazen plan to
plunder the public treasury for the benefit of the very
bankers and speculators who are responsible for the
financial crash. Evidently not seeing a contradiction, the
article also makes clear that the bailout measures are
being drawn up in the closest consultation with the Wall
Street insiders who stand to profit from them.

“Some of the biggest investment managers in the United

States,” the Times notes, “including BlackRock and PIMCO,
have been consulting with the government on ways to
rebuild the country’s broken financial markets.”

The article quotes Steven A. Baffico, an executive at

BlackRock, as saying, “It’s giving the guy on Main Street
an equal seat at the table next to the big guys.” This is
true only in the sense that “Main Street” will be given the
opportunity to absorb the bulk of any losses while the “big
guys” cream off the best assets and pocket the profits.

There are political concerns behind this effort to create the

appearance of offering the general public a cut in the
winnings. Hedge fund managers are wary that when, as
they anticipate, their partnership with the Treasury, the
Federal Reserve and the Federal Deposit Insurance
Corporation (FDIC) pays off with double-digit profits there
will be a public outcry, similar to that which erupted over
the AIG executive bonuses. This, they fear, might lead to
limits on their compensation, higher taxes on their
fortunes or similar intolerable infringements.

More important are definite commercial calculations. By

opening up the scheme to the broad public, the private
firms chosen by the Treasury to operate the plan stand to
increase greatly their take from investor fees. As the
Times puts it, “For the investment managers, the benefits
are potentially large. These big firms can charge healthy
fees to investors for taking part.”

There is one particularly remarkable passage in the Times

account. “But the comparison one industry official uses to
illustrate the mistake that America must avoid,” the
newspaper writes, “is the large-scale privatization in
Russia in the 1990s, which involved a transfer of entire
industries to a few, well-connected oligarchs. That
experience tarnished the idea of free-market capitalism in
Russia and undermined its program to move toward a
market economy.”

The many differences in political and historical

circumstances aside, there is a very real parallel between
the plundering of Soviet society by the former Stalinist
bureaucrats and their domestic gangster and foreign
imperialist allies and the current manner in which the
economic crisis in the US is being seized upon by Wall
Street and its political instrument, the Obama
administration, to further enrich the American financial
aristocracy. Indeed, the perpetrators are themselves quite
conscious that they are engaged in a similar—although
much bigger—looting operation.

The scale and character of the operation are further

indicated by another New York Times article published this
week. This one, authored by Times financial writer Andrew
Ross Sorkin and published on Tuesday, concerns the role
of the FDIC in the new bailout scheme.

The article begins by noting that the FDIC was established

76 years ago, in the depths of the Great Depression, to
provide a government guarantee, initially up to $5,000
and now up to $250,000, on the bank deposits of small
savers. It describes the transformation of the FDIC, under
the toxic asset disposal plan of the Obama administration,
as follows:

“It’s going to be insuring 85 percent of the debt, provided

by the Treasury, that private investors will use to subsidize
their acquisition of toxic assets.”

In other words, the function of the FDIC is being

transformed from guaranteeing the bank deposits of small
savers to guaranteeing the investments of multimillionaire
investment fund managers. And, as the article notes, this
is occurring without a vote by Congress.

The FDIC will be insuring more than $1 trillion in new

obligations incurred as the government covers the bad
debts of the banks. However, the FDIC’s charter limits the
obligations it can take on to $30 billion. The Times article
quotes one “prominent securities lawyers” as saying,
“They may not be breaking the letter of the law, but
they’re sure disregarding its spirit.”

How does the government justify this breach? By

calculating the obligations which the FDIC is assuming not
at their monetary value, but at their value as “contingent
liabilities.” That is, according to how much the FDIC
expects to lose from its vast extension of credit to Wall
Street firms (in the form of nonrecourse loans, i.e., loans
in which the firms put up no collateral of their own, but
only the supposed value of the toxic assets they are
purchasing).

And what is the sum total of these “contingent liabilities”?

Sorkin writes: “’We project no losses,’ Sheila Bair, the
chairwoman, told me in an interview. Zero? Really? ‘Our
accountants have signed off on no net losses,’ she said.
(Well, that’s one way to stay under the borrowing cap).”

What is the significance of this astonishing reasoning?

Simply this: The Obama administration, in order to protect
the wealth and power of the financial elite, is facilitating
and directly perpetrating on a colossal scale the same
type of accounting fraud and reckless leveraging that led
to the economic catastrophe in the first place.

Who is to pay the price for this looting operation? The

answer can be seen in the Obama Auto Task Force’s
demands for the liquidation of much of the US auto
industry and the brutal downsizing of what remains,
combined with the imposition of poverty-level wages on
those workers who remain in the surviving plants and the
gutting of the pensions and health benefits of retirees. It
can be further seen in the administration’s pledge to slash
social programs, including Medicare, Medicaid and Social
Security.

The administration’s “recovery” plan is a barely disguised

scheme to preserve the fortunes of the financial
aristocracy, whose interests it represents, by imposing
poverty and social misery on the working class.

Barry Grey
Why America's Economy fell off a cliff

Date: Wednesday, April 1, 2009, 5:49 AM

John Smith started the day early having set his alarm
clock (MADE IN JAPAN) for 6 am. While his coffeepot
(MADE IN CHINA) was perking, he shaved with his electric
razor (MADE IN HONG KONG).

He put on a dress shirt (MADE IN SRI LANKA), designer

jeans (MADE IN SINGAPORE) and tennis shoes (MADE IN
KOREA).

After cooking his breakfast in his new electric

skillet (MADE IN INDIA) he sat down with his calculator
(MADE IN MEXICO) to see how much he could spend
today.

After setting his watch (MADE IN TAIWAN) to the

radio (MADE IN INDIA) he got in his car (MADE IN
GERMANY) filled it with GAS (FROM SAUDI ARABIA) and
continued his search for a good paying AMERICAN JOB.

At the end of yet another discouraging and fruitless day

checking his Computer (made in MALAYSIA), John decided
to relax for a while.

He put on his sandals (MADE IN BRAZIL), poured himself a

glass of wine (MADE IN FRANCE) and turned on his TV
(MADE IN INDONESIA)...............

.......and then wondered why he can't find a good paying

job in AMERICA
*
*
*
*

........AND NOW HE'S HOPING HE CAN GET HELP FROM A

PRESIDENT MADE IN KENYA
 Playing the Banking Game
How Cash Starved States can Create their Own Credit

By Ellen Brown
Global Research, March 3, 2009
webofdebt.com

“He that will not apply new remedies must expect new evils; for
time is the greatest innovator.” Francis Bacon
On February 19, 2009, California narrowly escaped bankruptcy,
when Governor Arnold Schwarzenneger put on his Terminator hat
and held the state senate in lockdown mode until they signed a
very controversial budget.1 If the vote had failed, the state was
going to be reduced to paying its employees in I.O.U.s. California
avoided bankruptcy for the time being, but 46 of 50 states are
insolvent and could be filing Chapter 9 bankruptcy proceedings in
the next two years.2
One of the four states that is not insolvent is an unlikely candidate
for the distinction – North Dakota. As Michigan management
consultant Charles Fleetham observed last month in an article
distributed to his local media:
“North Dakota is a sparsely populated state of less than 700,000,
known for cold weather, isolated farmers and a hit movie – Fargo.
Yet, for some reason it defies the real estate cliché of location,
location, location. Since 2000, the state’s GNP has grown 56%,
personal income has grown 43%, and wages have grown 34%.
This year the state has a budget surplus of $1.2 billion!”
What does the State of North Dakota have that other states don’t?
The answer seems to be: its own bank. In fact, North Dakota has
the only state-owned bank in the nation. The state legislature
established the Bank of North Dakota in 1919. Fleetham writes
that the bank was set up to free farmers and small businessmen
from the clutches of out-of-state bankers and railroad men. By law,
the state must deposit all its funds in the bank, and the state
guarantees its deposits. Three elected officials oversee the bank:
the governor, the attorney general, and the commissioner of
agriculture. The bank’s stated mission is to deliver sound financial
services that promote agriculture, commerce and industry in North
Dakota. The bank operates as a bankers’ bank, partnering with
private banks to loan money to farmers, real estate developers,
schools and small businesses. It loans money to students (over
184,000 outstanding loans), and it purchases municipal bonds
from public institutions.
Still, you may ask, how does that solve the solvency problem? Isn’t
the state still limited to spending only the money it has? The
answer is no. Certified, card-carrying bankers are allowed to do
something nobody else can do: they can create “credit” with
accounting entries on their books.
A License to Create Money
Under the “fractional reserve” lending system, banks are allowed
to extend credit (create money as loans) in a sum equal to many
times their deposit base. Congressman Jerry Voorhis, writing in
1973, explained it like this:
“[F]or every $1 or $1.50 which people – or the government –
deposit in a bank, the banking system can create out of thin air
and by the stroke of a pen some $10 of checkbook money or
demand deposits. It can lend all that $10 into circulation at interest
just so long as it has the $1 or a little more in reserve to back it
up.”3
That banks actually create money with accounting entries was
confirmed in a revealing booklet published by the Chicago Federal
Reserve titled Modern Money Mechanics.2 The booklet was
periodically revised until 1992, when it had reached 50 pages long.
On page 49 of the 1992 edition, it states:
“With a uniform 10 percent reserve requirement, a $1 increase in
reserves would support $10 of additional transaction accounts
[loans created as deposits in borrowers’ accounts].”4
The 10 percent reserve requirement is now largely obsolete, in
part because banks have figured out how to get around it with
such devices as “overnight sweeps.” What chiefly limits bank
lending today is the 8 percent capital requirement imposed by the
Bank for International Settlements, the head of the private global
central banking system in Basel, Switzerland. With an 8 percent
capital requirement, a state with its own bank could fan its
revenues into 12.5 times their face value in loans (100 ÷ 8 = 12.5).
And since the state would actually own the bank, it would not have
to worry about shareholders or profits. It could lend to creditworthy
borrowers at very low interest, perhaps limited only to a service
charge covering its costs; and it could lend to itself or to its
municipal governments at as low as zero percent interest. If these
loans were rolled over indefinitely, the effect would be the same as
creating new, debt-free money.
Dangerously inflationary? Not if the money were used to create
new goods and services. Price inflation results only when
“demand” (money) exceeds “supply” (goods and services). When
they increase together, prices remain stable.
Today we are in a dangerous deflationary spiral, as lending has
dried up and asset values have plummeted. The monopoly on the
creation of money and credit by a private banking fraternity has
resulted in a malfunctioning credit system and monetary collapse.
Credit markets have been frozen by the wildly speculative
derivatives gambles of a few big Wall Street banks, bets that not
only destroyed those banks’ balance sheets but are infecting the
whole private banking system with toxic debris. To get out of this
deflationary debt trap requires an injection of new, debt-free
money into the economy, something that can best be done through
a system of public banks dedicated to serving the public interest,
administering credit as a public utility.
Some experts insist that we must tighten our belts and start saving
again, in order to rebuild the “capital” necessary for functioning
markets; but our markets actually functioned quite well so long as
the credit system was working. We have the same real assets (raw
materials, oil, technical knowledge, productive capacity, labor
force, etc.) that we had before the crisis began. Our workers and
factories are sitting idle because the private credit system has
failed. A system of public credit could put them back to work again.
The notion that “money” is something that has to be “saved” before
it can be “borrowed” misconstrues the nature of money and credit.
Credit is merely a legal agreement, a “monetization” of future
proceeds, a promise to pay later from the fruits of the advance.
Banks have created credit on their books for hundreds of years,
and this system would have worked quite well had it not been for
the enormous tribute siphoned off to private coffers in the form of
interest. A public banking system could overcome that problem by
returning the interest to the public purse. This is the sort of banking
system that was pioneered in the colony of Pennsylvania, where it
worked brilliantly well.
Restoring Michigan to Solvency
Among other advantages to a state of owning its own bank are the
substantial sums it could save in interest. As Fleetham notes of his
own ailing state of Michigan:
“According to recent financial reports (available online), the State
of Michigan, the City of Detroit, the Detroit Water and Sewerage
Department, the Wayne County Airport, the Detroit Public Schools,
the University of Michigan, and Michigan State University pay over
$800 million a year in interest on long term debt. If you add interest
paid by Michigan cities, school districts, and public utilities, the
cost to our taxpayers easily tops a billion a year. What does Wall
Street do with our billion plus dollars? They decorate their offices
like kings.”
Interestingly, the projected state budget deficit for 2009 is also $1
billion. If Michigan did not have to pay over a billion dollars in
interest to Wall Street, the budget could be balanced and the state
could be restored to solvency. A state-owned bank could not only
provide interest-free credit for the state but could actually generate
revenues for it. Fleetham notes that in 2007, the Bank of North
Dakota earned a net profit of $51 million on a loan volume of $2
billion. He comments:
“Last year, Michigan citizens paid over $5 billion dollars in personal
income tax. With a state bank like North Dakota’s we could reduce
this burden, fund new businesses, and restore our crumbling water
and sewer systems. And we don’t have to feel sorry about Wall
Street losing our business. They didn’t ‘earn’ the money they lent
us. They created it in computers and charged us interest to boot.
Let’s follow North Dakota’s lead and get free from Wall Street’s
web.”
Taking the Initiative in California
California could do this as well. Robert Ellis is a Tucson talk show
host who once worked on Wall Street and has been involved in
setting up several banks and financial institutions. In January of
this year, he proposed in a letter to Governor Schwarzenegger that
California could resolve its financial woes by setting up a bank on
the model of the Bank of North Dakota. Ellis wrote to the governor:
“I admire your tenacity in dealing with California’s financial
problems. Your idea of using IOU’s was ingenious but there is a
better way. The State of California can charter its own bank and
issue its own checks to all state employees . . . . It can also pay all
its vendors, contracts and contractors through the bank . . . .
Additionally, once the bank is operational, you can fund your own
state projects and you determine the interest rate paid as opposed
to being at the mercy of the banks you currently deal with or the
interest rates the investment bankers make you pay to issue
bonds. By doing this, you will put the state in control of its own
destiny and make it the benefactor of its own money.
“. . . What I am proposing is not new. It has been done by one
other state in the nation [North Dakota]. Why should you continue
to pay the banks for services and interest on loans when you can
receive that interest for the benefit of the state of California?
Wouldn’t it be better if you could fund your own infrastructure
projects without having to get the approval of independent banks
or investment bankers? Additionally, you set the interest rate on
your own projects. You can even set it at zero if you deem the
project worthy enough.”
Ellis offered his services in setting up the bank, which he thought
could be chartered in a few short months. The Governor has not
replied, but some pressure from constituents might encourage a
response.
Failing that, there is the initiative and referendum process
pioneered in California. It allows state laws to be proposed directly
by the public, and the state’s Constitution to be amended either by
public petition (the “initiative”) or by the legislature submitting a
proposed constitutional amendment to the electorate (the
“referendum”). The initiative is done by writing a proposed
constitutional amendment or statute as a petition, which is
submitted to the California Attorney General along with a
submission fee, which was a modest $200 in 2004. The petition
must be signed by registered voters amounting to 8% (for a
constitutional amendment) or 5% (for a statute) of the number of
people who voted in the most recent election for governor.5
As Gandhi said, “When the people lead, the leaders will follow.”
We the people can beat the Wall Street bankers at their own
game, by moving our legislators to set up publicly-owned banks
that create credit using the same banking principles that are
accepted as standard and usual in the trade by bankers
themselves.
Ellen Brown developed her research skills as an attorney
practicing civil litigation in Los Angeles. In Web of Debt, her latest
book, she turns those skills to an analysis of the Federal Reserve
and “the money trust.” She shows how this private cartel has
usurped the power to create money from the people themselves,
and how we the people can get it back. Her earlier books focused
on the pharmaceutical cartel that gets its power from “the money
trust.” Her eleven books include Forbidden Medicine, Nature’s
Pharmacy (co-authored with Dr. Lynne Walker), and The Key to
Ultimate Health (co-authored with Dr. Richard Hansen). Her
websites are www.webofdebt.com and www.ellenbrown.com.
Notes
1. Anne Davies, “Lockdown Vote Saves California from
Bankruptcy,” theage.com.au (February 21, 2009).

2. John Mitchell, “46 of 50 States Could File Bankruptcy in

2009-2010,” Freedom Arizona (January 30, 2009).

3. Jerry Voorhis, The Strange Case of Richard Milhous Nixon

(1973), excerpted at
http://www.sonic.net/~doretk/ArchiveARCHIVE/ECONOMICS
POLITICS/FEDERAL%20RESERVE/Jerry
%20VoorhisFedReserve.html.

4. Modern Money Mechanics: A Workbook on Bank Reserves

and Deposit Expansion (Federal Reserve Bank of Chicago,
Public Information Service, 1992, available at
http://www.rayservers.com/images/ModernMoneyMechanics.
pdf ).

5. “California Ballot Proposition,” Wikipedia.

Disclaimer: The views expressed in this article are the sole
responsibility of the author and do not necessarily reflect those of
the Centre for Research on Globalization. The contents of this
article are of sole responsibility of the author(s). The Centre for
Research on Globalization will not be responsible or liable for any
inaccurate or incorrect statements contained in this article.
 Don't Miss This Item!

The Best Way To Rob A Bank Is To

Own One
By Bill Moyers
Video - Audio and Transcript

The financial industry brought the economy to its knees,

but how did they get away with it? With the nation
wondering how to hold the bankers accountable, Bill
Moyers sits down with William K. Black, the former senior
regulator who cracked down on banks during the savings
and loan crisis of the 1980s. Black offers his analysis of
what went wrong and his critique of the bailout
Click Here To Watch The Video

TRANSCRIPT
Broadcast PBS - April 3, 2009
BILL MOYERS: Welcome to the Journal.
For months now, revelations of the wholesale greed and
blatant transgressions of Wall Street have reminded us
that "The Best Way to Rob a Bank Is to Own One." In fact,
the man you're about to meet wrote a book with just that
title. It was based upon his experience as a tough
regulator during one of the darkest chapters in our
financial history: the savings and loan scandal in the late
1980s.
WILLIAM K. BLACK: These numbers as large as they are,
vastly understate the problem of fraud.
BILL MOYERS: Bill Black was in New York this week for a
conference at the John Jay College of Criminal Justice
where scholars and journalists gathered to ask the
question, "How do they get away with it?" Well, no one
has asked that question more often than Bill Black.
The former Director of the Institute for Fraud Prevention
now teaches Economics and Law at the University of
Missouri, Kansas City. During the savings and loan crisis, it
was Black who accused then-house speaker Jim Wright
and five US Senators, including John Glenn and John
McCain, of doing favors for the S&L's in exchange for
contributions and other perks. The senators got off with a
slap on the wrist, but so enraged was one of those
bankers, Charles Keating — after whom the senate's so-
called "Keating Five" were named — he sent a memo that
read, in part, "get Black — kill him dead." Metaphorically,
of course. Of course.
Now Black is focused on an even greater scandal, and he
spares no one — not even the President he worked hard to
elect, Barack Obama. But his main targets are the Wall
Street barons, heirs of an earlier generation whose
scandalous rip-offs of wealth back in the 1930s earned
them comparison to Al Capone and the mob, and the
nickname "banksters."
Bill Black, welcome to the Journal.
WILLIAM K. BLACK: Thank you.
BILL MOYERS: I was taken with your candor at the
conference here in New York to hear you say that this
crisis we're going through, this economic and financial
meltdown is driven by fraud. What's your definition of
fraud?
WILLIAM K. BLACK: Fraud is deceit. And the essence of
fraud is, "I create trust in you, and then I betray that trust,
and get you to give me something of value." And as a
result, there's no more effective acid against trust than
fraud, especially fraud by top elites, and that's what we
have.
BILL MOYERS: In your book, you make it clear that
calculated dishonesty by people in charge is at the heart
of most large corporate failures and scandals, including, of
course, the S&L, but is that true? Is that what you're
saying here, that it was in the boardrooms and the CEO
offices where this fraud began?
WILLIAM K. BLACK: Absolutely.
BILL MOYERS: How did they do it? What do you mean?
WILLIAM K. BLACK: Well, the way that you do it is to
make really bad loans, because they pay better. Then you
grow extremely rapidly, in other words, you're a Ponzi-like
scheme. And the third thing you do is we call it leverage.
That just means borrowing a lot of money, and the
combination creates a situation where you have
guaranteed record profits in the early years. That makes
you rich, through the bonuses that modern executive
compensation has produced. It also makes it inevitable
that there's going to be a disaster down the road.
BILL MOYERS: So you're suggesting, saying that CEOs of
some of these banks and mortgage firms in order to
increase their own personal income, deliberately set out to
make bad loans?
WILLIAM K. BLACK: Yes.
BILL MOYERS: How do they get away with it? I mean,
what about their own checks and balances in the
company? What about their accounting divisions?
WILLIAM K. BLACK: All of those checks and balances
report to the CEO, so if the CEO goes bad, all of the checks
and balances are easily overcome. And the art form is not
simply to defeat those internal controls, but to suborn
them, to turn them into your greatest allies. And the
bonus programs are exactly how you do that.
BILL MOYERS: If I wanted to go looking for the parties to
this, with a good bird dog, where would you send me?
WILLIAM K. BLACK: Well, that's exactly what hasn't
happened. We haven't looked, all right? The Bush
Administration essentially got rid of regulation, so if
nobody was looking, you were able to do this with
impunity and that's exactly what happened. Where would
you look? You'd look at the specialty lenders. The lenders
that did almost all of their work in the sub-prime and
what's called Alt-A, liars' loans.
BILL MOYERS: Yeah. Liars' loans--
WILLIAM K. BLACK: Liars' loans.
BILL MOYERS: Why did they call them liars' loans?
WILLIAM K. BLACK: Because they were liars' loans.
BILL MOYERS: And they knew it?
WILLIAM K. BLACK: They knew it. They knew that they
were frauds.
WILLIAM K. BLACK: Liars' loans mean that we don't
check. You tell us what your income is. You tell us what
your job is. You tell us what your assets are, and we agree
to believe you. We won't check on any of those things.
And by the way, you get a better deal if you inflate your
income and your job history and your assets.
BILL MOYERS: You think they really said that to
borrowers?
WILLIAM K. BLACK: We know that they said that to
borrowers. In fact, they were also called, in the trade,
ninja loans.
BILL MOYERS: Ninja?
WILLIAM K. BLACK: Yeah, because no income
verification, no job verification, no asset verification.
BILL MOYERS: You're talking about significant American
companies.
WILLIAM K. BLACK: Huge! One company produced as
many losses as the entire Savings and Loan debacle.
BILL MOYERS: Which company?
WILLIAM K. BLACK: IndyMac specialized in making liars'
loans. In 2006 alone, it sold $80 billion dollars of liars'
loans to other companies. $80 billion.
BILL MOYERS: And was this happening exclusively in this
sub-prime mortgage business?
WILLIAM K. BLACK: No, and that's a big part of the story
as well. Even prime loans began to have non-verification.
Even Ronald Reagan, you know, said, "Trust, but verify."
They just gutted the verification process. We know that
will produce enormous fraud, under economic theory,
criminology theory, and two thousand years of life
experience.
BILL MOYERS: Is it possible that these complex
instruments were deliberately created so swindlers could
exploit them?
WILLIAM K. BLACK: Oh, absolutely. This stuff, the exotic
stuff that you're talking about was created out of things
like liars' loans, that were known to be extraordinarily bad.
And now it was getting triple-A ratings. Now a triple-A
rating is supposed to mean there is zero credit risk. So you
take something that not only has significant, it has
crushing risk. That's why it's toxic. And you create this
fiction that it has zero risk. That itself, of course, is a
fraudulent exercise. And again, there was nobody looking,
during the Bush years. So finally, only a year ago, we
started to have a Congressional investigation of some of
these rating agencies, and it's scandalous what came out.
What we know now is that the rating agencies never
looked at a single loan file. When they finally did look,
after the markets had completely collapsed, they found,
and I'm quoting Fitch, the smallest of the rating agencies,
"the results were disconcerting, in that there was the
appearance of fraud in nearly every file we examined."
BILL MOYERS: So if your assumption is correct, your
evidence is sound, the bank, the lending company,
created a fraud. And the ratings agency that is supposed
to test the value of these assets knowingly entered into
the fraud. Both parties are committing fraud by intention.
WILLIAM K. BLACK: Right, and the investment banker
that — we call it pooling — puts together these bad
mortgages, these liars' loans, and creates the toxic waste
of these derivatives. All of them do that. And then they sell
it to the world and the world just thinks because it has a
triple-A rating it must actually be safe. Well, instead, there
are 60 and 80 percent losses on these things, because of
course they, in reality, are toxic waste.
BILL MOYERS: You're describing what Bernie Madoff did
to a limited number of people. But you're saying it's
systemic, a systemic Ponzi scheme.
WILLIAM K. BLACK: Oh, Bernie was a piker. He doesn't
even get into the front ranks of a Ponzi scheme...
BILL MOYERS: But you're saying our system became a
Ponzi scheme.
WILLIAM K. BLACK: Our system...
BILL MOYERS: Our financial system...
WILLIAM K. BLACK: Became a Ponzi scheme. Everybody
was buying a pig in the poke. But they were buying a pig
in the poke with a pretty pink ribbon, and the pink ribbon
said, "Triple-A."
BILL MOYERS: Is there a law against liars' loans?
WILLIAM K. BLACK: Not directly, but there, of course,
many laws against fraud, and liars' loans are fraudulent.
BILL MOYERS: Because...
WILLIAM K. BLACK: Because they're not going to be
repaid and because they had false representations. They
involve deceit, which is the essence of fraud.
BILL MOYERS: Why is it so hard to prosecute? Why
hasn't anyone been brought to justice over this?
WILLIAM K. BLACK: Because they didn't even begin to
investigate the major lenders until the market had actually
collapsed, which is completely contrary to what we did
successfully in the Savings and Loan crisis, right? Even
while the institutions were reporting they were the most
profitable savings and loan in America, we knew they were
frauds. And we were moving to close them down. Here,
the Justice Department, even though it very appropriately
warned, in 2004, that there was an epidemic...
BILL MOYERS: Who did?
WILLIAM K. BLACK: The FBI publicly warned, in
September 2004 that there was an epidemic of mortgage
fraud, that if it was allowed to continue it would produce a
crisis at least as large as the Savings and Loan debacle.
And that they were going to make sure that they didn't let
that happen. So what goes wrong? After 9/11, the attacks,
the Justice Department transfers 500 white-collar
specialists in the FBI to national terrorism. Well, we can all
understand that. But then, the Bush administration
refused to replace the missing 500 agents. So even today,
again, as you say, this crisis is 1000 times worse, perhaps,
certainly 100 times worse, than the Savings and Loan
crisis. There are one-fifth as many FBI agents as worked
the Savings and Loan crisis.
BILL MOYERS: You talk about the Bush administration. Of
course, there's that famous photograph of some of the
regulators in 2003, who come to a press conference with a
chainsaw suggesting that they're going to slash, cut
business loose from regulation, right?
WILLIAM K. BLACK: Well, they succeeded. And in that
picture, by the way, the other — three of the other guys
with pruning shears are the...
BILL MOYERS: That's right.
WILLIAM K. BLACK: They're the trade representatives.
They're the lobbyists for the bankers. And everybody's
grinning. The government's working together with the
industry to destroy regulation. Well, we now know what
happens when you destroy regulation. You get the biggest
financial calamity of anybody under the age of 80.
BILL MOYERS: But I can point you to statements by Larry
Summers, who was then Bill Clinton's Secretary of the
Treasury, or the other Clinton Secretary of the Treasury,
Rubin. I can point you to suspects in both parties, right?
WILLIAM K. BLACK: There were two really big things,
under the Clinton administration. One, they got rid of the
law that came out of the real-world disasters of the Great
Depression. We learned a lot of things in the Great
Depression. And one is we had to separate what's called
commercial banking from investment banking. That's the
Glass-Steagall law. But we thought we were much
smarter, supposedly. So we got rid of that law, and that
was bipartisan. And the other thing is we passed a law,
because there was a very good regulator, Brooksley Born,
that everybody should know about and probably doesn't.
She tried to do the right thing to regulate one of these
exotic derivatives that you're talking about. We call them
C.D.F.S. And Summers, Rubin, and Phil Gramm came
together to say not only will we block this particular
regulation. We will pass a law that says you can't regulate.
And it's this type of derivative that is most involved in the
AIG scandal. AIG all by itself, cost the same as the entire
Savings and Loan debacle.
BILL MOYERS: What did AIG contribute? What did they
do wrong?
WILLIAM K. BLACK: They made bad loans. Their type of
loan was to sell a guarantee, right? And they charged a lot
of fees up front. So, they booked a lot of income. Paid
enormous bonuses. The bonuses we're thinking about
now, they're much smaller than these bonuses that were
also the product of accounting fraud. And they got very,
very rich. But, of course, then they had guaranteed this
toxic waste. These liars' loans. Well, we've just gone
through why those toxic waste, those liars' loans, are
going to have enormous losses. And so, you have to pay
the guarantee on those enormous losses. And you go
bankrupt. Except that you don't in the modern world,
because you've come to the United States, and the
taxpayers play the fool. Under Secretary Geithner and
under Secretary Paulson before him... we took $5 billion
dollars, for example, in U.S. taxpayer money. And sent it
to a huge Swiss Bank called UBS. At the same time that
that bank was defrauding the taxpayers of America. And
we were bringing a criminal case against them. We
eventually get them to pay a $780 million fine, but wait,
we gave them $5 billion. So, the taxpayers of America
paid the fine of a Swiss Bank. And why are we bailing out
somebody who that is defrauding us?
BILL MOYERS: And why...
WILLIAM K. BLACK: How mad is this?
BILL MOYERS: What is your explanation for why the
bankers who created this mess are still calling the shots?
WILLIAM K. BLACK: Well, that, especially after what's
just happened at G.M., that's... it's scandalous.
BILL MOYERS: Why are they firing the president of G.M.
and not firing the head of all these banks that are
involved?
WILLIAM K. BLACK: There are two reasons. One, they're
much closer to the bankers. These are people from the
banking industry. And they have a lot more sympathy. In
fact, they're outright hostile to autoworkers, as you can
see. They want to bash all of their contracts. But when
they get to banking, they say, ‘contracts, sacred.' But
the other element of your question is we don't want to
change the bankers, because if we do, if we put honest
people in, who didn't cause the problem, their first job
would be to find the scope of the problem. And that would
destroy the cover up.
BILL MOYERS: The cover up?
WILLIAM K. BLACK: Sure. The cover up.
BILL MOYERS: That's a serious charge.
WILLIAM K. BLACK: Of course.
BILL MOYERS: Who's covering up?
WILLIAM K. BLACK: Geithner is charging, is covering up.
Just like Paulson did before him. Geithner is publicly saying
that it's going to take $2 trillion — a trillion is a thousand
billion — $2 trillion taxpayer dollars to deal with this
problem. But they're allowing all the banks to report that
they're not only solvent, but fully capitalized. Both
statements can't be true. It can't be that they need $2
trillion, because they have masses losses, and that they're
fine.
These are all people who have failed. Paulson failed,
Geithner failed. They were all promoted because they
failed, not because...
BILL MOYERS: What do you mean?
WILLIAM K. BLACK: Well, Geithner has, was one of our
nation's top regulators, during the entire subprime
scandal, that I just described. He took absolutely no
effective action. He gave no warning. He did nothing in
response to the FBI warning that there was an epidemic of
fraud. All this pig in the poke stuff happened under him.
So, in his phrase about legacy assets. Well he's a failed
legacy regulator.
BILL MOYERS: But he denies that he was a regulator. Let
me show you some of his testimony before Congress. Take
a look at this.
TIMOTHY GEITHNER:I've never been a regulator, for better
or worse. And I think you're right to say that we have to be
very skeptical that regulation can solve all of these
problems. We have parts of our system that are
overwhelmed by regulation.
Overwhelmed by regulation! It wasn't the absence of
regulation that was the problem, it was despite the
presence of regulation you've got huge risks that build up.
WILLIAM K. BLACK: Well, he may be right that he never
regulated, but his job was to regulate. That was his
mission statement.
BILL MOYERS: As?
WILLIAM K. BLACK: As president of the Federal Reserve
Bank of New York, which is responsible for regulating most
of the largest bank holding companies in America. And
he's completely wrong that we had too much regulation in
some of these areas. I mean, he gives no details,
obviously. But that's just plain wrong.
BILL MOYERS: How is this happening? I mean why is it
happening?
WILLIAM K. BLACK: Until you get the facts, it's harder to
blow all this up. And, of course, the entire strategy is to
keep people from getting the facts.
BILL MOYERS: What facts?
WILLIAM K. BLACK: The facts about how bad the
condition of the banks is. So, as long as I keep the old CEO
who caused the problems, is he going to go vigorously
around finding the problems? Finding the frauds?
BILL MOYERS: You--
WILLIAM K. BLACK: Taking away people's bonuses?
BILL MOYERS: To hear you say this is unusual because
you supported Barack Obama, during the campaign. But
you're seeming disillusioned now.
WILLIAM K. BLACK: Well, certainly in the financial
sphere, I am. I think, first, the policies are substantively
bad. Second, I think they completely lack integrity. Third,
they violate the rule of law. This is being done just like
Secretary Paulson did it. In violation of the law. We
adopted a law after the Savings and Loan crisis, called the
Prompt Corrective Action Law. And it requires them to
close these institutions. And they're refusing to obey the
law.
BILL MOYERS: In other words, they could have closed
these banks without nationalizing them?
WILLIAM K. BLACK: Well, you do a receivership. No one
-- Ronald Reagan did receiverships. Nobody called it
nationalization.
BILL MOYERS: And that's a law?
WILLIAM K. BLACK: That's the law.
BILL MOYERS: So, Paulson could have done this?
Geithner could do this?
WILLIAM K. BLACK: Not could. Was mandated--
BILL MOYERS: By the law.
WILLIAM K. BLACK: By the law.
BILL MOYERS: This law, you're talking about.
WILLIAM K. BLACK: Yes.
BILL MOYERS: What the reason they give for not doing
it?
WILLIAM K. BLACK: They ignore it. And nobody calls
them on it.
BILL MOYERS: Well, where's Congress? Where's the
press? Where--
WILLIAM K. BLACK: Well, where's the Pecora
investigation?
BILL MOYERS: The what?
WILLIAM K. BLACK: The Pecora investigation. The Great
Depression, we said, "Hey, we have to learn the facts.
What caused this disaster, so that we can take steps, like
pass the Glass-Steagall law, that will prevent future
disasters?" Where's our investigation?
What would happen if after a plane crashes, we said, "Oh,
we don't want to look in the past. We want to be forward
looking. Many people might have been, you know, we
don't want to pass blame. No. We have a nonpartisan,
skilled inquiry. We spend lots of money on, get really
bright people. And we find out, to the best of our ability,
what caused every single major plane crash in America.
And because of that, aviation has an extraordinarily good
safety record. We ought to follow the same policies in the
financial sphere. We have to find out what caused the
disasters, or we will keep reliving them. And here, we've
got a double tragedy. It isn't just that we are failing to
learn from the mistakes of the past. We're failing to learn
from the successes of the past.
BILL MOYERS: What do you mean?
WILLIAM K. BLACK: In the Savings and Loan debacle, we
developed excellent ways for dealing with the frauds, and
for dealing with the failed institutions. And for 15 years
after the Savings and Loan crisis, didn't matter which
party was in power, the U.S. Treasury Secretary would fly
over to Tokyo and tell the Japanese, "You ought to do
things the way we did in the Savings and Loan crisis,
because it worked really well. Instead you're covering up
the bank losses, because you know, you say you need
confidence. And so, we have to lie to the people to create
confidence. And it doesn't work. You will cause your
recession to continue and continue." And the Japanese call
it the lost decade. That was the result. So, now we get in
trouble, and what do we do? We adopt the Japanese
approach of lying about the assets. And you know what?
It's working just as well as it did in Japan.
BILL MOYERS: Yeah. Are you saying that Timothy
Geithner, the Secretary of the Treasury, and others in the
administration, with the banks, are engaged in a cover up
to keep us from knowing what went wrong?
WILLIAM K. BLACK: Absolutely.
BILL MOYERS: You are.
WILLIAM K. BLACK: Absolutely, because they are scared
to death. All right? They're scared to death of a collapse.
They're afraid that if they admit the truth, that many of
the large banks are insolvent. They think Americans are a
bunch of cowards, and that we'll run screaming to the
exits. And we won't rely on deposit insurance. And, by the
way, you can rely on deposit insurance. And it's
foolishness. All right? Now, it may be worse than that. You
can impute more cynical motives. But I think they are
sincerely just panicked about, "We just can't let the big
banks fail." That's wrong.
BILL MOYERS: But what might happen, at this point, if in
fact they keep from us the true health of the banks?
WILLIAM K. BLACK: Well, then the banks will, as they did
in Japan, either stay enormously weak, or Treasury will be
forced to increasingly absurd giveaways of taxpayer
money. We've seen how horrific AIG -- and remember,
they kept secrets from everyone.
BILL MOYERS: A.I.G. did?
WILLIAM K. BLACK: What we're doing with -- no,
Treasury and both administrations. The Bush
administration and now the Obama administration kept
secret from us what was being done with AIG. AIG was
being used secretly to bail out favored banks like UBS and
like Goldman Sachs. Secretary Paulson's firm, that he had
come from being CEO. It got the largest amount of money.
$12.9 billion. And they didn't want us to know that. And it
was only Congressional pressure, and not Congressional
pressure, by the way, on Geithner, but Congressional
pressure on AIG.
Where Congress said, "We will not give you a single penny
more unless we know who received the money." And, you
know, when he was Treasury Secretary, Paulson created a
recommendation group to tell Treasury what they ought to
do with AIG. And he put Goldman Sachs on it.
BILL MOYERS: Even though Goldman Sachs had a big
vested stake.
WILLIAM K. BLACK: Massive stake. And even though he
had just been CEO of Goldman Sachs before becoming
Treasury Secretary. Now, in most stages in American
history, that would be a scandal of such proportions that
he wouldn't be allowed in civilized society.
BILL MOYERS: Yeah, like a conflict of interest, it seems.
WILLIAM K. BLACK: Massive conflict of interests.
BILL MOYERS: So, how did he get away with it?
WILLIAM K. BLACK: I don't know whether we've lost our
capability of outrage. Or whether the cover up has been so
successful that people just don't have the facts to react to
it.
BILL MOYERS: Who's going to get the facts?
WILLIAM K. BLACK: We need some chairmen or
chairwomen--
BILL MOYERS: In Congress.
WILLIAM K. BLACK: --in Congress, to hold the necessary
hearings. And we can blast this out. But if you leave the
failed CEOs in place, it isn't just that they're terrible
business people, though they are. It isn't just that they
lack integrity, though they do. Because they were
engaged in these frauds. But they're not going to disclose
the truth about the assets.
BILL MOYERS: And we have to know that, in order to
know what?
WILLIAM K. BLACK: To know everything. To know who
committed the frauds. Whose bonuses we should recover.
How much the assets are worth. How much they should be
sold for. Is the bank insolvent, such that we should resolve
it in this way? It's the predicate, right? You need to know
the facts to make intelligent decisions. And they're
deliberately leaving in place the people that caused the
problem, because they don't want the facts. And this is
not new. The Reagan Administration's central priority, at
all times, during the Savings and Loan crisis, was covering
up the losses.
BILL MOYERS: So, you're saying that people in power,
political power, and financial power, act in concert when
their own behinds are in the ringer, right?
WILLIAM K. BLACK: That's right. And it's particularly a
crisis that brings this out, because then the class of the
banker says, "You've got to keep the information away
from the public or everything will collapse. If they
understand how bad it is, they'll run for the exits."
BILL MOYERS: Yeah, and this week in New York, at this
conference, you described this as more than a financial
crisis. You called it a moral crisis.
WILLIAM K. BLACK: Yes.
BILL MOYERS: Why?
WILLIAM K. BLACK: Because it is a fundamental lack of
integrity. But also because, if you look back at crises, an
economist who is also a presidential appointee, as a
regulator in the Savings and Loan industry, right here in
New York, Larry White, wrote a book about the Savings
and Loan crisis. And he said, you know, one of the most
interesting questions is why so few people engaged in
fraud? Because objectively, you could have gotten away
with it. But only about ten percent of the CEOs, engaged
in fraud. So, 90 percent of them were restrained by ethics
and integrity. So, far more than law or by F.B.I. agents, it's
our integrity that often prevents the greatest abuses. And
what we had in this crisis, instead of the Savings and
Loan, is the most elite institutions in America engaging or
facilitating fraud.
BILL MOYERS: This wound that you say has been
inflicted on American life. The loss of worker's income. And
security and pensions and future happened, because of
the misconduct of a relatively few, very well-heeled
people, in very well-decorated corporate suites, right?
WILLIAM K. BLACK: Right.
BILL MOYERS: It was relatively a handful of people.
WILLIAM K. BLACK: And their ideologies, which swept
away regulation. So, in the example, regulation means
that cheaters don't prosper. So, instead of being bad for
capitalism, it's what saves capitalism. "Honest purveyors
prosper" is what we want. And you need regulation and
law enforcement to be able to do this. The tragedy of this
crisis is it didn't need to happen at all.
BILL MOYERS: When you wake in the middle of the night,
thinking about your work, what do you make of that? What
do you tell yourself?
WILLIAM K. BLACK: There's a saying that we took great
comfort in. It's actually by the Dutch, who were fighting
this impossible war for independence against what was
then the most powerful nation in the world, Spain. And
their motto was, "It is not necessary to hope in order to
persevere."
Now, going forward, get rid of the people that have caused
the problems. That's a pretty straightforward thing, as
well. Why would we keep CEOs and CFOs and other senior
officers, that caused the problems? That's facially nuts.
That's our current system.
So stop that current system. We're hiding the losses,
instead of trying to find out the real losses. Stop that,
because you need good information to make good
decisions, right? Follow what works instead of what's
failed. Start appointing people who have records of
success, instead of records of failure. That would be
another nice place to start. There are lots of things we can
do. Even today, as late as it is. Even though they've had a
terrible start to the administration. They could change,
and they could change within weeks. And by the way, the
folks who are the better regulators, they paid their taxes.
So, you can get them through the vetting process a lot
quicker.
BILL MOYERS: William Black, thank you very much for
being with me on the Journal.
WILLIAM K. BLACK: Thank you so much.
 America's Fiscal Collapse

by Michel Chossudovsky

Global Research, March 2, 2009

“We will rebuild, we will recover, and the United States of

America will emerge stronger" ( President Barack Obama,
State of the Union Address 24 Feb 2009)

"Those of us who manage the public's dollars will be held

to account—to spend wisely, reform bad habits, and do
our business in the light of day—because only then can
we restore the vital trust between a people and their
government." President Barack Obama, A New Era of
Responsibility, the 2010 Budget)

"Strong economic medicine" with a "human face"

“Promise amid peril.” The stated priorities of the Obama

economic package are health, education, renewable
energy, investment in infrastructure and transportation.
"Quality education" is at the forefront. Obama has also
promised to "make health care more affordable and
accessible", for every American.
At first sight, the budget proposal has all the appearances
of an expansionary program, a demand oriented
"Second New Deal" geared towards creating employment,
rebuilding shattered social programs and reviving the real
economy.
The realities are otherwise. Obama's promise is based
on a mammoth austerity program. The entire fiscal
structure is shattered, turned upside down.
To reach these stated objectives, a significant hike in
public spending on social programs (health, education,
housing, social security) would be required as well as the
implementation of a large scale public investment
program. Major shifts in the composition of public
expenditure would also be required: i.e. a move out of a
war economy, requiring a movement out of military
related spending in favour of civilian programs.
In actuality, what we are dealing with is the most drastic
curtailment in public spending in American history,
leading to social havoc and the potential impoverishment
of millions of people.
The Obama promise largely serves the interests of Wall
Street, the defence contractors and the oil conglomerates.
In turn, the Bush-Obama bank "bailouts" are leading
America into a spiralling public debt crisis. The economic
and social dislocations are potentially devastating.
Obama's budget submitted to Congress on February 26,
2009 envisages outlays for the 2010 fiscal year
(commencing October 1st 2009) of $3.94 trillion, an
increase of 32 percent. Total government revenues for the
2010 fiscal year, according to preliminary estimates by
the Bureau of Budget, are of the order of $2.381 trillion.
The predicted budget deficit (according to the president's
speech) is of the order of $1.75 trillion, almost 12 percent
of the U.S. Gross Domestic Product.
War and Wall Street
This is a "War Budget". The austerity measures hit all
major federal spending programs with the
exception of: 1. Defence and the Middle East War:
2. the Wall Street bank bailout, 3. Interest
payments on a staggering public debt.
The budget diverts tax revenues into financing the war. It
legitimizes the fraudulent transfers of tax dollars to the
financial elites under the "bank bailouts".
The pattern of deficit spending is not expansionary. We
are not dealing with a Keynesian style deficit, which
stimulates investment and consumer demand, leading to
an expansion of production and employment.
The "bank bailouts" (involving several initiatives financed
by tax dollars) constitute a component of government
expenditure. Both the Bush and Obama bank bailouts are
hand outs to major financial institutions. They do not
constitute a positive spending injection into the real
economy. Quite the opposite. The bailouts contribute to
financing the restructuring of the banking system leading
to a massive concentration of wealth and centralization of
banking power.
A large part of the bailout money granted by the US
government will be transferred electronically to various
affiliated accounts including the hedge funds. The largest
banks in the US will also use this windfall cash to buy out
their weaker competitors, thereby consolidating their
position. The tendency, therefore, is towards a new wave
of corporate buyouts, mergers and acquisitions in the
financial services industry.
In turn, the financial elites will use these large
amounts of liquid assets (paper wealth), together
with the hundreds of billions acquired through
speculative trade, to buy out real economy
corporations (airlines, the automobile industry,
Telecoms, media, etc ), whose quoted value on the stock
markets has tumbled.
In essence, a budget deficit (combined with massive cuts
in social programs) is required to fund the handouts to the
banks as well as finance defence spending and the
military surge in the Middle East war. Obama's budget
envisages:
 The Real AIG Conspiracy

by Prof. Michael Hudson

Global Research, March 18, 2009

Email this article to a friend

Print this article

It may seem odd, but the public outrage against $135

million in AIG bonuses is a godsend to Wall Street, AID
scoundrels included. How can the media be so
preoccupied with the discovery that there is self-serving
greed to be found in the financial sector? Every TV
channel and every newspaper in the country, from right to
left, have made these bonuses the lead story over the
past two days.
What is wrong with this picture? Is there not something
over-inflated about the outrage led most vociferously by
Senator Charles Schumer and Rep. Barney Frank, the two
leading shills for the bank giveaways over the past year?
And does Pres. Obama perhaps find it convenient that
finally, at long last, he has been able to criticize something
that he believes Wall Street has done wrong? Even the
Wall Street Journal has gotten into the act. The
government’s takeover of AIG, it pointed out, "uses the
firm as a conduit to bail out other institutions." So much
more greed is involved than just that of AIG employees.
The firm owed much more to other players – abroad as
well as on Wall Street – than the assets it had. That is
what drove it to insolvency. And popular opposition has
been rising to how Mr. Obama and Mr. McCain could have
banded together to support the bailout that, in retrospect,
amounts to trillions and trillions of dollars thrown "down
the drain." Not really down the drain at all, of course – but
given to financial speculators on the winning "smart" side
of AIG’s bad financial gambles.
"The Washington crowd wants to focus on bonuses
because it aims public anger on private actors," it accused
in a March 17 editorial. But instead of explaining that the
shift is away from Wall Street grabbers of a thousand
times the amount of bonuses being contested, it blames
its usual all-purpose bete noire: Congress. Where the right
and left differ is just whom the public should be directing
its anger at!
Here’s the problem with all the hoopla over the $135
million in AIG bonuses: This sum is only less than 0.1% –
one thousandth – of the $183 BILLION that the U.S.
Treasury gave to AIG as a "pass-through" to its
counterparties. This sum, over a thousand times the
magnitude of the bonuses on which public attention is
conveniently being focused by Wall Street promoters, did
not stay with AIG. For over six months, the public media
and Congressmen have been trying to find out just where
this money DID go. Bloomberg brought a lawsuit to find
out. Only to be met with a wall of silence.
Until finally, on Sunday night, March 15, the government
finally released the details. They were indeed highly
embarrassing. The largest recipient turned out to be just
what earlier financial reporters had said was rumored: Mr.
Paulson’s own firm, Goldman Sachs, headed the list. It was
owed $13 billion in counterparty claims. So here’s the
picture that’s emerging. Last September, Treasury
Secretary Paulson, from Goldman Sachs, drew up a terse
3-page memo outlining his bailout proposal. The plan
specified that whatever he and other Treasury officials did
(thus including his subordinates, also from Goldman
Sachs), could not be challenged legally or undone, much
less prosecuted. This condition enraged Congress, which
rejected the bailout in its first incarnation.
It now looks as if Mr. Paulson had good reason to put in a
fatal legal clause blocking any clawback of funds given by
the Treasury to AIG’s counterparties. This is where public
outrage should be focused.
Instead, the leading Congressional shepherds of the
bailout legislation – along with Mr. Obama, who came out
in his final, Friday night presidential debate with Sen.
McCain strongly in favor of the bailout in Mr. Paulson’s
awful "short" version – have been posing as conspicuously
as possible for the media to cover a deflected target – the
AIG executives receiving bonuses, not the company’s
counterparties.
There are two questions that one always must ask when a
political operation is being launched. First, qui bono? Who
benefits? And second, why now? In my experience, timing
almost always is the key to figuring out the dynamics at
work.
Regarding qui bono, what does Sen. Schumer, Rep. Frank,
Pres. Obama and other Wall Street sponsors gain from this
public outcry? For starters, it depicts them as hard
taskmasters of the banking and financial sector, not its
lobbyists carrying water for one giveaway after another.
So the AIG kafuffle has muddied the water about where
their political loyalties really lie. It enables them to strike a
misleading pose – and hence to pose as "honest brokers"
next time they dishonestly give away the next few trillion
dollars to their major sponsors and campaign contributors.
Regarding the timing, I think I have answered that above.
Talking about AIG bonuses has effectively distracted
attention from the AIG counterparties who received the
$183 billion in Treasury giveaways. The "final" sum to be
given to its counterparties has been rumored to be $250
billion, do Sen. Schumer, Rep. Frank and Pres. Obama still
have a lot more work to do for Wall Street in the coming
year or so.
To succeed in this work – while mitigating the public
outrage already rising against the bad bailouts – they
need to strike precisely the pose that they’re striking now.
It is an exercise in deception.
The moral should be: The wetter the crocodile tears shed
over giving bonuses to AIG individuals (who seem to be
largely on the healthy, bona fide insurance side of AIG’s
business, not its hedge-fund Ponzi-scheme racket), the
more they will distract public attention from the $180
billion giveaway, and the better they can position
themselves to give away yet more government money
(Treasury bonds and Federal Reserve deposits) to their
favorite financial charities.

Michael Hudson is a frequent contributor to Global

Research. Global Research Articles by Michael Hudson
 AIG is a Legal Money-laundering Ring

The Circle of Financial Life, AIG, Goldman Sachs,

Bank of America, and Others…

by Debbie Morgan

Global Research, March 21, 2009

TakeBackWashington.com

Email this article to a friend

Print this article
There is a very tight financial circle spinning in perpetuity.
There are players on the inside and there are others on
the outside, forever looking for some sort of break, trying
to figure out just how to stop this insidious circle from
spinning… Like a tornado, it sucks money into it, but never
seems to throw any out. Thus is the disaster that is the
current United States Financial crisis.
It was reported by several outlets that AIG, after receiving
$170 billion-plus in taxpayer-funded bailout money, is
paying “bills.” Some of those “bills” were in the form of
bonuses…$168 million in bonuses, to be exact. But, the
most disgusting “bills” paid by AIG, in my opinion, were
the ones they paid to Goldman Sachs, Bank of America,
CitiGroup, and a few others. Yes the very same
companies to which our government (from here on out, I
will use the term lightly, as it doesn’t seem able to
“govern” anything!) took the liberty of bailing out, along
WITH AIG…

That is, AIG paid, according to a report meant for

transparency, Goldman Sachs $12.9 billion, Merrill Lynch
$6.8 billion, Bank of America $5.2 billion, Wachovia $1.5
billion, Morgan Stanley $1.2 billion, JP Morgan $400
million, among others. The funny thing about this is that
ALL these institutions also received bailout money from
the “government,” as well, so they have now received a
double dose! Please tell me I am not the only one to find
this utterly appalling! Enough is enough!
On top of that, AIG paid several foreign banks, as well.
France’s Societe Generale received a whopping $11.9
billion, Deutsche Bank in Germany received nearly that at
$11.8 billion. Barclays of England faired well at $7.9
billion and the Swiss UBS received $5 billion, among
others…so, our much-needed money is going overseas!
Now, granted, it was the dim-witted US financial
institutions that caused the global meltdown, but come
on!

Add to that, AIG paid itself $2.5 billion, and it paid AIG
International $600 million. Now, before we go too much
farther, technically speaking Maiden Lane III paid AIG the
$2.5 billion, as well as portions of the other payouts, but
Maiden Lane III was set up for AIG by the New York Federal
Reserve office to handle AIG business…so…the way I see
it, they are the same company!

Why is it so hard for our “government” to let AIG fail and

let other, (yes, smaller) companies pick up their slack?
Why is this a bad idea in the “land of opportunity?” Our
“government” has committed money to the favored, yet
utterly worthless, AIG several times, and AIG is still
failing. The “government” isn’t, however. Our
“government” is shifting from a Constitutional Republic to
a Fascist state right before our eyes and there seems to
be little we can do about it…AND, our “government,” on
behalf of the US taxpayers, now owns an 80% controlling
share of AIG…as a result of the huge bailout. Maybe that
sheds some light on it!

Over the past six months, our “government” has

committed money (that wasn’t theirs to commit) to AIG, to
the tune of $170 billion. To put the $170 billion into
perspective, that is about $555 PER PERSON living in the
US right now. A family of 4 has paid approximately $2,220
JUST to AIG in this bailout fiasco! How many of us have
lost jobs because of the nefarious dealings of AIG and all
the others that caused this economic disaster? Let’s put
things another way…The War in Iraq, at the time of this
writing, has only cost us (I use that lightly as well!) right
around $656 billion.
Our economy is tanking and while it was not our “policies”
that caused it, our representatives are dedicating our
funds to these shoddy businesses to fix it, all the while
letting the criminals at the helm of these derelict
companies get away with barely a slap on the wrist.
These companies and our “government” make unwise
decisions and we pay for it. I guess it is easy to make
daring mistakes if you have a guarantee that someone
else will pay for them!

AIG sells insurance, among other things. During the first

round of support for AIG, my brother made the statement
that he already had insurance, so why is he paying for a
service that he doesn’t need and will not use? Not only
that, why is he having to pay so much more for this
unused service than he pays for the insurance he already
has? Good questions! On the other hand, he did say that
if we are bailing out AIG, then we should get free
Insurance coverage from them. Makes sense to me!

I’ve decided with all these inside-the-circle payments, that

AIG is a legal money-laundering ring.

This is an incessant circle of destruction that is continually

fueled by more and more taxpayer money…how do we
stop this vicious cycle? Well…stop electing idiot
lawmakers that cannot write a decent piece of legislative
if their lives depended on it! Stop electing lawmakers that
are willing to make YOU tighten your belt when they are
unwilling to make failing big business do the same. Stop
electing lawmakers that are IN the circle to begin with!

Endnotes:
Bonus Money at Troubled A.I.G. Draws Heavy Criticism
http://www.nytimes.com/2009/03/16/business/16aig.html?
hp

Obama Orders Treasury Chief to Try to Block A.I.G.

Bonuses
http://www.nytimes.com/2009/03/17/us/politics/17obama.
html?hp
AIG Discloses $75 Billion in Bailout Payments
http://www.washingtonpost.com/wp-
dyn/content/article/2009/03/15/AR2009031501909.html?
wpisrc=newsletter

The Payment Report for AIG:

http://www.aig.com/aigweb/internet/en/files/Counterparty
Attachments031809_tcm385-155645.pdf

A.I.G. Lists Which Banks It Paid With U.S. Bailout Funds

http://www.nytimes.com/2009/03/16/business/16rescue.ht
ml?th&emc=th

AIG again
www.sawssaws.com

Obama outraged over AIG bonuses

http://www.reuters.com/article/newsOne/idUSTRE52F6022
0090316

AIG, Seeking Government Bailout, Warned Of 'Run' On

Insurance Cos
http://money.cnn.com/news/newsfeeds/articles/djf500/200
903161718DOWJONESDJONLINE000529_FORTUNE5.htm

The Case for Saving AIG, by AIG

http://www.nytimes.com/2009/03/03/business/economy/03
sorkin.html?em

AIG DISCLOSES COUNTERPARTIES TO CDS, GIA AND

SECURITIES LENDING TRANSACTIONS
http://www.aig.com/aigweb/internet/en/files/Counterpartie
s_tcm385-153017.pdf?sid=ST2009031501910

The Kick Them All Out Project

http://www.kickthemallout.com/
Statement of Robert B. Willumstad Before The US House of
Representatives Committee on Oversight and Government
Reform Oct. 7, 2008
http://oversight.house.gov/documents/20081007101054.p
df
Global Research Articles by Debbie Morgan
 Big bank profits are bogus! Massive public
deception!
by Martin D. Weiss, Ph.D. 04-20-09
A big bank CEO on a mission to deceive the public doesn’t
have to tell outright lies. He can con people just as easily
by using “perfectly legal” tricks, shams, and accounting
ruses.
First, I’ll give you the big-picture facts. Then, I’ll show you
how big U.S. banks are painting lipstick on some of the
fattest pigs ever raised.
Six of America’s Largest
Banks at Risk of Failure
As we have written here so often … as we documented in
our recent white paper … as we showed in our
presentation to the National Press Club … and as we
explained again with new data in our follow-up press
conference, the nation’s banking troubles are many times
more severe than the authorities are admitting.
First, look at the megabanks: The authorities SAY that
all of the 14 largest banks have earned a “passing” grade
in their just-completed “stress tests.” But just six months
ago, the authorities swore that, without a massive
injection of taxpayer funds, those same banks would
suffer a fatal meltdown.
Was the bad-debt disease magically cured? Did the
economy miraculously turn around? Not quite. In fact, we
have overwhelming evidence that the condition of the
nation’s banks has deteriorated massively since then.
How can our trusted authorities be so blatantly deceptive
and still keep their jobs? Perhaps you should ask Fed
Chairman Ben Bernanke. Not long ago, for example, he
declared that the total losses from the debt crisis would
not exceed $100 billion, while conveying the hope that
most of those losses could be soon written off. Also around
that time, the International Monetary Fund (IMF) estimated
the losses would be $1 trillion, with only a small
percentage written off.
The IMF’s latest estimate: $4 trillion in losses, with only
one-third of those written off so far. Bernanke’s error
factor: He was 4,000 percent off the mark, in a world
where 50 percent errors can be lethal.
Meanwhile, based on fourth quarter Fed data, we find that,
among the nation’s megabanks, six are at risk of failure in
our opinion (seven if you count Wachovia and Wells Fargo
as separate institutions).
• JPMorgan Chase is the nation’s largest, with $1.7
trillion in assets in its primary banking unit. It’s
massively exposed to defaults by its trading partners
in derivatives — to the tune of 382 percent (almost
four times) its risk-based capital. Plus, since it holds
HALF of ALL the derivatives in the U.S. banking
industry, JPMorgan is at ground zero in the debt crisis.

• Citibank is the nation’s third largest, with assets of

$1.2 trillion in its main banking unit. Its total credit
exposure to derivatives is a bit lower than Morgan’s,
at 278 percent, but still extremely high. Plus, it has
other troubles, especially the surging default rates in
its sprawling global portfolio of credit cards and other
consumer loans. (More on these in a moment.)
• Wells Fargo and Wachovia now make up the
nation’s fourth largest bank with combined assets of
 $1.17 trillion. But in the fourth quarter, they still
reported separately, which is illuminating: Even
without Wachovia’s troubled assets, TheStreet.com
Ratings has downgraded Wells Fargo to a D+.
Wachovia, meanwhile, got a D. This tells you that
Wells Fargo wasn’t exactly the best merger partner,
unless you believe in some bizarre math wherein
adding two negatives somehow gives you a positive
result.
• SunTrust, with $185 billion in assets, is getting hit
hard by the collapse in the commercial real estate.
Its Financial Strength Rating is D+.
• HSBC Bank USA has massive credit exposure to
derivatives that’s even greater than Morgan’s: 550
percent of risk-based capital. We’re not looking at its
larger foreign operations. But the U.S. numbers are
ugly enough, meriting a rating of D+.
• Goldman Sachs, which reported for the first time as
a commercial bank in the fourth quarter, seems to be
taking the biggest risks of all in derivatives. Its total
credit exposure is 1,056 percent of capital. Bottom
line: It debuts as a bank with a rating of D, on par
with Wachovia.
Regional banks: Banking regulators have been largely
mute regarding major regional banks. But several are also
at risk of failure, including Compass Bank (Alabama), Fifth
Third (Michigan), Huntington (Ohio), and E*Trade Bank
(Virginia). Primary reason: Massive losses in commercial
real estate loans.
Smaller banks: On its “Problem List,” the FDIC reports
only 252 institutions with assets of $159 billion. In
contrast, our list of at-risk institutions includes 1,816
banks and thrifts with $4.67 trillion in assets. That’s seven
times the number of institutions and 29 times more assets
at risk than the FDIC admits.
What Explains the Huge Gap Between
Official Declarations and Our Analysis?
We all use essentially the same data. And conceptually,
the analytical approach is also similar.
The primary difference is that the regulators have an
agenda: Instead of protecting the people from bank
failures, they’re trying harder than ever to protect failed
banks from the people. Specifically …
• They have forever hidden the names of the banks on
the FDIC’s “Problem List,” making it almost
impossible for average consumers to get prior
warnings of troubles.
• They have never disclosed their own official ratings
of the banks — the CAMELS ratings — making it
difficult for the public to find safe institutions they
can trust.
• They have religiously underestimated — or
understated — the depth and breadth of the debt
crisis.
• And as I explained a moment ago, they have rigged
their recent stress tests to give passing grades to all
of the nation’s 14 largest banks, sending the false
signal that even the most dangerous among them
are somehow “safe.”
Legal Cover-Ups, Flim-Flam and Sham
In the Big Bank’s “Glowing”
First-Quarter Earnings Reports
Wall Street is aglow with the latest “better-than-expected”
earnings reports by major banks. But take one look below
the surface, and you’ll see three of the most egregious
accounting gimmicks in recent history.
Gimmick #1. Toxic asset cover-up. In their infinite
wisdom, global banking regulators have now agreed to let
banks cover up their toxic assets by booking them at
fluffy-high values, bearing little resemblance to actual
market prices. Like magic, the bad assets are suddenly
worth more, as hundreds of billions in losses are defined
away.
Gimmick #2. Reserve flim-flam. Every quarter, banks
are required to estimate their losses and decide how much
to set aside in loss reserves. If they deliberately guess too
much in one quarter and too little in the next, they can
shove all their bad earnings into earlier P&Ls and make
future P&Ls look rosy by comparison.
Gimmick #3. The great debt sham. Consider this
scenario: A financially distressed real estate developer
owes the bank $4 million. His revenues have plunged.
He’s lost a fortune in his properties. And he’s on the brink
of bankruptcy.
Therefore, in the secondary market, traders recognize that
loans like his are worth, say, only half their face value, or
about $2 million. So far, a very common situation, right?
But now imagine this: He walks into the bank one morning
and claims that he really owes only $2 million. Why?
Because, in theory, he says, he could buy back his own
loan for that price, thereby reducing his debt in half.
In practice, of course, that’s a pipedream. If he actually
had the cash to buy back his own loans on the market,
then he wouldn’t be financially distressed in the first
place. And if he weren’t financially distressed, his loans
wouldn’t be selling on the market for half price.
The reality is that he can’t buy back his own debt and
never will. And even if he could someday, he will still be
on the hook for the full $4 million unless and until he files
for bankruptcy and the bankruptcy judge decides
otherwise.
That’s why the government would never let real estate
developers — or hardly anyone else, for that matter —
mark down the debts on their books and still stay in
business. But guess what? The government lets banks do
precisely that!
It’s the ultimate double standard: The banks get away with
inflating their toxic assets. But at the same time, they’re
allowed to mark to market their own debts, which happen
to be trading at huge discounts on the open market
precisely because of their toxic assets.
Accountants call it a “credit value adjustment.” I call it
cheating.
Finding all of this hard to believe? Then consider …
How Citigroup Mobilized ALL THREE of These
Gimmicks to Create One of the Greatest Accounting
Shams of All Time in Its First-Quarter Earnings
Report
I’m outraged. But I’m glad to see that someone besides us
is speaking out:
• Meredith Whitney, one of the few no-nonsense
analysts in the industry, says that the banks’ latest
reports are, in essence, “a great whitewash.”
• Jack T. Ciesielski, publisher of an accounting advisory
service, calls it “junk income.”
• And Saturday’s New York Times, picking up from
their research, lays out precisely how Citigroup has
transformed a massive loss into what appears to be a
fat profit …
First, Citigroup deployed the Toxic Asset Cover-Up. By
inflating the value of the bad assets on its books, it was
able to beef up its after-tax profits by $413 million.
Second, Citigroup used the Reserve Flim-Flam gimmick:
By (a) shoving most of its bad-debt losses into last year’s
fourth quarter and (b) greatly understating its likely losses
in the first quarter, the bank legally rigged its books to
look like it had made major improvements. Even assuming
no further deterioration in its loan portfolio, I estimate this
gimmick alone bloated profits by at least another $1
billion.
Third, Citigroup went all out with the Great Debt Sham,
marking down its own debt and creating an additional $2.7
billion in purely bogus profits from this maneuver alone.
So here’s Citigroup’s true math for the first quarter:
So-called “profit” $1.6 billion
Gimmick #1 $0.4 billion
Gimmick #2 $1.0 billion
Gimmick #3 $2.7 billion
Total gimmicks $4.1 billion

Actual result: $2.5 billion LOSS!

And all this despite the fact that Citigroup’s loan portfolios
actually deteriorated further in the first quarter. Based on
its Q1 2009 Quarterly Financial Data Supplement, we find
that:
 1. Net credit losses in Citi’s global credit card business
surged from $1.67 billion at year-end 2008 to $1.94
billion by March 31. And compared to March 2008,
they surged by a whopping 56 percent! (Page 9 of its
data supplement.)
2. Foretelling future credit card losses, the delinquency
rate (90+ days past due) on those credit cards
jumped from 2.62 percent at year-end to 3.16
percent on March 31 (page 10).
3. Credit losses on consumer banking operations
jumped from $3.442 billion on December 31 to
$3.786 billion on March 31. And compared to the
year-earlier period, they surged 66 percent (page
12).
By almost every measure, Citigroup’s first-quarter
numbers are worse than they were just three months
earlier and far worse than they were 12 months before.
My forecast: Citigroup’s effort last week to twist this into
an “improvement” will go down in history as one of the
greatest banking deceptions of all time.
But Citigroup is not the only one. Nearly all other major
banks are suffering similar surges in their credit losses
and delinquency rates. Nearly all are using at least one of
the same gimmicks to bloat their first-quarter profits. And
every single one is destined to see massive new losses,
driving their shares to new lows and the banking system
as a whole into a far more severe crisis.
Bottom line: Rather than the private-public partnership
the government has called for to address the nation’s
banking woes, we see little more than private-public
collusion to hide the truth from the public, paper over the
problems and, ultimately, sink the banks into an even
deeper hole.
My Recommendations
In my book, The Ultimate Depression Survival Guide, I give
you very detailed, step-by-step instructions on what to do
immediately. Here’s a quick summary:
Step 1. Get away from risky stocks. Use the recent stock
market rally as a selling opportunity — your second
chance to get out of danger before it’s too late.
Step 2. Get out of sinking real estate. If there’s a
temporary improvement in the market, grab it to sell the
properties you’ve been wanting to sell all along.
Step 3. Raise as much cash as you possibly can — not
only by selling stocks and real estate, but also by cutting
expenses and selling other things you own.
Step 4. Make sure you keep your cash in one of the safe
banks on the list we provide on the book’s resource page.
Or better yet, follow my instructions on how to buy
Treasury bills. They’re safer than any bank, with no limit
on the Treasury’s direct guarantee.
Step 5. For assets you cannot sell, buy protection using
exchange-traded funds that are designed to go UP when
stocks fall. The more the market goes down, the more you
make; and those profits can offset any losses you suffer in
the stocks or real estate that you cannot sell.
Step 6. Later, get ready for the big bottom in nearly all
markets. That’s when you should be able to lock in
relatively safe interest rates of 10 percent or more for
years to come … buy shares in our country’s best
companies for pennies on the dollar … buy a dream home
in a great location that’s practically being given away.
The book is now a Wall Street Journal bestseller. You can
effectively get as many copies as you want for free,
because you earn a $29.95 Weiss Research credit for each
one you buy for yourself or others — either for a new
service or a renewal. And I am donating 100 percent of my
royalties to a national charity — the Campaign to End
Child Homelessness.
Click here to order.
Good luck and God bless!
Martin
Reviewing Ellen Brown's "Web of Debt:" Part II
Reviewing Ellen Brown's "Web of Debt:" Part II - by
Stephen Lendman

This is the second of several articles on Ellen Brown's

remarkable book titled "Web of Debt....the shocking truth
about our money system, (how it) trapped us in debt, and
how we can break free." It's a multi-part snapshot.
Reading the entire book is strongly recommended - easily
obtainable through Amazon or Brown's webofdebt.com
site.

Bankers Capture the Money Machine - Fighting for the

Family Farm

In the 1890s, "keeping the family homestead was a key

political issue" given that foreclosures and evictions "were
occurring in record numbers," much like today. The
"Bankers Manifesto of 1892" spelled it out - a willful plan
"to disenfranchise farmers and laborers of their homes
and property," again like today except that now our very
freedom and futures are at stake as sinister forces aim to
steal them by turning America into Guatemala and lock it
down by police state repression.

The panic of 1893 caused an earlier depression - severe

enough to establish a precedent of street protests, the
result of the first ever march on Washington.
Businessman/populist Jacob Coxey led his "Coxey's Army
(of around 500) from Massilon, Ohio (beginning March 25,
Easter Sunday) to the nation's capital to demand jobs and
a return to debt and interest-free Greenbacks. Local police
intervened. The marchers were disbanded. Coxey was
arrested. He spent 20 days in jail for disturbing the peace
and violating a local ordinance against walking on the
grass. However, he was never charged, then released, and
is now remembered for his heroics.

He began a tradition later sparking suffragist marches;

unemployed WW I veterans for their "Bonus Bill" money;
numerous anti-war and earlier civil rights protests; in
2004, one million in the nation's capital for women's
rights, and the previous day thousands protesting IMF-
World Bank policies.

The late 19th century Populist movement was the last

serious challenge to private bankers' monopoly power
over the nation's money. Journalist William Hope Harvey
wrote a popular book titled "Coin's Financial School" that
explained the problem in simple English - that restricting
silver coinage was a conspiracy to enrich "London-
controlled Eastern financiers at the expense of farmers
and debtors." He called England "a money power that can
dictate the money of the world, and thereby create world
misery."

He referred to the "Crime of 73" that limited free silver

coinage and replaced it with British gold. It forced America
to pay England $200 million annually in gold in interest on
its bonds and inspired William Jennings Bryan's "Cross of
Gold" speech. He nearly became president, but lost in a
close (big-monied financed) race to William McKinley, but
he, too, paid a price. He was later assassinated, likely for
his protectionism, very much disadvantaging British
bankers. With him gone, the Morgans and Rockefellers
dominated US banking, and arranged for friendly leaders
to run the country, Teddy Roosevelt included, a man with
more bark than bite.

"The trusts and cartels remained the puppeteers with real

power, pulling the strings of puppet politicians" who were
bought and paid for like today.

The Secret Government

Various presidents suggested the worst of what's now

clear. By signing the Federal Reserve Act, Woodrow Wilson
was a tool of big money. Yet he belatedly expressed
regret, said "I have unwittingly ruined my country," and
called America "one of the worst ruled....most completely
controlled governments in the civilized world (run by) a
small group of dominant men."
Franklin Roosevelt was as clear in saying "The real truth
(is that) a financial element in the large centers has
owned the government since the days of Andrew Jackson."
Other officials said the same thing, and so did Matthew
Josephson (in his 1934 book) calling bankers and business
titans "Robber Barons" - men who "lived for market
conquest, and plotted takeovers like military strategy."

They sought monopolies for market dominance and trusts

- concentrated wealth in a few hands to be manipulated
for maximum profits and power. During the Gilded Age,
trusts became strong enough to plant "their own agents in
the federal commissions, (use) government regulation
(for) greater control....protect themselves from
competition," and keep prices high.

Four names (among others) stand out - Andrew Carnegie,

John D. Rockefeller, Henry Ford, and JP Morgan running
finance with the power of a potentate. "He didn't build, he
bought. He took over other people's businesses, and he
hated competition" so he eliminated it. Together with
Rockefeller, they dominated business and finance through
interlocking directorates, the same way as today
throughout industry, commerce and finance.

For his part, Morgan was so dominant, financial writer John

Moody called him "the greatest financial power in the
history of the world" even before the establishment of the
Federal Reserve. Morgan died months before its creation,
but his influence made it possible.

His long arm favored the fortunate - with enough funding

to monopolize their industries. "But where did (he and
other bankers get their money)?" Congressman Wright
Patman explained that they created it "out of an empty
hat." They held the ultimate credit card, limitless
accounting-entries to buy out competitors, corner raw
materials markets, control politicians, and after the birth
of public relations, popular opinion the way distinguished
author/psychogist and activist Alex Carey explained in his
seminal book titled "Taking the Risk out of Democracy:"
"The 20th century has been characterized by three
developments of great political importance: The growth of
democracy, the growth of corporate power, and the
growth of propaganda as a means of protecting corporate
power against democracy." It came into its own during
WW I, then grew, became dominant, and remains near-
omnipotent today, even with fissures appearing with
enough promise to challenge it.

The Jekyll Island Affair - Establishing the Federal Reserve

In 1910, seven financial titans met secretly on this

privately-owned island off the coast of Georgia and
created the Federal Reserve:

-- established three years later on December 23, in the

middle of the night, by an act of Congress;

-- its most outrageous action ever that few legislators, if

any, even read or would have understood if they did
because the text was so intentionally vague;

-- it enfranchised powerful bankers to hold the nation

hostage in permanent debt bondage by giving them the
right to create money, in violation of Article I, Section 8 of
the Constitution that states Congress alone has the power
"To coin (create) money (and) regulate the value
thereof...."

Woodrow Wilson made it possible, "Morgan's man in the

White House" with an administration staffed with his
cronies. This act was so publicly harmful it had to be
shepherded through a carefully arranged Conference
Committee, scheduled for between 1:30 - 4:30AM three
days before Christmas when many lawmakers had left
town and many others were asleep. It was then enacted
the next day - one that will live in infamy for the damage it
caused.

"The bill was so obscurely worded that no one really

understood its provisions." The nation's money would be
printed by the US Bureau of Engraving and Printing, then
issued as a government obligation (or debt) to the private
Federal Reserve with interest.

Nominally, Congress and the president appoint Fed

governors, but they operate secretly with no government
oversight or control. As a privately owned banking cartel,
they're a power unto themselves. The chairman sits at its
helm, but he's a mere tool of the bankers who control him.

The 1913 Federal Reserve Act "was a major coup" for

them. The Fed exists to serve them, not the government
or public interest. Therein lies its problem and why it must
be abolished.

For over a century, powerful international bankers wanted

a private central bank giving them "the exclusive right to
'monetize' the government's debt (that is, print their own
money and exchange it for government securities or
IOUs.)" The entire Act was written in obscure Fedspeak so
no one but its creators knew its purpose.

"In plain English, the Federal Reserve Act authorized a

private central bank to create money out of nothing, lend
it to the government at interest, and control the national
money supply, expanding or contracting it at will." Nothing
has been the same since.

Who Owns the Federal Reserve?

Contrary to common belief, it's a private banking cartel

owned by its member banks in each of its 12 Fed districts.
"The amount of Federal Reserve stock" each one holds "is
proportional to its size." The New York Fed is most
dominant (like a mother bank) owning 53% of the
System's shares because the nation's largest commercial
banks are located there, on Wall Street, of course, with
names like JP Morgan Chase, Citigroup, Goldman Sachs,
and Morgan Stanley prominent and familiar. Bank of
America was founded in California and remains
concentrated heavily in Western and Southwestern states,
yet operates globally like the others.
The largest banks are financial superpowers with interests
in commercial and investment banking, insurance, real
estate, home mortgages, credit cards, and virtually all
things financial - nationally and globally.

Financial commentator Hans Schicht refers to Wall Street's

"master spider" controlling a powerful inner circle of men,
headed by him. Their business is done secretly behind
closed doors by what he calls "spider webbing." It
exercises "tight personal management and control, with a
minimum of insiders and front-men who themselves have
only partial knowledge of the game. They also have
"leverage" over mergers, takeovers, chain store holdings
where one company holds shares of others, conditions
annexed to loans, and so forth.

Further, they make concentrated wealth "invisible. The

master spider studiously avoids close scrutiny by
maintaining anonymity, taking a back seat, and appearing
to be a philanthropist."

Post-WW II, the center of power shifted from the House of

Rothschild to Wall Street with David Rockefeller Sr. (John
D's grandson) becoming "master spider," a sort of boss of
bosses, much like the underworld but much more deadly
and powerful.

All the more so because "the Robber Barons (used) their

monopoly over money to buy up the major media,
educational institutions," and other means of
communications. They got all this but Morgan wanted
more - to "secure the banks' loans to the government with
a reliable source of taxes, (gotten directly from) the
incomes of the people. There was just one snag." The
Supreme Court "consistently" declared federal income
taxes unconstitutional. So how were they instituted and
why are they willingly paid?

The Federal Income Tax

The Constitution omits any mention of a federal income

tax because the Founders "considered the taxation of
private income, the ultimate source of productivity, to be
economic folly." They also decided that the States and
federal government shouldn't impose the same tax at the
same time. Congress was to have responsibility "for
collecting national taxes from the States' " tax revenues.

Direct taxes were to be apportioned according to each

State's population. "Income taxes were considered
unapportioned direct taxes in violation of this provision of
the Constitution."

Except in times of war, no federal income tax existed until

the 16th Amendment was ratified on February 13, 1913
empowering Congress to levy one - unapportioned among
the states. Even without one, the economy grew
impressively for nearly a century and a half, adequately
funded by customs and excise taxes.

For a brief period, Congress enacted an income tax in

1894 when the nation was at peace. On April 8, 1895, in
Pollock v. Farmers' Loan and Trust Company, the Supreme
Court held that unapportioned income taxes were
unconstitutional. "That ruling has never been overturned."
To get around it, Wall Street packaged the 16th
Amendment with the Federal Reserve Act, both in 1913. It
applied only to annual incomes over $4000, well above
the average level at the time.

The original tax code was simple enough to be covered in

14 pages. It's now a 17,000 page monster, filled with
obscure provisions professionals struggle to understand or
even know about. It also has "whole pages devoted to
private interests," including loopholes exempting powerful
corporations from paying rightfully owed taxes.

Before WW II, income taxes affected few people. However,

from 1939 - 1944, Congress passed various ones,
including to fund the war effort, and began letting workers
(voluntarily) pay them in installments. Thereafter,
"withholding" became mandatory.
"Today the federal income tax has acquired the standing
of a legitimate tax enforceable by law, despite
longstanding (Supreme Court rulings) strictly limiting its
constitutional scope." Numerous other taxes were also
added, including on capital gains, real estate, corporate
income, FICA, sales, luxury, and IRS interest and penalties.
With all hidden ones included (dozens in all), up to 40% of
an average worker's income goes for taxes.

Enough for some tax protesters to challenge the 16th

Amendment's legitimacy on grounds that it was
improperly ratified. However, US courts rejected the
argument and now it's "beyond review" - even though no
tax would be needed if the federal government printed its
own money interest-free instead of taking ours to defray
banker-imposed charges.

After signing the Federal Reserve Act, Woodrow Wilson

called himself "a most unhappy man. I have unwittingly
ruined my country." Yet he knew precisely what he did. He
was a lawyer, a Ph. D, a historian and political scientist,
and former Princeton University president before entering
politics.

Reaping the Whirlwind - The Great Depression

In theory, the Federal Reserve was established to stabilize

the economy, smooth out the business cycle, manage a
healthy, sustainable growth rate, and maintain stable
prices. It failed dismally on all counts - most noticeably in
the 1930s after a depression followed the crash. The Fed
wasn't the solution. It was the problem.

As in recent years, it kept interest rates low and money

plentiful - not money, in fact, but "credit" or "debt," the
same problem creating havoc today. In the 1920s,
production rose faster than wages, but (again like today)
people could borrow on credit. Then as stocks soared in
"value," Wall Street promoted buying them on margin
(namely, leverage on credit) on the premise that higher
prices could repay loans. It turned "investing" into a
"speculative pyramid scheme" based on money that didn't
exist.

The Fed caused the whole scheme with easy and plentiful
money (credit). It assured the inevitable crash, and late in
the game Fed officials saw it coming. New York Fed
governor, Benjamin Strong, warned wealthy industrialists,
politicians, and high foreign officials to sell stocks, then
began reducing the money supply and raising bank-loan
rates to correct the bubble "naturally." It caused a huge
liquidity squeeze. Stock purchases declined. Prices fell.
Margins were called causing the crash over three days -
so-called Black Thursday (on October 24), Monday and
Tuesday.

The subsequent fallout was disastrous. From 1929 - 1933,

"the money stock fell by a third, and a third of the nation's
banks closed their doors....It was dramatic evidence of the
dangers of delegating the power to control the money
supply to a single autocratic head of an autonomous
agency."

It resulted in a "vicious cyclone of debt....dragging all in its

path into hunger, poverty and despair" - the very process
repeating today, including insiders being tipped off, selling
high, profiting from the collapse at fire sale prices, and
letting the public pay for the dirty scheme they had in
mind in the first place. Then, like today - shifting huge
wealth amounts from "the Great American Middle Class to
Big Money."

Instead of shutting the Fed and prosecuting its

conspirators, Congress enacted the Federal Deposit
Insurance Corporation (FDIC), "ostensibly to prevent"
another collapse. It insured deposits up to $5000 at the
time and rescued some banks, but not all. It was for "rich
and powerful" ones, the equivalent of prominent names
today and considered then like now, "too big to fail" run by
officials too important to offend.

Milton Friedman blamed the Great Depression on the

contraction of the money supply, but others disagreed.
Chairman Louis McFadden of the House Banking and
Currency Committee said it "was not accidental. It was a
carefully contrived occurrence....The international bankers
sought to bring about a condition of despair here so that
they might emerge as rulers of us all."

The "Bankers Manifesto of 1934" suggested the same

thing, and some observers today believe it's again playing
out, this time on a global scale for much greater stakes for
both winners and losers.

Roosevelt, Keynes and the New Deal

Roosevelt addressed the collapse straightaway, starting

impressively in his first 100 days with the passage of 15
landmark acts, covering:

-- emergency banking;

-- Glass-Steagall and the FDIC;

-- empowering the Reconstruction Finance Corporation

that was toothless under Hoover;

-- the Securities Act of 1933, then the Securities Exchange

Act of 1934;

-- the Home Owners' Loan Corporation to refinance homes

and prevent foreclosures; and

-- an alphabet soup of development agencies in charge of

constructing national infrastructure and producing jobs for
the unemployed.

In all, it was a whirlwind of achievement in a few short

months unlike anything before or since - so much in such
a short time. This writer's late April article said:

Despite its flaws and failures, FDR's New Deal was

remarkable in what it accomplished. It helped people, put
millions back to work, reinvigorated the national spirit,
built or renovated 700,000 miles of roads, 7800 bridges,
45,000 schools, 2500 hospitals, 13,000 parks and
playgrounds, 1000 airfields, and various other
infrastructure, including much of Chicago's lakefront
where this writer lives. It cut unemployment from 25% in
May 1933 to 11% in 1937, then it spiked before early war
production revived economic growth and headed it lower.

Challenging Classical Economic Theory - Keynesianism

Post-WW II, it dominated economic policy, the idea being

that deficit spending could propel nations to prosperity
unlike the classical economic belief that money supply
increases weren't needed. Its theory was that when the
supply contracts, so do prices and wages naturally leaving
everything in balance like before.

It didn't work at a time people wanted jobs, but there were

few around. Factories could produce, but there was little
demand, and resources were available but unused - for
the lack of enough pump priming to reinvigorate a
collapsed economy.

Enough, but not too much because as long as bankers

print money, added liquidity means more debt and a
greater amount to service. In addition, doing it crowds out
social services, sacrifices industrial growth, and increases
inflation hugely over time. The 5 cent ice cream cone and
candy bars this writer remembers as a boy today cost
around $2.50. If government printed its own money, they
might still be a nickel or pretty close.

Congressman Wright Patman suggested it in 1933 by

asking: "Why is it necessary to have Government
ownership and operation of banks? The Constitution of the
United States says that Congress shall coin money and
regulate its value," not hand it over to predatory private
bankers.

Instead of returning money-creation power to the

government, Roosevelt let "moneychangers" keep it under
an overhauled Federal Reserve - a still powerful private
banker-controlled "citadel, run from the top down (by) a
small cartel of appointed banking representatives
(operating) behind a curtain of secrecy," more powerful
than government itself. Had Roosevelt acted like Jackson
and Lincoln, it would have been his greatest achievement.

Even so, in his first few months in office, he got enacted

tough reformist legislation, very much impacting bankers.
He also "took aim at the trusts and monopolies that had
returned in force" in the anything-goes 1920s. By 1929,
consolidation left around 200 companies "in control of
over half of all American industry."

FDR reversed the trend with new legislation, reviving

earlier trust-busting efforts. He also imposed banking
regulations as cited above - enough to get him to call
financiers "unanimous in their hatred of me, and I
welcome their hatred." Lucky for him he survived. Big
money plays for keeps, wins more often than it loses, and
generally on what matters most.

Wright Patman Exposes the Money Machine

A Texas Democrat, he served in Congress from 1929 -

1976 where from 1963 - 1975 he headed the House
Banking and Currency Committee until his death. Unlike
his counterparts today in the House and Senate, he was
called an "economic Populist," one way being for how he
exposed Fedspeak to reveal the scheme behind it.

In an August 5, 1964 Committee document titled "A Primer

on Money," he concluded:

"The Federal Reserve is a total moneymaking machine. It

can issue money or checks. And it never has a problem of
making its checks good because it can obtain the $5 and
$10 bills necessary to cover (them) simply by asking the
Treasury Department's Bureau of Engraving to print
them."

Although the Fed now returns most interest on its

government bonds to the Treasury, of far greater
importance is the windfall its member banks get. "The
bonds that have been acquired essentially for free become
the basis of the Fed's 'reserves" - the phantom money that
is advanced many times over by commercial banks in the
form of loans."

Virtually all money in circulation comes from the Fed and

its member banks, expanded by a factor of about 10
(through fractional reserve lending) for every federal debt
dollar monitized. It all "consists of loans on which the
banks have been paid interest." This interest, not what the
Fed gets, "is the real windfall to the banks.

The limitless money-creation machine is kept hidden "in

obscure Fedspeak," even undecipherable to people who
think they understand the process. In The Creature from
Jekyll Island, Ed Griffin states that:

"modern money is a grand illusion conjured by the

magicians of finance and politics. (The Fed's function) is to
turn debt into money. It's just that simple....if one
remembers that the process is not intended to be logical
but to confuse and deceive." It has to be. Would the public
ever put up with it if they realized they'd be had - that
their tax money was being used to enrich bankers, and
Washington made it possible.

"Magical(ly) multiplying reserves is called fractional

reserve banking" that seems more like a con or "shell
game." Each dollar deposited "magically" becomes about
10 in the form of loans or computer-generated funds. As
explained below, "reserves" are being phased out so the
10 - 1 multiple is actually higher but the principle is the
same.

So if $1 million deposited becomes $10 million, and

$900,000 can be loaned out (the other $100,000 required
for reserves), "money created out of thin air (at 5%
interest) is doubled in about two years."

The Fed claims it returns 95% of its profits to the Treasury.

In fact, it's only the interest on federal securities held as
reserves. Far more important is the windfall afforded
banks, the Fed's owners, that "use the securities as the
'reserves' that get multiplied many times over in the form
of loans" that generate huge profits for them.

Wright Patman wanted to abolish the Open Market

Committee and nationalize the Fed, thus giving Congress
control of it as a "truly federal agency" issuing interest-
free money.

The Fed is now heading for a zero percent reserve

requirement meaning they'll be "no limit to the number of
times deposits can be relent." There's effectively no limit
now as if banks exhaust their reserves, they can borrow
freely from the Fed - today at zero percent interest.

Inside the Fed's Playbook

"Banks don't have to have the money they lend before

they make loans, because the Fed will 'provide' the
necessary reserves by making them available at the
federal funds rate" - today amounting to limitless free
money at zero percent interest to be loaned out at higher
rates for profit. The "slight of hand" is that the Fed
"creates reserves out of thin air."

Loans then become deposits that banks can freely re-lend

many times over - the more deposits, the greater the
amount of lending. It's a process of multiplying the money
supply and charging interest for doing it, a very profitable
business when working well in a healthy economy.

So, the process works as follows:

-- banks "lend money (they) don't have;"

-- loans become deposits on their books;

-- when borrowers spend their money, banks raise their

reserves back to the required 10% (or less) "by borrowing
from the Fed or other sources;" and

-- the Fed never runs out of reserves because its "open

market operations" create more of them; it simply
manufactures whatever amounts it wishes out of thin air,
and the public is none the wiser or that they're being
taxed to pay for this shell game.

Reserves don't comprise safe money to pay claimants.

They're accounting entries at Federal Reserve banks
letting commercial banks "make many times those sums
in loans." In plain English, "reserve accounts are a smoke
and mirrors accounting trick concealing the fact that
banks create the money they lend out of thin air,
borrowing any 'reserves' they need from the Fed, which
also creates the money out of thin air." What a business,
especially given how secretive it is under the protection
and auspices of the federal government that sanctions the
con.

There's more as well. Besides what they loan out, banks

"create their own investment money" to use for their own
purposes. Traditionally, commercial banks invested
conservatively, but not investment banks. They raise
money for their clients through stock issuances and sales.
But more important is their "proprietary trading" that
involves using their own money to buy or sell stocks,
bonds, currencies, commodities, or any other financial
instrument or derivative thereof no matter how risky.

Since investment and commercial banks may be one in

the same, limitless sums are available through magical
money creation and open-ended Fed borrowing, then
leveraged multiple times through more borrowing. The
game worked "magically" until it no longer did the old
way, so alternatives are used.

Bear Raids and Short Sales

The 1929 "Crash" happened on three "Black" days but

"continued for nearly four years, stoked by speculators
who made huge profits not only on the market's" ascent
but during its plunge to 11% of its peak value.

Called a "bear raid," it targets vulnerable stocks for "take-

down" quick profits or corporate takeovers at fire sale
prices. When done on a large scale, short selling can
impact markets greatly on the downside just like heavy
"program buying" can rocket it up. The whole business
amounts to blatant manipulation for quick profits.

Short sellers actually do it with borrowed (not owned)

stock, then sell it into the market. If it declines (it may also
rise, of course), it's re-bought at the lower price, returned
to the seller, with short-sellers pocketing the difference as
profit. It's not investing. It's gambling with someone else's
stock, without permission to borrow it, and as a result
harms its owner by driving down the price when it works.

"Short selling is sometimes justified as being necessary to

keep a brake on (over-exuberance) that might otherwise
drive popular stocks into dangerous 'bubbles.'
(However,) Any alleged advantages to a company from
the liquidity afforded by short selling (and supposedly
keeping markets honest) are offset by the serious harm
(this causes) companies targeted for take-down(s) in bear
raids." When done with enough force, it can destroy
companies if that's the intent.

"Short selling is the modern version of the counterfeiting

(that brought) down the Continental in the 1770s."
Currencies, bonds, and commodities can be shorted just
like stocks - to manipulate them for profit.

Worse still, and illegal, is so-called naked short-selling

without first borrowing the security shorted, assuring it
can be borrowed, or arranging to borrow it as required by
law - the reason being that it's an even easier way to
manipulate stock prices so SEC regulations ban it.

Even so, the idea that markets move randomly is rubbish.

So is believing that companies or nations don't target
competitors for destruction by attacking their worth
through short selling or other manipulative ways.

Hedge funds and Derivatives

"Hedge funds are private funds that pool the assets of

wealthy investors with the aim of making 'absolute
returns' - making a profit whether (markets go) up or
down" on whatever financial assets they invest in.
Leverage is used for maximum profitability, the more of it
the greater gain or loss. In futures trading, it's called the
margin - placing "many more bets than if they had paid
the full price."

Originally, hedge funds were to "hedge (investment)

bets....against currency or interest rate fluctuations (but)
they quickly became instruments for manipulation and
control." At their peak, they controlled over half of daily
equity market trading because of their numbers, size,
amount of capital, and frequency of their buying or selling.

Derivatives are one of their key tools - essentially making

"side bets that some underlying investment will go up or
down" to insure against the risk. "All derivatives are
variations on futures trading (and like it) is inherently
speculation or gambling." Familiar examples include puts
and calls - on whether assets will go down or up.

"Over 90% of the derivatives held by banks....are 'over-

the-counter' (ones) specially tailored to financial
institutions (with) exotic and complex features, not traded
on standard exchanges." They're unregulated, hard to
trace, and "very hard to understand," quite often
impossible. In a 1998 interview, banking columnist John
Hoefle called them "the last gasp of a financial bubble."
More recently Warren Buffett said they were "financial
weapons of mass destruction" even though he owns a
sizable amount of them and incurred considerable losses
as a result.

Derivatives aren't assets. They're "just bets" on how

assets will perform using very little real money. Most is
borrowed to make private unreported, unregulated bets
that have soared to a "notional value" of around $370
trillion, according to the Bank for International Settlements
as of 2006. Notional value is "the number of units of an
asset underlying the contract, multiplied by the spot price
of the asset." In other words, "fanciful, dubious or
imaginary" assets.

The amount gets so large because when unregulated

"gamblers can bet any amount of money they want," and
when markets work well for them, the sky's the limit. In
mid-2006, the Office of the Controller of the Currency
reported that around 97% of US bank-held derivatives
were owned by five major US banks, including JP Morgan
Chase and Citigroup. In November 2005, Bloomberg
reported that the credit derivatives market was
"vulnerable to a crisis if one (of their major bank holders)
fails to pay on contracts that insure creditors from
companies defaulting...." John Hoefle warned we were "on
the verge of the biggest financial blowout in centuries,
bigger than the Great Depression...."

Since banks can create money out of thin air, how can
they go bankrupt? Because under accounting rules,
commercial banks have to balance their books so their
assets equal liabilities. "They can create all the money
they can find borrowers for, but" if loans default, banks
must record a loss.

Just imagine - if the government created money and not

banks, economic stability would follow, crises could be
avoided or greatly lessened, inflation would be minimal or
non-existant, prosperous growth would be long-term, and
bank loans would be far less risky than today assuring
steady profits but in smaller amounts.

A follow-up article will discuss global debt entrapment.

Stephen Lendman is a Research Associate of the Centre

for Research on Globalization. He lives in Chicago and can
be reached at lendmanstephen@sbcglobal.net.

Also visit his blog site at sjlendman.blogspot.com and

listen to The Global Research News Hour on
RepublicBroadcasting.org Monday - Friday at 10AM US
Central time for cutting-edge discussions with
distinguished guests on world and national issues. All
programs are archived for easy listening.
http://www.globalresearch.ca/index.php?
context=va&aid=13461
posted by Steve Lendman @ 3:08 AM
Wednesday, May 06, 2009

Reviewing Ellen Brown's "Web of Debt:" Part I

Reviewing Ellen Brown's "Web of Debt:" Part I - by Stephen
Lendman

This is the first of several articles on Ellen Brown's superb

2007 book titled "Web of Debt," now updated in a
December 2008 third edition. It tells "the shocking truth
about our money system, (how it) trapped us in debt, and
how we can break free." Given today's global economic
crisis, it's an appropriate time to review it and urge
readers to digest the entire work, easily gotten through
Amazon or Brown's webofdebt.com site. Her book is a
remarkable achievement - in its scope, depth, and
importance.

In the forward, banker/developer Reed Simpson said:

"I have been a banker for most of my career, and I can

report that even most bankers (don't know) what goes on
behind (top echelon) closed doors....I am more familiar
than most with the issues (Brown covered, and) still found
it an eye-opener, a remarkable window into what is really
going on....(Although many banks follow high ethical
practices), corruption is also rampant, (especially) in the
large money center banks, in one of which I worked."

"Credible evidence (reveals) a world (banking) power elite

intent on gaining absolute control over the planet and its
natural resources, including its subservient human
(ones)." Money is their "lifeblood," and "fear (their)
weapon." Ill-used, they can "enslave nations and ensure
perpetual wars and bondage." Brown exposes the scheme
and offers a solution.

Debt Bondage
What president Andrew Jackson called "a hydra-headed
monster...." entraps entire nations in debt. Financial
commentator Hans Schicht listed how:

-- by making concentrated wealth invisible;

-- "exercising control through leverage(d) mergers,

takeovers" or other holdings "annexed to loans;" and

-- using a minimum of insider front-men to exercise "tight

personal management and control."

Powerful bankers want to rule the world by creating and

controlling money, the very lifeblood of world economies
without which commerce would cease. Professor Henry Liu
calls the monetary system a "cruel hoax" in that (except
for government issued coins) "there is virtually no 'real'
money in the system, only debts" - to bankers "for money
they created with accounting entries....all done by a
sleight of hand," only possible because governments
empowered them to do it.

The solution is simple but untaken. As the Constitution

mandates, money-creation power must "be returned to
the government and the people it represents." Imagine
the possibilities:

-- the federal debt could be eliminated, at least a more

manageable amount before it mushroomed to
stratospheric levels;

-- federal income taxes could as well; entirely for low and

middle income people and at least substantially overall;

-- "social programs could be expanded....without sparking

runaway inflation;" and

-- financial resources would be available to grow the

nation economically and produce stable prosperity.

It's not pie-in-the-sky. It happened successfully under

Abraham Lincoln and early colonists. More on that below.
Brown's book explains that:

-- the Federal Reserve isn't federal; it's a private banking

cartel owned by its major bank members in 12 Fed
districts;

-- except for coins, they "create" money called Federal

Reserve notes, in violation of the Constitution under
Article I, Section 8 that gives Congress alone the right "To
coin (create) money (and) regulate the value thereof....;"

-- "tangible currency (coins and paper money comprise)

less than 3 percent of the US money supply;" the rest is in
computer entries for loans;

-- money that banks lend is "new money" that didn't exist

before;

-- 30% of bank-created money "is invested for their own

accounts;"

-- banks once made productive loans for industrial

development; today they're "a giant betting machine"
using countless trillions for high-risk casino-type
operations - through devices like derivatives and
securitization scams;

-- since Andrew Jackson's presidency (1829 - 1837), the

federal debt hasn't been paid, only the interest - to private
bankers and other owners of US obligations;

-- the 16th Amendment authorized Congress to levy an

income tax; it was done "to coerce (the public) to pay
interest to the banks on the federal debt;"

-- the amount has mushroomed to about $500 billion

annually and keeps rising;

-- creating money doesn't cause inflation; it's "caused by

banks expanding the money supply with loans;"
-- developing nations' inflation was caused "by global
institutional speculators attacking local currencies and
devaluing them on international markets;"

-- it could happen in America or anywhere else just as

easily; and

-- escaping this trap is simple if Washington reclaims its

money-issuing power; early colonists did it; so did Lincoln.

As long as bankers control our money, we'll remain in a

permanent "web of debt" and experience cycles of boom,
bust, inflation, deflation, instability and crisis. Yet none of
this has to be nor repeated and inevitable bubbles -
created by design, not chance, to advantage empowered
"moneychangers," much like today with its fallout causing
global havoc.

Prior to the Fed's creation, the House of Morgan was

dominant in contrast to the early colonists' model.
Operating out of Philadelphia, the nation's first capital, it
favored state-issued and loaned out money, collecting the
interest, and "return(ing) it to the provincial government"
in lieu of taxes.

Lincoln used the same system to finance the Civil War,

after which he was assassinated and bankers reclaimed
their money-issuing power. Wall Street's "silent coup (was)
the passage of the (1913) Federal Reserve Act," the most
destructive ever congressional legislation, thereafter
extracting a huge toll amounting to permanent debt
bondage with national wealth transference from the public
to private bankers - with most people none the wiser.

From Gold to Federal Reserve Notes

After the 1862 Legal Tender Act was rescinded (the so-
called Greenback law letting the government issue its own
money), new legislation replaced it empowering bankers
by making all money again interest-bearing. Here's the
problem. "As long as the money supply (is an interest-
bearing) debt owed back to private bankers....the nation's
wealth (will) continue to be drained off into private vaults,
leaving scarcity in its wake."

Dollars should belong to everyone. Early colonists

invented them as "a new form of paper currency backed
by the 'full faith and credit' of the people." Today, a
private banking cartel issues them by "turning debt into
money and demanding" due interest be paid.
Ever since, it's controlled the nation and public by
entrapment in permanent debt bondage, and they do it
through the Federal Reserve that's neither federal nor has
reserves. It doesn't have money. It creates it with
electronic entries, any amount at any time for any
purpose, the main one being to enrich its owner banks.

This body is a power unto itself, secretive, unaccountable,

and independent of congressional oversight or control. It's
a money-creating machine by turning debt into money,
but only a small fraction of the total money supply.
Individual commercial banks create most of it.

A 1960s Chicago Fed booklet (called Modern Money

Mechanics) explained how - through "fractional reserve"
alchemy. It states:

(Banks) do not really pay out loans from the money they
receive as deposits. If they did this, no additional money
would be created. What they do when they make loans is
to accept promissory notes in exchange for credits to the
borrowers' transaction accounts."

Money is created by "building up" deposits in the form of

loans. They, in turn, become deposits, not the reverse.
"This unique attribute of banking" goes back centuries, the
idea being that paper receipts could be issued and loaned
out for the same gold (in those days) many times over, so
long as enough gold was held in "reserve" so depositors
had access to their money. "This sleight of hand (became
known) as 'fractional reserve' banking," using money to
create multiples more of it.

As for credit market debt, William Hummel (on the web

site Money: What It Is, How It Works) explains that banks
create only about 20% of it. The rest is by other non-bank
financial institutions, including finance companies, pension
and mutual funds, insurance companies, and securities
dealers. They "recycle pre-existing funds, either by
borrowing at a low interest rate and lending at a higher
(one) or by pooling (investor) money and lending it to
borrowers." In other words, just like banks, "they borrow
low and lend high, pocketing the 'spread' as their profit."

But banks do more than borrow. They also "lend the

deposits they acquire....by crediting the borrower's
account with a new deposit." Banks thus increase total
bank deposits that grow the money supply. It amounts to
a sleight of hand like "magically pull(ing) money out of an
empty hat."

The US "money supply is the federal debt and cannot exist

without it. (To) keep money in the system, some major
player has to incur substantial debt that never gets paid
back; and this role is played by the federal government."
It's why the nation's debt can't be repaid under a banker-
controlled system. Today's size and debt service
compounds the problem, around double the amount
Brown cited, growing exponentially to unimaginable
levels.

Colonial Paper Money - Another Way Predating the

Republic's Birth

In 1691, three years before the Bank of England's

creation, Massachusetts became "the first local
government to issue its own paper money...." in the form
of a "bill of credit bond or IOU....to pay tomorrow on a debt
incurred today." This money "was backed by the full 'faith
and credit' of the government."

Other colonies then did the same, some as IOUs

redeemable in gold or silver or as "legal tender" money to
be legally accepted to pay debts. Cotton Mather, a famous
New England minister, later redefined money - not as gold
or silver, but as a credit: "the credit of the whole country."
Benjamin Franklin so embraced the "new medium of
exchange" that he's called "the father of paper money,"
then called "scrip." It made the colonies independent of
British banks and let them "finance their local
governments without" taxation. It was done in two ways,
and most colonies used both:

-- direct issue "bills of credit" or "treasury notes;"

essentially government-backed IOUs to be repaid by
future taxes, with no interest owed bankers or foreign
lenders; "they were just credits issued and sent into the
economy on goods and services;" and

-- a system of generating "revenue in the form of interest

by taking on the lending functions of banks; a government
loan office called a 'land bank' (issued) paper money and
(loaned) it to residents (usually farmers) at low interest
rates....the interest paid....went into the public coffers,
funding the government;" it was the preferred way to
assure a stable currency rather than by issuing "bills of
credit."

Pennsylvania did it best. It's 1723-established loan office

showed "it was possible for the government to issue new
money (in lieu of) taxes without inflating prices." For over
25 years, it collected none at all. The loan office provided
adequate revenue, supplemented by liquor import duties.
Throughout the period, prices remained stable.

Prior to this system, Pennsylvania lost "both business and

residents (for) lack of available currency." With it, its
population grew and commerce prospered. The "secret
was in not issuing too much, and in recycling the money
back to the government in the form of principal and
interest on government-issued loans."

Colony-based British merchants and financiers objected

strongly to Parliament. Enough so that in 1751, King
George II banned new paper money issuance to force
colonists to borrow it from UK bankers. In 1764, Franklin
petitioned Parliament to lift the ban. In London, Bank of
England directors asked him to explain colonial prosperity
at a time Britain experienced rampant unemployment and
poverty. It's because Colonial Scrip was issued, he stated,
"our own money" with no interest owed to anyone. He
added:

"You do not have too many workers, you have too little
money in circulation, and that which circulates, all bears
the endless burden of unrepayable debt and usury."

With banks loaning money into the economy, more was

"owed back in principle and interest than was lent in the
original loans (so) there was never enough in circulation to
pay interest and still keep workers fully employed." Unlike
banks, government can both lend and spend money in
circulation - enough to pay "interest due on the money it
lent, (keep) the money supply in 'proper proportion' and
(prevent) the 'impossible contract' problem (of having)
more money owed back on loans than was created (from)
the loans themselves."

Franklin's efforts notwithstanding, the Bank of England got

Parliament to pass a Currency Act making it illegal for the
colonies to issue their own money. It turned prosperity
into poverty because the money supply was halved with
not enough to pay for goods and services. According to
Franklin:

"the poverty caused by the bad influence of the English

bankers on the Parliament" got colonists to hate the
British enough to spark the Revolutionary War. "The
colonies would gladly have borne the little tax on tea and
other matters (if) England (hadn't taken their money),
which created unemployment and dissatisfaction." So
much that outraged people again issued their own money
in spite of the ban. As a result, they successfully financed
a war against a major power - with almost no hard
currency and no taxation. Thomas Paine called it the
Revolution's "corner stone."

However, British bankers responded by attacking its

"competitor's currency," the Continental, driving down its
value by flooding the colonies with counterfeit scrip. It was
"battered but remained stable." Where Britain failed,
speculators succeeded - "mostly northeastern bankers,
stockbrokers and businessmen, who bought up the
revolutionary currency at a fraction of its value after
convincing people it would be worthless after the war." It
had "to compete with states' paper notes and British
bankers' gold and silver coins....The problem might have
been avoided by making the Continental the sole official
currency, but the Continental Congress (didn't have) the
power to enforce" such an order - with no courts, police or
authority to collect taxes "to redeem the notes or contract
the money supply."

Having just rebelled against British taxation, colonists

weren't about to let Congress tax them. Speculators took
advantage and traded Continentals at discounts enough to
make them worthless and give rise to the expression "not
worth a Continental."

How the Government Was Persuaded to Borrow Its Own

Money

John Adams once said: "there are two ways to conquer

and enslave a nation. One is by the sword. The other is by
debt." The latter method is stealth enough so people don't
know what's happening and submit to their own bondage.
Openly, nothing seems changed, yet a whole new system
becomes master "in the form of debts and taxes" that
people think are for their own good, not tribute to their
captors. That's today's America writ large.

After the Revolutionary War, "British bankers and their

Wall Street vassals" pulled it off by acquiring a controlling
interest in the new United States Bank. It discredited
paper scrip through rampant Continental counterfeiting
and so disillusioned the Founders that they omitted
mentioning paper money in the Constitution. Congress
was given power to "coin money (and) regulate the value
thereof, (and) to borrow money on the credit of the United
States...." It left enough wiggle room for bankers to exploit
to their advantage - but only because Congress and the
president let them.

Alexander Hamilton bears much blame, the nation's first

Treasury Secretary and Tim Geithner of his day (1789 -
1795). He argued that America needed a monetary
system independent of foreign control, and that required a
federal central bank - to handle war debts and create a
standard form of currency. In 1791, it was created, hailed
at the time as a "brilliant solution to the nation's economic
straits, one that disposed of an oppressive national debt,
stabilized the economy, funded the government's budget,
and created confidence in the new paper dollars....It got
the country up and running, but left the bank largely in
private hands" - to be manipulated for private gain, much
like today. Worse still, "the government ended up in debt
for money it could have generated itself."

Instead, it had to pay interest on its own money in lieu of

creating it interest free. Today, Hamilton is acclaimed as a
model Treasury Secretary. For Jefferson, he was a
"diabolical schemer, a British stooge pursuing a political
agenda for his own ends." He modeled the Bank of the
United States on the Bank of England against which
colonists rebelled. It so angered Jefferson that he told
Washington he was a traitor. It fostered a bitter feud
between them with Jefferson ultimately prevailing.

Hamilton's Federalist Party disappeared after 1820 while

Jefferson and Madison's Democratic-Republicans became
the forerunner of today's Democrats after the party split
into two factions, the Whigs no longer in existence and
Jacksonians that by 1844 officially became the Democratic
Party. Shamefully they veered far from Jacksonian and
Jeffersonian principles.

For his part, Hamilton wasn't entirely bad. He stabilized

the new economy and got the country on its feet. He
restored the nation's credit, established a national
currency, and made it economically independent.
However, his legacy has a dark side - a "privileged class of
financial middlemen (henceforth able) to siphon off a
perpetual tribute in the form of interest." He delivered
money power into private hands, "subservient to an elite
class of oligarchical financiers," the same Wall Street
types today holding the entire nation hostage - in
permanent debt bondage.

From Abundance to Debt

Charging excessive interest is called "usury," but originally

it meant charging anything for the use of money. The
Christian Bible banned it, and the Catholic Church
enforced anti-usury laws through the end of the Middle
Ages.

Old Testament scripture was more lenient, prohibiting it

only between "brothers." Charging it to foreigners was
allowed and encouraged, which is why Jews unfairly were
called "moneychangers." They, like others, suffered
greatly from money-lending schemes. For centuries, they
were "persecuted for the profiteering of a few," then
scapegoated to divert attention from the real offenders.

Fiat money is legal tender by government decree - a

simple tally representing units of value to be traded for
goods and services. Paper money was invented in 9th
century Mandarin China and successfully used to fund its
long and prosperous empire. The same was true in
medieval England. The tally system worked well for over
five centuries before banker-controlled paper money
began demanding payment in the form of interest.

History portrays the Middle Ages as backward,

impoverishing, and a form of economic enslavement only
the Industrial Revolution changed. In fact, the era was
entirely different, characterized by 19th century historian
Thorold Rogers as a time when "a labourer could provide
all the necessities for his family for a year by working 14
weeks," leaving nearly nine discretionary months to work
for himself, study, fish, travel, or do what he pleased,
something today's overworked, over-stressed, underpaid
workers can't imagine.

Some attribute Middle Age prosperity to the absence of

usurious lending. Instead of paying tribute in the form of
interest, "people relied largely on interest-free tallies."
They avoided depressions and inflation since the supply
and demand for goods and services grew in proportion to
each other, thus holding prices stable. "The tally system
provided an organic form of money that expanded
naturally as trade (did) and contracted (the same way) as
taxes were paid."

No bankers set interest rates or manipulated markets to

their advantage. The tally system kept Britain stable and
thriving until the mid-17th century, "when Oliver Cromwell
(1599 - 1658)....needed money to fund a revolt against the
Tudor monarchy."

The Moneylenders Take Over England

In the 19th century, the Rothchild banking family's Nathan

Rothchild said it well:

"I care not what puppet (sits on) the throne of England to
rule the Empire on which the sun never sets. The man who
controls Britain's money supply controls the British
empire, and I (when he ran the Bank of England) control
the British money supply."

Centuries early, moneylender power was absent. But after

the 1666 Coinage Act, money-issuing authority, once the
sole right of kings, was transferred into private hands.
"Bankers now had the power to cause inflations and
depressions at will by issuing or withholding their gold
coins."

King William III (1672 - 1702), a Dutch aristocrat, financed

his war against France by borrowing 1.2 million pounds in
gold in a secret transaction with moneylenders, the
arrangement being a permanent loan on which debt would
be serviced and its principle never repaid. It came with
other strings as well:

-- lenders got a charter to establish the Bank of England

(in 1694) with monopoly power to issue banknotes as
national paper currency;

-- it created them out of nothing, with only a fraction of

them as reserves;

-- loans to the government were to be backed by

government IOUs to serve as reserves for creating
additional loans to private borrowers; and

-- lenders could consolidate the national debt on their

government loan to secure payment through people-
extracted taxes.

It was a prescription for huge profits and "substantial

political leverage. The Bank's charter gave the force of law
to the 'fractional reserve' banking scheme that put control
of the country's money" in private hands. It let the Bank of
England create money out of nothing and charge interest
for loans to the government and others - the same
practice central banks now employ.

For the next century, banknotes and tallies circulated

interchangeably even though they weren't a compatible
means of exchange. Banker money expanded when
"credit expanded and contracted when loans were
canceled or 'called,' producing cycles of 'tight' money and
depression alternating with 'easy' money and inflation." In
contrast, tallies were permanent, stable, fixed money,
making banknotes look bad so they had to go.

For another reason as well - because of King William's

disputed throne and fear if he were deposed,
moneylenders again might be banned. They used their
influence to legalize banknotes as the money of the realm
called "funded" debt with tallies referred to as "unfunded,"
what historians see as the beginning of a "Financial
Revolution." In the end, "tallies met the same fate as
witches - death by fire."

They were money of the people competing with

moneylending bankers. After 1834 monetary reform, "tally
sticks went up in flames in a huge bonfire started in a
House of Lords stove." Ironically, it got out of control and
burned down Westminster Palace and both Houses of
Parliament, symbolically ending "an equitable era of trade
(by transferring power) from the government to the"
central bank.

Henceforth, private bankers kept government in debt,

never demanding the return of principle, and profiting by
extracting interest, a very lucrative system always paying
off "like a slot machine" rigged to benefit its operators. It
became the basis for modern central banking, lending its
"own notes (printed paper money), which the government
swaps for bonds (its promises to pay) and circulates as a
national currency."

Government debt is never repaid. It's continually rolled

over and serviced, today with no gold in reserve to back it.
Though gone, tallies left their mark. The word "stock"
comes from the tally stick. Much of the original Bank of
England stock was bought with these sticks. In addition,
stock issuance began during the Middle Ages as a way to
finance businesses when no interest-bearing loans were
allowed.

In America, "usury banks fought for control for two

centuries before" getting it under the 1913 Federal
Reserve Act. An issue that once "defined American
politics," today is no longer a topic for debate. It's about
time it was reopened.

Jefferson and Jackson Sound the Alarm

Moneylenders conquered Britain, then aimed to entrap

America - by provoking "a series of wars. British financiers
funded the opposition to the American War for
Independence, the War of 1812, and both sides of the
American Civil War." They caused inflation, heavy
government debt, the chartering of the Bank of the United
States to fund it, thus giving private interests the power to
create money.

Jefferson opposed the first US Bank, Jackson the second,

and both for similar reasons:

-- distrust of profiteers controlling the nation's money; and

-- concern about the nation's banking system falling into

foreign hands.

Jefferson got Congress to refuse to renew the first US Bank

charter in 1811 and learned on liquidation that two-thirds
of its owners were foreigners, mostly English and Dutch
and none more influential than the Rothschilds. Later,
Madison signed a 20-year charter. However, when
Congress renewed it, Jackson vetoed it.

The Powerful Rothschild Family

The House of Rothschild was British in name only. In the

mid-18th century, it was founded in Frankfort, Germany by
Mayer Amschel Bauer, who changed his name to
Rothschild, fathered 10 children, and sent his five sons to
open branch banks in major European capitals. Nathan
was the most astute and went to London. "Over the course
of the nineteenth century, NM Rothschild would become
the biggest bank in the world, and the five brothers would
come to control most of the foreign-loan business of
Europe."

Belatedly, Jefferson caught on to the scheme - that

"private debt masquerading as paper money....owed to
bankers" placed the nation in bondage. In his words,
"deliver(ing) itself bound hand and foot to bold and
bankrupt adventurers and bankers...." Jefferson's idea for
a national bank was a wholly government-owned one
issuing its own credit without having to borrow it from
private interests.

Jackson believed the same thing in calling the Bank of the

United States "a hydra-headed monster." When the bank
charter was renewed, he promptly vetoed it, yet
understood that the battle was just beginning. "The hydra
of corruption is only scotched, not dead," he said.
He was right. The Bank's second president, Nicolas Biddle,
retaliated "by sharply contracting the money supply. Old
loans were called in and new ones refused. A financial
panic ensued, followed by a deep economic depression."
However, Biddle's victory was short-lived. In April 1834,
the House rejected re-chartering the Bank, then January
1835 became Jackson's "finest hour."

He did something never done before or since. He paid off

the first installment of the national debt, then reduced it
to zero and accumulated a surplus. In 1836, the Bank's
charter expired. Biddle was arrested and charged with
fraud. He was tried and acquitted but spent the rest of his
life in litigation over what he'd done. "Jackson had beaten
the Bank." Imagine today if Obama defeated the Fed and
its Wall Street puppeteers instead of embracing them with
limitless riches.

Lincoln Foils the Bankers and Pays with His Life

Like Jackson, Lincoln faced assassination attempts, before

even being inaugurated. "He had to deal with treason,
insurrection, and national bankruptcy" during his first days
in office. Considering the powerful forces against him, his
achievements were all the more remarkable:

-- he built the world's largest army;

-- "smashed the British-financed insurrection,"

-- took the first steps to abolish slavery; it became official

on December 6, 1865 when the 13th Amendment was
ratified, eight months after Lincoln was assassinated;

-- during and after his tenure, the country became "the

greatest industrial giant" in the world;

-- "the steel industry was launched; a continental railroad

system was created; the Department of Agriculture was
established; a new era of farm machinery and cheap tools
was promoted;"
-- the Land Grant College system established free higher
education;

-- the Homestead Act gave settlers ownership rights and

encouraged new land development;

-- government supported all branches of science;

-- "standardization and mass production was promoted

worldwide;"

-- labor productivity increased by 50 - 75%; and

-- still more was accomplished "with a Treasury that was

completely broke and a Congress that hadn't been paid"
as a result.

It was because the government issued its own money.

"National control was reestablished over banking, and the
economy was jump-started with a 600 percent increase in
government spending and cheap credit directed at
production." Roosevelt did the same thing with borrowed
money. Lincoln did it with United States Notes called
Greenbacks. They financed the war, paid the troops,
spurred the nation's growth, and did what hasn't been
done since - let the government print its own money, free
from banker-controlled debt slavery, the very system
strangling us today the way Lincoln feared would happen.

His advisor was Henry Carey, a man historian Vernon

Parrington called "our first professional economist."
Lincoln endorsed his prescription:

-- "government regulation of banking and credit to deter

speculation and encourage economic development;"

-- its support for science, public education and national

infrastructure development;

-- "regulation of privately-held infrastructure to ensure it

met the nation's needs;"
-- government-sponsored railroads and "scientific and
other aid to small farmers;"

-- "taxation and tariffs to protect and promote productive

domestic activity;" and

-- "rejection of class wars, exploitation and slavery,

physical or economic, in favor of a 'Harmony of Interests'
between capital and labor."

Leaders like Jefferson, Jackson and Lincoln are sorely

missed, but for Lincoln it was costly.

He Loses the Battle with "the Masters of European

Finance"

German Chancellor Otto von Bismark (1815 - 1898) called

them that in explaining how they engineered the "rupture
between the North and the South" to use it to their
advantage, then later wrote in 1876:

"The Government and the nation escaped the plots of the

foreign bankers. They understood at once that the United
States would escape their grip. The death of Lincoln was
resolved upon." The last Civil War battle ended on May 13,
1865. Lincoln was assassinated on April 15.

European bankers tried but failed to trap him "with

usurious war loans," at 24 - 36% interest had he agreed.
Using government-issued Greenbacks shut them out
entirely, so they determined to fight back - eliminate the
thorn, then get banker-friendly legislation passed,
achieved through the National Bank Act reversing the
Greenback Law. It was "only a compromise with bankers,
(but) buried in the fine print," they got what they wanted.

Although the Controller of the Currency got to issue new

national banknotes, it was just a formality. In fact, the new
law "authorized the bankers to issue and lend their own
paper money." They "deposited" bonds with the Treasury,
but owned them so "immediately got their money back in
the form of their own banknotes." It was an exclusive
franchise to control the nation's money forcing
government back into debt bondage where it never had to
be in the first place. A whole series of private banks were
then chartered, all empowered to create money in lieu of
debt free Greenbacks.

One other president confronted bankers and paid dearly

as well - James Garfield. In 1881, he charged:

"Whoever controls the volume of money in any country is

absolute master of all industry and commerce....And when
you realize that the entire system is very easily controlled,
one way or another, by a few powerful men at the top, you
will not have to be told how periods of inflation and
depression originate."

Garfield took office on March 4, 1881. On July 2, he was

shot. He survived the next two and half months, then died
on September 19. It was a time of depression, mass
unemployment, poverty, and starvation with no safety net
protections. "The country was facing poverty amidst
plenty," because bankers controlled money and kept too
little of it in circulation - an avoidable problem if
government printed its own.

Gold v. Inflation - Debunking Common Fallacies

The classical "quantity theory of money" holds that "too

much money chasing too few goods" causes inflation,
excess demand over supply forcing up prices. The counter
argument is that if paper money is tied to gold, an
inflation-free stable money supply will result. Another
fallacy is that adding money (demand) raises prices only if
supply remains fixed.

In fact, if new money creates new goods and services,

prices stay stable. For thousands of years, the Chinese
kept prices of its products low in spite of their money
supply being "flooded with the world's gold and silver, and
now with the world's dollars....to pay for China's cheap
products."
What's important is not what money consists of but who
creates it. "Whether the medium of exchange (is) gold or
paper or numbers in a ledger," when created by and owed
to private lenders with interest, "more money would
always be owed back than was created...spiraling the
economy into perpetual debt....whether the money takes
the form of gold or paper or accounting entries."

Today's popularism is associated with the political left.

However, 19th century Populists saw "a darker, more
malevolent force....private money power and the
corporations it had spawned, which was threatening to
take over the government unless the people intervened."

Lincoln also feared it saying:

"I see in the near future a crisis approaching that unnerves

me and causes me to tremble for the safety of my
country. Corporations have been enthroned, an era of
corruption in high places will follow, and the money power
of the country will endeavor to prolong its reign by
working upon the prejudices of the people until the wealth
is aggregated in the hands of a few and the Republic is
destroyed."

Today's America is the reality he feared. A tiny elite own

the vast majority of the nation's wealth in the form of
stocks, bonds, real estate, natural resources, business
assets and other investments. In contrast, 90% of
Americans have little or no net worth. Of all developed
nations, concentrated wealth and inequality extremes are
greatest here with powerful bankers sitting atop the
pyramid, now more than ever with their new riches
extracted from public tax dollars and Fed-created money.

A follow-up article will discuss how "bankers capture(d)

the money machine."

Stephen Lendman is a Research Associate of the Centre

for Research on Globalization. He lives in Chicago can be
reached at lendmanstephen@sbcglobal.net.
Also visit his blog site at sjlendman.blogspot.com and
listen to The Global Research News Hour on
RepublicBroadcasting.org Monday - Friday at 10AM US
Central time for cutting-edge discussions with
distinguished guests on world and national issues. All
programs are archived for easy listening.

http://www.globalresearch.ca/index.php?
context=va&aid=13461
posted by Steve Lendman @ 3:13 AM
Monday, May 04, 2009

Unreported or Underreported Real Pandemics, Not

Fake Ones Like Avian and Swine Flu
Unreported or Underreported Real Pandemics, Not Fake
Ones Like Avian and Swine Flu - by Stephen Lendman

In his April 29 Global Research.ca article, F. William

Engdahl discussed "Flying Pigs, Tamiflu and Factory
Farms" and shed light on the current swine flu hysteria -
hyped by the same folks who engineered the 2006 (H5N1)
Avian Flu scare that had more bark than bite. But it proved
hugely profitable for drug makers like Roche and Gilead
Sciences, the company Donald Rumsfeld led as chairman
from 1997 - 2001 and remains a major shareholder.
Although he won't discuss his "private finances," he's
likely benefitting handsomely from the current panic.

Earlier Avian Flu reports were like the following:

-- numerous ones from public health journalists saying

governments are "thoroughly unprepared" for a pandemic
flu outbreak; as a result, it could lead to potential "societal
breakdown, chaos, and panic;"

-- Robert Madelin, the EU's health and consumer

protection department director-general, cited scientists'
predictions of a potential two - seven million death toll
worldwide, then saying: "It's when and not if;"

-- the World Bank estimating that an Avian Flu (H5N1)

outbreak could kill up to 70 million worldwide and cause
$2 trillion in economic losses; and

-- a scary July 2006 consumeraffairs.com report citing

information like the above and more, then concluding:
"There have so far been no known cases of H5N1 (Avian
Flu) in the US."

When all was said and done, the global tempest was no
more than a teapot maximum few hundred deaths, but,
according to Engdahl, a Pentagon-initiated biowarfare
project threatens something far graver. In an August 2008
article titled "The Pentagon's alarming project: Avian Flu
Biowar Vaccine," he cited "alarming evidence" of a
cooperative pharmaceutical industry-Pentagon effort to
genetically weaponize the H5N1 virus, then unleash a
"selective pandemic through the process of mandatory
vaccination(s) with an alleged vaccine" offered as
protection.

If today's Swine Flu scare is for this purpose, indeed it is

worrisome, but that remains to be seen. What's known is
what Engdahl reported in his April 29 article:

that "In October 2005 the Pentagon ordered vaccination of

all US military personnel worldwide against what it called
Avian Flu, H5N1 (and) budgeted more than $1 billion to
stockpile the drug Oseltamivir, sold under the name
Tamiflu. (At the time, George Bush asked) Congress to
appropriate another $2 billion for Tamiflu stocks." This
drug "is no mild candy to be taken lightly. It has heavy
side effects" that potentially can kill.

Nonetheless, during the current panic, its sales have

skyrocketed, and that alone worries some enough to
wonder what's more dangerous - the flu or the
combination of the FDA approving potentially deadly drugs
like Tamiflu, the dominant media hyping a non-existant
threat, public health organizations terrifying people with
heightened alerts, and government officials like
Department of Homeland Security secretary Janet
Napolitano saying: "We are proceeding as if we are
preparatory to a full pandemic" even though:
-- no evidence suggests one;

-- flu epidemics are extremely rare, certainly global ones

with the potential to kill millions;

-- influenza (flu) is a common viral illness;

-- it exists in numerous strains;

-- most remain infectious for about a week and produce

symptoms including fever, coughing, nausea and at times
vomiting - annoying but rarely life-threatening; and

-- simple good health practices are more effective than

dangerous drugs, including frequent hand washing, use of
disinfectants and detergents, and abstaining from high-
risk foods like all GMO ones as well as beef, poultry, and
pork - raised under unsanitary conditions on factory farms
that "are notorious breeding grounds for toxic pathogens."

That said, major unreported or underreported pandemics

abound, real ones. None, however, make headlines or
arouse public or media concern. Below are some.

Wars, Massacres, Genocide, and Violence

Wars indeed are reported but not their toll, human or

otherwise. In the past century alone, scores of millions
died and even greater numbers of survivors suffered
horrendously. Currently, and in recent years alone, wars
and conflicts continue globally, including in Iraq,
Afghanistan, Occupied Palestine, Pakistan, Somalia, the
Democratic Republic of Congo, Sudan, Sri Lanka, Uganda,
Kashmir, Haiti, Ivory Coast, Southern Nigeria, Colombia,
and elsewhere plus the mounting "war on terrorism" toll
that's totally blacked out in news reports.

Gideon Polya edits the Body Count web site, and in 2007
published a book titled: "Body Count. Global avoidable
mortality since 1950." As a biological scientist, he calls it
"a carefully researched (country by country)" estimate
totaling about 1.3 billion needless human deaths,
including 140,000 under-five American infants in the last
seven years alone according to UN demographic data.
Globally 16 million avoidable deaths occur annually,
including 10 million under age-five ones.

Polya states: "There is no public discussion of the actual

human cost of First World policies" that are the chief
cause of global carnage in all forms, including wars, other
conflicts, massacres and genocide, starvation and famine,
disease, as well as preventable poverty and neglect. He
adds: "An apocalyptic quartet of violence, deprivation,
disease and LYING (including suppressing the truth) is
responsible for the continuing carnage.

Polya defines avoidable mortality as "the difference

between the actual deaths in a country and the deaths
expected for a peaceful, decently governed country with
the same demographics." His main source was UN
Population Division data for "essentially every country in
the world since 1950 - (for) population, death rate, birth
rate, population breakdown, (and) under-5 infant mortality
rate."

As violent occupiers, offending countries include:

-- Britain responsible for 727 million deaths in dozens of

countries, including Korea, Vietnam, Laos, Cambodia,
Afghanistan and Iraq;

-- France responsible for 142 million deaths in many

countries, including Algeria, Vietnam, Haiti, and Ivory
Coast;

-- the US responsible for 82 million deaths in Korea,

Vietnam, Cambodia, Laos, Haiti, Afghanistan, Iraq and
elsewhere; and

-- Israel responsible for 24 million deaths in Palestine,

Jordan, Lebanon and Egypt.

Polya calls the occupations of Palestine, Afghanistan, and

Iraq (among others) genocide as defined under Article 2 of
the 1948 Convention on the Prevention and Punishment of
the Crime of Genocide that states:

"In the present Convention, genocide means any of the

following acts committed with intent to destroy, in whole
or in part, a national, ethnical, racial or religious group, as
such:

(a) Killing members of the group;

(b) Causing serious bodily or mental harm to members of

the group;

(c) Deliberately inflicting on the group conditions of life

calculated to bring about its physical destruction in whole
or in part;

(d) Imposing measures intended to prevent births within

the group;

(e) Forcibly transferring children of the group to another

group."

Post-1967, Palestine sustained 300,000 avoidable deaths.

Post-1990, Iraq had about four million, up to half that
number since March 2003, and since 2001, Afghanistan
suffered three to seven million. These tolls mount daily,
yet are virtually blacked out in news reports.

Numerous other pandemics abound as well, mostly below

the radar.

Preventable Deadly Chronic Diseases

They're numerous and include heart disease, cancer,

malaria, tuberculosis, diabetes, chronic respiratory
diseases, HIV/AIDS, stroke, and many others, the result of
major risk factors like obesity, high blood pressure,
smoking, poor diet, stress, lack of exercise, poverty,
deprivation, and inadequate, unavailable, and/or poor
quality public health.
In two October 2005 articles titled "The neglected
epidemic of chronic disease" and "Preventing chronic
diseases: how may lives can we save," The (UK-based)
Lancet (medical journal) stated that many of them often
"remain marginal to the mainstream of global action on
health," yet they "represent a huge proportion of human
illness" and deaths.

In 2005, around 35 million people died from heart disease,

cancer, stroke, lower respiratory infections, and numerous
other illnesses for lack of prevention, control, or effective
effort to treat them.

Annually, over a half million women die unnecessarily in

childbirth, and for every death another 20 suffer injury,
infection or disease for lack of available, affordable quality
care - affecting about 10 million women in total. As a
result, one million children are left motherless each year
and become 10 times more likely to die within two years
of their mothers' death. The great majority of maternal
deaths would be preventable if a working health system
were available to save lives.

A 2005 World Health Report cited almost 11 million deaths

among children under five from largely avoidable causes,
including four million babies who don't survive their first
month of life. Why aren't world governments addressing
this and acting to save lives! Why don't the major media
explain it!

Including all chronic diseases, a mere 2% annual death

reduction "would avert 36 million deaths by 2015" or the
equivalent of about "500 million years of life over the 10"
year span from 2006 - 2015, mostly in low and middle
income countries, and under half will be for people
younger than 70 years.

By 2015, The Lancet projects around 64 million deaths

categorized under three major groupings:

-- communicable, maternal, perinatal, and nutritional;

-- chronic, non-communicable; and

-- injuries.

In 2005, chronic diseases accounted for 72% of the global

total for the older-30 aged population. The Lancet
concluded that "the serious consequences of chronic
diseases and their (preventable) risk factors are not
recognised by the international health community," at
least in terms of financial commitment or concern.

Further, although high-risk behavior (smoking, poor diet,

etc.) takes its toll, low-income countries experience a
larger problem, especially for the population segment
without easy access to good lifestyle choices, including
the availability of quality health care.

An "insidious myth" is that these conditions aren't

preventable because people bring them on themselves.
"The reality could hardly be more different" with
numerous factors playing a part, including environmental
and economic pressures that take a huge toll on human
health.

Differences between high and low income countries are

marked and show the successful effects of intervention.
From 1970 - 2000, around 14 million heart disease deaths
were averted in America alone. Overall, a relatively small
number of "modifiable risks" account for more than half of
all chronic disease deaths. Reducing them would have a
dramatic effect through:

-- individual interventions;

-- population-based ones; and

-- macroeconomic ones with enough desire and fiscal

allocations to do it.

The combination of all three are needed for chronic

disease prevention and control plus one more -
widespread dominant media promotion the same way it
spreads fear by hyping scams like Avian and Swine Flu.
The Lancet also stated:

"Our vision for the future extends beyond measuring risk

behavior and counting the dead, and instead encourages
all sectors of society (including the media) to contribute
effective ways of reducing health risks and promoting
longer, healthier lives." It's for those sectors to get on with
the task instead of acting counterproductively, pursuing
profits at the expense of human health, and ignoring the
global pandemic of preventable illnesses and diseases.

Other global pandemics include:

-- 1.3 billion people live on less than $1 dollar a day,

including over 500 million existing in "absolute poverty"
according to the World Bank; another three billion survive
on about $2 a day; poverty this extreme kills;

-- starvation and famine kill about 15 million children

annually;

-- according to the World Health Organization (WHO), one-

third of the world population is ill-fed and another one-
third is starving; malnutrition affects one in twelve people,
including 160 million children under age five; in America,
one-sixth of the elderly population is ill-fed, and one out of
eight children under 12 endures daily hunger;

-- global hunger, starvation and famine persist in spite of a

plentiful world food supply;

-- five million annual smoking-related deaths occur;

-- two million annual alcohol-related deaths;

-- about one million annual suicides;

-- 400,000 annual auto and truck accident deaths;

-- 200,000 annual illicit drug-related deaths; two - three

times that number die from legal drugs;

-- about 30,000 annual US gun-related deaths;

-- unknown annual tens of thousands of deaths from

pollution, food and water contamination, nuclear radiation
exposure, and domestic violence, especially to women,
children and the elderly; and

-- according to the World Health Organization: "The world's

biggest killer and the greatest cause of ill health and
suffering across the globe is listed almost at the end of the
International Classification of Diseases (code Z59.5) --
extreme poverty."

These are real preventable pandemics, not fake ones like

Swine Flu being hyped for profit, to spread fear, and divert
public attention from real problems like the above-listed
ones, the deepening global economic holocaust, the
systematic looting of national wealth, and the steady path
America is on to becoming a militarized banana republic
police state.

Stephen Lendman is a Research Associate of the Center

for Research on Globalization. He lives in Chicago and can
be reached at lendmanstephen@sbcglobal.net.

Also visit his blog site at sjlendman.blogspot.com and

listen to The Global Research News Hour on
RepublicBroadcasting.org Monday - Friday at 10AM US
Central time for cutting-edge discussions with
distinguished guests on world and national issues. All
programs are archived for easy listening.

http://www.globalresearch.ca/index.php?
context=va&aid=13461
posted by Steve Lendman @ 3:16 AM
Thursday, April 30, 2009

FDR's New Deal v. Obamanomics

FDR'S New Deal v. Obamanomics in Their First 100 Days -
by Stephen Lendman
With good reason, progressive economists reflect
positively on Roosevelt's New Deal even though:

-- it failed to end the Great Depression;

-- had many flaws;

-- did too little for blacks, women, immigrants, small

farmers, agricultural workers, and the poor;

-- let blacks be persecuted, discriminated against, and in

the South denied their voting rights and lynched;

-- 10 weeks after Pearl Harbor, he signed an Executive

Order interning loyal Japanese American citizens because
of their ethnicity; smaller numbers of German and Italian
Americans as well;

-- despite popular discontent with US broadcasting, he

signed the 1934 Communications Act establishing
permanent broadcasting law that handed the public
airwaves to entrenched interests and laid the foundation
for today's corrupted media; he called it a "New Deal in
Radio Law," indeed for the broadcasters that profited;

-- his main task was to save capitalism, not remake

America into a social democracy beyond what was
necessary at the time;

-- like all elected officials, Roosevelt was above all a

politician who wanted to be re-elected; and

-- it took a world war to restore prosperity.

Nonetheless, his achievements were impressive, and the

differences between then and now are stark - during the
two gravest economic periods in US history. Obama
embraces the Money Trust. Roosevelt, rhetorically at least,
confronted "the unscrupulous money changers."

The problem is what he did, how, what he didn't do; what

he could have done better; and if he had, maybe the Great
Depression might not have been as Great or, in fact, Great
at all.

He failed to do what Jackson and Lincoln did - return

money-creation power to the people, as the Constitution
mandates, instead leaving it in private hands - the very
"moneychangers" he denounced with the Federal Reserve
atop its pyramid.

Rather than finance New Deal programs with interest-free

money, he chose debt obligations to private bankers, left
the Fed's power unchanged, and turned deep recessionary
years into the Great Depression.

Government-created money would have eliminated the

national debt, income taxes, and most important given the
gravity of the crisis, would have produced stable growth
and prosperity without needing a world war to get it.
Lincoln did it, the Civil War notwithstanding, and so did
early colonists with interest-free money. Their decision to
break free from the Bank of England (run by bankers)
sparked the War of Independence. Britain wanted its
power back, colonists resisted, hence the war.

A future article addresses this topic and much more. This

one focuses on Roosevelt's first 100 days v. Obama's and
the differences in their approaches - helping people, not
bankers, the above comments notwithstanding; curbing
speculation, not protecting it; imposing regulations and
enforcing them, not disdaining them; establishing social
services, not ignoring public needs; and much more.

In all, 15 landmark laws were enacted that (imperfections

aside) set a standard for dealing with a troubled economy
- so grave in March 1933 that (except for the Civil War
period), machine guns protected government buildings
because the nation's financial system had collapsed,
peoples' life savings and jobs were being lost, and it was
feared they'd react violently as a result.

The Emergency Banking Act

Roosevelt took office on March 4, 1933. The next day
(through a special congressional session), he declared a
four-day bank holiday. On March 9, the Emergency
Banking Act passed that closed insolvent banks, then
reorganized and reopened viable ones under Treasury
supervision, with federal loans available if needed.

By mid-March, one-half of all banks with 90% of deposits

were judged solvent and reopened. Forty-five percent of
the others were reorganized under "conservators." The
rest were shut down. By mid-April, over 12,800 banks
were operating, 4000 fewer by year end after closures and
mergers, and by 1935 one-third were nationalized, an idea
the Obama administration rejects, but sooner or later will
have no alternative but to embrace for the large most
troubled ones.

The Bank Act of 1933 - Glass-Steagall

On June 16, the Bank Act of 1933 (Glass-Steagall) created

the FDIC insuring bank deposits up to $5000 and
separated commercial from investment banks and
insurance companies, among other provisions to curb
speculation. Senator Carter Glass was its prime mover and
got Senator Henry Steagall to go along by attaching his
amendment to protect deposits. For years, Glass believed
bankers should stick to their knitting, not deal in or hold
corporate securities. He blamed them for the 1929 crash,
the subsequent bank failures, and Great Depression that
followed. The Bank Act of 1933 passed quickly to curb
them.

Much more as well and largely people-oriented, not

Obama's agenda to reward banksters with trillions of
public dollars. More on that below.

Other economic measures enacted were:

The Reconstruction Finance Corporation (RFC)

In 1932, Herbert Hoover created it, but Roosevelt

streamlined its bureaucracy and increased its funding to
recapitalize troubled banks and corporations. Under
Hoover, it had $500 million in capital with authorization to
borrow up to $1.5 billion more. In its first six months, it
loaned banks over $800 million but didn't halt the crisis.
Like today, they retained their reserves, shunned lending,
and, besides, public trust was lacking.

Roosevelt's New Deal changed things. Under the 1933

Emergency Banking Act, RFC could buy bank equity and
within a year bought more than $1 billion, or about one-
third of total banks' capital. At the same time, government
measures and oversight restored public confidence
enough to attract hundreds of millions in deposits that
pumped life into troubled banks if only for starters.

During his tenure, Roosevelt used RFC funding for

agencies like the Home Owners' Loan Corporation, Farm
Credit Administration, Rural Electrification Administration,
Public Works Administration, and others as well as
emergency relief loans to states, something Hoover never
did, let alone establish New Deal policies to let him.

The Securities and Exchange Act of 1934 - Following the

Securities Act of 1933

The 1933 law (enacted May 27, 1933) required that offers
and sales of securities be registered, pursuant to the
Constitution's interstate commerce clause. Previously,
they were governed by state laws, known as "blue sky
laws" to protect against fraud.

The 1934 law (enacted June 6, 1934) regulates secondary

trading of financial securities and established the SEC
under Section 4 to enforce the new Act, then later the
Trust Indenture Act of 1939, the 1940 Investment
Company Act and Investment Advisers Act, Sarbanes-
Oxley of 2002, and the 2006 Credit Rating Agency Reform
Act.

Overall, it's to enforce federal securities laws, the

securities industry, the nation's financial and options
exchanges, and other electronic securities markets
unknown in the 1930s along with derivatives and other
forms of speculation. Then and now, it's charged with
uncovering wrongdoing, assuring investors aren't
swindled, and keeping the nation's financial markets free
from fraud. At least that was the idea. Eventually, the
fulfillment fell far short of the promise.

In the 1930s, regulation worked by requiring that

salesmen and brokers be licensed, prospectuses be used,
full disclosure provided, and enough enforcement as well
to cut fraud significantly. In addition, Glass-Steagall
eliminated many 1920s shenanigans, a decade, like today,
when Wall Street did as it pleased, created speculative
excesses, and caused the inevitable crash.

Reforms were simpler to implement at a time fewer than

5% of the public owned stocks compared to 50% today,
and most were sophisticated enough to know what they
were doing or thought so. Also, there were no 401ks, IRAs,
or a proliferation of mutual and hedge funds like today let
alone:

-- securitization/structured finance asset-backed securities

(ABSs), mortgage-backed securities (MBSs), collateralized
mortgage obligations (CMOs), collateralized debt
obligations (CDOs), collateralized bond obligations (CBOs),
credit default swaps (CDSs), and collateralized fund
obligations (CFOs) - combined, sliced, diced, packaged,
repackaged, and sold in tranches to sophisticated and
ordinary investors, many to mutual fund buyers, never
knowing they owned any, let alone were being swindled;
and

-- derivative futures, options, forwards, swaps, warrants,

leaps, baskets, swaptions, and whatever else Wall Street
minds can invent, package, and sell in various ways and
forms - too much of it not on the up and up as the current
crisis revealed.

Home Owners' Loan Corporation (HOLC)

It was established in 1933 under the Homeowners
Refinancing Act to refinance homes and prevent
foreclosures, something largely missing in Obama's
Homeowners Affordability and Stability Plan, the so-called
mortgage bailout. It mainly helps lenders, does nothing for
homeowners under water or those with second mortgages.
Nor does it address plunging property valuations and its
affect on millions.

In contrast, HOLC extended short and longer-term loans

for up to 30 years and prevented the loss of over a million
homes (about one-fifth of those owned with mortgages,
the equivalent of 10 million today) at a time half were in
default, and annual mortgage lending and residential
construction was down 80%.

States began enacting foreclosure moratoriums at a time

the average owner was two years in delinquency and
three years behind on property taxes. In today's dollars,
relative to current GDP, HOLC was initially authorized to
issue $200 billion in bonds, acquire defaulted properties in
exchange for them from lenders and investors, then
refinance mortgages at lower rates (at a maximum 5%) to
keep owners from losing their homes.

An essential HOLC element was for lenders and investors

to take losses to provide more affordable mortgages for
their holders - something missing in Obama's plan that
lets issuers add unpaid balances to principal in return for
lower rates and term extensions, meaning defaults are
delayed, not stopped, and as valuations keep falling,
millions more may lose their homes.

HOLC was hugely successful but not perfect. Given the

dire conditions of the times, around 200,000 owners
eventually defaulted but 80% were saved, far different
from today with over four million foreclosures and 2009
estimates ranging from three million more to much higher
numbers, plus many more in 2010.

The Economy Act

It was enacted on March 14, 1933 to deliver on
Roosevelt's campaign promise to balance the "regular"
non-emergency budget, be fiscally prudent, and do it by
cutting government employees' salaries and veterans
pensions by 40% for a $500 million savings at the worst
possible time to do it. As a candidate, Roosevelt said
deficit spending impaired recovery and hurt business
confidence. However, as president, New Deal spending
took precedence. By 1936, even four million veterans got
their $1.5 billion bonus, in Bonus Bill cash and welfare
benefits over Roosevelt's veto.

The Beer-Wine Revenue Act

On February 17, 1933, a dismal experiment ended when

the Blaine Act repealed Prohibition, the Constitution's 18th
Amendment, then formally adopted iti in December under
the 21st Amendment.

On March 22, passage of the Beer-Wine Revenue Act

levied a $5 tax on every barrel of beer and wine and
reenacted parts of the Webb-Kenyon Act to protect states
with laws prohibiting alcoholic beverages in excess of
3.2%. States also were left in charge of the sale and
distribution of spirits.

The Civilian Conservation Corps (CCC)

The March 31, 1933 Emergency Conservation Work Act

(CCC) put unemployed men to work on numerous projects
- building roads, bridges, parts of dams, developing state
parks, planting trees, and various forestry and recreational
programs for the Forest Service, National Park Service,
Fish and Wildlife Service, Bureau of Reclamation, Bureau
of Land Management, and Soil Conservation Service.

Reportedly, it was FDR's favorite initiative. On April 5,

Executive Order 6101 launched it by appointing a Director
of Emergency Conservation Work "By virtue of the
authority vested in me by the (CCC) Act of Congress...." It
had great public support. By year end 1935, it employed
over 600,000 in 2650 camps (including supervisors and
administrators) in every state engaged in more than 100
kinds of work.

Civilian Works Administration (CWA)

On May 12, 1933, enactment of the Federal Emergency

Relief Act established the Federal Emergency Relief
Administration (FERA) to provide funds to states (from May
through December 1935) to reduce unemployment. It set
up CWA, supplied over $3 billion for various work and
transient projects, created temporary jobs for over 20
million, then was gradually ended in favor of the Works
Progress Administration (WPA).

Before it did, it was considered a significant initiative with

Washington taking responsibility for the welfare of
millions, both employable and unemployable, at a time of
desperate need. Its flexibility and high administrative
standards made it a model for later relief efforts.

The National Industrial Recovery Act (NIRA)

Passed on June 16, 1933, Roosevelt called it "the most

important and far-reaching (law) ever enacted by the
American Congress." It established the National Recovery
Administration (NRA) as an initiative to revive economic
growth, encourage collective bargaining, set maximum
work hours, minimum wages, at times prices, and forbid
child labor in industry.

Business response was mixed. GE helped write it, and the

Chamber of Commerce said it was "a most important step
in our progress towards business rehabilitation." In
contrast, the National Association of Manufacturers and
Henry Ford, among others, opposed it.

So did the Supreme Court unanimously in its Poultry Corp.

v. United States (May 1935) ruling that NIRA/NRA "lay
outside the authority of Congress," infringed on states'
rights, unreasonably stretched the Commerce Clause, and
gave legislative powers to the president in violation of the
Nondelegation doctrine. It added that "extraordinary
conditions do not create or enlarge constitutional powers."

By then, the Act was increasingly unpopular, and many

doubted its effectiveness. Some economists called it
counterproductive and damaging to economic stability by
weakening antitrust laws and allowing collusion.

Public Works Administration (PWA)

It was created by NIRA for PWA-initiated projects to

provide jobs, increase purchasing power, improve public
welfare, and help revive the economy. Some called it
designed to prime the pump and spend "big bucks on big
projects," including electricity-generating dams, airports,
schools, hospitals, affordable housing, even aircraft
carriers.

While it operated, it spent over $6 billion but did little to

lift the economy or reduce unemployment because it
didn't do enough toward for either. When the nation
moved toward war production, PWA became irrelevant
and was ended.

Works Progress Administration (WPA)

It was a post-first 100 day initiative funded by the April

1935 Emergency Relief Appropriation Act and launched by
Roosevelt's May 6 Executive Order 7034 "to move from
the relief rolls to work on (various) projects or in private
employment the maximum number of persons in the
shortest time possible."

It replaced FERA, CWA and PWA to became the largest

New Deal agency, employing millions in every state,
especially in rural and western areas - those able to work,
not the aged, handicapped or otherwise unemployable to
be helped mostly at state and local levels. It and other
programs eventually found jobs for about 60% of the
nation's unemployed, paying around $50 a month (on WPA
jobs) that went a lot further then than now.

WPA focused heavily on construction and developmental

programs but also in areas of education, the arts, health,
and other community projects for professional and white
collar workers as well as efforts to feed children and
redistribute food, clothing and provide housing.

Most observers called WPA a success. Others, however,

objected to its competing unfairly with business,
dispensing jobs as political favors, undercutting prevailing
wages, and letting social protest themes be part of various
arts projects. Once war production began, WPA shifted
focus in that direction. By mid-1943, most alphabet soup
agencies ended in favor of business as usual taking over
post-war.

The Tennessee Valley Authority (TVA)

On May 18, 1933, the Tennessee Valley Authority Act

became law creating TVA as a federally-owned corporation
to provide navigation, flood control, electricity generation,
economic development, and promote agriculture in the
depression-impacted Tennessee Valley area covering most
of Tennessee as well as parts of Alabama, Mississippi,
Kentucky, Georgia, North Carolina, and Virginia. It was the
federal government's largest regional planning agency
and remains so.

From 1933 - 1944, it built 16 dams and a steam plant,

produced electricity cheaply, and by 1941 was its largest
producer in the country. It also established the Electric
Home and Farm Authority (EHFA) to help farmers buy
major electric appliances with EHFA low-cost financing.

In Ashwander v. TVA (February 1936), the Supreme Court

ruled it constitutional, noting that regulating interstate
commerce includes doing it for streams. They require
flood control for navigability, and electricity generation is
a by-product of this effort.

Today, TVA remains America's largest public power

company, with over 34,600 megawatts in generating
capacity serving about 8.5 million customers.
The Agricultural Adjustment Act (AAA)

Enacted on May 12, 1933, it restricted production by

paying farmers to reduce and/or destroy crops and kill
livestock at a time millions were impoverished and
hungry. The idea was to decrease supply and raise prices
(at the worst possible time) with farmers getting
government payments for agreeing not to plant specific
crops, not produce milk and butter, nor raise pigs and
lambs. In addition, the Agriculture Secretary had exclusive
powers to license food processors to control supply and
raise prices.

In United States v. Butler (January 1936), the Supreme

Court ruled that the tax underwriting AAA was
unconstitutional because, among other reasons, it
assessed one farmer to pay another. Congress later
achieved part of AAA's goals through the 1935 Soil
Conservation and Domestic Allotment Act until enactment
of the second AAA in February 1938. It was funded
through general taxation and thus constitutionally
acceptable to the High Court.

AAA was conceptually flawed. It ran counter to vitally

needed policy to produce low-cost food, make it affordable
for millions, and relieve hunger. It also subsidized owners,
not tenant farmers or sharecroppers, and ended up
depressing incomes and increasing unemployment at the
worst possible time.

The Farm Credit Act of 1933

Enacted on June 16, 1933 (the last of FDR's first 100

days), it was established to help farmers refinance
mortgages over an extended time at below-market rates,
and by so doing, helped them stay solvent and survive. It
also created the Farm Credit Administration to make loans
for the production and marketing of agricultural products
as well as regulate and examine banks, associations, and
related Farm Credit System entities - a network of
borrower-owned financial institutions to provide credit to
farmers, ranchers, and agricultural and rural utility
cooperatives.

The May 1933 Emergency Farm Mortgage Act, established

during the time of the Dust Bowl, provided refinancing
help for farmers facing foreclosure.

An Overall Assessment

Despite its flaws and failures, FDR's New Deal was

remarkable in what it accomplished. It helped people, put
millions back to work, reinvigorated the national spirit,
built or renovated 700,000 miles of roads, 7800 bridges,
45,000 schools, 2500 hospitals, 13,000 parks and
playgrounds, 1000 airfields, and various other
infrastructure, including much of Chicago's lakefront
where this writer lives. It cut unemployment from 25% in
May 1933 to 11% in 1937, then it spiked before early war
production revived economic growth and headed it lower.

The Great Depression was, in fact, two severe recessions:

-- from summer 1929 - March 1933;

-- followed by a 1933 - 1937 recovery; impressive enough

for the Dow Industrials to rise from a July 1932 low of 43 to
187 in February 1937 for a near-335% gain; however, the
rally followed an 89% decline so even the new top ended
up 50% below the 1929 peak of 385, a level it took 25
years to regain; then

-- from May 1937 - June 1938, another slump followed

(and a 47% Dow average decline) in response to reduced
government spending before early war preparations
produced recovery.

It might have been stronger and quicker had Roosevelt

embraced all of Keynes' advice in a December 31, 1933
New York Times "Open Letter" (republished on November
25, 2008 in the London Guardian) to:

-- "spend, spend, spend;"

-- supply "cheap and abundant credit;"

-- stress "speed and quick" recovery over reform that can

come later;

-- hold back on recovery-impeding reforms initially;

-- direct recovery to "increas(ing) the national output,"

increasing purchasing power, and "put(ting) more men to
work;"

-- let rising output, not government policies, produce price

increases; "increasing aggregate purchasing power is the
right way to get prices up and not the other way around;"

-- undertake "a large volume of Loan-expenditures under

Government auspices" but work cooperatively with
business; and

-- concentrate on projects that "can be made to mature

quickly on a large scale, as for example the rehabilitation
of the physical condition of the railroads."

Roosevelt did much of the above, but not enough of it,

then in 1937 declared victory too early and precipitated
another downturn. Nonetheless, he deserves praise for
what he accomplished during the gravest ever economic
period to that time. He confronted it head-on with
emergency first 100 days measures and vital reforms,
Keynes advice notwithstanding, including:

-- the above-cited "first 100 days" legislation, then later

-- the National Labor Relations Board with the passage of

the 1935 Wagner Act, that, for the first time, let labor
bargain collectively on equal terms with management -
something very much eroded in today's environment;

-- the 1935 Social Security Act that to this day is the single
most important federal program responsible for keeping
seniors and others eligible out of poverty;
-- unemployment insurance in partnership with the states;
by 1935, nearly all the unemployed got social benefit
payments;

-- the Revenue Acts of 1934 and 1935, so-called "Soak the

Rich" ones to make high income earners pay their fair
share;

-- the Revenue Act of 1936 that established an

"undistributed profits tax" on corporations;

-- the Revenue Act of 1937 that cracked down on tax

evasion;

-- a minimum wage, a 40-hour week, and time-and-a-half

for overtime guarantees under the 1938 Fair Labor
Standards Act (FLSA);

-- public housing under the 1934 National Housing Act

(creating the Federal Housing Administration - FHA) to
make housing and mortgages more affordable through
FHA and Federal Savings and Loan Insurance Corporation
(FSLIC) financing;

-- the May 1935-established Rural Electrification

Administration (REA) to bring electrical power to rural and
remote areas;

-- the 1937 Housing Act (Wagner-Steagall Act) providing

subsidies to local public housing agencies;

-- the Railroad Retirement System, separate from Social

Security, administering a social insurance program for
railroad workers and their families;

-- the National Youth Administration (NYA) under WPA to

help youth unemployment through grants to high school
and college students in return for work; it also aided
unemployed young people not in school with on-the-job
training in federally-funded work projects to provide
marketable future skills; and
-- more initiatives in an effort to reform and revive the
economy.

Obamanomics - Obama's Bad Deal

As stated above, Roosevelt confronted "the money

changers," even though mostly through rhetoric. Obama,
like Bush, embraces them openly to the tune of $12.8
trillion "spent, lent or guaranteed," according to
Bloomberg on March 31 while people needs go begging at
a time they're most essential. He leads:

-- an imperial enterprise presided over by a war cabinet

engaged in unbridled militarism, aggressive wars and
occupation with a budget well above $1 trillion annually;

-- a bogus democracy under a homeland police state

apparatus;

-- an anti-labor job destruction offensive, from 800,000 -

one million a month since his inauguration, compared to
FDR creating employment for most workers and reviving
the national spirit; and

-- a criminal cabal in charge of the greatest ever wealth

transfer in history - from the public to the top 1%, mainly
powerful corrupt Wall Street institutions.

As Michel Chossudovsky explains, his budget reflects "the

most drastic curtailment in public spending in American
history." It's a "War Budget (affecting) all major federal
(programs except): 1. Defense and the Middle East War(s
and whatever new ones are planned); 2. the Wall Street
bank bailout, (and) 3. Interest payments (approaching
$500 billion annually) on a staggering (growing) public
debt."

People needs don't matter. They get little more than lip
service, and in his April 14 Georgetown University
economic policy speech, Obama promised
disappointment. When he should have been Rooseveltian,
he defended bank bailouts, suggested more are coming,
championed "free market" rubbish, and presented "five
pillars (to) make the new century another American
(one):"

-- no-teeth financial regulations;

-- education reform, meaning the Bush agenda to end

public education;

-- renewable energy and technology investments, likely to

be far less than needed and for the wrong things;

-- health care reform minus Medicare-for-all to assure

profits trump human need; and

-- "restoring fiscal discipline (by) reduc(ing) discretionary

spending for domestic programs" at the same time it's
been recklessly abandoned for bankers and
militarism....we (cannot solve this problem by trimming a
few earmarks; (the) biggest (budget costs) are entitlement
programs like Medicare, Medicaid, and Social Security all
of which get more expensive every year....So if we want to
get serious about fiscal discipline - and I do - we will have
to get serious about entitlement reform" - meaning phase
them out in future years, or something close to that.

Unless policies like these are reversed, this agenda is

heading the nation toward insolvency, tyranny and ruin
with ordinary people hurt most.

Simon Johnson is a former IMF chief economist, now

teaching at MIT's Sloan School of Management. His article
in the Atlantic's May issue, titled "The Quiet Coup,"
suggests that Wall Street (a "financial oligarchy") is
turning America into a "banana republic," given the depth,
similarities and shock "reminiscent of" earlier crises in
Southeast Asia, Russia, Latin America, and other
developing countries.

His analysis is long and detailed, concluding as follows:

"The conventional wisdom among the elite is still that the

current slump 'cannot be as bad as the Great Depression.'
This view is wrong. What we face now could, in fact, be
worse than the Great Depression - because the world is
now so much more interconnected and the banking sector
so big. We face a synchronized downturn in almost all
countries, a weakening of confidence among individuals
and firms, and major problems for government finances. If
our leadership wakes up to the potential consequences,
we may yet see dramatic action on the banking system
and a breaking of the old elite."

So far policy is mirror-opposite, hugely destructive,

publicly papered over but evident in divergent G 20 views,
raging on London and other European streets, to a lesser
degree in America, and openly stated by Czech prime
minister/EU president Mirek Topolanek calling
Washington's stimulus "a way to hell (that will) undermine
the stability of" global finance.

Obama is wrecking America. Roosevelt determined to

revive it and help people as the way to do it.

He had his "Brain Trust," notable figures like Felix

Frankfurter, (a future Supreme Court justice), Justice Louis
Brandeis, consumerist/labor supporter Frances Perkins,
economist Rexford Tugwell, educator/author Adolph Berle,
and close personal confidant Louis Howe, among others -
officials and advisors dedicated to reviving the economy
by putting people back to work. One other was prominent
as well, his wife Eleanor.

Rexford Tugwell said this about her:

"No one who ever saw Eleanor Roosevelt sit down facing
her husband, and, holding his eye firmly, say to him,
'Franklin, I think you should....or, 'Franklin, surely you will
not....' will ever forget the experience....It would be
impossible to say how often and to what extent American
governmental processes have been turned in new
directions because of her determination."

At first, she worried she'd be marginalized as first lady,

unable to speak publicly about causes she championed.
But it didn't stop her. She held press conferences for
women reporters only; pressed FDR to appoint more
women and much more:

-- she urged the creation of the National Youth

Administration;

-- became a civil rights champion and pushed for including

blacks in government programs;

-- supported the Southern Tenant Farmer's Union;

-- worked with the PWA's Housing Division for planned

communities ("greenbelt towns") and slum clearance;

-- backed Federal Arts Projects, even ones with

"controversial" themes;

-- supported worker rights and lobbied for the Wagner and

Fair Labor Standards Acts;

-- visited coal mines, migrant camps, homes of

sharecroppers and slum-dwellers;

-- wrote articles, spoke publicly and on radio;

-- traveled widely to see firsthand how the Depression

affected the most vulnerable; and

-- displayed an unmatched spirit, passion and dedication,

and, by so doing, set a standard never matched by
another first lady; few, in fact, even tried.

That Was Then, This Is Now - A Different Time, A Different

President, A Different Agenda

The differences between FDR and Obama are stark during

the two gravest economic crises in our history. Obama
chose a financial coup d'etat "dream team" to address it.
It includes a rogue's gallery of 1990s and earlier retreads,
many of them proteges of former Treasury Secretary
Robert Rubin who plundered world economies during his
tenure, then led Citigroup close to collapse - disciples like
Treasury Secretary Timothy Geithner, former New York
Fed president who partnered with Ben Bernanke and Hank
Paulson's Treasury-looting under Bush.

Reportedly he was also one of the architects behind the

Bear Stearns bailout and various others, including Fannie,
Freddie, AIG, Merrill Lynch, Washington Mutual, and
Lehman Bros.' suspicious collapse that shocked financial
markets globally. He now runs the Treasury and continues
looting on a grander scale on the pretext of reviving the
economy. Instead, he's wrecking it - by design.

Others like Lawrence Summers, a former Reaganite and

World Bank chief economist before becoming Clinton's
Under-Treasury Secretary for International Affairs, then
Treasury Secretary from 1999 - 2001. He helped
deregulate financial markets and played a key role in the
1999 Gramm-Leach-Bliley Act that repealed Glass-Steagall
and opened the door to the kinds of rampant speculation,
fraud, and abuse that created today's crisis.

He was also instrumental in the passage of the 2000

Commodity Futures Modernation Act (CFMA). It legitimized
"swap agreements" and other "hybrid instruments" at the
heart of today's problems by preventing regulatory
oversight of derivatives and leveraging that turned Wall
Street into a casino.

Now he's do for Obama what he did earlier - as Director of

the National Economic Council where he's part of a
criminal cabal triumvirate in charge of economic policies
along with Geithner and Bernanke.

Another Rubin protege, Peter Orszag, heads the Office of

Management and Budget. Earlier he was on Clinton's
Council of Economic Advisors, then was Congressional
Budget Office Director from early 2007 to late 2008. He's
for destroying Social Security through a combination of
payroll and "benefits adjustments" as a way of cutting
retiree payouts.
Also close to Rubin and for Social Security privatization is
Jason Furman, Deputy Director of the National Economic
Council. In the Clinton administration, he served as Special
Assistant to the President for Economic Policy and on the
Council of Economic Advisors.

UC Berkeley economist Christina Romer chairs the Council

of Economic Advisors where she's close to the president
but with less clout than Geithner, Summers and Bernanke.
Her idea of good government - the less the better, except
for handouts to the rich. In praise of Ronald Reagan she
once wrote: "The costly wrong turn in ideas and
macropolicy of the 1960s and 1970s has been set right,
and the future of stabilization looks bright," meaning, of
course, to take from the many for the few.

That's also true for Paul Volker (former Fed chairman,

Trilateralist, corporatist and no friend of working people),
now serving as 1st Chair of the President's Economic
Recovery Advisory Board, a position with lots of bark and
little bite, but enough to pay attention to nonetheless,
especially when he differs on public policy.

Former Washington governor Gary Locke is the new

Commerce Secretary, hailed as "safe (and) strait-laced,"
but his record shows otherwise. He skirted campaign
finance laws; handed Boeing a $3.2 billion tax break; paid
Boeing's private consultant and outside auditor $715,000;
and arranged favors for his brother-in-law's business
above and beyond what's ethical.

Former Colorado senator and rancher Ken Salazar heads

the Interior Department. He backed the worst of Bush
administration appointments, including Alberto Gonzales
for Attorney General and right-winger Gale Norton for
Interior. He's an anti-environmentist and is staunchly pro-
business, clearly why he was appointed in the first place.

That's true as well for Tom Vilsack, former Iowa governor,

chair of the right wing Democratic Leadership Council
(DLC), now new Agriculture Secretary. Agribusiness loves
him. He's for ethanol and other biofuel production, big
subsidies for the giants, and the proliferation of harmful
GMO seeds.

As new Education Secretary, Arne Duncan will do for the

nation what he did to Chicago - preside over public
education's destruction by privatizing it for profit, and in
the process, destroy the futures of millions of youths in
the country.

The 1934 Securities and Exchange Act created an SEC

with teeth and, for a while, it worked. At least since the
1980s, it hasn't, and under George Bush it became a
travesty of non-enforcement.

Mary Schapiro is its new head, hand-picked by the

industry she'll regulate so there's no doubt where her
allegiance lies. She's a high-level insider, former FINRA
and NASD head and earlier CFTC chairperson. In each job,
she was a facilitator, not a regulator, credentials making
her perfect for SEC where industry interests matter, not
enforcing the nation's securities laws.

Other Obama officials are as tainted - his top team and

their underlings. Roosevelt promised change and
delivered. So did Obama - for his Wall Street backers and
beneficiaries.

Stephen Lendman is a Research Associate of the Centre

for Research on Globalization. He lives in Chicago and can
be reached at lendmanstephen@sbcglobal.net.

Also visit his blog site and listen to The Global Research
News Hour on Republic Broadcasting.org Monday - Friday
at 10AM US Central time for cutting-edge discussions with
distinguished guests on world and national issues. All
programs are archived for easy listening.

http://www.globalresearch.ca/index.php?
context=va&aid=13326
posted by Steve Lendman @ 3:08 AM
Wednesday, April 29, 2009
The Global Research News Hour - Media As It
Should Be
The Global Research News Hour (GRNH): Media As It
Should Be - by Stephen Lendman

Self-promotion? Fair enough, but for a good purpose - to

introduce more people to what the GRNH provides:

-- real democracy advocacy live, on-air, daily;

-- an antidote to government and corporate propaganda;

-- a force against war, injustice and inhumanity;

-- championing universal freedom;

-- a voice for social justice, human rights, and beneficial

change - of, for, and by the people;

-- a bulwark against Wall Street, corruption, unfettered

greed, fraud, and dirty government;

-- an advocate for our most precious First Amendment

rights without which all others are at risk;

-- a scrupulously free, fair, open, vibrant, and vital on-air

resource, Monday through Friday on Republic
Broadcasting.org with all programs archived for easy
listening;

-- real news and information unavailable through the

major media, on-air or in print;

-- cutting-edge discussions on world and national issues

with distinguished guests rarely, if ever, heard or read
through the dominant media; and

-- following Project Censored's tradition of discussing

"important (world and) national news stories that are
underreported, ignored, misrepresented, or censored by
the US corporate media."
The GRNH is committed to what James Madison meant by:
"A popular government, without popular information or the
means of acquiring it, is but a prologue to a farce or
tragedy; or perhaps both. Knowledge will forever govern
ignorance; and a people who mean to be their own
governors must arm themselves with the power
knowledge gives."

Ignorance begets servitude. Knowledge is empowering.

The GRNH is committed to it on-air, and through the
Centre for Research on Globalization and its web site,
Global Research.ca.

On December 10 in Mexico City, the Mexican Club of

Journalists awarded Global Research.ca, and its
distinguished editor, Michel Chossudovsky, its highest
honor for producing the best research and news website
at an international level.

The ceremony was broadcast live on Mexican TV, attended

by prominent Mexican and international journalists as well
as TV and radio producers, academics, Members of
Congress, government representatives, and members of
the diplomatic corps.

Global Research.ca and the GRNH are collective

endeavors, freely offered to readers and listeners, and
dependent solely on their help for support. Editor Michel
Chossudovsky writes:

At the end of the "Bush regime," with a new

administration in office, "what changes await us," and how
can we prepare?

"Indeed, in these troubling and uncertain times marked by

war and economic crisis, 'progressive change' is the one
thing we can all agree is necessary.

How can the global economy be rebuilt and democratised

with a view to curbing the enrichment of a powerful
economic minority, while addressing the real social needs
of the World's people?
What can we do to cease, terminate, and eradicate the
violence and human suffering inflicted through warfare
and unrestrained militarization?

Social and economic change, through mass action and

meaningful political reform, begins with the decision to
stay informed and aware.

Since 2001 (and 2008 respectively), Global Research (and

the GRNH have) been delivering critical analysis to its
readers (and listeners) as well as direction for the
questions we should be asking."

Both are independent and supported solely by readers and

listeners. No private or public funding is accepted. All
contributions go toward producing content. Your help
keeps these vital services functioning, growing, and
working for a free and open society.

The Global Research News Hour On-Air

Since February 2008, the GRNH has presented cutting-

edge discussions with distinguished guests on these and
other topics:

-- the corrosive effects of America under George Bush;

-- the Obama administration assuring continuity at home

and abroad;

-- 9/11 truth;

-- the "war on terror;"

-- the Iraq and Afghan wars;

-- the likelihood of further confrontation in Eurasia and

elsewhere, including a possible new Cold War against
Russia and China;

-- life in Occupied Palestine; Gaza under siege as well as

Operation Cast Lead and its aftermath;

-- the global Boycott, Divestment and Sanctions (BDS)

movement against Israel;

-- US and Israeli international law violations;

-- the global economic crisis;

-- a looming Great Depression;

-- dollar debasing and potential future hyperinflation;

-- America's witch-hunt prosecutions and political

prisoners;

-- torture as official US policy;

-- electoral theft and politics in America;

-- the dominant media's corrosive effects on democracy;

-- distinguished authors on their newest books;

-- democracy in Venezuela under Chavez;

-- Haiti under Aristide; the 2004 US coup against him, and

conditions today under UN paramilitary occupation;

-- violence and politics on the Indian sub-continent;

-- the hazards of GMO foods;

-- harmful depleted uranium;

-- institutionalized spying in America;

-- militarizing America;

-- the North American Union;

-- the tyranny of Wall Street and corporate America;

-- the private banking cartel Federal Reserve, and more.

Distinguished guests from around the world are listed on

the Global Research.ca web site and include academic
scholars, historians, authors, activists, human rights
lawyers, noted journalists, economists, media critics,
progressive web editors, and others. The GRNH airs them
daily in-depth.

Visit Global Research.ca regularly and listen to The Global

Research News Hour on Republic Broadcasting.org. Access
it on Global Research.ca, Republic Broadcasting.org, and
sjlendman.blogspot.com. Support this project for a free
and open media, progressive change, global democracy,
popular empowerment, and social justice at a critical time
in world history.

Stephen Lendman is a Research Associate of the Centre

for Research on Globalization. He lives in Chicago and can
be reached at lendmanstephen@sbcglobal.net.

Also visit his blog site at sjlendman.blogspot.com and

listen regularly, live or from archives, to The Global
Research News Hour on RepublicBroadcasting.org Monday
through Friday at 10AM US Central time.

http://www.globalresearch.ca/index.php?
context=va&aid=13326
posted by Steve Lendman @ 3:12 AM
Monday, April 27, 2009

Israeli Use of Palestinians As Human Shields

Israeli Use of Palestinians As Human Shields - by Stephen
Lendman

The Al Mezan Center for Human Rights is a Gaza-based

Palestinian NGO mandated "to promote, protect and
prevent violations of human rights in general, and
economic, social and cultural rights in particular, to
provide effective aid to those victims of such violations,
and to enhance the quality of life of the community in
(Gaza's) marginalized sectors."

It monitors and documents violations, provides legal aid

and advocacy, and helps Gazans on "fundamental issues
such as basic human rights, democracy, and international
humanitarian" matters. It also produces reports and
publications on its work.

In April, it published a seven-case study update of its July

2008 report titled: "Hiding Behind Civilians - The
Continued Use of Palestinian Civilians as Human Shields
by the Israeli Occupation Forces." This article reviews both
reports to highlight what international law unequivocally
prohibits. Nonetheless, it's customary IDF practice even
though Israel's Supreme Court banned it on October 6,
2005.

One Palestinian woman described her experience:

"They handcuffed and blindfolded me. Then, they forced

us to move out of the room, pushing me with their hands
and guns to move although I was blindfolded and
pregnant. I heard them pushing others to hurry up as well.
I got exhausted and fell down many times. I told them that
I was four months pregnant and couldn't continue but a
soldier threatened to shoot me."

Other witness testimonies related similar stories, at times

with tragic consequences for its victims. Israel is a party to
various human rights laws and conventions. As a result,
it's obligated to respect and protect the rights of people it
controls.

Under Article 3 of the UN General Assembly's 1948

Universal Declaration of Human Rights (UDHR): "everyone
has the right to life, liberty and security of person."

Under Article 5: "no one shall be subjected to torture or to

cruel, inhuman or degrading treatment or punishment."

Under Article 9: "no one shall be subjected to arbitrary

arrest, detention or exile."
The General Assembly's 1977 International Covenant on
Civil and Political Rights (ICCPR) affirms the same rights.
Under Article 17: "no one shall be subjected to arbitrary or
unlawful interference with his privacy, family, home or
correspondence."

Both international humanitarian law (IHL) and

international human rights law (IHRL) protect life, well-
being and dignity. ILH deals with armed conflicts while
IHRL applies to peace as well as war. Hague and Geneva
Conventions comprise the main body of IHL, and strike a
balance between military necessity and humanitarian
considerations. As an occupying power, Israel is obligated
under them.

Fourth Geneva protects civilians in war time, including

those in Occupied Palestine. It restricts the use of force
and prohibits seizing non-combatants as hostages,
including persons who've laid down their arms or can't
fight because of illness, injury or any other reason.

Article 34 states: "the taking of hostages is prohibited."

Article 28 states: "the presence of a protected person may
not be used to render certain points or areas immune from
military operations." Article 29 states: "the Party to the
conflict in whose hands protected persons may be, is
responsible for the treatment accorded to them by its
agents, irrespective of any individual responsibility which
may be incurred."

Protocol I, Article 51, paragraph 7 states: "the presence or

movements of the civilian population or individual civilians
shall not be used to render certain points or areas immune
from military operations, in particular in attempts to shield
military objectives from attacks or to shield, favor or
impede military operations." In other words, using civilians
as human shields is prohibited under all circumstances.

Further, the International Criminal Court's (ICC) Rome

Statute, Article 8 prohibits the "Taking of hostages." Israel
isn't a Court member but is obligated under international
law. Nonetheless, it flaunts it with impunity.

Al Mezan collected sworn testimonies of people's homes

seized and used as military posts for days with their
residents confined for prolonged periods, beaten and
abused, prevented from normal activities, and put in
harm's way.

Another practice was called the "neighbor procedure,"

later changed to "the prior warning procedure" to get
around a Court prohibition. Israel commandeers civilians,
has them knock on neighbors' doors, usually at night, to
deliver military orders to submit to arrest. Hostages are
put in harm's way when violence at times erupts that may
result in deaths or injuries.

Finally the practice was banned, but Israel blatantly

disregarded its own High Court ruling as well as its clear
obligation under IHL. It continues to use civilian men,
women and children as human shields.

During the Second Intifada (especially for Israel's large-

scale West Bank Operation Defensive Shield incursion),
Amnesty International (AI) said the following in October
2005:

AI "investigated tens of cases where the Israeli army used

Palestinians, children as well as adults, as 'human shields'
during military operations in towns and refugee camps
throughout the Occupied Territories. Palestinians were
forced to walk in front of Israeli soldiers who, at times,
fired their weapons while shielding themselves behind the
civilians. As well (they) were made to enter houses ahead
of Israeli soldiers to check for explosives or gunmen hiding
inside, to inspect suspicious objects, to stay in their
houses when Israeli soldiers took them over to use as
sniper positions, or to enter the houses of wanted,
possibly armed, Palestinians to tell them to surrender to
Israeli forces."

B'Tselem reports that Israel routinely uses "human shields

(as) an integral part of the orders received by Israeli
soldiers...." Al Mezan documented "dozens of cases" in
Gaza in spite of specific High Court prohibitions, usually at
times of incursions. Case studies below refute Israeli
claims about respecting civilians, not using them as
shields, and abiding strictly according to international and
its own case law.

Israeli officials lie. As standard practice, they seize

Palestinian civilians randomly, including women and young
children, then force them into harm's way. Usually to:

-- let soldiers commandeer their homes as military posts

and for sniper positions;

-- check for possible booby-traps in buildings;

-- order occupants inside to leave;

-- remove suspicious objects anywhere soldiers may go;

-- shield them from gunfire or thrown rocks; and

-- perform whatever other tasks soldiers order under very

real threats they'll be shot if they refuse.

Orders to conduct these practices come from top

commanders, not soldiers in the field.

Case Study Examples - 2008 and 2009

Number 1

On July 10, 2008, the IDF forced Rana Mofeed Awad An-
Nabaheen, age 11, to visit a relative's house delivering
orders to leave. On return, she was shot in the stomach by
other soldiers, unaware she was acting under orders.
Family member Mahir Hamdan Mheisin An-Nabaheen
provided eyewitness sworn testimony. At about 4:30AM,
vehicles, helicopters and gunfire woke him.

"I peeked through a window and saw Israeli soldiers

breaking into my family member's house and forcing them
to get out." Rana delivered orders to leave. He then heard
heavy gunfire. "I peeked out and saw Rana near the gate
screaming and saying: 'I am injured.' I stepped back into
the house and gave her my hand....I pulled her back into
the house. The gunfire became heavier. I left Rana
bleeding and took cover behind a wall. Rana crawled two
steps and lay on the floor....I saw her entrails coming out
of her abdomen.
A physician in military uniform came, brought a bandage,
and put it on her abdomen. The commander fastened
Rana to a carrier, then ordered two soldiers to carry her."
This case is typical of many others.

Number 2

It involves the arrest of civilians, including a pregnant

woman, from the As-Sreij neighborhood in eastern Al-
Qarara village in Khan Younis. They were held in an
agricultural field and forced to accompany soldiers
towards the separation border. The men were detained,
women and children ordered to leave. They were shot at
en route, then used as human shields during the
operation. Out of fear of reprisals, the witness remained
anonymous.

On April 3, 2008, at 7:30AM, her husband wasn't

answering his mobile at the time an Israeli force entered
the area where he was working. She rushed there with his
ID card. "When I was on my way, I heard somebody
shouting and ordering me to stop and come towards
him....I tried to explain that I had come to give my
husband his ID card but they threatened to shoot me."

"They led me to a room where I saw seven men and a

woman with her two daughters, who were detained. The
men were handcuffed and blindfolded. They handcuffed
and blindfolded me. Then, they forced us to move out of
the room, pushing me with their hands and guns although
I was blindfolded and pregnant....They stopped for a while
and took off my blindfold....I saw them taking the men
across the border, and then heard one of them ordering us
to leave the area....I heard heavy gunfire."
"I had to crawl for a long time to leave the area....I found
(soldiers) who forced me to stop. I tried to explain what
happened but they threatened to shoot me and forced me
to sit down with a child of (a) family....One soldier forced
the child to take his shirt off and tied his hands with it.
There were many explosions and intensive firing."

"I managed to go home at around 13:00 on the same day.

My husband returned home at around 21:00 on the same
day. I knew he was detained in a military post close to the
border line."

This is another human shield example that "demonstrates

the complete disregard of the soldiers for the life of a
pregnant woman and her unborn child." They were used
as cover for Israeli forces to withdraw from the area.

Other cases were of medical teams forced to carry out life-

threatening tasks, homes used as military posts and their
residents as human shields, and a 14 year old boy used
for the same purpose.

On April 9, 2009, Al Mezan presented an updated report,

containing seven new case studies "based on
comprehensive field investigations and witness
statements," these based on incidents during Operation
Cast Lead and one earlier in 2008.

"In endangering the lives of civilian men, women and

children through systematically using them as human
shields, the (IDF committed) crimes against humanity
according to IHL." This is one of many violations against
non-combatant Palestinian civilians.

Number 1: 15-year-old child used as a human shield

After being used for that purpose, the child was detained
in a hole in the ground with about 100 others for four
days. He now suffers from serious mental health
difficulties and refuses to speak to strangers. With help
from his parents, Al Mezan got him to tell his story and
presented excepts from it below. At home with his
parents, he was terrified by days of conflict.

"I was lying on the floor sheltering with my mother." His

uncle then said: 'Come downstairs.' "So we all went
downstairs. As soon as we opened the door, I saw a large
number of soldiers. One of them was pointing his weapon
at me....I saw my uncle and brothers lined up against the
wall. I saw the soldier signaling at me to stand beside
them. So I did....he wanted me to put my hands up. So I
did. Another soldier came and searched me from top to
bottom....He tied my hands to the hands of the people
next to me."

"I stood by the wall. A few minutes later one of the

soldiers came and kicked me. About two hours later, they
ordered us to walk....they made us go into Khalil al-Attar's
house....Then they told us all go, as a chain, into one of
the rooms." They took us outside the house....I heard the
sound of a huge explosion in the area. From there they
took us to a farm."

"They made us sit on the ground until dawn the following

day. Then they took us outside the field (and) blindfolded
my eyes....they led us to a low-lying area. They made us
sit on the ground....They tied my hands in front of my
stomach. They searched me a third time and made me sit
on the ground....After they took of my blindfold....I realized
where the low-lying area was. It was a hole made by
Israeli forces....south of the American school."

"We spent the whole night in this hole. I couldn't sleep.

The weather was really cold and I wasn't wearing a lot of
clothing. We stayed in this hole for four days....I could hear
the sound of shooting and explosions" close by. We got
one meal each afternoon...."On the third day I saw a
soldier making a wire fence around the hole (and bring) a
lot of people to the hole until the number reached around
100. On the morning of the fourth day, an Israeli soldier
untied me, my brother Ali, my cousins Hussein and Khalil.
They told us and the women to go to Jabalia.
Case 2: Majdi al-Abed Ahmed Abed Rabbo, male, age 40

On January 5 at 9:30AM, he was at home when he heard a

loud sound and someone say, "Open the door....I arrived
at the door and opened it. I was surprised to see an (IDF)
soldier hiding behind a man in his twenties and pointing a
gun at me. He said in Arabic, 'Take off your pants.' I took"
them off. He ordered him to strip naked, then get dressed.
About "15 - 20 Israeli soldiers then entered the courtyard
of my house....one grabbed my neck from behind and put
his gun to the back of my head."

"Two other soldiers hid behind me....They told me to lead

them to the roof, where they searched pigeon coups that I
keep in two rooms there." A soldier then asked about the
adjacent house, belonging to his cousin and connected to
his home by a common roof. "There's no space between
the two houses, just the wall."

"After that, one of the soldiers brought a demolition tool

and said, 'Drill a hole there.'....Then three soldiers went
through the hole to (his cousin's) house." He was told to
come as well along with more soldiers, then told, "Get up.
Get up," and grabbed violently. "I got up and entered with
them through the hole back to my roof, and they all went
as a group down the stairs. This happened quickly....The
whole group was running."

"The soldiers led me outside. I found myself in a mud

road....One of the soldiers was holding me and making me
run with him. Another soldier was bringing the young man
with him the same way, and (he) had his hands tied. They
pushed me in the mosque through its main door to the
north....They tied my hands in front of my stomach and
tied my legs and sat me down (in one corner). We entered
the house adjacent to the mosque. They took us out and
turned us toward another house," then sat us down
nearby.

In one house, a soldier said, there were gunmen and we

killed them. "Go take their clothes off and bring their guns
and come back."
"I refused. I asked him to let me return to my family. I said
to him:" going into that house "means death, and I don't
want to die." The soldier responded, 'You are here to do
what we tell you (and said) Go.'

"I walked about 200 meters to the house....I went in...I

went alone....but couldn't find anyone. I expected the
worst." He encountered three armed men wearing badges
saying Al Qassam Brigades. He said he was forced to
come. They told him to go back and say what he saw -
"three gunmen in the house, still alive....then the soldier
said to me, 'The officer says he's crazy and if you are lying
to him he swears by his mother he will shoot you."

"A short time later, I heard the sound of heavy gunfire

nearby. Twenty minutes passed....and a soldier said to
me; 'We killed them now. Go get them.' I refused. I told
them that they had told me that if I returned they would
kill me, and he shouted at me: 'We killed them.' "

He went again and found one man seriously injured and

bleeding and the others alive. He reported back what he
saw, then heard heavy gunfire and a very loud explosion.
A soldier said; 'Go and make sure they are dead. We
bombed the house again with planes...."With difficulty, I
entered the apartment. Inside, I saw the three men still
living, but they were under the rubble."

Majdi al-Abed Ahmed Abed Rabbo located his wife and

children after the IDF released him. His home was totally
destroyed by military bulldozers, and he's deeply
distressed. Numerous other examples are similar to his
account - human shields illegally used by IDF soldiers in
violation of international law and Israel's High Court ruling.

Conclusions

The above cases are examples of customary Israeli

practice in gross violation of international law and Israel's
High Court ruling. They endanger civilian lives and cause
"long-lasting psychological trauma."
IHL considers using civilian human shields a war crime and
when used systematically against non-combatants a crime
against humanity. It's essential to hold parties guilty of
these crimes accountable as the way to stop this heinous
practice.

Al Mezan condemns Israel's disregard for the law and says

that "the continued failure of the international community
to fulfill its obligations and its silence on Israeli violations
encourages" similar acts in the future - by Israel and
others engaged in this outrageous practice.

Stephen Lendman is a Research Associate of the Centre

for Research on Globalization. He lives in Chicago and can
be reached at lendmanstephen@sbcglobal.net.

Also visit his blog site at sjlendman.blogspot.com and

listen to The Global Research News Hour on
RepublicBroadcasting.org Monday - Friday at 10AM US
Central time for cutting-edge discussions with
distinguished guests on world and national issues. All
programs are archived for easy listening.

http://www.globalresearch.ca/index.php?
context=va&aid=13326
posted by Steve Lendman @ 3:09 AM
Wednesday, April 22, 2009

"Hizzhonor:" - Chicago Politics Under Richard M.

Daley
"Hizzhonor:" Chicago Politics Under Richard M. Daley - by
Stephen Lendman

First the father, Richard J. (mayor from April 20, 1955 -

December 20, 1976), now the son. To Chicagoans -
"Hizzhonor," and for some - "Hizzhonor Da Mare." Authors
Adam Cohen and Elizabeth Taylor called the elder an
"American Pharaoh." For former Chicago columnist, Mike
Royko, he was "Boss" in his 1971 book by that title. When
he died on December 20, 1976, Royko wrote:
"If ever a man reflected a city, it was Richard J. Daley," for
better or worse. He was "strong (and) hard-driving" with
Texas-sized ambitions, but also "arrogant, crude,
conniving, ruthless, suspicious, intolerant, raucous, hot-
tempered, devious, big and powerful." He was Chicago.

Now the son - mayor since April 24, 1989. His official
biography reads:

Now in his sixth mayoral term, "Richard M. Daley has

earned a national reputation for his innovative,
community-based programs (on) education, public safety,
neighborhood development and other challenges facing
American cities." More on that below.

On April 25, 2005. Time magazine called him "the nation's

top urban executive." A week earlier, it said:

"He wields near-imperial power" (in) steer(ing) the Windy

City into a period of impressive stability, with declining
unemployment and splashy growth." Never mind that the
facts belie the hyperbole. More on that as well.

Earlier, the Wall Street Journal praised him as "a fix-it,

problem-solving man" and most recently in a February 7
interview as: "The President's Mayor....whose personality
and history are inseparable from Chicago('s) political
culture....successful and enormously popular." He hopes
bringing the 2016 Olympics to Chicago will "showcase the
city (as a) gleaming tourist destination (and) At this stage
in the process, the city's bid is not just Chicago anymore.
It's the United States of America." Indeed, and like the
nation, Chicago and Illinois reek with problems, corruption,
and are for sale to the highest bidders, business ones, of
course.

According to the Corporate Crime Reporter, Illinois ranks

sixth worst in the nation on corruption after Louisiana,
Mississippi, Kentucky, Alabama and Ohio. In the wake of
the governor Blagojevich scandal, The New York Times (on
December 13) said Illinois has "a tradition (since the 19th
century) of corruption" (because) the state's unusually lax
(campaign finance) laws" allow it, and local citizens say
it's just the way it is.

On February 3, Dick Simpson, Thomas Gradel, and Andris

Zimelis (below Simpson et al) from the University of Illinois
Chicago's Political Science Department published: "Curing
Corruption in Illinois - Anti-Corruption Report Number 1."

They call it "an unfortunate aspect of Illinois (and Chicago)

politics for a century and a half," in citing one example
after another - like former secretary of state Paul Powell's
$800,000 stash found in shoe boxes when he died, 13
judges caught for fixing court cases, and a state auditor's
embezzlement of over $1.5 million to buy two planes, four
cars, and two homes.

Since 1972, three governors (besides Blagojevich), state

legislators, two congressmen, 19 Cook County judges, 30
aldermen, and many others were convicted of corruption.
In all since 1970, around 1000 public officials and
businessmen were caught and convicted.

It's a tradition as far back as the 1860s, and mainly in

Chicago where its large immigrant population helped
politicians gain power. Needing housing and work, they
turned public office into a bizaar. It's called patronage,
and in return, politicos got support. Businessmen as well
with bribes and payoffs for lucrative contracts, free from
"troublesome city inspectors."

Former Chicago alderman Paddy Bauler said it best:

"Chicago ain't ready for reform," and he was right. Richard
J. Daley modernized machine politics, and while mayor,
many of his subordinates were jailed. Under Richard M.,
the machine "simply adjusted to draw its power from
interest groups, corporations, unions, and the global
economy instead of ethnic communities." Everything
changes, yet stays the same.

The 2004 - 05 Hired Truck Program involved private trucks

for city work, but was phased out after a Chicago Sun-
Times investigation uncovered companies being paid for
little or no work and having mob and city officials' ties.
Daley's patronage chief Robert Sorich was involved. He
was tried, convicted and sentenced to 46 months in prison
with US District Court Judge David Coar saying he ran a
corruption operation "with a capital C."

Simpson et al calls Chicago "a one-party system where

Democrats control the city" but govern like Republicans.
They also explained that while many Daley aides were
convicted of corruption, "neither father or son" was ever
indicted. Yet, "corruption continues unabated in city,
county, suburban, and state" politics. Paddy Bauler was
right, and it's no different today. Here's more:

-- the FBI's Operation Safebet investigation into political

corruption and organized crime's control of prostitution
throughout metropolitan Chicago snared over 75
individuals;

-- Operation Gambat targeted First Ward connections to

organized crime with 24 individuals convicted or pleading
guilty;

-- Operation Incubator on City Hall corruption involved

bribes to win city contracts for collecting unpaid parking
tickets and water bills; convicted were four aldermen, a
former state senator, a deputy water commissioner, and
an aide to former Mayor Harold Washington;

-- Operation Greylord into Chicago's court system netted

87 court personnel and attorney convictions and guilty
pleas, including 13 judges;

-- Operation Haunted Hall about City Hall ghost payrolls

yielded 38 indictments and 35 convictions, including four
aldermen, a Cook County treasurer, and a state senator;

-- Operation Silver Shovel probed city government and

netted 18 convictions and guilty pleas from public
employees and six aldermen;

-- Operation Board Games into public corruption of insider

deals, peddling, and kickbacks involving state government
boards; and

-- much more systemic corruption for decades, including

under both Daleys.

Simpson et al explained while corruption permeates

Illinois, "the most notorious and persistent (kinds are in)
Chicago('s) City Council." The guilty aldermen range from
"bumblers (to) the most brilliant (and powerful) politicians"
like Tom Keane and Richard J. Daley's floor leader, "Fast
Eddie" Vrdolyak.

In the past 35 years, 30 alderman were indicted and

convicted of bribery, extortion, embezzlement, conspiracy,
mail fraud, and income tax evasion - three Republicans
and 26 Democrats. Three others were indicted. Two died
before going to trial, and the other was too sick to
proceed. Several others weren't indicted but resigned
after media investigations.

"In most cases, the Chicago political machine taught the

crooked aldermen the fine art of graft." They learned from
the grassroots up. "They saw political officials amass
power and get rich over time by playing the game,
keeping quiet, and delivering votes and campaign funds
for the party." Locally, heads only rolled if exposed in the
media. "The Cook County States Attorney or Illinois
Attorney General almost never investigated or prosecuted
political corruption." The task fell to federal attorneys,
postal inspectors, FBI, and IRS agents.

The convicted are a who's who in Chicago and state

politics, and the game is as old as the system - "Pay-to-
Play" and "quid pro quo" with the latter very hard to
prove, but it made millionaires out of the players.

These crimes persisted for decades, so it's clear Chicago

and Illinois house "a thriving culture of corruption." Fixing
something this embedded will take decades of committed
change, no simple task after a century and a half of
plundering public coffers for personal gain.
Simpson et al put it this way:

"Corruption is not funny (or) free. It costs taxpayers more

than $300 million a year. (What's called) 'The Chicago
Way' has also undermined the sense of political efficacy in
voters. Why apply for a city or state job if you know only
patronage employees or politicians' relatives will be hired
anyway? Why report corrupt officials, if you know they
won't be punished (unless the Feds do it), and they may
turn the powers of government on you?"

Voters become apathetic because they know the "fix is

in." After a tradition of corruption, it's time "to become the
land of Lincoln rather than the land of "Where's Mine."

Richard M. Daley's Machine

Simpson and four assocates (Ola Adeoye, Daniel Bliss,

Kevin Navratil, and Rebecca Raines) wrote earlier about
"The New Daley Machine: 1989 - 2004" and compared it to
the old one under his father - from 1955 - 1976.

Elder Daley's was characterized by "patronage, slate-

making, and alliances" to Chicago's business community.
Richard M.'s new version continues some of the old ways,
"but patronage precinct captains are supplemented by
candidate-based, synthetic campaigns using large sums of
money from the global economy to purchase professional
political consultants, public opinion polls, paid television
ads, and direct mail."

In government, it's enforced by a "rubber stamp city

council and public policies that benefit the new global
economy more than the older developer" one. From 1955
to the present, two Daleys, father and son, have run
Chicago for over 40 years and show no sign of stepping
down with Richard M. a still youthful 66 and likely to run
for a seventh term in February 2011.

He solidified power with strong business and trade union

backing, especially from construction, real estate, finance,
law, lobbying, and tourism related interests. His "regime is
composed of traditional (rubber stamp city council backing
along with) developers, city contractors, construction
unions, real estate firms (plus) major contributors from the
new global (economy), including banks, lawyers, and
international manufacturing firms."

Combined, it's less democracy and more centralized

power under the new "Chicago Machine." In city council
votes, mayoral support runs about 90%. In elections, it's
mainly from Whites and Latinos who are rewarded for their
backing.

An old-fashioned political machine runs city precincts and

the government, but private business instituted important
changes. One is "turning over major public decisions
either entirely to the private sector (with minimal
government supervision) or to quasi-independent
governmental agencies appointed by the mayor and
governor."

In the 1990s, Chicago, like other cities, renovated a

corporate-centered downtown and expanded its service
economy. It became "the Midwest capital of the global
economy," for example in tourism and conventions with
millions of annual visitors and growing annual tax
revenues as a result. "Most tourist, convention, and major
development decisions are made behind closed doors with
little public input" and considerable private sector
influence. On the one hand, business greatly benefits at
the discretion of an imperial mayor heading a powerful
Chicago Machine.

It's active in elections where it crushes a "poorly organized

opposition. In the 2003 aldermanic elections, all but five
(of 50) incumbents were re-elected, most by landslide
totals, and those that lost (got) tepid machine support in
the face of strong community opposition." At the same
time, ward committeemen won in "mostly uncontested
romps."

With less power than his father, Richard M. still runs

Chicago unchallenged. Democrats dominate city politics.
The last Republican mayor ("Big Bill" Thompson) left office
in 1931. The Great Depression ended their rule when
Anton Cermak took over, built a strong constituency
among African Americans, and consigned Republicans to
small pockets on the city's far northwest side and
suburban growth post-war.

As for regaining power in Chicago, they face "the prospect

of a long wait," according to one observer. Democrats are
well entrenched, and business loves them. Why not,
they're more Republican than Republicans and voters
hardly notice. They should as topics below explain.

Growing Poverty in Chicago

Last year, the Heartland Alliance for Human Needs and

Human Rights (HA) prepared a "2008 Report on Illinois
Poverty: Chicago Area Snapshot." It quotes federal poverty
monetary threshold guidelines (FPL). In each case, they're
woefully inadequate, given the city's true cost of living.
FPLs are:

-- $10,400 for a single person;

-- $14,400 for a family of two;

-- $17,600 for three;

-- $21,200 for four; and

-- $24,800 for five.

From 1980 - 2008, greater Chicago experienced a 114.5%

increase in poverty. Up to last year, it affected 400,000
suburban residents and over 570,000 Chicagoans or
21.2% of the population. Given the global economic crisis
and massive monthly job losses, these numbers are rising
dramatically at a time basic necessities like food, housing,
health care, energy costs, and more are less affordable for
many.
Like most major cities, Chicago is greatly impacted. HA
reports 977,320 Chicagoans as low income poor and 1.2
million "at risk of experiencing poverty," meaning they
struggle daily to meet basic needs and are dangerously
close to the edge. One negative event (like job loss) alone
can push them over.

Latinos and especially blacks are far more impoverished

than whites. Women are more affected than men. So are
children, the disabled, one wage-earner households, and
anyone "without education past high school." One-fourth
of Chicagoans have no health insurance. Being employed
is no guarantee against poverty. Over 56,000 full-time
workers are impoverished and nearly 210,000 part-time
ones. From 2000 - 2006 alone, when adjusted for inflation,
Chicagoans' median annual household income declined by
$3515 besides greater erosion since the 1970s. The
changing job market and lost benefits are to blame, and
conditions keep worsening with one-third of all
northeastern Illinois jobs classified as "low-wage service"
ones.

Affordable housing is shrinking, and the percent of renters

paying over half their income for shelter rose substantially
from 2000 - 2006 to around 30% of the population, leaving
fewer resources for other needs. Critically important is
that "the vast majority" of people needing help get none.
Since 2000, under the 1996 Welfare Reform Act, welfare
rolls dropped 77%, meaning tens of thousands of
Chicagoans are on their own and can't make it. Less
housing aid is also provided because vouchers from nine
of the 12 Public Housing Authorities aren't available. For
many, the situation is critical.

The result is extreme poverty is rising. It reached almost

10% in 2006 and now is much higher given the economic
crisis. In January, Feeding America (FA) reported that
Obama's economic stimulus plan provides nothing for the
hungry when growing numbers are needy and desperate.

Chicago and other city food banks report a 30% demand

increase for their services. Many are newly unemployed,
currently don't qualify for food stamps, or are waiting for
benefits to be approved. FA's president, Vicki Escarra, said
"Americans are going hungry, we're in crisis," and
government help isn't forthcoming. "Food banks are on
the front lines feeding people," so they're typically an
early warning sign of what's to come. In December, 70%
of them couldn't meet community needs, and that
percentage is rising as resources can't match demand.

In a December report, Chicago Community Trust reported

that local conditions are far worse than a year earlier:

-- 6000 Chicagoans face homelessness each month;

-- 350,000 Cook County residents depend on food pantries

to survive; tens of thousands more monthly are joining
them; 625,000 rely on food stamps;

-- 440,000 Illinois workers are unemployed and more

layoffs are announced daily; and

-- metropolitan area home foreclosures doubled from

autumn 2007 to autumn 2008.

The Decline of Public Housing in Chicago

Last July, the Chicago Tribune ran a lengthy report on

"Public housing limbo" in which it asked "What went wrong
with Chicago's grand experiment." Thousands of families
were displaced despite hundreds of millions of dollars
spent after the Daley administration let private developers
shape public housing's future for the city's poor under the
Chicago Housing Authority's (CHA) Plan for
Transformation.

CHA calls it "a blueprint for positive change (to) improve

the appearance, quality and culture of (Chicago's) public
housing." Tribune reporters Jason Grotto, Laurie Cohen
and Sara Olkon called it a "virtual giveaway of public land"
so real estate developers could displace poor residents
and gentrify neighborhoods for profit. In the past decade,
Chicago saw a surge in upscale development with many
working-class and poor neighborhoods transformed for the
well-off.

In the 1960s, sociologist Ruth Glass coined the term

"gentrification" to describe the invasion of middle and
upper income households into areas no longer affordable
for the poor. Upscale condos replaced low-cost housing
with people displaced to what Marquitta Campbell
discovered - substandard construction, leaky ceilings,
mold, awful odors, and much more making new quarters
worse than the old ones.

Also low-cost housing proceeded slowly and got bogged

down by bureaucracy, politics, and complex financing
made all the worse by today's crisis. With a glut of unsold
upscale properties, developers won't build low-profit ones
for the poor.

The result is thousands of displaced Chicagoans have

waited years for new public housing, and since 2001 no
new applicants have been accepted. The trend goes far
beyond Chicago in the wake of the Bush administration
prodding dozens of cities to adopt similar plans to dump
their poor, shift them to shoddy new buildings, and
concentrate on gentrifying neighborhoods for profit.

Recently, many projects stalled as the economy faltered,

but it hit Chicago hardest. Under ambitious Daley plans, it
undertook the nation's largest public housing
redevelopment with the idea of reshaping the city and
enriching builders.

Stateway Gardens was typical. It was once some of the

nation's worst public housing. It's demolition made it
prime real estate for Allison Davis, a developer with close
Daley ties. His Park Boulevard project is close to US
Cellular Field, home of the White Sox, but it's in trouble.
Construction bogged down and one development team
member went bankrupt.

At Plan for Transformation's launching, Daley vowed to

replace Chicago public housing eyesores with 25,000 new
units for the poor. But housing advocates worried that
displacing thousands quickly spelled trouble, and so it has.
Horizontal ghettos replaced vertical ones, made up mainly
of impoverished black families.

Daley promised to "rebuild lives." Meanwhile, demolition

proceeded, new construction slowed, and stringent
employment rules and background checks prevented most
residents from returning to refurbished neighborhoods.
Most took federal housing vouchers, were told they'd be
back in five years, were forced to move numerous times
since the plan started, and are no closer now to getting
new housing than before.

Stateway Gardens was supposed to be a bustling

neighborhood with new buildings, businesses, and a
renaissance for Chicago's South Side. Instead, most of the
33-acre site is vacant with dirt and brick pallets astride
unfinished sidewalks and homes.

The Daley administration approved the plan to mix public

housing with for-sale condos in the same buildings. It
required selling market-rate homes first. Under financing
terms, developers can't build affordable housing until it's
pre-sold half its upper-scale units. When housing peaked
and imploded, so did construction for the poor.

One development team promised to build 439 public

housing units by September 2008. The number so far is 53
and no new development is planned. For its part,
Chicago's CHA offered free land and paid to clean up
property and tear down old high-rises. The city also spent
millions for new roads, water pipes and sewers.

If housing stayed healthy, developers stood to profit

handsomely with all kinds of sweeteners at public and
former residents' expense. They donate heavily to the
Machine and are well compensated in return. As for the
poor, Francine Washington summed it up saying: "The
only thing wrong with Park Boulevard is the management."
City government as well the way it always is.
Chicago: "The National Capital of Police Repression"

That's how Frank Donner characterized Chicago in his

1990 book "Protectors of Privilege." As an ACLU attorney,
he explained how city police and US intelligence agencies
targeted alleged internal subversion, and while it operated
"was the outstanding example of its kind in the United
States (in terms of) size, number, and range of targets or
operational scope and diversity."

He referred to "wide-open, no-holds-barred style

surveillance" unmatched anywhere in the country. For
years, "Chicago-style official vigilantism (waged) guerrilla
warfare against substantial sectors of the city's
population." He called it "institutionalized aggression,
unique in the annals of any American city. Its (methods)
were flamboyantly illegal and in many instances criminal."

Law enforcement employed intimidation, physical

confrontation, and outright abuse. That was then. What
about now. CNN reported that between 2002 - 2004 alone,
"more than 10,000 complaints - many involving brutality
and assault - were filed against Chicago police officers."
Yet only 18 of them resulted in disciplinary action,
according to attorney Craig Futterman who uncovered the
data while researching a client's claim.

Diane Bond sued the city and police on charges physical

and sexual assault. The administration settled for
$150,000, admitted no wrongdoing, reprimanded no
officers, two were later promoted, and this case is typical
of many.

For years, community activists accused the Department's

Office of Professional Standards (its investigative unit) of
indifference and poor oversight. The Daley administration
did nothing to change things.

On November 15, 2007, The New York Times headlined:

"Chicago Police Cases Exceed Average." Writer Susan
Saulny explained that city police "are the subject of more
brutality complaints per officer than the national average,
and the Police Department is far less likely to pursue"
them, according to a University of Chicago report titled
"The Chicago Police Department's Broken System."

It's detailed and damning in citing extensive abuse, a

broken disciplinary and supervisory system, and a practice
of impunity. Under the Daley administration (much like
others that preceded him), cops can get away with
anything and they do.

Listed were police brutality, illegal searches, false arrests,

racial targeting, sexual abuse, shoddy investigations, a
culture of silence, and apartheid justice. The data is
conclusive. It:

-- "demonstrates the existence of deficient disciplinary

and supervisory policies;

-- provides powerful evidence of deliberate indifference -

the affirmative efforts that policymakers must make not to
know about individual and group patterns of abuse and
the egregious harm caused by (it); and

-- supports several theories of causation, including

demonstrating that minimally effective practices would
have identified and stopped (these things instead of)
encourag(ing them through a culture of indifference,
silence, and impunity)."

The report called the Chicago Police a "regime of not

knowing," and accomplishing that requires considerable
effort. "It (takes) a deep commitment to the machinery of
denial, including denying incidents of brutality, turning a
blind eye to patterns of abuse, refusing to look at data
that is just a key stroke or two away, and passively
encouraging a culture of silence in the face of abuse
perpetrated by officers."

As expected, those most affected are blacks, Latinos, and

the city's poor and disadvantaged. The report asks: "Does
a different Constitution apply in inner city minority (and
poor) communities?....How great is the loss of life, liberty,
and property? The loss of hope and opportunity? The loss
of family? Loss of justice? Loss of faith in our political
institutions?" How important is it that Richard Daley is as
silent as the police?

Why is he letting Chicago police equip 500 rank-and-file

officers with military assault weapons, according to a
March 25 Chicago Public Radio report? In question is the
purchase of 500 M-4 semi-automatic rifles powerful
enough to penetrate walls and cars, both sides of a
military helmet at 600 meters, and travel up to two miles,
meaning stray bullets may kill anyone and likely will,
especially in poor neighborhoods where they'll be used.

Destroying Public Education in Chicago

Under Richard Daley, Chicago took the lead in destroying

public education nationally through privatization schemes
for profit. Two previous articles by this writer covered
them. Below is material from them.

As Chicago Public Schools (CPS) "CEO" before becoming

Obama's Education Secretary, Arne Duncan
led Chicago's Renaissance 2010 Turnaround strategy for
100 new "high-performing" elementary and high schools in
the city by that date. Under five year contracts, they'll "be
held accountable....to create innovative learning
environments" under one of three "governance
structures:"

-- charter schools under the 1996 Illinois Charter Schools

Law; they're called "public schools of choice, selected by
students and parents....to take responsible risks and
create new, innovative and more flexible ways of
educating children within the public school system;" in
1997, the Illinois General Assembly approved 60 state
charter schools; Chicago was authorized 30, the suburbs
15 more, and 15 others downstate. The city bent the rules,
initially operated about 53 charter "campuses," and now
has nearly 100.

Charter schools aren't magnet ones that require students

in some cases to have special skills or pass admissions
tests. However, they have specific organizing themes and
educational philosophies and may target certain learning
problems, development needs, or educational possibilities.
In all states, they're legislatively authorized; near-
autonomous in their operations; free to choose their
students and exclude unwanted ones; and up to now are
quasi-public with no religious affiliation. Administration
and corporate schemes assure they won't stay that way
because that's the sinister plan. Duncan was a key part of
it, and so is his successor.

George Bush praised these schools in April 2007 when he

declared April 29 through May 5 National Charter Schools
Week. He said they provide more "choice," are a "valuable
educational alternative," and he thanked "educational
entrepreneurs for supporting" these schools around the
country.

Here's what the president praised. Lisa Delpit is executive

director of the Center for Urban Education & Innovation. In
her capacity, she studies charter school performance and
cited evidence from a 2005 Department of Education
report. Her conclusion: "charter schools....are less likely
than public schools to meet state education goals." Case
study examples in five states showed they underperform,
and are "less likely than traditional public (ones) to
employ teachers meeting state certification standards."

Other underperformance evidence came from an

unexpected source - an October 1994 Money magazine
report on 70 public and private schools. It concluded that
"students who attend the best public schools outperform
most private school students, that the best public schools
offer a more challenging curriculum than most private
schools, and that the private school advantage in test
scores is due to their selective admission policies."

Clearly a failing grade on what's spreading nationally en

route to total privatization and the triumph of the market
over educating the nation's youths.
In 1991, Minnesota passed the first charter school law.
California followed in 1992, and it's been off to the races
since. By 1995, 19 states had them, and in 2007 there
were over 4000 charter schools in 40 states and the
District of Columbia with more than one million students in
them and growing.

Chicago's two other "governance structures" are:

-- contract (privatized) schools run by "independent

nonprofit organizations;" they operate under a
Performance Agreement between the "organization" and
Board of Education; and

-- performance schools under Chicago Public Schools (CPS)

management "with freedom and flexibility on many
district initiatives and policies;" unmentioned is Delay's
close ties to the Bush and Obama administrations and
their preference for marketplace education; the idea isn't
new, but it accelerated rapidly in recent years.

Another part of the scheme is also in play, in Chicago and

throughout the country. Inner city schools are being
closed. Remaining ones are neglected and decrepit.
Classroom sizes are increasing, and children and parents
are being sacrificed on the alter of marketplace
triumphalism.

Consider recent events under Daley. Last February 27, the

city's Board of Education unanimously and without
discussion voted to close, relocate or otherwise target 19
public schools, fire teachers, and leave students in the
cold. Thousands of parents protested, were ignored and
denied access to the Board of Ed meeting where the
decision came down pro forma and quick. It wasn't the
first time and won't be the last. For years under the
current mayor, Chicago closed or privatized more schools
than anywhere else in the country, and the trend is
accelerating. Since July 2001, 59 elementary and
secondary schools were closed or replaced with charter or
contract ones.
The trend continues in Chicago and across the country to
"reform" education nationally, hand it to business
profiteers, destroy teacher unions, end public education,
commodify it, educate the well-off, cheat underprivileged
kids, consign them to low-wage, no benefit service jobs,
and end the American dream for millions.

Arne Duncan is doing it as Obama's Education Secretary

with schemes like the No Child Left Behind Act of 2001
(NCLB) that became law on January 8, 2002. It succeeded
the 1994 Goals 2000: Educate America Act that set eight
outcomes-based goals for the year 2000 but failed on all
counts to meet them. Goals 2000, in turn, goes back to
the 1965 Elementary and Secondary Education Act (ESEA)
and specifically its Title I provisions for funding schools
and districts with a high percentage of low-income family
students.

NCLB is outrageous, and Duncan administered the worst

of it in Chicago. It's long on testing, school choice, and
market-based "reforms" but short on real achievement.
It's built around rote learning, standardized tests,
requiring teachers to "teach to the test," assessing results
by Average Yearly Progress (AYP) scores, and punishing
failure harshly - firing teachers and principals, closing
schools and transforming them from public to charter or
for-profit ones.

Critics denounce NCLB as "an endless regimen of test-

preparation drills" for poor children. Others call it
underfunded and a thinly veiled scheme to privatize
education and transfer its costs and responsibilities from
Washington to individuals and impoverished school
districts. Mostly, it reflects current era thinking that
anything government does business does better, so let it.
And Democrats (like Obama, Duncan and his successor)
are as supportive as Republicans.

So far, NCLB renewal bills are stalled in both Houses,

election year politics intervened, and final resolution will
be for the new administration and 111th Congress to
decide. For critics, that's positive because the law failed to
deliver as promised. Its sponsors claimed it would close
the achievement gap between inner city and rural schools
and more affluent suburban ones. It's real aim, however, is
to commodify education, end government responsibility
for it, and make it another business profit center.

Obama promised to fix "the broken promises of" NCLB.

Whatever's done will affect millions of students already
harmed with little chance that the worst of this act will be
changed. Nonetheless, National Education Association
(NEA) president, Dennis Van Roekel, is hopeful that the
new administration will be "the beginning of a promising
new period for public education in this country."

Arne Duncan won't let it. He told Congress that NCLB

funding "should be doubled within five years, and that the
law must be amended to give schools the maximum
amount of flexibility possible...." Repealing the law, ending
the funding and privatization schemes, and fostering
policies to educate all kids equally regardless of
socioeconomic status is what's needed. Obama and Arne
Duncan won't let it. They've consigned poor kids to the
trash bin of no future.

Below are some Duncan policy initiatives, now run by new

CPS "CEO," and former Chicago Transit Authority head Ron
Huberman:

-- using the CPS's $5.5 billion budget for no-bid contracts

to cronies for all sorts of goods and services; Huberman
now recommends them to the seven-member board, and
nearly always they're approved unanimously with no
discussion or debate;

-- militarizing Chicago high schools (perhaps most in the

country) on the pretext of offering students "choice;"
JROTC programs were institutionalized, and high schools
were established entirely for military studies; poor
minorities comprise the overwhelming majority of affected
students;

-- while still in Chicago, Duncan litigated to be freed from

an early 1980s federal desegregation consent decree; he
claimed he did everything possible to comply even though
city students are predominantly black and over 90% black
and Latino; Chicago has over 300 segregated black
schools plus 40 or more all-Latino ones;

-- Duncan opposed and litigated against federal oversight

of special education programs; he violated the Individuals
with Disabilities Education Act (IDEA), ignored parents'
wishes, the needs of the children, and forced teachers to
go along; and

-- Chicago has nearly 100 quasi-private charter schools,

many of them run by for-profit companies; less than 10%
of them are integrated; the city is notorious for violating
the education needs of minority students; their schools
are sub-standard and abysmal.

Under "Renaissance 2010," 59 public schools were closed,

and 2009 plans call for shuttering at least another 22. In
its February issue, Substance News headlined: "End Ren
2010! echoes across city....Chicago protests grow."
Backing them against closure and privatization is an
alliance of parents, teachers, students, grandparents, and
community leaders. Even cold winter mornings and nights
haven't kept them off the streets - downtown outside, and
inside, the Board of Education headquarters. Their mission
- save Chicago public education from a rapacious scheme
to privatize it.

With no background or knowledge of education, it's Ron

Huberman's job to do it. As new CPS CEO, he's in charge
of:

-- gutting the city's public system in favor of privatization

schemes for profit;

-- continuing the process of militarizing them;

-- neutralizing the Chicago Teachers Union (CTU);

-- educating the well-off, not minorities or the poor; and

-- wrecking the dream of disadvantaged kids who'll be
sacrificed on the alter of marketplace education the way
Richard Daley and Washington mandate.

"The President's Mayor," nationally known for his

"innovative, community-based programs (on) education,
public safety, neighborhood development and other
challenges facing American cities." After 20 years in office,
he's just months away from equaling his father's reign as
Chicago's longest serving mayor.

"Hizzhonor," the most prominent of today's big city bosses

with no sign of stepping down or changing decades of
Chicago-style politics.

Stephen Lendman is a Research Associate of the Centre

for Research on Globalization. He's lived in Chicago for the
past 40 years and can be reached at
lendmanstephen@sbcglobal.net.

Also visit his blog site at sjlendman.blogspot.com and

listen to The Global Research News Hour on
RepublicBroadcasting.org Monday through Friday at 10AM
US Central time for cutting-edge discussions with
distinguished guests on world and national issues. All
programs are archived for easy listening.

http://www.globalresearch.ca/index.php?
context=va&aid=13225
posted by Steve Lendman @ 3:12 AM
Spitzer: Federal Reserve is ‘a Ponzi
Scheme, an Inside Job’
By Daniel Tencer

July 26, 2009 "Raw Story" -- The Federal Reserve — the quasi-autonomous body
that controls the US’s money supply — is a “Ponzi scheme” that created “bubble after
bubble” in the US economy and needs to be held accountable for its actions, says
Eliot Spitzer, the former governor and attorney-general of New York.
In a wide-ranging discussion of the bank bailouts on MSNBC’s Morning Meeting,
host Dylan Ratigan described the process by which the Federal Reserve exchanged
$13.9 trillion of bad bank debt for cash that it gave to the struggling banks.
Spitzer — who built a reputation as “the Sheriff of Wall Street” for his zealous
prosecutions of corporate crime as New York’s attorney-general and then resigned as
the state’s governor over revelations he had paid for prostitutes — seemed to agree
with Ratigan that the bank bailout amounts to “America’s greatest theft and cover-up
ever.”

Advocating in favor of a House bill to audit the Federal Reserve, Spitzer said: “The
Federal Reserve has benefited for decades from the notion that it is quasi-
autonomous, it’s supposed to be independent. Let me tell you a dirty secret: The Fed
has done an absolutely disastrous job since [former Fed Chairman] Paul Volcker left.
“The reality is the Fed has blown it. Time and time again, they blew it. Bubble after
bubble, they failed to understand what they were doing to the economy.
“The most poignant example for me is the AIG bailout, where they gave tens of
billions of dollars that went right through — conduit payments — to the investment
banks that are now solvent. We [taxpayers] didn’t get stock in those banks, they didn’t
ask what was going on — this begs and cries out for hard, tough examination.
“You look at the governing structure of the New York [Federal Reserve], it was run
by the very banks that got the money. This is a Ponzi scheme, an inside job. It is
outrageous, it is time for Congress to say enough of this. And to give them more
power now is crazy.
“The Fed needs to be examined carefully.”
Spitzer resigned as governor of New York in March, 2008, after news reports stated
he had paid for a $1,000-an-hour New York City call girl.
At the time, Spitzer had been raising the alarm about sub-prime mortgages. In the
wake of the economic meltdown triggered last fall by sub-prime loans, some
observers have suggested that Spitzer may have been targeted by law enforcement
because of his high-profile opposition to Wall Street financial policies.
Investigative reporter Greg Palast wrote that federal agents’ revealing of Spitzer’s
identity as a call-girl customer was no coincidence.
Palast wrote that the principle of “prosecutorial discretion” is often used to keep the
names of high-profile persons out of the media when they are tangentially linked to a
criminal investigation. In the case of Spitzer, the Justice Department chose not to
invoke prosecutorial discretion.
Funny thing, this ‘discretion.’ For example, Senator David Vitter, Republican of
Louisiana, paid Washington DC prostitutes to put him in diapers (ewww!), yet the
Senator was not exposed by the US prosecutors busting the pimp-ring that pampered
him.
Naming and shaming and ruining Spitzer – rarely done in these cases - was made at
the ‘discretion’ of Bush’s Justice Department.
Spitzer recently told Bloomberg News that President Obama’s regulatory reforms of
the financial sector are “irrelevant” because regulatory agencies have not been
enforcing corporate laws to begin with.
“Regulatory agencies already had the power to do everything they needed to do,” he
said. “They just affirmatively chose not to do it.”
– Daniel Tencer
The following video was broadcast on MSNBC’s Morning Meeting, Friday, July 24,
2009: