Tuesday, April 28, 2009

AIPAC and Jane Harman

On April 19, CQ Politics (CQpolitics.com) reported that Representative Jane Harman, of Los Angeles, the then-senior Democrat on the House Intelligence Committee, and one of the most zealous promoters of Congressional approval for the Bush Administration’s wiretapping, was caught on a wiretap herself. The 2005 tap, by the National Security Agency, overheard Harman assuring a suspected Israeli agent of her agreement to “lobby the Justice Department to reduce espionage-related charges against two former officials of AIPAC” (the American Israeli Public Affairs Committee). The alleged Israeli agent wanted Harman to use her influence with Attorney General Gonzales to reduce the charges against the AIPAC officials to “lesser felonies.” As a quid pro quo, the agent for Israel promised AIPAC’S help in getting Harman the post she hungered for: Chair of the House Intelligence Committee.

The accounts were confirmed by three sources in intelligence, according to CQ. The sources also confirmed that Harman hung up the phone with these words: “This conversation doesn’t exist.” The reports alleged as well that Justice Department officials, after hearing this evidence, actually concluded that Harman had committed a crime, and had decided to launch an FBI investigation against her. However, the probe was aborted by Attorney General Gonzales at the last minute because “he needed Harman’s help defending the administration’s warrantless wiretap program,” which we in fact know Harman provided on December 21, 2005, at a moment of intense criticism of the wiretaps. “I believe it [warrantless wiretapping] essential to U.S. national security,” she said, “and that its disclosure has damaged critical intelligence capabilities.” She is also said to have been instrumental in persuading the New York Times to delay publishing the wiretap story until after the 2004 elections.

As it turned out, Harman was passed over for the chairmanship she so lusted after by Speaker Nancy Pelosi, this despite the lobbying of her, Pelosi, by the pro-Israel lobbyists and the ample funds they are known to provide the Speaker. Pelosi gave the job to Congressman Silvestre Reyes of Texas instead.

Now let’s think about this. Here we have a United States Congresswoman, one of her party’s highest-ranking officials, agreeing to try to intervene with the Department of Justice in an ongoing federal case of conspiracy against the government she has sworn to uphold (the U.S. one). That government had charged Steve Rosen, the former official of AIPAC, with two counts of “conspiring to communicate, and communicating national defense information” to persons who shouldn’t have had it, presumably Israeli officials or agents. His confederate, Keith Weissman, was also charged with conspiracy. Both were dismissed but clearly not forgotten by AIPAC, for five months after they were charged, AIPAC was intervening with Representative Harman on their behalf. And she apparently agreed to help.

This stinks on several levels. First of all, what is AIPAC, working on behalf of a nation which is allegedly our closest ally, Israel, doing spying on the United States government, allegedly its closest ally? Why is it handing secret defense information to Israel? Is it not enough that AIPAC already controls most of the legislation concerning the Middle East through its lobbying efforts? That it manages to secure, year after year, more foreign aid for Israel—$3 billion each year—than any other nation in the world? That it manages to browbeat and bully the craven members of Congress to pass resolution after resolution approving of the international crimes Israel commits with that mostly military aid? But that apparently is not enough. It apparently feels so great a need to obtain secret information about U.S. national defense that it resorts to spying. And when it gets caught, it goes to one of its most reliable Congressional backers—Representative Jane Harman—and asks her to intervene on behalf of its spies. And she agrees! And gets away with it because the then-head of what had become Bush’s Department of In-Justice nixes a criminal investigation into her perfidy because he needs her support for the White House’s wiretapping program! No matter that her position forces her into what to anyone else would be an agonizing about-face—about how she’s s-o-o-o-o disappointed in her country for spying on her! in what she now, after defending warrantless wiretapping and those who did it for years, has the nerve to call “a gross abuse of power.”

What words can be used for this? One former NSA official called it “the deepest kind of corruption”, meaning, I presume, both Harman’s agreement to intervene in an ongoing espionage case, and Attorney General Gonzales’ decision to quash the case against Harman for her intervention, and perhaps AIPAC’s attempt to corrupt not only American justice but a sitting Congresswoman as well. And, underlying it all, the root crime: espionage by Israel against its alleged benefactor, friend, and ally, the good old U. S. of A.

I don’t know about you, but I’m getting pretty sick of all this. I’m sick of Israel’s crimes being legitimized. I’m sick of AIPAC’s power, including the power of the American Jewish lobby, over the foreign policy of this country. I’m sick of the Congress of the United States being so corrupt that it can be bought by lobbies like this. In fact, I think it’s time to start calling this official corruption what it is: treason. When elected officials of our government apparently are ready to countenance any crime—both internationally and against itself—by agents of another government, then it’s time to begin looking at who benefits and how. It’s time to begin investigating what used to be called “dual loyalties.” It’s time to start finding out why more hell isn’t being raised about the people’s elected representatives openly and unabashedly pledging their fealty, perhaps their primary fealty, to a foreign government. Especially when the actions of that government not only do NOT converge with our own best interests, but have brought down upon our government and our people the condemnation and militance and wrath of half the globe. I think it’s time to start asking questions about that; time to start cleaning house.

Lawrence DiStasi

Monday, April 27, 2009

The Torture Memos

Though I have written extensively about torture by the Bush administration, the recent release of new memos and President Obama’s changing stance on prosecution, raises the issue once again and demands action.

To begin with, I think several things have always been clear: that the Bush administration resorted to torture to get specific information; that the lawyers issuing the “torture memos” were seeking to provide cover for the torturers and the higher-ups to avoid prosecution; and that torture became commonplace not so much to get information needed to protect Americans from attack as to “kick some ass” to avenge the 9/11 attacks.

Consider the last one first. As I noted in “Concentration of Evil,” long ago, George W. Bush, from the very first moment of his administration’s response to 9/11, adopted the macho pose that he apparently needed to convince himself that he had the “right stuff.” In response to a comment by his Secretary of Defense, Donald Rumsfeld, that retaliatory action against terrorists might pose legal obstacles, the President lashed out:

“I don’t care what the international lawyers say. We are going to kick some ass.”

It is easy to see how thumbing his nose at sissy international lawyers in this way could lead to browbeating his own lawyers—John Yoo, Jay Bybee, Alberto Gonzalez, David Addington, Jim Haynes—into providing him and his interrogators legal cover for the crimes they might commit.

That is exactly what his lawyers did. Rather than providing dispassionate legal advice to a president that would alert him to the dangers of brutal methods, Yoo and Bybee and Gonzalez wrote memos that were meant to legally circumvent international conventions against torture. This is evident in the language used. The Geneva Conventions were “quaint,” according to these mob lawyers. The President was not bound by the 5th and 8th Amendment due process clauses to the Constitution. The President had “unlimited authority” to order war crimes against enemy combatants captured on foreign soil, so long as he decided that such orders were “necessary to the nation’s defense.” Yoo also openly argued for the immunity of all those who followed his memos and broke international laws:

“If a government defendant were to harm an enemy combatant during an interrogation in a manner that might arguably violate a criminal prohibition, he would be doing so in order to prevent further attacks on the United States by the al Qaeda terrorist network. In that case, we believe that he could argue that the executive branch’s constitutional authority to protect the nation from attack justified his actions.”

The relevant words are “we believe that he could argue…” Here is where Yoo is caught by his own language. He has argued, as many others like ex-VP Cheney now desperate to cover their asses have argued, that they cannot be judged now, in 2009, with the comfort and safety of hindsight, but rather must be judged in light of the terrible crisis they faced right after 9/11 when interrogators were begging them for permission to use harsher methods. But here, in his own words, are the real reasons Yoo wrote those memos: because higher-ups wanted more coercive measures, and needed to protect themselves and everyone else involved from culpability for war crimes.

But a recent news report has also provided another reason that the Bushies insisted on more coercive techniques. On April 22, 2009, Jonathan Landay of the McClatchy newspapers wrote a column based on testimony from a former U.S. intelligence official and a former army psychiatrist exposing that reason: to find an Iraqi link with al-Quaida. That’s right. Bush and his henchmen were eager to shore up one of the main rationales to invade Iraq—presumed operational ties between Osama bin Laden’s terror network and Saddam Hussein. According to the former senior intelligence official, VP Cheney and Secretary of Defense Rumsfeld were especially insistent in this regard:

“There were two reasons why these interrogations were so persistent, and why extreme methods were used," the former senior intelligence official said on condition of anonymity because of the issue's sensitivity. “The main one is that everyone was worried about some kind of follow-up attack (after 9/11). But for most of 2002 and into 2003, Cheney and Rumsfeld, especially, were also demanding proof of the links between al Qaida and Iraq that (former Iraqi exile leader Ahmed) Chalabi and others had told them were there.”

And, Landay points out, it was during this very 2002-2003 period that CIA interrogators waterboarded their top al Quaida prisoners so often—Abu Zubaydah some 83 times, Khaled Sheikh Mohammed some 183 times. The cause behind such an astonishing number of torture sessions? Not fear of another attack, but the unrelenting pressure from Cheney and Rumsfeld to find that presumptive al Quaida-Saddam link:

“There was constant pressure on the intelligence agencies and the interrogators to do whatever it took to get that information out of the detainees, especially the few high-value ones we had, and when people kept coming up empty, they were told by Cheney’s and Rumsfeld’s people to push harder.”

The former Army psychiatrist, Major Charles Burney, agreed. His testimony, included in the recently released Senate Armed Services investigation released last week, confirmed that, while he was at Guantanamo, a main focus was “trying to establish a link between al Quaida and Iraq” which was not successful. “The more frustrated people got in not being able to establish that link…there was more and more pressure to resort to measures that might produce more immediate results.”

So much for the excuse for torture we are constantly bludgeoned with: the fear that unless information was obtained, by any means, America could be attacked again. The real reason for increasing the severity of the “alternative techniques” was the same as always: finding a justification to commence a war that had already been decided upon. And we can infer the rest: that the torture that spread from Guantanamo to Abu Ghraib in Iraq had the same impetus: to find al Quaida figures who could be blamed for the insurgency, and to find someone who would point out where those still-missing Weapons of Mass Destruction were hidden. Always remembering that underlying it all was the racist contempt for hajjis or Arabs or Muslims, all of whom “deserved” the ass-kicking that the President from the beginning had promised.

In short, amid all the excuses about “protecting the homeland,” the truth is that the Bush administration was desperate to resort to any brutality to coerce out of its prisoners the information it needed to justify its ongoing crimes. It is in this sense only that torture works: anyone waterboarded 183 times will say anything to stop the horror. The Nuremberg precedent leaves no doubt about what should happen to those who resort to such methods: all involved—from the highest officials ordering them to the lawyers who wrote the memos to the interrogators who carried out the orders—must face the bar of justice. Neither “I was just following orders” or “we were facing a terrible crisis” constitutes a legal defense.

Lawrence DiStasi

Tuesday, April 21, 2009

The Case Against Ahmedinejad

The propaganda war against Iran, mostly advanced through continuing attacks against Mahmoud Amedinejad, continued this week as the Iranian president delivered the first speech at the UN Durban Review Conference on Racism. The reason he delivered the first speech, of course, is that he was the only national president who agreed to come to the conference. Most other nations sent representatives. The United States and Israel, as expected, refused to send anyone. So the Iranian President gave his speech, and with his first remarks about Israel, some forty outraged representatives of mostly European nations, stormed out in protest. The U.S. media predictably focused on this walkout, barely giving any attention to what Ahmedinejad had said, characterizing it as “anti-semitic,” and leaving the impression that the remarks were both humanly and historically false, racist, and deeply insulting to anyone who knows the facts. This is the same treatment Ahmedinejad has received in the past, to wit, when he made his remarks about Israel that are endlessly quoted as having vowed to “wipe Israel off the map”, and hence constituting a prima facie case for Iranian aggression. But as University of Michigan professor Juan Cole and Farsi language analysts long ago pointed out, Ahmadinejad was quoting Ayatollah Khomeini, who had said the “regime occupying Jerusalem must vanish from the page of time.” Cole explained that this “does not imply military action or killing anyone at all.” Journalist Diana Johnstone further pointed out that the quote was not aimed at the Israeli people, but at the Zionist “regime” occupying Jerusalem.

In the same way, it one takes a look at what Ahmedinejad said at this conference in the light of real rather than imagined history, one gets a different picture. First, according to CNN.com’s account, Ahmadinejad accused the West of making “an entire nation homeless under the pretext of Jewish suffering ... in order to establish a totally racist government in occupied Palestine.” Well let’s see. Did not the Israeli war of 1948 force some three-quarters of a million Palestinians from their homes and make them refugees? Is that not making Palestinians homeless? And did not subsequent wars in 1967 and thereafter turn the Palestinian people who remained into an occupied people, living in refugee camps called the West Bank and the Gaza Strip? And was not the 1948 United Nations plan to give a majority of historic Palestine to the Jewish people driven in part by the moral cowardice of the Europeans and Americans, who again and again refused to admit Jewish refugees trying to escape the Holocaust, and sought to compensate for this cowardice and their historic pogroms against Jews by giving their approval and hypocritical sanction to a Palestinian homeland for European Jews in a land already occupied since time immemorial? Which is what Ahmedinejad also said:

“In fact, in compensation for the dire consequences of racism in Europe, they helped bring to power the most cruel and repressive racist regime in Palestine.”

But you would never know that from the media’s account. For CNN.com felt compelled to add its own version of the 1948 founding of Israel: “Israel was established in 1948 as a homeland for the Jewish people after the Holocaust, on land also claimed by Palestinians.” ALSO CLAIMED BY PALESTINIANS? Palestinians didn’t have to claim it: Palestine was their land. It is their land, Palestine. And it was seized by Zionist force of arms in 1948 and subsequently, as any look at maps from different historical periods or fair accounts of what happened will show. And that seizure is still going on in the form of the apartheid wall and so-called “settlements.” And that war is still going on, most recently in the invasion of Gaza by Israeli forces, sanctioned and approved by the United States, including the slaughter of 1400 Gazans, most of them defenseless women and children.

But that bad Ahmedinejad had the nerve to call this “racism.” He put it very nicely in fact, when he said, “In fact, in compensation for the dire consequences of racism in Europe, they helped bring to power the most cruel and repressive racist regime in Palestine.” Well isn’t that true? Is not the history of Jews in Europe, and America for that matter, a history of racist oppression against a minority? And does not the status of Palestinians in Israel and the occupied territories now mirror that historic racism in the manner and methods the Zionist regime (European in origin) has consistently used to attack, oppress, disenfranchise and ethnically cleanse the original Semitic people of Palestine? But Ahmedinejad went further. He added that the Jewish national movement “personifies racism” (because what, pray, can a “Jewish state” mean other than the privileging of one people over another—as in the fact that any person of Jewish heritage even today arrives in Israel from Europe with more inherent rights than a Palestinian who has lived there for generations?) and in CNN’s words “accused Zionists of wielding economic and political resources to silence opponents.” Good lord. Does the man have no shame? Zionists use money and politics to try to silence opponents? Who ever heard of such a thing?

Finally, this man who has been compared to Hitler by the American press had the nerve to tar the United States of America’s invasion of Iraq with the same brush:

“Wasn’t the military action against Iraq planned by the Zionists and their allies in the then-U.S. administration?”

Well, wasn’t it? To whom did Iraq present a threat? Were we to believe that the fabled Iraqi “weapons of mass destruction” threatened the continental United States? No, the real threat Iraq posed was to absolute Israeli hegemony in the Middle East. Just as now, the real threat Iran poses is a constantly hyped threat to that same absolute hegemony. And so, though they may not have been primary in promoting the attack on Iraq—for Bush and his Vice President and his Secretary of Defense seemed determined from the very outset to find an excuse to take out Iraq and Saddam Hussein—there was a cluster of Bush administration hawks, the so-called neocons, who surely played a role in promoting the Iraqi invasion: people like Paul Wolfowitz, Irving “Scooter” Libby, Eliot Abrams, Richard Perle, Douglas Feith, and many more in Congress, many with a history of strong connections with Israel, its right-wing Likud party, and the wing-nut who now rules the nation, Binyamin Netanyahu. Ah, but to call attention to that fact is dastardly, un-diplomatic, anti-semitic. And so the great moral beacons of world democracy—the representatives of white, historically racist Europe—walk out in a huff. Heaving diatribes against this upstart crow from the Middle East: as, from that bastion of equality and fairness regarding the globe’s darker peoples, Great Britain, came “offensive,” “inflammatory,” “outrageous and anti-semitic;” from France came “unacceptable,” and “heinous;” while from Canada erupted the observation that the major problems with Iran are continued threats against Israel and against the Israeli people, along with persistent nuclear ambitions. “Nuclear ambitions!” mind you. For its part, the U.S. through its State Department, ignoring the comment of Navi Pillay, the UN high commissioner for human rights that she regrets and is “shocked” by the United States’ decision to boycott, said that its decision to not attend was based in its objection to a conference document that “singles out” Israel for criticism, and conflicts with the U.S. “commitment to unfettered free speech.”

Presumably, that right to free speech extends only to the U.S. and its allies, but not to the likes of Mahmoud Ahmedinejad, or Iran, or those “other” races in the Middle East possessed of this disturbing tendency to want to rule, and even inhabit their own part of the world.

Lawrence DiStasi

Wednesday, April 15, 2009

Bankers, Bailouts, Credit Cards, and Suckers

An item on the news today about the progress, or lack of it, of the “Credit Cardholders’ Bill of Rights Act of 2009" (to try to keep credit card companies, i.e. banks, from arbitrarily increasing interest rates on existing credit card balances) got me thinking about debt, credit, bankruptcy and how the laws all favor the banks until it comes time for the suckers (us) to bail them out. Especially in recent years, we suckers have all been taken for a real ride. In 2005, for example, the Bush Administration passed a law—“The Bankruptcy Abuse Prevention and Consumer Protection Act”—signed with great fanfare by President Decider, that “reformed” the bankruptcy laws, particularly governing credit card debt. The reform was promoted as a benefit to consumers (suckers) by making it harder for the average person with consumer debt to file for Chapter 7 bankruptcy (the law now forced such persons to file a “means test,” as well as undertake “credit counseling” and education in personal financial management), thus reducing losses to lenders. Presumably, we’d all benefit because lenders wouldn’t tighten up on the credit cards all the rest of us depend on. Though the new hurdles definitely caused a sharp decline in personal bankruptcy filings—thus benefiting the banks—they also failed to stop the rise of interest rates and fees these same banks charged suckers. A Harvard Law School fellow, Mike Simkovic, did a study and put it this way:

“The fact that after bankruptcy reform, interest rates and fees continued to rise, and grace periods continued to fall, even though credit card companies reaped tremendous gains from declining bankruptcy losses demonstrates that the credit card market is not price-competitive. This lack of price competition explains why the benefits of bankruptcy reform accrued exclusively to credit card lenders and…why bankruptcy reform was a failure.” (from “New Bankruptcy Laws Hurt Consumers,” at http://www.consumeraffairs.com/news04/2008/07/bankruptcy_changes.html)

The same article cites another effect of the 2005 “reforms”: the increase in home foreclosures and defaults—something clearly related to our current crisis. According to a study by David Bernstein, “The more stringent bankruptcy code” that limited financial relief and made it more difficult and expensive to file for bankruptcy, “appears to have increased the number of individuals walking away from their homes, their mortgages, and the other financial obligations without seeking the protection of the bankruptcy court.”

To grant the devils their due, such restrictive measures are not, historically, as bad as the practice in ancient Greece, where bankruptcy didn’t even exist. The families of adult fathers who couldn’t pay their debts were legally liable for those debts, and so entire families could be forced into “debt slavery” until their labor discharged the debt. Many if not most of the first immigrants to the United States were debtors as well, coming to the New World as indentured servants committed to working off their debts in a few years. Thomas Jefferson, among other notables, ended his life so deeply in debt that his entire property (including about 200 slaves) went on the auction block to pay his creditors, leaving his white family penniless (his “black” family by his enslaved concubine Sally Hemings, of course, would have inherited nothing in any case). Still, according to an article in the current New Yorker Magazine, the debtor policy in the United States improved on the bankruptcy situation that had prevailed in Europe, where only traders and merchants were allowed to claim bankruptcy—European logic being that such “risk-takers” had to be protected in order for their crucial trade to continue. All others went to debtors’ prisons—for sums as small as a few shillings. In the United States, by contrast, democracy in essence demanded that all were entitled to the same protection, and so the protection of bankruptcy, usually Chapter 7, became available to anyone unable to pay his bills. This meant that though major property items could be seized, at least some “exempt” property—clothing, household goods, an older car—could be retained as the rest of the debt was discharged (except for spousal and child support, student loans and most taxes). This was the situation that prevailed until the 2005 “reform” made bankruptcy for suckers less available.

Since then, however, a few things have changed. Most notably, the current financial crisis has meant that now it is not those irresponsible consumers (suckers) who are going bankrupt, but the banks (mortgage brokers, investment bankers, insurance companies etc.) themselves. And, reverting to the traditional attitude that wealthy traders and merchants deserve more consideration than the workers who actually make products, our financial wizards have decreed that we taxpayers (suckers) should all agree to bail out the financiers because, after all, what they do is crucial for the rest of us. And so, in the biggest bailout in U.S. history, we’ve propped them up with trillions ($12 trillion so far?) in taxpayer dollars.

Now that wouldn’t be quite so bad if the bastards displayed a little contrition, a little consideration for the little guy. But do they? Not on your life. First of all, these hucksters continued to pay themselves—the guys at the top—obscene bonuses. And more recently, an AFL-CIO sponsored study found that more CEOs of American companies got pay hikes than pay cuts in the year 2008. That’s right. Of 946 companies surveyed, 480 had CEOS who got pay raises, while 463 cut their CEOs pay. Moreover, median CEO salary rose 7% in 2008 (the year the economy collapsed), with their perks going up 13% to an average value of $336,246., and their average yearly compensation reaching $5.4 million.

Secondly, and this is the real outrage, the banks we’ve bailed out with trillions that our children will be paying for god knows how long, have chosen to stick it to us suckers in yet another way—by gouging us with credit card interest. That’s right, the same swine who have begged for billions to keep their companies “solvent” (after they drove them and us into the ditch with their complex securitized mortgage packaging and credit default swaps all designed to make billions while the getting was good), these same hot shots have now come up with yet another swindle—sticking it to credit card debtors. It’s a foolproof game, especially now that getting bankruptcy relief for credit card debt has been made much harder (thanks to the 2005 reform cited above): just raise the rates on credit card debt arbitrarily, take it or leave it. Listen to the experience of some recent complainants to CNN.money.com. A small business owner from Southhaven, Miss wrote:

“I have a very small business and most of our debt is on credit cards. We had a 0% annual percentage rate until January 2009 that would go up to 7.99% thereafter. A few months ago my check got there a day late. The credit card company, Advanta, increased my APR to 7.99%. I just received my current statement and the APR jumped to 25.39%. When I called, a supervisor said it was done for economic reasons. How can they do that? Is it illegal? Can I report them?”

The answer came from Kathleen Ryan O’Connor:
“Faced with the same economic pressures as other companies affected by the ongoing recession and credit crunch, credit card companies are racing to protect themselves from the costs of more defaults by hiking interest rates and slashing credit limits, even for cardholders with excellent credit histories.”

Another small business owner had the same experience, noting that her expanding company was not only issued a lower credit card limit, but also an interest rate hike that went from 3% to 27%! The credit card company, Advanta, referred her to the terms and conditions it issues, including this one: “We may change any of your account terms, including rates and fees, at any time, for any reason.” No questions asked. Take it or leave it.

So that’s the money game. First make a pile of money on fraudulent practices in mortgage lending and bundling the bad loans in impenetrable securitized mortgage packages to be sold to suckers the world over. Then get government bailouts (i.e. taxpayer money) to get rid of the “toxic assets” that are holding back credit and threatening to bring down the whole system. Then stick it to the taxpayers who bailed you out by raising their credit card interest so as to maintain your “profitability”—which is precisely what my credit card company, Chase, used as justification for bumping my APR over 4 percentage points. No reason needed. Take it or leave it, sucker.

So don’t be shy about calling your Congressional reps and senators. Tell them you back the idea proposed by Vermont’s Senator Bernie Sanders: calling the practice of credit card companies “nothing less than loan sharking,” Sanders has proposed a 15% limit on all credit card interest. Period. Now that’s a proposal. So is Senator Christopher Dodd’s idea to “bar credit card companies from raising interest rates at any time for any reason.” I wouldn’t hold my breath that either proposal will pass, but some outraged calls and letters threatening a debtors’ revolt might help.

Lawrence DiStasi

Saturday, April 4, 2009

Fraud at Every Level

Last night, Bill Moyers Journal (PBS, Friday nights, 10:00 PM) had the most stunning revelations about the financial crisis I’ve heard yet. His guest was William Black, former Director of the Institute for Fraud Prevention and now professor of Economics and Law at the University of Missouri, Kansas City. Black was the man who, during the Savings &Loan crisis of the late 1980s, accused House Speaker Jim Wright and 5 U.S. Senators, including John McCain, of doing favors for the S&L’s to get contributions in return. Now what he’s saying is that the current financial crisis is a case of fraud, fraud that has been warned about since at least 2004, and which has been enabled and covered up by two Secretaries of the Treasury, Hank Paulson and Timothy Geithner. All should read the whole transcript (http://www.pbs.org/moyers/journal/04032009/transcript1.html) but here are some highlights.

To the question of how the CEOs and bankers committed the fraud, Black answered that they made “really bad loans, because they pay better.” In other words, they can charge higher interest. Then “you grow extremely rapidly, in other words, you’re a Ponzi-like scheme.” Finally, you employ “leverage” which means “borrowing a lot of money” to make still more loans. Thus you get record profits early on, and get rich on bonuses. Also, I assume, then you get out if you can, with your money in the Bahamas.

Bill Moyers seemed to have a hard time believing this: banks and CEOs deliberately set out to make bad loans? Black answered with an unqualified “yes.” Then came the questions about how to find evidence of the fraud. Black pointed to “specialty lenders, the ones who did most of their work in the sub-prime and what’s called Alt-A, liars’ loans.” Liars’ loans. The term was apparently deliberate, meaning the lenders knew they were fraudulent. Because not only are income and job history and assets not checked for liars’ loan, “you get a better deal if you inflate your income and your job history and your assets.” Such loans were also called “ninja” loans in the trade, meaning no income verification, no job verification, no asset verification.

The next step, as we now know, was to create complex instruments to essentially hide the “crushing risk” that was known to be lurking in all these bad loans. And then get triple-A ratings on this toxic stuff from the rating agencies, which rating signifies that there is “zero-risk.” It was only after Congress investigated these rating agencies, a year ago and after the collapse, that it found that some rating agencies had never looked at a single loan file. One statement from Fitch, the smallest of the rating agencies, said “there was the appearance of fraud in nearly every file we examined.” After the crisis, of course. So, here is a short summary from Black:

“…the investment banker that—we call it pooling—puts together these bad mortgages, these liars’ loans, creates the toxic waste of these derivatives. All of them do that. And then they sell it to the world and the world just thinks because it has a triple-A rating it must actually be safe. Well, instead, there are 60 and 80% losses on these things, because of course they, in reality, are toxic waste.”

This is where we had got to last Fall when Treasury Secretary Paulson made the problem public, and warned that without government bailouts, the whole financial system could collapse. And Alan Greenspan, at one point, claimed he had no idea there was so much trouble in the industry he was supposed to be monitoring. Except that William Black also pointed out this little fact: that “the FBI warned, in September 2004, that there was an epidemic of mortgage fraud” that would produce a major crisis. The only problem being that after 9/11, the Justice Dept transferred 500 white-collar fraud specialists to terrorism investigations, and the Bushies refused to replace them. The result is that even today, according to Black, with a crisis 100 times worse than the S&L crisis, there are “one-fifth as many FBI agents” to work this crisis as worked the S&L one.

As to the insiders who are now supposed to be fixing all this for the Obama administration, and us, consider these stunners from William Black. Not only did the Clinton administration collude in getting rid of the regulations in the Glass-Steagall law, they also passed a law to hamstring a heroic regulator, Brooksley Born, who was trying to regulate exotic (toxic) derivatives. And guess who did the dirty deed: Lawrence Summers (Clinton’s second Treasury Secretary, now chief financial adviser to Obama), Robert Rubin (Clinton’s first Treasury Secretary, senior adviser of Citigroup before he resigned under fire), and Phil Gramm (then head of the Senate Banking Committee):

“…Summers, Rubin, and Phil Gramm came together to say not only will we block this particular regulation. We will pass a law that says you can’t regulate.”

The law was the Commodity Futures Modernization Act of 2000, which kept derivatives transactions and credit default swaps free of government regulation. Nice.

Regarding Timothy Geithner, the head of the New York Federal Reserve when all this took place, Black says flatly that he is “covering up. Just like Paulson did before him. Geithner is publicly saying that it’s going to take $2 trillion taxpayer dollars to deal with this problem. But they’re allowing all the banks to report that they’re not only solvent, but fully capitalized. Both statements can’t be true. It can’t be that they need $2 trillion, because they have massive losses, and that they’re fine.”

I don’t know about you, but this is enough. Enough to make my blood boil. Enough to demand from the U.S. Congress a full-fledged investigation of this whole mess—never mind “looking forward” as Obama likes to say, never mind protecting the “confidence” of the average American. Investigate, expose, and jail, if necessary, those who profited from all this, as Bernie Madoff is being jailed. Most important--and the same is true of the war crimes of the Bushies—without an investigation and the necessary information about what went wrong and exactly how it went wrong and exactly who facilitated it, there can be only another crisis in the years to come: one we may never get out of.

Lawrence DiStasi

Wednesday, April 1, 2009

Money Ex Nihilo

Since our little economic crisis took center stage, I have been trying, vainly, to understand it, along the way trying to understand money and a little concept called “debt-based currency.” Recently, I think I’ve got it—not thoroughly, to be sure, but enough to be able to perceive a monstrous scam when I see one, thanks to an amazing little article I suggest everyone read: “Dollar Deception: How Banks Secretly Create Money,” by Ellen Brown, J.D. on http://www.webofdebt.com/articles/dollar-deception.php. It doesn’t have to do with AIG or with credit default swaps or securitized mortgages. It has to do with the basic idea of money creation, who creates it, and how.

Begin with some common misconceptions. 1) The Federal Reserve is the nation’s bank, a public, government entity. Wrong. The Federal Reserve is actually a consortium of private banks, which creates money and lends it to the government, to us, at a nice rate of interest. 2) The Federal Reserve, by creating its Federal Reserve notes, i.e. printing all that money we all lust after, makes most of the money supply. Also wrong. Forget paper money: most of the money that’s created is actually created by plain old banks when they make loans. 3) The money that banks create is actually backed by something substantial, like gold or silver. Wrong. The United States went off the gold standard in 1933, when Franklin Delano Roosevelt made this move to keep what money was left in the United States from fleeing to foreign banks. Since then, the legendary stash of gold in Fort Knox supposedly backing our paper dollars no longer exists. Your dollars are backed by literally nothing except the U.S. government’s pledge to honor them in some way that is not clear. It’s a bit of a magic trick, kept afloat by the faith of people and businesses (and countries like China and Saudi Arabia which hold so much U.S. debt that if they ever decided to call it in, we’d all be in the sewer).

But let’s get back to basics. Banks create money out of thin air. Ellen Brown cites an astonishing lawsuit that illustrates this in an amazing way. In 1969, a man named Daly was about to lose his home to a bank that held a $14,000 mortgage on it. Daly, a lawyer, decided to sue the bank for not having “consideration,” or something of value, backing its loan to him. In court, the bank’s president admitted this was true, saying that the bank routinely created money “out of thin air” for its loans, which he said was standard practice in the industry. The judge, a Justice of the Peace named Mahoney, reiterated what he had heard: “Plaintiff admitted that it, in combination with the Federal Reserve Bank of Minneapolis…did create the entire $14,000 in money and credit upon its own books by bookkeeping entry. That this was the consideration used to support the note…[and that] the money and credit first came into existence when they created it. Mr. Morgan [the bank president] admitted that no United States Law or Statute existed which gave him the right to do this…” Given these facts—that the bank was actually extending credit without backing its loans with anything it actually had in its vaults—the court ruled against the bank’s foreclosure claim, and Daly kept his house.

Now elementary banking theory seems to partially admit this. It grants that since at least the 17th century, in a practice started by goldsmiths, bankers have engaged in what is known as “fractional reserve banking.” That is, when people deposited their gold with goldsmiths, and received paper notes testifying to the amount and allowing them to redeem the gold when they needed it, the goldsmiths holding the gold noticed something. People never came all at once to redeem their gold. In fact, at any one time, only about 10 or 20% of the gold was needed to redeem the notes people presented. This meant that the goldsmith could actually lend from 5 to 10 times as much money (in notes) as they had backed with gold. This became the basis for “fractional reserve banking” and most currency: except in situations like the Depression, where everyone suddenly wants to redeem paper bank notes for gold or silver in what is known as a “run” on banks, banks could lend out—literally create—far more money than they actually had in reserves. Ellen Brown quotes some notable bankers on this.
Sir Josiah Stamp, president of the Bank of England in the 1920s:
“The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented.”

Or Graham Towers, Governor of the Bank of Canada from 1935 to 1955:
“Banks create money. That is what they are for. . . The manufacturing process to make money consists of making an entry in a book. That is all. . . .Each and every time a Bank makes a loan . . . new Bank credit is created -- brand new money.”

Or Robert B. Anderson, Treasury Secretary under President Eisenhower:
“[W]hen a bank makes a loan, it simply adds to the borrower's deposit account in the bank by the amount of the loan. The money is not taken from anyone else's deposit; it was not previously paid in to the bank by anyone. It's new money, created by the bank for the use of the borrower.”

To get some idea of the amount of money that gets created this way, and its inflationary effect (creating money means more dollars (demand) chasing the same amount of goods (supply), hence prices tend to rise) Brown cites the Fed’s own money supply (M3) statistics. First of all, new money has to be created all the time, i.e. borrowed, “just to pay the interest owed to bankers. A dollar lent at 5 percent interest becomes 2 dollars in 14 years. That means the money supply has to double every 14 years just to cover the interest owed on the money existing at the beginning of this 14-year cycle. The Federal Reserve’s own figures confirm that M3 has doubled or more every 14 years since 1959. That means that every 14 years, banks siphon off as much money in interest as there was in the entire economy 14 years earlier. This tribute is paid for lending something the banks never actually had to lend, making it perhaps the greatest scam ever perpetrated…”

Now think about it. Bankers, and especially those in the big banks like Citibank and Morgan and Chase and Wells Fargo and Bank of America, have been getting rich on this “greatest scam ever perpetrated” for years, a scam that at one time was called usury. But not content with making billions on interest, especially from the difference between the rate they pay to borrow the money from the Federal Reserve and the outrageous rate they have been allowed, since 1981, to charge their credit card customers (one of my bank credit cards just informed me that my interest rate was being raised about 4%, the difference between the essentially 1% they get it for and the 13% they now charge me being their profit, not to mention the profit they make from poorer folks whom they charge 25 and 30% for the same credit), they had to get into “subprime” mortgages and complicated securitized debt instruments as well, so they could make even more obscene profits. All of which came a cropper when the housing bubble burst and all that debt going bad (I gather that that debt or money owed them is what banks tend to use as “consideration”) threatened to take the whole financial system down with them. And which they then had the nerve to beg the Federal Government via taxpayers to rescue them from. And which the government, using taxpayer dollars, urged the sucker public to agree to because otherwise we’d all be doomed.

Now, with a new president to hopefully instill some root sense into the whole system, we find that his top advisers, the Summers and Geithners and Emanuels and Goolsbees, are not only “centrist” and rooted in the financial system themselves, as are all our so-called representatives who derive the bulk of their contributions from this same financial sector, but in practice determined to revive and maintain the same bankers and the same system that brought us all to the brink of financial Armageddon in the first place.

So consider. Bankers create money out of nothing. And then charge us and the government (also us) interest on it. Not a bad way to make a living, one you’d think would be enough for these charlatans (who, by the way, pay their working-class tellers about $11 an hour to start). But no. Greed, by definition, knows no moderation, never says ‘this is enough.’ No, greed is infinite. Until, that is, the people finally wake up and get fed up and cry “foul.” Some of that has been happening already regarding the bonuses to the AIG scoundrels. Now what one hopes is that the outrage will continue until all banks and bankers and their whole system are truly brought to heel, along with insurance companies and the rest of the Wall Street bunco artists. How this might happen is not something I’m competent to predict (Ellen Brown suggests establishing a true government bank that prints its own money but doesn’t charge itself interest; think of the savings!) But perhaps we can all find out before it’s too late. Meantime, next time you see your banker, you might let him know that you know: Money ex nihilo might sound godlike, but it’s more like what Freud said it symbolized—the doings of the other end.

Lawrence DiStasi