Lindorff: Foreclosures; The Big Con

"Enough pussyfooting around! It’s time to make the banks and the bankers pay for their crimes. If government is to have any purpose, it must be to protect the public against crime.  And we have been robbed blind by these banks.  The problem here is that we Americans have lost any sense of community. We don’t really care about the millions who have had their homes stolen by the banksters, as long as our own homes haven’t been stolen."

There are calls in this election season for establishing a moratorium of some sort on home foreclosures, and a number of large banks have even voluntarily stopped, at least until after Election Day, on foreclosing on houses. That’s fine as far as it goes, but what about the millions of homes that have already been lost or stolen over the past several years?

Behind the talk of a legal moratorium on foreclosures, and the voluntary pause announced by some banks, lies the reality that many if not most of the mortgages in question are legally dubious. The homeowner getting a foreclosure notice frequently has no idea who the actual holder or holders of a mortgage may be, and banks that are trying to foreclose often themselves have no idea who actually holds title to the papers. This is because with the securitization of mortgages, they have been traded and re-traded, and often have even been diced up into pieces of mortgage-backed securities, so that the paper trail of ownership has been lost, perhaps irrevocably.

In some cases and some jurisdictions, federal bankruptcy courts have been tossing out foreclosure cases, saying that the foreclosing bank has no proof of ownership of the mortgage and thus cannot claim the property. It’s a little like the person who is caught speeding and shows up in court to contest the charge only to have it tossed out because the ticketing officer didn’t show up in court to make her or his case.

The truth is that there is nothing particularly virtuous about the moratorium that Bank of America and some other national banks have announced on foreclosures. They are probably only holding off because they know that they are in trouble for fraudulently signing and processing foreclosure documents claiming title to properties that they actually cannot prove they have any claim to. (It has even been suggested that the banks are temporarily halting foreclosures because they are afraid that the glut of foreclosed homes will depress the value of other properties which are in their mortgage portfolios, hurting their own balance sheets.)

But the real question is, why is nobody mentioning the over 9 million homes that have been foreclosed on already, or that have been threatened with foreclosure, in this longest and deepest recession since the 1930s.

If it is the right thing to do to put a stop to foreclosures until banks can prove ownership, then it is equally right to reverse, or pay damages for all those foreclosures that already occurred--1.3 million in 2007, 2.3 million in 2008, 2.8 million in 2009 and 1.6 million in just the first six months of this year--where there was bank fraud in the signing of documents, or where there is simply no paper trail to prove the bank in question owns the mortgage. (A difficulty is that if a foreclosed property was later sold, reversing the transaction could mean displacing another family that made a good-faith purchase from the bank, meaning that a compensation payment to the wronged first owner would be a better option.)

If an individual committed the kind of fraud that the nation’s banks have been committing in order to steal someone’s assets, she or he would be convicted of fraud and locked up in jail, yet not one banker has been locked up yet for mortgage foreclosure fraud.

This wave of foreclosures is really Grand Theft Home on an unprecedented scale. The number of homes foreclosed in 2004 was 677,000, so if we take that number as being an average foreclosure rate for ordinary times, and subtract it from the figures for following years, and if we assume that the balance of foreclosures are the result of the bank-induced recession, we’re talking about six million homes that have been stolen by the banks. If each foreclosed home over the period 2005-July 2010 was worth an average of just $50,000--probably a very conservative figure--we’d be talking about the theft through fraud or economic malpractice of some $300 billion in the assets of ordinary citizen homeowners.

Actually, of course, the theft of assets from the public has been much greater, since every time a home is foreclosed in a neighborhood, the value of all the surrounding homes plunges, but that’s a story for another day.

Just in terms of outright bank fraud and home theft, we are talking about perhaps hundreds of billions of dollars worth of property that has been stolen through forged papers. We are also talking about the heartless destruction of millions of families, who have been torn from their homes.

So why are we only discussing foreclosure moratoriums now and going forward? Why are we not seeing aggressive federal action by the Justice Department seeking restoration of title or compensation to families who have already lost their homes through bank fraud? As reported yesterday in the Washington Post, 40 state attorneys general have joined together to file court challenges to the securitization of mortgages, but so far, this effort appears aimed primarily at requiring banks and mortgage companies, going forward, to comply with all legal requirements in foreclosing on properties, not at recovering stolen property. The focus of this effort is also not on prosecuting banks and bankers for perjury, though this would certainly be possible.)

Why is Congress not aggressively investigating this colossal theft?

It’s one thing to say that financial institutions like Bank of America, Wells Fargo, JP Morgan Chase and Citibank are too big to fail. It is another to say that even though they are criminal enterprises that have perpetrated an unprecedented fraud on the public, they are too big to prosecute and to punish. That sounds like the way the Italian government has generally treated the Cosa Nostra.

Enough pussyfooting around! It’s time to make the banks and the bankers pay for their crimes. If government is to have any purpose, it must be to protect the public against crime. Even libertarians agree with that concept. And we have been robbed blind by these banks.

The problem here is that we Americans have lost any sense of community. We don’t really care about the millions who have had their homes stolen by the banksters, as long as our own homes haven’t been stolen. We’re so self-involved that we don’t even recognize that it is in our own self-interest to protect others from foreclosure because if they lose their home, our neighborhood suffers. Even the people who are acting riled up--the Tea Party folks--are only concerned about their own taxes, not about their neighbors. There were stories during the 30s of people who rallied to block auctions abd save their neighbors’ homes and farms. No stories like that today. But at least we could demand political action from our so-called political leaders.

There’s an election coming up Nov. 2. If the US Department of Justice and the attorney general offices of the 50 states cannot or will not go after the banks to demand the restoration of stolen properties to their rightful owners, and will not act to put the criminal bankers who committed fraud behind bars the way they do to the poor schmucks who pass a bad check, and if the House and Senate won’t seriously investigate these crimes by the banks, they should all be thrown out of office, Republicans and Democrats alike, and to hell with the consequences.

We couldn’t end up with anything worse than a government that coddles criminals, which is what we have right now.

Dave Lindorff is an award-winning veteran investigative journalist, a 1975 graduate of the Columbia University Graduate School of Journalism, and is author of Killing Time: An Investigation into the Death Penalty Case of Mumia Abu-Jamal (Common Courage Press, 2003) and three other books. He is also a founding member of the online newspaper ThisCantBeHappening! (http://www.thiscantbehappening.net/)

Michael Hudson: Class Warriors

"In sum, the Neoliberal Revolution seeks to achieve in Europe what the United States has achieved since real wages stopped rising in 1979: doubling the share of wealth enjoyed by the richest 1 per cent. This involves reducing the middle class to poverty ..."

Most of the press has described Europe’s labor demonstrations and strikes on Wednesday in terms of the familiar exercise by transport employees irritating travelers with work slowdowns, and large throngs letting off steam by setting fires. But the story goes much deeper than merely a reaction against unemployment and economic recession. At issue are proposals to drastically change the laws and structure of how European society will function for the next generation. If the anti-labor forces succeed, they will break up Europe, destroy the internal market, and render that continent a backwater. This is how serious the financial coup d’etat has become. And it is going to get much worse – quickly. As John Monks, head of the European Trade Union Confederation, put it: “This is the start of the fight, not the end.”


Spain has received most of the attention, thanks to its ten-million strong turnout – reportedly half the entire labor force. Holding its first general strike since 2002, Spanish labor protested against its socialist government using the bank crisis (stemming from bad real estate loans and negative mortgage equity, not high labor costs) as an opportunity to change the laws to enable companies and government bodies to fire workers at will, and to scale back their pensions and public social spending in order to pay the banks more. Portugal is doing the same, and it looks like Ireland will follow suit – all this in the countries whose banks have been the most irresponsible lenders. The bankers are demanding that they rebuild their loan reserves at labor’s expense, just as in President Obama’s program here in the United States but without the sanctimonious pretenses.

The problem is Europe-wide and indeed centered in the European Union capital in Brussels, where fifty to a hundred thousand workers gathered to protest the proposed transformation of social rules. Yet on the same day, the European Commission (EC) outlined a full-fledged war against labor. It is the most anti-labor campaign since the 1930s – even more extreme than the Third World austerity plans imposed by the IMF and World Bank in times past.

The EC is using the mortgage banking crisis – and the needless prohibition against central banks monetizing public budget deficits – as an opportunity to fine governments and even drive them bankrupt if they do not agree roll back salaries. Governments are told to borrow at interest from the banks, rather than raising revenue by taxing them as they did for half a century following the end of World War II. Governments unable to raise the money to pay the interest must close down their social programs. And if this shrinks the economy – and hence, government tax revenues – even more, the government must reduce social spending yet further.

From Brussels to Latvia, neoliberal planners have expressed the hope that lower public-sector salaries will spread to the private sector. The aim is to roll back wage levels by 30 per cent or more, to depression levels, on the pretense that this will “leave more surplus” available to pay in debt service. It will do no such thing, of course. It is a purely vicious attempt to reverse Europe’s Progressive Era social democratic reforms achieved over the past century. Europe is to be turned into a banana republic by taxing labor – not finance, insurance or real estate (FIRE). Governments are to impose heavier employment and sales taxes while cutting back pensions and other public spending.

“Join the fight against labor, or we will destroy you,” the EC is telling governments. This requires dictatorship, and the European Central Bank (ECB) has taken over this power from elected government. Its “independence” from political control is celebrated as the “hallmark of democracy” by today’s new financial oligarchy. This deceptive newspeak evokes Plato’s view that oligarchy is simply the political stage following democracy. The new power elite’s next step in this eternal political triangle is to make itself hereditary – by abolishing estate taxes, for starters – so as to turn itself into an aristocracy.

It is a very old game indeed. So it is time to put aside the economics of Adam Smith, John Stuart Mill and the Progressive Era, to forget Marx and even Keynes. Europe is ushering in an era of totalitarian neoliberal rule. This is what Wednesday’s strikes and demonstrations were about. Europe’s class war is back in business – with a vengeance!

This is economic suicide, but the EU is demanding that Euro-zone governments keep their budget deficits below 3 per cent of GDP, and their total debt below 60 per cent. On Wednesday the EU passed a law to fine governments up to 0.2 per cent of GDP for not “fixing” their budget deficits by imposing such fiscal austerity. Nations that borrow to engage in countercyclical “Keynesian-style” spending that raises their public debt beyond 60 per cent of GDP will have to reduce the excess by 5per cent each year, or suffer harsh punishment. The European Commission (EC) will fine euro-area states that do not obey its neoliberal recommendations – ostensibly to “correct” budget imbalances.

The reality is that every neoliberal “cure” only makes matters worse. But rather than seeing rising wage levels and living standards as being a precondition for higher labor productivity, the EU commission will “monitor” labor costs on the assumption that rising wages impair competitiveness rather than raise it. If euro members cannot depreciate their currencies, then they must fight labor – but not tax real estate, finance or other rentier sectors, not regulate monopolies, and not provide public services that can be privatized at much higher costs. Privatization is not deemed to impair competitiveness – only rising wages, regardless of productivity considerations.

The financial privatization and credit-creation monopoly that governments have relinquished to banks is now set to pay off – at the price of breaking up Europe. Unlike central banks elsewhere in the world, the charter of the European Central Bank (ECB, independent from democratic politics, not from control by its commercial bank members) forbids it to monetize government debt. Governments must borrow from banks, which are create interest-bearing debt on their own keyboards rather than having their national bank do it without cost.

The unelected members of the European Central Bank have taken over planning power from elected governments. Beholden to its financial constituency, the ECB has convinced the EU commission to back the new oligarchic power grab. This destructive policy has been tested above all in the Baltics, using them as guinea pigs to see how far labor can be depressed before it fights back. Latvia gave free rein to neoliberal policies by imposing flat taxes of 51 per cent and higher on labor, while real estate is virtually untaxed. Public-sector wages have been reduced by 30 per cent, prompting labor of working age (20 to 35 year-olds) to emigrate in droves. This of course is contributing to the plunge in real estate prices and tax revenue. Lifespans for men are shortening, disease rates are rising, and the internal market is shrinking, and so is Europe’s population – as it did in the 1930s, when the “population problem” was a plunge in fertility and birth rates (above all in France). That is what happens in a depression.

Iceland’s looting by its bankers came first, but the big news was Greece. When that nation entered its current fiscal crisis as a result of not collecting taxes on the wealthy, European Union officials recommended that it emulate Latvia, which remains the poster child for neoliberal devastation. The basic theory is that inasmuch as members of the euro cannot devalue their currency, they must resort to “internal devaluation”: slashing wages, pensions and social spending. So as Europe enters recession it is following precisely the opposite of Keynesian policy. It is reducing wages, ostensibly to “free” more income available to pay the enormous debts that Europeans have taken on to buy their homes and pay for schooling (hitherto provided freely in many countries such as Latvia’s Stockholm School of Economics), transportation and other public services. Manly such services have been privatized and subsequently raised their rates drastically. The privatizers justify this by pointing to the enormously bloated financial fees they had to pay their bankers and underwriters in order to get the credit to buy the infrastructure that was being sold off by governments.

So Europe is committing economic, demographic and fiscal suicide. Trying to “solve” the problem neoliberal style only makes things worse. Latvia’s public-sector workers, for example, have seen their wages cut by 30 per cent over the past year, and its central bankers have told me that they are seeking further cuts, in the hope that this will lower wages in the private sector as well, just as neoliberals in other European countries hope, as noted above.

About 10,000 Latvians attended protest meetings in the small town of Daugavilpils alone as part of the “Journey into the Crisis.” In Latvia’s capital city, Riga, Wednesday’s Action Day saw the usual stoppage of transportation and an accompanying honk concert for 10 minutes at 1 PM to let the public know that something was happening. Six independent trade unions and the Harmony Center organized a protest meeting in Riga’s Esplanade Park that drew 700 to 800 demonstrators, relatively large for so small a city. Another union protest saw about half that number gather at the Cabinet of Ministers where Latvia’s austerity program has been planned and carried out.

What is happening most importantly is the national parliamentary elections this Saturday (October 2). The leading coalition, Harmony Center, is pledged to enact an alternative tax and economic policy to the neoliberal policies that have reduced labor’s wages and workplace standards so sharply over the past decade. A few days earlier a bus tour drove journalists to the most visible victims – schools and hospitals that had been closed down, government buildings whose employees had seen their salaries slashed and the workforce downsized.

These demonstrations seem to have gained voter sympathy for the more militant unions, headed by the hundred individual unions belonging to the Independent Trade Union Association. The other union group – the Free Trade Unions (LBAS) lost face by acquiescing in June 2009 to the government’s proposed 10per cent pension cuts (and indeed, 70per cent for working pensioners). Latvia’s constitutional court was sufficiently independent to overrule these drastic cuts last December. And if the government does indeed change this Saturday, the conflict between the Neoliberal Revolution and the past few centuries of classical progressive reform will be made clear.

In sum, the Neoliberal Revolution seeks to achieve in Europe what the United States has achieved since real wages stopped rising in 1979: doubling the share of wealth enjoyed by the richest 1 per cent. This involves reducing the middle class to poverty, breaking union power, and destroying the internal market as a precondition.

Latvia’s Harmony Center program shows that there is a much easier way to cut the cost of labor in half than by reducing its wages: Simply shift the tax burden off labor onto real estate and monopolies (especially privatized infrastructure). This will leave less of the economic surplus to be capitalized into bank loans, lowering the price of housing accordingly (the major factor in labor’s cost of living), as well as the price of public services. (Owners of monopoly utility services would be prevented from factoring interest charges into their cost of doing business. The idea is to encourage them to take returns on equity. Whether or not they borrow is a business decision of theirs, not one that governments should subsidize.) The tax deductibility of interest will be repealed – there is nothing intrinsically “market dictated” by this fiscal subsidy for debt leveraging. This program may be reviewed at rtfl.lv, the Renew Task Force Latvia website.

No doubt many post-Soviet economies will find themselves obliged to withdraw from the euro area rather than see a flight of labor and capital. They remain the most extreme example of the Neoliberal Experiment to see how far a population can have its living standards slashed before it rebels.

But so far the neoliberals are fully in control of the bureaucracy, and they are reviving Margaret Thatcher’s slogan, TINA: There Is No Alternative. But there is an alternative, of course. In the small Baltic economies, pro-labor parties are pressing for the government to shift the tax burden off employees and consumers back onto property and financial wealth. Bad debts beyond the reasonable ability to pay must be scaled back. It may be necessary to let the banks go under (they are mainly Swedish), even if this means withdrawing from the Euro. The choice is between who will be destroyed: the banks, or labor?

European politicians now view this as being truly a fight to the death. This is the ideology that has replaced social democracy.

Dean Baker: Wall Street Rules

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy and False Profits: Recoverying From the Bubble Economy. (editor)

The middle class is getting whacked by the Great Recession. Fifteen million people are out of work, another 9 million workers can only find part-time jobs, and millions more have given up looking for work altogether. Those lucky enough to be employed are unlikely to see any substantial wage gains for years to come.

Millions of homeowners are facing the loss of their home and more than 10 million are underwater in their mortgage. Most of the huge baby boom cohort is approaching retirement with little other than Social Security to support them, now that the collapse of the housing bubble has destroyed their home equity and much of the rest of their savings.

This pain is infuriating for two reasons. First, this was an entirely preventable disaster. The housing bubble was easy to see. Competent economists had long warned of its dangers.

The second reason why the current situation is infuriating is that we know how to get the economy out of this mess. We just need to boost demand. This can be done either with much more government stimulus, more aggressive monetary policy from the Fed, or pushing the dollar down to boost exports.

If this disaster were preventable and we knew how to get out of it, why didn't our leaders try to stop it before it happened? Why don't they take the steps necessary now to get the economy moving again?

The answer to both these questions is simple: The politicians work for someone else. On Election Day, the politicians might need our votes, but they won't get to be serious contenders unless they've gotten the campaign contributions of the big money crew. And the moneyed elite has been using its control of the political process to ensure that an ever larger share of the economy's output is redistributed upward in their direction.

The reason that there was little interest in cracking down on the housing bubble is that Goldman Sachs, Citigroup and the rest were making a fortune from the financial shenanigans that fueled the bubble. Former Treasury Secretary Robert Rubin personally pocketed over $100 million from this fun. Why would they want the government to rein it in?

Of course, when the bubble did finally blow and threaten their banks with bankruptcy, the Wall Street crew just ran to the government for help. And they got trillions of dollars in loans and loan guarantees to ensure that they would not be victims of the crisis they had created. Now that they are back on their feet, with Wall Street profits and bonuses both again at near record levels, they see little reason to concern themselves with the measures that might set the economy right for the rest of us.

After all, the steps necessary to revitalize the economy could mean some inflation. This would reduce the value of the debt owned by the wealthy. And the wealthy don't see any reason that they should risk any of their wealth just for the good of the economy.

We have enormous ground to cover to restore an economy that works for the vast majority, but the first step is to know where we are. The upward redistribution of the last three decades has nothing to do with the market and a belief in "market fundamentalism." This is about a process where the rich and powerful have rewritten the rules to make themselves richer and more powerful.

For example, they wrote trade rules that were designed to put downward pressure on the wages of the bulk of the U.S. workforce by placing manufacturing workers in direct competition with low-paid workers in China and other developing countries. This had nothing to do with a belief in "free trade." They did not try to subject lawyers, doctors or other highly paid workers to the same sort of international competition. They only wanted international competition to put downward pressure on the wages of workers in the middle and bottom, not those at the top.

This elite has instituted a system of corporate governance that allows top executives to pilfer companies at the expense of their shareholders and its workers. Top executives are overseen only by a board of directors who owe their hugely overpaid sinecures to the executives they supervise. And of course the Wall Street barons themselves are given a license to gamble with the implicit promise that government picks up their tab when they lose.

No progressive movement will make any progress until we understand the battle we are fighting. Our income is a cost to the rich. They will look to cut it wherever they can, whether this is wages for private sector workers, pensions for public employees, or Social Security for retirees. That is their target.

We have to fight back using the same logic. Their income is our cost -- the multimillion dollar bonuses for the Wall Street wizards is a direct drain on the economy. So are the bloated paychecks of top executives and their lackey boards. Progressives must be prepared to use all the same tactics to bring down the income of the rich and powerful that they have used to reduce the income of everyone else.

This means restructuring the rules of corporate governance to put serious downward pressure on the pay of top executives. The highest paid workers (doctors, lawyers, and economists) must be subjected to international competition in the same way as manufacturing workers have been subjected to international competition. And, we should sharply limit the extent of the patent or copyright protections that are exploited by the drug industry and the entertainment and software industries

We have to put the focus on the ways the rich have rigged the rules and place this at the center of political debate. The three decade-long battle over tax cuts for the rich is important, but at the end of the day it is a side show. If we let them steal all the money at the onset, it really doesn't make much difference if they end up letting us tax a little of it back.

Green: On the Road to Serfdom

David Michael Green is a professor of political science at Hofstra University in New York.  (editor)

Let’s be honest: We live in stunningly, jaw-droppingly, ridiculously absurd political times.

Here’s the story in a nutshell: A far-right predatory overclass has spent the last thirty years undoing the hard-fought gains of the mid-twentieth century, which had produced a robust middle class and vastly more economic and social justice in America than the country had ever known before.

These regressives used every kind of deceit imaginable to persuade unsophisticated voters to choose candidates whose real agenda was to assist their plutocratic puppetmasters in fleecing the very same people who voted for them.

Such candidates ran on issues like the death penalty, immigration, bogus wars, gay marriage and abortion. But what they really were about as legislators was exporting jobs to where workers are dirt cheap and politically neutered, crashing organized labor, shifting the tax burden onto the mass public, deregulating industry to allow unhindered profit-taking on the upside and socialized public responsibility for risk on the downside, and locking in a Supreme Court majority that would never blanch at even the most outrageous rulings enhancing corporate power in American society.

If the product of this slow and silent coup wasn’t so bloody and so ruinous to so many lives, you’d really have to hand it to these guys for their political acumen and patience. It took a while, and it required the building of a broad and robust infrastructure, spanning from mainstream media to talk radio and TV to think-tanks to Congress, the presidency and the judiciary, to the GOP and now to the Democratic Party as well, but they have pretty much completely succeeded in grabbing all the levers of power in our society.

They dominate its discourse entirely, and they have been almost completely successful to date in securing all the elements of their legislative, regulatory and jurisprudential agenda, at least to this point (how far they ultimately intend to go isn’t clear – the US as Honduras, perhaps? – but it’s unlikely to be pretty).

Perhaps the only major exception to that rule was their 2005 failure to privatize the vast pool of public money sitting in the Social Security coffers, which they lust over lasciviously, like teenage boys inhaling online porn by the bucketful.

The product of these efforts has been precisely what one would expect. Corporations and economic elites have grown fantastically more wealthy than they already were thirty years ago. Their tax liabilities are now negligible and sometimes less than zero.

Massive national debt, the product in part of those tax gifts to the rich, plus huge bills for interest on that debt (this alone is one of the largest items in the federal budget each year), is now owned by the mass public, who got nickels and dimes worth of tax cuts, in exchange for which they will now have to literally work years of their lives to pay down the taxes the rich escaped.

Working people across the country get less and pay more for everything today. College is becoming increasingly out of the financial reach of average Americans. The minimum wage, which actually often isn’t the minimum, is far from a sustainable salary for one person, let alone a family.

As of 2004, the richest one percent of Americans possessed sixty percent of all wealth in the country, while the bottom forty percent accounted for a whopping two-tenths of a percent. Between 1979 and 2004, after-tax income for the top one percent of Americans rose by 176 percent, while for those in the bottom 20 percent that figure rose only six percent. And those figures are for six years ago, during what by current standards was flush times for working people.

Now jobs are disappearing, with the inevitable effect of driving wages down further, not to mention all the obvious effects on prosperity, security, health, mental health and sheer longevity.

Meanwhile, just the approach to regulation alone has produced three monstrous attacks on American society as a direct result. First the recession-starting-to-become-a-depression and all its devastation, then the recent mining disaster, and now BP’s WMD attack on the Gulf Coast states.

What all of these have in common is a government regulatory apparatus that over time transitioned from a public service mission into deference to those supposed to be regulated, and then from deference for the corporate sphere into constituting a straight-out satellite office of the corporations themselves, literally having business supposed ‘regulatees’ fill out their own monitoring forms in pencil, to be inked in later by the planted shills in government.

Hundreds of thousands of Americans have been wiped out by these actions and the public is paying for its own thrashing through bail-out funds. I’m sorry, but in what sense is this not treason?

Okay, so far so bad. Nothing particularly Alice-In-Wonderlandy or especially novel about rampant greed, is there? But what’s really bizarre to the point of being a fully hallucinogenic experience that really should come under the supervision of the Controlled Substances Act is the effect that this has had on politics.

Could there ever be a moment when right-wing ‘economics’ have been so thoroughly and manifestly repudiated? Could there ever be more overt examples of corporate greed gone nuclear? Could the repercussions of these policy decisions ever more clearly have wrecked the lives of economically insecure ordinary Americans?

No, no and no. All this is as obvious and predictable as sunrise. And yet... Here we find ourselves in this remarkable and remarkably absurd position where the folks who not only created this monster, who not only have worked assiduously to prevent any solutions to the destruction they’ve wrought, and who now also promise even more of the same – these very folks are poised to win resounding electoral victories in November. And the folks who will be voting for them will once again become victims of their predations.

And the folks in Congress and the White House they’ll be voting against – supposed socialist-fascists (whatever strange Janus-faced zoological beast that would look like if it actually existed) – are in fact just about the most pro-plutocrat government imaginable. But they’re going to get stomped by voters for being socialists.

How on earth did this happen?

Well, to start with, it happened because it was intended to happen. As described above, this is the product of a broad, concerted and patient effort by the radical right to capture and control American government, and it has worked remarkably well, especially when one considers the sheer amount of deceit required to pull it off. It’s like trying to sell a cocktail of Dirt Drink mixed with Sawdust Soda to a man dying of thirst. But it can be done, and we know that because the process is now all but complete.

When even John McCain refers to Congress “the best government that money can buy” you know you’re really hurting, pal.

As for that Trotskyite socialist in the White House, well he’s staffed his economic team directly out of Goldman Sachs’ boardroom, he bails out mega-banks one hundred cents on the dollar without even requiring that they loan money, he wrote a health care bill that forces thirty or forty million Americans to buy a product from bloated thieving insurance companies whether they want it or not, and he has dramatically increased spending on an already astonishingly distended military, while remaining essentially silent about (meager but essential) unemployment benefits right now in the process of terminating for millions of Americans.

Yeah, baby – that socialist. “Workers of the world unite” is definitely what they rap about at White House cabinet meetings. Geithner, Summers, Gates – all those revolutionary syndicalists can’t talk it up enough. Then they sing “The Internationale”.

Clearly, the political branches of the US government have been fully captured by monied elites. Perhaps scariest of all, however, is the newly emboldened ultra-radical majority on the Supreme Court (that description is not reckless hyperbole used for effect – look at what they’ve done in cases like Bush v. Gore, Ledbetter and Citizens United, and watch what they do in the coming years – it will be astonishing in its scope, radicalism and hypocrisy).

After decades of histrionic lies about supposed objections to judicial activism (what they really hated was the impudent offense of an elite court handing down liberal decisions and siding with mere mortals in American society, period), they have now kicked out the jambs to expand the practical definition of the ‘activism’ term beyond all recognition.

Lori Blatt, former attorney in the Solicitor General’s Office, put it best: “They are fearless. This is a business court. Now it’s the era of the corporation and the interests of business.”

No case underscored this tendency better than Citizens United, of course, where the regressive majority was so blatantly activist that they literally told the stunned litigants to go home, come back in a month and reargue the case around a far, far bigger question than was at stake for the parties involved, and then sweepingly cast aside long existing law in order to blow blitzkrieg-size breaches in the barriers that had previously controlled corporate influence of elections.

The only case that can rival this one for utterly transparent activism seeking a regressive outcome is Bush v. Gore, in which the right-wing bloc simultaneously violated three of their own cardinal tenets – judicial restraint, states’ rights, and hostility to civil rights principles – in order to require vote counting be stopped (say what?!) and to crown the mentally deficient dauphin as king.

It could hardly be clearer that the Roberts Court ominously completes the troika of the right-wing governmental coup.

But there are other reasons we’re in this state, as well. Think about Barack Obama and the Democrats for a second, and then try applying Ms. Blatt’s phrase, “They are fearless”, to those folks.

Now pick yourself up the floor. Change the underwear you just soiled from laughing so hard. Wring out the hanky you just soaked from sobbing so relentlessly. Part of why we’re in this mess is that Democrats wouldn’t know what guts looked like if they were all board-certified gastrointestinal surgeons.

But, of course, to complain that “the people’s party” lacks sufficient courage of their convictions assumes that they have any. The good news is that they do, as a matter of fact. The bad news, however, is that those convictions can be reduced neatly down to two: serving themselves and serving the nice folks who donate money to get them elected.

It’s a bit of a problem when the gang who are meant to protect us from the crimes of the GOP are nearly indistinguishable from Cheney’s thugs, apart from stylistically. Democrats are happy to give you a little kiss on the cheek before they screw you. Republicans prefer to just get on with the assault.

Then there’s the media in this country which is, of course, beyond hopeless. Watching Rachel Maddow the other month throwing a few medium-speed hardballs at Rand Paul only served to remind me just how rare it is for any of these pathetic hacks to actually do their job, as opposed to doing the cash-driven bidding of those in power, especially tough-guy Republicans who must get plenty of laughs out of how easy it is to bully the Washington press whores – er, sorry, I mean press corps.

There’s nothing quite so self-made as the disasters of Election 2000 and the Iraq invasion of 2003, and the absence of any sort of serious media scepticism in those cases simply illustrates how utterly worthless the press truly are. Except, of course, as excellent public relations specialists for plutocrats.

These days it seems like the only outlet doing anything approaching serious journalism is Rolling Stone. As to what it says about American society and journalism that you have to wade through cover photos of Lady Gaga’s full-on unclad posterior to find out the lies our government is telling us, well, I’ll leave that to you.

But clearly the neutering of the obedient profit-motivated media has worked spectacularly. One of the key fronts in this class warfare conducted by the wealthy in America has been with respect to framing.

For three decades now, all we’ve heard is how government is a screw-up and how heroically efficient are the captains of industry in the private sector. The way regressives trash our own government in a democracy would certainly have seemed traitorous in another day. Just imagine if you said the same things about the military, which seems to miraculously escape the right’s attention as the biggest and most famously wasteful government bureaucracy of all.

Moreover, looking back over Korea, Vietnam, Iraq and Afghanistan, not just a small bit of the curtain has been pulled back from the notion of the military’s supposed infallibility. It’s been two-thirds of a century since the United States won a big war against a serious adversary, and even then the Russians did the heavy lifting, at least in Europe. Somehow we never hear much about big, incompetent government in that context, though.

But, hey, forgive my little flight into logical analysis there. We really cannot have that in these times. For a minute there, I forgot to forget. It won’t happen again, Mr. O’Brien, I assure you.

From now on, up is down, black is white, war is peace, government is bad and corporations are purveyors of Happy Meals (happy, that is, unless you happen to be a cow, like having small businesses around, have a problem with obesity, don’t want your planet to catch fire, or object to the creation of massive great lakes full of animal waste).

Yep, big business is good! That’s why we need to apologize to BP for our government “shaking them down” and forcing them to be slightly-barely-kinda-nominally-sorta responsible for their ecological and economic epic disaster in the Gulf. Get it?

But the other sad truth is that, at the bottom of this roll call of nefarious predators – under every Cheney and Obama and Brian Williams and Lloyd Blankfein doing (his green) god’s work, is a great big stinking pile of yahoos better known as “Us”.

We’ll vote Republican this fall because we utterly lack the intellectual curiosity to investigate other options. We’ll vote Republican because we’re greedy and lazy and willing to step on anyone’s throat to get our little slice of prosperity back. We’ll vote Republican as if we weren’t only two years ago just absolutely counting down every second until the previous government packed up and left town. You know, the er, uh, Republicans.

But I have just one question for my fellow Americans before they step into that voting booth. The truth is that what ails us now is exactly what y’all have been voting for over the last three decades. The truth is that if you vote Republican in November it will all only get worse. The truth is that you’re living the regressive dream just now, right as we speak.

We’ve let corporations run wild. We’ve decimated the government whose function it was to regulate them in the public’s interest. We’ve shifted a very large pile of your money into the hands of the richest one percent of us, and given you and your kids loads of government debt to pay off in exchange. We’ve shipped your job off to China or India. We’ve completely immunized all branches of your government from any form of influence other than from rapacious plutocrats.

So my question is, fellow Americans, now that we’ve all had a nice heaping helping of what regressive politics means for us real people down here below the stratosphere, “How’s that recessioney, oily thing working out for ya?”

Simon Johnson: Obama Not Bucking Bankers

With the likes of Jamie Dimon at JP Morgan-Chase pulling his strings, most credible economists who understand the causes of the recent financial crisis, and the threats we face going forward, are disappointed in Obama's slavish support of the status quo.

In the face of the administration's continuing resistance to real financial reform, even members of the Democratic party voted yesterday to filibuster the bill.  

Presented with an historic opportunity to right the ship of state, Obama appears happy to stay with the mutineers of Wall Street while the people who elected him are set adrift in the lifeboats. 

Presented with an FDR moment, Obama has come with Clintonesque responses. When did "yes we can" turn into "no we can't"? (editor)

from Politico May 19, 2010

The consensus on President Barack Obama is that he seeks consensus. He’s always been a centrist, we are told by his many biographers, so it is no surprise — they say — that he hews to the center on issues like financial reform.

His staff reinforces the message that Obama is all about moderation: The president wants reform, but not in a way that would disrupt the recovery or prospects for longer-run sustainable growth.

There is just one fly in this ointment. In the current Senate debate about reforming the financial system, the push for stronger measures has come largely from the center — not from any radical wing.

But this is not the center that Obama claims. Obama’s moderation is quite conservative on finance — i.e., stick with the devil you know.

Centrist senators like Ted Kaufman (D-Del.), Carl Levin (D-Mich.), Jeff Merkley (D-Ore.) and Sheldon Whitehouse (D-R.I.), among others, have pushed hard to strengthen the financial reform legislation — working with little or no support from the White House.

These moderates have championed reform because they see extreme dangers posed by our existing financial system. In stark contrast to the president’s view, their attitude is: “Hey, it’s quite a devil.”

Even the centrist Democratic leadership — Senate Majority Leader Harry Reid of Nevada and Sens. Byron Dorgan of North Dakota and Dick Durbin of Illinois — all supported (or still support) amendments that would have made the legislation far more effective.

Among Obama appointees, it is Gary Gensler at the Commodity Futures Trading Commission — not the core White House-Treasury team, and, of all things, a former Goldman Sachs executive — who has pushed hardest, with some success, for stronger rules on derivatives.

And it is Mary Schapiro who took the risk to pursue Goldman Sachs — against the votes of the GOP appointees at the Securities and Exchange Commission.

With them all, of course, stands the intellect and vision of Paul Volcker — the man who remained apart, with apparent diffidence, from the initial reform effort last summer. But he then launched an effective sub rosa campaign that culminated in the “Volcker rules” that, at least initially, proposed a hard size on our largest banks and would still force megabanks to drop “proprietary trading” activities — the big speculative bets they make that are implicitly backed by the taxpayer.

No one has yet accused Volcker of being a left-wing radical.

It becomes increasingly clear that the divide is not left-right within the Democratic Party, or even across the aisle but, rather, between people who want to rein in the power of our largest banks vs. those broadly comfortable with the status quo.

Treasury Secretary Timothy Geithner, chief White House economic adviser Larry Summers and the White House-Senate core — which includes some Democrats and most Republicans — are all about not being too tough on the Big Six banks.

But what is “too tough” at this point? The big banks have no good arguments. They are reduced to asserting that being able to take risks in their current manner makes the financial system more stable — a point directly contradicted by their actions in the run-up to September 2008.

It was these banks’ own holdings of “toxic assets” that were the focus of rescue attempts organized by former Treasury Secretary Henry Paulson and Geithner. Holdings at this scale were not acquired in the mundane business of bringing buyers and sellers together. Instead, very smart people at the big banks saw this as a good investment, which proved devastatingly wrong.

The idea that our economy needs banks at the scale and with the characteristics of JPMorgan Chase, Citigroup, Bank of America, Wells Fargo, Goldman Sachs or Morgan Stanley is preposterous.

Try finding someone in the financial markets or otherwise well informed about how global banking really operates (say, the CEO of a big nonfinancial company) who thinks there are economies of scale in banking more than $100 billion in total assets.

The megabanks — with assets between $500 billion and $2.5 trillion, leaving aside their true derivative exposures, which no one knows — are far beyond the size needed by society. They are so big that their size has become very dangerous.

To be fair, the Senate bill most likely will include steps in the right direction.

On consumer protection, Elizabeth Warren paved the way, and the administration — to its credit — largely followed her lead. On derivatives, Gensler has brought us to a better — though far from ideal — set of rules. On compliance, Schapiro is picking the SEC up off the floor.

The White House supports Warren consistently, has been brought around to Gensler’s approach and hopefully will stick by Schapiro.

But the biggest banks have simply proved too powerful to overcome without sustained and intense counterlobbying by the White House.

A moderate reformist president could have taken, and held, the center ground by putting greater limits on any future damage that our biggest banks can cause.

But, for whatever reason, this is not what Obama chose to do. He presumably had his reasons. But they have nothing to do with being a centrist in general.

As a result, the financial system could well remain largely as it was before September 2008. Perhaps the megabanks will be slightly constrained in their activities; most likely not — at least for Goldman, JPMorgan Chase and Morgan Stanley.

Prepare now for new extremes.


Simon Johnson, former chief economist at the International Monetary Fund, is now the Ronald A. Kurtz professor of entrepreneurship at the Massachusetts Institute of Technology. He is the co-author of 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown.

Mike Whitney: Acropolishment?

Back in the day, "Uncle Tom" was a term reserved for those who went along and didn't oppose their masters.  Is our president the slave of current  financial oligarchs like Jamie Dimon at JP Morgan-Chase?

As his administration balks at breaking up financial institutions "too big to fail" and caves to Wall Street's lobbyists on amendment after amendment meant to strengthen his and Dodd's anemic financial reform bill, Obama is rapidly forfeiting any right to repeat his claim to represent "change you can believe in."  (editor)

The banking system is still so weak that the President of the United States has to spend his whole weekend hectoring heads-of-state throughout Euroland to beef up their bailout or the whole financial system will come crashing down.

Despite the news this week that all four of the nation's biggest banks (Bank of America, Goldman Sachs, JP Morgan, and Citigroup) racked up perfect quarters off their trading desks, (showing that the Fed's liquidity and zero-rates has restored profitability) Barack Obama must have been very frightened, indeed. Otherwise he never would have inserted himself so forcefully into Greece's debt crisis.
 
The truth is, there's much more at stake than people seem to realize. A Greek default would be a major blow to the banking system and the damage would not be limited just to Europe. It could easily spread to the United States and trigger another meltdown.

Obama's concern is that a Greek default will put pressure on French and German banks (which have 110 billion-euro exposure) that will start the dominoes tumbling again.

According to Dow Jones,

"JP Morgan's holdings of non-U.S. government bonds increased by $36.5 billion in 2009, while Citigroup's increased by almost $40 B." ("The European Bailout", James Hamilton, Econbrowser)

That's why Obama spent most of his weekend on the phone, exhorting EU finance ministers to take swift action.  And that explains why the Federal Reserve reopened its controversial swap lines with European central banks, providing unlimited short-term loans in dollars for collateral to prop up the euro and exposing the US to tens of billions in potential losses without congressional approval.

Not surprisingly, the details were omitted in the US media.  Here's an excerpt from the UK Independent explaining what happened behind the scenes last weekend:

"As the dust settles and the markets cool, details are beginning to emerge of the frantic background negotiations which generated the €750bn plan to save the euro in the early hours of Monday.....the most startling – and most pivotal role – may have been played by Barack Obama, according to both American and French officials. He convinced the Europeans that it was time not just to Do Something, but to Do Something Very Big, to rescue the euro and prevent the world from plunging into another financial crisis and recession..... It was after these calls that the headline figure for the EU rescue plan inflated rapidly to €500bn, plus another €250bn from the IMF."  (John Lichfield, Independent)

The Telegraph's Ambrose Evans-Pritchard tells a similar tale, but with a twist. In this incident, Obama spoke directly to Spanish Premier Jose Luis Zapatero. Here's an excerpt from the Telegraph:

"Premier Jose Luis Zapatero told a stunned nation that public sector pay will be reduced by 5 percent this year and frozen in 2011...Pension rises will be shelved. The country’s €2,500 baby bonus will be canceled. Aid to the regions will be slashed and infrastructure projects will be put on ice....

“US President Barack Obama played a key role behind the scenes, pleading with Mr Zapatero for ‘resolute action’. The telephone call from the White House is a clear indication that contagion from Greece and Portugal to the much larger debt markets of Spain had become a global systemic threat by late last week.

"The markets were going in for the kill: the eurozone itself was on the brink of collapse," said Jose Garcia Zarate from 4Cast."   (Ambrose Evans-Pritchard, Telegraph)

Is that why Obama was twisting arms all Saturday and Sunday, because he thought the EU might collapse?  And is that why ECB chief Jean Claude Trichet reversed his position on monetization and agreed to initiate an EU quantitative easing (QE) program that would buy up government and corporate bonds?

What's clear, is that very little of last weekend's behind-the-scenes maneuvering had anything to do with the problems facing ordinary Greeks, who are merely the victims in this latest bank bailout fiasco.

Greece will not escape default, so it's not in its long-term interests to stick with the euro. That just ensures years of high unemployment, severe cuts to public spending, and never-ending recession. A return to the drachma would provide an opportunity to restructure debt and regain fiscal equilibrium via devaluation. It would give Greek exports and tourism a boost by making them instantly cheaper. The fact that the Greek “rescue” and kindred efforts in Spain, Portugal and other tottering economies is designed to bail out bankers and the rich and sock it to ordinary people was well explained by Michael Hudson, and also by T.P. Wilkinson, on Counterpunch last week.

No country large or small has managed to close a fiscal gap as large as 10.9 per cent of GDP (which is what Greece is being asked to do.) It's cruel, especially in an environment where deflation is gradually tightening its grip. Greece needs counter-cyclical fiscal stimulus to get out of the hole its in and to grow its way out of recession. The EU plan implements an anti-Keynesian regimen that is the exact opposite of Obama's American Recovery and Reinvestment Act (ARRA) the $787 billion fiscal stimulus package to build aggregate demand and lower unemployment. The EU has no funding mechanism to implement such a plan, so it is prescribing extreme austerity measures instead. It's stupid, cruel and won't work, except as a short-term shot for the banks.

Greece didn't create this crisis by itself anyway. It had help from Germany. Germany dictates monetary policy in the EU, which means that it bears much of the responsibility for the deficit-mess in the south. Of course, now that the countries that enriched Berlin (by gobbling up their exports) are flailing about in red ink, German politicians have started lecturing them about the evils of profligate spending. Here's how Michael Pettis sums it up:

"The strong euro and burgeoning liquidity it brought on meant that much of Germany’s trade surplus had to be absorbed within the eurozone, forcing especially southern Europe into high trade deficits. These deficits were dismissed, very foolishly it turns out, and against all historical precedents, as being easily managed as long as the sanctity of the euro was maintained.....

“As I see it, domestic German policies, perhaps aimed at absorbing East German unemployment, forced a structural trade surplus. The strong euro, along with the automatic recycling of Germany’s large trade surplus within Europe, ensured the corresponding trade deficits in the rest of Europe – unless Europeans were willing to enact policies that raised unemployment in order to counter the deficits. As long as the ECB refused to raise interest rates, southern Europe had to accept asset bubbles and rapidly rising debt-fueled consumption.

“This couldn’t go on forever, or even for very long. Now southern Europe is paying the inevitable price, and of course the moralists are accusing the south of being shiftless and lazy, confusing the automatic balancing mechanisms in the balance of payments with moral weakness." (Michael Pettis, China Financial Markets)

Only a small portion of the nearly $1 trillion bailout will go to Greece. And, even that pittance comes with strict "belt-tightening" conditions. The bulk of the funds will be held in an structured investment vehicle (SIV) as a way to ward off speculators who smell blood in the water and think they can make a killing by toppling sovereign bond markets in Portugal, Spain and Italy.
What does that tell us? It tells us that the whole "recovery" meme is a fraud. It tells us that the banks (where lending is down 20 per cent, and foreclosures are running at 300,000 per month) are once again engaged in the riskiest type of speculation; that they're using complex financial assets and repo to maximize leverage to goose profits in the middle of a slump.

And, it tells us that Obama is Wall Street's biggest champion, a real "enabler" in chief.

Eric Toussaint: In Gold We Trust; a Calf No More

For any who also wonder whither has gone our faith, the article below may provide discomforting reassurance of a reality we would like to deny.

Eric Toussaint; Doctor of Political Science (University of Liege and University of Paris VIII), is president of the Committee for the Cancellation of Third World Debt – Belgium and author of The World Bank: A Critical Primer, Pluto, London, 2008.  (editor)

Practically all political leaders - whether from the traditional Left or the Right, from the North or the South - have a quasi-religious faith in the market, especially the financial markets. Or rather, they themselves are the high priests of this religion. Every day in every country, anyone with a television or an Internet connection can attend mass and worship the market-god - in the form of stock exchange and financial market reports. The market-god sends his messages through television anchormen and the financial editors of daily newspapers. Today, this happens not only in OECD countries, but in most parts of the planet. Whether you are in Shangai or Dakar, Rio de Janeiro or Timbuktu, you can receive 'market signals'. Everywhere, governments have privatised and created the illusion that the population will be able to participate directly in market rituals (by buying shares) and reap the benefits in accordance with how well one interprets signals sent by the market-god. In actual fact, the small part of the working population that has acquired shares has no say over market tendencies.

In a few centuries, the history books might say that from the 1980s onwards a fetishist cult prospered. The dramatic rise of this cult will perhaps be associated with two heads of state, Margaret Thatcher and Ronald Reagan. It will be noted that, from the start, this cult had the backing of governments and powerful private financial interests. Indeed, for this cult to gain ground within the population, public and private media found it necessary to pay homage to it day in and day out.

The gods of this religion are the financial markets. Its temples are known as Stock Exchanges. Only the high priests and their acolytes can tread their holy ground. The faithful are called upon to commune with their market-god on television, on their computer screen, in the daily papers, on the radio or at the bank. Thanks to television, radio and the Internet even in the most remote parts of the planet, hundreds of millions of people who are deprived of the right to meet their basic needs, are also urged to celebrate the market-god. In the North, in newspapers read by a majority of workers, housewives and unemployed, an 'investment' section is published every day, even though the overwhelming majority of readers do not own a single share. Journalists are paid to help the faithful understand signals sent by the gods.

To heighten the power of the gods in the eyes of the faithful, commentators periodically declare that the gods have sent signals to governments to express their satisfaction or discontent. The Greek government and parliament have at last understood the message sent by the gods and adopted a drastic austerity plan that has the lower classes paying the price. But the gods are dissatisfied with Spain, Portugal, Italy and Ireland. Their governments too will have to contribute their ritual offerings in the guise of strong antisocial measures.

The places where the gods are most likely to forcefully express their moods are Wall Street in New York, the City in London, and the Paris, Frankfurt and Tokyo stock exchanges. To gauge their moods, special indicators have been devised: the Dow Jones in New York, the Nikkei in Tokyo, the CAC40 in France, the Footsie in London, the Dax in Francfort,… To appease the gods, governments must sacrifice the Welfare State to the stock markets. They must also privatise public property.

Why are ordinary market operators given a religious aura? They are neither anonymous nor ethereal. They have names, addresses. They are the people in charge of the 200 biggest TNCs that control the world with the help of the G7, the G20 and institutions such as the IMF, which came back into the limelight thanks to the financial crisis. Next we also have the World Bank and the World Trade Organisation, currently in a rather difficult predicament, but who knows, the gods might favour it again soon. Governments are no strangers to this situation; from Reagan and Thatcher onwards, they relinquished the means they had of controlling financial markets. The situation is now almost reversed: institutional investors (i.e. major banks, pension funds, insurance companies,hedge funds, etc.) received thousands of billions dollars from governments in the form of grants or loans to bail them out after the 2007-8 meltdown. The European Central Bank, the US Federal Reserve, the Bank of England now lend them money on a daily basis at a lower rate than the capital inflation that institutional investors immediately use to speculate against the euro and against public money.

Money can cross borders without a single cent in taxes being levied. More than 3,000 billion dollars race around the planet every day. Less than 2 per cent of this amount is linked to actual trade in goods and services or to productive investments. More than 98 per cent is used for purely speculative operations mainly on currencies, on commodities, and on debt securities.

We have to put a stop to this death-breeding logic. We have to develop a new financial discipline, to expropriate the financial sector and exert social democratic control on all financial matters, to tax all institutional investors (which triggered and then profited from the crisis) heavily, to audit and cancel public debts, to implement a distributive tax reform, to drastically reduce working hours so as to offer more jobs while maintaining wages at their current level... In short, we must launch an anticapitalist project.

Translated by Raghu Krishnan in collaboration with Vicki Briault, Christine Pagnoulle and Judith Harris. (editor)

Greg Moses: Beware The Pusher

For those refugees of the drug crazed 60s, remaining memory perhaps includes lyrics from a hit, The Pusher.

What better metaphor might we find then for an analogy to the financial morass faced by so many greying "boomers" adrift, and hung-over in a world addicted to debt.

Greg Moses employs this shared memory to help us understand the predicament we face, and the fate of the pushers, co-dependent on victims tapped out and sobering up. 

Moses is editor of TexasWorker.org and author of Revolution of Conscience: Martin Luther King, Jr. and the Philosophy of Nonviolence. (editor)

May 10, 2010

Confronted on Tax Day by satellite visions of free market capitalism led by the American Tea Party, global investors began to exit the building. A 34-point drop in the Global Dow on April 16 was followed by a 42-point fall on April 27 and a plummet of 170 points during the first week of May. Now with a lavish bailout in Europe--of the financiers, by the financiers, and for the financiers--investors are retracing the exit steps.

As the cash value of capitalism fell from the shelf of a shaky rally, precisely in alignment with the televised prognostication of Steven Hochberg at Elliott Wave International, heavyweight voices at the Capitalism Knows Best Channel (CNBC) were pleading for a "new normal" that would allow each and every one of us the time and earnings we needed to pay back everyone we owed.

Restructuring is the magic word that signifies the best hope for the consciousness of the creditor classes that they can have their debt bubble and eat it too. Restructuring is the middle term that makes possible the conclusion of a "new normal" whenever the premise turns out to be California or Greece.

It hardly matters whether you favor the private sector or the public. As Robert Prechter has amply documented, social mania has been pervasive, and on his account it could not have been otherwise. Whether the party in power was Democrat, Republican, Conservative, Labor, Socialist, Enron, Madoff, or Lehman, everybody grabbed at least one imminent duty and placed it on the pay-later plan.

My Aunt Billie who learned her personal finance skills from the Great Depression warned me early in the 1970s that there was something wrong with the baby boom's approach to dollar bills. For better and worse, prefigured by Joplin, Hendrix, and Morrison, we winged our boom-time destiny straight into the flame.

If there is to be a process of social healing during the debt detox that lies ahead, as all the junk gets flushed down the world commode, a certain maturity will demand acceptance of the pain that comes with any withdrawal of toxic needs.

And if fortitude will be needed from debt payers, then debt collectors also should confront their complicity in a relationship that long ago showed all the symptoms of codependency. On all fronts public and private we have built a world house of debt. Not only the users of toxic assets, but the pushers, too, need to go through their social share of pain in the coming adjustment to sober living.

One annoying aspect of the Tea Party movement is how it pretends to stand apart from the history that got us here or the pain that will get us out. Scapegoats are most necessary where self-guilt is most threatening. Whose wealth have you been counting on? Whose humanity was the source of that wealth?

If the new Parthenon of the global economy is to be a project of collective restructuring, the creditor class must renounce all ideologies that apologize for debt slavery. The world became addicted to debt partly because there were pusher-men eager to get everybody hooked.

As signified on May 5 by the spinning-top candlestick on the S&P chart, we were transfixed in realization that all the debt in this life might never be repaid. Or if it could be repaid it would take so long as to be systemically demoralizing. Alienation is the word Marx used to name lives confined to other people's motives for profit. Indeed, that spinning-top candlestick appeared on the occasion of Marx's 192nd birthday--the day of the Greek uprising.

Once a person or generation realizes they have sold themselves into slavery, are they required to keep the contract? And if the lender could foresee the whole slavery debt coming, wouldn’t we call it predatory? Therefore, in the name of a crash and recovery that shall not be the re-alienation of the debtor classes, some systematic reduction in accounts receivable is one thing the "new normal" will require.

Arcane financial instruments called the Credit Default Swaps (CDS) are finally explainable on these terms. Invention of the CDS by JP Morgan in 1995 was a symptom that the system as a whole had gone debt-aholic. The CDS was the class consciousness of debt pushers acting out, insuring each other against the prospect of their junkie clients collapsing from under the weight of delivered services. It was a scheme that presumed dollars themselves would be reality enough to sustain all value in the aftermath of a pusher economy.

Creditor classes have developed pretty good notions of what they expect the debtor classes to give up: things like retirement. In return (pun or not) debtor classes have the inalienable right to remind bond holders of something Poor Richard nearly said: never mark a chicken to market before it's hatched.

Mike Whitney: Bernake's "Big Con"

They're back again with the second in the old two step. The final step to bailout the big banks that created all that toxic "securitized" mortgage debt.  

Step two is: stick the taxpayers with another $Trillion$ in worthless paper the Fed (that's a private institution remember) bought from the banks.  

Will they fool congress?  Will they fool the taxpayers?  Let Mr. Whitney explain just how they will. (editor)

The right-wing white paper mill, the American Enterprise Institute, is helping the Federal Reserve to develop a strategy to transfer $1.25 trillion in toxic mortgage-backed securities (MBS) and non performing loans onto the public's balance sheet. Although it's unknown whether Fed chair Ben Bernanke will act on the AEI's recommendations, it does show that the Fed's Quantitative Easing program (QE)--which moved the bulk of garbage assets from the banks to the Fed's balance sheet--poses long-term problems that will need to be addressed. Bernanke never intended to keep these assets any longer than necessary. Now he is actively exploring options for getting rid of them.

Ostensibly, the QE program was designed as the first leg in a two-step process to remove the bad paper from the banks balance sheets and then dump it on Fannie Mae and Freddie Mac as discreetly as possible. So far, Bernanke has been relatively successful in convincing people that he was buying the assets to increase lending, which was clearly never the objective. Quantitative Easing was a fraud from the get-go.

Here's an excerpt from the AEI's web page by the eerily-named "Shadow Financial Regulatory Committee" which explains what's going on:

"Freddie and Fannie have been placed in conservatorship and the Treasury has confirmed that their debt is now guaranteed by the U.S. Government. This means that their debt is essentially identical to Treasury debt. The Treasury could simply issue Treasury debt to Freddie and Fannie with the offsetting accounting transaction being an IOU to the U.S. Treasury. Freddie and Fannie could then swap the acquired Treasury debt for MBS held by the Federal Reserve. This transaction would have several desirable features. It would place housing debt on the books of Freddie and Fannie where it belongs and remove the Fed from financing U.S. housing policy, which is appropriately a fiscal policy and not a monetary policy function. This would also help to re-establish Federal Reserve independence from the Treasury and fiscal policy. Finally, it would free the Fed to device strategies to reduce its balance sheet by engaging in more traditional asset sales in the much deeper Treasury market where the pricing impacts would be smaller and would accommodate a more rapid reduction in excess reserves." ("Mortgage Backed Securities in the Federal Reserve’s Portfolio" Shadow Statement No. 294, American Enterprise Institute)

So, there it is in black and white: the committee believes that the "transaction would have several desirable features. It would place housing debt on the books of Freddie and Fannie where it belongs and remove the Fed" from any further obligation. Naturally, the Fed will need an excuse to justify what-amounts-to another gigantic bailout. The AEI thinks that the fear of inflation will do the trick, and they are probably right. Expect the Fed to mobilize its allies in the media to launch a public relations campaign that focuses on the imminent threat of hyperinflation. That way--when Bernanke dumps more than a trillion dollars of toxic sludge into Uncle Sam's mortgage-recycling center--he'll only be performing his statutory duties to maintain price stability.

There's nothing fancy about the AEI's strategy; it's a pretty straightforward "no frills" ripoff. Bernanke buys the garbage from the banks and then transfers it to the GSE's. No muss, no fuss.

It's a shame that congress can't figure this stuff out. Bernanke is merely acting as one would expect. He's bent-over-backwards to save the banks from nationalization and to keep their political and financial power intact. He's also usurped congress's power over the purse-strings by initiating fiscal policy (in the purchasing of the toxic assets) which is well-beyond the Fed's mandate. Now he's putting the finishing touches on another giant bailout so he can clear the Fed's books and resume the arduous task of bubblemaking.

Is it really that hard for congress to figure out what's going on?

Pam Martens: Busting Goldman Sachs

Goldman Sachs used to be the firm that pursued top government posts; now government is in hot pursuit of it, and not in a good way. The SEC has charged the firm and an employee, Fabrice Tourre, with securities fraud and the Justice Department has commenced a criminal investigation, according to news reports.

Change appears to be swallowing Goldman Sachs. It began quietly moving out of its storied and staid headquarters at 85 Broad last Fall to flashy new multi-billion dollar digs at 200 West Street, including a 54,000 square foot gym (roughly the size of 20 homes for average Americans; those who can still afford one after the Wall Street pillage). And after the release of internal emails by the SEC and Senate, Goldman looks more like a sleazy boiler room pump and dump operation in drag than an investment bank (in drag as a bank holding company). Comedy talk show hosts are having a field day (Jon Stewart calls them “those f*!*!ing guys”) and Goldmanfreude (pleasure in watching Goldman shamed for the pain it inflicted on others) is in full swing.

It all sounds eerily familiar to the wealth transfer maneuver by Goldman Sachs Trading Company in the asset bubble of 1928. The Trading Company was a closed end fund (called a trust in those days) that Goldman Sachs created and offered to the public at $104 a share, stuffed with conflicted investments while paying Goldman a hefty management fee, only to end up a few years after the 1929 crash trading at a buck and change. On May 20, 1932, Walter Sachs, President of the Goldman Sachs Trading Company, was grilled by the Senate Committee on Banking and Currency. The implication was the same as the current round of Senate hearings: Goldman royally fleeced its customers to line its own pockets.

Security lawyers who watched the Senate Permanent Subcommittee on Investigations grill Goldman Sachs employees on April 27, 2010 hopefully were more eagle-eyed than investment guru Warren Buffet, who is now echoing the same refrain as Goldman CEO Lloyd Blankfein, that the firm has done nothing wrong and is being unfairly pummeled. Never mind that Mr. Buffet has $5 bilsky invested in Goldman on which he is earning 10 percent. (Goldman employees like to refer to $1 billion in their emails as a bilsky when bored of characterizing what they’re selling to clients as crap or sh---y deals.)

The first Goldman Sachs panel to line up before Senator Carl Levin’s subcommittee on April 27 consisted of Daniel Sparks, Joshua Birnbaum, Michael Swenson and Fabrice Tourre. Mr. Sparks headed the Mortgage Department and supervised the other three who worked in the Structured Product Group at the time the SEC has alleged the securities fraud occurred.

To hear these four tell it, their jobs included trading for Goldman’s benefit (proprietary trading), originating investment products, selling the products to customers once they were created (distribution), and, in Mr. Tourre’s case, even speaking with the rating agency that would transform these subprime bets into AAA derivatives. And how did they sum up all of this as a job description?

They testified, under oath I might add, that they were “market-makers.” In a sane world, a market maker is an entity that matches buyers with sellers and profits from capturing a portion of the spread (bid and ask) on the buy and sell price of securities.

To a lay jury, this might fly as legitimate conduct; something akin to a short order cook who shops for the groceries, whips up the omelets, throws a little parsley garnish on the plates, serves the diners, and tallies up his P&L at the end of the day. If he overbought on ground beef, he might have to have three days of specials like Shepherd’s Pie, Hungarian Goulash, and Spaghetti with Meat Sauce to “flatten” his position and “get closer to home.” Nothing criminal going on here; just good ole American know-how and innovative workouts.

The major problem with this analogy, and most others in defense of Goldman, is that the short order cook wasn’t trying to pass off E. coli beef for prime rib. Another problem for Goldman is that embedded in the heart of every securities law is the principle that the customer must be treated honestly and fairly and any mechanism or device to deceive, manipulate or defraud is patently illegal. Remember, securities laws grew out of the ingrained Wall Street corruption exposed in two years of Senate hearings in 1932 and 1933.

It is difficult to see how one can be engaging in proprietary trading for the benefit of the firm at one moment, acting in an agent capacity for the benefit of the customer the next moment, and creating investment products designed to fail on a latte break. Sparks, Birnbaum and Swenson all had principal licenses to engage in investment banking activities like underwriting as well as the Series 7 license to trade securities. Mr. Tourre had only the Series 7 and Series 63 licenses to trade securities. He had no principal license according to his regulatory file available online. That could be a big legal issue for Goldman as a firm, for Mr. Sparks who supervised him, and for the controlled-demolition investment product he assisted in creating without a principal license. Failure to supervise is one of the first areas security lawyers review in assessing a firm’s liability.

According to the SEC complaint, Mr. Tourre knowingly assisted in creating and then peddled an investment product designed to fail that had been handpicked for that purpose by a hedge fund manager to facilitate his profiting from a short position. (John Paulson, the hedge fund manager, made approximately $1 billion while those on the other side of the trade lost about $1 billion while never being advised of the hedge fund manager’s role.) According to the Senate, Goldman was itself shorting (betting on subprime derivative products to fail) while actively promoting these products to clients. The Senate hearings raised a practice and pattern of deceit by Goldman against its own clients. And let’s not forget that the approximately $12.9 billion of taxpayer bailout funds that went in the front door of AIG and came out the backdoor into Goldman’s coffers was a result of Goldman’s well-placed subprime bets offloaded onto AIG.

Clearly, Goldman’s defense is being structured around the idea that anything goes if you call yourself a market maker. That seems like a fairly lame defense when your shareholders have lost $20 billion in market cap despite your top tier law firms playing hardball and the Oracle of Omaha waving pompoms. (This Buffet gesture is reminiscent of Prince Alwaleed bin Talal cheering on Citigroup as its share price plummeted to earth along with tens of billions of off balance sheet debt derivatives. He also owned a boatload of the stock.)

My advice to Goldman is to throw yourself on your sword. Come clean on everything and clean house. Put a modest gym in the basement of your new digs and donate the 54,000 square foot space to charities for the struggling folks you ripped off in their pensions and 401(k)s. And maybe it’s time to apologize for what you did in 1928 and 1929 as well.

Then have a sit down with Warren Buffett and start co-authoring OpEds on why the Glass-Steagall Act separating investment banks from insured mom and pop funds at commercial banks must be restored. If you have any trouble finding an argument for this, just lay all those recently disclosed internal emails end to end and observe the narcissistic, sociopathic culture you’ve created out of the uber-testosterone Wharton School boys.

g.h.kirsch: Welcome, Mr. President

As President Obama packed his bags tonight for a little visit to his good friends in New York, his old pals on Wall Street are rolling out quite a welcome.

They have a little message for Obama, the opening lines will be delivered by their new front group, Stop Too Big To Fail that just made an enormous media buy meant to signal the start of a campaign that will morph into political war on senators and congressmen who would trifle with the financial sector's power.

Appraising us to be the same suckers they sell beer, hamburgers, Viagra and soft drinks, here come the oligarchs with a twisted message intended to convince us that being impoverished for their benefit will all work out in the end for the best. (which of course would be them!)

Simon Johnson correctly observed the Democrats fear that if they truly take on the big banks, they will lose campaign contributions and be placed at a major disadvantage in 2010 and 2012.  The message from the White House to the Senate is “don’t push it too far.”

The Republicans, on the other hand, are standing around quite unembarrassed, like hookers used to prostituting themselves.

Johnson, perhaps the clearest, most consistent and most passionately concerned economist engaged, feels this just shows Obama has not fully comprehended the modern nature of banking. 

Not surprising given the people who surround the President.  I might go a bit further, and propose that our President does not see himself or banking in historical context. 

Greater men than Obama have struggled with this beast.  Since the days of Jefferson and Jackson, to the times of Lincoln, the nation's leaders have wrestled to secure a steady economy for Americans from the banking cartel.  But every few generations, the beast is back.  And the beast is at our very doors today.

I'm afraid Obama is not up to it.  His fear of political defeat will, most likely, assure it.  If we fail to reform the runaway corruption at the center of our financial system, yes right there on Wall Street, these racketeers will destroy the nation and leave us in a depression to match the worst human tragedies in our history.

Obama's only path forward, though few will agree with me now, is to throw his lot with the average American.  He has the eloquence to explain to his people the danger these parasites are to the body politic. 

The President can always command enough media not to be drowned out by high paid propagandists.  But can he bring it?

Today is the day, this is the place, now is the time.

Paul Craig Roberts: Giving Up ?

What follows below is a particularly poignant, and comprehensive statement by a truly moderate observer who, after decades of effort, says he is throwing in the towel.

Paul Craig Roberts is an economist and nationally syndicated columnist who served as an Assistant Secretary of the Treasury in the Reagan Administration earning fame as the "Father of Reaganomics." Another knee-jerk bleeding heart liberal!

America can only hope Mr. Roberts will reconsider such a decision, and continue to provide his insight into the tragic dilemma that we face as a nation. (editor)

There was a time when the pen was mightier than the sword. That was a time when people believed in truth and regarded truth as an independent power and not as an auxiliary for government, class, race, ideological, personal, or financial interest.

Today Americans are ruled by propaganda. Americans have little regard for truth, little access to it, and little ability to recognize it.

Truth is an unwelcome entity. It is disturbing. It is off limits. Those who speak it run the risk of being branded “anti-American,” “anti-semite” or “conspiracy theorist.”

Truth is an inconvenience for government and for the interest groups whose campaign contributions control government.

Truth is an inconvenience for prosecutors who want convictions, not the discovery of innocence or guilt.

Truth is inconvenient for ideologues.

Today many whose goal once was the discovery of truth are now paid handsomely to hide it. “Free market economists” are paid to sell offshoring to the American people. High-productivity, high value-added American jobs are denigrated as dirty, old industrial jobs. Relics from long ago, we are best shed of them. Their place has been taken by “the New Economy,” a mythical economy that allegedly consists of high-tech white collar jobs in which Americans innovate and finance activities that occur offshore. All Americans need in order to participate in this “new economy” are finance degrees from Ivy League universities, and then they will work on Wall Street at million dollar jobs.

Economists who were once respectable took money to contribute to this myth of “the New Economy.”


And not only economists sell their souls for filthy lucre. Recently we have had reports of medical doctors who, for money, have published in peer-reviewed journals concocted “studies” that hype this or that new medicine produced by pharmaceutical companies that paid for the “studies.”

The Council of Europe is investigating the drug companies’ role in hyping a false swine flu pandemic in order to gain billions of dollars in sales of the vaccine.

The media helped the US military hype its recent Marja offensive in Afghanistan, describing Marja as a city of 80,000 under Taliban control. It turns out that Marja is not urban but a collection of village farms.

And there is the global warming scandal, in which NGOs. the UN, and the nuclear industry colluded in concocting a doomsday scenario in order to create profit in pollution.

Wherever one looks, truth has fallen to money.

Wherever money is insufficient to bury the truth, ignorance, propaganda, and short memories finish the job.

I remember when, following CIA director William Colby’s testimony before the Church Committee in the mid-1970s, presidents Gerald Ford and Ronald Reagan issued executive orders preventing the CIA and U.S. black-op groups from assassinating foreign leaders. In 2010 the US Congress was told by Dennis Blair, head of national intelligence, that the US now assassinates its own citizens in addition to foreign leaders.

When Blair told the House Intelligence Committee that US citizens no longer needed to be arrested, charged, tried, and convicted of a capital crime, just murdered on suspicion alone of being a “threat,” he wasn’t impeached. No investigation pursued. Nothing happened. There was no Church Committee. In the mid-1970s the CIA got into trouble for plots to kill Castro. Today it is American citizens who are on the hit list. Whatever objections there might be don’t carry any weight. No one in government is in any trouble over the assassination of U.S. citizens by the U.S. government.

As an economist, I am astonished that the American economics profession has no awareness whatsoever that the U.S. economy has been destroyed by the offshoring of U.S. GDP to overseas countries. U.S. corporations, in pursuit of absolute advantage or lowest labor costs and maximum CEO “performance bonuses,” have moved the production of goods and services marketed to Americans to China, India, and elsewhere abroad. When I read economists describe offshoring as free trade based on comparative advantage, I realize that there is no intelligence or integrity in the American economics profession.

Intelligence and integrity have been purchased by money. The transnational or global U.S. corporations pay multi-million dollar compensation packages to top managers, who achieve these “performance awards” by replacing U.S. labor with foreign labor. While Washington worries about “the Muslim threat,” Wall Street, U.S. corporations and “free market” shills destroy the U.S. economy and the prospects of tens of millions of Americans.

Americans, or most of them, have proved to be putty in the hands of the police state.

Americans have bought into the government’s claim that security requires the suspension of civil liberties and accountable government. Astonishingly, Americans, or most of them, believe that civil liberties, such as habeas corpus and due process, protect “terrorists,” and not themselves. Many also believe that the Constitution is a tired old document that prevents government from exercising the kind of police state powers necessary to keep Americans safe and free.

Most Americans are unlikely to hear from anyone who would tell them any different.

I was associate editor and columnist for the Wall Street Journal. I was Business Week’s first outside columnist, a position I held for 15 years. I was columnist for a decade for Scripps Howard News Service, carried in 300 newspapers. I was a columnist for the Washington Times and for newspapers in France and Italy and for a magazine in Germany. I was a contributor to the New York Times and a regular feature in the Los Angeles Times. Today I cannot publish in, or appear on, the American “mainstream media.”

For the last six years I have been banned from the “mainstream media.” My last column in the New York Times appeared in January, 2004, coauthored with Democratic U.S. Senator Charles Schumer representing New York. We addressed the offshoring of U.S. jobs. Our op-ed article produced a conference at the Brookings Institution in Washington, D.C. and live coverage by C-Span. A debate was launched. No such thing could happen today.

For years I was a mainstay at the Washington Times, producing credibility for the Moony newspaper as a Business Week columnist, former Wall Street Journal editor, and former Assistant Secretary of the U.S. Treasury. But when I began criticizing Bush’s wars of aggression, the order came down to Mary Lou Forbes to cancel my column.

The American corporate does not serve the truth. It serves the government and the interest groups that empower the government.

America’s fate was sealed when the public and the anti-war movement bought the government’s 9/11 conspiracy theory. The government’s account of 9/11 is contradicted by much evidence. Nevertheless, this defining event of our time, which has launched the US on interminable wars of aggression and a domestic police state, is a taboo topic for investigation in the media. It is pointless to complain of war and a police state when one accepts the premise upon which they are based.

These trillion dollar wars have created financing problems for Washington’s deficits and threaten the U.S. dollar’s role as world reserve currency. The wars and the pressure that the budget deficits put on the dollar’s value have put Social Security and Medicare on the chopping block. Former Goldman Sachs chairman and U.S. Treasury Secretary Hank Paulson is after these protections for the elderly. Fed chairman Bernanke is also after them. The Republicans are after them as well. These protections are called “entitlements” as if they are some sort of welfare that people have not paid for in payroll taxes all their working lives.

With over 21 per cent unemployment as measured by the methodology of 1980, with American jobs, GDP, and technology having been given to China and India, with war being Washington’s greatest commitment, with the dollar over-burdened with debt, with civil liberty sacrificed to the “war on terror,” the liberty and prosperity of the American people have been thrown into the trash bin of history.

The militarism of the U.S. and Israeli states, and Wall Street and corporate greed, will now run their course. As the pen is censored and its might extinguished, I am signing off.