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Corporatist Corruption: Systemic Fraud under Clinton-Bush-Obama Regime

Crony capitalism and the elimination of accountability

News Corporatism Recommended Links Casino Capitalism Neoliberalism as a New Form of Corporatism Control Fraud
 (crisis of corporate governance)
Hillary Clinton email scandal: Timeline and summary "Clinton Cash" Scandal: Hillary Clinton links to foreign donors and financial industry Bill Clinton, the man who sold Democratic Party to Wall Street and helped FIRE sector to convert the country into casino Audatioues Oligarchy and Loss of Trust Propaganda of Shareholder Value  Amorality and criminality of neoliberal elite
Deregulation as crony capitalism Revolving Doors as Corruption Brooksley Born and Three Marketeers Lack of transparency, problems with following GAAP standards Principal-agent problem Revolving Doors as Corruption
Corruption of Regulators Corruption at the SEC Corruption of FED Corruption of Treasury Corruption of Congress John Dugan and the corruption of Office of Comptroller of currency
Neoclassical Pseudo Theories and Crooked and Bought Economists Financial Sector Induced Systemic Instability of Economy America’s Financial Oligarchy Banking Bonuses as Money Laundering Numbers racket Wrecking Crew: Notes on Republican Economic Policy
Quiet coup Neoliberalism as secular religion, "idolatry of money" Pope Francis on danger of neoliberalism The Great Transformation Kleptocracy Wall Street Propaganda Machine
Credibility Trap Privatization as a special case of corruption        
Think Tanks Enablers The Maestro Has No Clothes Glass-Steagall repeal Phil Gramm Financial Humor Etc

"At its heart, therefore, the financial crisis was a breakdown in the rule of law in America."

-- James Galbraith

In philosophical, theological, or moral discussions, corruption is spiritual or moral impurity or deviation from an ideal. Corruption may include many activities including bribery and embezzlement. Government, or 'political', corruption occurs when an office-holder or other governmental employee acts in an official capacity for personal gain.

Systemic fraud was the second nature of corporatist regimes from its humble beginning in the first half of the XX century in Mussolini Italy to reincarnation of corporatism by Reagan. In this sense the terms corporatism and the term crony capitalism reflect the same social phenomenon. Both means the elimination of accountability. And first and foremost elimination of accountability for the financial sector, as fish rots from the top. According to Wikipedia corruption occurred on several different scales:

Scales of corruption

Corruption can occur on different scales. There is corruption that occurs as small favors between a small number of people (petty corruption), corruption that affects the government on a large scale (grand corruption), and corruption that is so prevalent that it is part of the every day structure of society, including corruption as one of the symptoms of organized crime (systemic corruption).

Wikipedia conveniently omitted neoliberalism as the source of system corruption.  At a deeper level it is corruption that form the backbone to globalization. As neoliberal regimes enforce deregulation, privatization, and structural adjustment policies, requiring civil service to shrink, the side effect of externality of this policies is outflow of money iether to G7 countries (for the third worlds) or to offshore jurisdictions (for the USA and other G7 countries). While Western governments, the World Bank and IMF denounce corruption, their own policies promote it on a systemic level. 

Like Mussolini used to say (or was it attributed to him) the essence of corporatism is  to [corporate] friends everything, to enemies the law. And that's the essence of Clinton-Bush-Obama regime if we are talking about high level executives. Small fish still can be fried, but big sharks are untouchable. No executives went to jail after 2008 financial crisis. No executives went to jail due to deception of people before Iraq war or due to incompetence or worse during 9/11. 

Mussolini claimed that by elimination of accountability the dynamic (or heroic) capitalism based on private initiative could be prevented from degenerating into stale crony capitalism.  But opposite is actually true. There is a short initial period when deregulation unleashed private energy, but after that corruption emerges and the situation can deteriorate deeper that it was under stale state capitalism regime.

Many analysts assert that China is one of the main examples of state capitalism in the 21st century. But this is only partially true as elements of corporatism in China are very strong. The same was actually true for the USSR. All those three regimes are just different flavor of general corporatist model. As Margaret Thatcher used to say "There is no alternative".

The difference is only in degree of state involvement in economics, not in the substance of the social regime.  Bremmer describes state capitalism the following way (We're All State Capitalists Now - By Niall Ferguson Foreign Policy):

In this system, governments use various kinds of state-owned companies to manage the exploitation of resources that they consider the state's crown jewels and to create and maintain large numbers of jobs. They use select privately owned companies to dominate certain economic sectors. They use so-called sovereign wealth funds to invest their extra cash in ways that maximize the state's profits. In all three cases, the state is using markets to create wealth that can be directed as political officials see fit. And in all three cases, the ultimate motive is not economic (maximizing growth) but political (maximizing the state's power and the leadership's chances of survival). This is a form of capitalism, but one in which the state acts as the dominant economic player and uses markets primarily for political gain.

Just replace the word capitalism with corporatism in the last sentence and you will get pretty apt definition of both China and USSR social models.

Mussolini also aptly characterized corporatism as "state socialism turned on its head": instead of state controlling the corporations, in corporatism corporations are controlling the state.

In the last half of the 19th century people of the working class in Europe were beginning to show interest in the ideas of socialism and syndicalism. Some members of the intelligentsia, particularly the Catholic intelligentsia, decided to formulate an alternative to socialism which would emphasize social justice without the abolition of private property. It was this intellectual tradition that led to Corporatism, as the key is the attempt to merge corporate power with the state power. Such a system does not nessesary need to take form of national socialism. It became dominant in XX century in various, often milder forms (including BTW the "New Deal" in the USA).

Due to its origin Corporatism has been attractive social model in the Latin countries of Europe (Portugal, Spain, Italy and France) and Latin America, where it resonated with Catolisism. Germany also has significant catholic population which, by some accounts, was the core of the NSDP. The connection between Catholicism and the Continental corporatism movements is also obvious in the various Christian Democrat parties (where for ‘Christian’ we should read ‘Roman Catholic’). In USA corporatism initially got fertile ground in states with significant Catholic population such as Wisconsin with its high percentage of German Catholics (senator McCartney represented Wisconsin in the US senate). However, its influence goes much wider.

The key idea of corporatism is to eliminate or at least lessen the inherent conflict between the owners of capital represented by management and labor represented by unions.  And one way to do it and to institualize trade unions as the only legitimate representatives of workers and work with its corrupted leadership, not with charismatic leaders of the strikes or, worse, communists. This way demands of workers were partially accommodated in a form that was acceptable to large capital. And the key here are interest of large capital as it is the primary political force in any corporatist regime. Quoting Benito Mussolini: "Fascism should more appropriately be called Corporatism because it is a merger of State and corporate power.

Later in the USA large corporations understood that outsourcing of labor represents a lever that makes negotiation with trade union unnecessary. Globalization makes possible by-and-large ignore labor demand using outsourcing as a powerful wedge issue. Due to this development, in core of which was the dramatic rise of international communication and Internet, corporatism mutated into a different form in which demands of lower classes were just ideologically suppressed in a way that was done under communist dictatorships using Marxist ideology and labor was split using verge issues and brainwashed to vote against its own political interests. Paradoxically part of organized labor especially in mid-Western states became a staunch supporter of Republican Party (What's the matter with Kansas)

The resulting social order took a very specific form of "free market capitalism" (aka Neoliberalism) which like some previous forms of corporatism such as national socialism has very strong ideological component. Actually so strong that was able to defeat Marxism on international arena and series of neolibral revolutions shook former Soviet camp. Some states like China internally transformed into neoliberal form, avoiding "color revolution" stage.

As an ideology neoliberalism represent eclectic set of pseudoscience theories that somewhat mirror of Hitler theories of superiority of Arian race in economic terms  (replace the Arian race with corporations and "free market").  Like Marxism it became powerful global in its reach secular religion, with its own set of prophets, martyrs, holy books, and the plan of salvation.

In reality free market plays the role of Heaven in Christianity, an idealized but unachievable construction. There was never was and will never be any real "free market" in any neoliberal states  for a simple reason as it is impossible and contracts the fact that neoliberalism as a form of corporatism is a merge of power of large corporations and the state. As such large corporation, and under neoliberalism especially large financial players are always subsidized (and rescued) by state because they control the state. It is the same merger of state power and corporations as in classic corporatism  but with more prominent role of financial oligarchy in the mix: Johnson (The Quiet Coup - Magazine - The Atlantic) called acquiring by financial oligarchy dominant influence on the state a "Quiet coup" (not very dissimilar to NSDP takeover of power in Germany).

But religious component of neoliberalism are so strong that all concerns about this issue are suppressed in "true believers" (which constitute the majority of population in major Western countries).

That's why corruption of government is an immanent feature of corporatist regimes and it instantly became a prominent feature of the US capitalism (and a real problem) immediately after election of Reagan, which signifies political victory of neoliberalism in the USA (with Saving and Loan Crisis was the first act of this corruption drama). And it goes without saying that it became pervasive under Clinton-Bush-Obama regimes. Paradoxically it was especially acute under Clinton administration during which all "socialist" elements of "New Deal" (government regulation of private sector) were completely dismantled.

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[Sep 28, 2016] Who Cares About the Clinton Foundation?

Sep 28, 2016 |
by James Kwak Posted on August 25, 2016 The Baseline Scenario | 59 comments By James Kwak

Imagine that while George W. Bush was governor of Texas and president of the United States, various people and companies decided to write him checks for hundreds of thousands of dollars, just because they thought he was a great guy. Those people and companies, just coincidentally, happened to have interests that were affected by the policies of Texas and the United States. But when he thanked them for their money, Bush never promised to do anything in particular for them. You would be suspicious, right?

Now, that's roughly what has been happening with the Clinton Foundation. Various people and companies have been writing checks for millions of dollars to the Foundation during the same time that Hillary Clinton was secretary of state and, following that, the most likely next president of the United States-a title she has held since the day Barack Obama's second term began. (The Clintons finally decided to scale back the Foundation earlier this week.)

... ... ...

So the real question is this: Do you think it would be appropriate for people and companies affected by U.S. policy to be writing $1 million checks directly to the Clintons? If the answer is yes, then you should be against any campaign finance rules whatsoever. If the answer is no, you should be worried about the Clinton Foundation.

  1. Vinny Idol | August 25, 2016 at 8:02 pm | I disagree whole heartedly with this post. The clinton foundation is a big deal, because its proof positive that America was founded on Money laundering, the elite that run this country make and made their money through money laundering; and no one wants that in the White House. Thats ok for the rest of America sociery, but not the government where peoples lives hang on the balance through every speech, law and policy that is conducted on capitol hill.

    The Clintons destroyed Libya, Honduras, Haiti through their money laundering scheme called the clinton foundation. Theres no justification for that.

  1. Ray LaPan-Love | August 26, 2016 at 12:40 am | Trump thinks very highly of Reagan, but very lowly of Mexicans, so if Trump were to win I suspect he will secretly sell some of our nukes, this finally giving him the financial boost needed to overtake Carlos Slim on the list of the world's richest men. This 'deal of deals' then also harkens back to another historical 'deal' (Iran/Contra), and of course Reagan, while simultaneously eliminating Trump's deepest regret which is that of being bested by a Mexican. This being the real reason that he decided to run in the first place.

    Probably though, HRC will win. The problem there being that all of the scrutiny that she has been receiving for so long, coupled with Bills' infidelities, and other various setbacks and slights, have left her very angry and bitter. Combining this seething hatred of all humans, especially men, with the fact that there has never been a women president to look up to, HRC's only influence is a secretary who worked for Woodrow Wilson by the name of Mildred Jingowitz, or Ms. Jingo as she was called. Ms. Jingo stands out for HRC because she actually wrote the Espionage Act of 1917 and the the Sedition Act of 1918. Those combining to "cover a broader range of offenses, notably speech and the expression of opinion that cast the government or the war effort in a negative light or interfered with the sale of government bonds."
    "The Sedition Act of 1918 stated that people or countries cannot say negative things about the government or the war."
    "It forbade the use of "disloyal, profane, scurrilous, or abusive language" about the United States government, its flag, or its armed forces or that caused others to view the American government or its institutions with contempt." Most importantly though, these acts gave the Government the legal right to prosecute draft dodgers, and …these could bring an end to at least some of the scrutiny that has plagued HRC for so long just so long as we remain at war.
    So, if you are wondering what any of this has to do with the Clinton Foundation, well, HRC used the Foundation to facilitate at least one very large arms deal with at least one Royal Gulfie. But it matters little whether she used the foundation or not, HRC used her tenure at Foggy Bottom to arrange a record number of weapons deals, and of course she is mad as hell and determined to prove just how tough women can be (and there is of course one man who she respects, H. Kissinger).

    Anyway, it doesn't take a historian specializing in the build-up leading to the two World Wars to figure out the rest. BOOM!!!

  2. Philip Diehl | August 26, 2016 at 12:46 am | Dear James,

    I'm a long-time reader. I admire what you and Simon have done educating us about the financial crisis and its aftermath, and I agree with most of your political positions, especially related to the corrupting influence of money in politics. I have seen this first hand over my years in politics and government, and I believe it is the single most important issue we face because progress on all others depends on it.

    But in taking yet another hack at Hillary Clinton in this post, you've contradicted yourself in a way that unravels your argument, while engaging in false equivalencies and blowing a key fact out of proportion. First, the internal contradiction:

    "Bill and Hillary are getting on in years, they only have one child, and she is married to a hedge fund manager. When you have that much money, a dollar in your foundation is as good as a dollar in your bank account. Once you have all your consumption needs covered, what do you need money for?"

    You imply, here, that the Clintons' wealth and Marc Mezvinsky's hedge fund income have made the marginal value of another dollar in income de minimis for the Clintons' personal finances. Then you write, paraphrasing, that a dollar donated to the Foundation is as good as a dollar deposited in their personal bank account; therefore, you imply, money that goes to their foundation is as corrupting as money that goes into their personal accounts.

    You see the problem in claiming that a contribution to the Clinton Foundation is a powerful incentive for HRC to tilt her foreign policy positions, right? You just made the case for why a donation to the Foundation has little personal value to the Clintons:

    MV of $ to bank account = 0.
    MV of $ to Foundation = MV of $ to bank account.
    But you don't proceed to: Therefore, MV of $ to Foundation = 0. So, according to your logic, there can be no corrupting influence.

    You follow this, writing:

    "If you're a Clinton, you want to have an impact in the world, reward your friends, and burnish your legacy. A foundation is an excellent vehicle for all of those purposes, for obvious reasons. It is also an excellent way to transfer money to your daughter free of estate tax, since she can control it after you die."

    Your imply that the Clintons give equal weight to their desires to reward their friends, burnish their legacy, and have an impact on the world. What evidence do you have of this? Also, you implicitly denigrate their charitable motives by describing them as a desire "to have an impact on the world" without a nod to their clear intent to have an impact that is profoundly constructive. You also speculate, without providing any support, that the Foundation is a tax avoidance scheme to enrich their daughter. I think you've crossed a line here.

    Now for the false equivalencies:

    "Imagine that while George W. Bush was governor of Texas and president of the United States, various people and companies decided to write him checks for hundreds of thousands of dollars, just because they thought he was a great guy. Those people and companies, just coincidentally, happened to have interests that were affected by the policies of Texas and the United States. But when he thanked them for their money, Bush never promised to do anything in particular for them. You would be suspicious, right?"

    Why imagine? We have the real-world case of the Saudis bailing out George W's Harken Energy while his father was president. Of course, this is only one example of how the lucrative Bush-Saudi relationship generated income that went straight into the Bush "coffers".

    So you implicitly compare HRC's alleged conflict related to the family's charity with the Bush family conflict related to their own personal bank accounts. While HW Bush, as president, made use of his long friendship with the Saudis for the family's personal gain, HRC gave access to the likes of the crown prince of Bahrain and Nobel Peace Prize Winner Muhammad Yunus. Not equivalent. Not even close. I wonder how routine it is for a Secretary of State to meet with the crown prince of an oil-producing nation or a Nobel Prize winner versus how routine is it for foreign oligarchs friendly to a president to bailout his son.

    But at least the Saudis were allies of the US. Today, the GOP nominee has undisclosed but apparently significant business ties to close allies of the president of our greatest strategic adversary, and expresses his admiration for an autocrat who is seizing territory in Europe and terminating his opponents. I've missed your post on this one, though I'm sure there is one.

    One last point: This controversy involved some 85 meetings or telephone calls HRC granted to Foundation donors. The media have morphed this into 85 meetings, dropping the "and telephone calls," and made this out to be a pretty big number. Naive readers and Hillary haters have accepted it as such. If fact, 85 meetings and telephone calls over four years are, well, de minimis.

    Many of these donors had standing sufficient to get them in the door whether they gave to the Foundation or not. But let's say all of them gained access solely as a result of their donations. Over the four years HRC was Secretary of State, 85 meetings and telephone calls work out to 1.8 meetings/calls per month. Let's make a guess that she met or talked on the phone with an average of 15 people a day. So, one of every 250 people HRC met or had a phone call with each month, or 21 out of 3000 each year, would have secured their contact with her by donating to the Foundation. 85 doesn't look so big in context, especially since no one has presented any evidence of any quid pro quos.

  3. Ray LaPan-Love | August 26, 2016 at 2:42 am | Philip,
    The 85 meetings occurred during about half of HRC's term and I've not heard anyone else dilute things with "phone calls".

    Plus, the Bahrainis were approved for a major arms deal after donating. The Prince tried to make an appointment with HRC privately, but was made to go through State Dept. channels before being allowed a meeting.

    HRC was also involved in the selling of more weapons in her term than all of those occurring during the Bush 43 terms combined.

  1. Ray LaPan-Love | August 26, 2016 at 2:50 am | Philip.
    Also, there is this:
    "You had a situation, that The Wall Street Journal reported, where Hillary Clinton herself intervened in a case dealing with taxes with UBS, a Swiss bank, and then, suddenly, after that, UBS began donating big to the Clinton Foundation. So there are many examples of-I mean, there's oil companies-that's another one I should mention right now, which is that oil companies were giving big to the Clinton Foundation while lobbying the State Department-successfully-for the passage of the Alberta Clipper, the tar sands pipeline."
    David Sarota, interview:
  2. Ray LaPan-Love | August 26, 2016 at 9:40 am | Other noteworthy donors to the Clinton Foundation:

    Carlos Slim
    Chairman & CEO of Telmex, largest New York Times shareholder

    James Murdoch
    Chief Operating Officer of 21st Century Fox

    Newsmax Media
    Florida-based conservative media network

    Thomson Reuters
    Owner of the Reuters news service



    News Corporation Foundation
    Philanthropic arm of former Fox News parent company


    Houghton Mifflin Harcourt

    Richard Mellon Scaife
    Owner of Pittsburgh Tribune-Review


    Abigail Disney
    Documentary filmmaker

    Bloomberg Philanthropies

    Howard Stringer
    Former CBS, CBS News and Sony executive

    Intermountain West Communications Company
    Local television affiliate owner (formerly Sunbelt Communications)


    Bloomberg L.P.

    Discovery Communications Inc.

    George Stephanopoulos
    ABC News chief anchor and chief political correspondent

    Mort Zuckerman
    Owner of New York Daily News and U.S. News & World Report

    Time Warner Inc.
    Owner of CNN parent company Turner Broadcasting




    Read more:
    Follow us: @politico on Twitter | Politico on Facebook

  1. publiustex | August 26, 2016 at 10:11 am | Hello Ray,

    First, I'd appreciate it if you could provide a cite supporting the statement that move arms sales occurred during HRC's four years than during W's eight years. I'd like to look under the cover of that one.

    Also, it's important to note that a lot more people are involved in approving arms sales than the SoS, including Republicans on the Hill.

    Second, the AP touted its original story as being "meetings" but when you read the story itself you found it was "meetings and phone calls." Subsequently, the media and commentariat referred to 85 meetings, dropping reference to phone calls.

    Now for the arms sales to Bahrain. This one is especially juicy because it's an excellent example of how HRC is being tarred.

    The US has massive military assets in Bahrain, which hosts the largest US military outpost in the Gulf. We've been making massive arms sale to Bahrain for many years. So no surprise that we'd make some when HRC was SoS.

    And considering the strategic importance of Bahrain, there's no surprise in HRC meeting with the crown prince. The surprise would be if she declined to do so.

    Now, if memory serves, and I encourage you to check me on this, the US suspended arms sales to Bahrain while HRC was SoS in response to the Bahrain's suppression of dissent among its Shia minority. Later, we partially lifted the suspension to allow sales of arms Related to protecting our huge naval base in Bahrain. I think this decision also came while HRC was SoS.

    So, the arm sales to Bahrain illustrates my objections to the facile claims that contributions to the CF suggest that HRC is corrupt. These claims bring one sliver of information to the discussion: so and so donated money to the CF and then talked to HRC on the phone (or got a meeting). No evidence is produced that there's a causal relationship between the two much less a quid pro quo in which the donation and meeting led HRC to act in an official capacity to benefit the contributor.

    All of the examples I've seen so far, the oil companies, UBS, etc. are like this. No context, no evidence of a quid pro quo, all inuendo.

  2. publiustex | August 26, 2016 at 10:20 am | I consider some of these contributors to be unsavory, and I wish they'd give the Clinton Foundation a lot more money so they'd have less to sink into GOP House and Senate races.
  1. Philip Diehl | August 26, 2016 at 11:05 am | Ray LaPan-Love: You left out this quote from the interview with David Sirota. Context matters.

    'DAVID SIROTA: Well, my reaction to it is that I think that if you look at some of these individual examples, I think Paul is right that it's hard to argue that their donations to the foundation got them access. They are - a lot of these people in the AP story are people who knew her."

  2. Ray LaPan-Love | August 26, 2016 at 11:21 am | Pub,
    I can't remember where I saw the comparison between the arms sales of HRC and the shrub. But, if it comes to me I'll add it later. Meanwhile, here is a link to lots of related info:

    And yes, "no context, no evidence of a quid pro quo", and almost as if she knew she might run for the prez job.

  3. Ray LaPan-Love | August 26, 2016 at 11:41 am | Sorry Phillip, but gee whiz, am I to assume that nobody else has any 'context' on a story that is difficult to miss. Where does one draw such lines? And the spin you are hoping for is somewhat unwound by David using the phrase "hard to argue". That could be interpreted to simply mean that the CF is good at obfuscating. And as someone who has worked in politics and even for a large NPO, I can atably assure you
  4. Ray LaPan-Love | August 26, 2016 at 11:59 am | ….!!!!!! my cursor got stuck on the previous comment as I tried to use spell-check.
    Anyway, I was trying to comfratably assure you that these organizations are commonly structured to allow for deceptive practices. The Sierra Club for example has affiliates that collect donations and then those funds are used to pay the overhead of the affiliate 'before' any money is donated to the Sierra Club. Thus, the Sierra club's solicitation costs are not reflected in the percentage of funds used toward whatever cause. This is not of course very subtle, and a Foundation such the CF could not likely get away something this obvious, but…schemes such those exposed by the Panama Papers should make us all hesitant to assume anything.
  5. RICK | August 26, 2016 at 12:20 pm | Dear James -

    I'm a long-time fan of your smart writing and the important work that you (and Simon) do. But what's with this constant Clinton Derangement Syndrome? Why look so hard to find some morsel of "scandal" with the Clintons when there's an entire herd of elephants in the room with the Republican candidate??

    As a wealth manager of many years, I must disagree with your dismissive assessment of the Clintons' personal philanthropy as a personal piggy bank. For sure, in a regular family foundation (many of my clients!) the grants and donations are entirely at the discretion of the controlling family, and very often it's all about shiny brass plaques and photo ops with museum directors or mayors. Fine, that's our system, and at least something gets done. And then the donors die and the plaques fade. A shawl has no pockets.

    But the Clinton operation is unique: they choose specific issues, partner with competent outside groups, and then direct enormous extra outside funds - not just their own meager foundation money - to tackle the problems. This is only possible because of their international status; not a Gates nor a Slim nor a Zuckerberg could engineer the same.

    One can certainly speculate about who got access (a phone call, seriously?) or who was schmoozed in what way in order to secure their donations. But to broad-brush the whole of the Clinton philanthropy as personal corruption is truly unfair. And it sure doesn't make sense when there's so much worse and genuinely scandalous material on the other side just waiting to be uncovered.

    Keep the faith!

  1. Bruce E. Woych | August 27, 2016 at 2:39 pm | Note: (from Global Research critique @ (eg: ) cited above: "Philosopher, novelist, filmmaker and investigative journalist, Andre Vltchek has covered wars and conflicts in dozens of countries. His latest books are: "Exposing Lies Of The Empire" and "Fighting Against Western Imperialism". Discussion with Noam Chomsky: On Western Terrorism. Point of No Return is his critically acclaimed political novel. Oceania – a book on Western imperialism in the South Pacific. His provocative book about Indonesia: "Indonesia – The Archipelago of Fear". Andre is making films for teleSUR and Press TV.
  2. Ray LaPan-Love | August 27, 2016 at 3:42 pm | Bruce, (been awhile),
    High grade stuff there. Yet, I'm not as taken by Caros' comment as you seem to be. Near the end, this part: "The Clinton family business is benefiting themselves AND OTHERS by way of their prominence."
    To begin with, the Clinton's influence in arming the royal gulfies may get us all killed, and so his comparison to the Bushs, while apt in a current sense, it may well be…dangerously premature. Then too, Caro is of course taking sides as if the Clintons don't fully realize the P.R. benefits of giving away other peoples money. Which segs the question of how could the Clintons have put so much time and effort into Hillary's run, while creating so many pitfalls for themselves? Did they think the Repubs might get nice? Are they stupid, arrogant maybe? Or just so corrupt that they just can't stop like so many kleptomaniacs? In any case, it isn't only Trump's fitness that we should be questioning.

[Sep 15, 2016] Clinton Corruption Watch, Sept. 15, 2016

Notable quotes:
"... "State Department Delays Records Request About Clinton-Linked Firm Until After The 2016 Election" [ International Business Times ]. "Beacon Global Strategies is a shadowy consulting firm that's stacked with former Obama administration officials, high profile Republicans and a number of Hillary Clinton's closest foreign policy advisers. But beyond its billing as a firm that works with the defense industry, it is unclear for whom specifically the company works, exactly what it does, and if Beacon employees have tried to influence national security policy since the firm's founding in 2013. ..."
"... UPDATE "New York-based Teneo, with 575 employees, markets itself as a one-stop shop for CEOs to get advice on a wide range of issues, including mergers and acquisitions, handling crises and managing public relations. For its services, it generally charges clients monthly retainer fees of $100,000 to $300,000." [ Wall Street Journal , "Teneo, Consulting Firm with Clinton Ties, Eyes $1 Billion IPO"]. Founder Douglas Band was Bill Clinton's body man . One can only wonder what a body man does to become worth $1 billion to, well, the people who made him worth a billion. ..."
"... The donors expect that their support of the Clinton Foundation will help them get access to the State Department, [Doug] Band see above] expects that he can count on [Huma] Abedin to help, and Abedin seems to understand that she needs to be responsive to Band. This would be a lot of effort for powerful people to expend, if it led to nothing at all. ..."
"... UPDATE "Even as the Clintons are touting plans to distance themselves from their foundation and limit its fundraising if Hillary Clinton is elected president, they're planning one last glitzy fundraising bash on Friday to belatedly celebrate Bill Clinton's 70th birthday" [ Politico ]. ..."
"... "Plans called for performances by Wynton Marsalis, Jon Bon Jovi and Barbra Streisand, according to people briefed on the planning. They said that major donors are being asked to give $250,000 to be listed as a chair for the party, $100,000 to be listed a co-chair and $50,000 to be listed as a vice-chair." Sounds lovely! How I wish I could go… ..."
Sep 15, 2016 |

"State Department Delays Records Request About Clinton-Linked Firm Until After The 2016 Election" [ International Business Times ]. "Beacon Global Strategies is a shadowy consulting firm that's stacked with former Obama administration officials, high profile Republicans and a number of Hillary Clinton's closest foreign policy advisers. But beyond its billing as a firm that works with the defense industry, it is unclear for whom specifically the company works, exactly what it does, and if Beacon employees have tried to influence national security policy since the firm's founding in 2013.

UPDATE "New York-based Teneo, with 575 employees, markets itself as a one-stop shop for CEOs to get advice on a wide range of issues, including mergers and acquisitions, handling crises and managing public relations. For its services, it generally charges clients monthly retainer fees of $100,000 to $300,000." [ Wall Street Journal , "Teneo, Consulting Firm with Clinton Ties, Eyes $1 Billion IPO"]. Founder Douglas Band was Bill Clinton's body man . One can only wonder what a body man does to become worth $1 billion to, well, the people who made him worth a billion.

"[I]n many of these [Clinton Foundation] episodes you can see expectations operating like an electrical circuit. The donors expect that their support of the Clinton Foundation will help them get access to the State Department, [Doug] Band see above] expects that he can count on [Huma] Abedin to help, and Abedin seems to understand that she needs to be responsive to Band. This would be a lot of effort for powerful people to expend, if it led to nothing at all. There are two obvious possibilities. One is that the State Department actually was granting important favors to Clinton Foundation donors that the many sustained investigations have somehow failed to detect. The other, which is more likely, is that someone, somewhere along the line, was getting played" [ The New Yorker ]. Surely those two possibilities are not mutually exclusive? And public office is being used for private gain in either case?

UPDATE "Even as the Clintons are touting plans to distance themselves from their foundation and limit its fundraising if Hillary Clinton is elected president, they're planning one last glitzy fundraising bash on Friday to belatedly celebrate Bill Clinton's 70th birthday" [ Politico ].

"Plans called for performances by Wynton Marsalis, Jon Bon Jovi and Barbra Streisand, according to people briefed on the planning. They said that major donors are being asked to give $250,000 to be listed as a chair for the party, $100,000 to be listed a co-chair and $50,000 to be listed as a vice-chair." Sounds lovely! How I wish I could go…

[Sep 15, 2016] Are the categories terrorist and dictator versus crucial allies are determined based on the size of payments to the Clinton Foundation?

Sep 15, 2016 |

As one Michael Curry points out , Clinton's social messaging team is simply incompetent.

From a series of Clinton tweets attacking Trump over his assumed foreign policy:

Hillary Clinton @HillaryClinton

4. If you were willing to work with Qaddafi-a known terrorist and dictator-is there anyone you aren't willing to make a deal with? Who?

9:32 AM - 14 Sep 2016


Hillary Clinton @HillaryClinton

Hillary Clinton Retweeted Donald J. Trump

13. How can we know you won't (again) impulsively damage relationships with crucial allies to preserve your own ego? Hillary Clinton added,

Donald J. Trump @realDonaldTrump
Dopey Prince @Alwaleed_Talal wants to control our U.S. politicians with daddy's money. Can't do it when I get elected. #Trump2016

7:53 PM - 11 Dec 2015

9:48 AM - 14 Sep 2016

Is such incompetence in messaging a reflection of Hillary Clinton own confusion? Or are the categories "terrorist and dictator" versus "crucial allies" solely depending on the size of payments to the Clinton Foundation?

Posted by b at 02:03 PM | Comments (6) originalone | Sep 15, 2016 2:08:08 PM | 1
Again, B hits the nail on the head. Oh wait, could it be the koolaid by Putin the cause?

Terry | Sep 15, 2016 2:21:10 PM | 2
She is sliding to throwing mud ,. what ever will stick will do the trick I guess .This started after some polls showing the Donald ahead a few points .

FecklessLeft | Sep 15, 2016 2:52:32 PM | 3
I recognize election season is always crazy in the states, especially as an outside observer looking in, but this cycle seems so far beyond that norm compared even to 4 years ago it makes me quite uncomfortable. It reeks of a growing desperation by the elites to me. The 2012 campaigns of the two major parties were a circus by any measure, but they seem completely measured and intellectual by this year's standards.

I understand American culture dwells a lot on violence, but the new standards of political rhetoric disturb me greatly. It seems most of the country's population is either willfully ignorant of the destruction their country creates or cheers it on wildly and willingly. How anybody could advocate carpet bombing without irony or rebuttal is frightenening. That it could drum up support - well that's just depressing.

The two most important topics in this election, nuclear weapons and global warming, both candidates have been decidedly silent about. It scares me that neither party even attempts to appeal to the left anymore, except by manipulating them by fear and non existent 'security' issues. If it's all about PR and perception management anyways, I wonder why Clinton wears her right leaning nature and war mongering history on her sleeve? Maybe content and debate matters less than I assume it does to the average American voter. Maybe it's totally about spectacle and personality now and nothing else. Sad, sad days for those who live in the middle of the Empire but it's hard to be sympathetic sometimes. It seems the hot new consumer electronic device gets more of a thorough analysis and debate than does either major party candidates' platform (if you could even call it that).

Vote republican and catastrophic, irreversible climate change is almost guaranteed, with a hearty chance of more war and more regime change operations (despite attempts to paint the candidate as 'isolationist').

Vote democrat for more wars and regime change, with the status quo of environmental destruction happily maintained (despite the attempts to paint the candidate as an 'environmentalist').

james | Sep 15, 2016 2:54:25 PM | 4
this us election is much more pathetic then usual... witnessing the standing president refer to putin akin to saddam hussain is frankly insane, but shows how depraved the usa has gotten... and, besides that, since when did the average usa person even know where any place outside the usa was on a map, let alone having actually been their? oh - i guess it doesn't matter...

as @1 originalone says basically 'putin did it'...

Les | Sep 15, 2016 2:57:20 PM | 5
As everyone knows, the US normalized relations with Qaddafi in 2004.

The Obama administration authorized CIA backing of the rebellion almost before it started. In all likelihood, it started several years before the revolt, and the authorization was to provide legal cover for activity that was already ongoing.

Erelis | Sep 15, 2016 3:18:51 PM | 6
@ FecklessLeft 3

Unfortunately, your observations are sharp, correct and to the point. All I can weakly offer is something Ralph Nader said. Ralph Nader once noted that the difference between the democrats and republicans is the difference between a car hitting a wall at 60 miles per hour versus 120 miles per hour. Not so anymore. Now both cars will hit the wall going as fast as they can. And the passengers will jump for joy at the speed.

[Sep 12, 2016] Serving the Clintonian Interest: The last thing we need is a Clinton in charge of foreign policy

This is Christopher Hitchens biting analysis from previous Presidential elections, but still relevant
Notable quotes:
"... The last time that Clinton foreign-policy associations came up for congressional review, the investigations ended in a cloud of murk that still has not been dispelled. ..."
"... the real problem is otherwise. Both President and Sen. Clinton, while in office, made it obvious to foreign powers that they and their relatives were wide open to suggestions from lobbyists and middlemen. ..."
"... If you recall the names John Huang, James Riady, Johnny Chung, Charlie Trie, and others, you will remember the pattern of acquired amnesia syndrome and stubborn reluctance to testify, followed by sudden willingness on the part of the Democratic National Committee to return quite large sums of money from foreign sources. Much of this cash had been raised at political events held in the public rooms of the White House, the sort of events that featured the adorable Roger Tamraz , for another example. ..."
"... It found that the Clinton administration's attitude toward Chinese penetration had been abysmally lax (as lax, I would say, as its attitude toward easy money from businessmen with Chinese military-industrial associations). ..."
"... Many quids and many quos were mooted by these investigations (still incomplete at the time of writing) though perhaps not enough un-ambivalent pros . You can't say that about the Marc Rich and other pardons-the vulgar bonanza with which the last Clinton era came to an end. Rich's ex-wife, Denise Rich, gave large sums to Hillary Clinton's re-election campaign and to Bill Clinton's library, and Marc Rich got a pardon. ..."
"... Edgar and Vonna Jo Gregory, convicted of bank fraud, hired Hillary Clinton's brother Tony and paid him $250,000, and they got a pardon. Carlos Vignali Jr. and Almon Glenn Braswell paid $400,000 to Hillary Clinton's other brother, Hugh , and, hey, they , respectively, got a presidential commutation and a presidential pardon, too. ..."
"... Does this sibling and fraternal squalor have foreign-policy implications, too? Yes. Until late 1999, the fabulous Rodham boys were toiling on another scheme to get the hazelnut concession from the newly independent republic of Georgia. There was something quixotically awful about this scheme-something simultaneously too small-time and too big-time-but it also involved a partnership with the main political foe of the then-Georgian president (who may conceivably have had political aspirations), so once again the United States was made to look as if its extended first family were operating like a banana republic. ..."
"... In matters of foreign policy, it has been proved time and again, the Clintons are devoted to no interest other than their own. ..."
"... Who can say with a straight face that this is true of a woman whose personal ambition is without limit; whose second loyalty is to an impeached and disbarred and discredited former president; and who is ready at any moment, and on government time, to take a wheedling call from either of her bulbous brothers? This is also the unscrupulous female who until recently was willing to play the race card on President-elect Obama and (in spite of her own complete want of any foreign-policy qualifications) to ridicule him for lacking what she only knew about by way of sordid backstairs dealing. What may look like wound-healing and magnanimity to some looks like foolhardiness and masochism to me. ..."
Nov 01, 2008 |

It was apt in a small way that the first endorser of Hillary Rodham Clinton for secretary of state should have been Henry Kissinger. The last time he was nominated for any position of responsibility-the chairmanship of the 9/11 commission-he accepted with many florid words about the great honor and responsibility, and then he withdrew when it became clear that he would have to disclose the client list of Kissinger Associates. (See, for the article that began this embarrassing process for him, my Slate column "The Latest Kissinger Outrage.")

It is possible that the Senate will be as much of a club as the undistinguished fraternity/sorority of our ex-secretaries of state, but even so, it's difficult to see Sen. Clinton achieving confirmation unless our elected representatives are ready to ask a few questions about conflict of interest along similar lines. And how can they not? The last time that Clinton foreign-policy associations came up for congressional review, the investigations ended in a cloud of murk that still has not been dispelled. Former President Bill Clinton has recently and rather disingenuously offered to submit his own foundation to scrutiny (see the work of my Vanity Fair colleague Todd Purdum on the delightful friends and associates that Clinton has acquired since he left office), but the real problem is otherwise. Both President and Sen. Clinton, while in office, made it obvious to foreign powers that they and their relatives were wide open to suggestions from lobbyists and middlemen.

Just to give the most salient examples from the Clinton fundraising scandals of the late 1990s: The House Committee on Government Reform and Oversight published a list of witnesses called before it who had either "fled or pled"-in other words, who had left the country to avoid testifying or invoked the Fifth Amendment to avoid self-incrimination. Some Democratic members of the committee said that this was unfair to, say, the Buddhist nuns who raised the unlawful California temple dough for then-Vice President Al Gore, but however fair you want to be, the number of those who found it highly inconvenient to testify fluctuates between 94 and 120. If you recall the names John Huang, James Riady, Johnny Chung, Charlie Trie, and others, you will remember the pattern of acquired amnesia syndrome and stubborn reluctance to testify, followed by sudden willingness on the part of the Democratic National Committee to return quite large sums of money from foreign sources. Much of this cash had been raised at political events held in the public rooms of the White House, the sort of events that featured the adorable Roger Tamraz, for another example.

Related was the result of a House select committee on Chinese espionage in the United States and the illegal transfer to China of advanced military technology. Chaired by Christopher Cox, R-Calif., the committee issued a report in 1999 with no dissenting or "minority" signature. It found that the Clinton administration's attitude toward Chinese penetration had been abysmally lax (as lax, I would say, as its attitude toward easy money from businessmen with Chinese military-industrial associations).

Many quids and many quos were mooted by these investigations (still incomplete at the time of writing) though perhaps not enough un-ambivalent pros. You can't say that about the Marc Rich and other pardons-the vulgar bonanza with which the last Clinton era came to an end. Rich's ex-wife, Denise Rich, gave large sums to Hillary Clinton's re-election campaign and to Bill Clinton's library, and Marc Rich got a pardon.

Edgar and Vonna Jo Gregory, convicted of bank fraud, hired Hillary Clinton's brother Tony and paid him $250,000, and they got a pardon. Carlos Vignali Jr. and Almon Glenn Braswell paid $400,000 to Hillary Clinton's other brother, Hugh, and, hey, they, respectively, got a presidential commutation and a presidential pardon, too. In the Hugh case, the money was returned as being too embarrassing for words (and as though following the hallowed custom, when busted or flustered, of the Clinton-era DNC). But I would say that it was more embarrassing to realize that a former first lady, and a candidate for secretary of state, was a full partner in years of seedy overseas money-grubbing and has two greedy brothers to whom she cannot say no.

Does this sibling and fraternal squalor have foreign-policy implications, too? Yes. Until late 1999, the fabulous Rodham boys were toiling on another scheme to get the hazelnut concession from the newly independent republic of Georgia. There was something quixotically awful about this scheme-something simultaneously too small-time and too big-time-but it also involved a partnership with the main political foe of the then-Georgian president (who may conceivably have had political aspirations), so once again the United States was made to look as if its extended first family were operating like a banana republic.

China, Indonesia, Georgia-these are not exactly negligible countries on our defense and financial and ideological peripheries. In each country, there are important special interests that equate the name Clinton with the word pushover. And did I forget to add what President Clinton pleaded when the revulsion at the Rich pardons became too acute? He claimed that he had concerted the deal with the government of Israel in the intervals of the Camp David "agreement"! So anyone who criticized the pardons had better have been careful if they didn't want to hear from the Anti-Defamation League. Another splendid way of showing that all is aboveboard and of convincing the Muslim world of our evenhandedness.

In matters of foreign policy, it has been proved time and again, the Clintons are devoted to no interest other than their own. A president absolutely has to know of his chief foreign-policy executive that he or she has no other agenda than the one he has set. Who can say with a straight face that this is true of a woman whose personal ambition is without limit; whose second loyalty is to an impeached and disbarred and discredited former president; and who is ready at any moment, and on government time, to take a wheedling call from either of her bulbous brothers? This is also the unscrupulous female who until recently was willing to play the race card on President-elect Obama and (in spite of her own complete want of any foreign-policy qualifications) to ridicule him for lacking what she only knew about by way of sordid backstairs dealing. What may look like wound-healing and magnanimity to some looks like foolhardiness and masochism to me.

Christopher Hitchens (1949-2011) was a columnist for Vanity Fair and the author, most recently, of Arguably, a collection of essays.

[Sep 05, 2016] Gli Usa e la guerra fredda il prezzo della vittoria - rivista italiana di geopolitica

Bill Clinton was a regular neoliberal bottom feeder (in essence not that different from drunkard Yeltsin) without any strategical vision or political courage, He destroyed the golden possibility of rapprochement of the USA and Russia (which would require something like Marshall plan to help Russia). Instead he decided to plunder the country. It's sad that now Hillary will continue his policies, only in more jingoistic, dangerous fashion. She learn nothing.
Notable quotes:
"... However, according to Simes in the years immediately following the dissolution of the USSR, Washington has made perhaps the greatest error of a winner: sold for complacency. ..."
"... Russia simply ceased to be a U.S. geopolitical variable in the equation, Moscow was irrevocably excluded from the strategic horizon. ..."
"... The result was that the former Deputy Secretary of State Strobe Talbott called at the time the policy of "eat and shut up": the Russian economy was collapsing, the Red Army reduced the ghost of the past and Yeltsin's entourage welcomed with open arms of the IMF aid. In short, Russia is a power failure and as such was treated by administering liberal economic recipes and submitting its projection to a geopolitical drastic weight loss. Everything apart from the feeling of the Russian leadership. ..."
"... This approach found its full realization, between 1999 and 2004, the expansion of NATO eastward: they were including Poland, Hungary, Czech Republic, Slovakia, Slovenia, Bulgaria, Romania, Estonia, Latvia and Lithuania. Together with the U.S. intervention in Serbia during the Kosovo war (1999), this move Russia convinced that the cost of the American loans -- a dramatic and permanent reduction of the area of ​​security and its own geopolitical ambitions - was too high . ..."
Dec 12, 2011 |


America won the Cold War. But in addition to the USSR, has it defeated Russia? This question, which is still in the nineties sounded absurd to most people, began to appear in the last decade, thanks to the work of historians such as Dimitri Simes, John Lewis Gaddis, or in Italy, Adriano Roccucci.

In the United States is widely believed that the collapse of the Soviet Union was caused in large part by strategic decisions of the Reagan administration. Surely the military and economic pressure exerted by these contributed to the disintegration of the Warsaw Pact and then the final crisis of the Soviet system. However, according to Simes in the years immediately following the dissolution of the USSR, Washington has made perhaps the greatest error of a winner: sold for complacency.

This has resulted, in retrospect, in an overestimation of U.S. policy choices in the mid-eighties onwards, and in a parallel underestimation of the role played by the Soviet leadership. Gorbachev came to power in 1985 determined to solve the problems left behind by Brezhnev: overexposure military in Afghanistan and subsequent explosion of spending on defense, imposed on an economy tremendously inefficient. But if Reagan pushed the USSR on the edge of the precipice, Gorbachev was disposable, albeit unwittingly, triggering reforms that escaped the hands of his own theorist.

That fact has been largely removed from public debate and U.S. historiography which has led America in the second mistake: underestimating the enemy defeated, confusing the defunct Soviet Union with what was left of his heart - Russia.

In fact, Reagan and Bush Sr. after him fully understand the dangers inherent in the collapse of the superpower enemy, dealing with Gorbachev touch, even without discounts: the Soviet leader was refused the pressing demands for economic aid, incompatible with the military escalation Reagan once to crush the Soviet Union under the weight of war spending.

Even the first Gulf War (1990-91), who saw the massive American intervention in a country (Iraq) at the time near the borders of the USSR, did not provoke a diplomatic rupture between the two superpowers. This Soviet weakness undoubtedly was the result of an empire in decline, but remember that even in 1990 no one - least of all, the leadership in Moscow - the Soviet Union finally gave up on us yet.

Despite an election campaign played on the charge to GH Bush to focus too much on foreign policy, ignoring the economics (It's the economy, stupid), newly installed in the White House Bill Clinton was not spared aid to Russia, agreeing to this line of credit to be logged on to the International Monetary Fund (IMF), from June 1992. Clinton's support was directed mainly toward the figure of Yeltsin and his policies, with the exception of waging war against Chechen separatism, in 1994.

If Clinton with these moves proved to understand, like its two predecessors, the importance of "accompany" the Russian transition, avoiding - or at least contain - the chaos following the collapse of a continental empire, the other part of his administration demonstrated sinful paternalism and, above all, acquired the illusion of omnipotence that he saw in the "unipolar moment" end not only the U.S. opposed the US-USSR, but also of any power ambitions of Russia. Russia simply ceased to be a U.S. geopolitical variable in the equation, Moscow was irrevocably excluded from the strategic horizon.

The result was that the former Deputy Secretary of State Strobe Talbott called at the time the policy of "eat and shut up": the Russian economy was collapsing, the Red Army reduced the ghost of the past and Yeltsin's entourage welcomed with open arms of the IMF aid. In short, Russia is a power failure and as such was treated by administering liberal economic recipes and submitting its projection to a geopolitical drastic weight loss. Everything apart from the feeling of the Russian leadership.

This went hand in hand with growing resentment for the permanent position of inferiority which they were relegated by Washington. To the point that even the then Foreign Minister Andrei Kozyrev, known by the nickname "Yes sir" for his acquiescence to the dictates of Americans, showed growing impatience with the brutal Russian downgrading by America.

Indeed, the United States administration did not lack critics: former President Nixon, a number of businessmen and experts of Russia expressed skepticism or opposition to the Clinton administration attitude that did not seem to pay particular attention to wounded pride and the strategic interests of a nation that continued to think of itself as empire. However, these positions does not affect the dominant view in the administration of the establishment and much of the U.S., where consencus was that Russia in no longer entitled to have an independent foreign policy.

This approach found its full realization, between 1999 and 2004, the expansion of NATO eastward: they were including Poland, Hungary, Czech Republic, Slovakia, Slovenia, Bulgaria, Romania, Estonia, Latvia and Lithuania. Together with the U.S. intervention in Serbia during the Kosovo war (1999), this move Russia convinced that the cost of the American loans -- a dramatic and permanent reduction of the area of ​​security and its own geopolitical ambitions - was too high .

[Sep 04, 2016] UBS upped its cash to Bill and the foundation after the scandal and her intervention as Sec. of State

Sep 04, 2016 |
Julio -> EMichael... Friday, September 02, 2016 at 10:03 AM , Friday, September 02, 2016 at 10:03 AM
Look more carefully at the timeline, UBS upped its cash to Bill and the foundation after the scandal and her intervention as Sec. of State. See e.g.

The whole thing smells to high heaven. The only reason to trust that there are no direct quid pro quos is, perversely, that there are so many donations and so many speeches and interactions that they all begin to seem normal.

Yes, there may be smoke and no fire, in the legal sense, but let us not pretend there are no issues here.

[Sep 03, 2016] Buying access is the same as putting a stack of cash into someone's pocket to get them to vote one way or another on a bill of interest

Notable quotes:
"... Does it get money because of the Clintons involvement in raising money? Undoubtedly, without their participation it can't raise anywhere near that amount of money, and the reason is that their high public profile means that people believe that by giving to them they can influence policy, ..."

J.Goodwin, August 31, 2016 10:35 am

Low level personnel in the US government are expected to reject gifts, or if culturally they cannot, then they turn them over to their agency, unless it is something like a coffee or a sandwich.

There is an expectation that people are going to not just not actually corrupt their job by doing favors for people who give them gifts or do them favors, but that they will avoid the appearance of corruption that is generated by accepting gifts.

The supreme court doesn't agree with that anymore. Anyone can accept any kind of bribe as long as they don't let it influence their actions. You can't see the desk for the treasure that's being dumped onto political tables to fund campaigns and line their personal pockets.

This is a foreign practice, one that is corrupt and should be rooted out nationally. Accepting gifts creates a corrupting environment, no matter what the recipient does, because EVERYONE understands that the gift is intended to influence policy or gain access so that the person can influence policy. The person giving the gift knows it, or they wouldn't give it, the person receiving the gift knows it, but "deep down in their honest hearts" they're not going to allow it to influence their work and decisions?

No of course not. Buying access is the same as putting a stack of cash into someone's pocket to get them to vote one way or another on a bill of interest.

Does the Clinton foundation do good work? Sure. Does it get money because of the Clintons involvement in raising money? Undoubtedly, without their participation it can't raise anywhere near that amount of money, and the reason is that their high public profile means that people believe that by giving to them they can influence policy, even if those people are not in office (through backchannels and whispers and introductions).

Does every person donating to the Clinton foundation want to influence policy, or are they primarily motivated by wanting to fund it's good works? This is impossible to tell. Even someone as prominent and perhaps morally blameless Elie Wiesel isn't there to eat cookies and have tea and talk about the weather if he's in Hillary Clinton's office. That is not what he is there for. That kind of meeting is not purely a social call, it's an effort to influence policy, whether it is related to statements on the Armenian genocide or the Sudan or god knows what.

Is he a person that she should meet with, whether he gives a donation to her foundation or not? Maybe that is her job. Probably most of these meetings are that way. That's why public officials are expected to put investments and charities into trusts and blinds and under separate management when they're in office, to help establish the boundary between their public responsibilities and their private interests including their charitable interests.

It doesn't matter to me whether she did anything that she shouldn't have done, legally. The letter of the law is insufficient to dictate the actions of moral people. Is it disqualifying? She's already been disqualified in my mind, this is just another thing.

Is it disturbing and annoying to me to see the double standard where promoters are willing to weasel and explain away whatever the Clintons have done that for any person on the other side of the aisle would be moral issues that disqualify them from office?

[Sep 03, 2016] Emails Raise New Questions About Clinton Foundation Ties to State Dept

Notable quotes:
"... A top aide to Hillary Clinton at the State Department agreed to try to obtain a special diplomatic passport for an adviser to former President Bill Clinton in 2009, according to emails released Thursday, raising new questions about whether people tied to the Clinton Foundation received special access at the department. ..."
"... The exchange about the passport, between Mr. Band and Huma Abedin, who was then a top State Department aide to Mrs. Clinton, was included in a set of more than 500 pages of emails made public by Judicial Watch, a conservative legal group that sued for their release. ..."
"... "Need get me/justy and jd dip passports," Mr. Band wrote to Ms. Abedin on July 27, 2009, referring to passports for himself and two other aides to Mr. Clinton, Justin Cooper and John Davidson. ..."
"... Traveling with a former president does not convey any special diplomatic status, the State Department indicated in a statement regarding the emails. "Diplomatic passports are issued to Foreign Service officers or a person having diplomatic or comparable status," the statement said. ..."
"... "Any individuals who do not have this status are not issued diplomatic passports," it said, adding that "the staff of former presidents are not included among those eligible to be issued a diplomatic passport." ..."
Sep 03, 2016 |

A top aide to Hillary Clinton at the State Department agreed to try to obtain a special diplomatic passport for an adviser to former President Bill Clinton in 2009, according to emails released Thursday, raising new questions about whether people tied to the Clinton Foundation received special access at the department.

The request by the adviser, Douglas J. Band, who started one arm of the Clintons' charitable foundation, was unusual, and the State Department never issued the passport. Only department employees and others with diplomatic status are eligible for the special passports, which help envoys facilitate travel, officials said.

... ... ...

The exchange about the passport, between Mr. Band and Huma Abedin, who was then a top State Department aide to Mrs. Clinton, was included in a set of more than 500 pages of emails made public by Judicial Watch, a conservative legal group that sued for their release.

"Need get me/justy and jd dip passports," Mr. Band wrote to Ms. Abedin on July 27, 2009, referring to passports for himself and two other aides to Mr. Clinton, Justin Cooper and John Davidson.

... ... ...

But a person with knowledge of the issue, who spoke on the condition of anonymity, said that the three men were arranging to travel with Mr. Clinton to Pyongyang less than a week later for the former president's secret negotiations. Mr. Clinton already had a diplomatic passport as a former president.

... ... ...

Traveling with a former president does not convey any special diplomatic status, the State Department indicated in a statement regarding the emails. "Diplomatic passports are issued to Foreign Service officers or a person having diplomatic or comparable status," the statement said.

"Any individuals who do not have this status are not issued diplomatic passports," it said, adding that "the staff of former presidents are not included among those eligible to be issued a diplomatic passport."

The emails released by Judicial Watch also include discussions about meetings between Mrs. Clinton and a number of people involved in major donations to the Clinton Foundation.

In one exchange in July 2009, Ms. Abedin told Mrs. Clinton's scheduler that Mr. Clinton "wants to be sure" that Mrs. Clinton would be able to see Andrew Liveris, the chief executive of Dow Chemical, at an event the next night. Dow Chemical has been one of the biggest donors to the Clinton Foundation, giving $1 million to $5 million, records show.

Ms. Abedin arranged what she called "a pull-aside" for Mr. Liveris to speak with Mrs. Clinton in a private room after she arrived to give a speech, according to the emails, which did not explain the reason for the meeting.

The person with knowledge of the issue said that this email chain also related to Mr. Clinton's North Korea trip because Mr. Liveris had offered to let Mr. Clinton use his private plane.

A separate batch of State Department documents released by Judicial Watch last month also revealed contacts between the State Department and Clinton Foundation donors. In one such exchange, Mr. Band sought to put a billionaire donor in touch with the department's former ambassador to Lebanon.

Donald J. Trump, Mrs. Clinton's Republican opponent, has seized on the documents, saying they revealed a "pay to play" operation.

[Sep 03, 2016] The Real Clinton Foundation Revelation

Notable quotes:
"... "When I was the chief White House ethics lawyer for President George W. Bush," You knew exactly where this article was going once you read the first 14 words. ..."
"... The author was chief ethics lawyer for the George W. Bush Administration. Why does that bother me? I realize this guy's term was from 2005 to 2007 and the Abu Ghraib story pretty much broke in early 2005, ..."
"... How much did the Clinton campaign pay for this Op-Ed? 'Every one does it' and 'it's not illegal'. 'It's how business is done.' How about doing a real in-depth investigation on the Clinton Foundation and perceived favors to donors NYT, instead of more opinion? ..."
"... Clearly a planted article. Nice try. Is everyone aware that the Foundation paid off Clinton's '08 campaign debt? They gave $400,000 and considered "payment for the campaign's mailing lists" ..."
"... According to former Justice Department Deputy Assistant Attorney General Shannen Coffin, there are at least three different categories of federal laws which may be implicated. ..."
"... One, the ethics and government act, which says you can't use a public office for private gain for yourself or even for a charity. So in giving special access to the donors for the Clinton Foundation, the ethics and government act is implicated. So perhaps Mr. Painter is a bit hasty dismissing such claims. ..."
"... If it was only about getting a government post or an arranged meeting, I would agree. But this seems different because significant amounts of money changed hands as a result of State Department intervention. And a lot of that money ended up at the Foundation or as speaking fees to Bill Clinton. How is this not seen as foreign donations effecting an American election - which I believe is illegal. ..."
"... Mr. Painter: You say "There is little if any evidence that federal ethics laws were broken by Mrs. Clinton". So if there is even "little" evidence that the laws were broken, then shouldn't American electorate consider it when making their election day decisions? ..."
"... You did not mention that there was no independent investigation on this subject, so there is no way to know whether there was "little" or "significant" or "overwhelming" evidence that the laws were broken. ..."
"... And finally, even if the written laws were not broken, what about the immorality of what Clintons did? Has morality been completely removed from the public square in this once great country? ..."
"... If there was no evidence of corruption at the Clinton Foundation, then why did Bill Clinton's speaking fees increase astronomically (from roughly $100,000 to $850,000) during Hillary's tenure at the State Department? ..."
"... as the neocons and neolibs in power withdraw from the govt's former "general welfare" Constitutional role and concentrate on enriching themselves and their friends - it would pay for citizens to become more aware of how the sector works. ..."
"... the system they devised inevitably empowers some groups more than others. Since democratic theory defines government officials as representatives of the voters, it encourages constituents to influence the decisions of those agents. Ideally, politicians should not favor the interests of some groups over others, but reality dictates otherwise. ..."
"... In the contest for influence, money inevitably plays a major, although not always decisive, role. In an effort to limit this role, we have developed both formal and informal methods to constrain human greed. The law prohibits bribery, for example. To discourage subtler forms of influence-buying, we have developed codes of ethics that pressure officials to limit financial connections with groups or individuals who might seek their help. ..."
"... Public opinion can serve as a powerful tool to enforce these codes. This explains the informal requirement that a president divest herself of financial connections that might affect her decisions. If Clinton rejects this tradition, she will undermine an important method of limiting the influence of moneyed interests in government. We have too few such tools as it is. ..."
"... Our laws are relatively stringent and prevent the crassest forms of corruption, and our culture makes lesser but legal offenses dangerous politically. But to imagine that any government, anywhere, could function without either those sorts of alliances or some equally corruptible strongman central oversight is is as naive and dangerously idealistic. ..."
"... How would someone feel if they found out that a doctor who prescribed them a medication is also paid large sums by a pharmaceutical company to promote the drug? Or, if the doctors owns substantial amount of stock in the company? Appearances do matter and it is likely that such conflicts do impact judgement. These kinds of allowances are being cleaned up across the country, at least in medicine. ..."
"... I am fine if they get higher salaries, but it is time to clean up the political corruption and crony capitalism. It is a shame that we hold our politicians to such incredible low standards and it is not a surprise that so many people don't bother to vote. ..."
"... It doesn't matter how good or bad the work of the Clinton Foundation is. That is not the question. The question is the motivation of many who contribute to the foundation. Are they motivated by altruism or is donating in a big way a ploy to gain access to Mrs. Clinton. ..."
"... I doubt that Clinton breached a fundamental legal boundary. However, the Clinton's have always seen the bright line and have decided to test the boundaries. From using police to secure women while governor to taking money from Walmart to major financial institutions to the email scandal, the Clinton's do it again and again and blame a vast right wing conspiracy. The Clinton foundation used Doug Band as a bag man securing commercial contracts for Bill and Hilary while he had a senior role at the foundation (flashing red lights). Huma took money off the state department books as did other Clinton confidants (flashing red lights), etc. They can't help themselves. Are these actives illegal? Probably not. However, we seek to be inspired by our leaders, we want leaders who are better than the average, better than us. ..."
"... When Bill can trot off to Russia, get 750k for a speech at the same time that business interests of the donor is before the State Department, it smells. The crux of the matter is the rotten judgement. ..."
"... You want a POTUS who has good judgement. The relentless chasing of a buck mixed with the appearance of impropriety, real or imagined, is the problem. When mixed with her poor judgement on the emails and her poor judgement on invading Iraq and disrupting Libya, you have a problem which explains her low approval rating. She is just fortunate that she has Trump to run against. ..."
"... If we look back to the Bill Clinton and Monica Lewinsky scandal, those that were screaming the loudest for justice were having extramarital affairs during the "investigation". Newt Gingrich, Bob Livingston, Henry Hyde. And then there was Dennis Hastert. ..."
"... You bring up yet another problem with Hilary. She has covered for her sexual predator husband for decades, including harassing and publicly shaming her husband's sexual assault victims. And there are many going back to his Oxford days. How is that ok? ..."
"... The Trumpster won the Republican nomination precisely because of voter disgust over the in-crowd culture of politicians and donors. Bernie Sanders came close to winning the Democratic nomination for much of the same reason. Hilary and her entire family need to wake up fast if she has any hope or desire to get elected. We all know where Hilary's money is coming from. Does Hilary know where her voters are coming from and where they are now? ..."
"... To put this in a nutshell, The Clinton's self-enriching behavior- and use of public office for private gain - is troubling in the extreme ..."
"... During her tenure as Secretary of State (as reported by the AP) of the 154 non-official meetings at least 85 of those individuals were private-sector donors who contributed up to $156 million to Clinton Foundation initiatives. ..."
"... The report comes on top of other far more incriminating investigations revealing the appearance of quid pro quo with foreign donors to the Clinton Foundation. Perhaps the worst example was when investors who profited from the Clinton State Department's approval of a deal for Russia's atomic energy agency's acquisition of a fifth of America's uranium mining rights subsequently pumped money into the Clinton Foundation. ..."
"... I hate to say this but the Clintons are America's version of Russian Oligarchs - and their Foundation almost a glorified form of money laundering. I can only pray that in 2020, us Dems may find a better president ,and that the Clintons be soon forgotten. ..."
"... Without seeing the 30,000 deleted emails, how is anyone qualified to say no laws were broken? Besides, who cares what the chief ethics lawyer for a president who authorized torture thinks? ..."
Aug 31, 2016 | The New York Times

This is not the typical foundation funded by family wealth earned by an industrialist or financier. This foundation was funded almost entirely by donors, and to the extent anyone in the Clinton family "earned" the money, it was largely through speaking fees for former President Bill Clinton or Hillary Clinton when she was not secretary of state. This dependence on donations - a scenario remarkably similar to that of many political campaigns - means that the motivations of every single donor will be questioned whenever a President Clinton does anything that could conceivably benefit such donors.

... ... ...

This kind of access is the most corrupting brand of favoritism and pervades the entire government. Under both Republican and Democratic presidents, top ambassadorial posts routinely go to campaign contributors. Yet more campaign contributors hound these and other State Department employees for introductions abroad, preferred access and advancement of trade and other policy agendas. More often than not the State Department does their bidding.

... ... ...

The problem is that it does not matter that no laws were broken, or that the Clinton Foundation is principally about doing good deeds. It does not matter that favoritism is inescapable in the federal government and that the Clinton Foundation stories are really nothing new. The appearances surrounding the foundation are problematic, and it is and will be an albatross around Mrs. Clinton's neck.

... ... ...

As for Chelsea Clinton, anti-nepotism laws, strengthened after President Kennedy appointed his brother Robert as attorney general, could prevent her mother from appointing her to some of the highest government positions. But she could give her mother informal advice, and there are a great many government jobs for which she would be eligible. She does not need the Clinton Foundation to succeed in life.

Richard W. Painter, a professor of law at the University of Minnesota, was the chief White House ethics lawyer from 2005 to 2007.

Majortrout, is a trusted commenter Montreal 2 days ago

"When I was the chief White House ethics lawyer for President George W. Bush," You knew exactly where this article was going once you read the first 14 words.

chichimax, albany, ny 2 days ago

I have a hard time focusing on this article. The author was chief ethics lawyer for the George W. Bush Administration. Why does that bother me? I realize this guy's term was from 2005 to 2007 and the Abu Ghraib story pretty much broke in early 2005, but, thinking about those other lawyers for that Bush and what they said was okay, it really gives me the creeps to think about focusing on anything this guy might say about ethics. Just sayin'.

Lori, San Francisco 2 days ago

How much did the Clinton campaign pay for this Op-Ed? 'Every one does it' and 'it's not illegal'. 'It's how business is done.' How about doing a real in-depth investigation on the Clinton Foundation and perceived favors to donors NYT, instead of more opinion?

If the foundation is so squeaky clean there should be no problem. Or has Hilary made it clear you won't get a front row seat at her next mythical press conference? Or has she threatened to stop sending you the press releases from her campaign you report as news?

Ange, Boston 2 days ago

Clearly a planted article. Nice try. Is everyone aware that the Foundation paid off Clinton's '08 campaign debt? They gave $400,000 and considered "payment for the campaign's mailing lists"

Crabby Hayes, Virginia 2 days ago

According to former Justice Department Deputy Assistant Attorney General Shannen Coffin, there are at least three different categories of federal laws which may be implicated.

One, the ethics and government act, which says you can't use a public office for private gain for yourself or even for a charity. So in giving special access to the donors for the Clinton Foundation, the ethics and government act is implicated. So perhaps Mr. Painter is a bit hasty dismissing such claims.

Randy, Largent 2 days ago

If it was only about getting a government post or an arranged meeting, I would agree. But this seems different because significant amounts of money changed hands as a result of State Department intervention. And a lot of that money ended up at the Foundation or as speaking fees to Bill Clinton. How is this not seen as foreign donations effecting an American election - which I believe is illegal.

Isa Ten, CA 2 days ago

Mr. Painter: You say "There is little if any evidence that federal ethics laws were broken by Mrs. Clinton". So if there is even "little" evidence that the laws were broken, then shouldn't American electorate consider it when making their election day decisions?

You did not mention that there was no independent investigation on this subject, so there is no way to know whether there was "little" or "significant" or "overwhelming" evidence that the laws were broken.

Your main argument is that "everyone" does that. Perhaps, it is time to change that and Trump is the man who can do it. Is it fear of this kind of change that frightens so many NeverTrumpsters into rejecting him?

And finally, even if the written laws were not broken, what about the immorality of what Clintons did? Has morality been completely removed from the public square in this once great country?

David Keltz, Brooklyn 2 days ago

If there was no evidence of corruption at the Clinton Foundation, then why did Bill Clinton's speaking fees increase astronomically (from roughly $100,000 to $850,000) during Hillary's tenure at the State Department?

Did he suddenly become more sought after, nearly 8 or 9 years after his presidency? If there was no evidence of corruption, then why did Hillary Clinton use her authority to appoint herself onto the Haiti Relief Fund Board, where her sole relief efforts entailed asking people not to donate to the Red Cross, but to the Clinton Foundation?

John D., Out West 2 days ago

One thing that comes through loud & clear in the comments: a lot of people don't have a clue how non-profit organizations work. For a sector that's responsible for most of the good things in this country these days - as the neocons and neolibs in power withdraw from the govt's former "general welfare" Constitutional role and concentrate on enriching themselves and their friends - it would pay for citizens to become more aware of how the sector works.

James Lee, Arlington, Texas August 31, 2016

The framers of our Constitution had no illusions about the weaknesses of human nature. They carefully crafted our charter of government to pit the officials of each branch against each other, to obstruct the kind of collusion that could undermine the foundations of a free society.

Despite their best efforts, however, the system they devised inevitably empowers some groups more than others. Since democratic theory defines government officials as representatives of the voters, it encourages constituents to influence the decisions of those agents. Ideally, politicians should not favor the interests of some groups over others, but reality dictates otherwise.

In the contest for influence, money inevitably plays a major, although not always decisive, role. In an effort to limit this role, we have developed both formal and informal methods to constrain human greed. The law prohibits bribery, for example. To discourage subtler forms of influence-buying, we have developed codes of ethics that pressure officials to limit financial connections with groups or individuals who might seek their help.

Public opinion can serve as a powerful tool to enforce these codes. This explains the informal requirement that a president divest herself of financial connections that might affect her decisions. If Clinton rejects this tradition, she will undermine an important method of limiting the influence of moneyed interests in government. We have too few such tools as it is.

confetti, MD August 31, 2016

I don't think that favoritism in political life will ever go away, for the simple reason that political power isn't attained in a vacuum. It requires sturdy alliances by definition, and those are forged via exchange of valued items - material goods, policy compromises, position, status, assistance and other durable support. Our laws are relatively stringent and prevent the crassest forms of corruption, and our culture makes lesser but legal offenses dangerous politically. But to imagine that any government, anywhere, could function without either those sorts of alliances or some equally corruptible strongman central oversight is is as naive and dangerously idealistic.

Of course the Clintons wheeled and dealed - but well within the law.

I'm more interested in what end that served and the real consequences than the fact that it occurred. In their case, an effective charity that aided many very vulnerable people was sustained, and no demonstrable compromises that negatively affected global policies occurred.

It's the Republicans and truly sold out Democrats, who have forever been deep in the pocket of big money and whose 'deals' in that department cause tangible harm to the populace, that I'm more concerned with. This is their smoke and mirrors show.

Alexander K., Minnesota August 31, 2016

How would someone feel if they found out that a doctor who prescribed them a medication is also paid large sums by a pharmaceutical company to promote the drug? Or, if the doctors owns substantial amount of stock in the company? Appearances do matter and it is likely that such conflicts do impact judgement. These kinds of allowances are being cleaned up across the country, at least in medicine.

It is time that conflict of interest for politicians at all levels is taken seriously by the public. I am fine if they get higher salaries, but it is time to clean up the political corruption and crony capitalism. It is a shame that we hold our politicians to such incredible low standards and it is not a surprise that so many people don't bother to vote.

Great editorial.

Michael Belmont, Hewitt, New Jersey 2 days ago

It doesn't matter how good or bad the work of the Clinton Foundation is. That is not the question. The question is the motivation of many who contribute to the foundation. Are they motivated by altruism or is donating in a big way a ploy to gain access to Mrs. Clinton. The AP analysis suggests that is just what went on. At the very least it looks bad. Appearances are everything in politics.

Hillary doesn't need to appear to be unethical should she be elected. Bad enough she has Bill by her side. She doesn't need a special prosecutor investigator distracting her presidency with an influence peddling scandal. Like it or not, Republicans will be hunting for her political hide. Hillary doesn't need to paint a bulls-eye for them.

Chris, 10013 2 days ago

I doubt that Clinton breached a fundamental legal boundary. However, the Clinton's have always seen the bright line and have decided to test the boundaries. From using police to secure women while governor to taking money from Walmart to major financial institutions to the email scandal, the Clinton's do it again and again and blame a vast right wing conspiracy. The Clinton foundation used Doug Band as a bag man securing commercial contracts for Bill and Hilary while he had a senior role at the foundation (flashing red lights). Huma took money off the state department books as did other Clinton confidants (flashing red lights), etc. They can't help themselves. Are these actives illegal? Probably not. However, we seek to be inspired by our leaders, we want leaders who are better than the average, better than us.

In the Clintons, we have highly competent, experienced, politicians who have repeated shown deep ethical problems. She is the best candidate by far. It's unfortunate that our future President never learned what ethics are.

Robert, Minneapolis 2 days ago

An interesting article. It is probably true that many, if not most, politicians are influence sellers to a degree. I suspect that the Clintons are just better at it. It is fair to say that we do not know if laws have been broken. But it is also fair to say that appearances matter, and that the Clintons are very good at lining their own pockets at the same time the foundation does it's good work.

When Bill can trot off to Russia, get 750k for a speech at the same time that business interests of the donor is before the State Department, it smells. The crux of the matter is the rotten judgement.

You want a POTUS who has good judgement. The relentless chasing of a buck mixed with the appearance of impropriety, real or imagined, is the problem. When mixed with her poor judgement on the emails and her poor judgement on invading Iraq and disrupting Libya, you have a problem which explains her low approval rating. She is just fortunate that she has Trump to run against.

Madelyn Harris, Portland, OR 2 days ago

So glad to see many NYT readers here recognize the hypocrisy in this opinion piece. The message is "All of them do it, it's mostly legal, though it's distasteful and problematic. However, Hillary is the only one who should stop doing it because it looks bad."

The loudest voices of this partisan attack should be under the same scrutiny and be compelled to practice what they preach. If we look back to the Bill Clinton and Monica Lewinsky scandal, those that were screaming the loudest for justice were having extramarital affairs during the "investigation". Newt Gingrich, Bob Livingston, Henry Hyde. And then there was Dennis Hastert.

Let's start looking into the personal emails of Paul Ryan, Jason Chaffetz, Donald Trump, Trey Gowdy, Marco Rubio, Ted Cruz. Imagine what we would find! Legal, but ethically problematic exchanges and clearly illegal exchanges that would justify imprisonment. If they ask for justice, we should provide it.

Lori, San Francisco 2 days ago

You bring up yet another problem with Hilary. She has covered for her sexual predator husband for decades, including harassing and publicly shaming her husband's sexual assault victims. And there are many going back to his Oxford days. How is that ok?

John D., Out West 2 days ago

An excellent piece, actually tethered to reality and non-profit law and practice ... finally! Yes, all the Clinton clan needs to divorce themselves from the foundation, and I'm not sure why they would wait until after the election to do so.

It seems the loudest critics are of the tribe that created campaign finance law as it stands today, with the CU case having created a legal system of bribery across the board in government. C'mon guys, be consistent, or it's the big H word for you!

RNW, Albany, CA 2 days ago

When it comes to ethics and public officials, appearances do in indeed MATTER! Cronyism and conflicts of interest might elicit a big yawn from the political class, their fellow travelers and camp followers but arouse anger and indignation from voters. Remember those guys?

We're the ones that politicians suddenly remember every few years with they come. hats in hand, begging for donations and, most of all, our votes. (The plea for donations is a farce. Except for a few outliers, they don't really need or want OUR donations.)

The Trumpster won the Republican nomination precisely because of voter disgust over the in-crowd culture of politicians and donors. Bernie Sanders came close to winning the Democratic nomination for much of the same reason. Hilary and her entire family need to wake up fast if she has any hope or desire to get elected. We all know where Hilary's money is coming from. Does Hilary know where her voters are coming from and where they are now?

Tembrach, Connecticut 2 days ago

I preface this by saying that I am proud Democrat & will vote for Mrs. Clinton, as Mr. Trump is beyond the pale of decency

To put this in a nutshell, The Clinton's self-enriching behavior- and use of public office for private gain - is troubling in the extreme

During her tenure as Secretary of State (as reported by the AP) of the 154 non-official meetings at least 85 of those individuals were private-sector donors who contributed up to $156 million to Clinton Foundation initiatives.

The report comes on top of other far more incriminating investigations revealing the appearance of quid pro quo with foreign donors to the Clinton Foundation. Perhaps the worst example was when investors who profited from the Clinton State Department's approval of a deal for Russia's atomic energy agency's acquisition of a fifth of America's uranium mining rights subsequently pumped money into the Clinton Foundation.

Mrs Clinton rightly condemns Trump for playing footsy with Putin. But pray tell, what exactly was this?

I hate to say this but the Clintons are America's version of Russian Oligarchs - and their Foundation almost a glorified form of money laundering. I can only pray that in 2020, us Dems may find a better president ,and that the Clintons be soon forgotten.

Thought Bubble, New Jersey 2 days ago

Without seeing the 30,000 deleted emails, how is anyone qualified to say no laws were broken? Besides, who cares what the chief ethics lawyer for a president who authorized torture thinks?

[Sep 03, 2016] At the Clinton Foundation, Access Equals Corruption

Sep 02, 2016 |

More than half of the people who managed to score a personal one on one meeting with Hillary Clinton while she was Secretary of State donated money to the Clinton Foundation, either as an individual or through a company where they worked. "Combined, the 85 donors contributed as much as $156 million. At least 40 donated more than $100,000 each, and 20 gave more than $1 million," the Associated Press reported.

Does that make Hillary corrupt? Yes. It does.

At this writing, there is no evidence that anyone received any special favors as a result of their special access to Clinton. Not that treats were not requested. They were. (The most amusing was Bono's request to stream his band's music into the international space station, which was mercifully rejected.)

That's irrelevant. She's still corrupt.

Clinton's defenders like to point out that neither she nor her husband draw a salary from their foundation. But that's a technicality.

The Clintons extract millions of dollars in travel expenditures, including luxurious airplane accommodations and hotel suites, from their purported do-gooder outfit. They exploit the foundation as a patronage mill, arranging for it to hire their loyalists at extravagant six-figure salaries. Charity Navigator, the Yelp of non-profits, doesn't bother to issue a rating for the Clinton foundation due to the pathetically low portion of money ($9 million out of $140 million in 2013) that makes its way to someone who needs it.

"It seems like the Clinton Foundation operates as a slush fund for the Clintons," says Bill Allison of the Sunlight Foundation, a government watchdog group.

As a measure of how institutionally bankrupt American politics is, all this crap is technically legal. But that doesn't mean it's not corrupt.

Public relations experts caution politicians like the Clintons that the appearance of impropriety is almost as bad as its actuality. If it looks bad, it will hurt you with the polls. True, but that's not really the point.

The point is: access is corruption.

It doesn't matter that the lead singer of U2 didn't get to live out his rocker astronaut fantasy. It's disgusting that he was ever in a position to have it considered. To put a finer point on it, ethics require that someone in Hillary Clinton's position never, ever take a meeting or correspond by email or offer a job to someone who donated money to her and her husband's foundation. Failure to build an unscalable wall between government and money necessarily creates a corrupt quid pro quo:

"Just got a call from the Clinton Foundation. They're shaking us down for a donation. Should we cough up a few bucks?"

"Hillary could be president someday. Chelsea could end up in the Senate. It couldn't hurt to be remembered as someone who threw them some money when they asked."

This, I 100% guarantee you, was the calculus when Wall Street firms like Goldman Sachs paid hundreds of thousands of dollars to Hillary for a one- or two-hour speech. She doesn't have anything new to say that everyone hasn't already heard million times before. It's not like she shared any valuable stock tips during those talks. Wealthy individuals and corporations pay politicians for one thing: access.

Ted Rall, syndicated writer and the cartoonist for, is the author of the book "Snowden," the biography of the NSA whistleblower.

[Sep 02, 2016] HRC: "The Great Graspy"

Sep 02, 2016 |

curlydan , September 2, 2016 at 3:52 pm

HRC: "The Great Graspy"

OpenThePodBayDoorsHAL , September 2, 2016 at 4:16 pm

Good question, this NC reader is just pretty fed up with the status quo (maybe others want to chime in):
– Unlimited immunity from prosecution for banking executive criminals
– More shiny new undeclared "nation-building" and "RTP" wars
– Globalist trade deals that enshrine unaccountable corporate tribunals over national sovereignty, environmental and worker protection, and self-determination
– America's national business conducted in secrecy at the behest of corporate donors to tax-exempt foundations
– Paid-for quid-pro-quo media manipulation of candidate and election coverage
– Health care system reform designed to benefit entrenched insurance providers over providing access to reasonable-cost basic care.
Based on the above I'd say the 11:2 ratio looks about right.

Skippy , September 2, 2016 at 4:18 pm

When did neoliberalism become center left – ?????

[Sep 02, 2016] The Foundation is a tool to provide wealthy worthy individuals, groups, corporations, nations an expedited access to the government official, in this case Hillary

Sep 02, 2016 |
Marco , September 2, 2016 at 2:48 pm

Really enjoyed Atrios easy-breezy summation of Clinton Foundation / State Department skullduggery…

"…a bit unseemly in that way that the sausage factory is a bit gross, but it basically seems to fall in 'this is how things work' territory as far as I can tell…"

Pat , September 2, 2016 at 3:02 pm

Breezy is right. It does lead me to ask if this were not the Clinton Foundation but was the Bush Foundation or the Rubio Foundation or…would this still be just be the way things work? I do not think so.

Don't get me wrong I have great admiration for Atrios (he is right on the money regarding Social Security and self-driving cars), but the double standard where both Obama and Clinton are concerned is strong at Eschaton, and I'm sorry to say with him as well.

Accepting this as the way things work is just accepting that corruption is the norm and there is nothing to be done about it. So unless you are willing to shut up about supposed misdeeds of all elected officials and political candidates because this is the way it is done, you need to get the f*ck over the idea that this is NORMAL and ACCEPTABLE.

And I don't see that happening over there, or at Daily Kos, or… once the subject is out is out of the tribe.

Kurt Sperry , September 2, 2016 at 3:43 pm

I can understand the "it's OK when our people do it" double standard. Family/tribe/team, we are all trained to do that. What I don't understand is how one could ever arrive at Clinton Foundation = our people prerequisite to applying it in this instance. WT actual F?

Pat , September 2, 2016 at 3:52 pm

I think you are coming at this from far too realistic a point of view. You aren't looking at this as the Foundation is a tool, like a speech or a fundraiser, in order to provide wealthy worthy individuals/groups/corporations/nations a means to expedite access to the government official, in this case Clinton. You think of it as a false charity. But for the greasing the wheels is normal operating procedure, what this was was a gift to open more avenues for the wheels to be greased. It's up to you…or me…or even the people of Flint among others to use that opportunity.

Just saying.

timbers , September 2, 2016 at 3:45 pm

Yes. And this too:

Breezy is right. It does lead me to ask if this were not the Clinton War With Russia but was the Bush War With Iraq or the Rubio War With Syria or…would this still be just be the way things work? I do not think so.

Don't get me wrong I have great admiration for Atrios (he is right on the money regarding Social Security and self-driving cars), but the double standard where both Obama and Clinton are concerned is strong at Eschaton, and I'm sorry to say with him as well.

Accepting this as the way things work is just accepting that endless and new wars is the norm and there is nothing to be done about it. So unless you are willing to shut up about supposed endless new wars of all elected officials and political candidates because this is the way it is done, you need to get the f*ck over the idea that this is NORMAL and ACCEPTABLE.

And I don't see that happening over there, or at Daily Kos, or… once the subject is out is out of the tribe.

pretzelattack , September 2, 2016 at 4:40 pm

yeah, very well said. tammany hall, just the way things are done. jim crow laws, just the way things are done. endless etc's.

[Sep 02, 2016] 40 pieces of evidence that "the Clinton Foundation is not just a fraud, it's a massive fraud

Sep 02, 2016 |
aliteralmind , September 2, 2016 at 2:13 pm

I had the pleasure of interviewing Charles Ortel yesterday:

Charles Ortel: 40 days, 40 pieces of evidence that "the Clinton Foundation is not just a fraud, it's a massive fraud"

Jim Haygood , September 2, 2016 at 2:37 pm

"Bill Clinton wrote a book in 2007 called 'Giving' [for which he was paid $6.3 million]."

Give and ye shall receive, as the pious "Bill" is wont to say. /sarc

grayslady , September 2, 2016 at 5:55 pm

Excellent interview. I've bookmarked Ortel's website and am looking forward to his forthcoming writings. I was not aware of the differences between laws regulating charities versus other forms of organizations, so the interview as a starting point was very useful for me.

[Aug 29, 2016] Reince Priebus Demands Public Release of All Communications Between Clinton Foundation and State Department


Hillary Clinton's pay-for-play scandal is threatening to derail her campaign. Public outrage follows revelations that the Foundation took foreign cash during Clinton's tenure as Secretary of State, that Clinton aide Huma Abedin was helping Foundation donors get favors and access from the State Department, and that Clinton aide Cheryl Mills was doing assignments for the Clinton Foundation while on the State Department payroll.

In a letter Monday to Foundation president Donna Shalala, Priebus demands transparency.

"I am writing to you to call on the Clinton Foundation and all of the entities under its umbrella to release all correspondence its officials had with the State Department during Hillary Clinton's tenure as secretary of state," Priebus added.

As I am sure you are well aware, a spate of recent news reports involving the Clinton Foundation's relationship with the Clinton State Department has renewed serious concerns about conflicts of interest and whether donors to the foundation benefitted from official acts under then-Secretary Clinton.

[Aug 29, 2016] Why Did Saudi Regime Other Gulf Tyrannies Donate Millions to Clinton Foundation?

"It isn't just "suspicious." It's influence peddling, which is corrupt by definition. And there's a whole infrastructure, institutional and technical, to support it." Lambert Strether of Corrente.
Notable quotes:
"... here you have Hillary Clinton and Bill Clinton having this Clinton Foundation, with billions of dollars pouring into it from some of the world's worst tyrannies ..."
"... Bill and Hillary Clinton are being personally enriched by those same people, doing speeches, for many hundreds of thousands of dollars, in front of them, at the same time that she's running the State Department, getting ready to run for president, and soon will be running the executive branch. ..."
"... the problem here is that the Clintons have essentially become the pioneers of eliminating all of these lines, of amassing massive wealth from around the world, and using that to boost their own political power, and then using that political power to boost the interests of the people who are enriching them in all kinds of ways. ..."
Aug 29, 2016 | Democracy Now!

[W]hat Donna Brazile said in that video that you played is nothing short of laughable. It's not questioned when Republicans do favors for their donors? Of course it is. In fact, it's been a core, central critique of the Democratic Party, both Barack Obama and Hillary Clinton, for years, that Republicans are corrupt because they serve the interest of their big donors. One of the primary positions of the Democratic Party is that the Citizens United decision of the Supreme Court has corrupted politics because it allows huge money to flow into the political process in a way that ensures, or at least creates the appearance, that people are doing favors for donors.

And so, here you have Hillary Clinton and Bill Clinton having this Clinton Foundation, with billions of dollars pouring into it from some of the world's worst tyrannies, like Saudi Arabia and the United Arab Emirates and Qatar and other Gulf states, other people who have all kinds of vested interests in the policies of the United States government. And at the same time, in many cases, both Bill and Hillary Clinton are being personally enriched by those same people, doing speeches, for many hundreds of thousands of dollars, in front of them, at the same time that she's running the State Department, getting ready to run for president, and soon will be running the executive branch.

And so, the problem here is that the Clintons have essentially become the pioneers of eliminating all of these lines, of amassing massive wealth from around the world, and using that to boost their own political power, and then using that political power to boost the interests of the people who are enriching them in all kinds of ways. And of course questions need to be asked, and suspicions are necessarily raised, because this kind of behavior is inherently suspicious. And it needs a lot of media scrutiny and a lot of attention, and I'm glad it's getting that.

[Aug 29, 2016] Justice Stevens dissent in Citizens United (via @ggreenwald ) shreds the central argument of Hillarys defenders

Notable quotes:
"... On numerous occasions we have recognized Congress' legitimate interest in preventing the money that is spent on elections from exerting an "'undue influence on an officeholder's judgment"' and from creating "4he appearance of such influence,"' beyond the sphere of quid pro quo relationships. I ..."
"... Corruption can take many forms. Bribery may be the paradigm case. But the difference between selling a vote and selling access is a matter of degree, not kind. And selling access is not qualitatively different from giving special preference to those who spent money on one's behalf. ..."
"... Corruption operates along a spectrum, and the majority's apparent belief that quid pro quo arrangements can be neatly demarcated from other improper influences docs not accord with the theory or reality of politics. ..."
On numerous occasions we have recognized Congress' legitimate interest in preventing the money that is spent on elections from exerting an "'undue influence on an officeholder's judgment"' and from creating "4he appearance of such influence,"' beyond the sphere of quid pro quo relationships. Id., at 150; see also. e.g., id., at 143-144. 152-154; Colorado II, 533 U. S.. at 441; Shrink Missouri. 528 U. S., at 389.

Corruption can take many forms. Bribery may be the paradigm case. But the difference between selling a vote and selling access is a matter of degree, not kind. And selling access is not qualitatively different from giving special preference to those who spent money on one's behalf.

Corruption operates along a spectrum, and the majority's apparent belief that quid pro quo arrangements can be neatly demarcated from other improper influences docs not accord with the theory or reality of politics.

It certainly does not accord with the record Congress developed in passing BCRA. a record that stands as a remarkable testament to the energy and ingenuity with which corporations, unions, lobbyists, and politicians may go about scratching each other's backs - and which amply supported Congress' determination to target a limited set of especially destructive

[Aug 29, 2016] If Clinton gets elected, she will be under investigation prior to the inauguration.

Notable quotes:
"... Hillary will win, and it will be more than business as usual. Influence peddling and pay to play will accelerate. The neocon money will flow into the system and foreign policy will be a debacle. We may very well be approaching WWIII. ..."
"... Under a Clinton II presidency, long-term international turmoil and confrontation lie ahead no matter what their family foundation may attempt to achieve. ..."
Aug 28, 2016 |

Scott in MD , August 26, 2016 at 6:20 am

If Clinton gets elected, she will be under investigation prior to the inauguration. The Republicans will use their hold on the house to start several investigations on November 9.

However, the GOP (continuing a party tradition) will cruise right past several true issues, and lock onto the one thing they believe will hold the most shock value. This will turn out to not be provable, or not be all that interesting to anyone but die-hard GOP supporters, and she will exit the investigations as powerful, if not more so, than before.

There are plenty of reasons to investigate the Clinton machine, but if you expect this clown show to do it competently I have a bridge to sell you…

collin , August 26, 2016 at 9:47 am
No this one is backfiring already as most of the donors were people HRC would have met anyway, including Nobel Peace winners! and the 89 out of 154 people has not been released. And the article does not note any mischief but that there were meetings!

Or that there are a ton of other government officials have spouses that run well run charities. Matt Yglesias has de-bunked this one a lot and my guess disappears relatively quickly.

This is as worthless evidence as Michael Moore's Fahrenheit 9/11.

Johann , says: August 26, 2016 at 9:50 am

Hillary will win, and it will be more than business as usual. Influence peddling and pay to play will accelerate. The neocon money will flow into the system and foreign policy will be a debacle. We may very well be approaching WWIII.

The economy will continue to hollow out due to central bank hubris, government stimulus, and non-free trade deals. Income inequality will get worse. The middle class will continue to shrink.

We are well on our way to third world status.

Samuel Hooper , says: August 26, 2016 at 1:06 pm
After leaving office, Bill Clinton could have devoted his energies to Habitat for Humanity (like Jimmy Carter) or thrown his energies into helping an existing organisation (like the Bill & Melinda Gates foundation). He didn't, because he wanted the "fruits" of his philanthropic work to accrue to him and his family. And so it is not unreasonable to ask exactly what those fruits are, especially those gained while Hillary Clinton was serving as the nation's chief diplomat.
Steve Thompson \, says: August 26, 2016 at 2:41 pm
Here is an article that quite succinctly explains, in her own words, Hillary Clinton's views of America's role in the world:

Under a Clinton II presidency, long-term international turmoil and confrontation lie ahead no matter what their family foundation may attempt to achieve.

[Aug 29, 2016] Clinton under new threat as email woes and foundation questions merge

The two sources of her problems are beginning to merge much as two weather depressions might collide and become a hurricane. One is the already well-trodden matter of her use of a private email server while Secretary of State. The other relates to the Clinton Foundation and whether donors received preferential access to her while she served in that post.

Two bombs dropped on the Clinton campaign at once on Monday. First it emerged that the FBI has collected and delivered to the State Department almost 15,000 new emails not previously seen and a federal judge ordered the department to accelerate their release to the public. Meanwhile, a conservative group called Judicial Watch released details of still more emails detailing exactly how donors to the foundation set about trying to get Ms Clinton's attention.

... ... ...

Questions have been swirling for weeks about whether or not Ms Clinton was drawn into giving special favours to some of her husband's pals in return for their giving generously to the charitable foundation he set up after leaving the presidency – a pay and play arrangement. On Monday, Judicial Watch unveiled details that showed exactly how that might have happened thanks to emails it had accessed through the courts sent to and from Huma Abedin, a close Clinton confidante and her deputy chief of staff during her four years at the State Department.

... ... ...

In attempt to forestall the trouble that is already upon his wife, Mr Clinton announced this week that should she win the presidency, several things will change at his Foundation. First and foremost it would cease to take money from any foreign governments and donors and only from US-based charities and individuals. He would also step down from the foundation entirely and cease personally to raise funds for it.

...many voters are simply afraid that with Ms Clinton in the White House the whole tawdry cycle will just start all over again and nothing else with get done in Washington

[Aug 29, 2016] Hillary Clinton pushes fundraising limits with $200,000 tickets for single Silicon Valley house party

It was only one in a long parade of late-August fundraisers Ms Clinton has attended, but it stands out for the generosity required of those who attended. The price of admission for the 20-odd guests who obliged was a stunning $200,000. That was double the $100,000 charged for guests who mingled recently with Ms Clinton in Omaha at the home of Susan Buffett, the daughter of Warren Buffett, the veteran investment oracle.

... ... ...

As of Monday, she and Mr Kaine had harvested no less than $32 million for the Hillary Victory Fund, which will be distributed to her campaign, the Democratic National Committee and state parties. A lot of was raised in last week as Ms Clinton hopscotched from party to party on Martha's Vineyard and Cape Code in Massachusetts.

[Aug 27, 2016] Artists Impression Of Hillary Clintons Old Office

Notable quotes:
"... Source: ..."

Presented with no comment...


Here2Go d nmewn •Aug 27, 2016 8:37 PM
Is that Huma in a blue dress under the Resolute desk?
Pairadimes d Here2Go •Aug 27, 2016 9:14 PM
Ramirez is a genius.
zeronetwork d debtor of last resort •Aug 27, 2016 8:15 PM

The thought process Donald has started is not going to fade very soon. Still few weeks before election. I am sure Donald got some more cards in his sleeve.
are we there yet •Aug 27, 2016 8:36 PM
I have a solution for Hillary's in-continuance and mobility declining problems. The chair behind the presidents desk should be a wheelchair with a bedpan. Otherwise the term 'campaign trail' will take on a whole new meaning.

[Aug 26, 2016] Lots of Smoke Here, Hillary

Notable quotes:
"... If Hillary Clinton wins, within a year of her inauguration, she will be under investigation by a special prosecutor on charges of political corruption, thereby continuing a family tradition. ..."
"... Of 154 outsiders whom Clinton phoned or met with in her first two years at State, 85 had made contributions to the Clinton Foundation, and their contributions, taken together, totaled $156 million. ..."
"... Conclusion: access to Secretary of State Clinton could be bought, but it was not cheap. Forty of the 85 donors gave $100,000 or more. Twenty of those whom Clinton met with or phoned dumped in $1 million or more. ..."
"... On his last day in office, January 20, 2001, Bill Clinton issued a presidential pardon to financier-crook and fugitive from justice Marc Rich, whose wife, Denise, had contributed $450,000 to the Clinton Library. ..."
Aug 26, 2016 |

Prediction: If Hillary Clinton wins, within a year of her inauguration, she will be under investigation by a special prosecutor on charges of political corruption, thereby continuing a family tradition.

... ... ...

Of 154 outsiders whom Clinton phoned or met with in her first two years at State, 85 had made contributions to the Clinton Foundation, and their contributions, taken together, totaled $156 million.

Conclusion: access to Secretary of State Clinton could be bought, but it was not cheap. Forty of the 85 donors gave $100,000 or more. Twenty of those whom Clinton met with or phoned dumped in $1 million or more.

To get to the seventh floor of the Clinton State Department for a hearing for one's plea, the cover charge was high. Among those who got face time with Hillary Clinton were a Ukrainian oligarch and steel magnate who shipped oil pipe to Iran in violation of U.S. sanctions and a Bangladeshi economist who was under investigation by his government and was eventually pressured to leave his own bank.

The stench is familiar, and all too Clintonian in character.

Recall. On his last day in office, January 20, 2001, Bill Clinton issued a presidential pardon to financier-crook and fugitive from justice Marc Rich, whose wife, Denise, had contributed $450,000 to the Clinton Library.

The Clintons appear belatedly to have recognized their political peril.

Bill has promised that, if Hillary is elected, he will end his big-dog days at the foundation and stop taking checks from foreign regimes and entities, and corporate donors. Cash contributions from wealthy Americans will still be gratefully accepted.

One wonders: will Bill be writing thank-you notes for the millions that will roll in to the family foundation-on White House stationery?

[Aug 01, 2016] Progressive Leaders Urge Voters To Wait To #DemExit Until After State Primaries

Notable quotes:
"... Progressives who are fed up with the Democratic leadership's adherence to the status quo are calling for a major #DemExit on July 29. ..."

Progressives who are fed up with the Democratic leadership's adherence to the status quo are calling for a major #DemExit on July 29. However, progressive groups, such as Black Men for Bernie, are urging voters to stay in the party until they have a chance to vote in their states' primaries, especially if they live in closed or semi-closed primary states.

Abstaining from #DemExit until after state and local primaries is especially important for Florida, which has a closed primary. On August 30, Professor and legal expert Tim Canova has a chance to unseat Democratic National Committee Chair Debbie Wasserman-Schultz, whose tenure as the head of the Democratic Party has been fraught with controversy and more recently, allegations of election fraud and rigging.

A mass exodus, therefore, could sabotage progressives' own agenda to elect officials who are challenging incumbents and establishment candidates. As of now, 23 states and territories have local and state primaries up until September 13, so it is imperative for current members of the Democratic party to stay until they've voted and then commit to #DemExit.

[Sep 27, 2015] Maria Zakharova, spokeswoman for Russian Foreign Ministry, grades Nuland's paper

September 16, 2015 | Fort Russ/Komsomolskaya Pravda

It is impossible to deal with cockroaches in one room while at the same time laying out little plates of bread crumbs on the other side of the wall.

Translated from Russian by Tom Winter

Translator's note: this press account is based on a post on Maria Zakharova's facebook page, and I have changed this account slightly in alignment with Zakharova's original text. It was not clear in KP what was Zakharova and what was KP. I think it is in this translation...

Head of the Information Department of the Russian Foreign Ministry wrote a "critical review" on the "Yalta speech" of the assistant US Secretary of State.

In Kiev, there was a conference "Yalta European Strategy". Already amazing. Yalta is in the Russian Crimea, and the "Yalta" conference was held in the Ukrainian capital. Well and good -- you couldn't miss that one!. But at this Yalta conference came the assistant US Secretary of State Victoria Nuland. Yes, the same one that passed out the cookies. But now, considered a shadow ruler of Ukraine, she points out to the Kiev authorities what to do. This time, Nuland said in a public speech:

- There should be no tolerance for those oligarchs who do not pay taxes. There must be zero tolerance for bribery and corruption, to those who would use violence for political ends.

And these words of the grande dame of the State Department could not be overlooked. Just think, Americans don't like it when their loans to Ukraine get stolen. And anti-oligarchic Maidan brought the very oligarchs to power, and corruption in the country has become even greater. Some of us have grown weary of this talk. But, let Nuland drone on ...

But then Russian Foreign Ministry official spokesman Maria Zakharova replied. So much so that not a stone was left on stone in the American's "Yalta speech":

"All this a little bit, just a little, looks like a lecture to the fox about how bad it is to steal chickens, but actually it surprised in other ways. As soon as Russian authorities began exposing the tax evasion, bribery, or corruption of the oligarchs, Victoria Nuland's office hastened to call zero tolerance "political repression" - Zakharova wrote on her facebook page.

It would be great to see the Department of State "show that same zero tolerance and inquire a bit about how the initial capital of the Russian (and Ukrainian would not hurt) oligarchs got started, those oligarchs who have been accused of corruption at home, but who, once in London, feel protected by the authorities, enjoying all the benefits of membership in the Club of Victims of Political Persecution" - continued Zakharova.

"It is impossible to deal with cockroaches in one room while at the same time laying out little plates of bread crumbs on the other side of the wall. Giving the green light to the dirty money from Russia and the former Soviet Union, the Western world is only boosting the zeal with which the domestic thieves shove their loot in foreign bins."

"Though perhaps," wonders the Foreign Minstiry spokesman "this is the actual purpose of the imaginary zero tolerance?"

"Why do people on Interpol's lists, by the decision of the Russian courts, prove their financial immorality, as they thrive in the Western capitals, and no alarm bells go off in the State Department?"

It turns out to be an interesting story: Taking fetid streams of notes, the West has just one requirement at the border crossing. Scream "victim of the regime." That's it! and you're in spades!

This calls to mind the old Soviet bribery password translated into modern American:

- In Soviet times, it was common phrase, revealing corrupt intent to proceed with plans insidious in varying degrees: "I'm from Ivan Ivanovich." Today the corresponding "Open Sesame" that opens the doors "in Europe and the best houses in Philadelphia," is the phrase "I'm running away from Vladimir".

Victoria, if you're going to start cleaning out the cockroaches, stop feeding them on your side.

[Jul 15, 2015] When connected turns into corrupted

Los Angeles Times

CRONY CAPITALISM is the name of the Republican game. Their slogan is "take care of your friends and leave the risks of the free market for the suckers." That would be John Q. Public.

From Halliburton's overcharging in Iraq to Enron's manipulation of the California energy crisis and now the emerging hurricane reconstruction boondoggle, we witness what happens when the federal government is turned into a glorified help desk and ATM machine for politically connected corporations.

But the defining case study on the deep corruption of the Bush administration and the GOP is emerging from the myriad investigations of well-connected Republican fundraiser and lobbyist Jack Abramoff. For starters, Abramoff, a $100,000-plus fundraiser for George W. Bush's presidential campaigns, is under federal indictment on wire fraud and conspiracy charges. He is also under congressional and FBI investigations.

In the last fortnight alone, the spreading stain of Abramoff's legacy is seen in the possible undoing of Bush's nominee to the nation's No. 2 law enforcement position, the resignation and arrest of the Office of Management and Budget's former procurement chief and another blow to the already tawdry reputation of top Bush political advisor Karl Rove.

It was reported last week that Timothy Flanigan, Tyco International Ltd. general counsel and Bush's nominee for deputy attorney general, stated that Abramoff's lobbying firm had boasted that his access to the highest levels of Congress could help Tyco fight tax liability legislation and that Abramoff later said he "had contact with Mr. Karl Rove" about the issue.

Flanigan's statement was in response to scathing criticism from Democrats on the Senate Judiciary Committee — which is considering his nomination — that he had not been sufficiently responsive in his testimony. Records and interviews show that Flanigan supervised Abramoff's successful efforts two years ago to lobby Congress to kill the legislation, which would have penalized companies such as Bermuda-based Tyco that avoid taxes by moving offshore. Abramoff's firm was paid $1.7 million by Tyco in 2003 and 2004.

In his statement, Flanigan said Abramoff also boasted of his ties to Tom DeLay, the House majority leader. DeLay once described Abramoff as "one of my closest and dearest friends" and accompanied him on several foreign junkets. DeLay denies that the Abramoff-arranged trips were political favors. DeLay continues to be tangled in myriad ethics investigations, many of them linked to his relationship with Abramoff.

Another episode in the rapidly evolving Abramoff scandal involves David Safavian, one of the Bush administration's top federal procurement officials. He resigned shortly before being arrested last week for allegedly lying to officials and obstructing a Justice Department investigation in connection with his relationship with Abramoff. Safavian received a golf trip to Scotland with the lobbyist, allegedly as a quid pro quo for helping Abramoff in his efforts to buy federal properties. Safavian and Abramoff once worked together at a powerful Washington lobbying firm.

Before Safavian resigned, he reportedly was working on contracting policies for Hurricane Katrina recovery efforts. Don't expect the GOP Congress to look askance at this. Safavian's wife is chief counsel for oversight and investigations on the House Government Reform Committee, which oversees procurement matters, although she's said she'll recuse herself.

The hurricane season is proving to be a windfall for GOP-connected companies such as Halliburton, which are being rewarded with lucrative contracts despite their shoddy performance in Iraq. In the vocabulary of crony capitalism, the word "shame" does not exist.

The players may change, given the occasional criminal indictment, but the game goes on. On the day of Safavian's arrest, former Tyco Chief Executive L. Dennis Kozlowski was sentenced to eight to 25 years in prison for bilking millions from the company, which we are now expected to believe has been reborn virtuous.

Tyco's current lobbyist, Edward P. Ayoob, who once worked with Abramoff at a Washington law firm, is lobbying for another cause these days: Flanigan's confirmation as the nation's second-highest law enforcement officer. Ayoob insisted last week that he is acting on his own and not on behalf of Tyco. And, oh yes, Flanigan promises that, if confirmed, he will recuse himself from any Abramoff investigation involving Tyco. Sure.

[Jun 02, 2015]Angry Bear " Class Struggle In The USA

Noam Scheiber has a hard hitting article on the front page of "2016 Candidates and Wealthy Are Aligned on Inequality"

The content should be familiar to AngryBear readers. A majority of Americans are alarmed by high and increasing inequality and support government action to reduce inequality. However, none of the important 2016 candidates has expressed any willingness to raise taxes on the rich. The Republicans want to cut them and Clinton (and a spokesperson) dodge the question.

Rich individuals (who are willing to be interviewed) also express concern about inequality but generally oppose using higher taxes on the rich to fight it. Scheiber is very willing to bluntly state his guess (and everyone's) that candidates are eager to please the rich, because they spend much of their time begging the rich for contributions.

No suprise to anyone who has been paying attention except for the fact that it is on the front page of and the article is printed in the business section not the opinion section. Do click the link — it is brief, to the point, solid, alarming and a must read.

I clicked one of the links and found weaker evidence than I expected for Scheiber's view (which of course I share

"By contrast, more than half of Americans and three-quarters of Democrats believe the "government should redistribute wealth by heavy taxes on the rich," according to a Gallup poll of about 1,000 adults in April 2013."

It is a small majority 52% favor and 47% oppose. This 52 % is noticeably smaller than the solid majorities who have been telling Gallup that high income individuals pay less than their fair share of taxes (click and search for Gallup on the page).

I guess this isn't really surprising — the word "heavy" is heavy maaaan and "redistribute" evokes the dreaded welfare (and conservatives have devoted gigantic effort to giving it pejorative connotations). The 52% majority is remarkable given the phrasing of the question. But it isn't enough to win elections, since it is 52% of adults which corresponds to well under 52% of actual voters.

My reading is that it is important for egalitarians to stress the tax cuts for the non rich and that higher taxes on the rich are, unfortunately, necessary if we are to have lower taxes on the non rich without huge budget deficits. This is exactly Obama's approach.

Comments (87)
Jerry Critter

March 29, 2015 10:40 pm

Get rid of tax breaks that only the wealthy can take advantage of and perhaps everyone will pay their fair share. The same goes for corporations.

amateur socialist

March 30, 2015 11:42 am

Of course another way to reduce inequality is to raise wages. Buried way down around paragraph 9 I found this gem: "Forty percent of the wealthy, versus 78 percent of the public, said the government should make the minimum wage "high enough so that no family with a full-time worker falls below the official poverty line."

I'm fine with raising people's taxes by increasing their wages. A story I heard on NPR recently indicated that a single person needs to make about $17-19 an hour to cover most basic necessities nowadays (the story went on to say that most people in that situation are working 2 or more jobs to get enough income, a "solution" that creates more problems with health/stress etc.). A full time worker supporting kids needs more than $20.

You double the minimum wage and strengthen people's rights to organize union representation. Tax revenues go up (including SS contributions btw) and we add significant growth to the economy with the increased purchasing power of workers. People can go back to working 40-50 hours a week and cut back on moonlighting which creates new job opportunities for the younger folks decimated by this so called recovery.

Win Win Win Win. And the poor overburdened millionaires don't have to have their poor tax fee fees hurt.

Mark Jamison, March 30, 2015 8:09 pm

How about if we get rid of the "re" and call it what it is "distribution". The current foundational rules embedded in tax law, intellectual property law, corporate construction law, and other elements of our legal and regulatory system result in distributions that favor those with capital or in a position to seek rents.

This isn't a situation that calls for a Robin Hood who takes from the rich and gives to the poor. It is more a question of how elites have rigged the system to work primarily for them. Democrats cede the rhetoric to the Right when they allow the discussion to be about redistribution. Even talk of inequality without reference to the basic legal constructs that are rigged to create slanted outcomes tend to accepted premises that are in and of themselves false.

The issue shouldn't be rejiggering things after the the initial distribution but creating a system with basic rules that level the opportunity playing field.

coberly, March 30, 2015 11:03 pm

Thank You Mark Jamison!

An elegant, informed writer who says it better than I can.

But here is how I would say it:

Addressing "inequality" by "tax the rich" is the wrong answer and a political loser.

Address inequality by re-criminalizing the criminal practices of the criminal rich. Address inequality by creating well paying jobs… with government jobs if necessary (and there is necessary work to be done by the government), with government protection for unions, with government policies that make it less profitable to off shore…

etc. the direction to take is to make the economy more fair…. actually more "free" though you'll never get the free enterprise fundamentalists to admit that's what it is. You WILL get the honest rich on your side. They don't like being robbed any more than you do.

But you will not, in America, get even poor people to vote to "take from the rich to give to the poor." It has something to do with the "story" Americans have been telling themselves since 1776. A story heard round the world.

That said, there is nothing wrong with raising taxes on the rich… to pay for the government THEY need as well as you. But don't raise taxes to give the money to the poor. They won't do it, and even the poor don't want it… except as a last resort, which we hope we are not at yet.

urban legend, March 31, 2015 2:07 am

Coberly, you are dead-on. Right now, taxation is the least issue. Listen to Jared Bernstein and Dean Baker: the problem is incomes and demand, and the first and best answer for creating demand for workers and higher wages to compete for those workers is full employment. Minimum wage will help at the margins to push incomes up, and it's the easiest initial legislative sell, but the public will support policies — mainly big-big infrastructure modernization in a country that has neglected its infrastructure for a generation — that signal a firm commitment to full employment.

It's laying right there for the Democrats to pick it up. Will they? Having policies that are traditional Democratic policies will not do the job. For believability — for convincing voters they actually have a handle on what has been wrong and how to fix it — they need to have a story for why we have seem unable to generate enough jobs for over a decade. The neglect of infrastructure — the unfilled millions of jobs that should have gone to keeping it up to date and up to major-country standards — should be a big part of that story. Trade and manufacturing, to be sure, is the other big element that will connect with voters. Many Democrats (including you know who) are severely compromised on trade, but they need to find a way to come own on the right side with the voters.

coberly, March 31, 2015 10:52 am


i wish you'd give some thought to the other comments on this post.

if you are proposing raising taxes on the rich SO THAT you can cut taxes on the non rich you are simply proposing theft. if you were proposing raising taxes on the rich to provide reasonable welfare to those who need it you would be asking the rich to contribute to the strength of their own country and ultimately their own wealth.

i hope you can see the difference.

it is especially irritating to me because many of the "non rich" who want their taxes cut make more than twice as much as i do. what we are looking at here is simple old fashioned greed… just as stupid and ugly among the "non rich" as it is among the rich.

"the poor" in this country do not pay a significant amount of taxes (Social Security and Medicare are not "taxes," merely an efficient way for us to pay for our own direct needs…. as long as you call them taxes you play into the hands of the Petersons who want to "cut taxes" and leave the poor elderly to die on the streets, and the poor non-elderly to spend their lives in anxiety and fear-driven greed trying to provide against desperate poverty in old age absent any reliable security for their savings.)

Kai-HK, April 4, 2015 12:23 am


Thanks for your well-reasoned response.

You state, 'i personally am not much interested in the "poor capitalist will flee the country if you tax him too much." in fact i'd say good riddance, and by the way watch out for that tarriff when you try to sell your stuff here.'

(a) What happens after thy leave? Sure you can get one-time 'exit tax' but you lose all the intellectual capital (think of Bill Gates, Warren Buffet, or Steve Jobs leaving and taking their intellectual property and human capital with them). These guys are great jobs creators…it will not only be the 'bad capitalists' that leave but also many of the 'job creating' good ones.

(b) I am less worried about existing job creating capitalists in America; what about the future ones? The ones that either flee overseas and make their wealth there or are already overseas and then have a plethora of places they can invest but why bother investing in the US if all they are going to do is call me a predator and then seize my assets and or penalise me for investing there? Right? It is the future investment that gets impacted not current wealth per se.

You also make a great point, 'the poor are in the worst position with respect to shifting their tax burden on to others. the rich do it as a matter of course. it would be simpler just to tax the rich… there are fewer of them, and they know what is at stake, and they can afford accountants. the rest of us would pay our "taxes" in the form of higher prices for what we buy.'

Investment capital will go where it is best treated and to attract investment capital a market must provide a competitive return (profit margin or return on investment). Those companies and investment that stay will do so because they are able to maintain that margin….and they will do so by either reducing wages or increasing prices. Where they can do neither, their will exit the market.

That is why, according to research, a bulk of the corporate taxation falls on workers and consumers as a pass-on effect. The optimum corporate tax is 0. This will be the case as taxation increases on the owners of businesses and capital….workers, the middle class, and the poor pay it. The margins stay competitive for the owners of capital since capital is highly mobile and fungible.Workers and the poor less so.

But thanks again for the tone and content of your response. I often get attacked personally for my views instead of people focusing on the issue. I appreciate the respite.


coberly, April 4, 2015 12:34 pm


yes, but you missed the point.

i am sick of the whining about taxes. it takes so much money to run the country (including the kind of pernicious poverty that will turn the US into sub-saharan africa. and then who will buy their products.

i can't do much about the poor whining about taxes. they are just people with limited understanding, except for their own pressing needs. the rich know what the taxes are needed for, they are just stupid about paying them. of course they would pass the taxes through to their customers. the customers would still buy what they need/want at the new price. leaving everyone pretty much where they are today financially. but the rich would be forced to be grownup about "paying" the taxes, and maybe the politics of "don't tax me tax the other guy" would go away.

as for the sainted bill gates. there are plenty of other people in this country as smart as he is and would be happy to sell us computer operating systems and pay the taxes on their billion dollars a year profits.

nothing breaks my heart more than a whining millionaire.


April 4, 2015 11:32 pm

Sure I got YOUR point,…it just didn't address MY points as put forth in MY original post. And it still doesn't.

More importantly, you have failed to defend YOUR point against even a rudimentary challenge.


coberly, April 5, 2015 12:45 pm


rudimentary is right.

i have read your "points" about sixteen hundred times in the last year alone. made by the ayn rand faithful. it is wearisome.

and i have learned there is no point in trying to talk to true believers.

William Ryan, May 13, 2015 4:43 pm

Thanks again Coberly for your and K's very thoughtful insight. You guys really made me think hard today and I do see your points about perverted capitalism being a big problem in US. I still do like the progressive tax structure and balanced trade agenda better.

I realize as you say that we cannot compare US to Hong Kong just on size and scale alone. Without all the obfuscation going Lean by building cultures that makes people want to take ownership and sharing learning and growing together is a big part of the solution… Ford once said "you cannot learn in school what the world is going to do next".

Also never argue with an idiot. They will bring you down to their level then beat you with experience. The only cure for organized greed is organized labor. It's because no matter what they do nothing get done about it. With all this manure around there must be a pony somewhere! "

  • A typical voice of American politics is the avoidance of saying anything real on real issues". FDR.
  • Rich people pay rich people to tell middle class people to blame poor people…
  • Earth doesn't matter, people don't matter, even economy doesn't matter . The only thing that matters is R.W. nut bar total ownership of everything.
  • I'm sorry I put profits ahead of people, greed above need and the rule of gold above God's golden rules.
  • I try to stay away from negative people who have a problem for every solution…
  • We need capitalism that is based on justice and greater corporate responsibility. I do not speak nor do I comprehend assholian.
  • "If you don't change direction , you may end up where you are headed". Lao-Tzu.
  • "The true strength of our nation comes not from our arm or wealth but from our ideas". Obama..

Last one.

  • "If the soul is left to darkness, sins will be committed. The guilty one is not the one who commits the sins, but the one who caused the darkness". Victor Hugo.

coberly , May 16, 2015 9:57 pm


as a matter of fact i disagree with the current "equality" fad… at least insofar as it implies taking from the rich and giving to the poor directly.

i don't believe people are "equal" in terms of their economic potential. i do beleive they are equal in terms of being due the respect of human beings.

i also believe your simple view of "equality" is a closet way of guarantee that the rich can prey upon the poor without interruption.

humans made their first big step in evolution when they learned to cooperate with each other against the big predators.

Jerry Critter, May 17, 2015 12:10 am

it is mildly progressive up to about $75,000 per year where the rate hits 30%. But from there up to $1.542 million the rate only increases to 33.3%.

I call that very flat!

Jerry Critter, May 17, 2015 11:20 am

"i assume there are people in this country who are truly poor. as far as i know they don't pay taxes."

Read my reference and you will see that the "poor" indeed pay taxes, just not much income tax because they don't have much income. You are fixated on income when we should be considering all forms of taxation.

Jerry Critter, May 17, 2015 9:25 pm

Oh Kai, cut the crap. Paying taxes Is nothing like slavery. My oh my, how did we ever survive with a top tax rate of around 90%, nearly 3 times the current rate? Some people would even say that the economy then was pretty great and the middle class was doing terrific. So stop the deflection and redirection. I think you just like to see how many words you can write. Sorry, but history is not on your side.

[May 28, 2015]Bush earned millions in juggling act as corporate adviser

May 28, 2015 |

Lucrative stints as corporate director, adviser earned Bush millions, may invite 2016 scrutiny

During his transition from Florida governor to likely presidential candidate, Jeb Bush served on the boards of or as an adviser to at least 15 companies and nonprofits, a dizzying array of corporate connections that earned him millions of dollars and occasional headaches.

Bush returned to corporate America after leaving the governor's mansion in early 2007, and his industry portfolio expanded steadily until he began shedding ties late last year to prepare a run for president.

Executives who worked alongside Bush describe him as an engaged adviser with an eye for detail.

Yet experts question how anyone could serve so many boards at once effectively.

"Board of directors and advisory boards are in charge of high-level oversight," said law professor Elizabeth Nowicki, a former Securities and Exchange Commission lawyer. "You cannot possibly do that simultaneously for 10 or 15 entities."

There is no formal rule limiting the number of boards one person can serve. But in the wake of the Enron scandal, where flimsy board oversight contributed to the company's infamous meltdown, and a federal law that increased liability for a public company's director, common sense dictates a small number, Nowicki said.

"If somebody starts serving on more than three or four boards that's a problem," she said.

Three boards should be the maximum, agreed Zabihollah Rezaee, a University of Memphis accounting professor who has authored books about corporate governance.

"Board members are representing shareholders, and they are responsible to shareholders for financial integrity," said Rezaee. "Best practices" dictate a small number, he said, "because of the amount of time it requires to be effective."

Bush served on the boards of or as an adviser to 11 companies or nonprofits at a time each year from 2010 to 2013, The Associated Press found. Those ties were in addition to his own businesses, such as Jeb Bush & Associates, and the educational foundations he created.

In 2010 Bush served on the board of directors of eight different entities, as adviser to a ninth company and advisory board member for two others. In 2013, he served on six boards, as an adviser to another company and on the advisory board of four more entities.

Bush answered curtly Thursday when asked about the positions after visiting a lab in Lansing, Michigan, that makes antidotes and vaccinations for poisons such as anthrax.

"I had two public boards," he said. "And I did my fiduciary duty quite well, I think. You'll have to ask them."

Bush was apparently referring to his standing only in 2014, when he shed his corporate ties. At that time he was on the board of two publicly held companies, Tenet Healthcare and Rayonier Inc. In 2013, he was on the board of four public companies, including the international advisory board of Barrick Gold Corp.

Bush spokeswoman Kristy Campbell said not all the corporate entities were the same — some were board slots, some advisory positions and others nonprofits — and suggested it was unfair to put them all in the same basket. AP's review found that Bush served on the board of directors of as many as seven for-profit companies at a time — while also serving as an adviser to other companies and nonprofits.

Bush's experience on corporate boardrooms could evolve into a theme during the 2016 race for the presidency. Among the issues the Florida Republican could be asked to explain:

  • One company that paid Bush $15,000 a month as a board member and consultant, InnoVida Holdings, collapsed in fraud and bankruptcy, with the company's CEO, Claudio Osorio, now serving 12½ years in prison. Bush joined InnoVida despite warning signs that Osorio's prior company dissolved amid bankruptcy and allegations of fraud.
  • At least five companies where Bush served on the board or as adviser faced class-action lawsuits from shareholders or legal action by the government. Some of the most sweeping cases, involving allegations of fraud or environmental damage, remain active. The Securities and Exchange Commission subpoenaed one of the companies, Rayonier Inc., in November, shortly before Bush's exit.
  • Bush earned $3.9 million from four companies alone since 2007, the AP found, plus $25,000 a year more from a medical company in Georgia, $9,600 annually from Bloomberg Philanthropies and zero pay from a drug addiction nonprofit. His earnings from eight other companies are unknown, and Bush has declined AP's requests to disclose his compensation — raising questions about how open he would be as a presidential candidate.

Bush was a board member or adviser to publicly traded health care, timber, gold mining and sanitation companies; for private firms involved in housing, finance, medicine, higher education and decontamination; and for nonprofits focused on drug addiction and philanthropy. He served on the board of directors for nine of the 15, and as an adviser or advisory board member for the others. Two of the 15 are nonprofits.

Once Bush officially declares for president, he will have 45 days to file a public disclosure form listing his sources of income for the prior year. Those forms include broad ranges for the values of assets or salaries that can be used to estimate a politician's net worth, but they will not be precise totals and will capture just the prior year.

... ... ...

Re-joining the corporate world

Bush returned to corporate America less wealthy than when he took office. Bush's net worth, $2 million when he was elected Florida governor in 1998, dipped to less than $1.3 million by the time he left office in the first days of 2007, his financial disclosure forms show. The decline came largely from a diminished investment portfolio. He also earned less as governor — $129,000 his last year in office — than in the private sector, where he had been paid $755,000 annually by the Codina Group, a development company in Coral Gables, Florida, before taking office.

Out of office, Bush began quickly making up time, becoming an adviser or board member for at least five companies in 2007.

One was Tenet Healthcare Corp., a publicly held company where Bush served on the board of directors from 2007 to 2014, earning $2,375,870 in pay and stock, the company's SEC filings show.

Tenet declined to make a board member available for an interview, but spokesman Donn Walker said Bush challenged management to deliver for patients and consumers. Bush attended 94 percent of board meetings and 99 percent of committee meetings, Walker said.

In a statement, Trevor Fetter, the company's president and CEO, said his fellow board member "made innumerable contributions to Tenet's transformation into a national diversified health care services provider."

That year Bush also became an adviser for Lehman Brothers, which, after its collapse, was absorbed by Barclays Capital. Bush worked for Barclays through 2014, advising clients on the regulatory landscape in the U.S. The New York Times reported last year that Barclays paid Bush $1 million a year. The company declined comment on Bush's pay and tenure.

Later in 2007, Bush took on what became his most troublesome board position, joining Miami Beach's InnoVida Holdings. Founder Osorio is now serving a prison sentence for orchestrating a global fraud that cost investors millions.

Bush conducted a thorough review before joining InnoVida's board, Campbell said. That included commissioning a background check of Osorio, conducted by a former federal agent whom she declined to identify.

"Based on the report that was shared with the governor by the company that was hired to do the background check, there were not red flags to indicate financial or criminal wrongdoing," Campbell said. The campaign declined to share the report.

But financial red flags did exist, public court records show.

Thirteen years before creating InnoVida in 2006, Osorio had founded another South Florida business, CHS Electronics, which sold computer products in Latin America and Europe from its headquarters west of the Miami International Airport.

In 1999, just as Bush was beginning his first term as Florida governor, scores of CHS investors filed suit in federal court in Miami accusing Osorio and CHS of inflating the company's income and profits. In all, 36 separate actions were consolidated into one class-action lawsuit that said CHS overstated its profits in 1998 by 50 percent.

After CHS admitted in 1999 that it overstated vendor rebates, a financial chess move that led the company to issue a misleadingly rosy financial picture, the price of its common stock plummeted 35 percent in one day.

The lawsuit cited analyst Robert Damron who urged investors not to buy. "There was fraud, and when I see fraud I walk away," he said.

CHS filed for bankruptcy protection in 2000, and, a year later, entered into an $11.5 million settlement with shareholders, federal court records show.

In September 2007, the SEC revoked CHS' securities registration.

Three months later, Bush joined Osorio's InnoVida, a South Florida manufacturer that said its unique fiber composite panel construction could withstand fires and hurricanes. But instead of building homes, including a U.S. government-financed project in earthquake-stricken Haiti, Osorio used investors' money to bankroll a Miami Beach mansion, Colorado mountain retreat home, Maserati and country club dues, the SEC said.

Bush's role on InnoVida's board helped build the company's image and attract business.

One businessman who hired InnoVida as a contractor said that, when he visited Osorio at the company's Miami Beach offices, Bush's pictures were all over the wall.

"He drops his name repeatedly. 'Jeb Bush this, Jeb Bush that.' And you just say, OK, there's credibility there," said Troy Von Otnott, founder of Massive Technologies, a CleanTech consulting firm in Atlanta.

InnoVida never delivered on its promises to build housing in Africa, despite receiving $3 million for the job from Von Otnott's partners. "They delivered false promises and hot air and lies," he said.

Now Von Otnott is among creditors trying to collect pennies on the dollar — and questioning how Bush could have put his name behind the company.

"We bought into their whole sales push because Jeb Bush was on their board of directors and had his picture all over their office," said Von Otnott, a onetime volunteer with Citizens Climate Lobby who describes himself as a political independent.

"At the very least, it just demonstrates poor judgment. If you are running for the president of the United States of America, you need to show that you have judgment."

A major InnoVida investor, Miami lawyer Chris Korge, said Bush "showed true concern" about the losses investors suffered.

Bush left InnoVida in September 2010. In 2013, as part of the company's bankruptcy proceedings, Bush agreed to repay $270,000 of the $468,902 InnoVida paid Jeb Bush & Associates LLC over the 33 months he worked for InnoVida. From his Miami prison, Osorio declined an AP interview request.

"As soon as concerns regarding InnoVida were brought to Gov. Bush's attention, he took action to address them immediately," Campbell said.

[May 23, 2015] The Children of the Abyss

May 20, 2015 | Jesse's Café Américain
"He shows you how to become as gods. Then he laughs and jokes with you, and gets intimate with you; he takes your hand, and gets his fingers between yours, and grasps them, and then you are his."

J.H.Newman, The Times of Antichrist

People do not wake up one day and suddenly decide to become monsters, giving birth to unspeakable horrors.

And yet throughout history, different peoples have done truly monstrous things. The Americans were pioneers in forced sterilization and state propaganda. The British invented concentration camps, and were masters of predatory colonization. They even turned a large portion of the capital of their Empire into a festering ghetto through the Darwinian economics of neglect. None have clean hands. No one is exceptional.

What do they have in common? They all take a walk down a long and twisted path, one cold-hearted and 'expedient' decision at a time, shifting responsibility by deflecting the choice for their actions on their leaders.

There is always some crackpot theory. some law of nature, from scientists or economists to support it. What else could they do? It is always difficult, but necessary.

They cope with their actions by making their victims the other, objectified, different, marginalized. And what they marginalize they cannot see. What they cannot see, by choice, is easily ignored.

And so they destroy and they kill, first by neglect and then by more efficient and decisive actions.

They walk slowly, but almost determinedly, into an abyss of their own creation.

But they all seem to have one thing in common. First they come for the old, the weak, the disabled, and the different, in a widening circle of scapegoats for their plunder.

"There is one beautiful sight in the East End, and only one, and it is the children dancing in the street when the organ-grinder goes his round. It is fascinating to watch them, the new-born, the next generation, swaying and stepping, with pretty little mimicries and graceful inventions all their own, with muscles that move swiftly and easily, and bodies that leap airily, weaving rhythms never taught in dancing school.

I have talked with these children, here, there, and everywhere, and they struck me as being bright as other children, and in many ways even brighter. They have most active little imaginations. Their capacity for projecting themselves into the realm of romance and fantasy is remarkable. A joyous life is romping in their blood. They delight in music, and motion, and colour, and very often they betray a startling beauty of face and form under their filth and rags.

But there is a Pied Piper of London Town who steals them all away. They disappear. One never sees them again, or anything that suggests them. You may look for them in vain amongst the generation of grown-ups. Here you will find stunted forms, ugly faces, and blunt and stolid minds. Grace, beauty, imagination, all the resiliency of mind and muscle, are gone. Sometimes, however, you may see a woman, not necessarily old, but twisted and deformed out of all womanhood, bloated and drunken, lift her draggled skirts and execute a few grotesque and lumbering steps upon the pavement. It is a hint that she was once one of those children who danced to the organ-grinder. Those grotesque and lumbering steps are all that is left of the promise of childhood. In the befogged recesses of her brain has arisen a fleeting memory that she was once a girl. The crowd closes in. Little girls are dancing beside her, about her, with all the pretty graces she dimly recollects, but can no more than parody with her body. Then she pants for breath, exhausted, and stumbles out through the circle. But the little girls dance on.

The children of the Ghetto possess all the qualities which make for noble manhood and womanhood; but the Ghetto itself, like an infuriated tigress turning on its young, turns upon and destroys all these qualities, blots out the light and laughter, and moulds those it does not kill into sodden and forlorn creatures, uncouth, degraded, and wretched below the beasts of the field.

As to the manner in which this is done, I have in previous chapters described it at length; here let Professor Huxley describe it in brief:-

"Any one who is acquainted with the state of the population of all great industrial centres, whether in this or other countries, is aware that amidst a large and increasing body of that population there reigns supreme . . . that condition which the French call la misere, a word for which I do not think there is any exact English equivalent. It is a condition in which the food, warmth, and clothing which are necessary for the mere maintenance of the functions of the body in their normal state cannot be obtained; in which men, women, and children are forced to crowd into dens wherein decency is abolished, and the most ordinary conditions of healthful existence are impossible of attainment; in which the pleasures within reach are reduced to brutality and drunkenness; in which the pains accumulate at compound interest in the shape of starvation, disease, stunted development, and moral degradation; in which the prospect of even steady and honest industry is a life of unsuccessful battling with hunger, rounded by a pauper's grave."

In such conditions, the outlook for children is hopeless. They die like flies, and those that survive, survive because they possess excessive vitality and a capacity of adaptation to the degradation with which they are surrounded. They have no home life. In the dens and lairs in which they live they are exposed to all that is obscene and indecent. And as their minds are made rotten, so are their bodies made rotten by bad sanitation, overcrowding, and underfeeding. When a father and mother live with three or four children in a room where the children take turn about in sitting up to drive the rats away from the sleepers, when those children never have enough to eat and are preyed upon and made miserable and weak by swarming vermin, the sort of men and women the survivors will make can readily be imagined."

Jack London, The People of the Abyss

[May 09, 2015] Nomi Prins The Clintons & Their Banker Friends

May 08, 2015 | Zero Hedge
In the coming months, however many hours Clinton spends introducing herself to voters in small-town America, she will spend hundreds more raising money in four-star hotels and multimillion-dollar homes around the nation. The question is: "Can Clinton claim to stand for 'everyday Americans,' while hauling in huge sums of cash from the very wealthiest of us?" This much cannot be disputed: Clinton's connections to the financiers and bankers of this country - and this country's campaigns - run deep. As Nomi Prins questions, who counts more to such a candidate, the person you met over that chicken burrito bowl or the Citigroup partner you met over crudités and caviar?


The Clintons and Their Banker Friends
The Wall Street Connection (1992 to 2016)

[This piece has been adapted and updated by Nomi Prins from chapters 18 and 19 of her book All the Presidents' Bankers: The Hidden Alliances that Drive American Power, just out in paperback (Nation Books).]

The past, especially the political past, doesn’t just provide clues to the present. In the realm of the presidency and Wall Street, it provides an ongoing pathway for political-financial relationships and policies that remain a threat to the American economy going forward.

When Hillary Clinton video-announced her bid for the Oval Office, she claimed she wanted to be a “champion” for the American people. Since then, she has attempted to recast herself as a populist and distance herself from some of the policies of her husband. But Bill Clinton did not become president without sharing the friendships, associations, and ideologies of the elite banking sect, nor will Hillary Clinton. Such relationships run too deep and are too longstanding.

To grasp the dangers that the Big Six banks (JPMorgan Chase, Citigroup, Bank of America, Wells Fargo, Goldman Sachs, and Morgan Stanley) presently pose to the financial stability of our nation and the world, you need to understand their history in Washington, starting with the Clinton years of the 1990s. Alliances established then (not exclusively with Democrats, since bankers are bipartisan by nature) enabled these firms to become as politically powerful as they are today and to exert that power over an unprecedented amount of capital. Rest assured of one thing: their past and present CEOs will prove as critical in backing a Hillary Clinton presidency as they were in enabling her husband’s years in office.

In return, today’s titans of finance and their hordes of lobbyists, more than half of whom held prior positions in the government, exact certain requirements from Washington. They need to know that a safety net or bailout will always be available in times of emergency and that the regulatory road will be open to whatever practices they deem most profitable.

Whatever her populist pitch may be in the 2016 campaign -- and she will have one -- note that, in all these years, Hillary Clinton has not publicly condemned Wall Street or any individual Wall Street leader. Though she may, in the heat of that campaign, raise the bad-apples or bad-situation explanation for Wall Street’s role in the financial crisis of 2007-2008, rest assured that she will not point fingers at her friends. She will not chastise the people that pay her hundreds of thousands of dollars a pop to speak or the ones that have long shared the social circles in which she and her husband move. She is an undeniable component of the Clinton political-financial legacy that came to national fruition more than 23 years ago, which is why looking back at the history of the first Clinton presidency is likely to tell you so much about the shape and character of the possible second one.

The 1992 Election and the Rise of Bill Clinton

Challenging President George H.W. Bush, who was seeking a second term, Arkansas Governor Bill Clinton announced he would seek the 1992 Democratic nomination for the presidency on October 2, 1991. The upcoming presidential election would not, however, turn out to alter the path of mergers or White House support for deregulation that was already in play one iota.

First, though, Clinton needed money. A consummate fundraiser in his home state, he cleverly amassed backing and established early alliances with Wall Street. One of his key supporters would later change American banking forever. As Clinton put it, he received “invaluable early support” from Ken Brody, a Goldman Sachs executive seeking to delve into Democratic politics. Brody took Clinton “to a dinner with high-powered New York businesspeople, including Bob Rubin, whose tightly reasoned arguments for a new economic policy,” Clinton later wrote, “made a lasting impression on me.”

The battle for the White House kicked into high gear the following fall. William Schreyer, chairman and CEO of Merrill Lynch, showed his support for Bush by giving the maximum personal contribution to his campaign committee permitted by law: $1,000. But he wanted to do more. So when one of Bush’s fundraisers solicited him to contribute to the Republican National Committee’s nonfederal, or “soft money,” account, Schreyer made a $100,000 donation.

The bankers’ alliances remained divided among the candidates at first, as they considered which man would be best for their own power trajectories, but their donations were plentiful: mortgage and broker company contributions were $1.2 million; 46% to the GOP and 54% to the Democrats. Commercial banks poured in $14.8 million to the 1992 campaigns at a near 50-50 split.

Clinton, like every good Democrat, campaigned publicly against the bankers: “It’s time to end the greed that consumed Wall Street and ruined our S&Ls [Savings and Loans] in the last decade,” he said. But equally, he had no qualms about taking money from the financial sector. In the early months of his campaign, BusinessWeek estimated that he received $2 million of his initial $8.5 million in contributions from New York, under the care of Ken Brody.

“If I had a Ken Brody working for me in every state, I’d be like the Maytag man with nothing to do,” said Rahm Emanuel, who ran Clinton’s nationwide fundraising committee and later became Barack Obama’s chief of staff. Wealthy donors and prospective fundraisers were invited to a select series of intimate meetings with Clinton at the plush Manhattan office of the prestigious private equity firm Blackstone.

Robert Rubin Comes to Washington

Clinton knew that embracing the bankers would help him get things done in Washington, and what he wanted to get done dovetailed nicely with their desires anyway. To facilitate his policies and maintain ties to Wall Street, he selected a man who had been instrumental to his campaign, Robert Rubin, as his economic adviser.

In 1980, Rubin had landed on Goldman Sachs' management committee alongside fellow Democrat Jon Corzine. A decade later, Rubin and Stephen Friedman were appointed cochairmen of Goldman Sachs. Rubin’s political aspirations met an appropriate opportunity when Clinton captured the White House.

On January 25, 1993, Clinton appointed him as assistant to the president for economic policy. Shortly thereafter, the president created a unique role for his comrade, head of the newly created National Economic Council. “I asked Bob Rubin to take on a new job,” Clinton later wrote, “coordinating economic policy in the White House as Chairman of the National Economic Council, which would operate in much the same way the National Security Council did, bringing all the relevant agencies together to formulate and implement policy... [I]f he could balance all of [Goldman Sachs’] egos and interests, he had a good chance to succeed with the job.” (Ten years later, President George W. Bush gave the same position to Rubin’s old partner, Friedman.)

Back at Goldman, Jon Corzine, co-head of fixed income, and Henry Paulson, co-head of investment banking, were ascending through the ranks. They became co-CEOs when Friedman retired at the end of 1994.

Those two men were the perfect bipartisan duo. Corzine was a staunch Democrat serving on the International Capital Markets Advisory Committee of the Federal Reserve Bank of New York (from 1989 to 1999). He would co-chair a presidential commission for Clinton on capital budgeting between 1997 and 1999, while serving in a key role on the Borrowing Advisory Committee of the Treasury Department. Paulson was a well connected Republican and Harvard graduate who had served on the White House Domestic Council as staff assistant to the president in the Nixon administration.

Bankers Forge Ahead

By May 1995, Rubin was impatiently warning Congress that the Glass-Steagall Act could “conceivably impede safety and soundness by limiting revenue diversification.” Banking deregulation was then inching through Congress. As they had during the previous Bush administration, both the House and Senate Banking Committees had approved separate versions of legislation to repeal Glass-Steagall, the 1933 Act passed by the administration of Franklin Delano Roosevelt that had separated deposit-taking and lending or “commercial” bank activities from speculative or “investment bank” activities, such as securities creation and trading. Conference negotiations had fallen apart, though, and the effort was stalled.

By 1996, however, other industries, representing core clients of the banking sector, were already being deregulated. On February 8, 1996, Clinton signed the Telecom Act, which killed many independent and smaller broadcasting companies by opening a national market for “cross-ownership.” The result was mass mergers in that sector advised by banks.

Deregulation of companies that could transport energy across state lines came next. Before such deregulation, state commissions had regulated companies that owned power plants and transmission lines, which worked together to distribute power. Afterward, these could be divided and effectively traded without uniform regulation or responsibility to regional customers. This would lead to blackouts in California and a slew of energy derivatives, as well as trades at firms such as Enron that used the energy business as a front for fraudulent deals.

The number of mergers and stock and debt issuances ballooned on the back of all the deregulation that eliminated barriers that had kept companies separated. As industries consolidated, they also ramped up their complex transactions and special purpose vehicles (off-balance-sheet, offshore constructions tailored by the banking community to hide the true nature of their debts and shield their profits from taxes). Bankers kicked into overdrive to generate fees and create related deals. Many of these blew up in the early 2000s in a spate of scandals and bankruptcies, causing an earlier millennium recession.

Meanwhile, though, bankers plowed ahead with their advisory services, speculative enterprises, and deregulation pursuits. President Clinton and his team would soon provide them an epic gift, all in the name of U.S. global power and competitiveness. Robert Rubin would steer the White House ship to that goal.

On February 12, 1999, Rubin found a fresh angle to argue on behalf of banking deregulation. He addressed the House Committee on Banking and Financial Services, claiming that, “the problem U.S. financial services firms face abroad is more one of access than lack of competitiveness.”

He was referring to the European banks’ increasing control of distribution channels into the European institutional and retail client base. Unlike U.S. commercial banks, European banks had no restrictions keeping them from buying and teaming up with U.S. or other securities firms and investment banks to create or distribute their products. He did not appear concerned about the destruction caused by sizeable financial bets throughout Europe. The international competitiveness argument allowed him to focus the committee on what needed to be done domestically in the banking sector to remain competitive.

Rubin stressed the necessity of HR 665, the Financial Services Modernization Act of 1999, or the Gramm-Leach-Bliley Act, that was officially introduced on February 10, 1999. He said it took “fundamental actions to modernize our financial system by repealing the Glass-Steagall Act prohibitions on banks affiliating with securities firms and repealing the Bank Holding Company Act prohibitions on insurance underwriting.”

The Gramm-Leach-Bliley Act Marches Forward

On February 24, 1999, in more testimony before the Senate Banking Committee, Rubin pushed for fewer prohibitions on bank affiliates that wanted to perform the same functions as their larger bank holding company, once the different types of financial firms could legally merge. That minor distinction would enable subsidiaries to place all sorts of bets and house all sorts of junk under the false premise that they had the same capital beneath them as their parent. The idea that a subsidiary’s problems can’t taint or destroy the host, or bank holding company, or create “catastrophic” risk, is a myth perpetuated by bankers and political enablers that continues to this day.

Rubin had no qualms with mega-consolidations across multiple service lines. His real problems were those of his banker friends, which lay with the financial modernization bill’s “prohibition on the use of subsidiaries by larger banks.” The bankers wanted the right to establish off-book subsidiaries where they could hide risks, and profits, as needed.

Again, Rubin decided to use the notion of remaining competitive with foreign banks to make his point. This technicality was “unacceptable to the administration,” he said, not least because “foreign banks underwrite and deal in securities through subsidiaries in the United States, and U.S. banks [already] conduct securities and merchant banking activities abroad through so-called Edge subsidiaries.” Rubin got his way. These off-book, risky, and barely regulated subsidiaries would be at the forefront of the 2008 financial crisis.

On March 1, 1999, Senator Phil Gramm released a final draft of the Financial Services Modernization Act of 1999 and scheduled committee consideration for March 4th. A bevy of excited financial titans who were close to Clinton, including Travelers CEO Sandy Weill, Bank of America CEO, Hugh McColl, and American Express CEO Harvey Golub, called for “swift congressional action.”

The Quintessential Revolving-Door Man

The stock market continued its meteoric rise in anticipation of a banker-friendly conclusion to the legislation that would deregulate their industry. Rising consumer confidence reflected the nation’s fondness for the markets and lack of empathy with the rest of the world’s economic plight. On March 29, 1999, the Dow Jones Industrial Average closed above 10,000 for the first time. Six weeks later, on May 6th, the Financial Services Modernization Act passed the Senate. It legalized, after the fact, the merger that created the nation’s biggest bank. Citigroup, the marriage of Citibank and Travelers, had been finalized the previous October.

It was not until that point that one of Glass-Steagall’s main assassins decided to leave Washington. Six days after the bill passed the Senate, on May 12, 1999, Robert Rubin abruptly announced his resignation. As Clinton wrote, “I believed he had been the best and most important treasury secretary since Alexander Hamilton... He had played a decisive role in our efforts to restore economic growth and spread its benefits to more Americans.”

Clinton named Larry Summers to succeed Rubin. Two weeks later, BusinessWeek reported signs of trouble in merger paradise -- in the form of a growing rift between John Reed, the former Chairman of Citibank, and Sandy Weill at the new Citigroup. As Reed said, “Co-CEOs are hard.” Perhaps to patch their rift, or simply to take advantage of a political opportunity, the two men enlisted a third person to join their relationship -- none other than Robert Rubin.

Rubin’s resignation from Treasury became effective on July 2nd. At that time, he announced, “This almost six and a half years has been all-consuming, and I think it is time for me to go home to New York and to do whatever I’m going to do next.” Rubin became chairman of Citigroup’s executive committee and a member of the newly created “office of the chairman.” His initial annual compensation package was worth around $40 million. It was more than worth the “hit” he took when he left Goldman for the Treasury post.

Three days after the conference committee endorsed the Gramm-Leach-Bliley bill, Rubin assumed his Citigroup position, joining the institution destined to dominate the financial industry. That very same day, Reed and Weill issued a joint statement praising Washington for “liberating our financial companies from an antiquated regulatory structure,” stating that “this legislation will unleash the creativity of our industry and ensure our global competitiveness.”

On November 4th, the Senate approved the Gramm-Leach-Bliley Act by a vote of 90 to 8. (The House voted 362–57 in favor.) Critics famously referred to it as the Citigroup Authorization Act.

Mirth abounded in Clinton’s White House. “Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the twenty-first century,” Summers said. “This historic legislation will better enable American companies to compete in the new economy.”

But the happiness was misguided. Deregulating the banking industry might have helped the titans of Wall Street but not people on Main Street. The Clinton era epitomized the vast difference between appearance and reality, spin and actuality. As the decade drew to a close, Clinton basked in the glow of a lofty stock market, a budget surplus, and the passage of this key banking “modernization.” It would be revealed in the 2000s that many corporate profits of the 1990s were based on inflated evaluations, manipulation, and fraud. When Clinton left office, the gap between rich and poor was greater than it had been in 1992, and yet the Democrats heralded him as some sort of prosperity hero.

When he resigned in 1997, Robert Reich, Clinton’s labor secretary, said, “America is prospering, but the prosperity is not being widely shared, certainly not as widely shared as it once was... We have made progress in growing the economy. But growing together again must be our central goal in the future.” Instead, the growth of wealth inequality in the United States accelerated, as the men yielding the most financial power wielded it with increasingly less culpability or restriction. By 2015, that wealth or prosperity gap would stand near historic highs.

The power of the bankers increased dramatically in the wake of the repeal of Glass-Steagall. The Clinton administration had rendered twenty-first-century banking practices similar to those of the pre-1929 crash. But worse. “Modernizing” meant utilizing government-backed depositors’ funds as collateral for the creation and distribution of all types of complex securities and derivatives whose proliferation would be increasingly quick and dangerous.

Eviscerating Glass-Steagall allowed big banks to compete against Europe and also enabled them to go on a rampage: more acquisitions, greater speculation, and more risky products. The big banks used their bloated balance sheets to engage in more complex activity, while counting on customer deposits and loans as capital chips on the global betting table. Bankers used hefty trading profits and wealth to increase lobbying funds and campaign donations, creating an endless circle of influence and mutual reinforcement of boundary-less speculation, endorsed by the White House.

Deposits could be used to garner larger windfalls, just as cheap labor and commodities in developing countries were used to formulate more expensive goods for profit in the upper echelons of the global financial hierarchy. Energy and telecoms proved especially fertile ground for the investment banking fee business (and later for fraud, extensive lawsuits, and bankruptcies). Deregulation greased the wheels of complex financial instruments such as collateralized debt obligations, junk bonds, toxic assets, and unregulated derivatives.

The Glass-Steagall repeal led to unfettered derivatives growth and unstable balance sheets at commercial banks that merged with investment banks and at investment banks that preferred to remain solo but engaged in dodgier practices to remain “competitive.” In conjunction with the tight political-financial alignment and associated collaboration that began with Bush and increased under Clinton, bankers channeled the 1920s, only with more power over an immense and growing pile of global financial assets and increasingly "open” markets. In the process, accountability would evaporate.

Every bank accelerated its hunt for acquisitions and deposits to amass global influence while creating, trading, and distributing increasingly convoluted securities and derivatives. These practices would foster the kind of shaky, interconnected, and opaque financial environment that provided the backdrop and conditions leading up to the financial meltdown of 2008.

The Realities of 2016

Hillary Clinton is, of course, not her husband. But her access to his past banker alliances, amplified by the ones that she has formed herself, makes her more of a friend than an adversary to the banking industry. In her brief 2008 candidacy, all four of the New York-based Big Six banks ranked among her top 10 corporate donors. They have also contributed to the Clinton Foundation. She needs them to win, just as both Barack Obama and Bill Clinton did.

No matter what spin is used for campaigning purposes, the idea that a critical distance can be maintained between the White House and Wall Street is naïve given the multiple channels of money and favors that flow between the two. It is even more improbable, given the history of connections that Hillary Clinton has established through her associations with key bank leaders in the early 1990s, during her time as a senator from New York, and given their contributions to the Clinton foundation while she was secretary of state. At some level, the situation couldn’t be less complicated: her path aligns with that of the country’s most powerful bankers. If she becomes president, that will remain the case.

[May 06, 2015] Clinton Cash: errors dog Bill and Hillary exposé – but is there any 'there' there? by Ed Pilkington

May 05, 2015 | The Guardian

In an interview with the sympathetic Fox News (owned by Rupert Murdoch, who also owns Harper, the publisher of Clinton Cash) it was put to Schweizer that he hadn’t “nailed” his thesis. “It’s hard for any author to nail it – one of the strategies of the Clinton camp is to set a bar for me as an author that is impossible to meet,” he replied.

... ... ...

Certainly, pundits were warning about the problem of the large sums of money flowing into the Clinton Foundation’s coffers even before Hillary Clinton took up her position as Obama’s global emissary-in-chief. A month before she became secretary of state, the Washington Post warned in an editorial that her husband’s fundraising activities were problematic. “Even if Ms Clinton is not influenced by gifts to her husband’s charity, the appearance of conflict is unavoidable.”

Since the foundation was formed in 2001, some $2bn has been donated, mainly in big lump sums. Fully a third of the donors giving more than $1m, and more than a half of those handing over more than $5m, have been foreign governments, corporations or tycoons. (The foundation stresses that such largesse has been put to very good use – fighting obesity around the globe, combating climate change, helping millions of people with HIV/Aids obtain antiretroviral drugs at affordable prices.)

Schweizer may have made mistakes about aspects of Bill Clinton’s fees on the speaker circuit, but one of his main contentions – that the former president’s rates skyrocketed after his wife became secretary of state – is correct. Politifact confirmed that since leaving the White House in 2001 and 2013, Bill Clinton made 13 speeches for which he commanded more than $500,000; all but two of those mega-money earners occurred in the period when Hillary was at the State Department.

Though Schweizer has failed to prove actual corruption in the arrangement – at no point in the book does he produce evidence showing that Bill’s exorbitant speaker fees were directly tied to policy concessions from Hillary – he does point to several glaring conflicts of interest. Bill Clinton did accept large speaker fees accumulating to more than $1m from TD Bank, a major shareholder in the Keystone XL pipeline, at precisely the time that the Obama administration, and Hillary Clinton within it, was wrestling with the vexed issue of whether to approve it.

It is also true that large donations to the foundation from the chairman of Uranium One, Ian Telfer, at around the time of the Russian purchase of the company and while Hillary Clinton was secretary of state, were never disclosed to the public. The multimillion sums were channeled through a subsidiary of the Clinton Foundation, CGSCI, which did not reveal its individual donors.

Such awkward collisions between Bill’s fundraising activities and Hillary’s public service have raised concerns not just among those who might be dismissed as part of a vast rightwing conspiracy. Take Zephyr Teachout, a law professor at Fordham university who has written extensively on political corruption in the US.

Teachout, who last year stood against Andrew Cuomo for the Democratic party nomination for New York governor, points out that you don’t have to be able to prove quid pro quo for alarm bells to ring. “Our whole system of rules is built upon the concept that you must prevent conflicts of interests if you are to resist corruption in its many forms. Conflicts like that can infect us in ways we don’t even see.”

Teachout said that the Clintons presented the US political world with a totally new challenge. “We have never had somebody running for president whose spouse – himself a former president – is running around the world raising money in these vast sums.”

... ... ...

Though Bill Clinton insisted this week that his charity has done nothing “knowingly inappropriate”, that is unlikely to satisfy the skeptics from left or right. They say that a family in which one member is vying for the most powerful office on Earth must avoid straying into even the unintentionally inappropriate.

In the wake of Clinton Cash, the foundation has admitted that it made mistakes in disclosing some of its contributions. It has also implemented new rules that will see its financial reporting increase from once annually to four times a year, while large donations from foreign governments will be limited in future to six countries including the UK and Germany.

But with Bill refusing doggedly to give up his speaker engagements – “I gotta pay our bills” – and foreign corporations and super-rich individuals still able to donate to the family charity, it looks like this controversy may run and run. Politically, too, Hillary Clinton is confronted with a potential credibility gap between her appeal to ordinary Americans on the presidential campaign trail and the millions that continue to flow to the foundation.

“Is she going to be in touch with the needs and dreams of poor America when her spouse and daughter are working with the world’s global elite?” said Dave Levinthal of the anti-corruption investigative organization, the Center for Public Integrity. “That’s a question she will have to answer, every step of the way.”

mkenney63 5 May 2015 20:39
It would be nice to know how much Saudi and Chinese money her "Foundation" has taken-in. I can tell you how much Bernie has taken - $0. Bernie, the only truly progressive in the race, raised $1.5 million in one day from ordinary working people like you and me who have the smarts to know who's really in their corner. When I look at Hillary I ask myself, do we really want parasitic people like this running our country? Is there anything she has ever touched that isn't tainted by a lust for money?
foggy2 gixxerman006 5 May 2015 20:38
I am in the process of reading the actual book. He does have actual sources for many things but what is missing is the information controlled by that now cleaned off server and the details of just who contributed to them, their foundation, and who hired them for those gold plated speeches. Those names never were made public and now the related tax forms are being "redone." Wonder how long that will take.

The author was able to get pertinent data from the Canadian tax base information and that is important because some of the heavier hitters are Canadians who needed help in the US and other places to make piles of money on their investments. And many statements made by people are documented as are some cables sent TO the state department.

AlfredHerring raffine 5 May 2015 20:33

It's funny that free-market Tea Party Republicans criticize the Clintons

There's a broad populist streak in the Tea Party. They may be social conservatives and opposed to government telling them they MUST buy health insurance from a private company (that's where it started) but on many issues they're part of the Teddy Roosevelt trust busting and Franklin Roosevelt New Deal traditions.

[May 05, 2015] Ben Bernanke's Bad Example

It's a pay off for doing what Big Finance wants. It's ironic that Bernanke, who didn't recognize the biggest bubble in financial history until it popped is being paid millions of dollars for uncovering economic trends.

Economist's View

At MoneyWatch:

Ben Bernanke's bad example, by Mark Thoma: The recent announcements that former Federal Reserve Chairman Ben Bernanke has accepted a position as a senior adviser at Pimco and a similar position at hedge fund Citadel have raised questions about whether the "revolving door" between government and private sector jobs ought to be restricted.
Perhaps, for example, Federal Reserve officials should be subject to a five-year waiting period before they can take jobs in the financial sector. The idea would be to reduce the chance that bank regulators could be influenced through formal and informal ties to previous Fed officials.
My concern is somewhat different: The incentive for Federal Reserve Board members to step down before their terms are up and accept lucrative private sector positions has the potential to damage the Fed as an independent institution...

Syaloch -> pgl...

"For 2014, the Chairman's annual salary is $201,700. The annual salary of the other Board members (including the Vice Chairman) is $181,500."

$201,700 isn't a good salary? Sure, maybe it's peanuts to someone working on Wall Street, but doesn't that kinda go to the point that Thoma was making?

"[Bernanke's] stepping down isn't the main problem. It's the idea that it's OK for a former Fed member -- and its chair, no less -- to take these kinds of jobs once you leave. If Bernanke had returned to academia or limited himself to his position at the Brookings Institution, that wouldn't be a problem.

"However, if the chair can cash out, then other board members will also have an incentive to resign their positions as Fed governors after a few years to pursue financial interests in the private sector. Bernanke's acceptance of positions at Citadel and Pimco sets a bad precedent because it encourages other board members to do the same."

pgl -> Syaloch...

Where on earth did I say he made minimum wages? I said he did a good job and $200,000 a year was a bargain even if it was not slave wages.

DrDick -> pgl...

It is much more than most academic economists make. It is, in fact, a very good salary by any reasonable standard. The fact that people on Wall Street are paid obscene amounts for no useful product is beside the point.

am -> Syaloch...

US$200,000 is about GBP133,333.

Now here is the salary for the BOE equivalent.

Kind of puts U$200,000 in perspective. Anyone who takes the FED job sure ain't doing it for the money. Must be for prestige or future earnings when they retire or resign.

Bit of a shock to a European to see how poorly paid some US civil servants are.


It's a pay off for doing what Big Finance wants.

It's ironic that Bernanke, who didn't recognize the biggest bubble in financial history until it popped is being paid millions of dollars for uncovering economic trends.

pgl -> Ellis...

Pray tell - who did foresee this bubble and its busting? Robert Lucas even in 2009 was arguing no one could have foreseen it as he was supposed to be the Dean of Macroeconomics back then.

supersaurus -> pgl...

uhhh... . that's "dr. nobody", right?

Ellis -> pgl...

Dean Baker and Nouriel Roubini, off the top of my head.

You could see it coming a mile away, especially given the worsening financialization and boom-bust pattern over the last four decades.

Of course, Bernanke said the exact opposite, that we were in the middle of the Great Moderation. Like most politicians, he's a liar, covering for the banks that made a fortune off the bubble, and then insulated from the catastrophe by the government and Fed.

Ellis -> pgl...

Dean Baker and Nouriel Roubini, off the top of my head.

You could see it coming a mile away, especially given the worsening financialization and boom-bust pattern over the last four decades.

Of course, Bernanke said the exact opposite, that we were in the middle of the Great Moderation. Like most politicians, he's a liar, covering for the banks that made a fortune off the bubble, and then insulated from the catastrophe by the government and Fed.

pgl -> Ellis...

The trio was also mocked by many at the time. Yes - they got it right and they deserve credit for doing so. But none of them have ever attacked Bernanke for not being as fore sighted.

But hey - I guess it is beat up on Ben day so have at it!

DrDick -> pgl...

While I think he could have done better at the Fed, I think he was decent in that position. He should not be allowed to take this job, however.

Ellis -> pgl...

Yes, they were mocked -- which is not surprising, given the financial and career advancement incentives -- which is exactly the point. Have you seen the documentary "Inside Job"? It has a good section on corruption among top economists.

Your wrong on your second point: Check out the post by Dean Baker in Beat the Press, April 30, "The Man Who Completely Missed the Housing Bubble and Was Convinced Financial Disruption Would be Restricted to the Subprime Market Deserves Two Seven-Figure Sinecures?"

Sorry for being so "mean and nasty" about Bernanke. But compare that to all those who lost everything, as a result of the crisis that he oversaw? His big salaries, of course, are little more than a tip from the big boys, who made out so well.

Roger Gathmann -> pgl...

You really see no difference between economic journalists and the head of the FED? Uh, that is pretty incredible.

How could Bernanke have found out more? Well, maybe he could have operated a bit more like Steve Eisman at frontpoint who did the math, as reported by Michael Lewis in The Big Short.
Really, to pretend that the FED has the same capacities as a newspaper columnist or economics professor, that the voices, and there were more than two or three, in the financial industry warning that there was something deeply wrong, is to apologize for Bernanke by saying, hey, he was a complete doofus, but he did all right after he sank the ship.
Greenspan and Bernanke were the worst FED chairmen in the Fed's history. The record, which should be read in terms of the health of the general economy, bears this out. Granted, after three crashes that seemed not to result in Depressions, Greenspan might not seem as bad, but it was his spirit and ideas that created the de-regulatory box and the market can do no wrong ethos at the Fed, which Bernanke continued. Bernanke even got a second chance after Bear Stearns fell. But no, between May and September, 2008, the Fed pretty much sat on its hands.

Roger Gathmann

Bernanke served the hedge fund sector well during his reign of terror at the Fed. Who can forget the loans to even a semi-criminal hedge fund like Yorkville from the ever understanding Fed, once the roof fell in? Or to all the other moneyed interests?
And who can forget the prophet Bernanke? The one who, in 2005, looked about and said yeah, there is no housing bubble, and anyway, housing prices don't decline:

"U.S. house prices have risen by nearly 25 percent over the past two years, noted Bernanke, currently chairman of the president's Council of Economic Advisers, in testimony to Congress's Joint Economic Committee. But these increases, he said, "largely reflect strong economic fundamentals," such as strong growth in jobs, incomes and the number of new households."
I like the strong increase in incomes remark particularly. No wonder Bush, who had shown an eye for characters like Bernanke - Wolfowitz, Rumsfeld and Cheney shared a similar bogus confidence in their "facts" - appointed him. And he didn't disappoint. This is the guy who said that the Fed shouldn't be second guessing on the price of assets - free market, don't you know? - whose response to Stock market declines in 2006 and 2007 with a series of cuts was all about - keeping up the price of assets. But these were special assets, the kind of assets mainly held by the upper 20 percent income group. Not the tawdry assets held by the lower 80 with their homes.

Here he is, in his speech on the state of the economy in March, 2007, giving us more prophetic Ben:

Although the turmoil in the subprime mortgage market has created severe financial problems for many individuals and families, the implications of these developments for the housing market as a whole are less clear. The ongoing tightening of lending standards, although an appropriate market response, will reduce somewhat the effective demand for housing, and foreclosed properties will add to the inventories of unsold homes. At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency."

Bear Stearns collapsed two months after everything was contained, in May. Now, did Mr Bernanke think maybe there needed to be some urgent work done to make sure other big banks weren't at risk? Were he and his friend in Treasury in firefighing mode? Of course not. That would not be serving the hedge fund community well.

Not that he was without ideas. Obviously, you wouldn't want to regulate a market in CDOs - it would be irresponsible to suggest such things! - but you could recommend that the bottom 80 percent be better informed about the risks they were taking.

Ace idea. Maybe even the top 1 percent should have been informed about the risks they were running? oh, but they have the computers and the smarts, of course. No need to rush right in.
Of course, I'm just a crazy leftist with these views. And the crazy leftists who issued the Financial Crisis Inquiry report in 2011 echoed them.

"The majority report finds fault with two Fed chairmen: Alan Greenspan, who led the central bank as the housing bubble expanded, and his successor, Ben S. Bernanke, who did not foresee the crisis but played a crucial role in the response. It criticizes Mr. Greenspan for advocating deregulation and cites a “pivotal failure to stem the flow of toxic mortgages” under his leadership as a “prime example” of negligence.

It also criticizes the Bush administration’s “inconsistent response” to the crisis — allowing Lehman Brothers to collapse in September 2008 after earlier bailing out another bank, Bear Stearns, with Fed help — as having “added to the uncertainty and panic in the financial markets.”

Like Mr. Bernanke, Mr. Bush’s Treasury secretary, Henry M. Paulson Jr., predicted in 2007 — wrongly, it turned out — that the subprime collapse would be contained, the report notes."

Bernanke like his companeros in the Bush administration was smug, incompetent, and a key player in a disaster that impacted negatively on most Americans and the world at large. The result of his continuation of Greenspan's policies and his reaction to the onset of the crisis contributed to the reduction of the median net worth of American households by a third:
Salut, Ben! You deserve every penny.

Roger Gathmann

I mentioned rather cryptically the Yorkville hedge fund that was helped out by the ever hedge friendly Ben Bernanke. In the dark winter of 2008 - 2009, some people thought of the retirement funds that were evaporating, the foreclosures, the unemployment. But the Fed was thinking in larger terms about who should get premium loans at Uncle Ben's We loan for less window. Yorkville was one of them.

“A Jersey City, N.J., hedge fund under Securities and Exchange Commission investigation received more than $230 million in federal loans as part of a government bailout program.

Yorkville Advisors has been part of the Term Asset-Backed Securities Loan Facility Program since last year. Under TALF, the Federal Reserve Bank of New York has up to $1 billion to lend as part of an effort to inject liquidity into the ABS market.
Yorkville received some $233 million of that financing, using it to buy $253 million in securities last year for its flagship, YA Global Investments. The TALF deals were made via a subsidiary of the fund, New Earthshell Corp., and placed with a special-purpose entity called YA TALF Holdings, Forbes reports. The hedge fund still owes the Fed $162 million.”

This is of course a pennyante amount. You, my friend, may not be able to get one cent from the Fed even if you write them and ask pretty please and include pics of your starving kids, but to other of the higher players in the Wallfare world, that loan is pocket change.
Since it isn’t pocket change to me, though (if I and one thousand of my clones worked one thousand years at the rate in which I make money, we would not have collected anything near 230 million dollars), I figure that it might be a good idea to poke around Yorkville Associates, and see what they are about.

So what does Yorkville do, and why would we want to loan it money?

Here’s a good summary of one of Yorkville’s big money makers:

“Yorkville Advisors, founded by 38-year-old Mark Angelo in 2001, is one of the largest hedge fund firms specializing in investing in thinly-traded and often illiquid outfits by making private investments in public equities, also known as PIPEs. The hedge fund firm reported nearly $1 billion in assets as recently as 2008. Angelo’s variation on PIPEs is a structured product called a standby equity distribution agreement, which like most PIPEs often causes the stock of the company receiving the investment to drop because it results in Yorkville’s funds collecting discounted shares.

A report prepared by Sagient Research’s PlacementTracker shows that Yorkville has entered into $762 million in PIPE deals since 2001, causing the underlying stocks to drop 38% on average in the first year. Most of those investments were made by Yorkville’s Cornell Capital Partners, which later changed its name to YA Global Investments.
YA Global Investments reported a total return of 6.04% in 2009 and 6.22% in 2008, its financial statements say. It reported a net investment loss of 0.09% in 2009 and net investment income of 5.43% in 2008.

According to the one-page independent auditor’s report prepared on August 13 by McGladrey & Pullen, YA Global Investments’ consolidated financial statements include investments valued at $804 million, representing 94% of its partners’ capital plus the amounts due to certain Yorkville special purpose vehicles, “whose fair values have been estimated” by Yorkville Advisors “in the absence of readily ascertainable fair values.”

Now, that seems a bit curious. We gave this outfit money so that it could use the money to mount a play to make selected stock prices drop, which made it money.

Hmm, how is this possible? Well, here’s an explanation of PIPE action as it pertains to another fund, the NIR group, written by Matthew Goldstein at Reuters:

"But what’s surprising to me is why the SEC is just looking into the NIR funds now, given that it has been a dominant player in so-called “death spiral” convertible market. These securities have gotten a bad rap over the years because they include a trigger that permits bonds to be converted into common shares whenever there is a precipitous drop in the prices of a company’s stock.

Roger Gathmann -> pete...

The accusation is that the loose set up of Talf was Bernanke's baby, not that he was personally on the phone to Yorkville associates.

The Bureau of Mine head wasn't personally in contact with BP when Deep Horizon blew, he had simply helped produced the regulatory environment that made it possible.

Carola Binder said...

A few weeks ago I blogged about Bernanke's decision to join Citadel, hoping the move will catalyze a change in Fed governance:

Interesting WSJ article on Fed's links to Citadel and Pimco:

Roger Gathmann

Checking out Citadel's history of tax avoidance and taking advantage of loopholes in regulation, Bernanke obviously saw a corporate culture he could admire. As early as 2007, the NYT featured an article about their innovative program of helping employees avoid tax through a system of off shore accounts.

One of the flagship funds at Citadel, a $13.5 billion hedge fund, for example, has deferred at least $1.7 billion since it was founded at the end of 1990. And that does not count what might have been taken out already. Citadel declined to comment.

“We pile advantage on advantage for these managers and there doesn’t seem to be any economically logical basis for it,” said John C. Bogle, the founder of the Vanguard Group. “It’s a very well-gilded lily to allow these tax deferrals.”

This tax advantage is now coming under scrutiny in Washington, where Congress is looking for ways to reduce the budget deficit, to pay for the Iraq war and to help cover the exploding retirement and health care costs of aging baby boomers.

For now, many hedge fund managers are enjoying not only extraordinary profits but the extra benefit of a system almost encouraging them to set up offshore accounts.

Most hedge funds are private partnerships; managers are usually paid 2 percent of the money they manage plus 20 percent of the profits the partnership earns. If the fund operates in the United States, any deferral of the pay of the managers means investors lose the tax deduction associated with the compensation expense. As a result, deferred compensation in domestic funds is very uncommon.

By setting up an offshore fund, though, hedge fund managers avoid socking their investors with extra taxes. At the same time, it serves to attract tax-exempt investors like pension funds and endowments, as well as foreign investors, two of the most active groups investing in hedge funds today."

At the end of 2008, things did look bad for Citadel. But they got some help at least from the Government, as did any household who had experienced a bad year - NOT! Just joking. That is when Citadel got a 200 million dollars from the payout of AIG with money loaned from the Fed.

Life is sweet. True, what's 200 million between friends? after all, citadel's ceo made 900 million dollars in 2009. That's how they roll.

Roger Gathmann

After the senate report on the financial meltdown, Bernanke, in a country where the elite were more vulnerable to shame, would have stepped down. Actually, if a cashier at a grocery store had a record that was comparably as bad as Bernanke's at the Fed, that cashier would have been fired, with no reference.

But cashiers are peons and proles - they have to take responsibility for what they do. Sweetly enough, our elite has liquidated that notion as far as it refers to themselves. America is such a lovely place to live in like that - if you have an income of above 500 thou a year.

For the rest, well, in an ownership society you gotta take your risks, suckers.

[May 05, 2015] The Higher Immorality

Excerpts from the book The Power Elite by C.Wright Mills Oxford Press, 1956

The higher immorality can neither be narrowed to the political sphere nor understood as primarily a matter of corrupt men in fundamentally sound institutions. Political corruption is one aspect of a more general immorality; the level of moral sensibility that now prevails is not merely a matter of corrupt men. The higher immorality is a systematic feature of the American elite; its general acceptance is an essential feature of the mass society.

Of course, there may be corrupt men in sound institutions, but when institutions are corrupting, many of the men who live and work in them are necessarily corrupted. In the corporate era, economic relations become impersonal-and the executive feels less personal responsibility. Within the corporate worlds of business, war-making and politics, the private conscience is attenuated-and the higher immorality is institutionalized. It is not merely a question of a corrupt administration in corporation, army, or state; it is a feature of the corporate rich, as a capitalist stratum, deeply intertwined with the politics of the military state.


There is still one old American value that has not markedly declined: the value of money and of the things money can buy-these, even in inflated times, seem as solid and enduring as stainless steel. 'I've been rich and I've been poor,' Sophie Tucker has said, 'and believe me, rich is best.' As many other values are weakened, the question for Americans becomes not Is there anything that money, used with intelligence, will not buy?' but, 'How many of the things that money will not buy are valued and desired more than what money will buy?' Money is the one unambiguous criterion of success, and such success is still the sovereign American value.

Whenever the standards of the moneyed life prevail, the man with money, no matter how he got it, will eventually be respected. A million dollars, it is said, covers a multitude of sins. It is not only that men want money; it is that their very standards are pecuniary. In a society in which the money-maker has had no serious rival for repute and honor, the word 'practical' comes to mean useful for private gain, and 'common sense,' the sense to get ahead financially. The pursuit of the moneyed life is the commanding value, in relation to which the influence of other values has declined, so men easily become morally ruthless in the pursuit of easy money and fast estate-building.

A great deal of corruption is simply a part of the old effort to get rich and then to become richer. But today the context in which the old drive must operate has changed. When both economic and political institutions were small and scattered-as in the simpler models of classical economics and Jeffersonian democracy-no man had it in his power to bestow or to receive great favors. But when political institutions and economic opportunities are at once concentrated and linked, then public office can be used for private gain.

Governmental agencies contain no more of the higher immorality than do business corporations. Political men can grant financial favors only when there are economic men ready and willing to take them. And economic men can seek political favors only when there are political agents who can bestow such favors. The publicity spotlight, of course, shines brighter upon the transactions of the men in government, for which there is good reason. Expectations being higher, publics are more easily disappointed by public officials. Businessmen are supposed to be out for themselves, and if they successfully skate on legally thin ice, Americans generally honor them for having gotten away with it. But in a civilization so thoroughly business-penetrated as America, the rules of business are carried over into government-especially when so many businessmen have gone into government. How many executives would really fight for a law requiring a careful and public accounting of all executive contracts and 'expense accounts'? High income taxes have resulted in a network of collusion between big firm and higher employee. There are many ingenious ways to cheat the spirit of the tax laws, as we have seen, and the standards of consumption of many high-priced men are determined more by complicated expense accounts than by simple take-home pay. Like prohibition, the laws of income taxes and the regulations of wartime exist without the support of firm business convention. It is merely illegal to cheat them, but it is smart to get away with it. Laws without supporting moral conventions invite crime, but much more importantly, they spur the growth of an expedient, amoral attitude.

A society that is in its higher circles and on its middle levels widely believed to be a network of smart rackets does not produce men with an inner moral sense; a society that is merely expedient does not produce men of conscience. A society that narrows the meaning of 'success' to the big money and in its terms condemns failure as the chief vice, raising money to the plane of absolute value, will produce the sharp operator and the shady deal. Blessed are the cynical, for only they have what it takes to succeed.


It is the proud claim of the higher circles in America that their members are entirely self-made. That is their self-image and their well-publicized myth. Popular proof of this is based on anecdotes its scholarly proof is supposed to rest upon statistical rituals whereby it is shown that varying proportions of the men at the top are sons of men of lower rank. We have already seen the proportions of given elite circles composed of the men who have risen. But what is more important than the proportions of the sons of wage workers among these higher circles is the criteria of admission to them, and the question of who applies these criteria. We cannot from upward mobility infer higher merit. Even if the rough figures that now generally hold were reversed, and 90 per cent of the elite were sons of wage workers-but the criteria of co-optation by the elite remained what they now are-we could not from that mobility necessarily infer merit. Only if the criteria of the top positions were meritorious, and only if they were self-applied, as in a purely entrepreneurial manner, could we smuggle merit into such statistics-from any statistics-of mobility. The idea that the self-made man is somehow 'good' and that the family-made man is not good makes moral sense only when the career is independent, when one is on one's own as an entrepreneur. It would also make sense in a strict bureaucracy where examinations control advancement. It makes little sense in the system of corporate co-optation.

There is, in psychological fact, no such thing as a self-made man. No man makes himself, least of all the members of the American elite. In a world of corporate hierarchies, men are selected by those above them in the hierarchy in accordance with whatever criteria they use. In connection with the corporations of America, we have seen the current criteria. Men shape themselves to fit them, and are thus made by the criteria, the social premiums that prevail. If there is no such thing as a self-made man, there is such a thing as a self-used man, and there are many such men among the American elite.

Under such conditions of success, there is no virtue in starting out poor and becoming rich. Only where the ways of becoming rich are such as to require virtue or to lead to virtue does personal enrichment imply virtue. In a system of co-optation from above, whether you began rich or poor seems less relevant in revealing what kind of man you are when you have arrived than in revealing the principles of those in charge of selecting the ones who succeed.

All this is sensed by enough people below the higher circles to lead to cynical views of the lack of connection between merit and mobility, between virtue and success. It is a sense of the immorality of accomplishment, and it is revealed in the prevalence of such views as: 'it's all just another racket,' and 'it's not what you know but who you know.' Considerable numbers of people now accept the immorality of accomplishment as a going fact


Moral distrust of the American elite-as well as the fact of organized irresponsibility-rests upon the higher immorality, but also upon vague feelings about the higher ignorance. Once upon a time in the United States, men of affairs were also men of sensibility: to a considerable extent the elite of power and the elite of culture coincided, and where they did not coincide they often overlapped as circles. Within the compass of a knowledgeable and effective public, knowledge and power were in effective touch; and more than that, this public decided much that was decided.

'Nothing is more revealing,' James Reston has written, 'than to read the debate in the House of Representatives in the Eighteen Thirties on Greece's fight with Turkey for independence and the Greek-Turkish debate in the Congress in 1947. The first is dignified and eloquent, the argument marching from principle through illustration to conclusion; the second is a dreary garble of debating points, full of irrelevancies and bad history. George Washington in 1783 relaxed with Voltaire's 'letters' and Locke's 'On Human Understanding'; Eisenhower read cowboy tales and detective stories. For such men as now typically arrive in the higher political, economic and military circles, the briefing and the memorandum seem to have pretty well replaced not only the serious book, but the newspaper as well. Given the immorality of accomplishment, this is perhaps as it must be, but what is somewhat disconcerting about it is that they are below the level on which they might feel a little bit ashamed of the uncultivated style of their relaxation and of their mental fare, and that no self-cultivated public is in a position by its reactions to educate them to such uneasiness.

By the middle of the twentieth century, the American elite have become an entirely different breed of men from those who could on any reasonable grounds be considered a cultural elite, or even for that matter cultivated men of sensibility. Knowledge and power are not truly united inside the ruling circles; and when men of knowledge do come in contact with the circles of powerful men, they come not as peers but as hired men. The elite of power, wealth, and celebrity do not have even a passing acquaintance with the elite of culture, knowledge and sensibility; they are not in touch with them-although the ostentatious fringes of the two worlds sometimes overlap in the world of the celebrity.

Most men are encouraged to assume that, in general, the most powerful and the wealthiest are also the most knowledgeable or, as they might say, 'the smartest.' Such ideas are propped up by many little slogans about those who 'teach because they can't do,' and about 'if you're so smart, why aren't you rich?' But all that such wisecracks mean is that those who use them assume that power and wealth are sovereign values for all men and especially for men 'who are smart.' They assume also that knowledge always pays off in such ways, or surely ought to, and that the test of genuine knowledge is just such pay-offs. The powerful and the wealthy must be the men of most knowledge, otherwise how could they be where they are? But to say that those who succeed to power must be 'smart,' is to say that power is knowledge. To say that those who succeed to wealth must be smart, is to say that wealth is knowledge.

The prevalence of such assumptions does reveal something that is true: that ordinary men, even today, are prone to explain and to justify power and wealth in terms of knowledge or ability. Such assumptions also reveal something of what has happened to the kind of experience that knowledge has come to be. Knowledge is t no longer widely felt as an ideal; it is seen as an instrument. In a society of power and wealth, knowledge is valued as an instrument of power and wealth, and also, of course, as an ornament in conversation.


The American elite is not composed of representative men whose conduct and character constitute models for American imitation and aspiration. There is no set of men with whom members of the mass public can rightfully and gladly identify. In this fundamental sense, America is indeed without leaders. Yet such is the nature of the mass public's morally cynical and politically unspecified distrust that it is readily drained off without real political effect. That this is so, after the men and events of the last thirty years, is further proof of the extreme difficulty of finding and of using in America today the political means of sanity for morally sane objectives.

America - a conservative country without any conservative ideology-appears now before the world a naked and arbitrary power, as, in the name of realism, its men of decision enforce their often crackpot definitions upon world reality. The second-rate mind is in command of the ponderously spoken platitude. In the liberal rhetoric, vagueness, and in the conservative mood, irrationality, are raised to principle. Public relations and the official secret, the trivializing campaign and the terrible fact clumsily accomplished, are replacing the reasoned debate of political ideas in the privately incorporated economy, the military ascendancy, and the political vacuum of modern America.

The men of the higher circles are not representative men; their high position is not a result of moral virtue; their fabulous success is not firmly connected with meritorious ability. Those who sit in the seats of the high and the mighty are selected and formed by the means of power, the sources of wealth, the mechanics of celebrity, which prevail in their society. They are not men selected and formed by a civil service that is linked with the world of knowledge and sensibility. They are not men shaped by nationally responsible parties that debate openly and clearly the issues this nation now so unintelligently confronts. They are not men held in responsible check by a plurality of voluntary associations which connect debating publics with the pinnacles of decision. Commanders of power unequaled in human history, they have succeeded within the American system of organized irresponsibility.

[Apr 14, 2015] The Message from the 22 Year Old Suicide at the Nation's Capitol

Apr 14, 2015 | Jesse's Café Américain

Suicide is a prohibited form of violence in my own belief, as are all other forms of murder. Therefore I would not hold this type of protest up as an example to anyone.

However, an even worse offense would be to completely ignore the message which this young man delivered, as most of the mainstream media has done in the US.

I did not even know what really happened until I read this article below from Wall Street On Parade today. The police and media referred to it as a 'social protest.'

Before he killed himself, the young man held up a sign that said "Tax the One Percent."

Perhaps an even more pointed message might be 'shut down the loopholes for the Top .01%.' Those who make their money from wages and ordinary income pay fairly significant taxes.

However, the uber-rich have so many loopholes and tax avoidance schemes that they often pay much lower percentage than even those in the lowest income levels. The top .01% use the upper middle class as shields for their antics.

You may read the entire article about this here.

Rather than one young light be extinguished and quickly overlooked by the powerful, perhaps it would be better if a million people were to march on the Capitol, and effective shut it down in protest this Summer. That might get their attention. Alas, the apathy in the people is pervasive, at least for now.

Wall Street On Parade

22-Year Old Commits Suicide at Capitol to Send Congress a Message

By Pam Martens: April 14, 2015

At approximately 1:07 p.m. on Saturday afternoon, April 11, during the annual Cherry Blossom Festival celebrating springtime in the Nation's Capitol, a 22-year old man took his own life with a gun on the Capitol grounds with a protest sign taped to his hand. According to the Washington Post, the sign read: "Tax the one percent."

Yesterday, the Metropolitan Police Department released the young man's name. He was Leo P. Thornton of Lincolnwood, Illinois. Based on what is currently known, the young man had traveled to Washington, D.C. for the express purpose of making a political statement with his sign and then ending his young life.

The Chicago Tribune reported that "Thornton's parents filed a missing persons report on the morning of April 11 after he never came home from work on April 10, Lincolnwood Deputy Police Chief John Walsh said."

Those are the tragic facts of the incident itself. But there is a broader tragedy: the vacuous handling of this story by corporate media. The Washington Post headlined the story with this: "Rhythms of Washington Return after Illinois Man's Suicide Outside Capitol." The message he delivered to his Congress – tax the one percent – has yet to be explored by any major news outlet in America in connection with this tragedy.

Was the message of Leo P. Thornton of Lincolnwood, Illinois a critical piece of information for this Congress to hear at this moment in American history. You're damn right it was. Outside of Wall Street's wealth transfer system, provisions in the U.S. tax code are the second biggest wealth transfer system to the one percent. Together, these two systems have created the greatest income and wealth inequality since the economic collapse in the Great Depression. They threaten a repeat of the 2008 financial collapse because the majority of Americans do not have the wages or savings to support the broader economy...

Profiles In Hypocrisy, In the Garden of Beasts

08 April 2015 | Jesse's Café Américain

"The only vice that cannot be forgiven is hypocrisy. The repentance of a hypocrite is itself hypocrisy."

William Hazlitt

"The U.S. went off the gold standard in August 1971. With no benchmark, central banks could print money and debase currencies. That opened the door for huge bailouts after big banks screwed up in a big way. Taxpayers—not incompetent bankers—paid the price.

By [the late 1980's], the Federal Reserve Bank and large U.S. banks had established a pattern to control the public relations damage each time banks had a major screw-up: accountants and regulators let banks lie about the size of the problem to stall for time; the Federal Reserve blew smoke at the media; finally, the Fed would bail out the banks in a way that most taxpayers would not understand.

Banks didn't have to get smarter or more competent. The Fed trained the banks that uninformed taxpayers would eat the losses, and fake accounting would let bank officers keep their positions and their money."

Janet Tavakoli, Decisions: Life and Death on Wall Street

Gold and silver were pushed back to their assigned round numbers, with gold barely holding above 1200 and silver pushed well below the 17 handle.

Ted Butler has a rather striking piece about the rigging in the silver market which you can read here.

Speaking of silver it appears that Turkey had record imports of silver bullion in March. You can read about that here. I am not sure how significant that is. We can certainly keep an eye on it to see if this is a one time thing or a trend.

Thoughts of silver drachmas and dirhams come to mind, but it is most likely improbably premature. Still, this is a currency war and things seem to be building to a reckoning of sorts. Who can say what desperate people might do to end repression?

Nothing really happened at the Bucket Shop on the Hudson. A few contracts of silver were claimed, and inventory was shoved around the plate in the warehouses. The real action is taking place in the Mideast and Asia.

We have become a coarse and careless people, smugly confident in our 'Exceptionalism.' We are no longer shocked about lies, but instead critique the style and performance of the liars, and try to emulate them in our own professions.

How can we not cringe at some of the more shocking abuses that pass for generally acceptable behavior in public figures these days? And we encourage it, by both our silence and our acceptance.

Oh yes, we recoil in horror at any kind of sex, at the human form, with great puritanical umbrage, but stealing and cheating, and abusing the poor and the defenseless in even the most petty and vicious ways is looked upon with admiration, because we are in love with power.

Power is our new golden calf. Even some so-called 'reformers' are falling all over themselves at a chance to move near the circles of power, to have influence, to be seen as connected. All we seem to want is to get paid, to get ahead, to 'win.'


And the example of our cultural and societal icons are certainly leading to a general corrosion of all morals and civilities. And that is a shame, which eventually will have significant repercussions and consequences for us as a people and a society.

Where will we finally draw the line and come to our senses? How far are we willing to go? How many crimes and abuses, how much theft and torture are we willing to overlook? Why do we allow our society to be defined by sociopaths?

When will we finally look about, and see that we too, despite all our smug superiority, have created our own garden of beasts?

[Apr 12, 2015] Portrait Of American Oligarchy The Very Troubling Income & Wealth Trends Since 1989

Quote: "As of 2013, this group's median annual income stood at about $45,000, down 16 percent in inflation-adjusted terms from 1989, with a big part of the drop occurring since 2001. "
Apr 10, 2015 | Zero Hedge

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

Screen Shot 2015-04-10 at 10.38.46 AM

One of the primary purposes of Liberty Blitzkrieg is to dispel the myth that America is politically a democracy and economically a free market, and prove that it is in fact a centrally planned oligarchy. If the people were well aware of this and fine with it, that's one thing, but my contention is that the vast majority of the public is merely buying into the myth. This is why the population is so passive and easily controlled. They simply don't understand what is happening to them. The proverbial frog slowing boiling to death.

Whenever I note that real median incomes in America haven't increased for decades, many people have a hard time believing it. Nevertheless, as John Adams famously proclaimed: "facts are stubborn things." Indeed they are, and an article published today by Bloomberg View provides some disturbingly stubborn facts that must be admitted to and faced. We learn that:

If you worry about the declining fortunes of the U.S. middle class, take heed: It might be worse than you realized.

Tracking the middle class can be difficult, because the group is hard to define. Typically, researchers look at households with incomes or net worth in the middle of the entire population. This approach, though, might provide a falsely rosy picture.

Two economists at the Federal Reserve Bank of St. Louis — William Emmons and Bryan Noeth — sought to address this shortcoming by focusing on households' demographic characteristics, rather than income or wealth. Specifically, they looked at families whose breadwinner was at least 40 years old and had achieved a level of education that would typically allow a middle-class standard of living. Whites and Asians needed exactly a high-school diploma to qualify. For blacks and Hispanics, it took a two-year or four-year college degree — a stark recognition of persistent racial inequality.

The results are not pretty. As of 2013, this group's median annual income stood at about $45,000, down 16 percent in inflation-adjusted terms from 1989, with a big part of the drop occurring since 2001. Over the same period, a more commonly used measure of the middle class's fortunes — the median income for all families — declined just 1 percent.

Yep, since 2001. This is not a coincidence. This is when America reacted like a bunch of scared imbeciles to a terrifying terrorist attack, and squandered what was left of freedom, civil liberties and common sense (see: How I Remember September 11, 2001). But moving along…

The picture for wealth is no better. The group's median net worth (assets minus debt) was about $127,000 in 2013, down an inflation-adjusted 27 percent from 1989 and 38 percent from 2007, just before the financial crisis hit. By comparison, the median net worth for all families declined just 4 percent over the whole period (it's also lower overall because it includes younger families that haven't yet saved much).

While the numbers revealed by this alternative methodology are downright devastating, I'd note that even by the conventional measurement income and wealth are still DOWN since 1989. Don't worry though, oligarchs are more wealthy and more powerful than ever. This is no accident, it's baked into the system.

* * *

For related articles, see:

[Apr 10, 2015] The Government's Revolving-est Doors

Apr 07, 2015 | Zero Hedge

Former employees of federal agencies can often find good (and lucrative) jobs as lobbyists, capitalizing on the connections that they forged while in public service. As OpenSecrets exposes, the numbers of revolving-door-enthusiasts is reminiscent of the Ebola epidemic as this deadly-to-democracy disease spreads from department to department ripping away 'hope and change' wherever it appears. "Revolvers" include those as powerful - and well connected - as secretaries of state and as far from Washington as Peace Corps volunteers... but The Department of Commerce tops the list...

The agencies shown here have employed the greatest number of former lobbyists - or sent the greatest number of former employees to lobbying firms and interest groups.

Agency Number of revolving door people profiled
Dept of Commerce 1736
Dept of Defense 1688
Dept of State 1452
Dept of Health & Human Services 1225
White House 1216
Dept of Agriculture 1112
Dept of Army 1080
US House of Representatives 876
Dept of Justice 864
Dept of Energy 840
Dept of Transportation 750
Dept of Interior 700
Dept of Labor 555
Dept of Housing & Urban Development 530
Dept of Homeland Security 520
Dept of the Treasury 444
Dept of Navy 428
Dept of Education 412
Dept of Air Force 312
US Senate 256


[Apr 10, 2015] Rahm Emanuel and Rick Perry Hold Public in Bipartisan Contempt by Lambert Strether

April 7, 2015 |

Lambert here: This post is short and sweet. It's worth reminding ourselves that on some axes of evaluation, Republicans and Democrats are far more alike than different.

By PEU Report. Originally posted on their blog, Private Equity Report.

Holding the public in contempt is a bipartisan effort. Consider the following stories. The first involves Republican Governor Rick Perry of Texas:

Information contained in a blistering state audit shows that at least five of the recipients… which got tens of millions of dollars from the fund — never actually submitted formal applications. At issue are at least five recipients of Texas Enterprise Fund money: Vought Aircraft…

Texas Governor Rick Perry gave Vought, a Carlyle Group affiliate, $35 million for fifteen years. Ten years later it's unclear if Vought provided even one additional new job. Governor Perry's job number is fanciful and the recent audit gives no overall job number. In 2010 Carlyle sold Vought for $1.44 billion but not one penny was returned to Texas taxpayers.

Chicago's Democratic Mayor Rahm Emanuel is as free with taxpayer money for his political benefactors and purposely evasive about those relationships:

Emanuel's administration has for weeks blocked the release of correspondence between his administration and one of the Democratic mayor's top donors, Michael Sacks. The administration has also refused to release details about tens of millions of dollars in shadowy no-bid city payments to some of Emanuel's largest campaign contributors.

Rahm's top donor is a private equity underwriter (PEU):

The CEO of the Chicago private equity firm Grosvenor, Sacks has been described as Emanuel's closest ally in the private sector, and has been called Emanuel's "go-to guy" and his "top troubleshooter."

PEU sponsored politicians are above the law:

Illinois' open records law mandates that communications to and from public officials like Emanuel be made available for public inspection.

Back to how Rahm rewards his donors:

…firms that have received tens of millions of dollars' worth of shadowy "direct voucher payments" (DVPs) from the Emanuel administration have given more than $775,000 worth of campaign contributions to the mayor's political organizations.

Chicago's DVP process is permitted thanks to loopholes in Illinois' procurement law that allow municipal officials to circumvent the traditional contracting process. Unlike standard government contracts, DVP payouts do not require any type of public documentation. Emanuel appointees retain substantial discretionary authority to approve DVPs. The payments are not required to go to the lowest bidder; vendors receiving the payments do not have to list their qualifications and never need to document the services they provide to the city in return for the money. The DVPs appear to have been used for everything from phone service to interest payments to financial firms, but unlike the George W. Bush administration's no-bid contracts, DVP payments do not even require a formal contract, so it is impossible to verify what the money purchased.

No application, no contract and no accountability. It's our PEU world, where politicians Red and Blue love PEU.

[Nov 20, 2014] The NY Fed's Attempt To Explain That It Is Not A Subsidiary Of Goldman Sachs

Nov 20, 2014 |

The most shocking, if already completely buried, news of the day was that - in yet another confirmation that Goldman Sachs is in charge of the New York Fed - a NY Fed staffer was colluding and leaking confidential, material information to a 29-year-old Goldman vice president, himself a former Federal Reserve employee.

This only happened because on the day Carmen Segarra disclosed her 47 hours of "secret Goldman tapes" on This American Life, Goldman executives asked the former Fed staffer where he had gotten what appeared to be confidential information from.

To nobody's surprise the answer was: The New York Fed. So as the latter, also known as the biggest hedge fund of the western world with $2.7 trillion in AUM, is scrambling to once again prove it is shocked, shocked, that it has become merely the latest subsidiary of Goldman Sachs, Inc., it released the following statement explaining what "really" happened.

From the NY Fed:

As soon as we learned that Goldman Sachs suspected one of its employees may have inappropriately obtained confidential supervisory information, we alerted law enforcement authorities. We have been working with law enforcement authorities since then. Because any public statement about the investigation could be prejudicial to a potential future criminal case, we are unable to comment on the specific facts that are under investigation.

As a general matter, we have detailed rules and controls protecting confidential information. All employees with access to confidential supervisory information need to agree to safeguard that information appropriately, and not to disclose it without the necessary approval. Employees receive training relating to the handling and protection of confidential supervisory information and other information security matters. Employees are informed that a violation of these restrictions could lead to criminal prosecution.

Employees also receive ongoing ethics training and are required to do an annual certification that they understand and will adhere to the Bank’s Code of Conduct. In addition, we use off-boarding procedures to confirm with departing employees that no confidential information may be taken. With respect to all New York Fed staff, departing Officers may have no official contact with the Federal Reserve System for a period of one year. In addition, all departing New York Fed employees may not have substantive business contacts with the New York Fed relating to any particular matter that he or she had worked on when employed by the New York Fed. Further, with respect to employees departing from the financial institution supervision group, if the departing employee had served as a senior supervisory officer or central point of contact at a large and complex banking organization, that employee may not receive compensation from the supervised organization as an employee, officer, director or consultant for a period of one year. Finally, the New York Fed has in place technology to help identify and prevent the forwarding of confidential information in violation of our rules.

So did this technology fail? Or is Goldman simply one of the exempted parties?

Selected Skeptical Comments


Is the NY FED trying to say that Goldman Sachs does not own shares in the New York Federal Reserve Bank?

The 12 regional Federal Reserve Banks, which were established by the
Congress as the operating arms of the nation's central banking system,
are organized similarly to private corporations--possibly leading to
some confusion about "ownership." For example, the Reserve Banks issue
shares of stock to member banks. However, owning Reserve Bank stock is
quite different from owning stock in a private company. The Reserve
Banks are not operated for profit, and ownership of a certain amount of
stock is, by law, a condition of membership in the System
. The stock may
not be sold, traded, or pledged as security for a loan; dividends are,
by law, 6 percent per year.


Goldman Sachs Bank USA (“GS Bank”) is a New York State-chartered bank and a member of the Federal Reserve System.

Which is why it is a complete farce and racket to have The NY Federal Reserve Bank be responsible for regulating the member banks that own it.

The Board of Governors of the Federal Reserve System has supervisory and regulatory authority over a wide range of financial institutions, including state-chartered banks that are members of the Federal Reserve System (state member banks), bank holding companies, thrift holding companies and foreign banking organizations that have a branch, agency, a commercial lending company subsidiary or a bank subsidiary in the United States...

Nice HH.

" Finally, the New York Fed has in place technology to help identify and prevent the forwarding of confidential information in violation of our rules. "

Fancy way of saying the NSA, eh?


insanelysane's picture

It takes two to tango. Goldman wacked a couple of employees but the FED has kept all of theirs. Apparently law enforcement led by Mr. Holder are undertaking another extensive "investigation."

Either that or they are waiting for a memo from Goldman detailing what their "investigation" found.

Bay of Pigs

They don't need to explain anything. The William Dudley's bio....

"Prior to joining the Bank in 2007, Mr. Dudley was a partner and managing director at Goldman, Sachs & Company and was the firm's chief U.S. economist for a decade."


If this was a just country, by now the FBI would have an undercover operation, bug Dudley and KHenry and obtain irrefutable evidence that would be enough to end the NY FED and put them behind bars.

As we don't, and Goldman owns the FBI, we watch and cringe at these masters of arrogance and corruption.


To understand Goldman’s ticket to monopoly, the key is the Fed’s chain of command.

Since the days of Alexander Hamilton the investment banks have made their home and impact in the Empire State. There, the concentration of big banks has made the NY Federal Reserve Bank powerful enough to outmaneuver, outvote and override all other regional interests. Its Fed ownership position, extensive size, holdings, insiders operating in the Fed and its New York contacts guarantees Goldman Sachs the leverage when needed to direct the Federal Reserve System.

It boils down to this: when you have the kind of leverage Goldman and the TBTFs have, this Wall Street money trust can make the critical decisions. One consortium, Goldman Sachs, tells the NY Fed what to do; it tells the FOMC and it relays its decision to Janet Yellen, representing 90 percent of the banking power. It means the government of the United States is under the direction of the Wall Street money trust.

The Federal Reserve Bank of New York is the feature of how centralized, incestuous and tyrannical America’s financial system has become. It is the New York Fed that literally gives the first and last word on who gets what and when in financial America. In other words, when the money trust picks its winners and losers, it’s here’s where the decisions are made....

Because of the extensive holdings and connections of New York based investment banks, what influence could a St. Louis or Dallas banker possible make on Fed policy? And since the domination of the Fed by Ben Strong of J.P. Morgan Trust and Governor of the New York Fed from 1914 until his death in 1928, no Fed decision is made without the New York stamp.

The president of the New York Fed is a permanent voting member of the FOMC and traditionally is selected as its vice chairman. The other presidents serve one-year terms on a rotating basis. All of the presidents participate in FOMC discussions, but only the five who are members of the Committee vote on policy decisions.

The Federal Reserve Bank of New York has several unique responsibilities associated with its presence in the financial capital of the United States.

At the direction of the Federal Open Market Committee (FOMC), the Federal Reserve's top monetary policy-making group, the New York Fed executes domestic open market operations on behalf of the System.

Open market operations—the buying and selling of U.S. government securities in the secondary market—are the principal means through which the System implements monetary policy. Although the FOMC decides what policy to follow, the System's portfolio is directed, on a daily basis, by the Manager of the System Open Market Account at the New York Fed. The Manager, along with the rest of the Open Market Department, constantly monitors bank reserves and acts to ensure that the FOMC's directive is being fulfilled.

In addition to its domestic trading desk responsibilities, the New York Fed, at the direction of the FOMC and U.S. Treasury, conducts all foreign exchange trading for the Treasury and the Federal Reserve System. In this role, the New York Fed intervenes in foreign exchange markets to achieve dollar exchange rate policy objectives and to counter disorderly conditions in foreign exchange markets.

The New York Fed also is responsible for maintaining relations with, and providing financial services for, foreign central banks and international organizations. One of these services is the New York Reserve Bank's unique custodial responsibility for the gold reserves of about five dozens countries, central banks, and international organizations. The New York Fed's gold vault stores approximately one-quarter of the world's official gold supply—the largest concentration of monetary gold in the world.

Foreign official gold reserves have been held at the New York Fed since 1924 for numerous reasons, including the stability of the U.S. political system, the concentration of international trade and finance in New York City, and the convenience of centralizing gold holdings in a place where international payments can be made quickly.

The truth is, Goldman Sachs is one of the Fed owners, but it is so big, it is pushing everybody else around, at the moment.

The most recent information from observers says that just eight families, four of which reside in the US, own 80 percent of the NY Federal Reserve Bank. They are, according Dean Henderson of Global Research in 2011, Goldman Sachs, Rockefellers, Lehmans and Kuhn Loebs of New York; the Rothschilds of Paris and London; the Warburgs of Hamburg; the Lazards of Paris; and the Israel Moses Seifs of Rome.This ownership information was provided by J.W. McCallister, an oil industry insider with House of Saud connections, writing in "The Grime Reaper," information he acquired from Saudi bankers.

[Nov 19, 2014] Matt Stoller: Lobbying Used to Be a Crime: A Review of Zephyr Teachout’s New Book on the Secret History of Corruption in America by Yves Smith

November 18, 2014

Yves here. You can also read Zephyr Teachout answering questions about her book at last weekend’s Book Salon at Firedoglake.

By Matt Stoller, who writes for Salon and has contributed to Politico, Alternet, The Nation and Reuters. You can reach him at stoller (at) or follow him on Twitter at @matthewstoller. Originally published at Medium and Firedoglake

If there’s one way to summarize Zephyr Teachout’s extraordinary book Corruption in America: From Benjamin Franklin’s Snuff Box to Citizens United, it is that today we are living in Benjamin Franklin’s dystopia. Her basic contention, which is not unfamiliar to most of us in sentiment if not in detail, is that the modern Supreme Court has engaged in a revolutionary reinterpretation of corruption and therefore in American political life. This outlook, written by Supreme Court Justice Anthony Kennedy in the famous Citizens United case, understands and celebrates America as a brutal and Hobbesian competitive struggle among self-interested actors attempting to use money to gain personal benefits in the public sphere.

What makes the book so remarkable is its scope and ability to link current debates to our rich and forgotten history. Perhaps this has been done before, but if it has, I have never seen it. Liberals tend to think that questions about electoral and political corruption started in the 1970s, in the Watergate era. What Teachout shows is that these questions were foundational in the American Revolution itself, and every epoch since. They are in fact questions fundamental to the design of democracy.

Teachout starts her book by telling the story of a set of debates that took place even before the Constitution was ratified — whether American officials could take gifts from foreign kings. The French King, as a matter of diplomatic process, routinely gave diamond-encrusted snuff boxes to foreign ambassadors. Americans, adopting a radical Dutch provision banning such gifts, wrestled with the question of temptation to individual public servants versus international diplomatic norms. The gifts ban, she argues, was evidence of a particular demanding notion of corruption at the heart of American legal history. These rules, ‘bright-line’ rules versus ‘corrupt-intent’ rules, govern temptation and structure. They cover innocent and illicit activity, as opposed to bribery rules which are organized solely around quid pro quo corruption.

The Constitution is full of such bright-line rules. For instance, the residency requirement was intended to protect against ‘adventurers’ and the takings clause protects private property and has an anti-monopoly interpretive framework. The census, rules on representation of House members, the regular electoral cycle of two year terms, age requirements (to prevent dynasties), requirements for legislative journals, salary payments for legislators, and prohibitions on holding legislative and other offices are all anti-corruption provisions. The founders, Teachout argues, were obsessed with corruption. They had seen their beloved British system fall into the trap of corruption, with ‘place men’ (members of parliament dependent on the king) and rotten boroughs, and sought to prevent a recurrence in America.

Teachout points out something fairly obvious, but not recognized today — the theoretical underpinning of the American revolution was that a corrupt government had no legitimacy to govern. This is something the founders well recognized. The debates they had — Madison, Jefferson, Adams, Franklin, Washington, Hamilton, and people in the culture at large — reflected a divide between political philosophers Thomas Hobbes versus Baron de Montesquieu. Hobbes’s vision, echoed today among the Chicago school’s law and economics scholars, was that corruption as a concept made no sense. Life was a brutal competition among selfish actors. In such a paradigm, a revolution would simply be a question of raw power, rather than any set of principles.

The founders roundly repudiated this view, adopting Montesquieu’s arguments that there is such a thing as a public interest and that people could orient themselves around it given sufficient personal virtue and adequate structural incentives to do so. Montesquieu is best-known for his promotion of the concept of different branches of government, but that concept came from his moral view of human nature. Teachout shows that questions of bribery were fairly insignificant in the dialogue over the structure of the new republic, whereas anti-corruption as a Montesquieu-influenced deliberative design principle was the key animator of the shaping of the country.

This debate continued, in some sense, throughout the two hundred plus years of American legal and cultural history. The first significant test of the revolutionary anti-corruption doctrine was the 1795 ‘Yazoo’ controversy, when a Georgia legislature sold a massive d process never went away.

In her discussion of the 19th century robber baron era, she includes the critical yet forgotten law of 19th century lobbying. Lobbying today is considered a Constitutionally protected free speech activity, an unfortunate but necessarily tolerated side effect of the First Amendment. That, however, is a relatively recent legal status.

In the 19th century, lobbying was perceived as an illegitimate and inherently corrupt activity, a betrayal of one’s own citizenship. The Georgia draft Constitution in 1877 made lobbying a crime. ”Throughout the country, from the early 1830s through the early 1930s, the sale of personal influence was treated as a civic wrong in the eyes of the law,” she writes. “A citizen did not have a personal right to pay someone else to press his or her legislative agenda.” This anti lobbying sentiment was not enforced through criminal law, but through civil law. Contracts for lobbying were unenforceable by courts, as the case Trist vs Child showed.

In 1890, the first law requiring lobbyists to register was passed in Massachusetts. This began the legitimization of lobbying as a profession. In 1927, the Supreme Court began chipping away at the de fact prohibition on lobbying via contract law, but as late as 1941 it still upheld Trist vs. Child.

Corruption in this era was widespread, as was the reaction against it. The Pendleton Act, which created the civil service, and the secret ballot, were both bright-line rule innovations to reduce the temptation of corruption. The country also began wrestling with the increasingly high cost of campaigns, which was a pivotal factor in the election of 1896 contest between populist Democrat William Jennings Bryan and Republican William McKinley. Banks were assessed a .25% charge on capital to finance McKinley’s run, which amounted to roughly $5 billion in today’s money. This led to, among other things, Teddy Roosevelt’s anti-monopoly crusades and his work to ban corporate contributions in the early 20th century.

Corruption was more than just bribery, it was a threat to self-government and individual citizenship. It was a moral problem. Mark Twain’s novel The Gilded Age, from which the era took its namesake, was a story of an innocent woman turned sophisticated amoral lobbyist. Corruption as a problem had religious overtones.

Gradually, this ardor has cooled. It was only in the post-World War II era that courts began carving out a First Amendment right on lobbying. Lobbying in the post-war administrative state was a necessity, and the increasing expense of public campaigns suggested that restrictions were necessary. But in 1976, the Supreme Court ushered in the modern Hobbesian view of political economy with its ruling in Buckley vs. Valeo. This case invalidated restrictions on campaign spending, and began the reinterpretation of corruption to simply mean quid pro quo bribery. The court argued that spending on elections in a First Amendment right, though the government had a valid anti-corruption interest in limiting speech. Contribution limits were valid, but spending limits were not. Post Buckley, the only limits on campaign spending became corruption-based, so scholars and lawyers began defining their policy preferences in terms of corruption, twisting and warping the term.

The book’s final chapters are a discussion of Citizens United, the Supreme Court’s makeup, and a legal proscription of how to restore the more appropriate conception of corruption in our national life.

According to Teachout, Citizens United was a decision in which the Supreme Court ignored the historic record to narrow the definition of corruption to mean a simple quid pro quo transaction. It found that the First Amendment protects “political speech regardless of the identity of the speaker,” and that the Court found no sufficient “government interest in limiting corporate political advertising.” It equated favoratism and influence with ‘democratic responsiveness’. This was, as Teachout shows earlier, what Benjamin Franklin saw to be a dystopian view of how the American republic would be organized.

... ... ...

Minor Heretic, November 17, 2014 at 11:04 pm

A fallacy at the root of the modern 1st Amendment interpretation of campaign finance is just that: money as speech. Consider that high spending candidates win congressional primaries 98% of the time. That 98% is literal – see USPIRG’s work on this. That makes donating money analogous to voting, not speaking. Last I checked, we were each supposed to have an equal number of votes, namely one.

Just throwing this out: Limit political donations (to candidates, parties, PACs, ballot initiative movements, lobbying organizations, 501(c)4…) to a day’s wages at the federal minimum wage. It would also be the annual maximum. That’s $58 at the present level. David Koch and the guy who mows David Koch’s lawn would have equal clout.

Going further with the idea of money-as-vote, there should be a constituency restriction. Why should a resident of Ohio be able to influence the outcome of an election or ballot initiative in California? For that matter, why should a resident of Ohio congressional District 1 influence the elections of a representative for Ohio District 2? In neither case would the donor have legal party status.

I’m going to read Teachout’s book. I should note that her sister Woden co-wrote an excellent book called “Slow Democracy,” about the practice of direct deliberative democracy, including (but not limited to) town meetings.

Sam Kanu, November 18, 2014 at 8:54 am

“Money = free speech” is the ultimate fallacy. If money is equal to speech, then per definition, speech cannot be free or equal, as we have huge disparities in wealth. And in turn that means we dont have a democracy.

So basically the courts have dictated that democracy is dead. But that is not news on these pages, where it has long been obvious that we live in an oligarchy….

Paul Tioxon, November 18, 2014 at 5:53 am

The corruption of the Gilded Age included the buying of US Senate offices. Mark Twain in particular wrote against the practice whereby state legislatures picked the US Senators for a state, without any direct election by the citizenry. One of the richest men in world, William A. Clark, The Copper King of Montana, paid off the entire legislature of that state to become its appointed Senator. Finally, the the 17th Amendment to the US Constitution provided for the direct election of US Senators. Today, another institutional barrier to democratic elective office is the Congressional District. When I vote for a Senator, we have state wide elections, not 1 of 2 Senatorial Districts. When I vote in PA for my Congressional representation, I am only voting for a tiny fraction of my full representation, due to my being forced to vote for only one candidate in my congressional district. PA has 18 districts because it has to follow the law that provides for this organization. I should get to vote for all 18 of the federal representatives, because I am a citizen of Pennsylvania, which enter the Union of the USofA.

The districts are not hallowed institutions, because they keep changing with the growth in population of the nation. And I, get to vote for some frequently redrawn district that keep the amount of Republicans going to Washington DC in numbers greater than the total vote count for their party for each of their district races. I want a vote fore each representative, no matter how many there are for my state. Some small states with only 1 representative have a statewide election. That is what I want for all of the citizens with more than 1 representative. If I had 18 votes, I could vote 18 times for a Democratic slate of reps or maybe 12 Dems and 6 Green Party reps. As it stands now, 17 or the 18 people who represent my state get to go to DC without my consent. I am not 1/18th Pennsylvanian and I don’t want 1/18th of a voice in Congress. One person, One vote, for One Candidate. How come I can’t vote for the rest of my state’s delegation to Congress. Oh yeah, we might take over the government mechanism of decision making.

beene, November 18, 2014 at 7:54 am

To me this is the most outrageous settle law that we have failed to address in over two hundred years (to the Supreme Court, where in 1810, in Fletcher v Peck, the court said that the sanctity of the contract must be upheld even in the face of corruption. In a nod to today’s logic of brutal tolerance of corruption, the court argued that corruption may be problematic, but there was nothing the state could do about it. This was a highly consequential decision, and prioritized contract rights over anti-corruption.).

cabjoe mentioned voters being able to vote on approval of any new law passed by our representatives seems like an excellent correction to a lot of corruption by law makers.

Linda Amick, November 18, 2014 at 8:30 am

As a post grad student of Historical Philosophy, I find it absolutely shocking that our societal first principles are Hobbesian. His view of human dynamics and behaviors is MIGHT MAKES RIGHT. Human beings are nothing more than brutes.

If our societal viewpoint was Aristotelian with man being a rational animal and part of the living organism of the earth and solar system with a responsibility to respect all parts, maybe our society would find its basis in something more akin to the Golden Rule.

Jim, November 18, 2014 at 5:25 pm

Mr. Hobbes, I believe, has inappropriately been maligned by many of the posts on this particular thread when making allusions to his moral psychology.

If you take a more careful look at his writings you might notice that Hobbes is concerned with cultivating a personality type concerned with honor. Hobbes says

“That which gives to human actions the relish of justice is a certain nobleness or gallantness of courage, rarely found, by which a man scorns to be beholden for the contentment of his life to fraud, or breach of promise. The justice of the manners is that which is meant, where justice is called a virtue, and injustice a vice.” (Leviathan, Chapter 14).

When talking about the first steps in the transition from the state of nature to a social contract Hobbes seems to believe that at least some members of the original society have to be of a sufficiently magnanimous temperament that they are willing to take unprecedented risks for the benefit of all.

Hobbes identifies magnanimity with the just conduct that springs from a “contempt” of injustice, and he seems to recognize that men are often prepared to risk their lives rather than suffer some sorts of shame. He also says that “magnanimity is a sign of power.”(Leviathan, Chapter 10)

JTMcPhee , November 18, 2014 at 8:31 am

Speaking of corruption, moral hazard and all that related badness, years ago I was in the man cave of a person busy in the open-outcry activity at the CME. Up on his wall in a florid frame was the front page from a Chicago Tribune dated as I recall in august 1852. The headline story reported he criminal conviction of two fellas for engaging in “speculation” on the future price of corn, or maybe pork — back then, the stock in trade of the CBOT/CME today was totally illegal, even barred by the Illinois constitution, for a lot of reasons that reflect the pain that smartass “speculation” and derivatization have and continue to cause:

The Struggle for Legitimacy

Nineteenth century America was both fascinated and appalled by futures trading. This is apparent from the litigation and many public debates surrounding its legitimacy (Baer and Saxon 1949, 55; Buck 1913, 131, 271; Hoffman 1932, 29, 351; Irwin 1954, 80; Lurie 1979, 53, 106). Many agricultural producers, the lay community and, at times, legislatures and the courts, believed trading in futures was tantamount to gambling. The difference between the latter and speculating, which required the purchase or sale of a futures contract but not the shipment or delivery of the commodity, was ostensibly lost on most Americans (Baer and Saxon 1949, 56; Ferris 1988, 88; Hoffman 1932, 5; Lurie 1979, 53, 115).

Many Americans believed that futures traders frequently manipulated prices. From the end of the Civil War until 1879 alone, corners – control of enough of the available supply of a commodity to manipulate its price – allegedly occurred with varying degrees of success in wheat (1868, 1871, 1878/9), corn (1868), oats (1868, 1871, 1874), rye (1868) and pork (1868) (Boyle 1920, 64-65). This manipulation continued throughout the century and culminated in the Three Big Corners – the Hutchinson (1888), the Leiter (1898), and the Patten (1909). The Patten corner was later debunked (Boyle 1920, 67-74), while the Leiter corner was the inspiration for Frank Norris’s classic The Pit: A Story of Chicago (Norris 1903; Rothstein 1982, 60).14 In any case, reports of market corners on America’s early futures exchanges were likely exaggerated (Boyle 1920, 62-74; Hieronymus 1977, 84), as were their long term effects on prices and hence consumer welfare (Rothstein 1982, 60).

By 1892 thousands of petitions to Congress called for the prohibition of “speculative gambling in grain” (Lurie, 1979, 109). And, attacks from state legislatures were seemingly unrelenting: in 1812 a New York act made short sales illegal (the act was repealed in 1858); in 1841 a Pennsylvania law made short sales, where the position was not covered in five days, a misdemeanor (the law was repealed in 1862); in 1882 an Ohio law and a similar one in Illinois tried unsuccessfully to restrict cash settlement of futures contracts; in 1867 the Illinois constitution forbade dealing in futures contracts (this was repealed by 1869); in 1879 California’s constitution invalidated futures contracts (this was effectively repealed in 1908); and, in 1882, 1883 and 1885, Mississippi, Arkansas, and Texas, respectively, passed laws that equated futures trading with gambling, thus making the former a misdemeanor (Peterson 1933, 68-69).

Two nineteenth century challenges to futures trading are particularly noteworthy. The first was the so-called Anti-Option movement. According to Lurie (1979), the movement was fueled by agrarians and their sympathizers in Congress who wanted to end what they perceived as wanton speculative abuses in futures trading (109). Although options were (are) not futures contracts, and were nonetheless already outlawed on most exchanges by the 1890s, the legislation did not distinguish between the two instruments and effectively sought to outlaw both (Lurie 1979, 109).

In 1890 the Butterworth Anti-Option Bill was introduced in Congress but never came to a vote. However, in 1892 the Hatch (and Washburn) Anti-Option bills passed both houses of Congress, and failed only on technicalities during reconciliation between the two houses. Had either bill become law, it would have effectively ended options and futures trading in the United States (Lurie 1979, 110).

A second notable challenge was the bucket shop controversy, which challenged the legitimacy of the CBT in particular. A bucket shop was essentially an association of gamblers who met outside the CBT and wagered on the direction of futures prices. These associations had legitimate-sounding names such as the Christie Grain and Stock Company and the Public Grain Exchange. To most Americans, these “exchanges” were no less legitimate than the CBT. That some CBT members were guilty of “bucket shopping” only made matters worse!

The Players reported on in that Tribune article, as I recall, were convicted of multiple felonies, and sentenced to something like 15 years each in pre-privatization Illinois prison.

And another example of the fun and games, and how libertarianism actually operates if allowed: Remember the Onion Corner scam, again centered in Chicago?

I’m old enough and cynical enough to know that there’s an irreducible amount of corruption, some cheerful but most perverse, in any social organization. The constant problem is managing what I’d call “slack,” the apparently necessary “play” in the system, that like mechanical tolerances in timepieces and transmissions, keeps friction and heat from locking up the mechanisms. I doubt we humans will ever be very successful at keeping the “sharpest” among us from fattening themselves via fraud, abuse, theft, combination and all that — there are no incorruptible mechanisms that can keep the “slack” to a level that like, our gut bacteria population does not proliferate and degenerate into a disease state that threatens to kill us, the organism of ordinary people that keep all this going with our work and our little bits of wealth…

blucollarAl November 18, 2014 at 9:15 am

The entire philosophical and ideological foundation of modern capitalism, the almost always unquestioned because unrecognized and assumed anthropological and moral premises of the system of organizing economic and social life, is Hobbesian in its roots and accepts a Hobbesian picture of the universe. What passes today for the “American Conservative Movement”, that collection of foreign policy neo-cons and economic/social neo-liberals that deceptively calls itself “conservative”, suggesting a respect for if not a reverence for the traditional and older ways, represents in fact a radical, anti-American tradition of Hobbesian political philosophy as Treachout seems to recognize in her book (I have not yet read it).

Still the best treatment of the Hobbes and modern capitalism are Hannah Arendt, “The Origins of Totalitarianism”, Chapter 5, “The Political Emancipation of the Bourgeoise”, and C.B. McPherson, “The Political Philosophy of Hobbes”. Read them and weep.

So we have a radical, anti-American, anti-human philosophy based on a picture of human nature as pure passion, aggression, power-hungry greed, appealing to ordinary Americans under the guise of “conservative” respect for their cherished (what’s left) customs, traditions, and respect for decency. It is as if we have all fallen into a deep trance with no one, certainly not today’s Democrat Party, there to wake us up.

JTMcPhee November 18, 2014 at 4:26 pm

Even The Capitalist Tool, and the Economist (sic), and the OECD (and of course the keepers of order, the military and state security types) know the pot is already simmering, the flame is turned up and all that:

Even that apologia for More Of The Same, The Economist: “For richer, for poorer: Growing inequality is one of the biggest social, economic and political challenges of our time. But it is not inevitable, says Zanny Minton Beddoes,” (Neither are heart disease and cancer, sort of…)

On the Big War side of things, ” Pentagon preparing for mass civil breakdown: Social science is being militarised to develop ‘operational tools’ to target peaceful activists and protest movements,”, and unless one really enjoys depression and self-flagellation, it does not pay to research the crowd control technologies our young innovators are handing to the rich shits and their “people.”

The “elite,” having lucked into the knack of creating a Black Hole to suck in all the resources and wealth of everyone else, of course need “Security” to not only hang tight to what they have grabbed, but to keep anyone else from picking off a few crumbs. More from Forbes:

Security Concerns Of The Super-Rich

Worried about someone hacking into your offshore bank account? Kidnapping you and holding you for ransom because of your high net worth? Breaking into your Caribbean villa while you’re working from lower Manhattan?

Those aren’t concerns for most of us, but for the extremely wealthy they could be. Trite as it may seem, the rich really are different from you and me. Especially when it comes to security….”

And all those ex-imperial military types, loaded for bear and needing a paycheck… “retainers”, isn’t that the old term?

Katie, bar the door!

ex-PFC Chuck November 18, 2014 at 11:43 am

Judging from this review, Teachout’s book covers much of the same ground that Larry Lessig did three years ago in Republic, Lost. In that book, Lessig drew considerably on Teachout’s earlier work in this area. He used the terms “dependence corruption” and “systematic corruption,” to describe features and practices that undermine the peoples’ influence on government but are not illegal, and differentiates them from quid pro quo corruptions such as bribery. He describes at length how dependence corruption was a major concern of the founders. Here are some links for people interested in doing something useful in this area: >

juliania November 18, 2014 at 12:42 pm

Many thanks for this review, Yves!

“…Teachout shows, through painstaking historical research, that this popular conception of corruption is actually far more consistent with the intent of the Constitutional framers than the odd and anomalous John Roberts-led Hobbesian majority…”

In my small liberal arts college back in the early ’60′s we were reading the papers of the framers of the Constitution, after having read works by the English philosophers, and what I remember of Hobbes boils down to his description of the lives of human beings as being ‘nasty, brutish, and short.’ (Consequently when I think of Hobbes in my mind he takes on that persona – nasty, brutish, and short.) Teachout’s analysis of Citizens United is extremely interesting; I always thought the Constitution was crafted with Hobbesian realities in mind; that was what ‘checks and balances’ were all about. It was never ‘just a piece of paper’ but you had to toe the line it brightly (love that appellation) laid out.

Always until now the better angels of our nature were not just folderol propaganda, given occasional lip service and nothing further, but also verities enshrined in our founding documents, to be treasured and protected – how far we have come away from that glorious heritage!

Maybe we are approaching the turning point.

Sluggeaux, November 18, 2014 at 4:18 pm

“I believe that the common character of the universe is not harmony, but hostility, chaos, and murder.” — Werner Herzog, Grizzly Man

As one of the few people in this country who seems to have actually read the opinions which make up the Citizens United decision, I believe that our Constitution represents an effort to overcome a Hobbesian world by those who well understood the brutish instincts of their fellow human beings.

Kennedy actually relies on dissents penned by William O. Douglas and Earl Warren to decisions affirming the muzzling of collective political action by organized labor under the Taft-Hartley Act passed in the wake of the Second World War at the beginning of the McCarthyite Red Scare.

Eight of the nine Justices agreed with Kennedy that collectively spending money on political communication is protected by the First Amendment, but that the Congress may constitutionally require that the speaker(s) be transparently identified (only Thomas dissented from this view).

It is the Congress which has corruptly failed to act on the Supreme Court’s invitation to ban “Dark Money” and force political speakers to identify themselves and their agendas. Such sunshine would make their corruption far more difficult.

Jim, November 18, 2014 at 5:55 pm

I think you should try to keep in mind that Hobbes was also a theoretician of skepticism, something which seems in extremly short supply in 2014.

Hobbes’s has said “For the thoughts are to the desires, as scouts, and spies, to range abroad, and find the way to the things desired (Leviathan, Chapter 8).

As with Hume, Mr Hobbes argues for a certain type of circularity in our arguments where the reasons generated by reason are largely concerned with clarifying the ends to which are passions are driving us and in figuring out the most expeditious means for getting there.

In other words, in contrast to, say, the political theorists of MMT (at least in their earlier versions) there is a powerful argument in both Hobbes and later Hume for the primacy of the prescriptive over the descriptive -– if we are honest with ourselves.

Jim, November 18, 2014 at 3:44 pm

“The founders…adopting Montesquieu’s arguments that there is such a thing as a public interest and that people could orient themselves around it given sufficient personal virtue and the adequate structural incentives to do so.”

But if the general public tends to lack virtue and “double government” becomes institutionalized then what are we to do?

The recent article/book by Michael J Glennon “National Security and the Double Government” deals directly with the profound issues of personal virtue and structural checks and balances.

Glennon argues that we have created, especially in the area of national security, a type of double government–one part public (Congress, the President, and the courts) and the other more concealed were several hundred executive officers in the military, intelligence and law enforcement agencies are basically responsible for protecting the nation’s security and have acquired unchecked power–which accounts for the same imperial foreign policy no matter who is Preseident as well as our incrementally collective moves towards totalitarianism,.

The result of such an situation, according to Glennon, is a negative feedback loop were resuscitating the more Madisonian institutions (Congress, Presidency, Courts) requires an informed, engaged electorate (civic virtue) which is simultaneously faced with a political structure that has locked them out–thus voters have little incentive to become informed or engaged and in fact often appear to be moving toward greater unengagement

Glennon finishes his analysis with a quote from John Adams: “The nation which will not adopt an equilibrium of power must adopt a despotism. There is no other alternative.”

Walter Antoniotti, November 18, 2014 at 8:04 pm

What bothers me is how few educated people don’t know this. John Hamilton, a bootlegger, paid for the Minutemen so he would not have to pay taxes for British protection. People should read Lies My Teacher Told Me and Don’t Know Much about history.

People like David Brooks really thinks now is a really bad time. Compared to 1962-1982 things are great. Lets compare US citizens killed in wars, assassinations, the misery index, the social net, income of old people, corrupt politics, riots in cities, students killed on college campuses…

[Nov 17, 2014] Bill Black and Marshall Auerback Discuss Why Economists and Regulators Don’t Use “Fraud”

Quote: "I believe that the fraudulent nature of the GWOT (Global War on Terror) should be a key ingredient of any analysis of our political situation and it should be looked at as a part of the massive financial fraud of that period–the two are not separate. "
November 15, 2014 |

Yves here. Bill Black discusses his favorite topic, fraud, with Marshall Auerback of the Institute of New Economic Thinking. Some of this talk is familiar terrain for those who know Black’s work, such as Black’s well-argued criticism of the failure of financial regulators to make criminal referrals for misconduct in the runup to the financial crisis.

Even so, many readers are likely to find new information here, such as the number of FBI agents assigned to handle white collar fraud, and how some regulators during the savings & loan crisis defied Congressional pressure to go easy on failing and defrauded banks, and the career costs they paid.

Watt4Bob, November 15, 2014 at 9:15 am

In retrospect it seems likely that taking the FBI off the financial crimes beat and putting them on terrorism beat was a strategic move on the part of DOJ, at the behest of Wall$t interests.

After all, they passed the bankruptcy reform act well ahead of time because they foresaw the need to prevent our escape from the coming crisis, evidence they have some overall understanding of the likely results of their behavior.

Why then would we doubt they plan ahead to forestall prosecution for their crimes by systematic gelding of regulators and Justice to create a backstop?

(Not mention the missing $ trillions Rumsfeld admitted to congress on 9/10/01, and the subsequent attack on the Pentagon that managed to destroy only the offices of the guys auditing the MIC books?)

Banger, November 15, 2014 at 10:02 am

The way officials dealt with the massive financial fraud during the aughts, particularly the Obama Administration, was the final nail on the coffin of the U.S. government. There is no way to argue that we have a legitimate government in Washington. First 9/11 and the Global War on Terror a totally bogus and Orwellian enterprise that took FBI agents out of their jobs chasing wild geese or focusing on dissidents like Occupy protesters. I believe that the fraudulent nature of the GWOT should be a key ingredient of any analysis of our political situation and it should be looked at as a part of the massive financial fraud of that period–the two are not separate.

The rest of the federal government will collapse into the most sordid kind of political corruption eventually though this will take some time since most bureaucrats, dispirited as many of them are, are not constitutionally corrupt or corruptable – but eventually the Washington maxim of “no good deed goes unpunished” will win out. When I say corrupt, btw, I mean structural corruption not a few people selling their services to the people they regulate – I mean the corruption we have today is sytemic and incurable. Reform cannot happen at this time–there are no political forces that have a) articulated how bad the situation actually is (if criminals suffer no consequences then criminals will flourish); and b) know how to do anything to remedy the situations. The mainstream media and even the financial press is an integral part of the system that is focused on disinformation and misdirection with, at least, the occasional article that shows a little glimpse of the ankle of this situation.

Anyone familiar with the work of Black and many others that does not grasp that a system that rewards its worse criminals is, essentially, a criminal system. It is as if organized crime has taken over the U.S. and we haven’t even noticed! Where is Batman?

fresno dan, November 15, 2014 at 12:09 pm

The one good line Kinsley has, “the outrage is not what’s illegal, its what’s legal”.

The 0.1% have 24/7 access, and no one else does. These government people cannot even fathom what is wrong, because they are never actually exposed to another viewpoint…

susan the other, November 15, 2014 at 2:59 pm

That Holder said it might be “fraud” but he wasn’t touchin’ it with a 10-ft pole, is a quote to die for. I must ask then, isn’t the US financial system a classic SOE? Indeed it is.

China eat your heart out. So it follows that MMT doesn’t necessarily apply in this case because our system divvies up the money unequally by design and not equally (also by design) – ergo corporatist design. Nevermind that 90% (?) of our corporations are terminal.

Giving the banksters (partners in crime) a lavish allotment mostly to allow them to then support the MIC and etc. God praise private banking, er, agency banking. So what’s not to love about Bill Black’s wonderfully graphic description about the authorities denying “fraud” as “suddenly realizing you are in an elevator with a crazy person.”

And it then almost makes me think, in my entrenched paranoia, that the S&L crisis might have merely been a dry run.

EconCCX, November 15, 2014 at 8:39 pm

I do not know “SOE”. What does it refer to?

State-owned enterprise, probs. “China eat your heart out.”

barbara gibbs, November 15, 2014 at 4:10 pm

When you have CEO’s like Jamie Diamon who goes before Congress wearing White House cufflinks, he pretty much gave the finger to Congress. and Obama saying they did nothing wrong, is why I lost my support for President Obama.

Obama why did you have to suck Diamon’s dick?

TedWa, November 15, 2014 at 5:22 pm

Even the Financial Crisis Inquiry Commission (FCIC) was told they could never use the word “Fraud” in their investigations. Sick, isn’t it – and sickening.

I can’t wait to hear how Holder is going to answer the questions about Alayne Fleischmann, the former JPMorgan Chase securities lawyer who tried to blow the whistle on “massive criminal securities fraud” by the bank and Jamie Dimon, only to have the government try to silence her with a $9 billion settlement.

Like we’ve been trying to say for years, you can prosecute the TBTF’s.

Cultural Capture and the Financial Crisis By James Kwak

October 9, 2014 | The Baseline Scenario | 41 comments
A few years ago, while still in law school, I was invited to write a chapter for a Tobin Project book on regulatory capture. It was a bit intimidating, being part of a project that included luminaries like David Moss, Dan Carpenter, Luigi Zingales, Richard Posner, Tino Cuellar, and the deans of two of the best law schools in the country. I was asked to write something about an idea that I had slipped into 13 Bankers, almost in passing, about the cultural prestige of the financial industry and the political and regulatory benefits the industry derived from that prestige. My chapter turned into a discussion of the various mechanisms by which status and social networks can influence regulators, creating the equivalent of regulatory capture even without traditional materialist incentives (cash under the table, promises of future jobs, etc.).

Two weeks ago, an investigation by ProPublica and This American Life illustrated the culture of deference, risk aversion, and general sucking-upitude among New York Fed bank examiners that effectively resulted in the capture of regulators by the banks they were supposed to be regulating. As David Beim wrote in a confidential report about the New York Fed, the core problem was “what the culture expected of people and what the culture induced people to do.”

I wrote about the story for the Atlantic and referred to my book chapter, but at the time the chapter was not available for free on the Internet (at least not legally). The good people at the Tobin Project have since put it up on the book’s website, from which you can download it (legally!). Note that they are only allowed to put up one chapter at a time and they rotate them, so this is a limited-time offer.

Anonymous | October 9, 2014 at 10:20 am

Regulatory Capture is a very serious issue. When groups or individuals have a high-stakes interest in the outcome of policy or regulatory they often focus their resources and energies in attempting to gain the policy outcomes they prefer, while members of the public, each with only a tiny individual stake in the outcome, are unable to do anything about it.

Cladia | October 9, 2014 at 10:23 am

When groups or individuals with a high-stakes interest in the outcome of policy they often focus their resources and energies in attempting to gain the policy outcomes they prefer, while members of the public, each with only a tiny individual stake in the outcome, have no power to effect the outcome.

this is a pure form of hierarchy.

joebhed | October 9, 2014 at 9:35 pm

Sorry, the relevant paradigm goes far beyond the natural outcome of having a regulator work within a bank, people being people and all.

But that administrative failure and its resulting Rolex-seeking bedfellows all pale in comparison to the deeper realty present having to do with the dual mandate of the Fed to regulate the banks while being in charge of the money system that those banks operate to maintain our economic output and stability.
Be either the regulator or the promoter of the banking industry.

The Fed’s mandate to do both, from the same room, is morally perplexing to good people, and is economically paralyzing.

We can’t have the money to put us back to work until bankers see robust creditwortiness for lending and profit opportunities , which cannot happen without more money ….. to make them more creditworthy.. Catch 22 of debt-based money.

This is why Martin Wolf says the government should issue the money.

One less moral hazard.

Henry | October 11, 2014 at 5:32 pm

It is sickening how regulators seek personal benefit, with complete disregard for the needs of the many that should outweigh the needs of the very few. The fact that the same people have to both regulate and promote banking activity is a recipe for corruption. Regardless of cultural background of regulators and examiners, they should not have the power causing them to reach a moral dilemma.

tonyforesta | October 13, 2014 at 1:30 am

Crimes were committed by all the financial oligarchs on an epic scale. Fraud, insidertrading, price manipulation, tax evasion, naked massive theft, bribery, collusion, market rigging, and the list is long and festering and putrid. The same crimes, by these same oligarchs, peopled with the same den of vipers and thieves continue today unabated on an even more epic, epochal scale.. There is nothing “unconscious” in the capture and conduct of the socalled regulators. Both those pursuing the capture and the socalled captured are equally guilty of the same crimes, for the same unholy pyshopathic reasons. Wealth and power.

Either regulators regulate and enforce existing laws. or there are no laws. The laws are reduced to endless reams of meaningless words on worthless paper, full of sound and fury, signifying nothing.” The conjuring of debt products into assets is a criminal activity, a Ponzi scheme. Derivative products amount to (and the numbers are nebulous) a $600Billion exposure. 3/4′s of a Quadrillion. How is this possible? How will this exposure ever be reconciled? The entire global GDP is only 70+ trillion. There is no fixing this rank evil, there is no balm in Gilead. How will this unholy and criminal math ever be reconciled???? I beg anyone to answer any of these inquiries.

Part of the problem is the cognitive capture of academics, politicians, regulators, law enforcement, and the dimsheeple these shaitans rob, pillage, incarcerate, murder, and otherwise abuse. The language used itself deceptive and cloaked in the insular supremist ideologies and beliefs in wealth and subsequent power as the singular measurements of status and greatness, of socalled “masters of the universe”. Terms like captilalism, market efficiency, freemarkets, jobcreators, patriotism, and christianity, freedom, democracy have been intentionally and ruthlessly mangled and dismembered and redefined by decades of wingnut propaganda covens information domination operations, and disinformation campaigns. For example. – I double dare any of you erudite experts to define capitalism or democracy or freemarkets, or market efficiency and get back to me. The definitions no longer apply to the realities or the facts. Fascists and oligarchs rule Amerika and control the wealth and resources nation and all the conduct of the socalled government, enforced by militarized mass murdering biggoted pigs, – I mean police, – excused and shielded by partisan judges, including the fascists in the supreme court, and the captured regulatory apparatus, who favor, shield, protect, advance and insulate the fascists predatorclass and their mindless thugs – so obviously – we here in the land of Oz no longer inhabit a democracy,

Capitalism? Freemarkets? If there ever were such things, – they certainly does not exist today The markets are better defined as bandit capitalism and certainly not free, or fair, – wherein an entrenched predatorclass den of vipers and thieves are free, because of massive systemic criminality and theft, and the ensuing absurd illgotten imponderable wealth, to wantonly rob and pillage the people and manipulate markets, commodities, resources, the socalled judicial system, the socalled regulatory apparatus, the mass murdering militarized pigs, – I mean socalled law enforcement, and the socalled government, with absolute impunity and immunity, and zero accountability.

Market efficiency? The socalled mastersoftheuniverse were and are today wildly and dangerously stupid and horribly inefficient, and are singularly responsible for the most catastrophic economic FAILURE in the sordid history of the world, – a catastrophic FAILURE that is ongoing, and metastasizing on an exponential level today.

Christianity? Personally loath all institutional religions, as they are all awash in oceans of innocent blood, and seek only profit and power through the manipulation of religion – but also a student of comparison religion, including the bible, the apocrypha, and the Nag Hamadi texts. Any fiend or shaitan that would besmirch, bastardize, and claim the Nazarene to justify their evils promoting wealth, and biggotry, racism, sexism, and homophobia – is obviously woefully uneducated on the true teachings of christianity.

You are all victims of “pecuniary logic” and “pecuniary – psuedo truth” beliefs, – where in lies are majikally shapeshifted into truths, and truths denounced and the babbling of conspiratorialists.

The EPA, note the key term ENVIRONMENTAL in the name of the agency should be “captured by ENVIRONMENTAL types. That is the point the the purpose of in protection mandate in service of the people.

The creature from Jekyll Island, or the socalled FED is a horrific FAILURE, or a CRIMINAL CARTEL, or both. Regardless of the incessant bruting of the complicit parrots in the MSM, and the spaniels in the regulatory apparatus – there is no growth, there are and never will be any meaningful jobs, and inflation (again setting aside the manipulated and intentionally deceptive conjured numbers these shaitans and fiends pimp) is rampant and brutal, for the 99%. Price bacon, or cheese, or any staple, or healthcare, or rent, or car insurance, and get to me biiiiiaaatches.

The fact is CRIMES were committed. The economy the great disadvantage and disregard of the poor and middle class, while the predatorclass has absconded unfathomable wealth and protections. And the shaitans and fiends in the socalled government and regulatory apparatus chose to shield advance, protect, and immunize the den of vipers and thieves who are singularly responsible and culpable for this horrorshow.

Insular supremists pimp and brute the fiction that if the banks were not bailed out at the taxpayer expense, – the world would have come to an end.

Why would any intelligent free thinking individual, knowing what this den of vipers and thieves were responsible for, recognizing how much imponderable wealth these shaitans absconded believe this fiction and myth.

We’ll never know. But a resolutiontrustlikeentitiy could have commandeered the banks, dissolved their criminal enterprizes, sold what was left in the open markets, sent those responsible to court, and eventually jail, – and no of you could ever convince me – that those in my circles would not be much better off.

Defenders of the predatorclass are pathological liars. CONSCIOUSLY, for inclusion and the grim hope someday walking the earth as predatorclass.

This is psychopathic and sociopathic depravity, criminality and insanity, only possible when one renounces every particle of humanity, decency, morality and compassion – and any concern for their fellow man.

The reality predatorclass shaitans and fiends and vipers and thieves will face – beyond the inevitable and certain collapse of the socalled global financial system – is that some of us in the 99% will not forget or forgive, and there will be a reckoning, and there will be blood.

In a world where there are no laws, – there are no laws for anyone predatorclass biiiiiiaaaatches.
Burn it all down. Reset. It’s the only hope for the 99%.. .

Annie | October 13, 2014 at 8:32 pm

For Tony Foresta:

At most, the estimate is that there are 400 billion stars in the Milky Way….

Any questions on why the price of oil is falling? LOL

Considering that the Federal Reserve Board (FRB) has never been audited, based on what they DID is all we can go on to ascertain whether they are a criminal cabal. So there is no other answer other than “Yes, they are” based on the 4 requirements for launching a “Just War” – since we are all here repeating ourselves, I am also – you all know where to find the “list”….right?

The FRB keeps lording it that they have ABSOLUTE control over “employment” in USA – so that clinches it that they DID conduct economic genocide when all those jobs disappeared as the Bush Cabal packed up their derivative piece on the way out of town…

@Jeb – you wrote, “But that administrative failure and its resulting Rolex-seeking bedfellows all pale in comparison to the deeper realty present having to do with the dual mandate of the Fed to regulate the banks while being in charge of the money system that those banks operate to maintain our economic output and stability.”

You have to add their manipulation of “employment”….no?

Totalitarian Nihilism…”cosmic insanity” — still just low life scum bag THEFT of real $$ by trillions of Fiat $$$$s…a virtual cloud game for sadists and psychos….and they DO HAVE A LEADER, btw….The Urantia Book has leveled the playing field – info in the Book approved for ALL of humanity by none other than JC :-)

Page 759 – “….The Caligastia scheme for the immediate reconstruction of human society in accordance with his own ideas of individual freedom and group liberties, proved a swift and more or less complete failure. Society quickly sank back to its old biologic level, and the forward struggle began all over, starting not very far in advance of where it was at the Caligastia regime, this upheaval having left the world in confusion worse confounded.”

That was 250, 000 years ago – looks like “social media” is not all that….

Sill never bending my knee to the GLOBAL War, Drug and Slave Lords stood up by the FRB’s retarded shenanigans.

Math never was and never will be the paper that covers the rock that is SCIENCE…

400 BILLION stars from all that FIAT evergy :-)

Anonymouse | October 20, 2014 at 7:25 am

Frankly Annie, I have come to learn that over all, people are not KIND. Disbelief and denial follow, but do not sooth the mind. And that same non kindness includes family and friends in a tit for tat war that has no meaning or logical conclusion.

Sure we ask how it could have happened, but i’m certain if we got the chance somehow to do it all over again, this family would top the charts, the talent was undeniable, the timing was not.

[Nov 3, 2014] How Much Does It Cost To Keep JPMorgan FX-Riggers Out Of Jail?

11/03/2014 |

More than originally estimated, apparently...

Another day, another major bank adjust its reported data based on 'all-new' information about regulatory probes over its market manipulation. Last week was Citi, this week it's JPMorgan... with a double-whammy:

First, The SEC sanctioned 13 firms - including JPMorgan - for violating a rule primarily designed to protect retail investors in the municipal securities market in the sale of Puerto Rico bonds earlier this year...


All municipal bond offerings include a “minimum denomination” that establishes the smallest amount of the bonds that a dealer firm is allowed to sell an investor in a single transaction. Municipal issuers often set high minimum denomination amounts for so-called “junk bonds” that have a higher default risk that may make the investments inappropriate for retail investors. Because retail investors tend to purchase securities in smaller amounts, this minimum denomination standard helps ensure that dealer firms sell high-risk securities only to investors who are capable of making sizeable investments and more prepared to bear the higher risk.

In its surveillance of trading in the municipal bond market, the SEC Enforcement Division’s Municipal Securities and Public Pensions Unit detected improper sales below a $100,000 minimum denomination set in a $3.5 billion offering of junk bonds by the Commonwealth of Puerto Rico earlier this year. The SEC’s subsequent investigation identified a total of 66 occasions when dealer firms sold the Puerto Rico bonds to investors in amounts below $100,000. The agency instituted administrative proceedings against the firms behind those improper sales: Charles Schwab & Co., Hapoalim Securities USA, Interactive Brokers LLC, Investment Professionals Inc., J.P. Morgan Securities, Lebenthal & Co., National Securities Corporation, Oppenheimer & Co., Riedl First Securities Co. of Kansas, Stifel Nicolaus & Co., TD Ameritrade, UBS Financial Services, and Wedbush Securities.

The enforcement actions are the SEC’s first under Municipal Securities Rulemaking Board (MSRB) Rule G-15(f), which establishes the minimum denomination requirement. Each firm agreed to settle the SEC’s charges and pay penalties ranging from $54,000 to $130,000.

“These actions demonstrate our commitment to rigorous enforcement of all types of violations in the municipal bond market,” said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement. “We will act quickly and use all available tools to protect investors in municipal securities.”

LeeAnn G. Gaunt, Chief of the SEC’s Municipal Securities and Public Pensions Unit added, “These firms violated a straightforward investor protection rule that prohibits the sale of muni bonds in increments below a specified minimum. We conduct frequent surveillance of trading in the municipal bond market and will penalize abuses that threaten retail investors.”

The SEC’s orders against the 13 dealers find that in addition to violating MSRB Rule G-15(f) by executing sales below the minimum denomination, they violated Section 15B(c)(1) of the Securities Exchange Act of 1934, which prohibits violations of any MSRB rule. Without admitting or denying the findings, each of the firms agreed to be censured. They also agreed to review their policies and procedures and make any changes that are necessary to ensure proper compliance with MSRB Rule G-15(f).

The SEC’s investigation, which is continuing, is being conducted by Joseph Chimienti, Sue Curtin, Heidi M. Mitza, and Jonathon Wilcox with assistance from Kathleen B. Shields. The case is supervised by Kevin B. Currid and Mark R. Zehner. The SEC appreciates the assistance of the MSRB.

* * *
• Charles Schwab & Co. – $61,800
• Hapoalim Securities USA – $54,000
• Interactive Brokers LLC – $56,000
• Investment Professionals Inc. – $67,800
J.P. Morgan Securities – $54,000
• Lebenthal & Co. – $54,000
• National Securities Corporation – $60,000
• Oppenheimer & Co. – $61,200
• Riedl First Securities Co. of Kansas – $130,000
• Stifel Nicolaus & Co. – $60,000
• TD Ameritrade – $100,800
• UBS Financial Services – $56,400
• Wedbush Securities Inc. – $67,200

So that should teach them a lesson eh!!!

But then, second, JPMorgan was forced to admit to some more market manipulation was beinmg investigated:


From JPMorgan's 10-Q: Foreign Exchange Investigations and Litigation.

DOJ is conducting a criminal investigation, and various regulatory and civil enforcement authorities, including U.S. banking regulators, the Commodity Futures Trading Commission (“CFTC”), the U.K. Financial Conduct Authority (the “FCA”) and other foreign government authorities, are conducting civil investigations, regarding the Firm’s foreign exchange ("FX") trading business.

These investigations are focused on the Firm's spot FX trading activities as well as controls applicable to those activities. The Firm continues to cooperate with these investigations and is currently engaged in discussions with DOJ, and various regulatory and civil enforcement authorities, about resolving their respective investigations with respect to the Firm. There is no assurance that such discussions will result in settlements.

Since November 2013, a number of class actions have been filed in the United States District Court for the Southern District of New York against a number of foreign exchange dealers, including the Firm, for alleged violations of federal and state antitrust laws and unjust enrichment based on an alleged conspiracy to manipulate foreign exchange rates reported on the WM/Reuters service. In March 2014, plaintiffs filed a consolidated amended class action complaint, which defendants moved to dismiss in May 2014.

When the bank that has a fortress balance sheet has 7 pages of double sided tiny print Litigation in its 10-Q, something is wrong!!

* * *

So back to the question at the start of the post... how much does it cost to keep JPMorgan FX-riggers out of jail? The answer is - at least $24,341 per employee (243,388 employees and a $5.9 billion allocation)

[Oct 24, 2014] Henry Giroux On the Rise of Neoliberalism As a Political Ideology

A very important article. Should be read in full. Large quote below does not cover all the content of the article.
Oct 19, 2014 :

"There is a lack of critical assessment of the past. But you have to understand that the current ruling elite is actually the old ruling elite. So they are incapable of a self-critical approach to the past."

Ryszard Kapuscinski

Are they incapable, or merely unwilling? That is the credibility trap, the inability to address the key problems because the ruling elite must risk or even undermine their own undeserved power to do so.

I think this interview below highlights the false dichotomy between communism and free market capitalism that was created in the 1980's largely by Thatcher's and Reagan's handlers. The dichotomy was more properly between communist government and democracy, of the primacy of the individual over the primacy of the organization and the state as embodied in fascism and the real world implementations of communism in Russia and China.

But we never think of it that way any more, if at all. It is one of the greatest public relation coups in history. One form of organizational oppression by the Russian nomenklatura was replaced by the oppression by the oligarchs and their Corporations, in the name of freedom.

Free market capitalism, under the banner of the efficient markets hypothesis, has taken the place of democratic ideals as the primary good as embodied in the original framing of the Declaration of Independence and the US Constitution.

It is no accident that the individual and their concerns have become subordinated to the corporate welfare and the profits of the upper one percent. We even see this in religion with the 'gospel of prosperity.' In their delusion they make friends of the mammon of unrighteousness, so that after they may be received into their everlasting habitations.

The market as the highest good has stood on the shoulders of the 'greed is good' philosophy promulgated by the pied pipers of the me generation, and has turned the Western democracies on their heads, as a series of political leaders have capitulated to this false idol of money as the measure of all things, and all virtue.

Policy is now crafted to maximize profits as an end to itself without regard to the overall impact on freedom and the public good. It measures 'costs' in the most narrow and biased of terms, and allocated wealth based on the subversion of good sense to false economy theories.

Greed is a portion of the will to power. And that madness serves none but itself.

This is a brief excerpt. You may read the entire interview here.

Henry Giroux on the Rise of Neoliberalism
19 October 2014
By Michael Nevradakis, Truthout

"...We're talking about an ideology marked by the selling off of public goods to private interests; the attack on social provisions; the rise of the corporate state organized around privatization, free trade, and deregulation; the celebration of self interests over social needs; the celebration of profit-making as the essence of democracy coupled with the utterly reductionist notion that consumption is the only applicable form of citizenship.

But even more than that, it upholds the notion that the market serves as a model for structuring all social relations: not just the economy, but the governing of all of social life...

That's a key issue. I mean, this is a particular political and economic and social project that not only consolidates class power in the hands of the one percent, but operates off the assumption that economics can divorce itself from social costs, that it doesn't have to deal with matters of ethical and social responsibility, that these things get in the way.

And I think the consequences of these policies across the globe have caused massive suffering, misery, and the spread of a massive inequalities in wealth, power, and income. Moreover, increasingly, we are witnessing a number of people who are committing suicide because they have lost their pensions, jobs and dignity.

We see the attack on the welfare state; we see the privatization of public services, the dismantling of the connection between private issues and public problems, the selling off of state functions, deregulations, an unchecked emphasis on self-interest, the refusal to tax the rich, and really the redistribution of wealth from the middle and working classes to the ruling class, the elite class, what the Occupy movement called the one percent. It really has created a very bleak emotional and economic landscape for the 99 percent of the population throughout the world."

"This is a particular political and economic and social project that not only consolidates class power in the hands of the one percent, but operates off the assumption that economics can divorce itself from social costs, that it doesn't have to deal with matters of ethical and social responsibility."
I think that as a mode of governance, it is really quite dreadful because it tends to produce identities, subjects and ways of life driven by a kind of "survival of the fittest" ethic, grounded in the notion of the free, possessive individual and committed to the right of individual and ruling groups to accrue wealth removed from matters of ethics and social cost.

That's a key issue. I mean, this is a particular political and economic and social project that not only consolidates class power in the hands of the one percent, but operates off the assumption that economics can divorce itself from social costs, that it doesn't have to deal with matters of ethical and social responsibility, that these things get in the way. And I think the consequences of these policies across the globe have caused massive suffering, misery, and the spread of a massive inequalities in wealth, power, and income. Moreover, increasingly, we are witnessing a number of people who are committing suicide because they have lost their pensions, jobs and dignity. We see the attack on the welfare state; we see the privatization of public services, the dismantling of the connection between private issues and public problems, the selling off of state functions, deregulations, an unchecked emphasis on self-interest, the refusal to tax the rich, and really the redistribution of wealth from the middle and working classes to the ruling class, the elite class, what the Occupy movement called the one percent. It really has created a very bleak emotional and economic landscape for the 99 percent of the population throughout the world.

And having mentioned this impact on the social state and the 99%, would you go as far as to say that these ideologies have been the direct cause of the economic crisis the world is presently experiencing?

Oh, absolutely. I think when you look at the crisis in 2007, what are you looking at? You're looking at the merging of unchecked financial power and a pathological notion of greed that implemented banking policies and deregulated the financial world and allowed the financial elite, the one percent, to pursue a series of policies, particularly the selling of junk bonds and the illegality of what we call subprime mortgages to people who couldn't pay for them. This created a bubble and it exploded. This is directly related to the assumption that the market should drive all aspects of political, economic, and social life and that the ruling elite can exercise their ruthless power and financial tools in ways that defy accountability. And what we saw is that it failed, and it not only failed, but it caused an enormous amount of cruelty and hardship across the world. More importantly, it emerged from the crisis not only entirely unapologetic about what it did, but reinvented itself, particularly in the United States under the Rubin boys along with Larry Summers and others, by attempting to prevent any policies from being implemented that would have overturned this massively failed policy of deregulation.

It gets worse. In the aftermath of this sordid crisis produced by the banks and financial elite, we have also learned that the feudal politics of the rich was legitimated by the false notion that they were too big to fail, an irrational conceit that gave way to the notion that they were too big to jail, which is a more realistic measure of the criminogenic/zombie culture that nourishes casino capitalism.

[Oct 23, 2014] Rebuilding Trust in Finance We Can Do Better by Robert Johnson

Quote: "That’s because of the persistent belief that the financial sector is functioning less like the nerve system of the economy and more like an autoimmune disease feeding on its host. This perception is not entirely unjustified."
September 17, 2013 | The Institute for New Economic Thinking
Trust is an essential part of a functioning economy, yet it is often one of the least understood variables in economics. That’s why the Institute for New Economic Thinking is supporting the Thomson Reuters TRust index, which provides concrete metrics for understanding the level of trust in the financial system using a benchmark of the top 50 global financial institutions as a proxy for the sector as a whole.

While trust is difficult to understand and measure in the context of economics, this type of innovative work enables new and important conversations about trust and how it affects the economy. The Institute will be exploring this issue and the new economic thinking it facilitates In a series of essays over the next week. Stay tuned for more.

In the aftermath of the 2008 financial crisis, distrust in the financial sector was widespread. Even after the mess appeared to be cleaned up, the uncertainty over whether the worst was over remained real.

But since that time, financial institutions have shored up their balance sheets as their earnings and capital cushions have improved and leverage ratios have shrunk. In short, banks today are safer than they were before the crash. So surely trust should have returned as the likelihood of systemic collapse declined.

That, however, does not appear to be the case, as is demonstrated by the persistent negative levels of trust shown by the Thomson Reuters TRust index.

Many people in the financial sector feel this distrust. But they aren’t sure what to do about it. How can they win back the public’s trust? Aren’t record profits enough?

Apparently, there are some things that money can’t buy.

Trust is an essential part of a functioning economy. It provides an antidote to the fundamental uncertainty that is part of any economic decision. Without trust, you would likely spend all of your energy and resources protecting yourself rather than working on productive activities.

For the financial sector, trust is especially important. Finance is the nerve center of our economy, and trust is an essential component of the financial system. As we saw in 2008, without trust and a properly functioning financial system the economy breaks down. If people don’t trust in financial institutions, the entire economic system can be thrown out of balance.

This lack of trust leads to many dysfunctional symptoms. When people don’t trust where to put their savings, they hoard cash, or commodities like gold, which reached its highest price in history in the aftermath the 2008 crisis. Similarly, when trust in the financial sector is low, corporations also are more likely to hoard cash and less likely to invest in expansion or hire new employees, leading to stagnant economic growth and persistent unemployment.

Despite the financial sector’s economic resurgence, we are still dealing with these economic problems today. The situation is a reflection of the distrust the public still feels for our financial institutions.

After 2008, when so many banks were rescued the public rightly felt that it was owed systemic reform so it wouldn’t be put in the position of having to rescue the financial sector again. And while there has been an increase in regulation with Dodd-Frank, none of the changes have addressed the fundamental issues underpinning the lasting distrust in the financial system. I’m talking about major obstacles such as too big to fail, derivatives regulation, and the revolving door between regulators and those they are supposed to regulate. Eric Holder’s comment before the United States Senate in March of this year that some banks are simply too big to effectively prosecute suggests that the system is still very far out of balance.

So while profits have returned, if the financial sector wants to regain the public’s trust, it needs to offer something more than earnings reports.

That’s because of the persistent belief that the financial sector is functioning less like the nerve system of the economy and more like an autoimmune disease feeding on its host. This perception is not entirely unjustified. Large multinational banks have been forced to pay billions of dollars in fines for misdeeds leading up to and during the crisis. And yet fundamental change remains illusive in the industry. As Holder’s comments suggest, the ungovernability of some of the most powerful entities in our society is a big barrier to reestablishing trust in our financial system.

While some in the financial sector may profess dismay at this state of affairs, most of the leaders of behemoth banks have shown themselves more eager to coerce the process rather than agreeing to necessary reform.

For example, consider the way underwater mortgage holders were treated when the housing market collapsed. After already being bailed out by the public, the banks preached forbearance in mortgage markets because of their still-fragile balance sheets. Yet, at the same time these same banks still were offering their employees sizeable bonuses, even though the hole in the mortgage market could have been substantially reduced by the more than $100 billion these firms handed out over the last five years.

If our society had operated under a different set of priorities and required banks to put these funds into helping underwater borrowers instead of toward bonuses for many of the same people who helped sink the system in 2008, the hole in the mortgage market would no longer exist, there would be no need for forbearance, and our economy would be in much better shape. But that’s not what happened.

As long as this Wall Street versus Main Street dynamic persists, so too will the belief that the financial sector plays by a different set of rules, rules tilted in their favor at the expense of the rest of us.

In order to regain the public’s trust, the financial sector must show itself willing to take meaningful steps to address this concern. It must show the public that it is worthy of its trust by accepting meaningful reform for the good of our society. Until that happens, all of the profits and equity financing in the world won’t win back the kind of trust that is essential for the financial sector to serve its role at the center of our economy.

This situation isn’t “heads I win, tails you lose.” In this scenario, we all lose. Persistent anger and mistrust cannot be good for anyone. We can do better.

[Oct 22, 2014] Corruption, neoliberals and their strange neoclassic economics

October 21, 2014 |
Neoliberal dogma is consistent only in rabid Russophobia. In all other respects they are, as in the joke: Q: How much will be 2 x 2 ? A: Well, what you want. We can make it from anywhere from 3 to 5...

Here's an example how it looks like a dispute with normal, sane blogger, who is writing under the nick - voronkov_kirill whose position is close to the positions staunch neoliberals:

- What is happening now with oil is called "short squeeze". And market mechanisms are not involved. Oil depreciates against the logic of the market, " says Cyril.

But wait a minute, I replied, there are two ways of pricing:

  1. Market price inherent in democratic countries with "free market"
  2. Administrative inherent in the totalitarian countries without the latter

Do I understand correctly that the countries that define the price of oil and the price of the ruble, are mostly totalitarian?

"No, not right. Well, absolute market, as well as absolute democracy does not exist. The market is "free" only for small players. Big players with serious financial or political-administrative levers, can influence "free market" and even control the price....

Here is everything you need to know about neoliberalism. And about so called "free market". Here Voltaire equality of free individuals. Here's to you and all the liberal government non-intervention in private Affairs. There is a “small players” and there are agents that can (I wonder by what right?) this element of control.

Unfortunately neoliberal thinking is not capable of a simple two-step, otherwise it inevitably would come to the conclusion that the absence of free competition in the economy will lead to the same state as in politics, where free competition of ideas and authorities only for small players, but not for TBTF -- like top government and industrial leaders. That is all about this now fashionable word "corruption"

In 1988 one stubborn Communist (then he is the same stubborn nationalist (Latvia-forever), and now no less staunch euro-emigrant ) promised to shoot me, because I argued that there were no socialism in the USSR and the economic system was not consistent with the fundamental principle of socialism is "from each according to his ability - to each according to his work"

Now here's the same thing with the market, with competition, with democracy. In reality like in case with the pregnancy market is iether free or not. If the corruption rules in the "real" market but illusions are force fed like in Guantanamo, sooner or later you will get full totalitarianism and with it total corruption. This is where slowly but inexorably the West moves, and with it anyone who tries to copy the Western model of the neoliberal economy. to this stable state called total corruption.

[Oct 07, 2014] Regulatory Capture 101 - WSJ - WSJ

It's not regulation per se is deficient, it is regulation under neoliberal regime, were government is captured by financial oligarchy ;-). But that understanding is foreign to WSJ with its neoliberal agenda :-(.
Oct 05, 2014 | Casino Capitalism and Crapshoot Politics
Regulatory Capture 101

Impressionable journalists finally meet George Stigler.

Oct. 5, 2014 5:28 p.m. ET The financial scandal du jour involves leaked audio recordings that purport to show that regulators at the Federal Reserve Bank of New York were soft on Goldman Sachs . Say it ain’t so.

... ... ...

The secret recordings were made by Carmen Segarra, who went to work as an examiner at the New York Fed in 2011 but was fired less than seven months later in 2012. She has filed a wrongful termination lawsuit against the regulator and says Fed officials sought to bury her claim that Goldman had no firm-wide policy on conflicts-of-interest. Goldman says it has had such policies for years, though on the same day Ms. Segarra’s revelations were broadcast, the firm added new restrictions on employees trading for their own accounts.

The New York Fed won against Ms. Segarra in district court, though the case is on appeal. The regulator also notes that Ms. Segarra “demanded $7 million to settle her complaint.” And last week New York Fed President William Dudley said, “We are going to keep striving to improve, but I don’t think anyone should question our motives or what we are trying to accomplish.”

On the recordings, regulators can be heard doing what regulators do—revealing the limits of their knowledge and demonstrating their reluctance to challenge the firms they regulate. At one point Fed officials suspect a Goldman deal with Banco Santander may have been “legal but shady” in the words of one regulator, and should have required Fed approval. But the regulators basically accept Goldman’s explanations without a fight.

The sleuths at the ProPublica website, working with a crack team of investigators from public radio, also seem to think they have another smoking gun in one of Ms. Segarra’s conversations that was not recorded but was confirmed by another regulator. Ms. Se

est means. For example, a company offering securities is exempt from some registration requirements if it is only selling to accredited investors, such as people with more than $1 million in net worth, excluding the value of primary residences.

The journalists have also found evidence in Ms. Segarra’s recordings that even after the financial crisis and the supposed reforms of the Dodd-Frank law, the New York Fed remained a bureaucratic agency resistant to new ideas and hostile to strong-willed, independent-minded employees. In government?


Enter George Stigler, who published his famous essay “The Theory of Economic Regulation” in the spring 1971 issue of the Bell Journal of Economics and Management Science. The University of Chicago economist reported empirical data from various markets and concluded that “as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit.”

Stigler knew he was fighting an uphill battle trying to persuade his fellow academics. “The idealistic view of public regulation is deeply imbedded in professional economic thought,” he wrote. But thanks to Stigler, who would go on to win a Nobel prize, many economists have studied the operation and effects of regulation and found similar results.

A classic example was the New York Fed’s decision to let Citigroup stash $1.2 trillion of assets—including more than $600 billion of mortgage-related securities—in off-balance-sheet vehicles before the financial crisis. That’s when Tim Geithner ran the New York Fed and Jack Lew was at Citigroup.

Once one understands the inevitability of regulatory capture, the logical policy response is to enact simple laws that can’t be gamed by the biggest firms and their captive bureaucrats. This means repealing most of Dodd-Frank and the so-called Basel rules and replacing them with a simple requirement for more bank capital—an equity-to-asset ratio of perhaps 15%. It means bringing back bankruptcy for giant firms instead of resolution at the discretion of political appointees. And it means considering economist Charles Calomiris’s plan to automatically convert a portion of a bank’s debt into equity if the bank’s market value falls below a healthy level.


[Oct 06, 2014] Crony Capitalism Is Kryptonite To Democracy And The Real Economy

Zero Hedge

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

When the machinery of governance is ruled by the highest bidders, democracy is dead.

Last week I described the sources of America's America's terminal political dysfunction. The engine of this terminal dysfunction is crony capitalism, the incestuous and oh-so-profitable marriage of the Central State and monied Elites.

Gordon T. Long and I continue our discussion of the perverse incentives and consequences of crony capitalism in a 25-minute video program.

Gordon argues that America's Crony Capitalism closely resembles the Roman Tribute System, an arrangement that skims wealth and concentrates it at the top of the power pyramid.

Vast financial crimes are met with fines. Guilty parties do not go to jail but rather the corporation pays a fine. Billion-dollar crimes are assessed million-dollar fines-- a percentage that closely mirrors a Tribute System. The government makes money through enforcement but not prevention. Corporations make illicit fortunes with the confidence that the government will settle for a small slice of the wealth stripmined from the people.

The fines for financial skimming operations act as a form of tribute to the Central State: the State and its corrupt elected officials and regulators turn a blind eye to the pillage of the citizenry via financialization schemes, and then skim a tribute via fines and campaign contributions.

Everybody in the inner circle wins: the finance perps collect their millions in bonuses, the legislators collect their millions in campaign contributions, and the regulators (who managed to do nothing in the way of prevention) get to declare a toothless victory in announcing wrist-slap fines.

I have covered this dynamic many times:

This cozy arrangement might seem benign, but it's actually deadly to democracy and the real economy. Let's call crony capitalism what it really is: Kryptonite to democracy and the real economy.

Concentrated wealth and State power form a self-reinforcing feedback loop that destroys democracy. The more profitable buying influence and the revolving door between corporations and regulators becomes, the more money the corporations have to spend on lobbying, which serves to further protect their profits. The more money political toadies collect, the more beholden they are to entrenched interests.

This feedback loop rewards crony capitalism and limits classical capitalism’s key features: transparent markets and competition. An economy dominated by crony capitalism stagnates as competition is suppressed and government enriches those who are “more equal than others” (to borrow a phrase from Orwell).

Money that might have once been invested in research and development is now devoted to bribing politicos, lawsuits defending corporate turf and wrist-slap fines/Tribute to the State that enables and protects crony skimming operations.

When the machinery of governance is ruled by the highest bidders, democracy is dead.

Selected Skeptical Comments

Radical Marijuana

For sure, falcon, there is NO widely understood language to discuss what has been happening, as has been expressed by Cognitive Dissonance in these ways:

"Control the Language and You Control the Mind! ... It is the effective manipulation of our belief systems that enslaves us to the present day insanity. ... The absolute best controlled opposition is one that doesn't know they are controlled."

The American democratic republic was destroyed as the international bankers took control over the public "money" supply, and turned that inside-out and upside-down, so that the word "money" now means pretty well the opposite of what it used to mean! The American money supply was supposed to be backed by gold and silver, who value was set by Congress. Indeed, the word "dollar" originally meant a particular amount of silver.

However, the banksters were able to systematically apply the methods of organized crime, through bribery, intimidation, and assassination, in order to result in enough of the politicians becoming the banksters' puppets, while enough the people could be fooled enough of the time, in order to keep on replacing their representatives with one fresh crop of professional liars and immaculate hypocrites after another.

As usual on Zero Hedge, this article grossly underestimates and understates how serious the problems actually are!

Jack Burton

It is beyond doubt that citizen democracy is dead in America. The Main Stream media investigates nothing of importance and if something unfavorable to corporate interests emerges from other sources, the Main Stream Media ignores it completely. A congress and President that accept money bribes in public, as part of the political process, with Supreme Court approval, is a sign of their arrogance. I just read a long study of Fracking Industry and US Foreign Policy. You literally have corporations and the State Department as virtual departments within each other, not separate entities. Where Frackers seek to go, American tax payer money, the CIA, State Department and US Military lead the way. There is no revolving door, because corporate and government operate together with all actions "in house" as it were.

Obama health care law, this was written by Insurance Company lobbyists and present to congress by corporate health insurance companies to be passed in the interests of profits and nothing more.

The government and corporate contractors are one single entity when it comes to arms, war, spy agencies and the police state. Even people in America's gulag are often held by for profit guards who seek to make maximum profit by dealing with humans at the lowest level possible.

One could go on, Universities are money machines for their owners and top executives, not to mention sports interests and television.

'Taylor v. Summers on Secular Stagnation'

That is politics not economics and, clearly, as for Taylor, it comes down to the usual question: are Republicans more stupid of more evil.
Economist's View

Here's the Jared Bernstein response to John Taylor that Roger Farmer is referring to:

Taylor v. Summers on Secular Stagnation: ... In a recent speech I’ve featured here in numerous posts, Larry Summers raised the possibility that the economy is growing below its potential, with all the ancillary problems that engenders (e.g., weak job and income growth), and not just in recession, but in recovery. Stagnation is by definition expected in recession, but not in an expansion...
Taylor argues, however, that secular stagnation is “hokem.” His argument rest on two points, both of which seem obviously wrong.
First, he claims that the current recovery has been weak is not due to any underlying problems in the private sector or lousy fiscal policy, but due to “policy uncertainty, increased regulation, including through the Dodd Frank and Affordable Care Act.” But the recovery began in the second half of 2009, well before either of those measures took effect. And, in fact, since they’ve done so, if anything, growth and jobs have accelerated. Financial markets have done particularly well...
Taylor’s antipathy toward fiscal stimulus leads him to completely omit the fact of austerity in the form of fiscal drag as a factor in the weak recovery. ...
His second argument is that if secular stagnation were a real problem, we would have seen it in the 2000s expansion, yet instead we saw “boom-like conditions, especially in residential investment.” ...
Yes, there was a lot—too much—residential investment, but employment growth was terribly weak...,the share of the population employed actually declined. Real GDP grew almost a point more slowly per year over the 2000s business cycle relative to the prior two cycles. Business investment grew less than half as fast in the 2000s than it did in the 1990s. In fact, after rising pretty steeply in the 1990s, CBO’s estimate of potential GDP fell sharply in the 2000s..., a serious cost of the problem Summers is raising and Taylor is wrongly debunking.
It’s also worth noting that middle-class incomes and poverty rates did much better in the 1990s, thanks to full employment conditions in the latter half of that cycle, than in the 2000s, when slack labor markets led to a flattening trend in real median income and increasing poverty rates.
I doubt any of this will convince Taylor and others who simply want to go after the ACA, the Fed, stimulus measures, et al. But those of us interested in blazing the path back to full employment should recognize these arguments as politically motivated distractions. ...

This post from Brad DeLong on the same topic is also worthwhile

pgl said...

If one has been reading Taylor's blog - ECONOMICS ONE - none of his latest partisan garbage in this oped would have come as a surprise. In the olden days - we would have to turn to Lawrence Kudlow and those Jerry Bowyer Fuzzcharts for such insanity. I wonder if Stanford is proud of its most famous macroeconomist. Cough, cough.

DeDude :

The thing that holds back businesses from deploying their stash of cash, is not “policy uncertainty” or “increased regulation”. It is lack of demand.

If the demand is there then the product/service will be produced. When demand is not there then the cash will sit idle or be used non-productively for things like stock buybacks or takeover of competitors. Any individual business owner who fail to meet demand (because of policy uncertainty or regulation) will simply give up market share to those of his/her competitors that chose not to be held back by those things.

DeDude said in reply to Matt Young...

I am actually not talking about GDP. The issue is why do businesses not hire more people. The explanation that right wing fools and smart business people love to give is that it's because of regulations and policies that they don't like. However, as pointed out over on "calculated risk" they always complain about regulations and there is no correlation between their complaining (or not) and their actual hire of new employees. The only thing that determine whether a business will hire more people is whether the demand for its products/services is in excess of what can be delivered by its current workforce. And they will respond to such demand regardless of cumbersome regulations - or they will lose market share to competitors that are more than happy to fill the demand.

Fred C. Dobbs:

(Found out on the web.)

Definition of the term secular stagnation theory is presented. It refers to the protracted economic depression characterized by a falling population growth, low aggregate demand and a tendency to save rather than invest.

Dictionary of Theories;2002, p478


I don't think the right word for Taylor's erroneous claims as chiefly "political". It's moral prejudice. The absolute belief in totally unregulated markets is based on the belief that

1. The wealthy are more virtuous than the poor.

2. Only the strong should survive (see Abba's song "The winnner takes it all").

So it goes from a.Moral Prejudice to b. Political ideology to c. Economic chicanery.

Moral prejudices are the most deeply rooted in human beings because they don't only dictate how the world is, but how it should be.

pgl said in reply to David...

Aren't your comments better directed towards Greg Mankiw? Oh wait - they are both toadies for Mitt Romney. Sorry about my question!


Taylor isn't right or wrong. Taylor is simply irrelevant to the largest social ill of 2014- Unemployment.

If one of the basic assumptions of your model is "Assume Full Employment" then employment doesn't become a goal but a constant.

Under the Assumption of Full Employment, is secular stagnation even possible?

Taylor's model does not even look at Unemployment, and reducing unemployment is not his priority.

If as a policy maker, your goal is to reduce unemployment as quickly as possible, you should find another model that addresses unemployment directly. Once unemployment is fixed, other models may be more useful as new problems pop up.

anne said in reply to bakho...

November 30, 2008

Keep Your Distance

Chapel Hill, N.C.

On Nov. 22, Hoover welcomed Roosevelt to the White House. Throughout the meeting, he treated his successor as though he were a thickheaded schoolboy who needed drilling on intransitive verbs. He sought to bully the president-elect into endorsing the administration's policies at home and abroad, especially sustaining the gold standard at whatever cost. Alert to Hoover's intent, Roosevelt smiled, nodded, smiled again, but made no commitment. A frustrated Hoover later vowed, "I'll have my way with Roosevelt yet."

Hoover returned to the attack in February. He sent the president-elect a hectoring 10-page handwritten letter that misspelled Roosevelt's name (as "Roosvelt"). As a consequence of the flight of gold and runs on banks, Hoover wrote, there was "steadily degenerating confidence in the future." His wise policies, he claimed, had brought an upturn in the summer of 1932. Since then, though, he said, there had been a sharp decline because the country was unnerved by Roosevelt's election, for it feared that the new president would embark on radical experiments. Hoover concluded by asking Roosevelt to restore confidence by stating publicly that there would be "no tampering" with the currency and that "the budget will be unquestionably balanced, even if further taxation is necessary."

Three days after writing this letter, Hoover told an archconservative senator that "if these declarations be made by the president-elect, he will have ratified the whole major program of the Republican administration; that is, it means the abandonment of 90 percent of the so-called new deal." To another Republican senator, he spelled out what he demanded that his successor renounce: aid to homeowners burdened with mortgages, public works projects and plans for a Tennessee Valley Authority. He also wanted Roosevelt to raise tariff barriers and impose a national sales tax.

Roosevelt, who regarded the letter as "cheeky," let days go by without replying, fibbing that his response had miscarried. He would not let himself be trammeled by being identified with an unpopular dying administration, so he refused to issue any statement. He would not permit Hoover to rob him of the fruits of victory. On March 4, unfettered, he announced to the nation a new beginning....

William E. Leuchtenburg is the William Rand Kenan, Jr. professor emeritus at the University of North Carolina at Chapel Hill.


I wonder if Tyler Cowen, James Hamilton, and Steve Williamson will take John Taylor to task for saying that Larry Summers and Ben Bernanke are just putting out a bunch of hokum to protect the Obama administration from its policy errors? No, I don't think so, civility and treating those who disagree with you with respect and deference is only something economists with liberal political leanings, who kind of care what happens to the rest of the American people, and not just the 1%, owe to their conservative, "scientific," betters.

It should not be forgotten that Professor Taylor was the Deputy Undersecretary of Treasury for Economics and Financial Issues from 2001-2004. That economic growth was anemic during this time is well documented.

Has he ever explained his policy errors? As to hokum, I do acknowledge that Professor Taylor has a lot of experience peddling that for his political masters.

How can Mark Thoma, Noah Smith, or Brue Bartlett have an honest argument with the likes of John Taylor. I hope he finds his bubble comfortable in side the right wing machine. I am sure he finds it lucrative.

P.S. Again, the evidence is that economic growth is picking up, just as both Dodd-Frank and the Affordable Care Act are coming into full effect. Correlation or causation? Are more likely just co-incidence?

kievite said...

This is an interesting topic which sadly attracted very few comments.

I think there are two issues not covered in comments:

  1. That is politics, not economics and, clearly, as for Taylor, it comes down to the usual question: "are Republicans more stupid or more evil" (see Robert Waldmann comment to the post from Brad DeLong ).
  2. The level of debt and the price of energy are two important variables that should probably be taken into account in any discussion of secular stagnation.

As for Taylor personal legacy, I would suggest that the underlying assumption that there is an exogenous NIARU (non-inflation-accelerating rate of unemployment) imposing an unavoidable constraint on macroeconomic possibilities is wrong on both historical and analytical grounds. From a historical standpoint, a NIARU, if it exists at all, must be regarded as highly variable over time and place.

To me it smells with the desire to enlist the fear of inflation to justify the maintenance of a "reserve army of the unemployed" in the society (which is a Marxist term, but probably is applicable here). In a way high level of unemployment is a precondition to the fast redistribution of wealth that we observed under the current neoliberal regime.

Which is another way to say that Taylor is a stooge of financial oligarchy. A Trojan horse which plays the role of an academic economist.

'Why the Fed Is So Wimpy'

Economist's View

Justin Fox:

Why the Fed Is So Wimpy, by Justin Fox: Regulatory capture — when regulators come to act mainly in the interest of the industries they regulate — is a phenomenon that economists, political scientists, and legal scholars have been writing about for decades. Bank regulators in particular have been depicted as captives for years, and have even taken to describing themselves as such.
Actually witnessing capture in the wild is different, though, and the new This American Life episode with secret recordings of bank examiners at the Federal Reserve Bank of New York going about their jobs is going to focus a lot more attention on the phenomenon. It’s really well done, and you should listen to it, read the transcript, and/or read the story by ProPublica reporter Jake Bernstein.
Still, there is some context that’s inevitably missing, and as a former banking-regulation reporter for the American Banker, I feel called to fill some of it in. Much of it has to do with the structure of bank regulation in the U.S., which actually seems designed to encourage capture. But to start, there are a couple of revelations about Goldman Sachs in the story that are treated as smoking guns. One seems to have fired a blank, while the other may be even more explosive than it’s made out to be. ...


Probably the biggest lesson that will be taken from this is Carmen's fate - she was fired, so don't cross Goldman.

anne said in reply to don...

September 25, 2014

Wall Street Still Needs a Leader on Reform
By William D. Cohan

This is also the same New York Fed that fired Carmen M. Segarra, a former bank examiner, after she questioned Goldman’s conflicts in connection with its role in advising a client, the El Paso Corporation, on its merger with Kinder Morgan Inc., in which Goldman’s private-equity fund had a large investment. When Ms. Segarra asked Goldman for its conflict-of-interest policy, she discovered that it did not have one. She raised her concerns with her superiors at the New York Fed but, she contended, her bosses asked her to alter her written views on the matter because they could cause Goldman “substantial financial harm,” according to an article in The New York Times. * Ms. Segarra was eventually fired. She sued the New York Fed, accusing it of retaliation; a federal judge ruled against her in April....


anne -> don:

October 10, 2013

Suit Revives Goldman Conflict Issue
By Susanne Craig and Jessica Silver-Greenberg

At a March 2012 meeting, a group of examiners at the Federal Reserve Bank of New York agreed that Goldman Sachs had inadequate procedures to guard against conflicts of interest — guidelines aimed at stopping firms from putting their pursuit of profit ahead of their clients’ best interests.

The examiners voted to downgrade a confidential rating assigned by the New York Fed that could have spurred costly enforcement actions and other regulatory penalties. It is not known whether the vote in fact led to a rating change. The former examiner who pushed for a downgrade, Carmen M. Segarra, now contends in a lawsuit filed on Thursday that just weeks after the vote, her superiors asked her to change her findings on Goldman and fired her after she refused.

The vote to downgrade, which has not been previously reported, could have been a big blow for Goldman.

“Goldman Sachs does not have a conflicts-of-interest policy, not firmwide, and not for any divisions,” Ms. Segarra wrote to Michael F. Silva, a senior executive at the New York Fed. “I would go so far as to say they have never had a policy on conflicts.”

The lawsuit, along with a review by The New York Times of confidential government documents and internal e-mails, raises questions about the success of Goldman’s efforts to police potential conflicts.

The bank has been buffeted by accusations that it has put its own interests ahead of its clients, a contention it denies. Goldman, for instance, faced accusations that in the run-up to the financial crisis that it sold billions of dollars in souring real estate assets to unsuspecting clients. Just weeks before the examiners’ vote last year, the bank was publicly excoriated by a federal judge who found that Goldman had conflicts in a huge energy deal.

The lawsuit also provides a look into the often-opaque relationship between federal regulators and Wall Street. After the financial crisis, banking regulators faced criticism that they were too cozy with the banks that they were overseeing — a familiarity that failed to thwart some of the risky behavior precipitating the housing crisis and ensuing recession.

Even now, banks have sway over their regulators, especially those stationed at a bank’s headquarters, according to two former regulators who spoke on the condition of anonymity. The banks, for example, can work behind the scenes to avert a vote like the one to downgrade Goldman. The people said, however, that once a vote to downgrade has taken place, it is difficult to reverse.

In the lawsuit, which was filed in Federal District Court in Manhattan, Ms. Segarra contends she was wrongfully terminated in violation of a federal law that affords protections to bank examiners who find wrongdoing in the course of doing their jobs. Mr. Silva, who is chief of staff for the executive group at the New York Fed, is among the defendants named in the suit....

Richard :

While they may be the worst offenders I doubt that the problem ends with Goldman. I have heard too many horror stories from people who worked as regulators in the government over the last thirty years to believe that this is an isolated case.

So long as we have a money driven political process it will be very difficult to avoid regulatory capture.

Increasingly th U.S. resembles a Latin American country where bankers are at war with democracy itself.


In the RollingStone, Taiibi described GS as the Great Vampire Squid:

"The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who's Who of Goldman Sachs graduates."

GS makes money by manipulating the system in a quasi-legal, morally corrupt manner. They challenge all the rules and use the Revolving Door between regulator and regulated to deliver legal bribes. Society needs better regulators and regulations to protect themselves from parasites like the GS Vampire Squid.

GS is one of the chief proponents of "Free Market" ideology.

Free Market" is short for "Free to rip off the "Market" . The words "to rip off" are omitted when they sell the "Free Market" ideology and are reserved for the back rooms and jokes in private email. The rubes are too dim to get it or else think they are the scammers and not the scammed.

EE said in reply to bakho...

"GS makes money by manipulating the system in a quasi-legal, morally corrupt manner. They challenge all the rules and use the Revolving Door between regulator and regulated to deliver legal bribes."

Well said, but its not just GS. Your description applies to much of corporate America. We're living in a crony capitalist society.

EE said...

"Much of it has to do with the structure of bank regulation in the U.S., which actually seems designed to encourage capture."

Which is a feature and not a bug.

[Sep 27, 2014] How Goldman Controls The New York Fed: 47.5 Hours Of "The Secret Goldman Sachs Tapes" Explain

Sep 26, 2014 |

I don't want to spoil the revelations of "This American Life": It's far better to hear the actual sounds on the radio, as so much of the meaning of the piece is in the tones of the voices -- and, especially, in the breathtaking wussiness of the people at the Fed charged with regulating Goldman Sachs. But once you have listened to it -- as when you were faced with the newly unignorable truth of what actually happened to that NFL running back's fiancee in that elevator -- consider the following:

  1. You sort of knew that the regulators were more or less controlled by the banks. Now you know.
  2. The only reason you know is that one woman, Carmen Segarra, has been brave enough to fight the system. She has paid a great price to inform us all of the obvious. She has lost her job, undermined her career, and will no doubt also endure a lifetime of lawsuits and slander.

So what are you going to do about it? At this moment the Fed is probably telling itself that, like the financial crisis, this, too, will blow over. It shouldn't.

[Sep 26, 2014] The Biggest Lie of the New Century

Sep 07, 2014 | Bloomberg View

Yesterday, we looked at why bankers weren't busted for crimes committed during the financial crisis. Political corruption, prosecutorial malfeasance, rewritten legislation and cowardice on the part of government officials were among the many reasons.

But I saved the biggest reason so many financial felons escaped justice for today: They dumped the cost of their criminal activities on you, the shareholder (never mind the taxpayer).

Corporate executives theoretically work for the owners of the company, namely, the shareholders. But there is an agency problem in that owners can't closely manage and object to the actions of these executives. Collective owners, such as mutual funds, seem to have no interest in doing so. What we end up with is a management class that works for itself instead of on behalf of the owners of the publicly traded banks. Many of these executives committed crimes; got big bonuses for doing so; and paid huge fines using shareholder assets (i.e., company cash), helping them avoid prosecution.

As for claims like those of white-collar crime defense attorney Mark F. Pomerantz, that “the executives running companies like Bank of America, Citigroup and JP Morgan were not committing criminal acts,” they simply are implausible if not laughable. Consider a brief survey of some of the more egregious acts of wrongdoing:

Foreclosure fraud: Of all the crimes committed during the financial crisis and in its aftermath, this is one that should have been the easiest to identify and prosecute.

Any bank that owns a mortgage with the debtor in default must follow a simple set of legal steps in order to foreclose. The procedure is time consuming, specific to each state's laws and involves lawyers, so foreclosures are expensive. Hey, it is the cost of issuing credit, and a simple reality of the rule of law. There are no shortcuts.

Except the banks took many short cuts and did so on purpose and with the goal of improperly expediting the process. They failed to review the documents of the mortgages they were foreclosing on, then told courts they had. They didn't verify information, but claimed to have done so in sworn affidavits. They hired $8 an hour burger-flippers to “robosign” these documents, pretending the underlying legal work had been done. They knowingly used falsified records, some of which they bought en masse. They were aided by a company called DocX, which had a price list of fabricated documents for use in court. (DocX, by the way, was eventually indicted on charges of mortgage fraud).

After creating phony dossiers on borrowers, the banks signed and notarized affidavits stating they had taken all of the legal steps. In many cases, even the notarizations were fakes. Submitting a falsified notarized affidavit to a court is perjury and fraud.

Of course, the burger-flippers who did the paperwork didn’t think up the whole scheme -- someone much higher did. Somewhere between these low-level workers and the chief executive officer were managers who masterminded robosigning. So far, just one midlevel executive has been convicted at Bank of America, while scores of others have gone untouched.

Mortgage underwriting: Then there are the crimes committed in mortgage underwriting, where defects were knowingly ignored. The FBI investigated these cases early on, but investigators never moved forward with prosecutions.

Maybe the scale of the financial penalties bank agreed to pay had something to do with this inaction. Bank of America, for instance, using shareholder money, paid $16.65 billion to settle allegations of fraudulent mortgage originations, securitizations and servicing. One can't help think that this money bought immunity from prosecution for executives.

Money Laundering: Banks have been laundering staggering sums of money for drug dealers and terrorists. Hey, there are big bucks in high net worth narco-terrorists. Awash in cash, drug cartels relied on big banks to launder their ill-gotten money. Apparently, it was just good business to grab a slice of that pie. However, these are deeply offensive, very illegal activities, and deserve not just penalties, but jail time.

How much of this dirty money made its way through the banks? One analysis estimates that $1.6 trillion of tainted proceeds has been laundered through major money-center banks around the world.

A U.S. Senate report linked HSBC to drug lords and terrorists, leading to a record $1.9 billion fine. The Federal Reserve faulted Citigroup over its controls, allowing money laundering to go on. And Wells Fargo admitted to laundering money for Mexican drug gangs.

So next time you hear the claim that “there were no crimes committed by bankers,” just remember that this may be the biggest lie of the 21st century.

To contact the author of this article: Barry Ritholtz at To contact the editor responsible for this article: James Greiff at

[Sep 26, 2014] 'The New Classical Clique'

Economist's View

Paul Krugman continues the conversation on New Classical economics::

The New Classical Clique: Simon Wren-Lewis thinks some more about macroeconomics gone astray; Robert J. Waldmann weighs in. For those new to this conversation, the question is why starting in the 1970s much of academic macroeconomics was taken over by a school of thought that began by denying any useful role for policies to raise demand in a slump, and eventually coalesced around denial that the demand side of the economy has any role in causing slumps.
I was a grad student and then an assistant professor as this was happening, albeit doing international economics – and international macro went in a different direction, for reasons I’ll get to in a bit. So I have some sense of what was really going on. And while both Wren-Lewis and Waldmann hit on most of the main points, neither I think gets at the important role of personal self-interest. New classical macro was and still is many things – an ideological bludgeon against liberals, a showcase for fancy math, a haven for people who want some kind of intellectual purity in a messy world. But it’s also a self-promoting clique. ...

Regarding Waldmann's remark about the ideological proclivities of, among others, Martin Feldstein, at the recent NBER meetings in D.C. he presented a paper on reducing tax expenditures to lower the deficit, wherein no tax expenditure favoring saving or investment fell to his axe. When someone in the audience mentioned that tax expenditures for saving probably reduced saving more than increased it (since the cost to the Gov exceeds the marginal effect on saving), he professed ignorance of whether or not that is true. (It is.)

bakho said...

In the 70s models were started in a lot of fields in addition to economics including biology, environmental science, ecology. In part it looks to have been physics envy. But the physicists made models of systems that were far more simple than economics. Modelers in the 70s went to work using computers that filled whole rooms but had less computing power than my laptop. By necessity they had to make assumptions that made the models crude predictors. But computing power was increasing and the optimists believed that eventually it would be possible to model such complex systems as economics using micro foundations, a lifetimes work.............. Not. Micro founded models make about as much sense as building a weather model based on individual atoms. Computers still are not there yet and may never be. The modelers of the 70s were overoptimistic about what they could deliver and buffaloed many people into thinking they were hot stuff. It was an exclusive club with higher math skills required as a ticket to admission. It is most difficult to cut losses on sunk costs, but that is their legacy.

Rather than detailed models that provide insights to the minutiae of economies, models have many short cuts and assumptions that assume as givens what might be important insights. They assumed the economy of the time: Full employment and supply limited. The models of the 70s fell apart with the 80s recession but regained their footing after the recovery and great moderation when the economy was in a sweet spot that required little action for the Fed. Thus the models had several decades to coast along without major fail. We hit an economy that was demand limited and high unemployment. The things many models simply assumed away were the very problems that needed addressing.

The 70s models belong on the dust heap of history in the company of many failed models in other disciplines that have long since been abandoned. As the Nobel Laureate Max Planck noted, "Science advances one funeral at a time."

bakho said in reply to bakho...

SWL wonders why Keynes was dismissed in the 70s.

Very wealthy special interests disliked Keynes, disliked the New Deal and spent some of their money to support academics and intellectuals that could dismiss Keynes or show that his policies were in error. They funded people to work on the project of undermining Keynes and still do. Wealthy elites were eager to support economists to work on economics projects that denounced Keynes. Researchers of all striped try to keep their patrons happy. If refutation of Keynes was the price demanded in order to build up a computer based economics from micro foundations so be it. Keynes wasn't needed for micro foundations. Keynes was an impediment to funding. It is not surprising that Keynes was jettisoned. When micro foundations sputtered, there was too much crow to be eaten. Better to double down than die of embarrassment.

The US Is In a Societal Panic: Why Our Tax and Economic Debates Are Irrational

David Cay Johnston is an excellent lecturer, who can address economics and public policy in clear and simple statements.

This is one of most informative talks I have heard about where we are, and how we got here, what the crony kleptocracy is, and how it works.

Johnston's concept of a societal panic corresponds to the notion of national hysteria which I have expressed on a number of occasions. But he fills out the idea more fluently and fully. It is a dangerous period of time which can yield new ideas and concepts, depending on how well we survive it.

It is a must watch, and I rarely say that.

[Sep 11, 2014] 'Think Tank-Gate' Corruption Is the Price of Empire by Justin Raimondo

Quote: "Corruption – there is no other word for the buying of America’s thinktanks by rich foreigners – is part of the price we pay for our empire."
September 8, 2014 | The Ron Paul Institute for Peace and Prosperity

A New York Times investigation into the influence of foreign money on American thinktanks is causing a Twitter-storm as I write this, and with good reason. In one particularly egregious example, the report details an explicit agreement, signed by the principals, between the Center for Global Development (CGD) and the government of Norway for the former to propagandize on behalf of doubling a foreign aid program to Norway in exchange for a $5 million donation. Aside from the brazen corruption of the CGD/Norway relationship, the report focuses on three other Washington DC biggies: the Atlantic Council, the Brookings Institution, and the Center for Strategic and International Studies, all of which receive substantial chunks of cash from rich overseas donors, primarily from the Middle East, Europe, and the Far East. For example, the Times notes:

"The United Arab Emirates, a major supporter of the Center for Strategic and International Studies, quietly provided a donation of more than $1 million to help build the center’s gleaming new glass and steel headquarters not far from the White House. Qatar, the small but wealthy Middle East nation, agreed last year to make a $14.8 million, four-year donation to Brookings, which has helped fund a Brookings affiliate in Qatar and a project on United States relations with the Islamic world."

CSIS was a major supporter of the Iraq war (both of them), as were the Gulf sheikdoms that have been funneling money into it: CSIS has also been a major bulwark of the War Party when it comes to Iran.

Brookings, the grand old man of Washington thinktanks, denies all that cash has any meaning as far as its "product" is concerned, but it’s hard to take this seriously when it publishes papers like this and sponsors events like this one, where Qatar’s funding of jihadist groups like ISIS and other radical Syrian rebel factions is downplayed in favor of putting the onus on Kuwait. Qatar has been a major backer of the decidedly non-"moderate" wing of the Syrian rebel movement, and while Brookings has published writers skeptical of the idea of arming and/or funding them, a bit of research shows that their overwhelming bias has been pro-rebel, e.g. "Arm the Syrian Rebels. Now."

Brookings has also been a major source of pro-Israel propaganda in the United States via their Saban Center for Middle East Policy. Funded by Haim Saban, an Israeli-American television and film producer – originator of the "Mighty Morphin Power Rangers" – whose wealth is estimated at $3 billion, the Saban Center has consistently supported the Israeli party line and acted as a "nonpartisan" complement to AIPAC’s Washington Institute for Near East Policy. Quite naturally, the Saban Center’sKenneth Pollack was a major supporter of the Iraq war amongst the policy wonk crowd.

Dual Israeli-American citizen Saban makes no bones about the goal of his giving: he has said that his number one priority in giving money to thinktanks like Brookings is to "strengthen the US-Israeli relationship." As a New Yorker profile of Saban put it, he counts "three ways to be influential in American politics": "make donations to political parties, establish think tanks, and control media outlets." Saban owns Univision and has repeatedly tried to buy the Los Angeles Times. He is also one of the top donors to the Democratic party, and will no doubt be a major contributor to Hillary Clinton’s presidential campaign.

At a recent Brookings Institution dinner, Saban engaged in a "two-cheeked kiss" with Qatari Prime Minister Jaber Al Thani. What unites these two somewhat disparate figures is their fulsome financial support for Brookings, which – like any whore – sells its services to the highest bidder.

While Brookings, one of Washington’s most established courtesans, charges higher prices, and thus relies on high-rollers like Qatar and Saban, the relatively new Atlantic Council takes the quantitative approach: the Times reports the Council has accepted donations from at least 25 countries since 2008." Among the donors: Estonia, Latvia, Lithuania, Macedonia, Hungary, the Czechs, the Slovaks, Sweden, Luxembourg, and the United Kingdom. This donor list isn’t surprising: the Atlantic Council, as befits its name, is NATO’s unofficial lobbyist in Washington. It has been particularly militant around the Ukraine issue, pushing the NATO-crat party line that the fascist coup leaders in Kiev are really Jeffersonian democrats and stoking the embers of the cold war.

CSIS, long a mainstay of interventionist policymaking, actually posted a list of the governments that have filled its coffers, including Saudi Arabia, United Arab Emirates, the United Kingdom, NATO – and the United States of America! Yes, your tax dollars are going to fund the efforts of CSIS co-director and senior fellow Thomas Sanderson and CSIS "Transnational Threats" head honcho Arnaud de Borchgrave in their efforts to torpedo a possible peace agreement with Iran. We don’t know how much Uncle Sam doles out to CSIS because they refuse to divulge specific amounts – and of course we peons have no right to know.

The extent of the problem of foreign governments buying up American thinktanks like house flippers buy up foreclosures is bigger than even I imagined. As the Times puts it:

"The scope of foreign financing for American think tanks is difficult to determine. But since 2011, at least 64 foreign governments, state-controlled entities or government officials have contributed to a group of 28 major United States-based research organizations, according to disclosures by the institutions and government documents. What little information the organizations volunteer about their donors, along with public records and lobbying reports filed with American officials by foreign representatives, indicates a minimum of $92 million in contributions or commitments from overseas government interests over the last four years. The total is certainly more."

As Todd Moss, COO of CGD, said "after being shown dozens of pages of emails between his organization and the government of Norway": "Yikes"!

The Foreign Agents Registration Act (FARA), which requires foreign lobbyists to register and report their activities to the federal government, has never been enforced except selectively: US allies are given a free pass, and the "foreign aid" gravy train flows freely and fast. This makes perfect sense, given our status as a global empire on which the sun never sets: our foreign clients and protectorates are constantly begging for handouts, intervention against their enemies, and special economic privileges of one sort or another, and the government would no more shut down this profitable industry than it would voluntarily dismantle the Empire itself.

NATO’s eastern European members want US troops and bases on their soil, ostensibly to "protect" against the nonexistent threat of a Russian invasion – and it’s only natural for them to go running to the Atlantic Council to lobby on their behalf. Qatar wants US aid to Syria’s jihadist rebels – and off they go to their bought-and-paid-for "scholars" at Brookings to write policy papers and sponsor events pushing US intervention in the Syrian snake-pit.

Corruption – there is no other word for the buying of America’s thinktanks by rich foreigners – is part of the price we pay for our empire. It won’t stop until we return to our roots as a republic that "seeks honest friendship with all nations – entangling alliances with none."

[Jan 18, 2014] Neoliberalism and Corruption by Wyz

May 19, 2011 |

The core assumption of our neoliberal moment, of course, is that markets are the best ways to distribute goods and organize society. Right-neoliberals end there, and declare war on all public goods and any attempt whatsoever to regulate that market. Left-neoliberals maintain that individuals should have access to some basic social welfare, but always reject the idea that the state should be in charge of distributing it. Thus you end up with bizarre, hideously complicated, and inefficient systems like Obama’s health care plan. Since it is almost literally unthinkable that the state could provide a good better than the Market could (every time you say the word Market, by the way, an angel should be playing flutes inside your brain), left-neoliberals have to invent complicated ways to bribe, coerce, and manage the Market God into sort-of-kind-of-not-really providing the resource that left-neoliberals admit is essential.

This critique of neoliberalism is well known. Two recent stories, though, have reminded me just how much this brand of brain-dead market worship isn’t just inefficient and wasteful, but contributes directly to corruption and the erosion of our democracy. First, this one from Albany. Charter schools are, of course, neoliberalism’s wet dreams– you get abundant public money, little oversight, and, best of all, get to hide behind cute disadvantaged kids, all while doing Goldman Sachs’ bidding. Problem is, of course, they don’t actually perform any better than most public schools, so given a choice parents might not send their children to charter schools. The first solution, of course, is to spend money on advertising, a horrible waste of public money, which doesn’t in any way contribute to a better educational experience. The second option we see in Albany, where Charter Schools are spending their money, which comes, remember, from the taxpayers, to advertise against the local school budget. Why? Well, the budget didn’t affect them at all, but it would increase support for the city’s public schools. So they used public money, in order to try to lower the funding for their competitors, who happen to be public schools. Cute, huh? Public money in order to hollow out public institutions.

Next, we have the prison industry, where the New York Times reports that private prisons are no cheaper, and often more expensive, then public government run prison. If Dostoevsky famously said that the conditions of prisons demonstrates the level of your civilization, then the fact that we have turned our prisons over to faceless, unaccountable corporations seems appropriate. But even more appropriate to our time, is that the prison industry often uses their money, which comes from the public, to advocate for brutal racist immigration policies that are guaranteed to produce more prisoners. Specifically, they were behind the push for Arizona’s notorious SB 1070 law, cracking down on undocumented immigrants.

Connecting both stories, obviously, is that fact that the market is not some neutral “tool” that can be manipulated to serve the ends of the state. By turning public goods over to private entities, we empower people who have a particular interest in public policy. The (attempted) underfunding of Albany schools and the racist immigration laws of Arizona, then, are partly the product of seemingly separate political decisions about how to provide certain services.

[Jan 18, 2014] Neoliberalism and Corruption

Aug 19, 2008 |

In 1997, the World Bank asserted that: any reform that increases the competitiveness of the economy will reduce incentives for corrupt behavior. Thus policies that lower controls on foreign trade, remove entry barriers to private industry, and privatize state firms in a way that ensure competition will all support the fight.

The Bank has so far shown no signs of taking back this view. It continues to claim that corruption can be battled through deregulation of the economy; public sector reform in areas such as customs, tax administration and civil service; strengthening of anti-corruption and audit bodies; and decentralization.
Yet the empirical evidence, much of it from the World Bank itself, suggests that, far from reducing corruption, such policies, and the manner in which they have been implemented, have in some circumstances increased it. — Dr Susan Hawley, Exporting Corruption; Privatization, Multinationals and Bribery, The Corner House, June 2000 Jubilee Research (formerly the prominent Jubilee 2000 debt relief campaign organization) has similar criticisms, and is also worth quoting at length:

Rich country politicians and bank officials argue that because dictators like Marcos, Suharto, and Mobutu were kept in power with western arms and were given loans to squander on ill-judged and repressive schemes, that the people of those countries—who often fought valiantly against those dictators—cannot be trusted not to waste the money released by debt cancellation. This may seem confusing to people not familiar with the logic of the IMF and World Bank.

In summary:

  • Creditors colluded with, and gave loans to dictators they knew were corrupt and who would squander the money.
  • Creditors gave military and political aid to those dictators — knowing arms might be used to suppress popular opposition
  • Therefore, successor democratic governments and their supporters, who may have been victims of corruption and oppression, cannot be trusted.

To many people in the South, this seems irrational and illogical—the logic of blaming the victim. It is the logic of power rather than of integrity, and is used to benefit the rich rather than the poor in developing countries.

A similar logic argues that if the World Bank and government export credit agencies promoted inappropriate and unprofitable projects, then southern governments proved their inability to control money because they accepted the ill-advised projects in the first place. Thus, if money is released by debt cancellation, it must be controlled by agencies which promoted those failed projects.

This is the logic that says if people were stupid enough to believe cigarette advertising, then they are too stupid to take care of themselves and the “reformed” cigarette companies should be put in charge of their health care.

The same institutions who made the corrupt loans to Zaire and lent for projects in Africa that failed repeatedly are still in charge, but their role has been enhanced because of their success in pushing loans. Can we trust these institutions to suddenly only lend wisely; to not give loans when the money might be wasted?

Preventing new wasted loans and new debt crises, and ensuring that there is not another debt crisis, means that the people who pushed the loans and caused this crisis cannot be left in charge.
The creditors or loan pushers cannot be left in charge, no matter how heartfelt their protestations that they have changed. Pushers and addicts need to work together, to bring to an end the entire reckless and corrupt lending and borrowing habit. — Joseph Hanlon and Ann Pettifor, Kicking the Habit; Finding a lasting solution to addictive lending and borrowing—and its corrupting side-effects, Jubilee Research, March 2000

And in terms of how lack of transparency by the international institutions contributes to so much corruption structured into the system, Hanlon and Pettifor continue in the same report as cited above:
Structural adjustment programs cover most of a country’s economic governance.
… The most striking aspect of IMF/World Bank conditionality [for aid, debt relief, etc] is that the civil servants of these institutions, the staff members, have virtual dictatorial powers to impose their whims on recipient countries. This comes about because poor countries must have IMF and World Bank programs, but staff can decline to submit programs to the boards of those institutions until the poor country accepts conditions demanded by IMF civil servants.
There is much talk of transparency and participation, but the crunch comes in final negotiations between ministers and World Bank and IMF civil servants The country manager can say to the Prime Minister, “unless you accept condition X, I will not submit this program to the board”. No agreed program means a sudden halt to essential aid and no debt relief, so few ministers are prepared to hold out. Instead Prime Ministers and presidents bow to the diktat of foreign civil servants. Joseph Stiglitz also notes that “reforms often bring advantages to some groups while disadvantaging others,” and one of the problems with policies agreed in secret is that a governing elite may accept an imposed policy which does not harm the elite but harms others. An example is the elimination of food subsidies.
— Joseph Hanlon and Ann Pettifor, Kicking the Habit; Finding a lasting solution to addictive lending and borrowing—and its corrupting side-effects, Jubilee Research, March 2000

As further detailed by Hanlon and Pettifor, Christian Aid partners (a coalition of development organizations), argued that top-down “conditionality has undermined democracy by making elected governments accountable to Washington-based institutions instead of to their own people.” The potential for unaccountability and corruption therefore increases as well.

World Bank battles corruption — but only in some countries.

Observing the struggles of its sister organization (the IMF), the World Bank has taken a proactive approach to its own crisis of legitimacy by considering extending invitations to Mexico, Turkey, South Korea and China to become full voting members. The World Bank is also investing $30 million in a public relations campaign in an effort to position itself as the premiere lending institution for global efforts to end poverty, protect the environment and address the global AIDS pandemic, as well as to reiterate that it is the world’s largest “development” research organization.

At the heart of this new media campaign is World Bank President Paul Wolfowitz’s new anti-corruption campaign. Given Wolfowitz’s recent history as the architect of the Iraq war and occupation — an undertaking literally drowning under allegations of mismanagement and nepotism — many see this anti-corruption campaign as grossly hypocritical.

Many African leaders have long said that they need Western institutions to aid them in rooting out corruption and ensure transparent governance, since international institutions based in the Global North are complicit in corruption. Recently, European countries have pressured Wolfowitz to put greater emphasis on building institutions to fight corruption in the developing world, rather than simply suspending loans where corruption is suspected. As a result, he began working with shareholders to develop a framework to fight and monitor corruption. The framework will be considered at the next IMF/WB meetings in the Fall of 2006 in Singapore. While welcoming this needed reform, many argue that the World Bank is not applying the same scrutiny to Iraq and Indonesia (where Wolfowitz worked prior to his work in the Bush administration) that is being applied to Chad and the Democratic Republic of Congo.

In January, the World Bank cut off $124 million in loans after Chad changed its laws to siphon oil pipeline revenues away from anti-poverty programs; and in March, the Bank imposed rigid conditions on Congo’s oil-exporting capacity. The World Bank maintains that Chad, Congo and Sudan may all be eligible for debt relief in the coming months, provided they show proof of economic stability and government reform. Civil society reactions Addressing corruption and the need for basic standards applied to loans and disbursements has been one of the main campaign points of civil society in the Global South for the last 30 years. Campaigners are pleased to see the financial institutions that are the source of so much corruption taking this life-threatening issue seriously. However, ensuring that debt-servicing funds are properly reallocated to address human needs (education, health, etc.) is a process that must involve partnerships between civil society and governments in indebted countries. This process cannot be achieved solely vis-a-vis international institutions. At present, there are seven international bodies that address accountability and transparency in international fund management. If the World Bank wants to add itself to this list, there must first be a proper analysis of why these existing institutions and bodies have not been wholly effective.

Corruption by Anup Shah

Corruption everywhere; rich and poor countries, international institutions

It goes without saying, almost, that corruption is everywhere. Corruption in poor countries is well commented on (sometimes used dismissively to explain away problems caused by other issues, too). It would be futile to provide examples here (see also the sources of information at the end of this document for more on this).

Rich countries, also suffer from corruption. Examples are also numerous and beyond the scope of this page to list them here. However, a few recent examples are worth mentioning because they are varied on the type of corruption involved, and are very recent, implying this is a massive problem in rich countries as well as poor.

The first example is the US government, accused of outsourcing many contracts without an open bid process. Jim Hightower notes that “An analysis by the Times found that more than half of their outsourcing contracts are not open to competition. In essence, the Bushites choose the company and award the money without getting other bids. Prior to Bush, only 21% of federal contracts were awarded on a no-bid basis.”

Another example is Italy, where former Italian Prime Minister Silvio Berlusconi and some of his close associates were held on trial for various crimes and corruption cases (though Berlusconi himself has not, to date, been found guilty of any charges). Many key teams in the massive Italian soccer league, Serie A were also found to be involved in a massive corruption ring.

In the United Kingdom, the arms manufacturer, BAE was being investigated for bribing Saudi officials to buy fighter planes, but the government intervened in the investigation citing national interests. The Guardian also reported that BAE gave a Saudi prince a £75 airliner ($150m approx) as part of a British arms deal, with the arms firm paying the expenses of flying it. This seemingly large figure is small compared to the overall deal, but very enticing for the deal makers, and it is easy to see how corruption is so possible when large sums are involved.

International institutions, such as the United Nations and World Bank have also recently come under criticism for corruption, ironically while presenting themselves in the forefront fighting against corruption.

The recent example with the UN has been the oil for food scandal, where the headlines were about the corruption in the UN. In reality, the figures of $21 billion or so of illicit funds blamed on the UN were exaggerations; it was $2 billion; it was the UN Security Council (primarily US and UK) responsible for much of the monitoring; US kickbacks for corrupt oil sales were higher, for example. (This is discussed in more detail on this site’s Iraq sanctions, oil for food scandal section.)

At the World Bank, headlines were made when its recent president, Paul Wolfowitz, was forced to resign after it was revealed he had moved his girlfriend to a new government post with an extremely high salary without review by its ethics committee.

Paul Wolfowitz’s appointment was also controversial, due to his influential role in architecting the US invasion of Iraq. A former member of staff at the World Bank also noted concerns of cronyism related to Wolfowitz’s appointment way before the scandal that forced him to resign.

The US nominee for the next president is the former US Trade Representative and currently an executive at Goldman Sachs, Robert Zoellick. His nomination is also coming under criticism. Bush supports it, saying Zoellick “is the right man to succeed Paul in this vital work.” Former World Bank chief economist, and Nobel Prize winner for economics, Joseph Stiglitz feels that instead of a political appointee, it would be better to get an economist who understands development.

As also reported by the BBC, Paul Zeitz, executive director of the Global AIDS Alliance, said that he thought Mr Zoellick was a terrible choice because “Zoellick has no significant experience in economic development in poor countries,” and that “he has been a close friend to the brand-name pharmaceutical industry, and the bilateral trade agreements he has negotiated [for the US] effectively block access to generic medication for millions of people.”

While the US typically gets its preferred nomination to head the World Bank, Europe has typically got its preferred person to head the IMF. Critics have long argued that this lacks transparency and is not democratic. While not illegal as such, it does feel like a form of corruption.

Address weaknesses in the global system

The Bretton Woods Project organization notes that the World Bank, under pressure of late, has suspended a number of loans due to concerns of corruption. These include loans to Chad, Kenya, Congo, India, Bangladesh, Uzbekistan, Yemen, and Argentina. The Bank has also started internal investigations of Bank corruption. However, “despite high-profile moves by president Paul Wolfowitz, the root causes of corruption—underpaid civil servants, an acceptance of bribery by big business, and dirty money—remain largely unaddressed.”

The Bretton Woods Project adds that the “normalization of petty corruption in developing countries has in part been driven by”

  • IFI conditions;
  • The aid industry for “overpaying consultants” and turning a blind eye to corruption in some regimes; and
  • The “World Bank’s ‘pressure to lend’ culture where staff are rewarded for the volume of the portfolio they manage;”
  • The World Bank’s slow pace in investigating and disbarring companies found guilty of corrupt practices such as bribery, fraud or malpractice;
  • Failing to increase transparency of some of its own procedures;
  • The IFI’s “central part of an international financial system which has both actively and tacitly supported the global proliferation of dirty money flows” including, for example, the financing of various despotic rulers that have siphoned off a lot of money to personal offshore accounts.

To help address these problems, the Bretton Woods Project suggests a few steps:

  • Greater transparency of World Bank processes, allowing greater visibility for elected officials and civil society in recipient countries;
  • Strengthening internal mechanisms within the Bank itself, to monitor integrity of Bank functions, and allow truly independent audits of Bank operations;
  • Minimum standards in governance, transparency and human rights that must be fulfilled before approving oil, gas and mining projects in institutionally weak countries.
  • Not always tying loans with economic policy conditions in such a way that some governments surrender their policy-making space.

During the 2002 World Summit on Sustainable Development, the BBC broadcast a mini debate on globalization, poverty, and related issues, and had a panel of around 30 experts, from both the developing and rich countries. One person on that panel was Vandana Shiva, a vocal critic of the current form of globalization and its impact on the environment and people in the third world. She was asked why people should listen to concerns from the third world when they cannot sort out the rampant corruption first. Her answer was simple: rich countries need to stop dictating policies that encourage corruption in the first place.

Like Shiva, Professor Neild feels that the solution is philosophically simple. However, as Neild acknowledges, in reality it is far harder to do, due to the power interests involved:

It is hard to see how the international economic agencies and their member governments can introduce incentives that would cause corrupt rulers to [attack corruption]… Not only are the rich countries and their agencies in this respect impotent, they commonly have been and are accomplices in corruption abroad, encouraging it by their action rather than impeding it.

… It is hard to see any solution other than transparency and criticism. It would take an unprecedented degree of united dedication to the checking of corruption for the international community to agree that the oil and mining companies of the world should boycott corrupt regimes, somehow defined, let alone manage to enforce an agreement.

Robert Neild, Public Corruption; The Dark Side of Social Evolution, (London: Anthem Press, 2002), pp. 208-210, [Emphasis added]

[Jan 18, 2014] Corporatism masquerading as Liberty

I have been meaning to write something on faux Libertarians of the corporatist ilk for a while. However, since I switched to forecasting mode instead of advocacy, I have tried to leave the political element out of my posts as much as possible. I’ll leave the politics to those who enjoy it; I don’t. But, I think this is an important topic so I am going to give it a go here.

If you do a search for the word ‘liberty’ on the Internet, invariably you find the Wikipedia entry for that word. I think the definition used there is a good one. Here’s what Wikipedia says about Liberty:

Liberty is the concept of ideological and political philosophy that identifies the condition to which an individual has the right to behave according to one’s own personal responsibility and free will. The conception of liberty is influenced by ideals concerning the social contract as well as arguments that are concerned with the state of nature.

Individualist and classical liberal conceptions of liberty relate to the freedom of the individual from outside compulsion or coercion and this is defined as negative liberty.

What you will notice is there is nothing in this definition regarding corporations. It is all about individual liberty and the freedoms of individuals. Individuals are born with innate, natural and inalienable rights to liberty that are self-evident. This philosophical view of humankind gained currency during the enlightenment and is now universally accepted. It also underpins the very concept of democracy and is the origin of the founding of the United States of America.

For example, the U.S. Declaration of Independence begins [highlighting added]:

When in the Course of human events it becomes necessary for one people to dissolve the political bands which have connected them withpowers of the earth, the separate and equal sta

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

As always, I have to note that the writer of the Declaration was a slaveholder in a country in which government killed the indigenous population. So, there is certainly a gap between the high-mindedness of this wonderful document and actual events on the ground. Don’t let that detract from the aspirational quality of the words.This is exactly what individual liberty is all about.

On the other hand, a corporation is a societal construct codified into legal existence to further the mutual interests of individuals. A corporation is “an artificial being, invisible, intangible, and existing only in contemplation of the law,” according to Chief Justice Marshall in the Dartmouth College Case of 1819. Trustees of Dartmouth College v. Woodward, won by Daniel Webster when the state of New Hampshire attempted to turn the college into The University of New Hampshire, was an early American test of eminent domain-type property seizure.

A corporation has no inalienable or natural rights. Nevertheless, it is the fact that corporations represent a group of individuals that allows the ‘corporatist’ to claim that these fictional legal entities should enjoy the same natural and legal liberties and rights with which individuals are born.

Let me be bold here: The ‘Corporatist’ is a kleptocrat masquerading as a believer in liberty. He uses terminology based in liberty to construct an ideology solely as a means of furthering the gains of a specific strata of society allied with the corporatist and at the expense of other strata, by coercion if necessary.

Remember my post on kleptocracy from 2008? If not, here are the four methods Jared Diamond says ruling elites use to maintain power:

  1. Disarm the populace, and arm the elite.
  2. Make the masses happy by redistributing much of the tribute received, in popular ways.
  3. Use the monopoly of force to promote happiness, by maintaining public order and curbing violence. This is potentially a big and underappreciated advantage of centralized societies over noncentralized ones.
  4. The remaining way for kleptocrats to gain public support is to construct an ideology or religion justifying kleptocracy.

I broadened the argument on this in my year in review in 2009. Please read The year in review at Credit Writedowns – Kleptocracy to get a fuller perspective. Here’s the statement from that post I want to concentrate on:

The last (and perhaps most important) issue [of the four ways elites maintain power], in my view, has to do with the unabiding faith in free markets that many now have. It is with religious zeal that these so-called Libertarians defend the primacy of markets over all else when in reality common sense would tell you that those with the greatest influence and money will always be at an advantage without some check on that influence and power.

This is the corporatism, the faux Libertarianism, to which I refer. The logic goes like this:

  1. Individuals have inalienable rights to freedom. This is a fundamental right that all individuals have and efforts by government to undermine these rights must be resisted at all costs.
  2. Corporations are groups of individuals which have banded together for mutual benefit. In so doing, they can express their individual natural rights more effectively than they could as individuals.
  3. As such, corporations must retain the same rights as individuals legally in order to allow those individuals the corporation represents to express there natural rights. Therefore, the same resistance to denying the rights of individuals must also be transferred to the corporations which represent them.

This logic will take you much further in furthering the aims of corporations, the point being that corporations, businesses, should enjoy the same rights that individuals have.

That is not to say that businesses should not have rights. They should; and we should grant them as much liberty as is reasonable and warranted. But let’s be clear, corporations are not individuals; they are collections of individuals. Often, individuals hide behind this collective using the corporate veil to shield themselves from sanction for behaviour that abuses individual liberties. In a very real sense, the rights and liberties of businesses and individuals often come into conflict. A real libertarian would always favour the individual in that conflict. A corporatist would favour the corporation. That’s the difference.

Let me give you an example. Say I was walking down the street in Louisville, Kentucky and saw a cute little shop that sold Kettle Korn. For those of you who don’t know kettle korn, it is salted and sweetened popcorn that was brought to the U.S. by German immigrant farmers in Pennsylvania, Maryland and into the Midwest over two hundred years ago. In Germany, popcorn is sweet not salty like it is in the U.S. So, I see this store and I am thinking, “They have Kettle Korn in Kentucky? Wow, who knew. I love this stuff. Let me go get some.” Here’s the problem: the owner of the store has a business policy that no black people are allowed inside. Mind you, this isn’t a government policy because government discrimination based on race or ethnicity is illegal in the United States. But, this business owner doesn’t want Blacks in his store. So when I enter, he tells me to leave because I am violating his store’s liberty to choose its own policies.

I would say the individual liberty trumps the business liberty in this case, especially since the owner is violating his own government’s business policy as well as societal norms. A corporatist would say that the business owner wins since it is his business. Again, that’s the difference.

There are lots of other examples of corporatism at work in the U.S. legal system regarding property rights in particular. My November 2009 post “New York to use eminent domain to build a basketball stadium” showed the New York State Court of Appeals ruling that the Atlantic Yards basketball project can go forward as planned, dislocating the residents in the Brooklyn, NY area where the stadium is to be built. The decision means that government can evict you from your own home, seize your property, and give you what it believes is a fair price without your consent to build a sports arena, ostensibly for the public good but certainly for state and private profit.

This and other cases like it are occurring because of the decision in Kelo v. City of New London, Conn. If a state or local government deems a private project – funded by private monies and profiting private enterprises – to be in the public interest, it can seize your property to allow this project to occur. In the New London case, residents were evicted to make way for a luxury hotel and up-scale condos, from which private developers would profit handsomely. Kelo was an outrageous example of cronyism completely at odds with the ethos of the Dartmouth College Case of 1819. Because of Kelo, government can now abuse its power to enrich specific private interests. That’s corporatism at work.

Corporatism has nothing to do with liberty. It is all about power and coercion. It’s about favouring the big guy over the little guy, the more well-connected over the less well-connected, the insider over the outsider. And in society that means favouring large, incumbent businesses over smaller businesses, new entrants or individuals. How does deregulation and free market ideology fit into this?

“Obviously, if some always have more power and wealth than others, there is never a situation in which the economic playing field is level. Moreover, it is axiomatic that those with the means and access will always have greater influence over government than those without. So, in a very real sense, the socioeconomic elite of any advanced, stratified society will always have disproportionate control of the economic and political system.

“Now, I happen to be a Libertarian-minded individual, so I have nothing against the free markets or the concept of limited government and deregulation. Freer markets and more limited government are my preferred ideal. However, I am a realist. I understand that markets are never truly free and government fulfils a necessary function.

“So, when you hear someone talking about getting government out of the way and allowing the free markets to work, you should be thinking about the influence and control this would naturally engender.

“Think crony capitalism

“In fact, I would argue that the deregulation and free market capitalism that these individuals refer to is really crony capitalism in disguise. I will explain.

“When I think of deregulation, I think of two related but distinct concepts. The one is the actual de-regulation, which is the permission of economic actors to compete in markets previously unavailable to them by order of legislation or de facto government intervention and coercion. The other is regulatory oversight, which is the maintenance of specific rules of engagement under threat of penalty on economic actors by government. De-regulation and regulatory oversight are related concepts but they are not the same.”

This favouring of large corporate interests is what Bill Black has been calling Deregulation, Desupervision and De Facto Decriminalization. Dylan Ratigan calls it corporate communism. Ron Paul calls it corporatism. I am calling it kleptocracy. Whatever label you put on this ‘thing’, it is not about liberty at all. It is about entrenching the interests of a select few at the expense of the rest– and that has nothing to do with liberty.

[Jan 18, 2014] Thatcher and corporatist corruption

April 16, 2013

Margaret Thatcher‘s belief, writes Dalrymple, that the idea of public service

was…a mask for private rent-seeking, which could be avoided only by the introduction of the management techniques of the…private sector, paved the way for the…corporatist corruption of…Blair…and Brown….She helped create a…large class of apparatchiks posing as businessmen, who…learned how to loot the public purse….Blair and Brown…expanded the public sector to secure votes…and increased…dependency on the state….They did so by…borrowing.

[Jan 18, 2014] The Corporatist Culture of Corruption

A very interesting use of the concept of corruption as a tool to blackmail "resource nationalists" and enforce neoliberal regime in countries like Russia.

Transparency International, a non-governmental anti-corruption organization in Berlin, classifies Russia as one of the most corrupt nations in the world. The organization defines corruption explicitly: "The abuse of entrusted power for private gain." Transparency International's 2010 Corruption Perception Index, an assessment administrated by independent institutions on corruption in the public sector, ranked Russia 154th out of 178 nations, below Iran, Kenya, Cambodia, and Pakistan. The CPI measures corruption in the following way:

The surveys and assessments used to compile the index include questions relating to bribery of public officials, kickbacks in public procurement, embezzlement of public funds, and questions that probe the strength and effectiveness of public sector anti-corruption efforts...It captures information about the administrative and political aspects of corruption.

In response to global distrust, the Anti-Corruption Council meeting on January 13, chaired by Russian President Dmitry Medvedev, outlined Russia's emphatic difficulties with bureaucracy. The President sketched out a plan for reform, while emphasizing the need for civilian cooperation in all anti-corruption initiatives.

[Nov 03, 2013] Plutocrats vs. Populists

Economist's View

Dryly 41 said...

Much of this is nonsense. The idea that Larry Summers was opposed by "The left wing of the Democratic party..". is pure nonsense. Clinton, Robert Rubin, and, Larry Summers led the Wall Street wing of the Democratic party to join with right wing Republicans such as Alan Greenspan, Phil Gramm, Newt Gingrich, and, Thomas Bliley to eviscerate the "strict supervision" of the financial system and return to the Laissez Faire approach of Warren G. Harding, Calvin Coolidge, Herbert Hoover and their Treasury Secretary, Andrew W. Mellon. The New Dealers referred to Harding, Coolidge, Hoover, and, Mellon as "Lazy Fairies". You could make the case that Clinton, Rubin, and, Summers were even lazier Lazy Farries than President Calvin Coolidge, his Treasury Secretary Andrew W. Mellon, and, Commerce Secretary Herbert Hoover, since, in 1927 Coolidge signed into law the McFadden Act which place restrictions on interstate branch banking. Small banks wanted the McFadden Act but there was also a recognition that the economic and political power of the Wall Street banks should be curbed. Eisenhower signed the Bank Holding Company Act of 1956 which extended McFadden Act restrictions to bank holding companies. In 1994, Clinton signed the Reigel-Neal Act which repealed the McFadden and Bank Holding Company Act of 1956, thus, creating "Too Big To Fail" financial institutions. In 1999 Clinton signed the Gramm-Leach-Bliley law which removed the restriction on commercial banks from joining with investment banks prohibited by Glass-Steagall while retaining the deposit insurance liability of the Federal government signed into law by FDR on June 16, 1933. In 2000 Clinton signed the Commodities Futures Modernization Act prohibiting any regulation of derivatives.

When does a set of policies that have proved successful, such as the "strict supervision" of finance which provided the longest period of financial stability in American history, suddenly become "extreme" advocated by "Left wing" Democrats? I would argue they are not "extreme" but conservative. As we have seen again Laissez Faire doesn't work too well.

Gibbon said in reply to Dryly 41...

That is absolutely true, strict supervision, and interstate firewalls to prevent financial contagion, limits on the size of finance companies to prevent 'too big to fail' are pragmatically conservative not looney liberal. Point mostly excellently argued.

Also one of observations, conservative policy in the US aren't conservative at all. So much conservative policy to me these days seems like just a bunch of threadbare and moldy fig leaves covering superstition, fear, and greed.

One comment I also have is that plutocracy as currently encultured can't bring itself to offer up anything to the middle classes and the poors. So they have nothing they are willing to offer, more the demands they're making on the economic distribution means that there gains have to come from at the expense of the rest of us. Not just a lower percentage share, but lower in absolute terms. I think more than anything, this is what's driving things.

Dryly 41 said in reply to Gibbon...

I agree that the use of terms is incomprehensible in this era. One striking example; "supply side" tax cuts for the wealthy by Ronald Reagan were denominated as conservative. No! In fact that was a radical, radical departure from traditional Republican party orthodoxy from its inception in 1860 through 1980. In the twenty years of Reagan and Bush family presidencies not one budget was balanced and the Gross Federal Debt was increased from 32.5% to 85.1%-and this notwithstanding Clinton raised taxes and reduced the debt by 9.7%.

Not only was "supply side" radical for the Republican party, it was radical for any party in American history. Nothing like it has ever been done, and, it was not done for any great national purpose such as incurring debt for the Revolutionary War, the Civil War, WW I, or, WW II. All those trillions were borrowed to fund tax cuts for the wealthy.

Nothing "conservative" about that.

[Oct 20, 2013] 'Congress all bribed, has zero confidence in eyes of American people' - World Bank whistleblower

The Federal Reserve is printing dollars like there is no tomorrow, and if they keep going, the rest of the world is not going to accept them.
RT SophieCo

Sophie Shevardnadze: Our guest today is whistleblower Karen Hudes, former senior counsel at the World Bank. Karen, it’s great to have you on a show today.

SS: So, the government shutdown. Is the move on the part of the Republicans justified? Is fighting off Obamacare worth all this mess?

KH: I think there is something more going on behind the scenes. A lot more, actually.

SS: What do you mean?

KH: Well, there is terrible currency problem. We’re on the verge of the currency war. The Federal Reserve is printing dollars like there is no tomorrow, and if they keep going, the rest of the world is not going to accept them. As it is, the BRICS countries – Brazil, Russia, India, China and South Africa – have decided that they are going to finance the trade among these countries with assets and pay for the difference in gold. And this is the right move for them...

SS: But how is that connected with a shutdown though?

KH: The US Congress has been fighting with the presidency, because the presidency have been in total contempt, and the highest legal officer of the United States government has also been in contempt of Congress in fighting this international corruption that is ruining the dollar as an international reserve currency.

SS: But you know, economists have been predicting the dollar will fall ever since the crisis in 2008. But the Government has managed to keep it afloat.

KH: Well, not for long. If you look at what’s going in the gold and other precious metals markets, silver as well, we’re headed towards something called “permanent gold backwardation”- that means there is a loss in confidence in the fiat currencies that are issued by those private banks. They like to consider themselves as ‘public banks’ but they really are owned by private entities. And these currencies are about to crash because they are valueless, that’s what always happens to paper currencies that aren’t backed by assets.

SS: Like you’ve mentioned - “gold backwardation”, gold is often chanted as perfectly safe investment and alternative to the dollar, even. But how come the price of gold is falling?

KH: Because of market manipulation - but that can only continue for so long because the Central Banks are running out of gold and the rest of the world are lining up to buy them. If you want to buy gold today, you have to pay a premium. What they are offering in the future is called ‘a naked short’. They don’t have the gold to back those offers, that’s illegal what they are doing.

SS: I will get back to gold in a bit. But for now I would like to focus on Obamacare. In your opinion, is Obamacare really that crucial for the US economy?

KH: What you have is something that’s very good for the medical insurers because most of the other countries that offer medical coverage do this through a single issuer. And that’s not what we have here. What we have here is a bill that was drafted by the medical insurance companies. It’s not good for this economy. It never was.

SS: Why do you say it’s not good?

KH: Because what’s happening is that workers that worked full-time are being put deliberately on part-time basis, so that the companies can avoid giving the medical insurance coverage under the provisions of the law.

SS: You know this Obamacare thing.. I’ve heard it many times being compared to Socialism, Communism sometimes even. Do you trace the resemblance?

KH: That’s just because the mainstream media, when they report about what’s going on, are doing it by telling lies and anything that’s good for the powers that be. The mainstream media is completely owned and controlled by the same companies, private companies that own the Federal Reserve System. Most of the American citizens are clueless about the corruption that’s rifling their economy.

SS: But just to make sure - are you saying that everything about Obamacare is bad? Or are there good things about it?

KH: No, of course, there are good things about it. But the problem is that the people that wanted to get up decent coverage were not given the tools, they were not given the equipment, they were not given the press coverage – the honest press coverage, that society needs to enact just legislation. The Congress people are all bribed by these corrupt forces and the American citizens have zero confidence in their Congress.

SS: So, at this point you side with the Republicans for blocking the medicare.

KH: I’m not siding with Democrats or Republicans, because both of those parties have been co-opted by these terrible corrupt forces I’m talking about.

SS: What we have right now is Americans being forced to get health insurance. How does it go with their love of liberties and freedom of choice?

KH: It’s not so much a question of being forced; you have to look at those parts of the society that have been thrown under the bus. The uneducated children, who are not given superior education, like we used to have. We are society that is giving short shrift to the people that need us. I’m not saying that we ignore the health needs of our country. I’m saying that we ignore the mainstream media, because they are not telling us the truth.

SS: You know, I’ve also heard Obama supporters argue that the American Capitalism is on the verge of death in its present form, the way it is existing now, and the social injections, meaning the medical care and Obamacare, are needed as the only way to reform it or save it. Do you agree or disagree with that?

KH: The problem is not with the American citizens, they are a wonderful group, their values are good. It’s just that they are not given the tools that they need to have a just society. They are not given the basic information about what is really going on and who is benefiting from the economies that they are being told… they are being told that they have no money, they have taken an entire city, Detroit, and declared it bankrupt. When what’s actually happening is their tax dollars are not even staying in the society, their tax dollars are going by treaty to the United Kingdom, and then they are being transferred to the Vatican, to the bank of the Vatican. This is not a society that is going to be sustainable on any basis, for any reason.

SS: Do you feel like American economy is picking up because we hear President Obama saying the shutdown hurts American economy but at the very sensitive moment, word is it has just started to catch up. Do you feel like it’s catching up really?

KH: Those numbers about the employment are completely fabricated because they are not counting those people who have given up ever finding a job as unemployed. That’s ridiculous! The real rate is just about double what they reported as being.

SS: So the American debt looks like a doomed patient. Is there any other possibility for it than just grow into eternity forever? I mean raising debt ceiling once or twice a year, what’s the problem?

KH: The problem is actually when you talk about debt, is that our currency is financed by debt; our currency is issued by the Federal Reserve instead of the Treasury which is unconstitutional. When the Federal Reserve System was instituted in 1913 most of the Congress was on break, they sneaked that legislation through. So the debt is there simply for those bankers to put in interest on it and have it grow and compound every year. The debt is a fabrication, it’s probably should be repudiated. But it can be repudiated until you’ll have looked that all of the implications.

SS: Do you think it’s going to go on and on forever?

KH: No, what I think it’s going to happen is that at the upcoming Bretton Woods meeting on October 9th the countries of the world, the foreign ministers of the world are going to sit down and have a rational basis for currency rather than this fiat currency which is absolutely... what can I say, it makes no sense to anyone but the bankers that are issuing it.

SS: So, when you look at the concept of the debt, it’s much more than just borrowing money - it makes you controllable. For example, in the case of US - who controls it, you mean the big corporations, or countries like China and Japan, who control large chunks of the debt?

KH: Well, that’s a very good question and, fortunately, some mathematicians at the Swiss Federal Institute of Technology have given us a very precise answer. They did a study of who owns and controls the companies on the capital markets - 43 000 companies. They found out that there is «a secret super-entity», they call it, that owns 60% of the earnings every year and 40% of the assets. They did this by putting the same people on the boards of these companies. So, they have ten times the economic power than there are entitled to. And they thought that none would catch them at it. This is a huge conglomerate that has been rigging the labor prices, it has been rigging all of the commodity’s prices, and it has been trading in the securities markets with the insider information. It has got to be stopped. It also bought up the media and has been lying to people deliberately. This is going to stop.

SS: So just to answer my question - the government is controlled by the conglomerate or the corporations rather than countries that are up and coming economically, right? Why haven’t these corporations or conglomerate, as you call it, been caught? Why is nothing changing?

KH: That’s the whole point about it. They’d like to think they are in control but they are not, they are not above the law. And we, citizens, know exactly what they are up to, we’ve been working on this problem, all of the governors of the States have been working on this terrible corruption, so have the Attorneys-General, so have the Sheriffs, and it’s not going to continue. The American people are taking back their government and they are stopping this terrible corruption.

SS: As of today, the United States is a financial heart of the world. Whether it collapses or keeps on going, it’s obviously wrong – this much power is concentrated in one place. Asia is a rising monster right now; could it be stealing this financial role from the US? Do you think China, for example, could steal its financial role from the US? Or are they also controlled by that same financial elite you’re mentioning?

KH: Well, I can tell you that the Jesuits have a very strong stranglehold on China as well but I can also tell you that the transition of economic strengths from the western countries to the east is going to happen, but it’s going to happen in a smooth way. It’s not going to be a transition through a currency war like that terrible corrupt group is trying to manipulate everyone into. No, we’re going to have a peaceful power transition this time around; we’re not going to have the World War III. They try to pull it off in Syria, they are now thinking they can pull it off in Iran, it’s not happening. The citizens of the world see what they are doing and we’re not letting them get away with it this time.

SS: Foreign governments keep buying US Treasury bonds despite obvious problems US economy is facing. What’s making them do that, in your opinion?

KH: I think the biggest market for the Federal Reserve notes is the US Treasury and there is a gut of dollars right now. But, yes, there is also a small market, unfortunately, the market is weakening as the dollar weakens because of all of this, what they call quantitative easing, where every month so many additional dollars are printed with absolutely no backing.

SS: Should we be buying gold?

KH: Well, yes and no, I think gold is probably a wise purchase right now, but more as insurance than investment, because there is actually a great deal of gold, there is even more gold than people know about. For example, the amount of gold in the deposit in the Bank of Hawaii is 170 000 tonnes, this is more than the World Gold Council says is available for all the gold on the Earth. People don’t know how much gold there is, there is a lot of gold.

SS: Are you buying gold?

KH: I did actually, yes. But not because it’s an investment, but because I’m not 100% certain that we’re going to get to act together before all of the paper fiat currency falls apart. So I see it as insurance, but because of the amount of gold that’s actually around in the world in deposit all over the world I’m not so sure it’s a great investment.

SS: So you think the return to the gold standard is a realistic thing? It could be a possibility?

KH: Well, actually, that’s not such a good thing. The currency ought to be backed by value, but there is no reason why it should be restricted to precious metals, it could be any of the commodities that are valuable. The important thing is that, yes, the currency should be backed by assets rather than by debt as we now have.

SS: But if a financial collapse happens , let’s say, will gold be of any use? I mean, there is shortage of food, look at the world today, the biggest problem we’re facing is the clean drinking water. What gold is going to do about that?

KH: First of all, I think that we’re going to manage to get our act together; I’m not expecting a collapse. Very accurate game-theory model is showing that we’re going to manage to make a transition in a very smooth way; maybe there’ll be a few fits and starts, but I think most of the countries in the world are in favor of working together and not to have a collapse. The only thing that you’re saying is that some of these crooks haven’t figured out, they haven’t seen the writing on the wall, they haven’t seen that we understand that there is a way to work together and avoid these problems, which are definitely avoidable.

SS: So, Karen, you were a senior counsel at the World Bank. Tell me something, honest banking is this an oxymoron?

KH: No, we have examples all over the place - in the United States, the state of North Dakota has its own state bank and many of the other states are looking at that - at the moment 22 other states are looking at it, and we’re urging the other 28 states to look at it. There was a bank in Amsterdam that, I think, went on for 300 years with no problem. We know how to do banking, it should be like infrastructure to support the economy, it shouldn’t be for the benefit of elites that think they are above the law as we currently have. If you look at the Bank for International Settlements (BIS) - that institution was established when the war reparations were being exacted from Germany after the World War I. That’s when it was started in 1930 and I believe its 60 central banks, that are members of the BIS - those are the corporates, those are the ones that really needs to go out of business.

... ... ....

Bill Otinger

Google video FIAT EMPIRE and on youtube see video THE SECRET OF OZ

[Oct 20, 2013] 'We face a crisis of epic proportions, Circus Clown College in Congress a joke' - whistleblower

October 18, 2013 | RT SophieCo
Download video (181.08 MB)

Is the drama in Washington, a comedy or a tragedy? What's a better term for American democracy? When will the debt time bomb detonate? Who can stand up against American exceptionalism? We discuss this and more with National Security whistleblower, Mark Novitsky

.Sophie Shevardnadze: Our guest today is another national security whistleblower, and no it’s not Edward Snowden – his name is Mark Novitsky and he joins us from the American city of Minneapolis.

So the drama in Washington – what was it? Is it a comedy or a tragedy?

Mark Novitsky: It’s really disturbing to refer to what’s happening in Washington as a joke, and on behalf of all critical, clear-thinking Americans I want to apologize to the rest of the world for our Circus Clown College in Congress, and only the American Congress could pat themselves on the back and break their elbows for kicking the can down the road instead of actually doing their job, and delaying this for another three months on an issue that they should have handled couple years ago.


Read the full transcript

SS: There is no default this time, but only for now, the root causes aren’t really going away, be they political or economic, don’t you think?

MN: The situation is that actually there was a default, we went into default in May, and the Treasury department actually started dipping into US government pension funds to make up for that deficit. All of these things are really scary and I think that we would have to take a look at these issues as if what would be the consequences for the average person if they were to pile up their credit card debt to the point where they can’t afford to pay their mortgage and going to get another credit card – there has to be some type of resolution to all of this nonsense from an economic perspective. I think the first thing you do when you’re in the bottom of the hole is stop digging.

SS: Why is it that every draft bill turns into existential crisis for Congress? I mean, beforehandCongress was somewhat able to make more pragmatic decisions, come to an accord – but now it’s all about life and death struggle..

MN: Because the concept of social control being best managed through fear predates Christ from a political perspective, and in order for there to be fear so that one may have social control have to have a crisis. People often tend to refer to me, saying “Mark, you’re so negative!” That’s because we have a new crisis every week that we need to deal with and the way that we end up dealing with this crises is piling them on top of each other and nothing ever gets resolved. We need to hold our government officials accountable to the rule of law, to the Constitution, and I want to thank Russia Today for having me on, because the media is such a big component of that – and, tragically, Americans find themselves the best-entertained people on the planet and the least informed. But I think that that tide is turning, people are starting to understand the use propaganda, and being a little bit more selective.

I’ll be honest with you – when I told people that I was going to do a program on Russia Today people were saying “why would you do that? You’re going to look like a Commie!” And I said, “Listen, you need to broaden your perspective. You need to find a news source or news service that doesn’t just tell you what you want to hear.” You have to be critical, you have to think about what they are trying to sell you, when you’re talking about the news. What becomes news here in America is when a teen actress named Miley Cyrus sticks her tongue out and gets more naked and there’s three hours’ programmed on CNN.

SS: Well, thank you very much for being so positive about Russia Today, but talking about narrowing things down or broadening them – American Democracy is narrowed down to two parties and even then the Congress fails to agree on things. Is there a better term than “democracy” to describe it?

MN: Feudalism, I guess. Pseudo-democracy. We are in the United States of America and we ended up coming down to having a choice between two pre-selected candidates who spend the most money. A look at what just transpired with our country and our government with regards to this “every six month debt limit increase” or it’s a fiscal cliff, or it’s austerity – there’s always something to be afraid of, but at this point in time if we look at the television and see these two idiot teams bickering and fighting back and forth.

I’ll be candid with you, when I have a mental image of American politics I see two warring factions of chimpanzees baring their teeth and screaming at each other and waving and flailing their hands above them and throwing feces at each other. That’s where we are at. We got to get back to being the beacon of freedom, the beacon of democracy, the beacon of common sense.

SS: The American debt looks increasingly insane with no improvements or even signs of desire to pay down. Where is the US going with it?

MN: That’s a situation that we are afforded having a luxury being the international reserve currency of the world, and with that should come a certain responsibility. There have been periods of time when governments have been the international reserve currency of the world, you know, pre-World War II it was the UK, before that that was Spain, before it was Portugal – so a country being in the position of holding an international reserve currency is not a static thing. What we have to take a look at is getting our spending under control, eliminating useless and severely detrimental wars that we’re involving ourselves in relation to support of the military industrial complex. We should be like a responsible adult, pay what we own and live within our means.

SS: The US is printing money in enormous amounts to serve its financial purposes – it is their national currency, of course, but it’s also an international commodity, whose consequences resonate through every corner of the world, including riots and revolts in countries with destroyed economies. Is this an American exceptionalism at play?

MN: I’m troubled by the fact that president Obama mentioned the word “American exceptionalism”, because I think that God created us all equal. That’s kind of a point that I would not have made, especially to the UN General Assembly. Somebody has to do it. Somebody has to be the international reserve currency, there has to be oversight, there has to be transparency and that’s where the process or procedure of improvements needs to be made.

We have a system that’s broken. We have to find the best and the brightest people in the US and internationally, that have the resolve to correct the problem. We’re off the tracks, we’re off the rails and so we can’t go back to continuously doing the same thing. So we need to put a team of objective independent critical thinkers behind the problem and address these concerns.

SS: But do you personally think America is exceptional?

MN: Well yes, I do. And I think that we have a potential for being exceptional. But again, do we have problems? Yes, we do. But do we have the capacity to address these problems? Yes we do. I think a sense of nationalism is something inherent in every society and that’s a good thing. But what we have to do is to be grown ups and understand that not everything we do is in the public’s best interest and rein in those people that are taking us off the rails.

SS: Is there any valid force to stand up to this exceptionalism in the form we have it now?

MN: The people, the American people and the people of the world. You know, the internet, in what you’re doing here has changed so much, because information is power, and the fact that we have so many avenues for information and sharing information. I really have not been allowed, and nor has Karen Hudes, nor have many people been allowed, to say the types of things we’re saying to the American media. That has to change and that’s why I thank Russia Today for having the opportunity to express this opinion and to say that this can no longer be confrontational, we’re all in the same team and we all need to work together. This is a crisis of epic proportions – if the US goes down, tragically, we’re going to take the rest of the world down with us, and so we have to look at this as a global concern.

SS: You are a national security whistleblower – tell us your story. Has your story resonated at all?

MN: Yes and in fact, I’d like to lead off with the fact there’s a national security whistleblower coalition, and the senior academic advisor - his name is William Weaver - actually advises people against being a national security whistleblower, that if you do that you’ll be destroyed, you’ll go through character assassination, you will lose your family, your job, you’ll lose your credibility and that goes back to the way that you can tell a society is in decline by how they treat their truth-tellers.

Now, this whole issue of Ed Snowden and national security and domestic surveillance – as everyone knows, this is international surveillance issues and concerns. I worked for a company called Teletech Holdings, which is headquartered in Denver, Colorado. I was illegally and maliciously sued by this company in federal court. Against all odds and unlimited resources of Teletech’s legal coffers and basically pro se, I managed to fight Teletech’s illegal and malicious accusations and charges against me, to win a dismissal with prejudice. And in the end of that term I thought that that was a victory and it really was it, because early on in the situation I was warned by the former CIO – its chief information officer at the Teletech subsidiary I used to work for – that Teletech had the capacity to wiretap my phones and ISP and they would see to it that I would never work again.

Now, at that point in time I had no idea that this company was involved internationally and had a special subsidiary called Teletech Government Solutions. It was couple of weeks after that warning that my son found two people in the house, that I presumed to be people that were setting up to attach wiretaps to the phones. We know that they don’t need that information now, but what I understood was that Teletech had friends in very high places and they would see to it that I would never work again, and tragically that was the case.

The further along I got, I realized I was on the receiving end of the domestic surveillance, and that this was a government contractor, and they seem to be receiving preferential treatment and cover by the government. So I did everything the whistleblower is supposed to do. I went to the media, I went to lawyers, I went to, then, my Congress people…

SS: But did your story got out, did people listen to you?

MN: None whatsoever. I mean, I handed people a Pulitzer Prize-winning story on a golden platter, and people in the media would say “Oh my God, I can’t believe what you’re telling us!” I came to them with everything that I’m going to tell you and everything that I’ve got is public record information. I’m not telling any top-secret information.

See, there is the thing of the internet that if Congress and their staff actually wanted to, they could find a whole lot of information. So when President Obama and members of the Congress say “this isn’t about spying on the American citizens,” that is blatantly untrue. And I am a victim of that.

Based on the information and belief, on everything that I’ve gone through, I’ve been blowing the whistle on the fact that the government is going after whistleblowers, they’re going after journalists, they’re going after government employees, they’re going after lawyers and judges. Think of the ramifications of all of this. If George Orwell was alive today, he’d do a spit-take about what’s going on. One of the points that I wanted to try to make was just how long has this been going on and sent you some information, with respect to some of the programs the government has been involved into. That goes back to ’60s!

SS: Mark, you’re saying that no one will hire you, you’re being tapped, no media will take your story. Are you reaching your goals? Is whistleblowing worth it?

MN: You know, somebody has to do it. If not me or us, then who? What I advocate is... I mean, was it my life goal to become a martyr? Absolutely not, I had unrealistic expectations of how I would be treated by the media, by the government officials. I figured that if I went and provided all of these documents and the information to the government officials, about domestic surveillance perpetrated against the American citizens that is being covered up. And I was essentially told that under the Patriot Act, it’s against the law for the government officials to tell you if you are under surveillance. In fact, my senator Al Franken recently commented in a CNN op-ed, and I’m going to paraphrase what he said: “If we told the American people what the NSA was doing, then Congress could face federal charges for leaking information.”

SS: To get back to whistleblowing. Do you believe people can fight back their right to know what is going on and to govern the process? What needs to happen to make them actually start pushing?

MN: In the US we’re presumed to have equal access to courts and equal access to due process of the law –if you can afford it. The way that our – I don’t call it “justice system” – our legal system works, it a for-profit enterprise. And so, here I went to the majority of the largest local and national associated law-firms, and I laid down my case for them about this hostile abuse. I took this to the state attorney-general, and at the time the deputy attorney-general looked at me and said that this is one of the most egregious acts of civil injustice that he had ever seen, but there was nothing he could do.

When I went to a variety of lawyers, they looked at this and said “Oh my God, this is horrible. This was a travesty of justice. This was a lawsuit brought against you with no evidential support and this was a hostile and malicious attack!” But they said there’s nothing they could do, unless I could afford to pay them $250,000 upfront for the retainer.

A corporation of the size of the Teletech is just going to outspend you. That’s not a justice system. Also, we have a real big problem with a judiciary and the rulings of the court. I think it would be in the best interest of the US and the world that if we actually had a whistleblower protection program to be in place and afford credible national security whistleblowers and financial whistleblowers.

I am also a financial security whistleblower, in 2007 and 2009 associated with my case with the Teletech, I found out that there was a hotline in the SEC, the Security Exchange Commission, to stop or stall investigations and this in fact happened to me. So I went to Congress and told them first in 2007 about this hotline and showed them the evidence. I also warned about the 2008 financial collapse - hundreds and thousands of people actually warned about the 2008 collapse – and nothing happened. Because as I said earlier in the conversation, there is a need to have a crisis.

I think it was Mayer Rothschild who said that the best time to buy is when it’s blood in the streets, and so we create this crisis and these bubbles, and bubbles are built to explode, and we start the whole process all over again. What we need to do with the whistleblowers, and this was a promise that Obama made when he was a senator and when he was candidate – that whistleblowers represent the best of the US and we need to do everything in our power to protect whistleblowers – when in fact he had done specifically the opposite, and had seemingly attacked whistleblowers with a bloodlust, and keeping things private and secret. That’s getting back to “you can tell where society is headed towards how they attack their truth-tellers”

SS: Mark, I want to talk to you a little bit about the credit crunch of 2008 and its consequences. We’ve seen stocks drop, bailouts, bankruptcies, riots – most agree the major financial institutions were to blame, but nobody really bore the responsibility for that. Can you explain to our viewers, who you see as the main players – banksters you’ve talked about?

MN: That’s the problem. Everything you talk about can be fixed and should have been fixed. I could take American 5th-graders and show to them and demonstrate really to them that these financial crises were not only preventable, by all appearances they look like they were intentional! Again, what happens here impacts the whole world’s economy.

In 2005, mortgage companies and banking institutions and rating agencies coalesced together into this massive concept of fraud and were pushing this fraudulent mortgages on to people and signing people up for houses that they couldn’t afford, knowing that this was going to be a big problem, and then bundling those packages together and selling them on international market, knowing that they were going to default, and then, against the advice that were giving to their customers, actually shorting the investments and securities that they were marketing and promoting to their customers that were not in the loop.

There was information with respect to Fannie Mae and the massive and systemic fraud and abuse by Fannie Mae, but the chairman of Fannie Mae at the time – it was a guy named Franklin Raines – he ended up getting a $2million bonus! So tragically with President Obama and Attorney-General Holder, who comes from the Defense industry, protecting the white-collar criminals, they haven’t grasped the concept that crime expands to our willingness to tolerate it.

The system seems to be gamed for the incentive of fraud and corruption and abuse. Until we start putting bankers in jail for their crimes against humanity we’re going to continue with the same problems. But when we go to our congresspeople, to the regulators, when we go to the FBI - all things I’ve done – I was not only shunned, these people started working against me, and that’s not how the program should work.

[May 11, 2013] The Neoliberal Harvest Routine Economic Fraud Dr. Jörg Wiegratz

10 May 2013 | Truthout

Are you tired of yet another revelation of fraud in the food industry or the banks? Are you paying less attention to those stories? Are you getting numb, thinking more and more "that's just how the system works?"

If so, congratulations! You're learning to lower your expectations to meet the new normal: pervasive, institutional economic fraud. This used to be the sort of thing you read about in income-poor countries in Africa and South America. Nowadays, though, it turns out (yet again) that We Do It Too, and not just the usual suspects in the shadowy corners of the arms trade. Supermarkets and the rest of the food industry, pharmaceutical firms, hospitals and care homes, housing and construction, great swaths of the financial sector - tales from all of these show that fraud and trickery are in the mainstream, the New Black of commercial life. In particular, there appears to be an expansion of organized fraud in the economies and markets for legal, everyday goods and services; the recent horsemeat scandal in Europe is one example of this. And it is not just companies. There's corruption and crime in governments here and around the world: crony capitalism, powerful oligarchies, elite criminality.

All of this raises crucial questions about contemporary capitalist societies. What norms, values, beliefs and attitudes, what ways of thinking and reasoning, shape these practices? What brought these about, and encouraged so many people to take so much from the rest of us?

It seems as though Margaret Thatcher and Ronald Reagan and their powerful backers have a lot to answer for. I say that because my research into fraud points to the importance of the neoliberal talk, policies, programmes and transformations that became important starting in the 1980s. This neoliberal economic and political transformation brought with it a moral transformation. High levels of fraud and trickery, it appears, are the result of the extensive changes in political and moral economies that occurred across economic sectors, the state and communities in those countries that experienced neoliberal transformation.

If the conclusions I have drawn from my own research are generally correct, then dealing with that fraud and trickery is more complicated than many people seem to think. Talk of social enterprise, responsible capitalism, corporate responsibility and the rest might sound nice (to some). But unless we investigate and think carefully about the moral-economic and interrelated political-economic aspects of neoliberalism, that talk is likely to be little more than campaign promises from a tainted political class and hot air from a tainted corporate class.

For scholars interested in economic fraud in the West, the past few years have provided a vast number of cases and huge amounts of information. And yet, few academics are prepared to collect and analyze the data on this historical shift to "fake capitalism" in the West. We have scholars discussing the current economic crisis in conventional terms, but we have few who are concerned with that fraud and what it tells us about social change, power, accumulation and democracy. For most, it seems to be scholarly business as usual post-2008, and that is not good enough. We need a strong scholarly engagement with the realities of fraud and the related bundle of norms, values, practices and systems of power. With that, we can begin to challenge conventional narratives and models of the capitalist market, the sources of wealth, poverty and power, and the bases of people's culture and practices.

If we are going to try to fix things, we need to recognize that fraud is not simply a manifestation of culture. That is because that culture is shaped by the political economy that gives it force. Those who tell us that they want to change the culture in, say, the banking sector are fooling us, and maybe themselves, if they ignore the ways that cultural change works via political-economic change. That is because of a simple truth: if you want to change existing practice, you have to change existing structures of power. Hence, whoever wants to combat commercial fraud has to address commercial power. It is far from clear that our rulers are up for that.

However, if we are going to try to fix things, we also need to remember that fighting fraud does not mean giving morality to the amoral fraudsters and deceivers. Since Mandeville and The Fable of the Bees, we have been told that greed is good, that each of us serving our own interests serves the common weal. The current economic crisis shows how empty that fable is. But it should not blind us to the fact that all economic actors have a moral compass, even the fraudsters. They are guided by moral norms and codes of one sort or another. Those are the codes that lead people to say, perhaps, "Everybody tricks these days," "If I don't do it somebody else will," "Who cares?," "In business you have to be though - I can't afford to be nice," "I wouldn't be paid this much if I didn't make good decisions," "Looking after my family is more important than looking after strangers," or "If we all look out for ourselves, everyone will be better off." Economic fraud, then, signifies not the absence of moral norms, views and codes, but their presence. In other words, a moral norm does not automatically prescribe a pro-social practice such as solidarity, cooperation, honesty or justice. In a particular case, the actually existing moral norm - i.e. notions of standards of interaction regarding others' welfare and of what constitutes acceptable/unacceptable practice - among the actors involved can also be that it is OK, proper, or necessary to defraud (and therefore harm) another human being or social group (say, the poor, elderly, vulnerable, workers, customers and so on), for example to meet the corporation's target, to keep one's job, to survive, to defend or advance one's own power and wealth position or that of one's own family, social group, corporation, or country and so on.

That said, to combat fraud we need to understand it. We need to understand the systems of economic and political power that facilitate it and of the values and norms that justify it. Ignorance will not help us to see where the fraud comes from, and if we can not see where it comes from we can not even begin to see how to restrain it.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

[Jul 26, 2012] The Congressional Culture of Corruption

It is important to distinguish "micro corruption" (corruption on loser levels of goverment hierachy) and macro corruption -- Corruption of Congress.

Jack Abramoff:

I Know the Congressional Culture of Corruption, by Jack Abramoff: ...No one would seriously propose visiting a judge before a trial and offering a financial gratuity, or choice tickets to an athletic event, in exchange for special consideration from the bench. Yet no inside-the-Beltway hackles are raised when a legislative jurist -- also known as a congressman -- receives a campaign contribution even as he contemplates action on an issue of vital importance to the donor.

During the years I was lobbying, I purveyed millions of my own and clients' dollars to congressmen, especially at such decisive moments. I never contemplated that these payments were really just bribes, but they were. Like most dissembling Washington hacks, I viewed these payments as legitimate political contributions, expressions of my admiration of and fealty to the venerable statesman I needed to influence.

Outside our capital city (and its ever-prosperous contiguous counties), the campaign contributions of special interests are rightly seen as nothing but bribes. The purposeful dissonance of the political class enables congressmen to accept donations and solemnly recite their real oath of office: My vote is not for sale for a mere contribution. They are wrong. Their votes are very much for sale, only they don't wish to admit it. ...

[Jun 01, 2012] A populist interpretation of the latest Boom-Bust cycle

naked capitalism

The Theory of Kleptocracy
First, let's use a theory from Guns, Germs, and Steel by Jared Diamond as the center-piece for this little theory. In Chapter 14, entitled "From Egalitarianism to Kleptocracy," Diamond postulates that more stratified societies are by definition less egalitarian, but more efficient and are, thus, able to eradicate or conquer more egalitarian, less stratified societies. Thus, all 'advanced' societies with high levels of GDP are complex and hierarchical.

The problem is: these more stratified, more complex societies are in essence Kleptocracies, where those in power re-distribute societal wealth to themselves. Those at the bottom of the society's pyramid accept this unequal, non-egalitarian state of affairs because they too benefit from their society's relative advancement. It's a case of a rising tide lifting all boats.

Diamond says the Kleptocrats maintain power using 4 different methods:

"1. Disarm the populace, and arm the elite."
"2. Make the masses happy by redistributing much of the tribute received, in popular ways."
"3. Use the monopoly of force to promote happiness, by maintaining public order and curbing violence. This is potentially a big and underappreciated advantage of centralized societies over noncentralized ones."
"4. The remaining way for kleptocrats to gain public support is to construct an ideology or religion justifying kleptocracy."

Kleptocracy in America?
The obvious corollary of this theory is that most successful modern societies are, in fact, kleptocracies. The key is to use the four methods to gain popular support in order to re-distribute as much wealth to the ruling class as the populace will support. If the ruling class takes too much, it will be overthrown and replaced by a new ruling class (which in turn will re-distribute wealth to itself using the same four methods).

While this angle seems cynical, it is a a line of argument that has great internal consistency.

So, is the United States a kleptocracy? Of course it is! Is that bad? Well, it obviously depends on who you are in society. But, it also depends on whether the kleptocracy is efficient and fair over the long term. Let me explain this last statement a bit more.

Extortion, Capture, Looting, Propaganda. Our Modern Finance Industry.

April 8th, 2012 | BEEZERNOTES

First, let’s get something very clearly understood: More than three years after the Great Recession, all of our major banks, as well as the major banks in Europe, remain insolvent. From Yves Smith’s brilliant book, Econned, How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism.

“Andrew Haldane, the Executive Director for Financial Stability at the Bank of England, concluded that it was impossible for the financial services industry to pay for the damage it wrought in the global debacle. The lowest plausible estimate of the total costs that he could come up with, amortized over 20 years, still resulted in a first year’s bill that exceeded the total market capitalization of the biggest banks.”

It took 40 years to unwind a regulatory structure that was the envy of the world. That regulatory discipline allowed America to become the world’s greatest manufacturer. Common sense regulations, forged in the heat of the Great Depression and responsible for a long period of economic growth widely shared by the majority of citizens, were systematically dismantled.

As the dismantling progressed the nation’s financial industry grew in size and profitability. Once only 8% of the economy, it soared to 25%. In terms of total corporate profits, finance grabbed more than 40% of profits. At the core of this expansion were a new class of financial ‘innovations’ called derivatives. Layered over traditional financial instruments like bonds, stocks, insurance contracts, commodity futures and related options, these derivatives exponentially increased the amount of money going into finance and, for all intents and purposes, dramatically under-priced risk. Derivatives had the nefarious effect of funding debt that was hugely under-priced, causing trillions of dollars in ‘bets’ to be made on all aspects of finance.

It wasn’t just in housing mortgages either. This surge in under-priced debt went everywhere: Student loans, car loans, merger and acquisition funding, sovereign debt, insurance contracts–everywhere–you name the financial function and this explosion of liquidity drove down interest rates to the point where those rates couldn’t come close to covering repayment problems or other risks.

The only solution is structural change that reduces the size and interconnectedness of the major actors. Given the fact that these ‘major actors’ provide the primary funding for political campaigns, including millions of dollars in political advertising aimed at influencing the public’s understanding and perception of events, efforts to make structural changes face huge political hurdles.

  • Shrink the use of derivatives, most specifically so-called credit default swaps (CDS). These instruments are pure bets on insurance contracts. They avoid the ‘insurable interest’ rule of insurance (you can’t pay for insurance on your neighbor’s house, for one obvious example, because you have an incentive to burn it down!) and have no legitimate economic purpose other than being a fee generating machine for the financial services industry. These derivatives still exist and are still exempt from regulation, believe it or not. They are so pervasive inside bank balance sheets, an outright ban is probably not wise. Regulating them, however, will end the cowboy type of behaviour common with their use. Regulating them will increase their cost, in other words, and limit their use. This will also restore more accurate risk assessment.
  • Limit guarantees to critically important banking and capital market activities by installing a modified version of the Great Depression era, Glass Steagall legislation. Commercial banks would be limited to making traditional loans and using plain vanilla hedges. They could also engage in pure fee businesses such as those of being custodians or trustees. Any use of CDS derivatives would be limited to regulated CDS insurance subsidiaries. Investment banks would become more strictly regulated although their traditional functions would remain unchanged: Underwriting and distributing equities and bonds and market making; CDS activity limited to regulated insurance subsidiaries; mergers and acquisitions; asset management providing the asset manager does not rely in any way on funding from the investment bank. Proprietary trading and the trading and sale of over the counter (OTC) derivatives would be prohibited, however. Lending to hedge funds, save against specific positions on conservative terms, would be barred, as would warehouse facilities and bridge loans.
  • Tighten other regulations to close gaps and extend liability to responsible parties. These regulations should not be rules-based, but principles-based, a.k.a. ‘if it walks like a duck and quacks like a duck, it’s probably a duck.’ A low tolerance policy towards ‘innovation’ designed to evade standards would be more effective than any attempts to craft airtight regulations.
  • Restore secondary liability. In 1994 the US Supreme Court disallowed suits against advisors like accountants and lawyers aiding and abetting frauds. In criminal law the guy who drives the getaway vehicle is an accessory, why isn’t an accounting firm who prepared misleading financial statements an accessory to fraud?
  • Increase the budgets of regulators. More auditors are needed who can sniff out that something is not right. The claim that everyone who knows the inner workings will be in the private sector and won’t want to be a regulator is specious. There are many examples of experienced private market actors who decide to become regulators. Sometimes for, God forbid, altruistic reasons! The enforcement team would need to attract only a few of these experienced individuals to make a great difference.
  • End ‘Free market’ mania, quoted from Econned:

    “Powerful business interests, largely captive regulators and officials, and a lapdog media took up this amorphous, malleable idea and made it a Trojan horse for a three-decades long campaign to tear down the rules that constrained the finance sector. The result has been a massive transfer of wealth, with its centerpiece the greatest theft from the public purse in history. This campaign has been far too consistent and calculated to brand it with the traditional label, ‘spin.’ This manipulation of public perception can only be called propaganda. Only when we, the public, are able to call the underlying realities by their proper names–extortion, capture, looting, propaganda–can we begin to root them out.”

Beezer here. Econned is the best book I’ve read so far, and I’ve read many, that explains in terms the average person can understand just how we got into this mess–and explain how we might be able to extricate ourselves without burning the whole house down. In our opinion the last bullet is obviously the most important. The public has to be better informed in order to understand that what we have now is decidedly not capitalism and the markets we have now are decidedly not ‘free.’ The first job is to take on the propaganda machine. It’s giving the public a Potemkin Village version of reality. What we need is reality.

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Financial parasitism and looting are the “new normal”

September 17, 2012

Financial parasitism and looting are the “new normal.”

The decision by the US Federal Reserve Board to provide indefinite support to financial markets under a third round of so-called quantitative easing (QE3), announced last week, coupled with the earlier decision by the European Central Bank (ECB) to intervene in the bond markets, marks a new stage in the breakdown of the global capitalist economy that began with the collapse of Lehman Brothers.

The moves by the world’s major central banks to pump more money into the global financial system signify that four years after financial markets stood on the brink of collapse in September 2008, there is no prospect of a return to what were once considered “normal” conditions.

Far from lessening its support to the banks and financial institutions, the Fed is increasing it. The earlier interventions were implemented with time limits. In its latest decision, the Fed has given an indefinite commitment. As the headline of one article in the Financial Times put it, “Fed Sets Its Sights on Infinity and Beyond.”

Moreover, the form of the commitment marks a major turn. Rather than buying up Treasury bonds, the Fed is going to intervene to the tune of $40 billion a month to buy up mortgage-backed securities from the banks and investment houses. It will thereby enable the banks to offload some of the “toxic assets” that provided the trigger for the breakdown.

It used to be said that the task of the Fed was to take away the punch bowl just as the party was about to get going. No longer. Now the Fed is committed to increasing the alcohol content, with a pledge that it will keep topping up the supply indefinitely.

In providing a rationale for the decision, Fed Chairman Ben Bernanke cited the continuing high levels of US unemployment—job growth, even at the lower wage levels now prevailing in the US, is failing to keep pace with population growth—and the anaemic growth in the US economy. According to conventional theory, the Fed’s actions will lower interest rates across the board, making investment decisions more attractive to corporations and leading to economic growth and increased employment.

But as Bernanke well knows, as does everyone else in financial circles, those conditions do not apply. Corporations, above all financial institutions, are continuing to accumulate profits, but they are not being used to finance new productive investments. Rather, they are being funnelled into large cash reserves to be deployed in speculation.

Moreover, cuts in government spending both in Europe and the US are lowering wages and increasing unemployment, thereby reducing consumer demand. The ECB has made it a condition that governments whose bonds it buys must put in place austerity programs aimed at cutting spending and increasing unemployment. In the US, government spending is contracting and may decline even further at the end of the year with the arrival of the so-called “fiscal cliff,” when earlier decisions by Congress to automatically initiate cuts come into effect.

The Fed’s decision is not aimed at bringing about economic “recovery” in any meaningful sense of the term. Rather, its market intervention is intended to raise the price of stocks and asset-backed securities, lifting the profits of corporations, above all the banks and finance houses, not through investment in the real economy but via financial operations. In other words, the very financial parasitism that led to the collapse of Lehman Brothers and the near-meltdown of the US and global financial system has become the official policy of the Fed.

The class interests served by this policy can be seen both in the manner of its implementation and its consequences.

Financial journalist Michael West accurately summed the circumstances of its introduction in an article published in Saturday’s Sydney Morning Herald.

“They demanded the Fed ‘deliver’,” he wrote. “The consequences of ‘failure’ were ‘dire’, they cried.” Bernanke then “obliged the denizens of Wall Street” with the “ultimate money-printing bonanza. And they then had the cheek to dress it up as a boon for the jobless. In reality, the banks get to shovel their lame mortgage debts plumb into the lap of the taxpayers at $40 billion a month.”

As he noted, the Fed is buying not just government bonds, but the “mortgage-backed securities which are clogging up Wall Street balance sheets.”

The Fed’s decision will have global consequences, all of which will impact adversely on the social and economic circumstances of workers as well as the world’s poorest people. Immediately the decision was announced, the prices of oil and gold jumped, signalling the start of a new round of commodity speculation.

This will impact the prices of fuels for transport as well as for cooking and heating, and set off inflation in basic foodstuffs. Already the prices of corn, wheat and soybeans, crucial for the well-being of billions of people, have started to increase.

By printing money, the Fed is also undermining the value of the US dollar in global currency markets, which will have a significant impact in Europe as the euro rises. This will lead to further cuts in exports and increased unemployment as firms find it increasingly difficult to compete.

Countries such as Brazil and Australia, where increases in currency values have already heavily impacted on manufacturing, will also be adversely affected. Further downward pressure on the dollar increases the prospect of “currency wars,” as national governments strive to maintain their export markets.

There is also a political aspect to the Fed’s decision. In 2008, the collapse of Lehman Brothers played a crucial role in swinging the support of key sections of the American ruling elite behind the election of Barack Obama over his Republican opponent John McCain.

The Fed’s latest action in the run-up to this year’s election will similarly provide a boost to the Obama re-election campaign.

But the most significant political conclusions are those that must be drawn by the working class. The decision to promote financial parasitism at the expense of the jobs, livelihoods and social position of the working class in the US and the world over is another powerful expression of the historic crisis and bankruptcy of the capitalist system. There is no economic “recovery” waiting around the corner.

The banks and financial interests represented by the US Federal Reserve and the ECB have a program: parasitism accompanied by the systematic looting and impoverishment of the population.

The working class in the US and internationally must adopt its own independent program, thought out and fought for to the end. It must initiate a struggle for workers’ governments committed to the expropriation of the banks and finance houses as the first, and indispensable, step in the establishment of a planned socialist economy, in which the resources created by the labour of billions are used to meet human needs instead of profit.

Nick Beams

[Oct 21, 2009] PrudentBear by Peter Souleles

October 21, 2009

I used to think that "civilized society" was defined as people collaborating and in the process of doing so, providing each other with goods and services, mostly for reward but at times – either through taxation or volunteerism – for free to those less fortunate. In the process of this collaborative exchange, man was supposed to become more enlightened, thus ensuring optimum outcomes could be secured with fewer natural resources and less labor, abetted by invention, cooperation and innovation. Each generation was to leave behind a legacy of capital formation (roads, bridges, schools, etc.) as well as an intellectual legacy in the arts and technology.

Over time, a compounding of these positive developments would endow each successive generation with a higher standard of living, without the good earth being gutted and polluted beyond recognition.

But something, unfortunately, has gone wrong, and it may possibly become far worse than we can imagine. What has been the source of this failure to compound progress?

The answer is theft. Earthquakes, tsunamis and other such natural phenomena, as well as diseases, are of miniscule consequence compared to theft. Theft throughout history has manifested itself in the same forms again and again and each time it has resulted in resources either being destroyed or re-distributed in the process.

It is my thesis, in this brief essay, that theft is supplanting value in both the medium of exchange as well as in the exchange itself. Theft has become the manifestation of greed and moves in when the conscience moves out. As a result, we are faced with the phenomenon of cascading theft – that is, theft that leads to more theft. In the end, the concept of "value added" is transformed increasingly into "value lost."


War, which has often been described as organized theft, most probably occupies equal top spot in the rankings. History has repeatedly cast conquerors as liberators who bring some form of democracy/freedom to the downtrodden, when in fact a closer examination shows that the conqueror either carts off the spoils and/or leaves behind a corrupt and compliant democracy or dictator that allocates favorable concessions to the bankers and capitalists of the conqueror.

War not only vanquishes the loser, but also has the effect of weakening the ally. A study of how a financially cash-strapped Great Britain was made redundant as an Empire is fascinating as it is telling about who your friends are. According to a recent article by economist and historian Zachary Karabell, Great Britain in 1946 asked for a loan of $5 billion at zero percent interest for 50 years. What she got was a $3.7 billion loan and a set of conditions which effectively installed the United States and the U.S. dollar as the linchpins of power and finance. As someone once cleverly quipped, "I want to thank the U.S.A. for coming to our assistance in 1941 when we really needed them in 1939."

To maintain its Empire, the U.S.A. has installed bases all over the world. According to Hugh Gusterson, professor of Anthropology at George Mason University, the United States has over 1,000 bases worldwide which constitute 95% of all foreign bases in the world. So we have the U.S. citizenry largely footing the bill for human and material resources so that major corporations can extract "profit" which is often not even taxed in the U.S.A. Can anyone estimate what those resources would have yielded the American people had they been deployed in the U.S.A? Moreover, has there ever been an instance in history where a nation has spent so much to make so many enemies? Perhaps it was only a coincidence that the United States invaded Iraq a few months after it announced that it would refuse U.S. dollars for the sale of its oil. It is clear here that business must be protected against "unreasonable" foreigners.

Unfortunately, the matter does not stop there and as part of the cascading effect, additional theft is warranted through the implementation of the Department of Homeland Security and other such measures.

The Banking System

The banking system, which is war's grotesque Siamese twin, is the greenhouse, factory and laboratory of every paper alchemy known and unknown to man. Is there any wonder that this is the case? A recent Wall Street Journal report stated that Wall Street firms would be paying out $140 billion in bonuses this year as opposed to $130 billion a year before the meltdown. Amounts of this size are neither payment nor reward; they are bribes to buy the intellect of America's best without the inhibition of conscience. At least New York might be saved by the infusion of these bonuses.

The credit creation system, which is the heart of banking, is by all accounts nothing more than a debt pyramid that, in combination with opportunistic mortgage brokers, accommodating government-sponsored enterprises (GSEs), clever bankers and gullible investors, gave rise to an unprecedented orgy of buying, speculation and manipulation. Manufactured income details and low upfront interest rates gave the perpetrators of this theft the means to initially create dreams for the clueless home buyers – and to subsequently substitute those dreams with nightmares.

The cascading effect of this theft has led not only to loss of homes, but also bankruptcy, loss of jobs, breakdown of families and the gutting of so many industries that sprung up in the wake of a building boom struggling to keep up with demand. The game was good while it lasted, but the day arrived when even the banks were brought to the brink as a result of losses being generated by the subprime fiasco. This was no doubt greatly complicated by derivatives, which still remain more deadly than the unaccounted for nuclear-bomb briefcases of the USSR.

It is no secret that the Federal Reserve has more or less provided astronomical amounts at a virtually zero rate of interest to a raft of top banks in an attempt to counter horrendous losses, and to therefore save them from annihilation. Has the Fed's largesse flowed to the struggling home owner? According to a recent Bloomberg News report, a total of 937,840 homes received a default or auction notice or were repossessed by banks, which represented a 23% increase from a year earlier. So there is your answer.

Fear not, as not all is lost. Goldman Sachs reported a $3 billion profit in three months just days ago. Is this a sign of recovery or massaging the truth? I am afraid to say the latter after reading various commentators and in particular the piece by Dylan Ratigan in the Huffington Post. Some $64 billion received through the Trouble Asset Relief Program (TRAP), AIG, the Fed and the FDIC was exponentially leveraged to buy distressed assets, which has led to their reflation.

The taxpayers, of course, have received precious little in return but the politicians did better. According to the Center for Responsive Politics, major banks and financial institutions in receipt of $295 billion in TARP money reciprocated with $114 million to Washington for lobbying and campaign contributions. As Andrew Cockburn puts it, "at 258,449 percent, it has been called the single best investment in history."

The mutually parasitic relationship goes further, in that the major banks are also keen buyers of U.S. Treasurys sold at auction. And what they cannot lend out, they ysts and commentators will scratch their heads in disbelief at this fiasco which is so brazen that it defies any modicum of common sense.

Whether the assistance afforded by the Fed to banks can outrun the pace of foreclosures and rising unemployment remains to be seen, although the signs are not encouraging. Either the unfolding internal collapse or the external refusal to continue funding the United States while its dollar slides will inevitably bring on a resolution unlikely to be palatable to anyone. In the meantime, depositors are subjected to laughable rates of interest on their savings as well as the ignominy and insult of potentially having their bank closed by the FDIC on a Friday afternoon.


If war and banking are the terrible Siamese twins then surely government is the mother of these two creatures. Whilst I do not consider myself to be a member of some lunatic fringe advocating the dismantling of government, I nevertheless consider most of its activities to be wasteful and many without purpose and therefore a form of theft. (Here the astute reader will correctly point out that war is their doing also).

Do I need to remind readers that Social Security contributions disappear into the unified budget and replaced with increasingly worthless IOU's in the forms of government securities? Through inflation, their value diminishes until retirement resembles imprisonment. Government will either tax or borrow in increasingly larger vicious circles to both placate the masses but also to cement its position and authority. As the vicious circle grows, so does the amount "skimmed" by corporate America which provides the bulk of the services. Where otherwise would the Halliburtons of this world be without Uncle Sam's generosity?


The final member in the quadriga of theft belongs to consumption. No doubt the Renaissance and the Industrial Revolution transformed the world of consumption, but it has been in the last couple of decades that consumption took on a hideous conspicuousness that has in its own right threatened the viability and stability of the system. Whereas only the rich in previous generations could flaunt their "toys," in the world of today, anyone armed with a credit card could create a veneer of affluence. As Warren Buffet once exclaimed, "price is what you pay, value is what you get." It is clear that whilst price and value are rarely identical, nevertheless the hiatus between the two has never been so disturbingly wide.

Housing values up to the time of the bust were the major but not the only example of this rift. No doubt the siren call of easy credit and the interest-ree loans of retailers also proved extremely powerful and effective. The reality is that the real wages of Americans had not increased since the 1970s, and in an effort to keep the lid on their wage demands and propensity to strike, credit became a common currency. The ability to borrow not only gave the masses the ability to buy, but also blurred the distinction between needs and wants. Consumption was fast-tracked well beyond the normal trajectory of the economy to the point that it now constitutes some 70% of U.S. Gross Domestic Product (GDP).

To repeat an earlier point in a different manner, the price of a need more closely tracks value than what the price of a want does. When wants are satisfied in increasing measures, another cascading sequence of "thefts" occurs. A simple example would be the consumption of high-sugar carbonated drinks and fatty foods, which are simply wants. The effects are well documented and the results highly visible when one looks at the youth of America as it claims close to top spot (if not top spot) on the obesity charts. The effects of such over consumption on their health and by extension on the health system cannot be overestimated. Nor can the effect on their education, employment, income earning capacity, relationships and mental well being be discounted.

Possible Solutions

Between wars, the banking system, government and consumption, one can safely say that the four have combined to bring a great nation to its knee. Should the United States go down on both knees, the ramifications for world prosperity and peace will be greatly jeopardized. The United States has but little time and very few options to counter the present descent in its economy. Creative destruction has largely been thwarted by the interference of government in banking and the car industry, as well as by providing stimulus checks. It may well be that the White House has a chaotic solution in mind should it be faced with doomsday economic scenarios. The reasoning may be that if you cannot get back on top of your affairs, then at least cause as much chaos to your rivals as is possible, to even out the net result. No doubt the U.S. dollar could become a refuge by default.

In my view, the United States can reclaim the high ground in five ways. Whilst its capitalist system has been abused beyond comprehension, it is nevertheless a far better foundation than any communist or socialist system that relies on squeezing and restricting its citizens. In brief the five approaches are as follows:

  • The components of GDP must be given differential weighting. Buying take-out food cannot be accorded the same value as buying fresh fruit. Visiting the doctor cannot be the same as visiting a gym, and buying a solar panel cannot equate to buying an electric hot water heater. Building a house with full bricks must surely rate more highly than a house built of a simple timber frame with some form of cheap cladding. Unless GDP becomes a qualitative measure instead of just a quantitative measure, then the ability of the United States to remodel itself will be hampered.
    The adoption of such changes to GDP calculation may also provide the impetus for a tax system that is more skewed to taxing consumption rather than investment. Hamburgers and soft drinks can incur a value-added tax (VAT) of 20%, whereas the VAT on a solar panel can be zero. I acknowledge that such a proposal is not without difficulties and has a number of objective and subjective limitations. It should be noted, however, that some nations are already studying the proposal of taxing "unhealthy" foods favored by children.
    The introduction, or rather the reintroduction, of honest money is an imperative. Gold, if nothing else, has retained value far better than almost anything else. The dollar's value since 1913 is now not much more than a noon shadow, whilst the Dow Jones Industrial Average is nothing more than a name when one considers that most of the companies in the original index are now history. Unless money regains its "store of value" characteristic, the retirement plan of every American will be become nothing more than a poor quality stamp collection.
    Needless to say, the Social Security contributions of Americans must be extricated from the general budget and accounted for separately. No longer can Social Security contributions be taken in exchange for Treasury bonds, unless they are used in building income producing infrastructure. The printing of dollars by the United States over the last half century has enabled the United States to lay claim to a disproportionate amount of the world's resources. Unfortunately, this misappropriation (another theft) has very little to show as it has been wasted on foreign adventures and very little investment at home.
    Additionally, the U.S. government must put a limit on the cost of health care for each person depending on age and the condition. This will prove to be a veritable minefield as there will always be cases that defy the criteria and which will give rise to many a cause celebre. This is the most unsustainable aspect of the U.S. budget going forward into the future owing to demographic developments, but failure to deal with this will render any other budgetary initiatives almost useless. Shrinkage in government in general is imperative.
    Finally, the gap between rich and poor, as well as the increasing concentration of wealth among the top few percent of the population, is a dangerous development that will destabilize democracy and its workings. The recent figures indicating that gambling is most prevalent among lower socioeconomic groups, is not only a measure of poor education but also an indication of the level of exasperation and helplessness among low-income groups. Perhaps the "rich" can be required to set up or provide certain services through private foundations for the less well-off in the community. This will have the two-fold effect of not enlarging government as well as ensuring best management practices, as it will be in the interests of the "rich" as well as a matter of pride to ensure effective use of their "tax" dollars. Such a proposal is not without precedent as it was common practice in Ancient Athens.

In conclusion, it should be noted that entrenched structures, force of habit, vested interests and a population that has led the high life on debt for too long, make any changes highly difficult. All hope, however, must be kept alive through strategies that can be followed step by step and brick by brick. Failure is not an option, because if compounding misery gets the upper hand, the nation will break apart. Value must be reinstated in transactions if value added is to return to the system. Progress is predicated on value added rather than value lost, and no amount of alchemy, printing, legislation or oratory will ever be able to reverse or supplant that truth.

Peter Souleles, an economics and law graduate, ran a private accounting practice in Sydney, Australia, until retiring in 2000.

Kregel-Parenteau No Sidestepping the Eurozone Implosion «

Wolf packs of financial speculators cicling around...

05/17/2010 | naked capitalism

By Jan Kregel, former professor of economics at Università degli Studi di Bologna and Johns Hopkins,m and currently a senior scholar at The Levy Economics Institute and Rob Parenteau, CFA, sole proprietor of MacroStrategy Edge, editor of The Richebacher Letter, and a research associate of The Levy Economics Institute

A week ago eurocrats launched their campaign of overwhelming force designed to shock and awe the “wolf pack” of professional speculators and institutional investors (hedge funds and pension fund managers) into a more docile, subservient position. In the currency market, the shock and awe wore off after the first 48 hours, while by the end of the week, it also appeared to be wearing off from the equity markets.

Some of this is undoubtedly just the innate brazenness of the wolf pack being expressed. As a general rule, they do not take kindly to being cowed or constrained in any fashion. It is simply is not in their genetic make up. Consequently, they have no choice but to follow their instincts to call the bluff of the eurocrats, and that is part of the reason we are seeing, for example, the wolf pack dragging the euro exchange rate down to the ground in recent trading sessions.

But this is about more than just testosterone counts. Some wing of the professional investing world is beginning to see the design flaws built into the eurozone from day one. And once they spy these flaws, they begin to realize the nature of the solution is something utterly different than what they are witnessing being rolled out before their very eyes. In the following 11 points, we highlight some of the key aspects of the eurozone predicament using the financial balance approach developed by the late Wynne Godley which we have explored in previous blog submissions, papers, and book chapters. Until more investors and policy makers can understand the true nature of the various predicaments facing the eurozone, and the inherent design flaws exhibited in the European Monetary Union and the (In)Stability and (Lack of) Growth Pact, odds are precious time will simply be wasted trying to make believe the shock and awe fix is already in.

1. Underlying the eurozone predicament is a missing adjustment mechanism. There is neither a price nor a policy mechanism that encourages the current account surplus nations to recycle their surpluses in a win/win, pro-growth fashion. Keynes tried to design such a mechanism into the Bretton Woods agreement, but the American negotiators scotched it. This same pro-growth adjustment mechanism is missing at the global level with regard to China (although they did report a trade deficit in March).

2. An ostensibly moral stance advocating balanced government budgets is revealing a profound ignorance of the simple accounting of sector financial balances. Those preferring to impose a “fiscally correct” policy on the peripheral nations should best recognize these accounting realities, and soon. If we are correct that domestic income deflation will be the end result of fiscal retrenchment colliding with private sector attempts to net save, then surely more desperate citizens will turn to even more desperate acts. Rather perversely, the combined effects of fiscal retrenchment, private income deflation, and rising private debt distress are likely to make moral considerations a second or third order concern for many eurozone citizens.

3. Ultimately, current account surpluses need to be recycled into chronic deficit nations in a sustainable fashion. Such a mechanism could be set up under the auspices of the European Investment Bank very quickly. Effective incentives to recycle current account surpluses via foreign direct investment or equity flows should be crafted at once.

4. Such an approach is likely to prove superior to funneling financial assistance through the IMF or other multinational arrangements. The IMF will undoubtedly insure that fiscal retrenchment gets imposed across the region. Any fiscal assistance is likely to be imposed with conditionality – a conditionality that fails to recognize sector financial balances are interlinked, both within and between nations. IMF conditionality is bound to set off the twin contagion vectors of falling trade surpluses and rising bank loan losses in the core nations. Surely this is not what Dutch and German policymakers intended, nor is it any way to hold the eurozone together.

5. Rapidly cutting fiscal deficits without considering the impact of such moves on private sector financial balances is a shortsighted, if not dangerous policy direction. Sector financial balances – the difference between saving and investment, or income and expenditures – are interconnected, and cannot be treated in isolation.

6. Hiking taxes and slashing government expenditures will suck cash flow out of the private sectors of the peripheral eurozone nations. These private sectors have been rebuilding their net saving positions in the wake of sharp and prolonged recessions. Companies have been conserving cash by slicing investment spending, inventories, and employment. Households have already drastically reduced home purchases and consumer spending.

7. It is an elementary fact of accounting that the private sector as a whole can only spend less than it earns if some other sector spends more than it earns. That sector has tended to be the government, usually as automatic stabilizers kicked in while recessions deepened. Indeed, most of the dramatic widening of government deficits is due to a collapse in tax revenues, not to discretionary stimulus. Pursuing fiscal retrenchment in order to reduce government debt default risk will merely raise the odds of private sector debt defaults. Cash flow will be taken from households and firms attempting to rebuild their net saving positions, and private debt servicing will falter.

8. The only way to avoid this outcome is if the nations undertaking fiscal retrenchment can swing their trade deficits around in a fully offsetting fashion. Otherwise, domestic income deflation is the likely result, Indeed, this is the madness behind the method of “internal devaluation” so evident in Latvia’s economic implosion. There is no guarantee that trade swings will be large enough to overcome fiscal drag. A return to debt deflation dynamics like those engaged after the Lehman debacle is not out of the question.

9. Furthermore, since the current account surplus of the eurozone has remained between +1 and -1 percent of GDP for quite some time, there is every reason to believe that attempts by the periphery to achieve trade surpluses will undermine the export led growth of Germany and the Netherlands.

10. It would therefore appear that fiscal retrenchment is about to set off two related contagion effects. First, the loans on the books of German, Dutch and French banks are likely to sour as private sector cash flows are squeezed in the periphery. Bank holdings of government debt issued by the periphery may not default, but the mortgages and corporate loans these banks have outstanding to the periphery will experience rising loan losses.

11. Second, the export sales of German and Dutch companies will fade with the falling import demand of the periphery. As their domestic incomes fall, they will import less. In other words, the fiscal retrenchment the core nations are insisting upon is highly likely to boomerang right back on them.

As it stands, investors have started to recognize that bank in the region are at risk. CDS for Spanish and Portuguese debt have started to widen more dramatically over the past two weeks, although investors still appear overly focused on government debt CDS. Policy makers have also begun to realize Greece is unlikely to be the last country requiring a bail out, while they at the same time sign on for rapid fiscal “consolidation” (read retrenchment) in order to ostensibly avoid becoming the next Greece.

Yet we continue to find many of the points detailed above are not yet recognized by professional investors or policy decision makers. Absent this coherent framework, it will indeed prove very difficult to sidestep an economic and financial implosion in the eurozone, following on the heels of an already historically deep recession, and burst property bubbles in a number of eurozone nations. May wiser heads prevail.

Kevin de Bruxelles says:

4:28 am
I’m not even an economist but it seems obvious that the mistake you are making is to see the Eurozone as an isolated unit instead of an economic entity that exists within a global system. From the global system point of view it is obvious that most of Europe’s’ recent problems will be resolved as the Euro declines in value. The one main exception is the problem of economic and political integration at the EU level which seems to be moving forward but which paradoxically gets more impetus as the crisis continues. In other words in order to profit from the crisis they have to push the speed of this integration before the falling Euro ends the crisis for Europe.

As the Euro declines, the current account deficits will become surpluses in the southern countries, with the exception of Greece. The Greek economic model, which by the way is very similar the the American one, is unsustainable within the European context and must be brought into balance. But luckily it is small enough to be dealt with. Even progress is being made there on reducing military spending if we are to believe the rhetoric coming out of the latest Greek – Turkish summit.

And so as the price of Chinese, Japanese, and American goods and services rise, Europeans will switch to buying European goods. So Germany and The Netherlands will not only be increasing their exports outside the Eurozone but the losses brought on by public fiscal retrenchment will more than be made up for by the increase in demand for European products. In other words the deflationary effects of the decrease in government spending will be matched by the increase in manufacturing brought on by the decline in the euro’s value – both in terms of exporting more out of the Eurozone and switching from imported goods to European manufactured goods within the Eurozone.

Yes energy costs will rise as the Euro falls but European energy policies are well designed to deal with this problem. The taxes make up a large percentage of most of the cost of many forms of energy in Europe. As prices rise these taxes can be reduced and be recuperated by the increase in manufacturing activity.

It is no surprise that Europe will be the first major bloc to come out of the current economic mess since their economy has been the least dysfunctional. How are China and America ever going to resolve their Chimerica imbalances? And how will the UK’s SWINEs (Scotland, Wales, northern Ireland, and the North East) deal with the austerity measures to be implemented by the new Tory government?

renting_is_evil says:
5:15 am

‘to see the Eurozone as an isolated unit’

It goes deeper than that – Americans simply are unable to recognize the concrete economic benefits of the euro WITHIN the eurozone. The arguments about design flaws remain, not that any of them are original to English language economists or analysts, regardless of how often they assume no one actually living in Europe was aware of these flaws. Or more importantly, how those flaws could be used as leverage to create a system which would not have those flaws, ie, greater integration.

And the idea that a falling euro is harmful to Europe is almost laughable – I don’t think any executive at Nokia (’anyone need some more cell phone infrastructure?’), or ABB (’anyone need the hydroelectric facility to power it?’), or Airbus (’anyone need more efficient planes’?), or Siemens (’maybe nuclear is better than hydroelectric? – especially with high speed rail’) or … well, at least some people get the idea. OK, most of them are in charge of European industrial exporters, but unlike the U.S., those people still count in how their nations are guided.

And even the idea that exporters require consumers is peculiarly Anglo-Saxon these days. The idea that a country which improve its road network can pay for the equipment and expertise necessary to build it can thus increase its exports is simply ignored – accounting entities may require zero sum thinking, but really, building a dam which allows for increased food production through providing both better irrigation and the power to process the food which is then sold to the country which provided the equipment is not a zero sum game.

I am not aware of anyone where I live in Germany that has any problem with a falling euro – of course, the 10% gain in German exports just might have be an explanation for that relative calm. And I’ll grant, especially for an American with some awareness of how world markets work, that a falling euro is a reason to panic. Unfortunately, the reason for panic has little to do with Europe.

As a side note – Bloomberg had an interesting euro summary, where it was written, apparently as straightforward truth, that the euro was designed to last forever. Hilarious – no one in Europe expects a currency to last a couple of generations, much less for eternity. After all, Europeans didn’t just wake up to the magic ‘fiat’ idea in just the last couple of years. Ask an East German, or a Slovakian, or a Czech, or …

charcad says:
2:09 pm
It goes deeper than that – Americans simply are unable to recognize the concrete economic benefits of the euro WITHIN the eurozone.

The source of this failure to see arises with a great many Europeans. They also don’t see “the concrete economic benefits WITHIN the eurozone.”

Or more importantly, how those flaws could be used as leverage to create a system which would not have those flaws, ie, greater integration.

This is closer to the mark. For example, the Frankfurter Allgemeine Zeitung has proposed a northern European “hard” currency zone consisting of Germany, Austria, Poland, Finland and the Benelux countries. Such a revived Hanseatic League would exert a strong attraction on Norway, Sweden and even Russia. This system would certainly have far more economic coherence, cultural unity and political stability minus the Latin countries. Cultural, political and economic factors are all far more closely aligned.

Someone who has the best interests of the inhabitants of these regions at heart will gladly greet such a project. otoh someone with a hidden true agenda that amounts to looting and pillaging northern Europe under a false guise of idealism will be less than happy.

Diego Méndez says:
2:30 pm

“This system would certainly have far more economic coherence, cultural unity and political stability”

Don’t shy away. Say the right word: “racial” affinity.

You know nothing about Europe if you think Poland or Russia are more similar (politically, economically or otherwise) to Germany than France or Spain are.

charcad says:
5:20 pm
Dear Diego,

It was perfectly predictable you’d be less than happy. Your agenda of one way North-South transfer payments has been perfectly clear for many months.

Well, now that my money is committed to EU bailouts via the IMF, let me join my President in calling on you, a Spaniard, for “resolute action” on your economy. I only do this in the same helpful spirit as Obama’s recent telephone call with Zapatero.

How much will you personally be belt tightening under the new austerity regime? Can we put you down for, say, a 20% reduction? I’m sure you want to set a strong leadership example for your family and neighbors.

Best Wishes,


Diego Méndez says:

10:51 am
My dear European fellows,

I would have agreed with you some weeks ago. Not any longer.

Europe is blind to the conditions it faces. Solidarity is an empty word, as US commentarists suspected all along.

The only answer to the North-South euro assymetry in this crisis was an Economic Union. The North should have supported inflationary, Keynesian policies at a eurozone level. They didn’t; domestic politics proved far more important than Continental monetary stability.

As I was told repeatedly by NC posters and commentarists, Spain just can’t make up for a deficit reduction via higher exports, barring an intra-euro devaluation.

Kevin, it is just wishful thinking if you think Spain will increase its exports to China and the US 30-fold in a single year, which is what’s needed to prevent an economic collapse.

In other words: since its eurozone partners don’t want to help (via inflation, higher deficits, etc.) Spain just can’t prevent a decade-long depression unless it gets out of the euro.

Now, of course, millions and millions of Spanish unemployed simply won’t wait 10 years living in misery so that the French and the Germans keep on misbelieving there is some kind of European solidarity when there is absolutely *none*, as proved once, and again, and again.

If you just don’t want to give us solidarity, we’ll take it. Forget about some mild inflation in your countries. We’ll just get out of the euro, cause a pan-European banking crisis, and devalue our way to full employment.

Kind regards,


kevin de bruxelles says:
12:32 pm

The only sustainable long-term condition both politically and economically in the eurozone is for a nation’s consumption to roughly matches its production. The reason there is unemployment in Spain is that there is more consumption than production. This is an economic model that only the United States can get away with (but for how long?).

So you do not have to export to China or the US to bring your current account balance to a surplus. You can also do it by either consuming less or producing more for domestic production. In other words stop exporting jobs to China, France, or Germany by buying their consumer goods.

The EU has shown Spain billions of euros of solidarity over the years. Long-term free cash is obviously not the answer. If German and French companies want to continue having market share in Spain then they will have to transfer production there. More production in Spain is the answer.

Switching currencies is always tempting but there are no magic bullets that will ever allow you to consume more than you produce over the long term. The US model is tempting but I wouldn’t advise you follow that path unless you are sure that Spain will be able to find some third world country to work for you like fiends in order to ship you high quality consumer products and be happy to just receive Pesetas in return.

Diego Méndez says:
12:59 pm
“The reason there is unemployment in Spain is that there is more consumption than production.”

I disagree. The reason there is unemployment in Spain is high inflation over the last decade, which rendered it an expensive country for production vs. Germany.

That inflation was the consequence of the euro and its one-size-fits-all interest rate. Unemployment in Spain would disappear in a second if our salaries and prices were 15% down in relative terms; if we had our independent currency, we could devalue 15% vs. Germany.

This wouldn’t mean a 15% fall in GDP, only a 15% fall in nominal salaries, around 10% in additional long-term inflation and a 10% growth in employment. So real GDP (real wealth) would remain stable, unemployment would disappear and the economy could grow again.

On the other hand, if European solidarity really was there, there would be no need to leave the euro. We could count on high inflation in Germany and other countries. Thus, in 3-4 years of 4% inflation in Germany, we would be competitive again.

What are Germans telling us? “Dream on, your problems are yours, we want 0 inflation over here.” Moreover, they are telling us to cut our budget deficits (despite our public debt being lower than theirs!) and let our economy implode.

The rise of economic xenophobia (mainly directed to Greeks, but also to Spain, etc.) in Germany over the last two months have been really shocking, but also revealing: European solidarity is only there for the easy things and the good times.

Don’t get it wrong, Kevin. Germany has shown 0 solidarity this time. All those loans for Greece only saved their own banks. Greece has been directed towards a controlled default in 2 years’ time, and an economic implosion in the meantime.

MacroStrategy Edge says:
3:09 pm
Diego -

Yes, it is absurd that the posters to this blogsite for the most part choose to ignore that I and others using this framework a) called this mess in advance, b) called it right, and c) called it for the right reasons.

Go back and take a look at what I submitted to this website overr the past few months. You listened Diego. You engaged. Hopefully you benefitted from doing so.

But it would appear many others find that too daunting a task. Changing your mind doesn’t have to be that difficult, but first you have to let go of your one note wonders, and open up to alternative, and sometimes controversial points of view.

Glad you got there Diego, hope others can as well, but really, the hour is getting late, and the wind begins to howl.

Lose your delusions folks, before the locust cloud of finanzkapital starts dicktating its terms in your backyard. You can see just how pretty the outcome is when they get the upper hand in places like Hungary, Latvia, Ireland, Greece, and Spain should be next.

Let’s jackboot the humanity out of each and every freakin European culture in the name of accumulation for finanzkapital uber alles.

And really now, who do you want for a neighbor, Zorba the Greek, or Mannheim the masochistic mittelstand mechanic? Maybe we in fact need both, but maybe some of the most beautiful stuff humanity can create comes out of the former more often than the latter.


Rob Parenteau, CFA
MacroStrategy Edge, sole proprietor
The Richebacher Letter, editor
The Levy Economics Institute, research associate

maff says:
4:30 am
…and the solution is?
avrymann says:
1:26 pm
If the people of the PIIGS nations are forced to take a cut in pay, so should the Bankers. The debt should be written down proportional to what the people are being forced to accept. It is not only fair, but it might just work. The clincher would be to loan more money to these nations at the same rate that the Federal Reserve now loans to the international banks who are also creditors to the PIIGS – .25%. It is one thing to say “I feel your pain” and quite another to voluntarily “share your pain”.

Since the US Supreme Court has now declared that corporations are persons, then they should be treated as such. They should have to make the same sacrifices as everyone else. Moreover, they should be subject to the same laws as the populace and their decision makers should be imprisoned when they commit fraud, or any other crime.

I know this is wishful thinking, but it is the solution, along with a reasonable rebalancing of expenditures in the debtor nations and criminal prosecution of corruption in business and politics.

john haskell says:
4:40 am
1. The fall in the euro is explained by the psychopathic behavior of genetically defective portfolio managers who are irrationally selling;
2. Here are 11 reasons why a reasonable person would be cutting exposure to the Euro.

Well okay then!

michel says:
5:06 am
Once again, one fails to grasp exactly what the policy recommendation is. It seems to be that Greece should continue to run deficits. To do which it should continue to borrow, as it must. Into the indefinite future? Or is the recommendation that there should be income transfers to Greece by the rest of the Euro zone on the basis that these transfers are subsidies from taxpayers in the North?

I really do not get the argument. Surely what has happened is really simple, its about debt. Governments have attempted to spend more than the countries produced, on ‘public services’, which in fact were nothing more than people sitting around in Government offices doing nothing. Of course, if people can do this rather than harvest lettuces or work in production, they will. The average wage level rises, investment falls, debt rises to unsustainable levels, the economy becomes uncompetitive, and people invoke the ghost of an economist from a different era to justify this idiocy.

The solution the authors seem to envisage, it seems to be simply more of the same, same level of spending, same level of state emloyment on unproductive activities, well, its unclear, but whatever, there is surely only one solution to this underlying problem, close down all those offices and have people do something productive? And not retire at 55 after a working life spent doing nothing, on inflation linked pensions?

dearieme says:
6:53 am
D’ye mean that my tin of Belgian Francs is going to be worth something again?
joebhed says:
7:12 am
Jan and Rob:
“Some wing of the professional investing world is beginning to see the design flaws built into the eurozone from day one”.
Unfortunately, but obviously, not so for a bunch of NC readers.
So, another 11 points, please, in reply to Matt above.
Ramanan says:
7:48 am
There is a nicely written biography and obituary of the late Wynne Godley here.

alex black says:
7:50 am
Most of the articles I’ve been reading on the EU seem to be making the same 4-point presentation:

1 – There is a big problem.

2 – Here is a possible solution

3 – There is no coordinated political will to adopt the solution.

4 – Oooo, that’s gonna leave a mark……

anon says:
8:13 am
“Ultimately, current account surpluses need to be recycled into chronic deficit nations in a sustainable fashion. Such a mechanism could be set up under the auspices of the European Investment Bank very quickly. Effective incentives to recycle current account surpluses via foreign direct investment or equity flows should be crafted at once.”

Doesn’t seem MMT’ish at all. That’s just changing financial capital structure

dearieme says:
8:57 am
@Ramanan: “Godley (who loved publicity and was something of a tease) acquired a reputation for contradicting other forecasters, usually by being more pessimistic…” – that’s why he was known as “Whinge Awfully”.
chsw says:
9:03 am
[fill here the blanks] are again the global evildoers:
“Greece, Spain and Portugal took the first steps last week toward enacting austerity measures that would reduce their budget deficits….were not enough to prevent a flare-up in money market funds, a crucial but little-noticed corner of the financial system in which American investors provide more than $500 billion in short-term loans to help European banks finance their daily operations.
The cash comes from conservative funds that hold the savings of big American corporations and individual American consumers. So far, the proposed rescue package has failed to ease worries at these funds, which have cut back on loans to European banks and are demanding higher rates and quicker repayment. ….
Because of the pullback by American lenders, the rate banks charge one another for overnight loans, known as Libor for the London Interbank Offered Rate, has been steadily climbing. ….
“We didn’t do so out of any special love for Europe” …“We’re American policy makers,…liquidity problems in European markets were showing signs of creating dangerous illiquidity problems in our own country’s financial markets.”
American banks are also big owners of Spanish bank debt, holding nearly $200 billion.”
sherparick says:
9:39 am
Secretary Geithner, channeling Bob Rubin’s and Larry Summers’s infatuation with a “strong dollar” and indifference to the industrial/agriculutural economy west of the Hudson and east of Malibu apparently gave an interview where he stated that Europe’s problems were “not likely to disrupt America’s recovery.” Well, I hope he is right because otherwise we we will get the “Tea Party” in control of the House and first item will be the President’s impeachment for failing to produce a satisfactory (satisfactory as defined by the Tea Partiers) birth certificate, plus a variety of other outrages upon the Constitution that they claim to love so much.
NotTimothyGeithner says:
12:49 pm
Wow, you really have a high opinion of the Teabaggers. If they took the House of Representatives, they would get rid of the pretense of the birth certificate and impeach the President for his two great sins. One is being a Democrat. The other is on the President’s nose. The Teabaggers don’t care where the President is from. They would fall all over themselves to vote for the Governator.

RagingDebate says:
5:10 pm
I would think that those that think three levels deep would love the Tea Party. They are advocating exteme austerity measures on themselves.

The global investor should love them too. Once the country finishes its collapse and the entitlements and beaurocrats are gone, it will be the investment opportunity of a lifetime. Plus, it will be the John Gault’s that feel the public wrath.

Either way, the U.S.A. economic model has gone off the rails and the empire portion crumbling. There is no solution as a species to mass consolidation and corruption from there except breaking apart into smaller sections and once again beginning the consolidation process. That is called evolution folks. Somdeay, the world will reconsolidate into a supply chain the people themselves will run towards, then a global government that survives will emerge. I see that happening in perhaps another seven decades to two hundred years, in other words long after I am dead.

/L says:
12:54 pm
“… otherwise we we will get the “Tea Party” in control of the House …”

We in the rest of the world look anxious forward to a “great” American show when the one term president is replaced by Sahara Palin and (why not) Glen Beck as vice president accompanied by a Tea Party administration.

S says:
11:37 am
The only thing missing from the clever by half accounting argument is debt and interest rates retrospective and prosepctive. How does that fit into the model?
michel says:
12:01 pm
“Ultimately, current account surpluses need to be recycled into chronic deficit nations in a sustainable fashion”

Like what? Any ideas? Do we maybe just give them the money? I really, really, do not understand what the proposal is.

Karen says:
12:30 pm
Maff, this seems to be the policy recommendation:

“3. Ultimately, current account surpluses need to be recycled into chronic deficit nations in a sustainable fashion. Such a mechanism could be set up under the auspices of the European Investment Bank very quickly. Effective incentives to recycle current account surpluses via foreign direct investment or equity flows should be crafted at once.”

But I for one have no idea what they mean. They need to spell out – in concrete, implementable terms – just what it is they think should be done.

/L says:
12:47 pm
This blog post should get a sub title – Euro Crisis for Dummies – and that is an acclamation of making things understandable for us dummies.
Smells Like Chapter 11 says:
12:55 pm
After reading these posts, is there any doubt as to why economics is referred to as the “dismal” science?
charcad says:
1:16 pm
But I for one have no idea what they mean. They need to spell out – in concrete, implementable terms – just what it is they think should be done.

They intend for you not to understand. What they mean is they want dictatorial powers to transfer wealth around Europe with a wave of their hand, similar to the way they fantasize that Stalin, Hitler, the Politburo, the Paris Commune, Louis XIV and Caesar Augustus did things back in their days.

Stating this claim too baldly would catalyze instant opposition. Hence the need to wrap everything in tendentious mendacity.

MacroStrategy Edge says:
5:01 pm

The solutions have been spelled out elsewhere, in Richebacher Letters, in TV interviews, in blog posts, in newspaper interviews, in conferences at the Ford Foundation – I could go on, but hopefully you catch my drift.

Go look for them, then let’s talk further.

Sorry, I’m not hear to spoon feed y’all.

Let your fingers do the walking.

Hugh :
Some of us have been saying this stuff for some time now. What European leaders were doing was a defense, not a fix, for the euro, and as happens with these policy pronouncements, it was unclear how much was real and how much was words. Never a good sign. It is astonishing though that it took 48 hours and longer for markets to begin to pay attention to the obvious.

Similarly, we have pointed out that the problem is not just with the debt of the PIIGS but with the export surpluses and banks of Northern Europe.

Northern Europe needs not only to buy from Southern Europe it needs to invest there in a sustainable long term fashion, not the various mortgage and debt bubbles we have seen.

kevin de bruxelles’ view that countries should live within their means is mistaken. It goes to the schizophrenic nature of the construction of Europe. Europe is neither an assemblage of nations nor is it a real union. And that’s the problem. Where do Greece’s real responsibilites end and those of Europe begin? The North knew about the PIIGS’ economic weakness going into the euro. But those were better economic times, the North profited from them, and they didn’t care about any potential downsides. Now bad times have come and suddenly, Europe doesn’t have a problem, the PIIGS do. As many have said, Europe either needs to go forward or go back. In our country, we have many states, especially in the West that do not pull their full weight. They do not live within their means. They chronically receive more from Washington than they send to it. We do not talk of forcing them to leave. Political union trumps economic disparity. This is the real question that Europe has to answer for itself. If Europeans are European only when it is easy and convenient, then Europe will remain a fiction, a geographic accident.

Karen says:

Anyone who thought the Eurozone was even remotely close to a real union was dreaming. It should be obvious that sovereignty still resides almost entirely with the individual nations of Europe. I’ve yet to read that the EU contributed forces to the efforts in Iraq or Afghanistan.

The “no-bailouts” clause in the EU founding documents should have made it clear that Greek sovereign debt is NOT backed by the full faith and credit of the rest of Europe but only by the Greek taxing authority.

There is a lot of opinion that countries need to deficit-spend their way back to a healthy economy, but as far as I can tell that opinion is not backed by any historical examples of success, only by the negative example of our NOT having done that in the 1930s.

So we are in an experiment, and what is happening to Greece seems to me a warning sign that maybe some people should be a little less sure of themselves in their advice-giving.

Kievite says:


The USA is also an experiment and with rise of Republican Taliban it might be that this particular experiment also went wrong . Kind of irreparable mental damage cold war inflicted…

And it would be nice to isolate crazy states from more sane states in the USA as well. For example what in common has NY with backward places like Kansas where people cannot even understand that they are voting against their own economic interests .

Jokes aside, this is a financial chess game with huge stakes, fog of war and such. In three-or move moves deep combinations the first move might be very deceptively looking. it looks like this wave of negative press about Eurozone while having some elements of truth is just a tactical move which is partially:

  1. A natural reaction of speculators with “burned finders” as well as “wolfs packs” that were deprived of what looked like a legit meal… It’s especially funny to read stories about Eurozone in FT which for all practical purposes should be called “Voice of the City”.
  2. Anglo-American financial attack on the continent (divide and conquer, you know) that have a competing reserve currency. BTW It’s pretty interesting that I do not hear mad cries about the USA industry competiveness problems due to strong dollar for some reason now. This is very suspicious.
  3. Smokescreen. The USA has an ecological Chernobyl in this backyard right now and GB has recurrent problem with ash affecting air travel. Translated into economical terms both are huge losses which probably make the financial situation in the USA and GB less sustainable.

Games that were played against Eurozone by financial hackers (aka wolfpacks of speculators) should became part of broad investigation of financial sector in the USA and GB (with possibly some European partners).

I think European intelligence agencies should work overtime hand-in-hand with FBI to discover the extent of “CDS -> rumor spreading/short selling -> profit” criminal schemes of those financial hackers. Some call them terrorists, but this is probably incorrect generalization; they are more similar to mafia structures with profit as the main motivation. It would be only natural to discover hedge funds controlled by Sicilian mafia .

Hacking of financial system that they are engaged in should be a crime like hacking of a computer and carry some years of isolation from the society

anon says:

5:16 pm
“In our country, we have many states, especially in the West that do not pull their full weight.”

If you are in the USA, why do you say “especially in the West”? From the stats I’ve seen, the east and midwest have as many states who are net federal tax receivers as the west does. The biggest tax winner, by a huge margin, is DC. (They get over $5 for every dollar paid in. And those tax dollars obviously benefit parts of Maryland and Virginia as well, both of whom are also large net tax winners without including any spillover effects from DC.) Last time I looked at a map, DC was on the east coast (although I think it would be an excellent idea if they moved it to somewhere – almost anywhere – not on the east coast). MS, WV, AL, and VA were in the top 10 tax receivers, as was LA and KY. NM, AK, ND, and SD were also in the top 10 (though, as a Californian, I consider the Dakotas to be in the midwest along with LA and KY). However, all these states have high percentages of indigenous peoples and I suspect that a large part of the reason that the states are “tax winners”. If so, I’d say that the people there still got a very bad deal and so should not be seen as “not pulling their full weight.” IMO they’ve been outright screwed by DC and are still owed much, much more than they’ll ever see from the USA.

NV, CA, and CO are among the biggest tax losers, as are NJ, CN, NH, MN, IL, DL, and NY. In general, the populous states – regardless of where they are located – are much more likely to be tax losers.

Unfortunately, the latest link I can find is from 1981 – 2005. In the past, I’ve found more recent data (though it was only through 2007 or 2008 IIRC) that was pretty much the same as this data.

anon says:
5:20 pm
clarification: However, (unlike the “tax winners” in other parts of the US) all these “western” states that are big tax winners (NM, AK, ND, and SD) have high percentages of indigenous peoples and I suspect that is a large part of the reason that the states are “tax winners”.

[May 05, 2010] Galbraith: The Role of Fraud in the Financial Crisis

Recent testimony from Jamie Galbraith before the Subcommittee on Crime on the role that fraud played in the financial crisis:

Statement by James K. Galbraith, Lloyd M. Bentsen, jr. Chair in Government/Business Relations, Lyndon B. Johnson School of Public Affairs, The University of Texas at Austin, before the Subcommittee on Crime, Senate Judiciary Committee, May 4, 2010: Chairman Specter, Ranking Member Graham, Members of the Subcommittee, as a former member of the congressional staff it is a pleasure to submit this statement for your record.

I write to you from a disgraced profession. Economic theory, as widely taught since the 1980s, failed miserably to understand the forces behind the financial crisis. Concepts including "rational expectations," "market discipline," and the "efficient markets hypothesis" led economists to argue that speculation would stabilize prices, that sellers would act to protect their reputations, that caveat emptor could be relied on, and that widespread fraud therefore could not occur. Not all economists believed this – but most did.

Thus the study of financial fraud received little attention. Practically no research institutes exist; collaboration between economists and criminologists is rare; in the leading departments there are few specialists and very few students. Economists have soft- pedaled the role of fraud in every crisis they examined, including the Savings & Loan debacle, the Russian transition, the Asian meltdown and the bubble. They continue to do so now. At a conference sponsored by the Levy Economics Institute in New York on April 17, the closest a former Under Secretary of the Treasury, Peter Fisher, got to this question was to use the word "naughtiness." This was on the day that the SEC charged Goldman Sachs with fraud.

There are exceptions. A famous 1993 article entitled "Looting: Bankruptcy for Profit," by George Akerlof and Paul Romer, drew exceptionally on the experience of regulators who understood fraud. The criminologist-economist William K. Black of the University of Missouri-Kansas City is our leading systematic analyst of the relationship between financial crime and financial crisis. Black points out that accounting fraud is a sure thing when you can control the institution engaging in it: "the best way to rob a bank is to own one." The experience of the Savings and Loan crisis was of businesses taken over for the explicit purpose of stripping them, of bleeding them dry. This was established in court: there were over one thousand felony convictions in the wake of that debacle. Other useful chronicles of modern financial fraud include James Stewart's Den of Thieves on the Boesky-Milken era and Kurt Eichenwald's Conspiracy of Fools, on the Enron scandal. Yet a large gap between this history and formal analysis remains.

Formal analysis tells us that control frauds follow certain patterns. They grow rapidly, reporting high profitability, certified by top accounting firms. They pay exceedingly well. At the same time, they radically lower standards, building new businesses in markets previously considered too risky for honest business. In the financial sector, this takes the form of relaxed – no, gutted – underwriting, combined with the capacity to pass the bad penny to the greater fool. In California in the 1980s, Charles Keating realized that an S&L charter was a "license to steal." In the 2000s, sub-prime mortgage origination was much the same thing. Given a license to steal, thieves get busy. And because their performance seems so good, they quickly come to dominate their markets; the bad players driving out the good.

The complexity of the mortgage finance sector before the crisis highlights another characteristic marker of fraud. In the system that developed, the original mortgage documents lay buried – where they remain – in the records of the loan originators, many of them since defunct or taken over. Those records, if examined, would reveal the extent of missing documentation, of abusive practices, and of fraud. So far, we have only very limited evidence on this, notably a 2007 Fitch Ratings study of a very small sample of highly-rated RMBS, which found "fraud, abuse or missing documentation in virtually every file." An efforts a year ago by Representative Doggett to persuade Secretary Geithner to examine and report thoroughly on the extent of fraud in the underlying mortgage records received an epic run-around.

When sub-prime mortgages were bundled and securitized, the ratings agencies failed to examine the underlying loan quality. Instead they substituted statistical models, in order to generate ratings that would make the resulting RMBS acceptable to investors. When one assumes that prices will always rise, it follows that a loan secured by the asset can always be refinanced; therefore the actual condition of the borrower does not matter. That projection is, of course, only as good as the underlying assumption, but in this perversely-designed marketplace those who paid for ratings had no reason to care about the quality of assumptions. Meanwhile, mortgage originators now had a formula for extending loans to the worst borrowers they could find, secure that in this reverse Lake Wobegon no child would be deemed below average even though they all were. Credit quality collapsed because the system was designed for it to collapse.

A third element in the toxic brew was a simulacrum of "insurance," provided by the market in credit default swaps. These are doomsday instruments in a precise sense: they generate cash-flow for the issuer until the credit event occurs. If the event is large enough, the issuer then fails, at which point the government faces blackmail: it must either step in or the system will collapse. CDS spread the consequences of a housing-price downturn through the entire financial sector, across the globe. They also provided the means to short the market in residential mortgage-backed securities, so that the largest players could turn tail and bet against the instruments they had previously been selling, just before the house of cards crashed.

Latter-day financial economics is blind to all of this. It necessarily treats stocks, bonds, options, derivatives and so forth as securities whose properties can be accepted largely at face value, and quantified in terms of return and risk. That quantification permits the calculation of price, using standard formulae. But everything in the formulae depends on the instruments being as they are represented to be. For if they are not, then what formula could possibly apply?

An older strand of institutional economics understood that a security is a contract in law. It can only be as good as the legal system that stands behind it. Some fraud is inevitable, but in a functioning system it must be rare. It must be considered – and rightly – a minor problem. If fraud – or even the perception of fraud – comes to dominate the system, then there is no foundation for a market in the securities. They become trash. And more deeply, so do the institutions responsible for creating, rating and selling them. Including, so long as it fails to respond with appropriate force, the legal system itself.

Control frauds always fail in the end. But the failure of the firm does not mean the fraud fails: the perpetrators often walk away rich. At some point, this requires subverting, suborning or defeating the law. This is where crime and politics intersect. At its heart, therefore, the financial crisis was a breakdown in the rule of law in America.

Ask yourselves: is it possible for mortgage originators, ratings agencies, underwriters, insurers and supervising agencies NOT to have known that the system of housing finance had become infested with fraud? Every statistical indicator of fraudulent practice – growth and profitability – suggests otherwise. Every examination of the record so far suggests otherwise. The very language in use: "liars' loans," "ninja loans," "neutron loans," and "toxic waste," tells you that people knew. I have also heard the expression, "IBG,YBG;" the meaning of that bit of code was: "I'll be gone, you'll be gone."

If doubt remains, investigation into the internal communications of the firms and agencies in question can clear it up. Emails are revealing. The government already possesses critical documentary trails -- those of AIG, Fannie Mae and Freddie Mac, the Treasury Department and the Federal Reserve. Those documents should be investigated, in full, by competent authority and also released, as appropriate, to the public. For instance, did AIG knowingly issue CDS against instruments that Goldman had designed on behalf of Mr. John Paulson to fail? If so, why? Or again: Did Fannie Mae and Freddie Mac appreciate the poor quality of the RMBS they were acquiring? Did they do so under pressure from Mr. Henry Paulson? If so, did Secretary Paulson know? And if he did, why did he act as he did? In a recent paper, Thomas Ferguson and Robert Johnson argue that the "Paulson Put" was intended to delay an inevitable crisis past the election. Does the internal record support this view?

Let us suppose that the investigation that you are about to begin confirms the existence of pervasive fraud, involving millions of mortgages, thousands of appraisers, underwriters, analysts, and the executives of the companies in which they worked, as well as public officials who assisted by turning a Nelson's Eye. What is the appropriate response?

Some appear to believe that "confidence in the banks" can be rebuilt by a new round of good economic news, by rising stock prices, by the reassurances of high officials – and by not looking too closely at the underlying evidence of fraud, abuse, deception and deceit. As you pursue your investigations, you will undermine, and I believe you may destroy, that illusion.

But you have to act. The true alternative is a failure extending over time from the economic to the political system. Just as too few predicted the financial crisis, it may be that too few are today speaking frankly about where a failure to deal with the aftermath may lead.

In this situation, let me suggest, the country faces an existential threat. Either the legal system must do its work. Or the market system cannot be restored. There must be a thorough, transparent, effective, radical cleaning of the financial sector and also of those public officials who failed the public trust. The financiers must be made to feel, in their bones, the power of the law. And the public, which lives by the law, must see very clearly and unambiguously that this is the case. Thank you.

Posted by Mark Thoma on Wednesday, May 5, 2010


Finally. I've never ceased to be amazed at the extent to which officialdom has gone to avoid looking at the fraud issue, when it has clearly been a major piece of bubble story. I still won't hold my breath waiting for any kind of substantive investigation, though.

Cnut "Rick" Wixell III, Esq:


There was once an economist who won a Nobel Prize for emphasizing the idea that Capital = Governance Structure, and money values are incidental. Do Nobel Prizes make economists "official" enough anymore? I only wonder, because Jamie and his old man have been pounding away at this message for years, as the academy leadership still fiddles away on metaphysics and recreational math.

And outside the academy, the discussions of "systemic risk" are still being framed in terms of interest rates and accounting identities. The framers inside "officialdom" are afraid of what they will find outside this safe statistical universe, to be sure.


"The government already possesses critical documentary trails -- those of AIG, Fannie Mae and Freddie Mac, the Treasury Department and the Federal Reserve. Those documents should be investigated, in full, by competent authority and also released, as appropriate, to the public."

including the fed in that statement took some 'nads.

Calabe Davis:

You know when you flush the toilet and occasionally the **** splashes upward momentarily in the bowl as its going around on its inevitable way down? This will be exactly how the recent "recovery" is going to look in hindsight if this issue isn't adressed.


Oh yeah. And give Matt Taibi an FBI badge while they're at it. The kid can smell a skunk a mile away.



I dunno if it was here I found the pointer to William K. Black's story, but it is an eye-opener. Here is his testimony:

Don the libertarian Democrat:

If you add the Galbraith Testimony to Russ Robert's post... have my view of the two main causes of this crisis. I can't say that we're doing near enough on either front.

On Default/Inflation in the US, I would imagine Default to be the politically easier sell. Especially if you target foreigners, who don't vote. Plus, Us Vs Them is an easier sell as well. In my view, we should just cut expenses and raise taxes. Conceptually, it's not that hard.

alan said in reply to Don the libertarian Democrat...

I like most of Robert's post, except the prescriptions - which suppose an old-fashioned barter world where all transactions happen between members of Mr Roger's neighborhood. But he does describe a leverage cycle in almost exactly the way Minsky describes it.

So the question is: what is the prescription for curing a financial system that has been diagnosed as susceptible to Minsky cycles? The right-wing thinks we need to go back to the 12th century before the Florentines invented banking. We're not going there. But where are we going?


Computers do lots of things, but then tend to come down to two things - storing data and doing computations. One thing that Galbraith's testimony highlights is that the massive increase in computer capacity available to financial firms has been used for computational purposes to a far greater extent that for informational purposes.

It is entirely possible to require that mortgage documentation be filled out so as to generate a database entry. There is even reason to think that doing so, while expensive at the outset, would have been a big money-saver for mortgage brokers and mortgage servicers. It's not that this wasn't done, sort of kind of. It just wasn't done in a way that brought actual qualities of individual mortgages and the borrowers they represent into the computation. Failure to do so looks suspiciously like a willingness not to know. Who wants information when you can assume the best?

The point I aim to make is that there is a glaring inconsistency in turning the mortgage business into a great big computation-fest, but leaving the inputs to computation out of the fest. Just digitizing mortgage applications doesn't make those applications true, but it does mean that to the extent mortgage folk required truth, that truth would have gone into mortgage computations. The choice was to do otherwise. Producing a bunch of representations of mortgage calculations which don't actually reflect the underlying mortgages when they so easily could have looks really, really intentional. IBG, YBG.

Lyle said in reply to kharris...

You have captured a key point that is well known in the IT industry, Garbage In, Garbage Out, running something thru a computer does not make it less Garbage.

Secondly the rush for revenues meant that corners were cut because everyone wanted their share, so we have greed, which again regulation tries to tamp down.

Its just like an amendment that won't pass that has been proposed to say that if you are a highly compensated executive or CEO of a company you may not hedge the company stock or buy a CDS on it. (Its sort of like playing a sport and betting against your team, to easy to throw the game).

run75441 said in reply to Lyle...


Sorry, that was Oliver Wight of MRP/MRPII vintage who coined the phrase of garbage in and garbage out.

kharris said in reply to Lyle...

Yup. One of Countrywide's big "innovations" was to gut the back room. By lowering processing costs, it put itself in a position to increase market share. To compete with Countrywide, other firms had to cut costs, and it was clear that back room goodness was no longer required, since Countrywide got along without it.

Cost cutting was a big element on the origination end, but or course at the slicing-and-dicing level, the lack of real information on borrowers had other advantages, like allowing the dicers to making up information that fed into better credit ratings for the product.

Chris of Stumptown:

"On Default/Inflation in the US, I would imagine Default to be the politically easier sell"

I disagree. There would be hell to pay when grandma's annuity stops paying because the insurance company is tits up.

Inflation needs the compounding effect before it becomes noticeable and it is IBG,YBG for politicians.

Noni Mausa:

The skunks began their parade decades ago, becoming skunkier and skunkier as they progressed. For me, one major signpost was when several official people (including Maggie Thatcher but many others) said we were entering a new economy, an information economy where boring old things like potatoes and machinery would become marginal elements in an otherwise abstract economic structure made up of ideas and calculations.

Being a woman, I uncharitably thought, "Only men would make up such nonsense." (I was not familiar with Ayn Rand at that time.)

My mental image was of highly skilled theorists discussing this new economy, while unnoticed in the background various people provided for them those marginal elements, cooking potatoes and scrubbing floors.

The abstract segment of all economies rides on the shoulders of the concrete ones. Anyone who says otherwise is either a fool, or has an eye on your potatoes.

Stephen Heyer:

Superb work by James K. Galbraith!

The most important thing, however, is that, like the SEC's civil fraud charges, it renders subjects that had been deliberately presented in a way that put them beyond the comprehension of ordinary people (and most “experts”) into terms that are fairly easily grasped by any reasonably intelligent observer.

The surprising thing is that once looked at in these terms, once one refuses to become lost in the maze carefully constructed by the thieves and looters and their hired/bought help, and simply looks at what the financial instruments, deregulation, corporate structures or whatever actually DOES, they turn out to be quite simple – and invariably quite unpleasant.

That’s where I think a serious mistake was made in desperately “kicking the can down the road” until after the next election / after the next bit of looting / after the escape hacienda in Uruguay was purchased (a beautiful, safe country by the way). In short, some of those opposing the current vast fraud and looting are learning to explain what is happening in simple terms that ordinary people can grasp.

If a major collapse had happened when it should have, some years ago, it would have all been too hard for the apathetic USA public to understand and they would probably have all suffered the “act of God” silently and “pulled together” with their government and Wall Street. Now, however, if the pain were to become bad enough for them to look up from Oprah there will be plenty of people willing and able to tell them exactly what happened and exactly who did it in terms that they can, with a little effort, understand.

Times could get “interesting” for what is now quite a large, privileged group who have a lot to hide.

Better keep kicking that can!

Stephen Heyer

kharris said in reply to Stephen Heyer...

" renders subjects that had been deliberately presented in a way that put them beyond the comprehension of ordinary people (and most “experts”) into terms that are fairly easily grasped by any reasonably intelligent observer."

Must be in the Galbraith genes.

Amileoj said in reply to kharris...

Indeed. Their simple willingness (and not so simple ability!) to eschew the conventionally favored obfuscations of the day, to write prose that strives instead for maximum clarity and accuracy, gives to practically every sentence a moral force that the bulk of our public discourse about such matters conspicuously lacks.


"At its heart, therefore, the financial crisis was a breakdown in the rule of law in America."

Note that he is not in the economics department. Nor, with such loosely reasoned arguments, would I ever expect this exalted individual to attain tenure in that department.

The profession has got to stop apologizing to the ill-informed who view forcasting as an important field of economics. Now, as for what has happened to the field of macro-economics, there is much to apologize for, but still no excuse to allow such as Galbraith a speaking role in the debate.

Sufferin' Succotash said in reply to don...

"Note that he is not in the economics department. Nor, with such loosely reasoned arguments, would I ever expect this exalted individual to attain tenure in that department."

So much the worse for the economics department.

Linda R.:

Over and over again, when I express the sentiment that someone needs to go to prison or that restitution is in order, I have been dismissed with talk of complexity, of the systemic nature of the problem, or of politics, or else I am dismissed because I lack the credentials some require for credibility. (It seems to me that a lot of the people with those credentials have been part of the problem, but that's another story.)

Both Galbraith and Bill Black (see: have been speaking truth, using the "F" word (fraud), for a while now. I keep hoping someone will not only hear them, but actually Listen to them - and act. If the Congress and the Justice Department can't (or won't) look for and find fraud, and file charges, then serious reform and regulation are the least that must be done. But there's the rub. The (so far) first failure leads right into what it appears will be the second. I await the final report of the FCIC with at least a smidgeon of hope.

I favor the Brown-Kaufman SAFE Banking Act which would sensibly limit the size of financial institutions. I also agree with Simon Johnson that we have no need for banks larger than $100,000,000,000. Oh, and one more thing... out here in the (formerly, at least) "boring" world, the nature and quality of collateral matters.

"In this situation, let me suggest, the country faces an existential threat. Either the legal system must do its work. Or the market system cannot be restored. There must be a thorough, transparent, effective, radical cleaning of the financial sector and also of those public officials who failed the public trust. The financiers must be made to feel, in their bones, the power of the law. And the public, which lives by the law, must see very clearly and unambiguously that this is the case."

In the face of regulatory capture, the problem grows. The changes needed go beyond rules written down on paper. In order to effect real change, there must be a fundamental change in attitudes, incentives, and ethics. The prevalence and seeming de facto acceptance of sociopathy in the investment banking and political worlds must be dealt a blow. Self-dealing must become difficult and penalties must be swift and strong. Gordon Gecko must die.

K Ackermann:

I agree, Stephen. They sort of blew it in that sense. There is an upper strata, and they collectively have rigged the system to where they can't fail downwards.

Their failure was shouldered by the public without its consent, and is that fair?

We were supposed to go out on a nice date, but instead they slipped us a mickey and raped us.

Now we require justice.

I'll tell you right now, the Fed is probably going to appeal to the Supreme Court to not turn over the crisis documents. If the Supreme court sides with the Fed, then to me, that is the signal that we are on our own, and the union no longer exists. There will be the people, and there will be the enemy.

We paid trillions for the right to see where the money went. If we are not allowed to, well... I'd rather die then live in that country.

They can still fix this. It's up to them.


Great testimony, and I'm especially glad to see him give William Black some of the credit he deserves. I heard him speak at the Economics meetings, where he laid out exactly how the fraudsters went about the business in crystal clear terms. As he pointed out, we need to see a LOT more indictments. Once the prosecutions start and the evidence from the subpoenas starts pouring out that will galvanize public opinion so strongly that the politicians won't be able to wiggle out of finally tackling the reforms we need to prevent this from happening all over again in an even more catastrophic form. As it is all it will take is for a couple of the bigger hedge funds to fail...

Barkley Rosser:

I still maintain that the bubble came first. We have had real estate and lending fraud in place for a long time without a bubble or crisis. There was no increase in fraud at the beginning of the bubble in 1998. That came later with the two feeding mutually into each other. Fraud was/is very important, but not the fundamental. That was the bubble.

I agree with Jamie that Bill Black has been an excellent source of information on the fraud that has occurred.

don said in reply to Barkley Rosser...

Agree. The bubble enabled and amplified opportunities for fraud, but the big damage came from the bubble and the inability of individual entities to account for systemic risk. Fraud may actually have helped, by bringing things to a head earlier before imbalances grew even greater. Just as weak sovereign borrowers may now be helping to limit unsustainable debt growth in stronger sovereign borrowers.

Bruce Wilder said in reply to don...

I can see how changes in interest rates, say, can set in motion the kind of processes detailed by Shiller, and create a bubble, and then the bubble process creates enhanced opportunties for fraud. In that sense, when Barkley says, makes sense to me, as an hypothesis.

What I don't see, is how the bubble can be sustained and magnified to the extent we witnessed without massive fraud and corruption, in the routine processes and procedures of banks in underwriting mortgages and financial securities, which normally would control the flow of funds into these markets.

As Barkley says, fraud and "the bubble" (identified with the psychology of mania?) fed on one another.

The "inability of individual entities to account for systemic risk" just seems like a stilted way to try to rationalize the false intuition of abstract models of markets with complete information. Real markets -- markets, which are organized, social institutions -- don't have, or depend on Supermen, exercising rational foresight and judgment on behalf of unitary firms. Sorry to disappoint. They have bureaucracies, carrying out strategies, policies and procedures.

Where you see failing Supermen, Galbraith and Black, more realistically, see corruption of policy and procedure.

don said in reply to Bruce Wilder...

Part of our difference may lie in definition. Are stated income loans 'fraud'? Where do you draw the line between bubble-induced loose lending standards ('housing can never go down') and fraud?

What percentage of the total market transactions do you think were patently illegal, as opposed to merely foolish (as revealed after the fact)?

I see no supermen in this episode. Certainly not most of the entity heads, who were handsomely overpaid.

I honestly can't believe that fraud was the major cause of the real estate bubble or its collapse. It seems as unlikely to me as believing that Iraq had weapons of mass destruction, or that we are in sustainable recovery. Galbraith offers no statistics to back up his story.

Cnut "Rick" Wixell III, Esq said in reply to don...

"Galbraith offers no statistics to back up his story. "

How can there be statistics about information that, by the nature of fraud, is deliberately hidden or distorted? It's not as though there are no definitions for fraud & misrepresentation in the law.

"It seems as unlikely to me that we are in sustainable recovery."

Don, here you offer no statistics to back up your insinuation.

Cnut "Rick" Wixell III, Esq said in reply to Bruce Wilder...

"Where you see failing Supermen, Galbraith and Black, more realistically, see corruption of policy and procedure."


That's why they call it fraud.

Though, the "public cause of action" versus the "private cause of action" issue fits that allegory at an institutional scope.

"Ironically, counterreformers use the perverse results arising from their interference as evidence of the failure of the reforms." -- Jan Winiecki

Bruce Wilder said in reply to Barkley Rosser...

I'm not sure what you mean by "the bubble", let alone what you mean by "the fundamental".

The Sandlers at Golden West, Mozilo and Loeb at Countrywide and IndyMac, were right there at "the beginning".

Indeed, if you are Professor Black, and viewing the whole phenomenon from the standpoint that the earlier devastation of the Savings & Loans was a dress rehearsal, I doubt that you would imagine that "the bubble" came "first". I suspect Black sees WaMu and Golden West as surviving contagion from the S&L era, ready to renew the Plague.

Whatever the "psychology" of would-be home buyers, caught up in "the bubble", there still has to be a sufficient flow of funds to drive up prices, and that can only happen on the scale witnessed, by means of a systematic erosion in underwriting standards. And, banking institutions "competing" on the basis of deteriorating underwriting standards have to receive funding.

Even if the "psychology" of the incipient bubble was the initial spark, I don't see how the bubble grows to Himalayan size, without accelerating fraud in underwriting and securitization to supply the necessary funds flow. To me, funds flow is "fundamental", and deserves primacy as identified "cause" in the analysis for two reasons:

1.) only massive deterioration in mortgage underwriting and security underwriting standards (aka fraud) could possibly supply the funds flows necessary to explain the magnitude and geographical scope of the bubble.

2.) regulating underwriting is a feasible target for government intervention.

The second is as important as the former. When we say something is a complex system is a "cause", usually what we mean is that it is a candidate for strategic intervention -- its a variable which policy can control to get a different result.

I'm fairly dubious that a top-level, systemic risk regulator is every going to want to intervene to stop "a bubble" in the making. It is too hard to judge meaning and consequence, let alone to motivate and reward right behavior.

The minutiae of underwriting procedure, however, is a different matter. No "liar's loans" is kind of a no-brainer, as a regulatory standard.

If all the processes for creating and granting a mortgage tie the maximum amount of the mortgage to the verified income and credit quality of the buyer, then housing prices will never vary much from the trend of rents or household income. A change in interest rates, or a local boom, might trigger small blips, but that's all they will ever be. Because the mechanistic processes of underwriting tie house prices and the prices of mortgage-backed securities to household income. And, that's a good thing -- it is what we want a market for houses to do.

Oupoot said in reply to Bruce Wilder...

If I remember correctly, many states did detect the fraud at originating level, but were told by Washington (with WallStreet lobby support??) to stop their investigations &/ prosecutions. If these investigations went ahead, the underlying fraud would have been exposed earlier and should have at least alerted investors (further down the investment chain) that these securities are not as good as they were led to believe. It may not have stopped the bubble from blowing up, but it would have released a lot of the pressure that was building up.

Sarah said in reply to Bruce Wilder...

I agree, and I think it can be seen in earlier, much smaller bubbles in California and elsewhere. In the bubble of the 80's in California, people were getting money from private lenders because banks would not lend in the amounts and on the terms that would sustain a bubble. When the bubble mentality was in full flower lots of people were sucked into lending (especially since interest rates were high, providing a justification beyond the simple assumption that prices would always rise). Ultimately, however, without sources like pension funds and other large institutions the amount available was limited, people began to get nervous and prices plunged back to earth-- without serious damage to the overall financial system, though with plenty of pain for individual homeowners and private lenders.

Lord said in reply to Barkley Rosser...

I agree, but most bubbles pop sooner by cracking down on fraud. In this one fraud was never cracked down on; it was only the exhaustion of borrowers that led this one to pop. This is why cracking down on fraud is so important; it prevents bubbles from becoming as large as this one did.

Cnut "Rick" Wixell III, Esq said in reply to Barkley Rosser...

chicken or egg

irrelevant which came first



{Formal analysis tells us that control frauds follow certain patterns. They grow rapidly, reporting high profitability, certified by top accounting firms. They pay exceedingly well. At the same time, they radically lower standards, building new businesses in markets previously considered too risky for honest business.}

Aside from being unethical, the sham is so patently stupid as to be implausible. Unless, of course, by some miracle of Consummate Greed, enough people talk it up and it adopts the industry mantle of "A good idea!" Which is what happened.

Which means that with no foresight and the suspension of any concern for ethical behaviour as well as a serious impetus; we can establish a mindset that (because there is no specific law against the scheme) we can get away with swindling. Try it, see if nobody stops us -- then take the money and run like hell.

And ethics be damned ... besides, who cares? When the fit hits the shan, BigBrother will bail us out!

Worse yet, for the three or four years that the swindle was working, nobody uttered a damning word. A couple of brave souls may have said "it can't last forever", but they were swiftly disregarded. Everybody, including some very intelligent people, thought stupidly that realty prices would keep rising inexorably. So, why worry that a bubble might burst?

America would have innovated, for the first time in the history of mankind, the Asset Bubble that never burst!

Which became Conventional Wisdom ... until the entire edifice came thundering down upon us.


Excellent piece, reminding one of a previous Galbraith.


Although I agree with the basic point here, I think it's more important to look at how people at every stage of the process got paid, and what types of things most certainly did not pay. Pointing out fraud was always revenue negative, made you part of an investigation where your customers (or bosses) were targets, rarely got take seriously anyway ...

The WaMu story was a petri dish of what happened [nearly] everywhere - compensation was based on bridge-building, not gate-keeping. Another metaphor was given to me once: "we don't cut corners, we run around them." Sure they did.

ken melvin:

John K. was my hero. He has much to be proud of in his sons.


So that we can separate who is who and what each is about:

November 12, 2009

American Adviser to Kurds Stands to Reap Oil Profits

OSLO — Peter W. Galbraith, an influential former American ambassador, is a powerful voice on Iraq who helped shape the views of policy makers like Joseph R. Biden Jr. and John Kerry. In the summer of 2005, he was also an adviser to the Kurdish regional government as Iraq wrote its Constitution — tough and sensitive talks not least because of issues like how Iraq would divide its vast oil wealth.

Now Mr. Galbraith, 58, son of the renowned economist John Kenneth Galbraith, stands to earn perhaps a hundred million or more dollars as a result of his closeness to the Kurds, his relations with a Norwegian oil company and constitutional provisions he helped the Kurds extract.

In the constitutional negotiations, he helped the Kurds ram through provisions that gave their region — rather than the central Baghdad government — sole authority over many of their internal affairs, including clauses that he maintains will give the Kurds virtually complete control over all new oil finds on their territory.

Mr. Galbraith, widely viewed in Washington as a smart and bold foreign policy expert, has always described himself as an unpaid adviser to the Kurds, although he has spoken in general terms about having business interests in Kurdistan, as the north of Iraq is known.

So it came as a shock to many last month when a group of Norwegian investigative journalists at the newspaper Dagens Naeringsliv began publishing documents linking Mr. Galbraith to a specific Norwegian oil company with major contracts in Iraq....


January 26, 2010

Oil Company Near Settling Over Contract in Kurdistan

OSLO — A Norwegian oil producer announced Monday that it would probably have to pay from $12 million to $144 million in an approaching arbitration settlement with parties identified in legal documents and local media reports as the former American diplomat Peter W. Galbraith and a Yemeni businessman.

Mr. Galbraith, who helped negotiators in the Kurdish regional government figure out how oil revenues are shared under the current Iraqi Constitution, spent part of 2004 as a private dealmaker. He helped bring together the Kurdish government and the Norwegian oil company DNO that year to sign an oilfield exploration and production contract that bypassed the central Iraqi government in Baghdad.

Mr. Galbraith has said that he thought the deal would advance the cause of Kurdish autonomy, which he favored. But it also held the promise of making him wealthy, a prospect reinforced by the announcement in Oslo about the coming settlement....


Well if there was systemic fraud, the spoils of the fraud were clearly protected by policies made by both the Bush and Obama administrations. Bush is out of office, but not so our current President. Is Mr. Galbraith calling for his removal from office?

dw said in reply to Eric...

seems like almost of the fraud occurred under the previous administration did it? not much fraud happened starting 2009 now did it? because at that time the fraud had already exploded didn't it? so i guess while we might not agree with all that Obama has done, I am thinking the horse had long since left the gate as far as fraud is concerned. now we might complain that he hasn't moved faster to put more in jail. but this isn't going to be easy

Cnut "Rick" Wixell III, Esq said in reply to Eric...

"the spoils of the fraud were clearly protected by policies made by both the...Obama administration."


Please provide any justification in law or fact for this incredibly ridiculous statement.

Are you implying that the Obama administration is pardoning fraudsters with "policy?"

Do you understand what a bill of attainder is? Are the PUMAs now taking the Joe Lieberman stance that due process is unamerican, provided the accusations are severe enough?



Thus the study of financial fraud received little attention. Practically no research institutes exist; collaboration between economists and criminologists is rare; in the leading departments there are few specialists and very few students.

-- James Galbraith

I would argue that this is not true, as there have been repeated studies on the mortgage abuse of Black homeowners, even a study by Federal Reserve researchers. The problem is that the mortgage abuse of Black homeowners has been of no evident concern to prominent analysts and is not even mentioned by Galbraith. Actually, prominent analysts were praising the mortgage abuse of Black homeowners even in 2007.


May 5, 2010

The Way We Were
By Paul Krugman

Mike Konczal has an interesting post on how Wall Street and the role of the SEC * were perceived in the late 1970s: back then, the securities abuses of the pre-New-Deal era were viewed as archaic evils, no longer part of the modern world thanks to effective regulation. Today, of course, regulation has been degraded, and the abuses are back in earnest.

Mike’s post made me think of another blast from the past, which I uncovered back when Enron and WorldCom were making headlines; the section in Galbraith’s New Industrial State (1967) in which he discusses the possibilities of corporate executives using their position to enrich themselves at investors’ expense:

"But these are not the sorts of thing that a good company man does; a generally effective code bans such behavior. Group decision-making ensures, moreover, that almost everyone’s actions and even thoughts are known to others. This acts to enforce the code and, more than incidentally, a high standard of personal honesty as well … "

The point Mike and I are getting at is that the raw profiteering we now take for granted as an inevitable part of capitalism is actually quite evitable; 40 or so years ago, the system didn’t work at all like this.



"Obviously, as long as ratings agencies are selling a regulatory license rather than accuracy, you can’t expect them to be accurate. And yet the motive for relying on them for regulatory purposes is the presumption that they’re accurate. As you can see, there’s a problem here."



{The point Mike and I are getting at is that the raw profiteering we now take for granted as an inevitable part of capitalism is actually quite evitable}

I quite agree ... just put marginal income tax rates back up to 90% above a megabuck or two or three!

The crafty ones will hightail it to Singapore and try their Dirty Tricks, get caught and find themselves in a jail cell ... and the keys thrown away.

Good riddance, I say ...


America is bewildered by two opposing principles:
(1) The first is that by (supposed) hard work, smarts and ambition an individual should be justly rewarded -- and the sky's the limit.
(2) That work should be rewarded by immense riches but those who manipulate the system by any combination of widespread predation, fraud or cronyism don't deserve to keep their wealth (if that indeed was the outcome).

Let's make up our minds because those two diametric opposites only lead to confusion, violent dispute and political gridlock.

Fred C. Dobbs:

People who play on Wall Street are expected to understand how to make $$$ whether putting or calling. Fraud? Maybe. Maybe not. Let a judge/jury decide.

(It sure might be fraud if 'the little people',
tinhorns out in the sticks, were hornswoggled &
bamboozled, if a case can be made. Not WB obviously.)


I am disgusted at the false statements, insinuation and innuendo of Galbraith's testimony. Most of it is pitched at such a high level of generality it can neither be true nor false, it's just a populist screed. But on the rare instances in which he attempts to identify some specific example, he resorts to cheap tricks that are nothing better than "have you stopped beating your wife yet?" Let's take a look:

Galbraith: "Did Fannie Mae and Freddie Mac appreciate the poor quality of the RMBS they were acquiring? Did they do so under pressure from Mr. Henry Paulson? If so, did Secretary Paulson know? And if he did, why did he act as he did?"

Paulson became Secretary of the Treasury in July 2006. Long before then, Fannie Mae and Freddie Mac had been the dominant purchaser of subprime mortgages. Don't take my word for it -- Mark Thoma linked in a 10/21/08 post [] to an Econbrowser article by Melanie Chinn that says: "Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication." Galbraith's use of unanswered rhetorical questions to insinuate personal misconduct is despicable. It's the lowest form of debate. It's McCarthy-like.

Another example:

" did AIG knowingly issue CDS against instruments that Goldman had designed on behalf of Mr. John Paulson to fail? If so, why?"

Same tactic - unanswered rhetorical questions insinuating fraud, and he adds to it the same "have you stopped beating your wife" tactic -- there is no "AIG backed transaction" that "Goldman designed on behalf of Mr John Paulson". The ABACUS transaction in the SEC suit involved a different company named ACA - to whom, the SEC complaint makes clear, Goldman disclosed Paulson's short positions at the outset of structuring the transaction. How shameful to resort to such cheap rhetorical tricks to disseminate falsehoods.

Another example.

Galbraith: "Those records, if examined, would reveal the extent of missing documentation, of abusive practices, and of fraud. So far, we have only very limited evidence on this, notably a 2007 Fitch Ratings study of a very small sample of highly-rated RMBS, which found "fraud, abuse or missing documentation in virtually every file."

Does he tell anyone how much was fraud and how much was missing documentation? No. He just treats it all as fraud. What is the missing documentation? Is it important - like the mortgage? Or is it unimportant or documentation that was allowed to be missing, like income verification for certain subprime loans. No detail, just conclusions. And what exactly is "abuse" in the context of RMBS? Does someone whip the little pieces of paper or crumple the file folders viciously? This is just rhetorical hysteria passed off as academic insight.

Cnut "Rick" Wixell III, Esq said in reply to mark...

"How shameful to resort to such cheap rhetorical tricks to disseminate falsehoods."

Good thing he wasn't charging millions in fees in exchange for it.

"there is no "AIG backed transaction" that "Goldman designed on behalf of Mr John Paulson"

Well, if a tree falls in the woods and mark's not there to hear it, did it happen? Goldman as a firm bought protection from AIG as a matter of regular course. Is this not true?

If the business partner of AIG -- a company with a stinking history of fraud investigations -- just got sued for going around soliciting undisclosed information from a short artist, you think a few follow-up questions about past dealings would just be rhetorical? You must not know much of what the SEC Enforcement Division is capable of.

"Long before [Henry Paulson's appointment], Fannie Mae and Freddie Mac had been the dominant purchaser of subprime mortgages."

Wow. You missed the whole point of that link. Fannie and Freddie's MARKET SHARE was rapidly DECREASING to private institutions. Just so you don't miss it, I put those words in all-caps for emphasis. They bought and bought, and still couldn't keep up.

And really, you think the Paulson-FannieFreddie remark is some kind of eccentric gaffe with no basis in the record? Goldman has traded actively with F&F before & after Henry bailed them out, no? I say this even as the point here should be to illustrate moral hazard & reg capture in general than Paulson per se.

"Does he tell anyone how much was fraud and how much was missing documentation?"

Why should he? He is reporting a Fitch finding on a particular incident. The whole point is that there is not enough information to measure systemically.

And as for the broad presumption of fraud as a systemic phenomenon that actually exists, maybe you could spend a few months reading through the archives on this random link and recalibrate your "hysteria" perception.

Most people who actually know something about the big picture it would not call these remarks hysterical.

mark, Jamie Galbraith is an economist, so it's not like the standard of accuracy is high to begin with. And as you know, inaccuracy alone is not sufficient to presume bad faith. Galbraith may be homely, belligerent, and cover'd in fleas, but who else in the profession is willing to rattle this cage when it comes to the systemic question. The reason people commit fraud in the first place is because, generally, they're badder than you.

Though after all this I will concede, if any of Galbraith's representations truly be misinformation, I'm glad you had the nerve to blow the whistle here, where praise certainly outweighs the criticism.

Caleb Azariah-Kiros:

Strangely Galbbrith did not mention anything about the Shadow banking system the root cause of the financial meltdown.

Cnut "Rick" Wixell III, Esq:

"I honestly can't believe that fraud was the major cause of the real estate bubble or its collapse. It seems as unlikely to me as believing that Iraq had weapons of mass destruction"

What irony. Is it intentional?

So, don, are more tenured employees willing to courageously assert "What problem! I don't see a problem!" in new and innovative styles, what economics departments need right now?


This was said and written here a while ago:

“2010 Foreseeable and Unforeseeable Risks ~ The Room For Policy Error is Enormous” «

naked capitalism
  • JTFaraday says:

    December 29, 2009 at 7:06 pm

    Well, considering that you, formerly dubbed “Gen-X,” are the lucky cohort already being told you’re washed up at 40, it’s hard to be optimistic.

    I do think we are in deep demographic denial, on a number of fronts.

  • sharonsj says:

    December 29, 2009 at 12:33 pm

    I doubt OPEC gives a rat’s ass about the Israeli/Palestinian conflict. OPEC only does what’s good for OPEC. And the price of oil often depends on speculators.

    Many banks are in terrible shape, but we don’t know how bad because they are still doing funny accounting. But the ARM reset, along with tanking commercial property, will be another blow.

    As for the states, they are sinking too. If they keep raising school and property taxes to save their asses, you’ll be seeing armed homeowners next.

    • Doug Terpstra says:

      December 29, 2009 at 1:22 pm

      OPEC’s 1973 oil embargo, with devastating impact on the global economy was a direct response to the wars of 1967 and Yom Kippur—clear blowback for US support of Israel’s expansion and occupation of Palestine. Though inconvenient history, that wellspring of Arab rage as much as Vietnam caused the last Great Recession. In the maddening absence of any peace process a repeat of that and another 9/11 is very likely—hence our increasingly entrenched militarism in the region—and the insane push for expanding war to Iran, Yemen, Syria, etc.

    • Ted K says:

      December 29, 2009 at 1:23 pm

      Adjustable rate mortgages are the biggest scam that’s been sold to the middle class over the last century. 95% of the time ARMs favor bankers, and anyone who doesn’t realize that hasn’t got a basic education in finance. Nobody writes terms and works double time to sell and market those terms (ARMs) unless they benefit from it. Least of all the banks.

      And anyone who cares to disagree with me please do: It will be proof of your current employment at a financial institution or that you never took finance 101 in University. Just please let us know which.

  • Hugh says:

    December 29, 2009 at 2:08 pm

    This is a good synopsis of the financial situation. We have a pig (the deteriorating fundamentals) and lipstick (bubbles in stocks and commodities and happy talk emanating from the likes of Tim Geithner).

    I would just add to his list the continuing drag on the economy of high unemployment and high debt loads. Uncontrolled healthcare costs will be unaffected too by any of the current healthcare bills. The 2010 elections will also change the political calculus, making reasonable reform even less likely. Foreclosures are touched on in the entry on GSEs but a real wild card remains the legal ramifications of the MERS and other related messes.

  • Harminder says:

    December 29, 2009 at 3:30 pm

    the attempted Christmas Day bombing and the expansion of Al Qaeda (Pakistan –> Afghanistan –> Pakistan –> Somalia –> Yemen –> ??) is a reminder that, even as the US/EU economies struggle, they will be stuck with high defense & security expenditure.. no chance to get any savings from ending the war in Iraq (swords into ploughshares etc)… while China, India, & South East Asia move along with the free trade agreements and managed peace, and no responsibility for bearing any of the burdens of global security…

    as long as Israel does not settle with Palestine, the US will be stuck bearing the cost of this conflict, and none of the benefits (if there are any, other than the existential gain of being in one’s historical homeland)…

    I think this security burden will, in the longer run, have a much larger impact on future growth than economic/banking reform… that might just be the neo-con victory at last…

  • mario margiocco says:

    December 29, 2009 at 4:08 pm

    Dear Mr. Bougearel,
    I think you insist too much on the Emu forthcoming problems. There will be, already there are problems, and Italy might have to struggle to keep its creditworthiness.
    But, first, your list in my opinion should be inverted, in the sense that Greece is already in trouble, Spain might come next, Italy third. Do not look only at public debt, look also at private debt and foreign debt.
    You see, on the western side of the Atlantic the only top person who has always been in favor of Emu and the euro has been Paul Volcker. Plus several academic economists, not many, and very few politicians. The euro had to fail. It seems to me that there is a scent of this in your analysis. We shall see.
    Now, some reflection. Given the fact that the U.S. economy is muuuch bigger and muuuuuch better than the Italian one, given the fact that if I had the choice to invest I would always prefer the U.S., not ignoring Italy nonetheless, given everything you want, do you know that if you take into account the U.S. gross public debt as you should and not only the debt held by the public, and if you rightly add to that the shaky assets of Fannie and Freddie covered by full federal guarantee since september 2008 and even more so since December 24 2009, do you know that if you do all this adding you reach a debt/gdp ratio for the U. S. higher – even now – than the Italian one?

    Thank you for your attention, and best wishes for 2010


  • kevinearick says:

    December 29, 2009 at 4:23 pm

    Back in the 70s, labor and capital had a row. Labor was reorganizing to accommodate demographic deceleration into equilibrium, and capital chose to replace all the labor superintendents with its own corporate people, to avoid losing the ability to pull revenue forward from the future.

    If you look, you will see that its superintendents have become increasingly corrupted by the process over time, accepting more and more money, other people’s debt, to liquidate the middle class, a capacitor that was built up over several thousand years of evolution. In a mere 35 years, they have liquidated the mechanism. Capital shorted its own future.

    Labor does not work for capital; they are countervailing powers. To the extent they compliment each other, a semi-neutral middle class grows between them. There is currently no agreement between them because capital shorted the constitution on a handful of votes in the Supreme Court to implement family law, with the intent of breeding weaker counter-parties to replace labor.

    Labor simply continued to move forward, as it always has under such circumstances, because it is subject to evolutionary pressure to do so, a condition capital doesn’t have to deal with until it discharges. The AFL-CIO is not labor. Take a look at its collection of non-performing capital; it has no understanding of physics.

    Now, 35 years later, the global economy must still be reorganized from the bottom up to accommodate demographic deceleration into equilibrium. Municipalities will continue to fall off the cliff of collapsing tax receipts until they adapt, through purely municipal interest law. The nation/state nexus is simply too tightly bound to initiate effective change; without space to disassemble and reorganize, it is imploding of its own gravity.

    The Internet is a temporarily useful crutch. Look around, where you are and in your travels. The reported numbers are meaningless; they are all designed to support demographic acceleration, an invalid objective.

    We will get this show on the road when capital minds its own knitting, efficient allocation. Labor supervises labor because evolution requires labor to be effective, to grow the middle class. Talent will not tolerate stupidity, willful ignorance.


    I was working with a union kid in his 20s, who was getting six figures to fix elevators. He bypassed all the safeties on an escalator, and shorted out the main circuit board 3 times. Finally, he threw a temper tantrum, in the middle of a mall during business hours, and beat up that circuit board with a sledgehammer. I quit when the union refused to correct the situation. Recently, a child lost his finger on that escalator.

    I don’t blame the kid. He’s working on efficient automation equipment designed to replace him, denied an education by the union filter, and his government certification makes him responsible for outcomes. Of course he’s imbalanced; that is the objective of corporate control, private profit at public cost.

    That kid is still “fixing” elevators, “earning” six figures, while many much more talented people are laid off from $10/hr jobs. The economy in a nutshell, all across the globe. The nation/states are simply playing musical chairs with the exploding debt.

    • kevinearick says:

      December 29, 2009 at 5:36 pm

      Acquaintances disassembled American plants and reassembled them in China, only to be surprised with termination upon completion of the task. Now, capital is gearing up to move plants from China to Africa. The circuit ends where it began. Surprise, surprise.

      Left to its own dc devices, capital will short circuit itself every time.

      Unforeseeable? Only to those with no experience in punchbowl economics.

  • Ignacio says:

    December 29, 2009 at 5:30 pm

    It is strange when writing about global risks you focus exclusively in the euro area, and particularly in what you call the PIIGS (not very elegant indeed). Didn’t you know that fiscal deficit in 2009 will be in France as large as in Spain in relative terms? What about the UK? They are the champions of fiscal deficit.

    Your “global risks” insights look very much like the typical europhobic english approach.

  • jdmckay says:

    December 29, 2009 at 6:19 pm

    Good article, not so sure I agree w/your EU scenarios… very highly speculative IMO. Your bullet point 19:

    19. Italy is expected to be the first country that will first kiss the EMU good riddance.

    Who, precisely, is doing this expecting? Italy needs EU right now a lot more than EU needs Italy.

    you point

    13. The solidification of the countries in the EMU may break-up like ice sheets in the Artic tundra as the global financial meltdown puts further stress on the EMU. Incentives to remain in the EMU, for many EU countries it might be better to leave the EMU than stick around for its constraints and austerity measures

    First one (”break-up like ice sheets”)… I dun’o, think you could be more specific? As several others have mentioned here, long history on this side of the pond “shorting the Euro” in error. There’s reasons EURO is up +/-50% against the USD in this decade.

    As for “better to leave”, seems strange comment as well: the lack of “austerity” measures are means by which US has “swept things under the rug”, as you describe in first part of your article (which I agree w/completely). Seems to me EU’s push for belt-tightening (and restrictions on finance “innovation”) are in their favor, not to their detriment.

  • NC Jim says:

    December 29, 2009 at 6:35 pm

    When Brad Setzer was at the RGE Monitor he tried to estimate purchases of Treasuries/Agencies by ME oil countries in the London markets in order to “launder” government purchases into private ones. I wonder if this could be the source of the phantom “household” purchases. If so, they could indeed continue if the oil price stays reasonably high.


    • Doug Terpstra says:

      December 29, 2009 at 6:47 pm

      Speaking of ‘laundering’, maybe narcotraffickers are the ‘households’ buying US treasuries. This includes Afghanistan, which (with the CIA?) now produces roughly 90% of the world’s heroin—a new growth shadow stat.

  • Doug Terpstra says:

    December 29, 2009 at 7:05 pm

    This is a terrific (and terrifying) article. Could it be the globalized collapse in OTC Debt and Derivatives that has panicked Geithner into stammering such dubious assurances? It is very likely that China and other foreign creditors may really be holding the reins, not Timmy. Just sayin’.

    Mr. Bougearel illustrates a kleptocracy with stark clarity. He notes that, unlike Geithner and Bernanke, FDR followed a traditional remedy in lending “freely and early, to solvent firms, against good collateral, and at high rates” while letting bad banks fail. But it is critical to note that FDR—in addition to such supply-side infusions—also made highly-productive demand-side investments in roads, schools, libraries, lodges bridges, dams, utilities, etc, many of them priceless cultural and economic treasures—still paying enormous dividends today. Summers and Geithner, unfortunately, seem too mired in blind neo-liberal Rubinomics to feign more than token stimulus for Main Street—IMO, misfeasance and/or crimes of tragic dimensions.

    There are no brakes to this kleptocracy, save the laws of physics—gravity and thermodynamics. Mr. Bougearel’s ecological model for the global economy helps a layman to visualize the parallel dynamics of financial and natural system sustainability—in this case how self-reinforcing ‘positive’ feedback loops in either sphere can potentially trigger an accelerating cascade of forces that overwhelm systemic carrying capacity rapidly (a tipping point conceivably beyond even Mr. Geithner’s herculean abilities, even after corporatizing Social Security). Particularly ominous here is the prospect of both planetary systems, natural and economic, converging in roughly synchronous collapse, with arguably apocalyptic global impacts, physical and geopolitical. Add in the possible exhaustion of ‘peak oil’ and James Howard Kunstler’s ‘Long Emergency’ and ‘A World Made by Hand’ may be upon us soon. Thus, the reference to the Mayan calendar seems not so fantastic.


    December 29, 2009 at 8:32 pm

    Excellent article. I tell all my young friends that no one should be worried about investing at all right now. The number one thing is to get out of debt and have 90 percent of net worth in cash. At some point the system is going to go kaput and the global economy is going to implode.

    How geithner thinks we are going to avoid this without getting rid of too big to fail, dangerous derivatives, and the huge amount of liabilities is totally laughable.

    The intellectual elite in this country are totally brain-dead. They are even worse than the bankers.

  • craazyman:

    October 17, 2009 at 6:59 am

    Financial Rapists

    “Words are the nodal points of numerous ideas, and are therefore predestined to ambiguity.”
    -Sigmund Freud, The Interpretation of Dreams

    “Poets are the unacknowledged legislators of the world”
    -Percy Bysshe Shelly

    The technical argument for why firms that leverage beta using the taxpayer’s balance sheet are looters is clear to anyone who remotely understands global finance and central banking. I suspect it’s also clear, at some level of mind and intellect, to the some of the people doing the looting. To many of the shallower and more reptilian minds involved — which constitute no doubt a dissapointingly large percentage — it admittedly is probably not. Power and profits, to them, are the only moral justifications needed. As both are no doubt, at some level of inarticulated but instinctively accepted reasoning, deserved.

    Financial looting is not now constrained by law, by regulation, or at the individual level, by a sufficiently powerful moral conscience. The easy justification for it is that it is somehow socially necessary to “save” the system. And that the skills involved are “worth” the price paid by society — which includes near-zero interest rates for savers and widespread fiscal and monetary disorder that innervates democracy and sickens spirit of the people.

    Yet society, in fact, is probably lucky that folks with skills such as these can “come to the rescue” and “reboot the economy” for the benefit of all. So states a certain “wisdom”, no doubt.

    “Looting” is a reasonably violent word that conveys with some degree of accuracy what these men and women are doing. But it’s a word that implies an anonymity of both perpetrator and victim in the context of this usage, with an inneffectual abstraction that lacks semiotic power. It flies through the cinema of the mind like an invisible gust of wind, unarrested and un-stilled by any imagery that is sufficiently shocking and provocative of moral reasoning.

    The language of political and social change needs a more muscular power and an imagery that arrests and convinces at an unconcious level — this is a prerequisite for a broader social turn of collective consicousness. Certainly the banksters and their lobbyists rely on this aspect of language in their own dealings with politicians and academics, and the political and economic establishments are complicit in the acceptance of a veritable thesaurus of synonyms that defang “looting” into “providing liquidity to markets”, “intermediating capital flows”, “compensating talent”, “creating efficiencies”.

    A more effective phrase that describes the legally permitted looting of the taxpayer is “financial rape”. The imagery is stark and unambiguous, the metaphor is truthful at a structural level, and the notion of a personalized victim and a heinous and brutal action is uncomfortably and effectively conveyed.

    The wife who sees her wealthy bankster husband as a “rapist” is likely to be pitched headlong on an uncomfortable path of self-reflection. The man who wonders in some corner of his mind if he really is a “rapist” may be more amenable to contemplation and enlightened regulation. A society that defines privatized gains and socialized losses as a form of “rape” may be more willing to demand the political and regulatory changes needed.

    The word is not so hysterical as to immediately lose it’s descriptive legitimacy, as are the frequent description of political enemies as “Nazis”.

    No, rape is a good and accurate word. And when firms counterfeit credit, inflate profits falsely, blow themselves up, get bailed out by taxpayers, pay bonuses with taxpayer monies and laugh in your face — they are raping you and they are “rapists” at an elemental level.

    And so the good men and women, the MBAs, CFAs, the gentle yoga class going, bottled water drinking, organic food eating, marathon running and symphony going worker bees in the brutal corners and principal trading desks of the financial industrial complex — Yes, you are “rapists”. And you, central bankers, academics, bailout lobbyists and regulator enablers. You are aiding and abetting financial rape.

    You don’t like that word, do you? It makes you get angry and squirm a bit.

    Yeah, that’s the point.

    Now think about it. And imagine what if feels like for the person underneath you, while you’re doing it to them.

    Criminal Capitalism and Quixotic Devotee

    by Girish Mishra October 26, 2005 Printer Friendly Version
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    Raymond W. Baker knows of the working of world capitalist system in all its intricacies to the minutest details as he worked for almost four decades in Africa and South America as a prominent businessman. Later, he was associated with two prominent think-tanks of America, including the Brookings Institution.

    The thesis, he has propounded in this book, is two fold: capitalism is rotten and badly stinking, yet it needs to be reformed, as there is no alternative to it. Baker, in his experience over a period of more than 40 years in more than 60 countries, has seen “the free–market system operate illicitly and corruptly” and its impact “on the lives of disadvantaged people on all six inhabited continents”. He very candidly admits that “The basic structure of our global economic system has fundamental flaws, and the accompanying risks are beginning to be evident to wealthy and impoverished alike.”

    When Baker, after finishing Harvard Business School and teaching a course in management at the University of New Hampshire, joined the business world in Nigeria, he was surprised to find that a lot of people invested their money in one place but reaped huge profits somewhere else through a complicated mechanism based on over- and under-invoicing and transfer pricing among other things. To quote Baker, “It took me two or three years to realize that most foreign-owned companies were doing largely the same thing. And then it took another couple of years to learn that most wealthy Africans involved in foreign trade were illegally moving money abroad by the same means. As the decades rolled on and my activities spread to dozens of countries across the planet, I observed that countless forms of financial chicanery are prevalent in international business. Like an iceberg, the little that is visible is supported by vastly more hidden beneath the surface.”

    Baker has found the reputation of free-market system, even in the West, in the mud as it abounds in all kinds of frauds, scandals and illegalities. “An assortment of frauds, thefts, corrupt practices, accounting irregularities, earning restatements, asset write downs, tax shenanigans, conflicts of interest, and other charges, probes, malpractices, and allegations have corroded the reputations of dozens of companies and sapped the net worth of untold numbers of shareholders and retirees. The list of financial institutions tarnished in the press reads like what should otherwise be the Who’s Who of propriety: Citigroup, J. P. Morgan Chase, Bank of America, Bankers Trust, Bank of New York and some 55 more on the roster I maintain. The corporate rap sheet, ranging from spectacular failures to merely disgraced executives, includes Enron, WorldCom, Global Crossing, Halliburton, and nearly 100 more on my list. All Big 5 accounting firms have been tarred and feathered. The number of law firms taking heat is too long to recount.”

    It has been claimed time and again that uninterrupted operation of market forces globally will do away with all kinds of corruption and criminal activities, which are supposed to arise from government interventions and regulations and the emergence of monopolies. What has happened in practice is quite the opposite. Baker has come out with a damning indictment: “Since the end of the Cold War, the opening years of the globalizing era have produced an explosion in the volume of illegitimate commercial and financial transactions. North American and European banking and investment institutions have been flooded with laundered and ill-gotten gains. Totaling trillions of dollars, most of these sums generated through secret arrangements between cooperating but distant private-sector entities. Lagging legal codes have proven inadequate to deal with the situation. Much of the subject is a taboo in business and government circles, yet this torrent of stolen, disguised, and hidden resources poses a major risk to state stability, corporate security, democracy, and free enterprise across the planet.”

    The major portion of the book is devoted to a discussion of dirty money, its various components, the mechanism by which it is generated, how the tax havens and Western financial institutions facilitate its generation and its laundering, and the way the U. S. and other governments, notwithstanding all their protestations abate it. ‘Dirty Money’ has been defined as “money that is illegally earned, illegally transferred, or illegally utilized. If it breaks laws in its origin, movement, or use, then it properly merits the label.”

    There are three main components of dirty money, namely, criminal, corrupt, and commercial. The criminal component comprises wide-ranging evil activities such as racketeering, smuggling of men as well as material goods, all kinds of fraud, counterfeiting of goods and currency notes, embezzlement, fraud, forgery, prostitution, piracy of all types and so on. It needs to be noted that most countries have banned proceeds of drug trafficking, bank fraud, and terrorism. The corrupt component has in its fold the yield of bribery and theft by foreign government officials. The commercial component is generally the result of tax-evasion and it does not find any place in official records.

    According to Baker, “What is most striking is that all three forms of dirty money –criminal, corrupt, and commercial–utilize basically the same subterfuges to roll through international channels: false documentation, dummy, corporations, shell banks, tax havens, offshore secrecy jurisdictions, mispricing, collusion, kickbacks, numbered accounts, wire transfers that disguise transactions, and more. Whether it’s moving drug money or tax-evading money, whether it’s a thug or tyrant or terrorist or corporate titan, all use the same bag of tricks. And the truth is, western business and banking sectors have developed and promoted the mechanisms for other countries for more than a century.

    There are many ways to get rich while the government and the society do not know where the money comes from. One of them is under- and over-invoicing. This is a very old tactics resorted to in international trade, real estate deals, purchase of services, etc. that form part of international business transactions. To give an example, an Indian businessman may export textiles worth $10m but show in the invoice just $8m and understanding is reached before hand with the importer that he would remit to the exporter $8m and deposit the rest in some Swiss bank account or somewhere else after deducting his commission or service charges. Similarly, some Indian businessman imports machinery and equipment worth $8m but bills, as per the secret understanding, for $10m. The Reserve Bank of India releases on the basis of the invoice a sum of $10m. The exporter takes $8m and the rest of the amount is deposited in the name of the Indian businessman or his nominee, after deducting the service charges. Thus India is defrauded to the extent of $4m in these two transactions taken together and dirty or black money to the tune of $4m is generated, which multiplies if ploughed back in business activities. So far as India is concerned, its government is deprived of foreign exchange to the tune of $4m that could have been used for developmental purposes.

    Baker has found that not only goods but services also can be mispriced or subject to over- and under-invoicing. “Insurance is a regular candidate with premiums marked up to provide offshore kickbacks. Foreign advertising is another popular vehicle. Consulting contracts and advisory services are easy to load with kickbacks. Technical assistance agreements offer a regular outflow of money that can be shifted into offshore bank accounts. Similarly, royalties, patents, and licenses have become a recent favorite among skilled money shifters.”

    The U.S. and other Western governments claim that they have legally forbidden their companies to indulge in bribery in foreign lands, but this stipulation is very easily circumvented. Baker has found that the usual trick is to allow 20 per cent or so in place of usual 10 per cent commission to the agents to procure the business. Agents understand the purpose of this unusually high rate of commission and they leave no stone unturned to influence and bribe the decision-makers. They offer money and various kinds of other inducements on one pretext or the other. As is widely known, one American company, Enron, now defunct, gave money to certain people in India in the name of promoting education! Baker mentions a widely used trick: “An expatriate lawyer in the MiddleEast does a thriving business representing arms manufacturers. He sets up billion-dollar weapons deals under two contracts, one for the main equipment and a second for support services such as training, maintenance, and software updates. The first contract with the government of the purchasing country is priced properly. The second contract is channeled through a joint-venture company in a Caribbean tax haven, owned by the arms manufacturer and by designated friends of the government officials in the buying country. While doing no work, these nominee partners share in the venture’s deliberately bloated revenues, passing the funds along to their principals, the officials who are the real but silent partners.” Even a reputed company like IBM entered into such an arrangement with an Argentine firm. Baker has the details of this shady deal.

    The Indian government’s scheme of offering subsidy to exporters has led to inflating the items entering export trade to corner as much subsidy as possible. “Lots of exporters continue to get rich off their government’s programs, so be alert to this money-making opportunity.” This is one of the findings of Baker so far as India is concerned. It speaks volumes about the honesty of Indian businessmen and the media they control.

    Another very useful trick is transfer pricing by multinational corporations who resort to “the use of trade to shift money at will between parents, subsidiaries, and affiliates operating in dozens of countries. For many multinational corporations, exaggerated transfer pricing is standard procedure, a major part of global strategies to minimize taxes and maximize profits.” Further, “Intracompany trade across borders represents about 50 to 60 per cent of all cross border trade. I have never known a multinational, multibillion-dollar, multiproduct corporation that did not use fictitious transfer pricing in some part of its business to shift money between some of its entities.”

    Consulting contracts claims arising out of imaginary damages, warranty payments, countertrade deals, etc. are some of the other effective tricks to generate dirty money and fleece developing countries.

    Another frequently used device is the formation of dummy or bogus companies. It is very simple, a reinvoicing company is formed that buys, changes prices, issues a new commercial invoice, and resells. This dummy company requires only a computer, a letterhead, and a bank account to come into play. Baker has given a number of concrete examples to illustrate the operation of dummy companies.

    Dummy companies play a major role in disguising the source of dirty money and then help launder it. Baker has named a number of “delightful places where you can situate and purchase your secret companies.” In all, they come to “63 jurisdictions providing varying degrees of incorporation concealment and protection from probing eyes.” There are printed manuals that guide all the way. These dummy companies have a number of variations such as trusts, foundations, and so on. Offshore dummy companies are known as international business corporations (IBCs) or personal investment corporations (PICs). If we believe Baker, then “the United States is encouraging havens and secrecy jurisdictions to keep up with the owners of IBCs and PICs and is trying to insist on mutual legal assistance and cooperation in specific tax and criminal matters.” If you are interested in details, then Baker has them. In addition to all this, one can very easily fake the entire transactions without stirring out of your home!

    What Baker says is beyond any dispute. To quote: “Use of instruments in the dirty-money user kit carries a high price. The price is damage to the capitalist system. The price is bolstering international crime and terrorism. The price is deprivation for billions of people. The price is heightened risk to the shared security of a globalizing world.”

    Raymond W. Baker’s study presents in great details how “corruption industry” has flourished over the years in Nigeria, Indonesia and Pakistan. It has led to worsening of poverty, limiting government tax revenues, curtailed expenditures on health and education, reduced economic growth, increased indebtedness and discouraged investments. The estimates of public funds looted by some of the corrupt rulers are mind- boggling. Suharto embezzled $15 to $35 billion while Marcos and Mobutu pilfered $5 to $10 billion and $$5 billion respectively. Sani Abacha of Nigeria stole $2 to $5 billion. Pinochet of Chile, who was once hailed as a great saviour of humanity from communism by the USA ate up public funds with the active help and connivance of the Washington-based Riggs Bank about which, to quote Baker, “groveled before some of the dirtiest money on Earth.”

    “Prestigious” banks and financial institutions of the world actively helped all these plunderers of public funds. Take, for example, the case of Sani Abacha of Nigeria. His “plunder was facilitated by some 100 banks all over the world—in the United States, England, the Channel Islands, France, Switzerland, Germany, Luxembourg, Liechtenstein, Austria, Dubai, Singapore, Hong Kong, Austria, Brazil, and elsewhere, with services allegedly performed by such institutions as Citibank, Barclays, Standard Chartered, HSBC, NatWest (now part of the Royal Bank of Scotland), ANZ Grindlays Bank, BNP Paribas, Crédit Agricole Indosuez, Credit Suisse (including Bank Hofmann and Bank Leu), Banque Baring Brothers, Banque du Gothard, Union Bancaire Privée, M. M. Warburg, Banque Edouard Constant, Deutsche Morgan Grenfell, J. Henry Schroder Bank, Picett & Cie, S. G. Ruegg Bank, Commerzbank, Bank of India, and many more. With a fortune estimated at $3 billion to $5 billion, a feeding frenzy arose to receive, shelter, and manage Abacha’s wealth.”

    Criminal component of dirty money has its source largely in drug trafficking, mostly from Afghanistan, Colombia, Peru, etc. and in thuggery and racketeering in which terrorists as well as Mafia have a key role. So far as commercial component is concerned, one has to look at the modus operandi of multinational corporations and the state of affairs prevailing in the Soviet Union and the East European countries after the collapse of socialist regimes. Baker has the details in his book.

    Baker, in the context of what happened on 9/11, asks: “Was it just religious extremism that brought on the terrorists, power disparities, income imbalances, and social disaffections evident in their motivations?”

    Baker thinks that, in spite of all its rottenness, capitalism has no alternative and it can be reformed and rejuvenated to take the humanity forward. It is difficult to accept this proposition because it is nothing but pure and simple quixotic.

    Before we conclude, let us draw the attention of our readers to a write-up in Guardian (October 25, 2005), which says that the Mayor of London is ready to welcome the robber barons fleeing from Russia after plundering it mercilessly. Obviously, capitalism feels at ease with criminals of all kind. » Our Kleptocracy Saving the American economy by looting it

    May 05, 2009

    Our Kleptocracy: Saving the American economy by looting it

    Paul Krugman recently pointed out that wages are falling across America. A week earlier the Treasury Department reported that tax revenue was collapsing at a 14% rate.

    It's easy to see the correlation between these two trends. But what do they have to do with this statement? Everything.

    Sen. Dick Durbin (D-Ill.) has been battling the banks the last few weeks in an effort to get 60 votes lined up for bankruptcy reform. He's losing.
    "And the banks -- hard to believe in a time when we're facing a banking crisis that many of the banks created -- are still the most powerful lobby on Capitol Hill. And they frankly own the place,"

    The first thing to understand is that the banking industry adds nothing to the economy. It doesn't sow crops, make widgets, build homes, or fix your computer. The financial industry sits on top of the real economy in the same way a fungus grows on a tree. In fact, as famous investor John Bogle said a few years before the massive bailouts, the financial sector actually subtracts from the economy.

    "My estimate is that the financial sector takes $560 billion a year out of society," Bogle explains to Bill Moyers. "Banks, money managers, insurance companies, certainly annuity providers. They're all subtracting value from the economy."
    If you add Senator Durbin's comments with John Bogle's, you have a classic case of the tail wagging the dog. The real problem happens when the tail has no regard for the welfare of the dog. We passed that point in the 1980's and only now we are seeing the effects of making that decision.
    Sixteen years ago Nobel-prize economist George Akerlof wrote that investors in the S&L scandal “acted as if future losses were somebody else’s problem. They were right.” Someone trying to make an honest buck would have "operated in a completely different manner." Instead, they looted.

    Does this sound familiar? If it doesn't, you haven't been paying attention.

    Living with our choices

    Economists are already floating the concept that Americans better get used to a lower standard of living.

    Hundreds of thousands of jobs have vanished forever in industries such as auto manufacturing and financial services. Millions of people who were fired or laid off will find it harder to get hired again and for years may have to accept lower earnings than they enjoyed before the slump.
    Layoffs now taking place are similar to those in the 1981-1982 recession, when unemployment peaked at 10.8 percent and 2.8 million jobs disappeared, leaving industries such as durable-goods manufacturing permanently smaller. Some 14 percent of durable-goods positions vanished in that slump, and the sector never regained the employment level of June 1981.
    It's funny that they should mention the 1981-82 recession. The obvious implication is that this is simply a matter of the periodic creative destruction of capitalism, and that we should just accept it.
    However, as William Greider describes in his excellent book The Secrets of the Temple, the fallout from that deep recession was so bad because the Federal Reserve made choices. They chose to leave real interest rates at abnormally high levels.
    Manufacturing and farming was destroyed while financial assets boomed during the the mid-80's because of one reason and one reason alone: the Federal Reserve decided who was going to be the winners and who was going to be the losers.

    The same is true this time around.

    The Predator Class

    “When a woman thinks that her house is on fire, her instinct is at once to rush to the thing which she values most. It is a perfectly overpowering impulse, and I have more than once taken advantage of it. . . . A married woman grabs at her baby; an unmarried one reaches for her jewel-box.”
    -- Sherlock Holmes from A Scandal in Bohemia

    When a central bank is on fire it will rush to save what it thinks is most important - the bonuses and dividends of the Wall Street clientele. It never considers what will happen to the real economy.

    Today, the signature of modern American capitalism is neither benign competition, nor class struggle, nor an inclusive middle-class utopia. Instead, predation has become the dominant feature—a system wherein the rich have come to feast on decaying systems built for the middle class. The predatory class is not the whole of the wealthy; it may be opposed by many others of similar wealth. But it is the defining feature, the leading force. And its agents are in full control of the government under which we live.

    Our rulers deliver favors to their clients...For in a predatory regime, nothing is done for public reasons. Indeed, the men in charge do not recognize that “public purposes” exist. They have friends, and enemies, and as for the rest—we’re the prey.

    In a predatory economy, the rules imagined by the law and economics crowd don’t apply. There’s no market discipline. Predators compete not by following the rules but by breaking them. They take the business-school view of law: Rules are not designed to guide behavior but laid down to define the limits of unpunished conduct. Once one gets close to the line, stepping over it is easy. A predatory economy is criminogenic: It fosters and rewards criminal behavior.
    - James K. Galbraith

    Galbraith might sound a little melodramatic, but he still hits the nail on the head.
    Bernie Madoff was a piker. Why? Because he thought small. The real Wall Street thieves buy the lawmakers to pass laws to turn their looting into legality.

    It's no secret that a significant part of the Treasury Department and some of Obama's economic advisers are old Goldman Sachs executives (aka Government Sachs). Since the Treasury Department is supposed to be regulating out of control banks like Goldman Sachs, this is a ethical and criminal conflict of interest. Yet no one bats at eye anymore. Why?

    What isn't as well known is the connections between the House and Goldman Sachs.

    Goldman Sachs' new top lobbyist was recently the top staffer to Rep. Barney Frank, D-Mass., on the House Financial Services Committee chaired by Frank.
    Congress is supposed to be the watchdogs of the executive branch, but now it is obvious that both branches of government are owned by the banks they are supposed to regulate.
    Given all this it shouldn't be a surprise that the largest beneficiary of the AIG bailouts was Goldman Sachs.

    Another good example of the rewards of owning the Treasury Department is the Public-Private Investment Program or “PPIP”.

    Investors, which under the original plan would have included Treasury, get to borrow FDIC’s money to buy toxic assets. This borrowed money comes with no strings attached: If the assets increase in value, investors get all the upside, proceeds of which they use to pay off the debt. If assets keep declining, then investors are out their small equity stake, but no more. FDIC is left holding the bag.

    The WSJ has come out and bluntly said that Congress won't investigate Wall Street. They could be right. Bear Stearns collapsed more than a year ago, and there still hasn't been a real investigation of the banking industry. Have you ever known politicians to be so reluctant to get in front of a camera to fake outrage? They are dragging their feet after trillions of taxpayer dollars in bailouts.

    "...our deepest problem is the ascendancy of finance in national policymaking as well as in the gross domestic product, and the complicity of politicians who really don’t want to talk about it.”
    - Kevin Phillips

    In fact, attempts at real regulatory reforms are being effectively blocked by the same banks that were saved with taxpayer money.

    “the banksters are eagerly, shamelessly, and openly harvesting their pound of flesh from financially stressed average taxpayers, and setting off a chain reaction in the auto industry which has the very real risk of creating even larger scale unemployment than the economy already faces. It’s reckless, utterly irresponsible, over-the-top greed.”
    Even the relatively modest "stress test", which was already rigged with unaudited bank information, was delayed by the bankers because it wasn't showing exactly what they wanted it to show.
    These banks can borrow from the Fed at 0% and lend at 4% with little risk, and yet still can't make a profit. Hell, I could make a profit!

    The Peasant Mentality

    In places like France, Latvia, Hungary, Greece, and Iceland, the populace is outraged and taking to the streets. Yet here in America a recent Zogby poll found a majority of the public thinks the news media made things worse by reporting the economic collapse.
    It's an amazing disconnect that I found baffling until I read this:

    After all, the reason the winger crowd can’t find a way to be coherently angry right now is because this country has no healthy avenues for genuine populist outrage. It never has. The setup always goes the other way: when the excesses of business interests and their political proteges in Washington leave the regular guy broke and screwed, the response is always for the lower and middle classes to split down the middle and find reasons to get pissed off not at their greedy bosses but at each other. That’s why even people like [Glenn] Beck’s audience, who I’d wager are mostly lower-income people, can’t imagine themselves protesting against the Wall Street barons who in actuality are the ones who fucked them over. . . .

    Actual rich people can’t ever be the target. It’s a classic peasant mentality: going into fits of groveling and bowing whenever the master’s carriage rides by, then fuming against the Turks in Crimea or the Jews in the Pale or whoever after spending fifteen hard hours in the fields. You know you’re a peasant when you worship the very people who are right now, this minute, conning you and taking your shit. Whatever the master does, you’re on board. When you get frisky, he sticks a big cross in the middle of your village, and you spend the rest of your life praying to it with big googly eyes. Or he puts out newspapers full of innuendo about this or that faraway group and you immediately salute and rush off to join the hate squad. A good peasant is loyal, simpleminded, and full of misdirected anger. And that’s what we’ve got now, a lot of misdirected anger searching around for a non-target to mis-punish . . . can’t be mad at AIG, can’t be mad at Citi or Goldman Sachs. The real villains have to be the anti-AIG protesters! After all, those people earned those bonuses! If ever there was a textbook case of peasant thinking, it’s struggling middle-class Americans burned up in defense of taxpayer-funded bonuses to millionaires. It’s really weird stuff.

    It makes one think that the American people would be better off with a monarchy. We seem to want to grovel and bow to our wealthy betters.

    The Age of Mammon zero hedge

    The Age of Mammon

    Submitted by Jim Quinn of The Burning Platform

    Financiers – like bank robbers – do not create wealth. They merely distribute it. While the mob may idolize holdup men in good times, in the bad times it lynches them. What they will do to the new money men when their blood is up, we wait eagerly to find out.” - Mobs, Messiahs and Markets

    As our economy hurtles towards its meeting with destiny, the political class seeks to assign blame on their enemies for this Greater Depression. The Republicans would like you to believe that Bill Clinton, Robert Rubin, Chris Dodd, and Barney Frank and their Community Reinvest Act caused the collapse of our financial system. Democrats want you to believe that George Bush and his band of unregulated free market capitalists created a financial disaster of epic proportions. The truth is that America has been captured by a financial class that makes no distinction between parties. These barbarians have sucked the life out of a once productive nation by raping and pillaging with impunity while enriching only them. They live in 20,000 square foot $10 million mansions in Greenwich, CT and in $3 million dollar penthouses on Central Park West.

    These are the robber barons that represent the Age of Mammon. The greed, avarice, gluttony and acute materialism of these American traitors has not been seen in this country since the 1920′s. The hedge fund managers and Wall Street bank executives that occupy the mansions and penthouses evidently don’t find much time to read the bible in their downtime from raping and pillaging the wealth of the middle class. There are cocktail parties and $5,000 a plate political “fundraisers” to attend. You can’t be cheap when buying off your protection in Washington DC.

    Lay not up for yourselves treasures upon earth, where moth and rust doth corrupt, and where thieves break through and steal: But lay up for yourselves treasures in heaven, where neither moth nor rust doth corrupt, and where thieves do not break through nor steal: For where your treasure is, there will your heart be also. No one can serve two masters, for either he will hate the one and love the other; or else he will be devoted to one and despise the other. You cannot serve both God and Mammon. – Matthew 6:19-21,24

    It seems that Lloyd Blankfein, the CEO of Goldman Sachs, may have been overstating the case in saying his firm doing God’s work. With his $67.9 million compensation in 2007 and payment of $20.2 billion to his co-conspirators, Blankfein appears to be a proverbial camel trying to pass through the eye of a needle. This compensation was paid in the year before the financial collapse brought on by the criminal actions of Lloyd and his fellow henchmen. After having his firm bailed out by the American middle class taxpayer at the behest of his fellow Goldman alumni Hank Paulson, Lloyd practiced his version of austerity by cutting compensation for his flock to only $16.2 billion ($500,000 per employee) in 2009. I’m all for people making as much money as they can for doing a good job. But, I ask you – What benefits have Goldman Sachs, the other Wall Street banks, and hedge funds provided for America?

    Never have so few, done so little, and made so much, while screwing so many.

    In 2005, the top 25 hedge fund managers “earned” $9 billion, or an average of $360 million. One year after a financial collapse caused by the financial innovations peddled by Wall Street, the top 25 hedge fund managers paid themselves $25 billion, or an average of $1 billion a piece. For some perspective, there were 7 million unemployed Americans in 2006. Today there are 14.6 million unemployed Americans. While the country plunges deeper into Depression, the barbarians pick up the pace of their plundering and looting of the remaining wealth of the nation. Bill Bonner and Lila Rajiva pointed out a basic truth in 2007, before the financial collapse.

    “On the Forbes list of rich people, you will find hedge fund managers in droves, but no one who made his money as a hedge fund client.” - Mobs, Messiahs and Markets

    Ask the clients of Bernie Madoff how they are doing.

    1920′s Redux The parallels between the period leading up to the Great Depression and our current situation leading to a Greater Depression are revealing. When you examine the facts without looking through the prism of party politics it becomes clear that when the wealth and power of the country are overly concentrated in the clutches of the top 1% wealthiest Americans, financial collapse and depression follow. This concentration of income and wealth did not cause the Stock Market Crash of 1929 or the financial system implosion in 2008, but they were a symptom of a sick system of warped incentives. The top 1% of income earners were raking in 24% of all the income in America in 1928. After World War II until 1980, the top 1% of income earners consistently took home between 9% and 11% of all income in the country. During the 1950′s and 1960′s when Americans made tremendous strides in their standard of living, the top 1% were earning 10% of all income. A hard working high school graduate could rise into the middle class, owning a home and a car.

    From 1980 onward, the top 1% wealthiest Americans have progressively taken home a greater and greater percentage of all income. It peaked at 22% in 1999 at the height of the internet scam. Wall Street peddled IPOs of worthless companies to delusional investors and siphoned off billions in fees and profits. The rich cut back on their embezzling of our national wealth for a year and then resumed despoiling our economic system by taking advantage of the Federal Reserve created housing boom. By 2007, the top 1% again was taking home 24% of the national income, just as they did in 1928. When the wealth of the country is captured by a small group of ruling elite through fraudulent means, collapse and crisis becomes imminent. We have experienced the collapse, while the crisis deepens.

    It’s Good To Be the King The Wall Street oligarchs were able to accumulate an ever increasing portion of corporate profits by inventing securitization, interest-rate swaps, and credit-default swaps which swelled the volume of transactions that bankers could make money on. These products were originally introduced as a means for corporations to hedge their risks. Wall Street shysters chose to use their “creative” financial products to build the biggest gambling casino in the history of the world. They functioned as the house, siphoning off billions in profits, but then got caught up in the hysteria and placed billions of bets themselves. This resulted in the financial industry generating 41% of all business profits in 2007. From World War II through 1980, financial industry profits ranged between 10% and 15%. Simon Johnson explains the despicable hijacking that has taken place since then.

    From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent in 2007.

    The original robber barons amassed huge personal fortunes, typically through the use of anti-competitive business practices. These well known titans of industry included Henry Ford, Andrew Carnage, John D. Rockefeller, and JP Morgan. They may have practiced questionable business ethics, but they did create wealth while benefitting the country as a whole. They introduced the automobile, provided the nation with steel, produced the oil that powered our economy, and brought order to industrial chaos of the day. It seems their fortunes were built by creating rather than destroying.

    The disgustingly rich Wall Street wheeler dealers who live in Greenwich CT and NYC and summer in the Hamptons have created nothing. Their immense wealth has been created through draining the economic system of its lifeblood. Their financial innovations have created no lasting benefit for our society. Wall Street knowingly created no documentation (liar loans) mortgage loans, Option ARM loans, and subprime loans. You do not create products that beg for fraud unless you want fraud. The packaging of these fraudulent mortgages into CDOs and CDSs by Wall Street’s crime machine benefitted Wall Street only. Those who got the loans defaulted, lost the homes, and had their credit ruined. Wall Street financiers have lured the American public into debt with easy credit and a marketing machine geared to convince the average Joe that he could live just like the rich. Simon Johnson explained the phenomena in a recent article.

    “Excessive consumer debt is an outcome of prolonged inequality – in trying to remain middle class, too many people borrowed too much, while unscrupulous lenders were only too willing to take advantage of such people.”

    You Call This Capitalism? Capitalism is supposed to be an economic system in which the means of production and distribution are privately owned and operated for profit; decisions regarding supply, demand, price, distribution, and investments are not made by the government; Profit is distributed to owners who invest in businesses, and wages are paid to workers employed by businesses. The American economy is in no way a free market capitalistic system. It has become a oligarchic consumer capitalist society that is manipulated, in a deliberate and coordinated way, on a very large scale, through mass-marketing techniques, to the advantage of Wall Street and mega-corporations.

    When you hear the Wall Street class on CNBC argue against tax increases for the rich, they hark to the fact that small businesses would be hurt most by the expiration of the Bush tax cuts. There are 6 million small businesses in the US, with 90% of them employing less than 20 employees. These are not the rich. The vast majority of these businesses earn less than $1 million per year. There are only about 134,000 people in America who make on average $2.5 million per year. There are another 600,000 people who make on average $760,000 per year. Out of a workforce of 150 million, less than 1 million rake in over $750,000 per year. These are not small businesses. They are the Wall Street elite, corporate CEOs and the privileged classes that control the power in NYC and Washington DC.

    The following charts clearly show that perverse incentives in the US financial system have allowed corporate executives to reap ungodly pay packages, while the middle class workers who do the day after day heavy lifting in corporations have been treated like dogs. Considering the S&P 500, which measures the stock returns of the 500 largest companies in the U.S., has returned 0% for the last 12 years, the CEOs of these companies would slightly embarrassed paying themselves 300 times as much as their average workers. Not in the age of mammon. Big time CEOs are rock stars. Outrageous pay packages are a medal of honor in a world where humility and honor don’t exist.

    The Depression that currently is engulfing the nation was 30 years in the making. The criminal Wall Street financiers are the modern day John Dilingers. They have mastered the art of stealing from the masses while convincing these same people that they should admire them because they are rich. This is the oddity about Americans as pointed out by Bill Bonner and Lila Rajiva.

    “The poor genuinely believe the rich are better than they are. They are smarter and better educated. The poor even support low tax rates for the rich, as long as they have a lurking chance of joining them.” - Mobs, Messiahs and Markets

    The truth is that the poor have no chance of joining the the rich. The game is rigged. The poor have admired the rich for decades. But, hard times have arrived. And they are about to get harder. The rich have armed guards to keep the poor at bay. They will need an army of guards before this crisis subsides.

    Leonard Cohen sums it up perfectly in his song Everybody Knows:

    Everybody knows that the dice are loaded Everybody rolls with their fingers crossed Everybody knows that the war is over Everybody knows the good guys lost Everybody knows the fight was fixed The poor stay poor, the rich get rich That’s how it goes Everybody knows Everybody knows that the boat is leaking Everybody knows that the captain lied Everybody got this broken feeling Like their father or their dog just died

    Selected Comments
    tom a taxpayer
    - 23:33 #552299

    We need Shock and Awe RICO prosecutions of the robber barons...mass trials in style of the Maxiprocesso (Maxi Trial) of the Mafia in Sicily during the mid-1980s that resulted in hundreds of defendants convicted.

    Rampant criminal activity of the robber barons must be attacked head on. We need coast-to-coast arrests from California Countrywide to Greenwich, CT to New York Goldman Sachs and every other part of the overlapping criminal enterprises, including the mortgage industry, the appraisers, Freddie and Fannie, Citi and the big banksters, the ratings agencies, the Wall Street investment banks, AIG, the federal co-conspirators at U.S. Treasury, SEC, OTS, and the Federal Reserve, especially FRBNY, and the members of Congress who aided and abetted the greatest financial crimes in U.S. history.

    These overlapping criminal enterprises raped and pillaged the mortgage industry, ruined the housing market, destroyed the credit system, endangered federal/state/municipal financing, pension funds, and the banking system, caused massive unemployment, sent the economy into a downward spiral, endangered the world financial system, extorted the U.S. and the world to pay them billions in ransom or face the destruction of the world financial system and economy, and now are costing taxpayers hundreds of billions, even trillions of $.

    The only thing that has any hope of stopping the continual rape and pillage of investors, pensioners, city and state funds, and taxpayers is to see the entire Wall Street RICO crime syndicate along with co-conspirators in the mortgage industry, the Fed, Treasury, SEC, and Congress arrested and perp walked in handcuffs to federal and state jails. Now. Not 2 years from now.

    We need RICO confiscations of the hundreds of billions in illegal "profits" from the criminal enterprises of the banks, mortgage industry, and Wall Street Mafia. We need 20 years-to-life hard time prison sentences.

    It takes only one prosecutor to investigate just one crime, and follow the money and the connected crimes, and bring down the overlapping criminal enterprises using Racketeer Influenced and Corrupt Organizations Act (RICO) prosecutions.

    The prosecutor who leads the charge against the robber barons will become a national hero.

    For a recap of the rampant criminality that begs for prosecution, see William Black's "Great American Bank Robbery":

    William Black is author of "The Best Way to Rob a Bank is to Own One".

    Bill Black’s Top Ten Ways to Crack Down on Corporate Financial Crime


    Now that the game is breaking down, honor among thieves is breaking out! As long as the global financial system with the USD as reserve currency was enabling the US economy scarf down the world's commodities, goods and services at throw away price and enabled folks at all strata to over consume thanks to phony jobs and easy credit, no one complained. But, the societal costs are now manifesting itself in the form of lost middle and low cost jobs while the creamy layers are continuing to benefit from keeping this financial game going.

    Let us accept the fact that these distortions are a result of the reserve currency status of the USD -- as long as we have the reserve status, our economy will continue to bleed jobs.


    Just like the mobsters, the banksters have bought and paid for politicians, judges, police (SEC) to continue their criminal acts without fear of prosecution.

    "When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes... Money has no motherland; financiers are without patriotism and without decency; their sole object is gain."

    - Napoleon Bonaparte, 1815

    The rape and plunder will continue until the victims band together to stop it. This will be the decade of "Project Mayhem".


    The elitists have only their own interests at heart. They will not rush to the rescue of their bretheren, weakened and falling under the force of angry "sheeple" (your moniker). They will scheme to abscond with everything they can during the collapse. They will not protect each other, just the status quo.

    We can and will have a "come to Jesus" event with these guys and they will be humbled (if they are lucky).

    Let the French Revolution be our guide. I am looking forward to see some heads roll down Wall St.

    That would be great, but the prosecutor who begins will find photos of himself having sex with a 15 year old on the front page of the New York Daily news. It does not matter if the official is clean or not...they will invent a story to destroy him. Which is why things are as bad as they are.

    They either install stooges or destroy the ethical in a relentless, vicious way.

    Once things really crater and the mobs begin to form the lackeys will betray their current masters to save themselves. This of course entails things really getting bad and does nothing to stop the robbery continuing right now. The criminals we have now are the most well connected powerful maniacs the world has ever seen. They own the government, and the government has means of coercion up to nuclear weapons.

    Underestimating how far these sociopaths will go to maintain their stranglehold is unwise.

    It is going to get ugly...very fast.

    Homeland Security

    "... the prosecutor who begins will find photos of himself having sex with a 15 year old on the front page of the New York Daily news" You mean like Elliott Sptizer? He went after the banks and the banks used the NSA/CIA/FBI financial tracking software to see where his money went. It prolly took some intern one microsecond to see that Spitz was bundeling his payments to Ms. Hotpants. The bundeling of payments to stay below the $10K reporting level is a crime. In fact, with "bundeling" there is no reporting threshold, they look at the series of transactions.


    Great, isn't it? Doing X is a crime. Not doing X is also a crime.


    Or like Blago? Everything was fine until he threatened BOA. Next morning, Arrested. Didn't see the media connect those dots did ya?

    jeff montanye

    as through this life you travel, you meet some funny men. some rob you with a six gun and some with a fountain pen. (pretty boy floyd, woody guthrie)


    Denninger, glad to see you on board @ ZH. Too bad you brought your myopic and painfully naive viewpoints here as well. Here's a simple heads-up that will hopefully serve to clarify the situation: The state is the criminal.

    What you don't seem to realize, and continually kick people off your boards for saying, is that the chief enabler, organizer & beneficiary is the US government itself. They are the ringleader, the mastermind.

    To paraphrase Voltaire, if banksters didn't exist, governments would have to invent them. They are simply a means to an end. The end is all encompassing government control, fueled by a global reserve currency backed by the muscle of the US military.


    Bingo. Everyone thinks campaign contributions are to get favorable laws passed and to buy regulators, but why would you need to buy them when they would be forthcoming anyway? They're really just tribute payments to mobsters more or less and/or direct tax (rather than tax that goes first into the general piggybank).

    Further, they operate under the control and jurisdiction of the government, not the other way around. Literally, instantly, the whole thing would turn around if the government desired. Mass prosecutions... etc. Maybe even some treason charges. But make no mistake about it, when the government decides to crack the whip, banksters cower and cringe. Not the other way around.

    Commander Cody

    Agreed. Government enables, banksters implement.



    - 08:16 #552672


    aint no fortuna...

    You nailed it tom... nice comment.


    To really understand how out of control the financial services industry is, sometimes it is good to step back and look at the big picture. While the free market profit motive is the only system that works, many of us individually are caught up in an irrational materialism. Perhaps you do not recognize this in yourself, and this blinds you to the author's point.

    Uncle Remus

    Faith has no place in discussions of markets, law, economics, or finance

    Uuuhhhhh - fiat. Hello...

    jeff montanye

    well played.


    religion is an attempt to codify morality, from a specific point of view. it is not faith. religion is like trying to carve a sculpture from a morning fog. faith is knowing the fog is there even after the sun has caused it to dissipate.


    The Truth About Religion

    Homeland Security

    "Faith has no place in discussions of markets, law, economics, or finance."

    Agreed - leave faith out.


    the dollar is keeps it going. I giggle every time a shopkeeper takes my green papers and gives me real valuable shit.

    Infuckencredible yahoo, more green papers, roll another one

    Homeland Security

    " as Nietzche said, 'if there is not God, everything is permitted" If we are to develop into a sophisticated society that lives in peace and harmony then we need to learn to respect each other as fellow human beings with out religion or with the acceptance of many religions. Population is increasing exponentially and its getting crowded and with out mature, rationale thought and actions I can see tough times ahead.

    Was it not the great Rodney King that said "Can't we all just get along?"


    Why do producers and creators (the people who make all the real wealth) continue to work under such a regime?

    Why does a young engineer accept a starting salary of $60k/year, to generate millions of dollars worth of output to the economy every year, and doesn't rebel?

    Have we become a nation of pussies? The finance men aren't exactly holding guns at our heads (yet), forcing our labour. Why don't people just start doing the minimum required to keep themselves alive, and not anything more until this nonsense ends?

    Mad Max

    Real producers are rapidly opting out, as you say. It's about the only realistic option left.

    BTW, I know some young engineers and most would have been thrilled to be offered $60k. Whatever schools may claim, $40-45k is a more realistic starting salary, IF you can even get a job offer in this economy. And a lot of that is because many US businesses are crying crocodile tears when they claim there's a shortage of engineers - they really just want the foreign engineers on H1-B visas who they will pay $20-25k for a couple years and then tell to go pound sand, to be replaced with the next guy off the plane from Mumbai. Both the US and Indian engineers get exploited this way, although the Indian engineer briefly gets a good job relative to what's available in India. There would be plenty of $60k jobs for US engineers, and enough US engineering grads to fill them, if it weren't for the racket of foreign visa workers that major US companies hiring engineers (and computer scientists, etc.) have developed. This is not based on theory - this is based on talking to people in the industry. I know someone who emigrated to the US from India at age 7, got his Ph.D. in computer science from one of the best US universities for that field, and then complained that he might have to move back to India to get a job. Irony.


    Yup, I know engineering and computer science grads from 2001, 2002, 2003, who still aren't employed and have never been employed, graduating from some of the top universities up here in Canada.

    Why are they unemployed? Because they won't lower their standards to the levels that the H1-B slave traders want in terms of salary, or in terms of professional behaviour and conduct.

    Many have decided that having no job is better than being in a job that is completely exploitive.


    I hope they rot. There are plenty of high paying engineering jobs. They are malingering pussies. Jobs don't meet their self-worth?? I wouldn't hire anyone who did nothing for 6 months aftering graduating- fricken flakes, it is not gonna get easier.


    There most certainly are not lots of 'high paying engineering jobs'. Not by a long shot, and certainly not at the entry level. Are you just trolling tonight, or what? No point in ruining one's health for a job that, after paying for expenses associated with working, doesn't leave any money left over for savings.

    Malingering, hardly. Get a clue. Most would beat your ass to a bloody pulp if you dared spew such bullshit ("malingering") to their faces.


    Look, Ethopians don't fare well in the desert. Go to where the jobs are- Texas. Engineering jobs are plentiful and the cost of living is less. But come sans the self pity manchild.


    Certain kinds of engineering perhaps, but not typially Electrical and/or Computer. And employers are very reluctant to hire Electricals and put them into PM roles, unfortunately, believing that the tech industry will sweep them up when it recovers.


    Bullshit, Austin is filled with those jobs. If you are trying to convince yourself that things are going to get better; you had better think again. Hell, the commercial mortgage problem won't even be shit here because of the new arrivals. I'm just saying for the forseeable future, Texas looks good and just about everywhere else is in the crapper. Want to increase your luck? Go where the odds are good.

    If you need to get into a job- forget PM (what makes you entitled to that position?), take what you can get and do something where you can learn another field.


    Austin filled with those jobs? Lol. The big companies in Austin have been slowly packing up and shipping as much as they can overseas, not hiring engineers. I'm talking Dell, TI, Freescale, etc. And it was like that even pre-2008 downturn.

    Dingleberry Jones

    And while those jobs are going overseas, the city, full of energetic, enterprising engineers, has increased employment via small businesses. Instead of whining about there being no jobs, create your own.

    The mentality of the entitled is digusting.


    A nation of defeatists. It is clear they are still on their 99 week vacations.


    PMs? Don't even get me started. That's part of the problem. More and more employees these days want to be a PM to attend meetings all day but not actually do productive work.

    It's about time that a large segment of the Western population wisens up that they're aren't too important to do manual labor. You can't complain about illegal immigration taking jobs but not be willing to work in fields or slaughterhouses, even with that expensive degree in Art History.


    Well, an Electrical/Computer Engineer who can't find a job because the H1-B's have taken them all (in software and in hardware engineering) can't exactly easily swing over to civil or mechanical design work. So the PM roles, if they can get them, are often good fits.

    We're not talking about random construction day labour here, we're talking about engineering professionals who have spend hundreds of thousands on their education.

    As for manual labour, there's a lot of progress we can make towards minimizing the amount of it required, but your average man on the street freaks out at the prospect of using a Wal-Mart self-checkout line, or buying stuff from vending machines.


    I don't freak out. What I see is 50 Cashier Lines and maybe 6 express lines. 5 of the 50 cashier line and one special line with tobacco products are open. 4 express lines are open filled with people shoving cartfuls beyond the 20 item limits.

    What I see is a Store filled with employees unable to sit for any length of time. The break room is empty. Yes there is a coffee pot there, but no one may touch or drink out of it.

    And the whole box is a rotting monument to buy buy buy!

    They do one thing well. Grocery and Perishables. Local Grocery Stores die when a Wal Pox shows up locally.

    I have to sit down, think for a minute and reach back 45 years or more and hit a Delicessian where everything is there for you a few blocks from home with 7 employees working day and night. Sweepers come up the street and Arrabers (Baltimore Produce brought up by horse from downtown) come up with grocerys and produce on carts. Milk is hand delivered each morning to your door. Your empty containers are taken away.

    All the powerful have to concern themselves with at that time is making sure that the entire factory is running on all 8 clynders with no misfire or problems anywhere.

    Now the factory sits silent. The workers gone elsewhere or dead. The Materials made over seas and imported while handled by a few people with phones and shipping papers constantly seeking a 3rd world nation to make the stuff cheap, cheaper and even without things that are considered an expense.

    The whole area round the factory has been empty for decades now and nothing moves on the street except brass shell casings and police cars. Anything anyone sees worth doing dont live in the city anymore. They live away, out of sight so that they may still raise children in safety... possibly even entirely off the grid itself. The Children grow up unaware of the sexual, materalistic and vices of society itself until they come out of the woods seeking a life.

    Thier innocents is signed away for college and they come out of there stripped of any humanity left. It is all about money or nothing. Jobs? You dont have a job unless said job involves making decisions that impact other people's lives. And you are expendible.

    Want some humor? Watch a old movie called the "Hudsucker Proxy" which refers to business in a funny light. We have much to learn. Watch Wall Street from the late 80's where we learned greed is good.

    Many times I have heard of powerful people owning very large mansions requiring utilitiy billing large enough to heat and cool a small southern town each month. With square footage so large it must be a millstone on thier necks.

    I say that the Rich and Powerful are lost to the everlasting and enternal grasping of the next big pot, the next big thrill and the eye is never filled.

    If this walmart proceeds down the path of automatic machines for everything, no one will have a job anywhere unless said machine breaks down and a tech support call comes in. That is ok, a few broken down out of order machines waiting a visit from Calcutta India tech out of a line of 50 or so still functioning is not too big of a loss.

    Yea I think one day we will have to settle accounts and make things right, but not by looting, pillaging or killing off those who will die anyway of excessive gluttony, excessive exertions in the bedroom and excessive greed that will choke them in the vault anyway.

    What we do need to do is remember who we are and take care of those who we can while making ready for when the rich finally run out of the very waters that keep them hydrated and come for you and yours.

    Almost Solvent

    Perishables are not done right by Walmart.

    The "fresh" produce from Chili and China look like $hit compared to what's down the street at Wegmans.

    Wilted greens, soft onions, etc.

    I would not buy produce from Walmart under any conditions.

    -Assfire, the absolute last thing we need in Texas is more unemployed Yankee malcontents looking for work. The unemployment rate in Texas is creeping up. We have an $18B budget shortfall. We get to choose between the Houston Mafia and Mr. Aggie Goodhair for governor. Things (as we say here) is a fixin to get a whole lot worse. Stay away, Yankee malcontents. If the threats don't work, consider this.......the place you wanna live in Texas is Monterrey. Don't let that little tollbooth on the bridge in Laredo discourage you. Wanna come south? Welcome. Just keep goin til the sign says Bienvenidos!

    What he says is actually very true. Take Rockstar Games for an example. They expect their employees to work more than 60 hours per week. Of course, they don't say this, they just hint that "Jim wasn't a team player so we had to let him go. Make sure you get all of those objectives done by Monday." Imagine doing calculus homework for 60 hours a week, every week, and you will get the picture. Some further info for you:


    Yup. The H1-B's do extremely well in this environment because a) being fired = deportation, b) usually single Indian men, c) very limited access to the US legal system because of a).

    Probably the most problematic thing with the guys I know is that they are top-notch talent, but, because of H1-B's, they simply get lost in the noise. Google, Microsoft, Oracle, etc., only consider less than 1% of applicants for their job openings. So even if you're Linus Torvalds himself, your chances aren't very good of even getting an interview with those firms simply because only a very small percentage of applications are even subjected to human review. That's why its not that uncommon to see people with 5 year resume gaps, or sometimes even longer out there.

    Ricky Bobby

    +1 This is the flat out fucking truth have seen it all first hand. H1's are indentured servants. Corporate Hierarchy is no different then the court of some feudal king, designed to make those at the top Masters of all. Screw the serfs and slaves its all about being a celebrity.


    We had a job running concrete that required about 30 of us to sleep in the plant and pull a 80 hour workweek to get things done that week. Of all the working I have seen, done and accomplished, I will never forget that week while everyone slept stacked like cordwood waiting for the hot summer heat to go down and run concrete in the night to satisfy those who bought, paid for and hired us to get it done before sunrise.

    We got it done that week. Never in my wildest dreams would I see half the places we poured rot in foreclosure today. And that was about 14 years ago.


    I hope they rot. There are plenty of high paying engineering jobs. They are malingering pussies. Jobs don't meet their self-worth?? I wouldn't hire anyone who did nothing for 6 months aftering graduating- fricken flakes, it is not gonna get easier.

    couldn't agree more.

    I have 2 engineers in my immediate family, and 3 or 4 more friends in every field including electrical, mechanical, civil, computer etc.

    All well employed (in canada).

    It's no wonder pitz is unemployed if you ask me. No one wants a depressed, whiny complainer on board.

    If anyone does ever hire you, I am sure they'll regret it fast. You'll poison the atmosphere with your depressing marxist drivel.


    I think the 14 junks are unfair, because AssFire does have a point in that workers in the U.S. need to lower their expectations. I know that in the Golden Age of 1980-2008, that workers in the U.S. could expect to make 2-3 times what people made in other countries for doing the same work, but in this age of Globalization and the Internet that situation will no longer be true. You may not like it, it may be disappointing, but there is no avoiding that reality.


    Agreed. H1B are a good thing but companies don't use them in the right way. There should be a restriction where you are obligated to pay the guy a minimum wage of the average salary for that field in that specific city/region.

    Then there won't be any advantage to take a foreigner unless if he is more talented than an American... or there are no Americans for that job that could fit.


    Why do producers and creators (the people who make all the real wealth) continue to work under such a regime?

    Why does a young engineer accept a starting salary of $60k/year, to generate millions of dollars worth of output to the economy every year, and doesn't rebel?

    I did, and for exactly that reason. I made changes to projects under my responsibility that saved /made the company millions, and was rewarded with...more of the same. That is why I am now self-employed, and much much happier.

    Always Positive

    Yes Pitz. Half of you are a Nation of pussies. More than half

    Caviar Emptor

    In the 30 years leading up to the great crash of 2008, American values reached an all time low. Cynicism, apathy and greed were worshiped at the altar of "the new man/woman". But along with the moral compass, we also lost the American ethic that taught generations not to always take the easy way out, cut corners and sacrifice quality for quantity.


    What the hell is wrong with cynicism? A number of great cynics have become famous and maybe wealthy throwing in a little gallows humour...i.e. Mark Twain and Ambrose Bierce come to mind immediately. Will Rogers? Add your own favs. I enjoy being both a cynic and iconoclast and if you twist in some humor people will generally laugh while still getting the point. Try it, its fun.

    The Rock

    This breakdown of this moral compass is brought to you in part by the PTB (Rockefellers, Murdoch, et al.). It's all by design.

    Btw, I think I read somewhere that in the year 2000, there were 18 million manufacturing jobs in the U.S. Now, ten years later, there is less than 11 million manufacturing jobs left... nice.

    Speaking of mammon, here's a nice little bit of info regarding the media:


    Here's one terrific example. John Swinton, the former Chief of Staff for the New York Times, was one of New York's best loved newspapermen. Called by his peers "The Dean of his Profession", John was asked in 1953 to give a toast before the New York Press Club, and in so doing, made a monumentally important and revealing statement. He is quoted as follows:

    "There is no such thing, at this date of the world's history, in America, as an independent press. You know it and I know it. There is not one of you who dares to write your honest opinions, and if you did, you know beforehand that it would never appear in print. I am paid weekly for keeping my honest opinion out of the paper I am connected with. Others of you are paid similar weekly salaries for similar things, and any of you who would be so foolish as to write honest opinions would be out on the streets looking for another job. If I allowed my honest opinions to appear in one issue of my paper, before twenty-four hours my occupation would be gone. The business of the journalists is to destroy the truth; to lie outright; to pervert; to vilify; to fawn at the feet of mammon, and to sell his country and his race for his daily bread. You know it and I know it, and what folly is this toasting an independent press? We are the tools and vassals of rich men behind the scenes. We are the jumping jacks, they pull the strings and we dance. Our talents, our possibilities, and our lives are all the property of other men. We are intellectual prostitutes."

    1953, 2010. SSDD (same shit, different decade...).

    - 05:00 #552509

    Good morning!

    I think this is closer to the root of the problem, than the article's idea that people are too greedy and that we need to read the bible more. (Although the author never says that latter part explicitly, you can sense it, can't you?)

    This crisis isn't about finance, or banks, or taxes or the government. We've seen all this before. And we made the same false claims then as we do know; it's all because of greed, or because of too little regulation, or too much. Nonsense. It's about one thing, and one thing only. The one thing that all sociopolitical battles has ever been about, the one thing that has decided the form of all societies through all times: the production, distribution and control of information.

    We wouldn't have democracy if it wasn't for the printing press, and we wouldn't have the feudal system and organised religion if it wasn't for papyrus. And in a sense, the current financial system is a beautiful manifestation of the flow of information in the US for the last 100 years. A small group of people create the information, and the masses consume it.

    One thing that's different with this crisis is that we have a new medium. A new way of distributing information. For the first time in human history, we have medium that allows anyone to reach everyone. A medium that works both ways, so to speak. This is why websites like ZH is so exciting. *All tingly*



    we wouldn't have the feudal system and organised religion if it wasn't for papyrus

    That's just silly and prima facie untrue, while if I remember right the Athenians did pretty darn well inventing democracy close to two thousand years before the invention of the printing press.

    Pull the other one, its' got bells on. ;-)

    Always Positive

    In a way, I admire the elites, the movers & shakers, the oligarchs, the rapers & pillagers, the robber barons, the shysters - I mean THEY'RE JUST GOING FOR IT!!! No restraint, no morals, no compassion, no regrets!! Just full-on, full throttle, totally & completely selfish with only ME! as a reference point!

    Isn't that just a reflection of much, even most, of society in general, even YOUR little corner of the world, writ small?

    We get what we deserve and don't have long to wait. Maybe Blankfein is doing God's work, showing us ourselves.


    not me, i share and always have. But never deal with crooks and never took advantage of anyone. I take a small pride in remaining a good guy in honor of my honor. I am an honest soul. And there is many another like I.

    Always Positive

    I respect you merehuman; sadly, you're in a diminishing minority. But would you take a serious offer (say, 6 billion for your honour)? Most sell out for much, much less.


    No need to sell out. When one is free of debt and house, family and everything is in good order along with needful things ready for a time then.. the rest are sent on thier way. It is far better to feed someone who is hungry in secret than to wear golden robes and broadcast in the tall towers what millions they have fed.

    You wont believe how much we were able to do these last few years on so little. If memory serves we cut trees and kept people warm during the winter. We did not take any money and we did keep some wood for ourselves. There is more for next winter that is coming and two households will come to get it when it cools off sufficently for the labor to make it done.

    These "Poor" have very good memories, and loyal are they to those who help them without requiring anything of it. We are poor yes, but we have no need of anything at the moment. So we do share a little bit.

    If you picked up a rich person worth millions per month and hold him upside down, the loose change from his pockets will make 10,000 people in our area be able to stay warm and cool for at least the next 10 years with warrantry and service to maintain these machines.

    But no, the rich will not share. They never do. And when they do give, they have the other hand out with either a knife for your pound of flesh or ready to choke you on something else.

    So. Let the Rich rage. But yet thier anger only lasts a hour or life time. We have as a Human Race on this Planet been here for millions of years with or without instructions or need of money and riches made do with what little we were able to earn by our daily bread and the sweat and labors.


    You may be free of debt and house, but you are never free of taxes. When the taxman comes to collect you better have you cash or off to the place where yes you are relatively free - 3 squares and a cot. Good luck in your commune.

    frosty zoom
    - 23:58 #552347

    communism becomes (de facto) capitalism...

    capitalism becomes (de facto) communism...

    and both in their worst forms.

    it's not new york, 1932; it's moscow 1989.




    A good rant as far as it goes. However, as is often the case, blame is laid at the feet of proximate causes like hedge fund managers.

    Upstream of fund managers and bankers there is the monetary system. In the particular case of a fiat monetary system, the logical evolution of the system leads inevitably to concentration of profits in the finance industry simply because banks and the corollary of financial institutions that operate around them are first in line to make use of newly printed money.

    As fiat money conforms to the law of diminishing returns, each unit of currency is progressively devalued from the instant it is created as it is handed down to the treasury, then to the primary dealers, then to other banks till it finally reaches the pockets of the great unwashed - this is the point at which the currency has been devalued most (i.e. the point at which it has least purchasing power).

    As the fiat monetary logic progresses over time, eventually the ripples of devaluation spread in ever wider circles. Thus from personal bankruptcies you move to commercial, then municipal, then state and, finally, sovereign bankruptcy becomes probable if not inevitable.


    Madoff is in the safest place...for now.


    Nuremberg Tribunals for Politicians, Banksters, Lobbyists, and Multinational CEO's...

    Confessions of "Crimes Against The State" carried on live TV...

    After that, we take a page from "Uncle Joe" Stalin's playbook and let the purges begin..

    Remember, it's ONE Politician per Lamppost...

    ONE Bankster or Lobbyist per Treelimb...

    ONE CEO or Hedgie per Impalement stake..

    4 meter stakes for the CEO's...5 meter for the Hedgies (they complain about the smell)

    And the lackeys or fellow travelers who don't repent and switch sides?

    500 lb. Trapezoidal knife on the neck...

    Paging Madame DeFarge...

    Hang The Fed

    It just goes to show that capitalism, communism, or whatever-ism will always be exposed to usury by some pile of jackasses who believe that they're somehow better, whether they paint that portrait in the strokes of religion, finance, or any other social vehicle. Further, the only thing that makes it work, every time, is the complicity of those on the receiving end of the great shafting. Never mind that the skins in which the "elite" wander about are no better or more valuable than any others.

    Sadly enough, we've taken such joy in manipulating everything, from finance to the world that surrounds us, all in the name of "getting ahead," that we've forgotten that it wasn't a tremendously long time ago that we were still just monkeys hurling shit at each other in the trees. Hahaha, if you don't believe me, watch the bloviating fucktards on CSPAN for a bit...maybe the face is different, but the paradigm still stands.

    The only difference between then and now, really, is that we've propped up this useless existence for so long that the damage to other systems is becoming "inconvenient" to our way of life, or, if you're looking at it from my end, completely fucking much for our comfy belief in manifest destiny, or some deus ex machina moment to bail us out. If cats have nine lives, I wonder how many of ours we've used up already?

    Hang The Fed

    On that note...I'm going to try to avoid throwing up in the next five minutes. Anyone want to take out a CDS against that event?


    While there's certainly truth in this article, it's too light on the other offenders. What has happened has been a FAILURE AT EVERY LEVEL. The Fed's loose money, gov housing mandates and interference, bankers obscuring bad loans into CDO's, rating companys' rubber stamps, investors who bought the crap, loan officers fudging numbers, and finally, people buying homes with loans they couldn't afford.

    Everyone assumed someone else was making sure things were ok. Oops!

    Hang The Fed

    Manipulation+complicity=OH, SHIT!!


    That's right. But the lack of monitoring is not an omission; it is deliberate.

    Fiat money has an inbuilt reset mechanism. If left alone, a fiat monetary system would bring about regular periods of slow growth and/or recession. The desire of the authorities to short circuit the system so as to keep it on a perpetual expansionary trajectory, can only be achieved by intentionally masking the imbalances that result from this policy.

    As fiat money conforms to the law of diminishing returns, the imbalances that are brought about and that manifest themselves in diminished purchasing power of the currency (declining intrinsic value), can only be masked by expanding credit. Hence the vital need to keep credit markets on an expansionry trajectory that must neccessarily be faster than the expansion of the underlying economy by any means such as Off Balance Sheet Investments, or Special Purpose Vehicles, or CDSs, or MBSs or special accounting treatment for select entities like Fannie Mae or Citibank for example. Hence the reason that, for example, since 1980 GDP has expanded by 100% (it has doubled) but Federal debt has expanded by 1200%. Hence the reason that as the fiat monetary logic pushes its own mathematical limits (as in 1929 or in 1970), nominal profits concentrate in the financial industry.

    As the logical conclusion of fiat money approaches, the authorities will prevent regulation and apply special provisions to select entities, mostly represented by banks but also by other political groups such as unions, in a gambit to both keep government alive (raison d'etat) and keep profits flowing to the banks.

    It's all a logical necessity of this type of monetary system as was suggested to politicians it should be imposed by a select number of banks in 1913.

    Hang The Fed

    The Creature from Jekyll Island will certainly swallow us whole.


    Reads like some socialist rant. The top of the food chain is just as fucked as the bottom once the game implodes. Perhaps they will build Ack-ack towers?


    Reads like some socialist rant.

    it's is a good example of how in reality religion and socialism are simply variants on the same theme (you are your brother's keeper, money is the root of all evil, reason is bad, faith is good, etc etc)


    I think this article misses the point in some respects. The CDO's etc, credit deafult swaps

    are a symptom of the problem not the cause.

    The cause is a monetary system that needs perpetual growth. When a mature economy like the US no longer actually needs to grow anymore

    I mean it has most of the roads it needs, the shops it needs and every perosn who can get a mortgage has then there is only one option for growth

    create s synthetic economy and thats what happened. the banksters are scum for not having the morals but they are really only playing the system which is the route of the problem.

    It makes me laugh when I see Rothchild going around the world in a boat to promote global warming and the environement when its his families money system which has caused all the problmes in the first place

    growth for growths sake is a cancer and now

    the cancer has overpowered the victim

    death is near


    Got to agree, Yabs. I don't get why folks think growth is constant. I can't think of one thing in nature that grows forever. They say even the universe, though, still expanding, will reach a point and then contract. Illogical


    There are lots of jobs down here in Texas- especially for mechanical engineers & fabricators. The land rig business is booming and businesses are moving in from all over (running from their former state's taxes).

    We surpassed California several years ago as the nation's largest exporting state. Manufactured goods like electronics, chemicals, and machinery account for a bigger chunk of Texas' exports than petroleum does. In the first two months of 2010, exports of stuff made in Texas rose 24.3 percent, to $29 billion, from 2009. That's about 10 percent of the nation's total exports. There are more than 700,000 Texan jobs geared to manufacturing goods for export.

    While the nation continues to lose jobs, Texas has added 181,500 jobs this year through July, including 30,700 in the D-FW area. D-FW gained 2,300 construction jobs in that time, but the 158,000 total was 6.5 percent less than a year ago.

    Texas accounts for more than half of the 10 largest upcoming construction projects in the South, valued at about $15 billion. That includes the $2 billion second phase of the Dallas Logistics Hub in southern Dallas County and the $1.2 billion DFW Airport terminal redevelopment.

    Texas has supplied over 55% of the jobs in the US and responsible For 111.5% Of All Private Job Creation In Last 12 Months

    Bottom line if you want to work, you might need to do it here; or just wait for your state to cut back (if you can wait forever).


    Yes, I agree with the Texas Solution. Go big or stay out of Texas. Imagine for a moment if every state in the union was properly run as Texas was run. We would have such a embarrasment of riches with untold prosperity and able to carry the world to such heights of wonder and awe at the wonderful things they can only dream of watching American Movies in thier theaters.

    The States with the most crushing taxes have managed to groan and stagger under the constant and unfettered hunger that gnaws upon them as the riches move out and everyone who can afford to flee. Taking the revenue and production with them to free states that have no need of such taxes to stay properly functioning.

    Indeed the exodus that we think we have seen these last 10 years now will become a pernament change in the future as the Union breaks up into a loose collection of regions with very different laws, some of which will be against everything that America has ever been good for.



    three chord sloth

    Nice. Quite a good rant.

    The trouble is this: Where are you gonna turn to fix it? The government? Hah! The financial robber barons are one wing of the pincer movement crushing America... unfortunately for us, our government (who is supposed to rein them in) is the other half. We have nowhere to turn.

    The coup by the financial industry began 3 decades ago; the master/servant inversion by the government began 5. The die was cast in the early 60's, when government workers were permitted to unionize. Once the bureaucracies were allowed to become their own special interest the citizens lost control of their government. We are working for them, they aren't working for us any longer. We don't set the agenda anymore, DC and Wall Street pull the strings and the elected puppets dance.

    You see, bureaucracies do a few things quite naturally; they expand, they grow inefficient, and they forget their original mission and focus primarily on their own internal needs. Under the best of circumstances it's difficult to keep the government contained and focused; add in civil service protections and it becomes damn near impossible. Throw on another layer of armor from union contracts and forget about it... the servants have taken over the manor. Government will do what is best for the government... their motivations are strictly internal now.

    And here we are today... trapped between a predatory financial sector who is allied with a predatory government. A classic pincer movement. The feds pretend to regulate and reform the banks, the banks pretend to be contrite and reformed, the "watchdog" media praises the charade and gives awards to itself for "bringing the issues to light" and "forcing needed changes", and the looting continues.

    So where are we supposed to turn?


    Ahhh, god's country...and he can have it along with all those mega churches.

    A lot of good seceding will do when you will need all good agrarian states to feed your people...or you can live off fish from the GOM I guess. Not everyone can be an oil baron.


    Don't forget the Bull, Cattle and great resources. Parts of Texas and the greater part of that western region keeps the rest of the United States in Beef. Throw in the Grain from the Dakotas who have lived carefully and within thier means suffering none of the collapse that others have suffered. Then look to Nebraska with such water and land that one can only dream of when standing on a grimy and choked city street that has been sinking each year since Manhattan was bought from the Indians 200 years ago. Look further into the Mountains where you must work to live or die.

    Once a time long ago common people endured 6 to 9 months walk to get to these great western lands. The ones of good stock that survived the trip are able to make do with what they have and they have done well.

    The problem I see now is the great danger of those who have nothing but money and tender hands that have not seen labor going to these places and trying to buy it all.

    Aint gonna happen.


    The coup began in 1913

    - 08:20 #552678

    It's simple. Just watch for the "riot dog."

    - 04:03 #552475

    If we had a government with balls (or guts for da ladies) there is an easy fix.

    Raise the tax rates to 50-60% for the top 1%, while closing the loopholes.

    Given that rock stars, CEOs and bankers make money from the sales, labor and pensions from the other 99% it is in there interest to make sure there is a market for thier "services"

    Especially the later group of "investment" bankers who siphon funds from the retirement funds of others.

    A non political solution for the last group is for the buy side pension and mutual funds to grow a pair and not rely on sell side, funds of funds, hedge funds and private equity who siphon returns.

    When you go to the super market, do you ask the snot nosed check out clerk which vegtables to buy?

    Do your homework, look for longer macro trends in industries with real economic growth (or at least throwing off cash) and buy from an electronic exchange. Fjuck the sell side traders and funds of fund of funds of funds of funds and their filthy carry.

    Jesus can't help you now!

    - 04:54 #552517

    What about eliminating all the subsudies for business?

    - 07:56 #552633

    excellent idea. they should eliminate all subsidies, to farmers, fishermen, etc.


    Raising taxes on the top 1% will not solve the underlying problem which is the monetary system. Besides, the top 1% can very easily shift wealth and/or domiciles and residence across borders. Taxes are not an efficient solution to this crisis.


    Agreed, over leverage and leveraged market speculation (especially in commodities and FX) cause major problems. Not to mention the financial illiteracy of the US public are both different problems. But there could be a better tax structure where the % of income earned is closer to % taxes paid in the country where income is derived. There would be of course gaming of the rules, but now it is ridiculous.

    Now the wealthy individuals, especially financial services employees are destrying thier own source of income by this wealth allocation structure.

    Not to mention investment bankers are WAY overpaid for the service they provide to society. Sorry to burst your bubble lord Blakenscheck, but GODmansachs employees are not just more productive.


    Not to mention investment bankers are WAY overpaid for the service they provide to society. Sorry to burst your bubble lord Blakenscheck, but GODmansachs employees are not just more productive.

    How do you know? Mr Market says otherwise. I'm betting mr market is right.


    Well, that's of course true. And personally I'm all for letting people keep everything they earn minus a small piece off the bottom (say, 3-5%, total) for fed/state/local gov'ts to provide basic, and charter (Constutionally) mandated services.

    But so long as we're going to bail-out the so-called "Too Big To Fail" on a regular basis then I say fuck-em - 99% taxation above some threshold (say, $10M).


    "So you think that money is the root of all evil?" said Francisco d'Anconia. "Have you ever asked what is the root of money? Money is a tool of exchange, which can't exist unless there are goods produced and men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value. Money is not the tool of the moochers, who claim your product by tears, or of the looters, who take it from you by force. Money is made possible only by the men who produce. Is this what you consider evil?"

    Francisco D'Anconia (Atlas Shrugged)

    Horatio Beanblower

    Relax, everything will soon be OK...

    "Anton Kreil, who starred as the portfolio manager in the BBC Two programme that gave eight members of the public $1m (£640,000) to run their own hedge fund, has set up a training business, called the "Anton Kreil Institute of Trading and Portfolio Management", to give students and private investors an insight into the complex world of share trading.

    The school is aimed at helping its students gain an insight into how the top 5pc of City traders make real money." -

    The HFT lessons should be good fun.

    - 06:32 #552558

    The Harvard Princeton Yale Club....

    Once get a shot at being in the 1% of the US population that controls the same level of wealth that 90% of US population has....

    Sound fair ?????

    Troy Ounce

    Tell me, what are the chances the Dems pull the plug and turn their back on Wall Street?

    Yes, I agree, WS would shut down the banking system and mayhem would follow.

    But if the Dems want to have power to govern that would be the only option open to them, no?

    Eeehhh, sorry, that ...and war.


    That train left Barry Obama station the day he signed-on to the Bush bailouts - before he was even elected.


    Some call it Babylon. Politricks, I say.


    Sorry Lenny Cohen, but you suck as a singer. Everybody knows that Don Hensley's remake of Everybody knows is a much better rendition.


    This could all be solved quite easily, were there the desire to do so. For instance, below is A modest proposal by Professor Emeritus Richard Wolff, published under the title "Economic Recovery for the Few" @

    Now, of course the mere mention of such a possibility will ignite howls of interference with the sacrosanct free market, and outrage at the suggestion of such a violation of property rights, and general wailing and crying.

    This is to be expected. And the proposal itself is, of course, beyond the wildest possible politically feasible solution.

    It's a non-starter. Instead, we shall punish the innocent, and reward the guilty with absolute dominion over those whose lives and country they have ruined. The predators will rule like gods over the sheep, and the republic will be consigned to the dustbin of history.

    Where is this elusive recovery? The banks, some say, have "recovered." Yet they remain dependent on Washington, they do not make the loans needed for a general recovery, and many medium and small banks keep collapsing. The stock market shows no recovery. The Dow index was 14,000 in late 2007 when capitalism hit the fan, and it is around 10,000 now. The Nasdaq market index was 2800 then and is 2300 now. Everywhere else -- unemployment, foreclosures, bankruptcies, depressed housing market, and so on -- no recovery in sight. Yet, my search finally found genuine recovery for one group, and its recovery offers a better policy to treat this crisis.

    Every year, two major companies catering to rich investors co-author a survey of their clients. Capgemini and Merrill Lynch Wealth Management's World Wealth Report covers the two groups that interest them: High Net Worth Individuals (HNWIs) and Ultra-High Net Worth Individuals (Ultra-HNWIs). The first group counts all individuals with at least $1 million of "investible assets" in addition to the values of their primary residence, art works, collectibles, etc. The second group includes individuals with at least $30 million of such investible assets.

    Their latest Report, covering the year 2009, finds 10 million HNWIs in the world that year: 3.1 million in North America, while Europe and Asia-Pacific each had 3.0 million. The rest of the world had a mere 0.9 million of the rich and richer.

    The 10 million HNWIs -- in a global population of 6.8 billion in 2009 -- amounted to 0.14 per cent of the earth's people. Together, they owned a total of $39 trillion in "investible assets." To see what this means: in 2009, the US GDP (total output of goods and services) was $14.6 trillion. The combined GDPs of the world's 9 richest countries(US, Japan, China, Germany, France, UK, Italy, Russia, and Spain) totaled less in 2009 than the investible assets of the world's HNWIs.

    During 2009, as tens of millions lost their jobs, the number of HNWIs rose by 17.1 per cent and their combined wealth rose by 18.9 per cent. They had a genuine "recovery." HNWIs regained in wealth most of what they lost in 2008. No wonder they celebrate "recovery" while the rest of the world wonders (or rages at) what they are talking about. In the US, for example, the HNWI population grew by 16.6 per cent in 2009 while the US GDP fell by 2.4 per cent.

    Only 1 per cent of all HNWIs were Ultra-HNWIs, but what a group that was and is. Ultra-HNWIs alone owned 35.5 per cent of the $39 trillion owned by all 10 million HNWIs. And they recovered more during 2009 than their fellow HNWIs.

    Capitalism is the name of the global economic system that delivers the outcomes summarized in these numbers. Capitalism produces "recovery" for those who need it least while offering austerity for nearly everyone else. Today's business and political leaders tell the people of all advanced industrial countries that there is no alternative to years of government budget austerity (raised taxes and/or reduced government employment and services).

    They don't explain that they could tap instead the immense wealth of the richest 0.14 per cent who (a) made huge gains in wealth over the last 25 years, and (b) already recovered in 2009 what they had lost in 2008.

    What notions of fairness, decency, ethics, or democracy could justify such economic performance, especially in a time of global economic crisis? Recall as well that these same rich and richer people contributed so significantly (as industrial employers, bankers, and investors) to generating that global economic crisis.

    Let's now concentrate on the HNWIs in just the US (including its Ultra-HNWIs). They numbered 2.9 million in 2009: well under 1 per cent of US citizens. Their investible assets totaled $12.09 trillion. For 2009, the total US budgetary deficit was $1.7 trillion. Had the US government levied an economic emergency tax of a modest 15 per cent on only the HNWI's investible assets, it could have erased its entire 2009 deficit. Over 99 per cent of US citizens would have been exempted from that tax.

    The European, Japanese, and other governments could have treated the crisis likewise in their countries. Then governments would not have had to borrow trillions. They would instead have taxed the super rich tiny minority a small portion of its immense wealth. Those governments would not then have had to turn to lenders (often those same super rich). There would be no current "sovereign debt crisis" in Greece, Portugal, Spain, Ireland, etc., and no need for the resulting austerities to satisfy those lenders. Republicans would have no "deficit, deficit" drum to beat hoping for election-day gains.

    Taxing the HNWIs and Ultra-HNWIs would be the policy of governments responsive to the needs of their working-class majorities instead of their rich and super-rich patrons. Austerity is not the only policy. Modestly taxing the wealth of HNWIs is the far better policy choice. The two wealth management companies that cater to HNWIs have kindly provided us all with the facts and figures needed to support the better policy.

    Across Europe, coalitions of trade unions, socialist, communist, and some green parties, and many social, religious, and community organizations are organizing growing mass demonstrations and general strikes. These oppose austerity and demand alternative ways to deal with economic crisis. In France, mobilization focuses on a nationwide general strike September 7. Plans are underway for an all-European day of public actions on September 29. National actions like this have already happened in Greece, Portugal, and other countries.

    The business and political leaders generated by the last 30 years of neoliberal capitalism simply assumed that they could impose the costs of their crisis on their countries' people. That assumption is now being contested. The European people are beginning to fight back. And here, in the USA?

    - 08:33 #552695

    Capitalism is the name of the global economic system that delivers the outcomes summarized in these numbers.

    When you start your "analysis" from such a ludicrous premise the ensuing lunacy is to be expected, I suppose.

    - 10:00 #552831

    Here's the problem - the U.S. has a structural deficit of about $1T, so for your "tax the rich" scheme to work you would have to take 15% of the Ultra-wealthy's wealth every single year. Do you really think they would sit around and take it year after year? No, they would bug out as fast as they could taking their wealth to more friendly countries.

    - 11:53 #553105

    Think of it as a claw back. Kinda like the gov't saying, "Ooops, our policies allowed you to be overpaid a tad there." After enough of being clawed-back to death there would be some reforms. Like maybe some sort of way to hide the wealth. I think Greece has some experience we could tap to reach that end. Those who don't get covers for their swimming pools or register their yachts in small Caribbean countries don't deserve to keep their spoils!

    - 08:14 #552667

    There is no doubt that the stratification of classes is more prevelant in the recent past in the US. Two comments: (i) historically, you need to look further in the past; and, (ii) it is ironic that there are so many "libertarian" thinkers and commentators on these pages, yet the group-think seems to be to rail against enterprise - fair or unfair - highly (overly) or not compensated. That really makes it easy to feel victimized by the "evil" bankers. That is just the mental equivalent of curling up in a fetal position. Unless you all want to be living in a more socialistic state like Germany, Britain or France (nothing wrong with this, mind you...), then you may want to consider that historically, the disparities between the top and bottom are not so wide now to be out of range (look it up) and if you are truly interested in limited government then let people earn what they can - absent fraud. We have a lot of laws that prevent fraudulent behaviour (except with the government sanctions it or participates). Sure, respond agrily...


    The US mirrors the world in wealth distribution. And, yes, todays stratification is it is not out of line historically. All wealth structures pull wealth from the periphery towards the center. Which is why we get a pyramid structure with wealth concentrated at the top and "wealth conveyors" pulling wealth towards the center. Debt markets are a good example of "wealth conveyors" . The US is the center of the global economic structure, so it gets wealth conveyed to it in the form of resource extraction via globalization and sophisticated forms financialization.

    Now is about the time in history when these wealth conveyors start to break down. As time goes on, we should see an increased number of failed states globally and underclass internally. As the periphery gets stripped of all it's wealth, the elite will move further up the pyramid via public policy to maintain their privileged positions and levels of wealth extraction as well as increased fighting over resource deposits on a global scale. This really can't be stopped and what we are witnessing is the elite using their political power not to lose their god-given share. As time goes on, and the wealth pie shrinks, even they will start to turn on each other as their is not enough to go around. It should be quite a show.


    From Wikipedia:Capital offences in the People's Republic of China - Crimes of Financial Fraud

    12. Whoever, for the purpose of illegal possession, unlawfully raises funds by means of fraud 13. Whoever commits fraud by means of financial bills in any of the following ways:

    (1) knowingly using forged or altered bills of exchange, promissory notes or cheques;

    (2) knowingly using invalidated bills of exchange, promissory notes or cheques;

    (3) illegally using another's bills of exchange, promissory notes or cheques;

    (4) signing and issuing a rubber cheque or a cheque, on which the seal is not in conformity with the reserved specimen seal, in order to defraud money or property; or

    (5) signing or issuing bills of exchange or promissory notes without funds as a guaranty, in the capacity of a drawer, falsely specifying the particulars thereon at the time of issue, in order to defraud money or property.

    14. Whoever commits fraud by means of a letter of credit in any of the following ways: (1) using a forged or altered letter of credit or any of its attached bills or documents;

    (2) using an invalidated letter of credit;

    (3) fraudulently obtaining a letter of credit; or

    (4) in any other ways.

    ... AND if the amount involved is especially huge, and especially heavy losses are caused to the interests of the State and the people.

    15. Whoever falsely makes out special invoices for value-added tax or any other invoices to defraud a tax refund for exports or to offset tax money if the amount involved is especially huge, and the circumstances are especially serious, thus causing especially heavy losses to the interests of the State. 16. Whoever forges or sells forged special invoices for value-added tax shall, if the number involved is especially huge, and the circumstances are especially serious so that economic order is seriously disrupted.

    And they mean it, too.


    There will NEVER be ANY sort of offical investigation/prosecution of these this elite class of banksters/lobbyists.speculators that ran the Republic into the ground like Soros did with Asia in the 1990's. There is no Truth and Reconcillation Committee. Everyone knows it. There wasn't after the First Great Depression, or the Second. The few with much to lose have already left the country - hanging their shingle in Dubai, or some other gelded monarchy, waiting for the statue of limitations to run or to avoid another half-assed subpoena, to dance a fantasy that more consulting to make/trade debt paper is a possitive impact for society. Everyone knows its a farce.

    It is most regrettable that as the real economy decouples from the Central Bank fantasy of bailing out wholesale Patrician waggering; people - Citizens, cold from the Winter, dreadful of their children's ruined future, starved for Justice will bizarrely act out of rage on those perceived un-punished criminals.

    A saw a t-shirt yesterday. It said, "Kill the Rich."


    That's a little gauche. I prefer the 1970s expression of the same sentiment - "Eat the Rich."


    It's time the American people stood up and took responsibility for their part in supporting there own exploitation. In their attempts to avoid footing the bill for outrageous spending, they have demanded lower taxes, lower interest rates and suported wasteful and immoral foreign wars. Start by changing yourselves.

    mark mchugh

    Know what the pivot point was for Wall Street?

    The 401(k) laws that went into effect January 1, 1980.

    That was the biggest, bestest bailout Wall Street ever got. For thirty years now, Americans have been throwing money at Wall Street and the biggest joke in the world is those "investments" have underperformed inflation and you still owe taxes on ALL of it (initial investment plus gain). This means inflation adjusted losses of more than 20%.

    And we're going to re-load this trade?

    Insanity: Doing the same thing over and over again and expecting different results.



    "It has become a oligarchic consumer capitalist society that is manipulated, in a deliberate and coordinated way, on a very large scale, through mass-marketing techniques, to the advantage of Wall Street and mega-corporations."

    "They are the Wall Street elite, corporate CEOs and the privileged classes that control the power in NYC and Washington DC."

    I don't disagree with main tenets of this piece. These people are criminal traitors and they and their protectors need to be punished. I disagree with calling it a form capitalism. I'm not fond of the term "crony capitalism" and its variants, because I think it muddies the water, contributes nothing to communication and permits propagandistic spin and confusion. It should be called what it is - mercantilism. An elite is benefitting and they beleive in big government to cover their actions, provide protection, propagandize, confuse and fail to properly inform the citizenry, and maintain control nationally and globally (stormtroopers). This ain't new folks. We've been at war with this impulse since the founding of the nation and we've been in the clutches of "big government" PTB for about 150 years - protosocialism and increasingly globalist socialism (progressivism). Leonard Cohen needs to ask "Which war?". Where is a jack hammer when you really need one? This shit needs to end and soon. We need real live laissez faire to re-center, determine real value and rebuild wealth. I suggest Austrian School economics.

    - 10:55 #552940

    P.S. Faith has no place in discussions of markets, law, economics, or finance.

    One guess who decided that only Gold and Silver are money, that fiat currency is an abomination and the other rules of economics. Economic rules that are as finely and carefully balanced as the fundamental forces of the universe.


    Wow! What a junkfest!

    Is that a president on that $100 bill, or your deity? I'm reminded of the Blood Sweat and Tears Song.

    It seems to be a common philosophy around here...

    "I swear there ain't no heaven and pray there ain't no hell"

    Whether in bed or on a pike, all psychopaths die uneasy!

    Morality and religion are difficult to separate, but the

    laws of cause and effect keep working.

    "A Crisis of Ethic Proportions"

    John Bogle says "self-interest got out of hand":

    A Crisis of Ethic Proportions, by John Bogle, Commentary, WSJ: I recently received a letter from a Vanguard shareholder who described the global financial crisis as "a crisis of ethic proportions." Substituting "ethic" for "epic" is a fine turn of phrase, and it accurately places a heavy responsibility for the meltdown on a broad deterioration in traditional ethical standards. ... Relying on [the] "invisible hand," through which our self-interest advances the interests of society, we have depended on the marketplace and competition to create prosperity and well-being.

    But self-interest got out of hand. ... Dollars became the coin of the new realm. Unchecked market forces overwhelmed traditional standards of professional conduct, developed over centuries. ... We've moved from a society in which "there are some things that one simply does not do" to one in which "if everyone else is doing it, I can too." Business ethics and professional standards were lost in the shuffle. ... The old notion of trusting and being trusted ... came to be seen as a quaint relic of an era long gone.

    The proximate causes of the crisis are usually said to be easy credit, bankers' cavalier attitudes toward risk, "securitization"..., the extraordinary leverage built into the financial system by complex derivatives, and the failure of our regulators to do their job.

    But the larger cause was our failure to recognize the sea change in the nature of capitalism that was occurring right before our eyes. That change was the growth of giant business corporations and giant financial institutions controlled not by their owners in the "ownership society" of yore, but by agents of the owners, which created an "agency society."

    The managers of our public corporations came to place their interests ahead of the interests of their company's owners. ... The malfeasance and misjudgments by our corporate, financial and government leaders, declining ethical standards, and the failure of our new agency society reflect a failure of capitalism. ...

    What's to be done? We must work to establish a "fiduciary society," where manager/agents entrusted with managing other people's money are required -- by federal statute -- to place front and center the interests of the owners they are duty-bound to serve. The focus needs to be on long-term investment (rather than short-term speculation), appropriate due diligence in security selection, and ensuring that corporations are run in the interest of their owners. ... Making that happen will be no easy task.

    Rules will never cover everything, so ethics is part of the problem. But the solution to the agency problem has to come in large part from changing incentives so that the self-interest of the managers coincides with the interests of the people they represent. [Kahneman also talks about agency problems in a section I left out of the next post.]

    Posted by Mark Thoma on Tuesday, April 21, 2009 at 01:24 AM in Economics, Market Failure


    PART 1: A Structural Link
    by Henry C K Liu

    Robert B Reich, former US Secretary of Labor and resident neo-liberal in the Clinton administration from 1993 to 1997, wrote in the September 14, 2007 edition of The Wall Street Journal an opinion piece, "CEOs Deserve Their Pay", as part of an orchestrated campaign to promote his new book: Supercapitalism: The Transformation of Business, Democracy, and Everyday Life (Afred A Knopf). Hexter Professor of Social and Economic Policy at the Heller School for Social Policy and Management at Brandeis University. He is currently a professor at the Goldman School of Public Policy at the University of California (Berkley) and a regular liberal gadfly in the unabashed supply-side Larry Kudlow TV show that celebrates the merits of capitalism.

    Reich's Supercapitalism brings to mind Michael Hudson's Super Imperialism: The Economic Strategy of American Empire (1972-2003). While Reich, a liberal turned neo-liberal, sees "supercapitalism" as the natural evolution of insatiable shareholder appetite for gain, a polite euphemism for greed, that cannot or should not be reined in by regulation, Hudson, a Marxist heterodox economist, sees "super imperialism" as the structural outcome of post-World War II superpower geopolitics, with state interests overwhelming free market forces, making regulation irrelevant. While Hudson is critical of "super imperialism" and thinks that it should be resisted by the weaker trading partners of the US, Reich gives the impression of being ambivalent about the inevitability, if not the benignity, of "supercapitalism".

    The structural link between capitalism and imperialism was first observed by John Atkinson Hobson (1858-1940), an English economist, who wrote in 1902 an insightful analysis of the economic basis of imperialism. Hobson provided a humanist critique of neoclassical economics, rejecting exclusively materialistic definitions of value. With Albert Frederick Mummery (1855-1895), the great British mountaineer who was killed in 1895 by an avalanche while reconnoitering Nanga Parbat, an 8,000-meter Himalayan peak, Hobson wrote The Physiology of Industry (1889), which argued that an industrial economy requires government intervention to maintain stability, and developed the theory of over-saving that was given a glowing tribute by John Maynard Keynes three decades later.

    The need for governmental intervention to stabilize an expanding national industrial economy was the rationale for political imperialism. On the other side of the coin, protectionism was a governmental counter-intervention on the part of weak trading partners for resisting imperialist expansion of the dominant power. Historically, the processes of globalization have always been the result of active state policy and action, as opposed to the mere passive surrender of state sovereignty to market forces. Market forces cannot operate in a vacuum. They are governed by man-made rules. Globalized markets require the acceptance by local authorities of established rules of the dominant economy. Currency monopoly of course is the most fundamental trade restraint by one single dominant government.

    Adam Smith published Wealth of Nations in 1776, the year of US independence. By the time the constitution was framed 11 years later, the US founding fathers were deeply influenced by Smith's ideas, which constituted a reasoned abhorrence of trade monopoly and government policy in restricting trade. What Smith abhorred most was a policy known as mercantilism, which was practiced by all the major powers of the time. It is necessary to bear in mind that Smith's notion of the limitation of government action was exclusively related to mercantilist issues of trade restraint. Smith never advocated government tolerance of trade restraint, whether by big business monopolies or by other governments in the name of open markets.

    A central aim of mercantilism was to ensure that a nation's exports remained higher in value than its imports, the surplus in that era being paid only in specie money (gold-backed as opposed to fiat money). This trade surplus in gold permitted the surplus country, such as England, to invest in more factories at home to manufacture more for export, thus bringing home more gold. The importing regions, such as the American colonies, not only found the gold reserves backing their currency depleted, causing free-fall devaluation (not unlike that faced today by many emerging-economy currencies), but also wanting in surplus capital for building factories to produce for domestic consumption and export. So despite plentiful iron ore in America, only pig iron was exported to England in return for English finished iron goods. The situation was similar to today's oil producing countries where despite plentiful crude oil, refined petrochemical products such as gasoline and heating oil have to be imported.

    In 1795, when the newly independent Americans began finally to wake up to their disadvantaged trade relationship and began to raise European (mostly French and Dutch) capital to start a manufacturing industry, England decreed the Iron Act, forbidding the manufacture of iron goods in its American colonies, which caused great dissatisfaction among the prospering colonials. Smith favored an opposite government policy toward promoting domestic economic production and free foreign trade for the weaker traders, a policy that came to be known as "laissez faire" (because the English, having nothing to do with such heretical ideas, refuse to give it an English name). Laissez faire, notwithstanding its literal meaning of "leave alone", meant nothing of the sort. It meant an activist government policy to counteract mercantilism. Neo-liberal free-market economists are just bad historians, among their other defective characteristics, when they propagandize "laissez faire" as no government interference in trade affairs.

    Friedrich List, in his National System of Political Economy (1841), asserts that political economy as espoused in England, far from being a valid science universally, was merely British national opinion, suited only to English historical conditions. List's institutional school of economics asserts that the doctrine of free trade was devised to keep England rich and powerful at the expense of its trading partners and it must be fought with protective tariffs and other protective devices of economic nationalism by the weaker countries.

    Henry Clay's "American system" was a national system of political economy. US neo-imperialism in the post WWII period disingenuously promotes neo-liberal free-trade against governmental protectionism to keep the US rich and powerful at the expense of its trading partners. Before the October Revolution of 1917, many national liberation movements in European colonies and semi-colonies around the world were influenced by List's economic nationalism. The 1911 Nationalist Revolution in China, led by Sun Yat-sen, was heavily influenced by Lincoln's political ideas - government of the people, by the people and for the people - and the economic nationalism of List, until after the October Revolution when Sun realized that the Soviet model was the correct path to national revival.

    Hobson's magnum opus, Imperialism, (1902), argues that imperialistic expansion is driven not by state hubris, known in US history as "manifest destiny", but by an innate quest for new markets and investment opportunities overseas for excess capital formed by over-saving at home for the benefit of the home state. Over-saving during the industrial age came from Richardo's theory of the iron law of wages, according to which wages were kept perpetually at subsistence levels as a result of uneven market power between capital and labor. Today, job outsourcing that returns as low-price imports contributes to the iron law of wages in the US domestic economy. (See my article Organization of Labor Exporting Countries [OLEC]).

    Hobson's analysis of the phenology (study of life cycles) of capitalism was drawn upon by Lenin to formulate a theory of imperialism as an advanced stage of capitalism: "Imperialism is capitalism at that stage of development at which the dominance of monopolies and finance capitalism is established; in which the export of capital has acquired pronounced importance; in which the division of the world a