Monday, September 29, 2008

Grand Theft America

Grand Theft America - by Stephen Lendman

The crime of the century. The greatest one ever. Author Danny Schechter calls it "Plunder." The title of his important new book on the subprime and overall financial crisis. Economist Michael Hudson and others refer to a kleptocracy. A Ponzi scheme writ large. Maybe an out-of-control Andromeda Strain. An economic one. Deadly. Unrecallable. Science fiction now real life. Potentially catastrophic. World governments trying to contain it. Trying everything but not sure what can work. Maybe only able to paper it over for short-term relief. Buy time but in the end vindicate the maxim that things that can't go on forever, won't.

The world as we know it is changing. Industrial capitalism. The entire global economic system. Interconnected. What affects one nation touches others. If the troubled country is America it reaches everywhere, and if the crisis is great enough, the disease may be fatal and human wreckage catastrophic. Precisely the current dilemma that world leaders and financial experts are scrambling to figure out. Desperate to contain, and not sure what, if anything, can work. How did this happen and why?

The result of unfettered capitalism's fatal flaw - unbridled greed in a rigged system that rewards the few at the expense of most others. First an explanation of how it works. Free-wheeling, "free market" Chicago School fundamentalism the way economist Milton Friedman championed it in his 1962 book "Capitalism and Freedom" and taught it to students for decades. He believed that government's sole function is "to protect our freedom both from (outside) enemies....and from our fellow-citizens." Preserve law and order. Enforce private contracts. Protect private property and "foster competitive (unregulated) markets." Everything else in public hands is "socialism....blasphemy." Not to be tolerated.

He said "free markets" work best. Unfettered by rules, regulations, onerous taxes or any at all, trade barriers, entrenched interests, and human interference. That anything government does, business does better, so let it. That the best government is one that governs least. That public wealth should be in private hands. The accumulation of profits unrestrained. Corporate taxes abolished. Social services also, and that "economic freedom is an end to itself....and an indispensable means toward (achieving) political freedom."

He called most all government interference a restriction of freedom. Opposed foreign aid. Subsidies. Import quotas and tariffs, and illicit drug laws for being a subsidy to organized crime, but he found no fault with major banks laundering their profits. He believed business should be unrestrained in maximizing them, even the illegal kind apparently.

He opposed the minimum wage and right of unions to bargain collectively on equal terms with management. He believed high wages and benefits harm everyone. They raise prices, and in the end, hurt workers as well as management. He called Social Security "The Biggest Ponzi Scheme on Earth," even though it's been the most effective poverty reduction program ever for millions of seniors who'd be desperate without it. Especially today given a deepening economic crisis. The nation's social safety net disappearing, and heading everyone toward managing on his or her own. Dependent on their ingenuity, resources, and good fortune. Milton Friedman's ideal world. For those who can't make it, it's their own fault. It's everyone for him or herself in his judgment, and let the devil take the hindmost.

As for today's largest ever unraveling Ponzi scheme, it's just the workings of the "free market." Creative destruction. "Freedom to choose." The best of all possible worlds, and unfettered capitalism will figure out the right solutions. Provided government gets out of the way and gives it free reign. Free money also to wreck world economies and human lives even more than what's already done.

The Chickens Are Home to Roost

Are they ever, and here's what we've got. A global asset bubble. A predictable crisis allowed to build and mushroom. Begun after Chicago School economics took hold under Ronald Reagan. Continued under GHW Bush. Became religion under Bill Clinton, and ultimately fundamentalism under GW Bush.

The result - a "slow motion train wreck" gaining speed. Banks and other financial institutions failing globally. On September 25, the largest bank failure in US history with Washington Mutual's collapse. Earlier it was giant insurer AIG. Before that Fannie Mae and Freddie Mac, Lehman Brothers, Bear Stearns, and Merrill Lynch a forced liquidation to Bank of America.

Others are now teetering on the edge. Strapped by toxic debt. The result of out-of-control greed for easy profits. Massive fraud to get them. Thinking they're the best and brightest, and only mere mortals mess up. Knowing Fed moral hazard will cushion them if they do. True for some. Not for others, and learning that the Federal Reserve (the world's key central bank) failed in its primary job. To protect the country's financial system from insolvency. By contributing to a financial crisis and one of confidence. By creating near-limitless amounts of capital. Fueling a housing bubble. Outsized consumer debt, and irresponsible investments free from government oversight. Fraudulent ones involving multi-trillions of dollars.

Partnering with government to make it easy. Risking a global economic meltdown as a result. Scrambling to find solutions. Unsure if there are any. The present crisis is unparalled. Maybe it can be fixed, and maybe not. The problem is multi-fold. A perfect storm involving:

-- residential housing;

-- commercial real estate;

-- consumer over-indebtedness;

-- unknown amounts of toxic debt (in the multi-trillions);

-- affecting world finance and economies;

-- causing bankruptcies;

-- many more will follow;

-- selected ones bailed out;

-- the entire system endangered;

-- consumer money market, bank accounts and private pension funds as well; government backing is needed to protect them; there's not enough money to do it; and

-- the contagion is spreading; threatening world economies and people everywhere.

This time is really different. A $700 billion bailout (called the Emergency Economic Stabilization Act of 2008 - EESA) is just a down payment. Trillions will be needed in the end. Other nations contributing to help. The problems are deeper and more intractable than anyone expected. Before this ends, unimaginable amounts of capital will be written off. Too much to even contemplate. Bad investments contaminating good ones. Threatening world financial structures with paralysis. Severe economic damage to their economies as a result.

Eroding industrial capitalism as we know it. At best managing a short-term fix and delaying a final denouement for a later time. Under new management with the current and past ones claiming no responsibility. And unmindful of millions of homeowners facing foreclosure and bankruptcy. One in ten currently behind in their payments. Others losing their jobs and way of life. They're the most vulnerable. Least able to cope, and for some their ability to survive.

According to The New York Times, here's how the Paulson scheme helps them: "it requires the government to use its new role as owner of distressed mortgage-backed securities to make 'more aggressive' efforts to prevent home foreclosures." Weasel words. No specifics. No assurances, and nothing apparently for homeowners already in foreclosure.

On September 22, ahead of the announced agreement, American Research Group (ASG) published its latest public sentiment poll results, and they were stunning. At 19%, George Bush scored lowest ever for a US president, surpassing Harry Truman at the depth of the Korean War and Richard Nixon during Watergate. It came at a time ASG's results showed 82% of Americans believe the economy is getting worse, and only 17% approve of how Bush is handling it. Among registered voters, the number is 18% at a time no one surveyed (zero percent) said the economy is improving and 68% say it's in recession. True or false, it's how they feel. How the crisis affects them, and that's what counts most.

Yet on September 24, the president addressed the nation audaciously. Callously dismissing public pain and anger. Deceitfully stating outright lies. A typical performance. Demanded that Congress give the treasury secretary carte blanche authority over $700 billion to address "a serious financial crisis." Asked taxpayers to pay for corporate fraud. Reward criminals and ignore their crimes. Said nothing about the root cause. The effect on ordinary people, or how Paulson's scheme will help them. Ignored growing public opposition. Large numbers of credible observers believing the proposed solution is worse than the problem. The most honest of them saying it will enrich fraudsters and offer no help for homeowners.

Yet Bush concluded that "democratic capitalism (is the) best system the world has ever devised" in spite of clear evidence that it's broken and corrupted. Exploits people for profit. Enriches the few at the expense of the many. Rewards criminals for their crimes. Protects the rich from beneficial social change.

Ahead of the president's address on September 24, The New York Times showed a rare display of candor in a critical Timothy Egan opinion piece. About "nearly nationalizing the banking system and giving the treasury secretary more power than a king....whose decisions may not be reviewed by any court of law or any administrative agency." He asked readers to remember "where the biggest heist took place, and how Wall Street dragged down the rest of the country once before," referring to the Great Depression but leaving out everything in between.

He stressed, however, "how Wall Street brought down main street," and things have now come full circle. Deregulation unleashed casino capitalism, and bankers made a killing. Now they're in trouble and Bush demands "the biggest bailout in American history....or the world will crumble. He said the a similar thing in the run-up to war" so who can believe him now. Egan quotes a dirt farmer asking why not the same "concerns (for) average Americans." Because "we the people" Bush speaks for are them, not us.

As for Paulson's plan, here's what the Financial Times writer Martin Wolf said on September 23. He called it "not a true solution to the crisis." It doesn't address the "fundamental problem." It's "neither a necessary nor an efficient solution. It is not necessary because the (Fed can) manage illiquidity through its many lender-of-last resort operations. It is not efficient because it can only deal with insolvency by buying bad assets (overpriced junk) at far above their true value, thereby guaranteeing big losses for taxpayers and providing an open-ended bail-out to the most irresponsible investors."

Wolf also objects to Paulson getting unchecked powers. Providing little or no help to the poor and "ill-informed" (read duped) borrowers, and lists other operational suggestions "essential for the long-run health of any financial system" without needing "a penny of public money." Among them, forcing creditors to take losses and not taxpayers.

Unmentioned in his article is the underlying fraud behind the crisis and a lack of regulatory oversight that made it easy. Also, omitted was what's covered in the section below.

The 1937 Housing Act's Empowering Section 8 Authority

One Section 8 sentence provided the basis for the treasury secretary's empowerment. It reads:

"Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administration agency."

In other words, unchallengeable czarist powers. In contrast to the 1930s Reconstruction Finance Corporation's (RFC) closely supervised operations. That era's Home Owners' Loan Corporation (HOLC) that refinanced homes to prevent foreclosures. And the 1980s Resolution Trust Corporation (RTC) mandate to liquidate assets from failed S & Ls. Not dispense free money for bad investments unchecked. The above authorities subject to judicial review. Not governed by a financial boss to run as he pleased.

The Announced "Bailout" Deal - The Emergency Stabilization Act of 2008 (ESA)

According to The New York Times, EESA calls for "strict oversight of the program by a Congressional panel and conflict-of-interest rules for firms hired by the Treasury to help run the program." Also "a change in the bankruptcy laws sought by some Democrats to give judges the authority to modify the terms of first mortgages."

Given the bipartisan blame for today's crisis. The post-9/11 willingness to give the administration near-carte blanche authority across the board. Eight years of indifference to social needs and public welfare. Who now believes that policy going forward will change and that the agreed-on scheme will protect people or curb the secretary's authority. On his own initiative, George Bush usurped supreme power post-9/11 while few in Congress blanched. None in leadership positions. Little today has changed.

Disclaimers notwithstanding from both sides of the aisle, Wall Street is pleased. Paulson got what he wanted. The plan's fine print will assure it. Public money. Far more, if needed, than $700 billion. The power to dispense it freely. With weak at best oversight and judicial review, and the ability to conceal fraud and malfeasance. In short, the between-the-lines meaning of Paulson saying: "We have made great progress toward a deal, which will work and be effective in the marketplace."

The same one that fleeced the nation and betrayed the public trust. Now empowered to take more with the full faith and blessing of the government from both sides of the aisle. Belying George Bush's insult that "The rescue not aimed at Wall Street; it is aimed at your street." And Nancy Pelosi's hypocrisy that: "All of this was done in a way to insulate Main Street and everyday Americans from the crisis on Wall Street....I want to congratulate all of the negotiators for the great work they have done." Who in banker boardrooms would disagree.

Some Relevant Facts

Clearly the present crisis is unprecedented. As stated above, maybe it can be fixed and maybe not. No one is sure because no one understands it fully. Where all the problems lie. To what degree can they be contained. How great their fallout may be. Their full effect on world economies. How bad things may get before they stabilize and improve, and the way the world will look like when they do.

Whatever's coming, industrial capitalism is eroding. A kleptocracy replaced it. If the system is saved, it will be temporary, and an even greater one will emerge. Why this article is called Grand Theft America. A criminal class runs it, and they're rewarded for their crimes. Backed by the full faith and credit of the government with taxpayer money. A near-limitless amount created and borrowed. Who said crime doesn't pay!

For over 30 years, an unimaginable wealth transfer to the rich has been ongoing. To the top 1% and corporate America from most others. It proves the failure of a system that rewards the few at the expense of the many. Licenses greed and creates this kind of global financial crisis so far uncontained. It begs the questions: what caused it and what's the fallout:

-- the ruinous effects of militarization; insane amounts of spending on it; "military Keynesianism;" believing capitalism thrives on foreign wars; "Global Wars on Terrorism" currently; their costs are unsustainable and are heading the nation toward bankruptcy;

-- the drain on an already weakened economy;

-- maxed out consumers now debt slaves;

-- so is government from unrepayable obligations in the tens of trillions; not the fictitious "official" reported numbers;

-- the possibility of future default; hyperinflation; national bankruptcy, and the demise of the republic;

-- human default as well: mass bankruptcies; home foreclosures; rising unemployment; increased poverty; and growing numbers of families unable to survive;

-- the subprime crisis is just part of it; seven million mortgages sold to the unwary; the idea was to criminally defraud them; offer two-year teaser rates; then reset them higher semi-annually based on an interest rate benchmark; payments soared as much as 30% and became unaffordable; the scheme was to cash in at the expense of mortgage holders, and five million risk losing their homes and life savings;

-- an "economic Pearl Harbor" for Warren Buffett; for Senator Chris Dodd a "50-state Katrina;" a "house of cards (built on) reckless finance" for author Kevin Phillips; Frankenstein finance; casino capitalism; for most Americans, a human catastrophe;

-- the demise of our manufacturing base; letting malls replace factories as the economy's engine;

-- permitting the financialization of the economy; speculative finance writ large; replacing productive investment; totally deregulated; run by fraudsters; free from government oversight; letting investment banks game the system at up to 40 to 1 leverage; until 2004, 12 to 1 was the maximum;

-- a government - business conspiracy for global dominance and the single-minded pursuit of profit; unfettered amounts of it through cleverly manipulated schemes; transferring multi-trillions of dollars from workers to the most wealthy; doing it without people even noticing;

-- creative destruction to let giant businesses grow larger by removing and devouring smaller ones; even large ones;

-- permitting and/or ignoring massive fraud; involving multi-trillions of dollars; the largest ever Ponzi scheme; a calculated crime with media complicity through silence; not reporting a growing problem as it emerged; waiting until it mushroomed and still not explaining it accurately and honestly; and

-- wondering won if the best and brightest can fix things or if no amount of money or ingenuity can do it.

The Plan's Architect - Henry Paulson

From a Nixon administration staff assistant to the assistant secretary of defense. To assistant to key Watergate official John Erlichman. To Goldman Sachs in 1974. To a partnership in the firm in 1982. Then Chief Operation Officer (COO) in 1994 and CEO in 1998 by a palace coup against co-chairman and now New Jersey governor Jon Corzine, according to New York Times columnist Floyd Norris.

Even before the current crisis, Goldman was the preeminent Wall Street firm. A survivor. The largest, and along with Morgan Stanley, the remaining two Street giants left standing. But no longer as investment banks after the Federal Reserve's September 21 announcement that both companies will become bank holding companies after a mandatory five-day waiting period, now over.

In theory, they'll be under stricter Fed oversight but will get Fed help to complete their transition and thereafter. As a well-connected financial powerhouse, whatever Goldman wants, Goldman gets. Always in the past by recycling top executives into Democrat and Republican administrations, and now more than ever given Henry Paulson's extraordinary financial czar powers.

Before his $700 billion giveaway plan, the 2008 Housing and Economic Recovery Act gave him authority to fleece taxpayers by rescuing Fannie Mae and Freddie Mac as well as raise the national debt by over $5 trillion dollars. He also orchestrated the demise of Bear Stearns, Lehman Brothers and Washington Mutual. The forced sale of Merrill Lynch, and arranged the government takeover of AIG.

He has near-open checkbook authority to reward close allies with loans and free money and let them acquire troubled assets on the cheap. This from a man with much responsibility for today's crisis. A June 12, 2006 Business Week cover story titled "Mr. Risk Goes to Washington" called him "one of the key architects of a more daring Wall Street, where securities firms are taking greater and greater chances in their pursuit of profits." Such as assuming huge amounts of debt and "placing big bets (with their own money) on all sorts of exotic derivatives and other securities." Advising clients to do the same. Casino capitalism at up to 40 to one leverage. Hugely profitable in up markets. Disastrous in down ones.

Paulson earned millions and now has an estimated $700 million + net worth. For 2007 overall, according to, "Wall Street's five biggest firms (paid out) a record $39 billion in bonuses (and did it in) a year when three of the companies suffered the worst quarterly losses in their history and shareholders lost more than $80 billion."

Speculative finance pays well, even in down years, and it even raised Bloomberg's ire in a Michael Lewis September 24 commentary titled "America Must Rescue the Bonuses at Goldman Sachs." It reflected on a possible global financial collapse but sacrificing Goldman bonuses is another matter. If firm "employees (take) pay cut(s), it will be (tantamount to failure and) our country may never recover." How will the company induce new talent to come aboard. Goldman is well-positioned to get maximum gain from its former CEO's $700 billion handout.

Why else would Warren Buffett bet $5 billion on the firm! For preferred shares paying an annual 10% dividend. Warrants as well to buy $5 billion in common stock at a $115 a share strike price. Well off its $251 peak and below the latest September 26 $138 a share.

Joseph Stiglitz on the Economy

Stiglitz was formerly part of the system he now criticizes. Free market fundamentalism in its most extreme form. For many months, he warned about a worsening global economy and growing financial crisis that's as bad or worse than the Great Depression.

He sees similar problems now as then:

-- outsized speculation through excessive leverage;

-- pyramid schemes;

-- multiple bubbles through so-called Wall Street innovations; and

-- a lack of transparency and government oversight.

Combined they created a crisis "so great that no one knows exactly the magnitude of the risk they face. It is particularly bad because our financial institutions are based on trust. You put money in the bank and you trust that you can get (it) out, so trust is absolutely essential for the functioning of our financial markets and economy."

The problem is exacerbated by those providing the news. The dominant media and frequent spokespeople. Industry representatives like Lehman Brothers CEO saying last April that "we turned the corner, and the economy is on the uptick." Also from the president, treasury secretary and others in government as things keep worsening.

Stiglitz calls this a "top down crisis." The "$3 trillion cost" of foreign wars a key. Creating huge deficits and consuming vital resources needed for growth. "This is the first war in American history that has been totally financed on the credit card. For the last five years....we have been a debt economy." Not since the Revolutionary War have "we have had to turn to foreigners," so now "40% of our national debt is financed by (them). Even as we went (to war) we had a big deficit, and yet the president called for tax cuts for upper middle class Americans." Insane but we did it.

Another factor is other countries trusting that our economy is working well, and when the president says it is he's believable. "This administration burned that wonder everybody around the world is losing confidence." Even worse is that the administration isn't dealing responsibly with these problems, mostly because they're of our own making.

Stiglitz worries about the "real economy:" home prices dropping; owners forced into foreclosure; more financial firms in crisis; and a good many won't survive. He sees a weakening financial system unable or unwilling "to provide credit (the lifeblood of the economy for) loans, mortgages," and that means lower home prices, contracting businesses, rising unemployment, and a "downward vicious cycle. You have to be in fantasy land to say that everything is fine (or even) that we have turned the corner." He sees at least another 18 months of pain. Maybe longer. Who can know or how much.

For sure, real economic stimulus is needed. Productive investment. Not the phony "bailout" kind proposed. Aiding state and local governments. Better unemployment insurance and more for infrastructure. Providing a basis for long-term growth. Not feeding markets and starving the hungry, as one writer put it. Not believing markets on their own will fix things.

Understanding that government must intervene. Responsibly. Facilitate job creation. End casino capitalism. Provide incentives for real economic growth. Let foreclosed and threatened homeowners stay in their homes. Work out an equitable way to do it. "We learned a painful lesson in the 1930s and today: The invisible hand often seems invisible because it's not there." It led to the kind of predicament now confronting the country. The solutions proposed will just compound it.

Ones that Can Fix It

Good ones not considered. From figures like Dean Baker of the Center for Economic and Policy Research. Others as well with solid advice to:

-- make fraudsters eat the bulk of their losses;

-- use public funds only "to sustain the orderly operation of the financial system;"

-- minimize speculative finance; the root of the current problem;

-- "minimize moral hazard" - the Paulson (and Bernanke) "put" picking up where Greenspan left off;

-- let delinquent homeowners stay in their homes and pay rent;

-- curtail executive compensation for companies getting government aid;

-- make a key Fed responsibility the prevention of asset bubbles; reinstitute regulations to do it; Glass-Steagall for starters that prohibited commercial and investment banks and insurance companies from combining;

-- impose a modest financial transactions tax to curb excesses and raise revenue;

-- trade assets, like credit default swaps, openly on exchanges to establish fair value for them;

-- impose strict limits on leverage;

-- keep Fannie and Freddie public institutions; their status before being privatized in 1968; and

-- restructure the Fed democratically; a far better solution is abolish it and let government control its own money; use it responsibly for all Americans, not just the privileged few.

Other recommendations recognize no quick or easy solutions to problems this great. Economist James Galbraith says borrowers need collateral. A new Home Owners Loan Corporation to rewrite mortgages. Manage rental conversions, and decide what degraded properties should be demolished. Which ones to save and refurbish. Set it up in communities under federal guidelines and do it quickly. Help state and local governments strapped for cash. Reestablish federal revenue sharing. A National Infrastructure Bank making capital available for infrastructure. Put people to work building it. Protect seniors and near-retirees from wealth loss. Extra Social Security, Medicare and Medicaid revenue will help. Get money in the hands of people who'll spend it.

Address other crucial issues like energy conservation, reconstruction and renewable power. Infrastructure overall. Tuition help for students. Another GI bill. Credit card and mortgage interest rate caps. Rescind anti-consumist laws like the misnamed 2005 Bankruptcy Abuse Prevention and Consumer Protection Act. A boon for credit card companies and other businesses. Unfairly burdensome to the public.

A whole range of other projects and ideas to redirect the economy away from speculative finance and militarism and toward high-return public investment. Do it before it's too late. Recognize that the present course is unsustainable. Imagine a government working for everyone and not just the privileged few. Imagine it not tolerating fraud and malfeasance.

Instead, Congress agreed to a "bailout" and passed a record $634 billion omnibus spending bill (to run the government through March 6, 2009) to include a record Pentagon budget; $25 billion in low-interest auto industry loans; maybe with no provision for repayment; lifting a quarter-century ban on Atlantic and Pacific off-shore drilling; billions more in earmarked pork; and likely more coming later for the airlines and other endangered companies. Taxpayers for Common Sense criticized the bill at the same time it noted that government "bailout" appropriations will reach about $1.2 trillion with the $700 billion Paulson scheme. Others put the total above $1.5 trillion, and many say it's only for starters.

Paying "hold-to-maturity" prices compounds the fraud. For securitized assets worth a fraction of full value. Much of it pennies on the dollar, if anything. Trillions of dollars of toxic ones. All sorts of them. Newly invented ones. Structured finance and insurance. Asset-backed securities. Repackaged into marketable pools. Sold to investors. It's been done for decades but only recently so out of hand. Greed and deregulation created an alphabet soup of levered-up, high-risk securitized assets. Financial alchemy. Largely outright fraud, including:

-- collateralized debt obligations (CDOs), including auto loans, credit and corporate debt;

-- collateralized (asset-backed home) mortgage obligations (CMOs);

-- commercial mortgage-backed securities (CMBS);

-- mortgage-backed securities (MBS) and levered loans;

-- structured investment vehicles (SIVs);

-- special purpose vehicles (SPVs);

-- pass-through securities;

-- credit and interest rate default swaps;

-- commercial paper and more;

-- repackaged arcane stuff most people don't understand; even investors who bought them; like eating a stew with no idea what's in it; a recipe with no list of ingredients; learning too late it's toxic and you're in trouble;

Credit card companies as well from growing amounts of unrepayable credit card debt. The auto industry already assured of a low-interest $25 billion loan (or maybe handout) for starters. Airlines coming next. Select homebuilders and troubled companies called too big to fail. If they're too big to fail, says one observer, they're too big to exist.

EESA will give the treasury secretary near-carte blanche powers to conceal fraud and help the fraudsters, including his former company, Goldman Sachs, now in trouble. Pick and choose among others. Which will survive, and what less favored ones will go on the block at fire sale prices or disappear. Today there are 9000 banks in the country. In a decade, half or more of them may be gone.

Economist Michael Hudson calls EESA "cash for trash" and a "giveaway," not a bailout. A "transfer of wealth to insiders." A financial coup d'etat. The "largest and most inequitable (kind) since the (19th century) land giveaways to the railroad barons."

In this case, socializing losses to let fraudsters "sell out all their bad bets." Junk of all sorts: a stew of securitized assets, bad mortgages, car loans, credit card loans, student loans, anything for insiders stuck with too much of them.

A doomed scheme that will raise the debt level instead of lowering it. Enrich fraudsters with taxpayer funds. Stick the public with toxic junk. Maybe buy time before more people and markets catch on, but, in the end, cripple the economy and erode industrial capitalism with it.

Hudson is justifiably angry given the amount of fraud and deceit. The government-concocted scheme to whitewash it. Reward criminals. Harm most others, and wreck the country at the same time. He says a "kleptocratic class has taken over the economy to replace industrial capitalism....'banksers' " for FDR and earlier condemned by Jefferson with this stinging comment:

"I sincerely believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a money aristocracy that has set the government at defiance. The issuing power should be taken from the banks and restored to the people to whom it properly belongs."

A half century later Lincoln said:

"I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country....corporations (including bankers) have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed."

Lincoln refused to pay bankers usurious rates to finance the Civil War and got Congress to pass the 1862 Legal Tender Act. It empowered the US Treasury to issue "greenbacks" that were interest-free because government printed its own money. When Lincoln was assassinated in 1865, the "Greenback Law" was rescinded. A new national banking act was passed, and the government once again had to pay interest to bankers.

On June 4, 1963, President Kennedy issued executive order (EO) 11110 giving the president authority to issue currency. He ordered the treasury to begin printing "United States (Treasury) Notes" to replace "Federal Reserve Notes." He began a process to let government control its own money and no longer private bankers under the guise of the Federal Reserve. Months later, Kennedy was assassinated. Once Lyndon Johnson took office, he rescinded EO 11110 and reestablished the current system. More on that below.

The Two Greatest Ever Financial Crimes - Today's Fraud and the 1913 Federal Reserve Act's Privatization of Money Creation

Most people think the Federal Reserve is a government agency, subject to its control. It's sometimes mistakenly called a quasi-governmental decentralized central bank to disguise its real identity and purpose. Its Eccles building headquarters compounds the subterfuge. Below it's stripped away.

The Federal Reserve is a private for-profit banking cartel. Owned and run by major banks and Wall Street in each of its 12 Districts. It was created and operates in violation of Article 1, Section 8 of the Constitution that states that Congress alone shall have the power to create money and regulate its value. In 1935, the Supreme Court ruled that Congress cannot constitutionally delegate this power to another authority, but, in fact it did.

On December 22, 1913, between 1:30 - 4:30 AM, the Federal Reserve Act was shepherded through a special Congressional Conference Committee. Then voted on and passed the next day. Two days before Christmas with many members gone and most others with no time to read or consider this momentous document.

By enacting this law, Congress and President Woodrow Wilson defrauded the public. Wilson later said (when it was too late to matter) he made a mistake and "unwittingly ruined my country." This from a man who was an intellect. Trained in the law. A PhD in political science and president of Princeton University in his earlier years.

The Federal Reserve Act gives private bankers the most important of all powers. The one most of all that governments should never relinquish. The authority to print money. Control its supply. Its price through the Fed Funds rate and how it influences the whole yield curve. Loan it out for profit, and charge government interest on its own money. It's later returned minus operating expenses and a guaranteed 6% profit. Taxpayers foot the bill. An early and continuing example of wealth transfer from the public to powerful bankers. Illegally sanctioned by Congress and the president.

The Fed literally creates money out of nothing. Expands or contracts its supply as it wishes - with no government oversight or control. Gold once backed it until Nixon closed the gold window in August 1971. Suspended dollar convertibility into the metal, and ended compliance with the Bretton Woods core provision. The US dollar became fiat currency. Mere paper. Backed by nothing except the faith of the issuing authority.

Given today's crisis, that faith is fast eroding and is to blame for dollar weakness. Mostly because of profligate policies by private bankers running the country's monetary policy for their own gain. The grandest of grand thefts along with today's all-consuming fraud. Backed by the full faith and credit of the government, and up to now at least, with most people none the wiser.

A Growing Public Response to the Crisis

For how long is the question given growing public anger and people expressing it publicly. It has administration officials worried enough to order what Michel Chossudovsky wrote in his September 26 article titled "Pre-election Militarization of the North American Homeland."

He cites an Army Times article saying that the 3rd Infantry's 1st Brigade Combat Team is coming home (in October) from Iraq as (according to the Times) "an on-call federal response force for natural or manmade emergencies and disasters, including terrorist attacks." Perhaps with a manufactured incident as pretext. To defend the homeland against ourselves. Be deployed against dissent. Erupting public anger. On city streets like in Denver and St. Paul. Displaying civil disobedience. Defiance against fraud, deceit, illegal foreign wars, and nearly eight intolerable years under George Bush and a complicit Congress. Capped by the current financial crisis touching everyone while government rewards crime and hangs its victims out to dry.

Chossudovsky is blunt about the possibilities. The 3rd Infantry's 1st Brigade is for combat. It's not the National Guard or local police. It's trained for war. "Equipped to kill people" with potent weapons, and a last hurrah scheme may be planned to divert public attention from the financial crisis. A "terrorist" attack with "chemical, biological" or other dangerous weapons. A possible pretext for martial law at a time the administration and Congress are vulnerable. When people are angry about Washington protecting the privileged. Partnering with them in crime. Defrauding the public and stifling dissent. Moving one step closer to tyranny and away from silly notions about democracy. Proving crime indeed does pay and awfully well on Wall Street. "It's the economy, stupid." Theirs, not ours.

Stephen Lendman is a Research Associate of the Centre for Research on Globalization. He lives in Chicago and can be reached at

Also visit his blog site at and listen to The Global Research News Hour on Mondays from 11AM - 1PM for cutting-edge discussions with distinguished guests. All programs are archived for easy listening.

Thursday, September 25, 2008

New Coup D'Etat Rumblings in Venezuela

New Coup D'Etat Rumblings in Venezuela - by Stephen Lendman

Since taking office in January 2001, the Bush administration targeted Hugo Chavez for removal. It tried and failed three previous times:

-- in April 2002 for two days; aborted by mass street protests and support from many in Venezuela's military, especially from its middle-ranking officer corp;

-- the 2002 - 2003 general strike and oil management lockout causing severe economic disruption; and

-- the August 2004 national recall referendum in which Chavez resoundingly prevailed with a 59% majority.

Other disruptions have occurred since and now may again be ongoing. US intervention is innovative and determined to regain control of Venezuela and its vast hydrocarbon resources, the largest by far in the hemisphere after Canada. Perhaps the world with the US Department of Energy's estimate of 1.36 trillion extra-heavy oil barrels included besides its proved 80 billion barrels of light sweet reserves, ranking it seventh overall behind the five largest Middle East producers and Canada.

Throughout most of his tenure and since the Bush administration took over, CIA and various misnamed US quasi-governmental agencies have been active in Venezuela. Ones like the National Endowment of Democracy (NED). The International Republican Institute (IRI) with John McCain as its chairman and its ties to extremist Republican party elements, and the US Agency for International Development (USAID). All are imperial instruments. Undemocratic and for rule by the power of money.

They fund opposition groups and coup supporters. Arrange (staged for media) anti-Chavez marches and street protests. Spend millions to subvert democracy to return the country to its past. Oligarchs who once controlled it. Washington and Big Oil that control them.

They plot assassination attempts, according to Chavez to remove him. To reverse Bolivarianism and its socially beneficial gains in health care, education, housing, feeding the hungry, lifting millions out of poverty, and enfranchising all Venezuelans in the country's participatory democracy. Strengthening it at the grassroots.

Recent Disturbing Events

On September 10, Venezolana de Television's (VTV) La Hojilla program disclosed a recording (from an undisclosed source) of a planned military coup against Chavez - by active and retired plotters. Participants named were Vice Admiral and National Guard Forces Inspector General Carlos Alberto Millan Millan. National Guard General Wilfredo Barroso Herrera, and retired Air Force General Eduardo Baez Torrealba (involved in the April 2002 aborted coup). Unknown is who else is behind this and how deep the suspected plot runs.

Conversations recorded were about "tak(ing) the Miraflores (presidential) Palace (government headquarters and) the TV installations....that is all effort towards where (Chavez) is. If he's in Miraflores, the effort goes toward there." Talk also was about seizing the "command headquarters (with) the troops inside" and about Maracay, Aragua state's Air Base Libertador where Venezuela's F-16s and other planes are based.

Baez Torrealba was heard saying: "We are divided into four zones....east, west, and two in the centre" and have an F-16 pilot. He mentions either attacking Chavez's plane or capturing it. Possibly the presidential palace the way the CIA engineered it in Chile for Augusto Pinochet against Salvador Allende on September 11, 1973 - with bombs, rockets and tank fire. Open warfare on Santiago's streets. Whether planned for Caracas is anyone's guess but it certainly is possible.

Chavez knows the history as well as past conspiracies against himself. He said on-air that his government "infiltrated the most radical and fascist movements (and have) known for a long time that they are looking for land and air rockets and sophisticated equipment to blow up the presidential plane" and that past plans were to bomb the Miraflores. He also knows that CIA is behind them and said if there's a coup, "the counter-coup would be overwhelming" - meaning a mass popular uprising to reverse it with military support, similar to 2002.

Chavez then confirmed the detentions of several suspected coop plotters and said others fled the country. He also expelled US ambassador, Patrick Duddy. Gave him 72 hours to leave, and recalled his Washington envoy, Bernardo Alvarez, in sympathy with Bolivia's Evo Morales. On September 10, he declared US ambassador, Philip Goldberg, persona non grata. Accused him of supporting eastern Bolivian fascist elements and working with them to plan a coup against his presidency.

On September 20, another incident occurred, so far unexplained. In west Caracas, a grenade was thrown from a residential building, killing two and injuring 19 others. A 23-year old man was identified as the perpetrator, who then, it was claimed, jumped to his death from the building's eighth floor. No further information is available at this time but authorities are investigating.

Then around the same time in London, Samuel Moncada, Venezuela's UK ambassador, attended a fringe Labour Party meeting and expressed "fear(s) that the next few weeks will be very dangerous for us." He believes that the Bush administration may try to oust Chavez in its remaining months. Others in Venezuela also think something is going on to destabilize the country. Possibly a plot to assassinate their president and bring down his government.

Disturbing Latin American stirrings in the final Bush administration months along with all else on their plate and planned in the Middle East, Central Asia and elsewhere. Plus the November presidential and congressional elections and a hugely calamitous financial crisis commanding daily headlines and top-level meetings as first order of business because of its seriousness.

Nonetheless, the Bush administration expelled Venezuela's Washington ambassador after he'd been recalled following Chavez saying "When there is a new government in the United States, we'll send an ambassador." Given the campaign rhetoric by both US presidential candidates, he may have a change of heart. Both promise permanent wars. New fronts to wage them on, and an uncompromising pro-corporate agenda. Not good news for independent democrats like Chavez, especially ones in oil-rich countries like Venezuela.

Separately on September 12, the Bush administration went further with US Treasury officials announcing sanctions and the freezing of assets against Hugo Carvajal Barrios and Henry Rangel Silva, both Venezuelan intelligence chiefs. Also named was Ramon Rodriguez Chacin, the country's former Justice and Interior Minister. Serious and unwarranted accusations against high government officials for supporting drugs trafficking and supplying arms to Colombia's FARC-EP resistance.

On September 17, Washington also blacklisted Venezuela (for the fourth time) and Bolivia (for the first time) for not cooperating in the "war on drugs" and designated both countries and Burma as "hav(ing) failed demonstrably during the previous 12 months to adhere to their obligations under international counternarcotics agreements," in a statement released by the White House. The State Department listed 20 countries as illicit major drugs producers or transit sites.

It omitted what scholar/researcher Peter Dale Scott calls "Deep Events (or "deep politics" that governments try to suppress) and the CIA's Global Drug Connection" in his article by that title. The "complex geography or network of banks, financial agents of influence and the 'alternative' or 'shadow' CIA" and its possible involvement in major "deep events" like the Kennedy assassination and 9/11. A "global financial complex of hot money uniting prominent business, financial and government (elements) as well as underworld figures." An "indirect empire (between) CIA, organized crime, and their mutual interest in drug-trafficking."

For the enormous profits that CIA uses for its operations and helps it plot coups against countries like Iran (1953), Guatemala (1954), Venezuela (2002) and maybe again in 2008 along with Bolivia and the current Iranian government. For state terrorism like Operation Condor (in Latin America in the 1970s). Iranian and Pakistani incursions currently. All its other nefarious activities, including "strengthening drug Laos, Pakistan, Lebanon, Turkey, Columbia," Thailand and Afghanistan - the world's largest by far opium producer after Washington replaced the Taliban and allowed regional "warlords" to ramp up replantings.

Also its involvement in a possible plot against Chavez. At the least, the latest Bush administration efforts to tarnish and disrupt his democratic government with considerable media support for its accusations and much more.

The Corporate Media on the Attack

A New York Times September 18 Simon Romero article is headlined: "Alleging Coup Plot, Chavez Ousts US Envoy." In it he suggests the accuracy of a Human Rights Watch's (HRW) biased 2008 Venezuela report discussed below. That "into its 10th year (Chavez's) government has consolidated power by eliminating the independence of the judiciary, punish(ed) critical news organizations, and engag(ed) in wide-ranging acts of political discrimination against opponents." Leaving mentioned the Chavez government's views to suggest his own and HRW's.

Do it in spite of its tainted state. An example is how it "condemn(es) human rights abuses in Colombia." Not the repressive government. The most fascist in the region, but the FARC-EP and ELN resistance against it. More on HRW below.

A Miami Herald op-ed piece is headlined: "Expulsions Underscore Chavez's Intolerance for Dissent" and states that expelling "two respected human rights monitors from Venezuela is the latest evidence that President Hugo Chavez is determined to muzzle dissenting views....Mr. Chavez never misses an opportunity to rail against the United States, but his real enemies are those who dare to take issue with his politics. His anti-democratic agenda has restricted legitimate political activity by his opponents for years, and his arbitrary behavior is getting worse." The most far right US elements couldn't say it better or be more mirror opposite the facts.

A Los Angeles Times August 9 editorial accused Chavez of a "power grab (and) attack(ing) democracy." The Washinton Post calls him a Venezuelan caudillo or strongman. So does the Wall Street Journal repeatedly. Reckless commentaries accuse him of rigging elections. Excluding his most formidable opponents. Violating Venezuelan law, and now engaging in drugs trafficking, terrorism, and delivering a suitcase with $800,000 in slush money to Argentina's Cristina Kirchner for her 2007 presidential campaign. The Inter-American Dialogue's Peter Hakim has "no doubt" this latter charge (playing out in a Miami courtroom) is politically motivated and "is coming from the US government." So are all the others.

The Journal's Mary O'Grady wages constant war against Chavez, and her latest September 15 op-ed refers to his "Russian Dalliance." His holding joint exercises with Moscow's "flotilla." Russia "evoking memories of the 1962 Cuban missile crisis by playing war games with another would-be Latin strongman." Chavez "only too happy to be used." Suggesting he and Evo Morales are communists and all the negatives that implies. That Chavez is a "dictator." That his "economy (is) in shambles" when, in fact, it's had 19 consecutive impressive quarters of growth and grew at 7.1% in the second quarter - compared to America's unprecedented economic crisis and contraction. That Chavez is so worried about a "serious challenge to (his) chavismo (that he) trotted out the Uncle Sam boogeyman, called in the Russians, and (sent) Washington's ambassador packing."

Human Rights Watch on the Attack

Too often, Human Rights Watch (HRW) fails to practice its stated mandate - that it's "dedicated to protecting the human rights of people around the world....stand(ing) with victims and activists....upholding political freedom (and) bring(ing) offenders to justice." Instead it functions the way James Petras characterizes similar NGOs as the "executing agents of US imperialism."

Its support for the oppressed is dubious at best. Tainted at worst, and its latest September 18 Venezuela report is disturbing, biased, and inaccurate. It's not dissimilar to how it covers the Israeli - Palestinian conflict. Distorting it to downplay Israeli violence. Playing up to the Israeli Lobby, and operating more by a political agenda than as a credible human rights organization. Clearly with its funding sources in mind that must be placated and never offended. HRW does it skillfully.

From its 1978 beginnings as the US Helsinki Watch Committee (or Helsinki Watch), HRW advanced America's interests as a propaganda instrument against Soviet Russia. Despite occasional good work, too often it's "serv(ed) as a virtual public relations arm of the (US) foreign policy establishment," according to Edward Herman, David Peterson and George Szamuely in their 2007 report titled: "Human Rights Watch in Service to the War Party."

Exhibits A and B: against Serbia's Slobodan Milosevic and Saddam at a time "the United States and Britain were clearly planning an assault on Iraq with a 'shock and awe' bombing campaign and ground invasion in violation of the UN Charter." HRW ignored the impending onslaught. The "supreme international crime," and focused on Saddam's much lesser ones. A "valuable public relations gift to US and British leaders" instead of denouncing them.

When the Pentagon-led NATO countries bombed Yugoslavia in 1999, HRW attacked the victim and absolved the aggressor. It supported regime change "either through (Milosevic's) indictment or a US war (for) the same outcome." It blamed him for the conflict America began and waged throughout the 1990s with its NATO allies. It ignored Washington's imperial aim to dismantle Yugoslavia. Its outrageous war crimes in doing it, and instead cited Serbia's "vicious wars in Bosnia, Croatia and Kosovo." It demanded responsible Serbs be held to account before the kangaroo International Criminal Tribunal for the Former Yugoslavia (ICTW). Run by made-in-Washington rules to avoid any prosecution of its own role.

It showed HRW's commitment to human rights is hollow and hypercritical. Its analysis opposite of the truth. Its disdain for the rule of law, and its judgment fully supportive of its funding sources. Organizations like:

-- the Ford Foundation;

-- the Rockefeller Foundation;

-- the Carnegie Corporation of New York; and

-- Time Warner.

Individuals like:

-- Edgar Bronfman, Jr., corporate CEO and member of one of Canada's most wealthy and influential Jewish families;

-- Katherine Graham (now deceased) of the Washington Post Corporation with her son and current chairman, Donald Graham, likely continuing her support;

-- and George Soros who was active in founding HRW jointly with the US State Department.

Some of its Americas Advisory Board members are also closely linked to the National Endowment of Democracy (NED) and its anti-democratic agenda. Figures like George Soros and Robert Pastor, Jimmy Carter's Latin American National Security Advisor and Senior Fellow at the Carter Center on Latin America and the Caribbean.

HRW failed to denounce CIA's 2002 coup attempt against Chavez or the 2004 one against Haiti's Jean-Bertrand Aristide. The thousands of Lavalas supporters murdered in its aftermath. The continuing daily human rights abuses committed by so-called UN Peacekeepers, police and other security forces. The unconscionable human misery in the coup's aftermath.

It said nothing about Venezuelan dominant media's advance knowledge about and support for the 2002 coup. The air time they gave plotters. Their virulent propaganda and calls for people to take to the streets "for freedom and democracy" by ousting Chavez. Their suppressing all pro-government reports and opinions. Their falsely reporting that Chavez resigned when, in fact, he was forcibly removed and was being held against his will. They knew because they were briefed in advance and were part of the scheme.

When hundreds of thousands of Chavez supporters were on the streets demanding his reinstatement, they ignored them and aired old movies and cartoons. Even when the coup was aborted, they maintained strict censorship in a further act of defiance. Yet, when Chavez refused to renew RCTV's VHF license (a mere slap on the wrist for an act of sedition), HRW vehemently complained and denounced the act as censorship. It continues to criticize Chavez, most noticeably in its 230 page 2008 report titled, "A Decade Under Chavez: Political Intolerance and Lost Opportunities for Advancing Human Rights in Venezuela."

The report is unfairly one-sided and biased by criticizing the "government's willful disregard for the institutional guarantees and fundamental rights that make democratic participation possible." In response, the government expelled two HRW employees - America's Director, Jose Miguel Vivanco, and his Deputy, Daniel Wilkinson. A Foreign Relations Ministry press release stated: Vivanco and Wilkerson "have done violence to the constitution (and) assaulted (Venezuela's) institutions (by) meddling illegally in (its) internal affairs."

The statement added that HRW is linked to America's "unacceptable strategy of aggression" and expelling them was done to defend "the people against aggressions by international factors." Not accidently was the report released two months before Venezuela's November 23 regional and local elections for governors and mayors. HRW did the same thing previously to sway voters away from Chavez candidates and issues and toward ones embracing a pro-Washington agenda. In October 2007, ahead of the December constitutional reform referendum, it criticized the measures and warned about the loss of freedoms if the vote was positive. Its latest report also comes at a time of increased tension between Washington and Caracas ahead of elections in both countries.

The Washington-based Venezuela Information Office (VIO) released an analysis of HRW's report titled: "The Truth Suffers in Human Rights Watch on Venezuela." It's summarized below and can be read in full along with other current Venezuela information on:

VIO is blunt and accurate in calling HRW down on its blatantly biased account. Not surprising given its history as explained above. It exaggerates and lies about human rights deficiencies, and at the same time, ignores Venezuela's impressive social and other advances under Chavez. Unparalled in the country's history. Nothing comparable in America where human rights and social gains are vanishing under both parties. Along with democracy that's pure fantasy. Facts that HRW is loath to point out nor would it dare at the risk of offending its funding sources.

VIO deconstructs the HRW report by stating "myths," and "facts".

HRW myth: political discrimination defines the Chavez presidency.

VIO fact: HRW mischaracterizes Chavez's condemnation of the aborted 2002 coup as "political discrimination" against the plotters. An absurdity on its face, but not to HRW.

HRW: Chavez disdains the separation of powers and an independent judiciary.

VIO: Chavez inherited a government for the rich. Mass poverty, and (according to an earlier HRW report) a judiciary plagued by "influence-peddling, political interference, and, above all, corruption....In terms of public credibility, the system was bankrupt." Since 1999, Chavez made great strides in cleaning it up. He still has a long way to go, but he's heading in the right direction.

HRW: Chavez "shifted....the mass media in the government's favor."

VIO: In print and electronically, Venezuela's corporate media are dominant. The five leading private TV channels control 90% of the market and most viewers. They operate freely with no government censorship. Are unrestrained in their one-sided anti-goverment reporting, including "calling for the overthrow of elected leaders" as they did in 2002. All major newspapers are corporate-owned. TVes (Venezuela's first public broadcaster) and TeleSur (the regional, multi-nation supported operation) reach much smaller audiences.

HRW: Chavez "has sought to remake the country's labor movement in ways that violate basic principles of freedom of movement."

VIO: In fact, Chavez is actively pro-labor. Supports unions and collective bargaining on equal terms with management. In 2003, pro-government workers founded the National Workers Union (UNT). Chavez is responsive to its rights and equitable demands.

HRW: Chavez has been "aggressively local rights advocates and civil society organizations."

VIO: Chavez is responsive to local leaders. Promotes the creation of community councils to address their own needs and find solutions free from federal government control and influence. The idea is democracy at the grassroots, and it works.

VIO concludes that HRW systematically mischaracterizes the Chavez government. Wrongly accuses it of political discrimination and targeting opponents. The truth is mirror opposite even to the extent of pardoning coup plotters and promoting open dialogue.

In addition, Venezuela has a vibrant and improving participatory democracy, anchored at the grassroots. Each government branch provides "strong checks and balances" against the others. The nation is a free and open society. The Bolivarian Constitution respects and guarantees human and labor rights for all Venezuelans equally. Social ones also, including healthcare, education, food, housing, jobs, security and more.

In its biased and inaccurate account, HRW reports none of this and all other impressive achievements under Chavez. Doing so would offend its corporate and other backers. They want Chavez ousted. Bolivarianism ended, and Venezuela returned to its past. HRW is an imperial agent. On board to make it happen.

Targeting Latin American Democracy

Subversion in Venezuela and possible civil war in Bolivia threaten Latin America's democracy. Fascists never rest and now control five of Bolivia's richest states, according to long-time regional expert, James Petras. They "forcefully oust(ed) all national officials, murder(ed), injur(ed) and assaulted leaders, activists and voters who have backed the (Morales) national government - with total impunity."

Why so? Because, in nearly three years in office, Evo Morales tried to bargain with the far right. Be conciliatory and compromising. Back down from even "the mildest social reforms." Favor business over progressive social change in spite of winning a nearly 70% majority in an August 10 recall election. Allowed the opposition to be "aggressive(ly) violent." Seize power in Santa Cruz, Pando, Beni, Tarija and Chuquisaca. Rule by thuggery and intimidation. Head the country toward fascism. Erase the few social reforms achieved in the past three years. Hand the country back to oligarchs and their Washington bosses.

Threaten to take the model to Venezuela. End the region's most impressive participatory democracy. Its social gains, and a leader who's committed to improving them. Stand up against the same dark forces targeting Bolivia. Refuses to surrender the way Morales has done. Share power with the fascist right. Give in to their demands. Back their neoliberal agenda. Betray the people who elected him overwhelmingly. And face the possibility of what Michel Chossudovsky calls the "Kosovo Option."

Break up Bolivia by the Yugoslav model. Use extreme violence to do it. It made Kosovo an independent state. Planning the same scheme for Bolivia's resource-rich states. Perhaps the same fate for Venezuela and extinguishing all Latin American democracy.

A very disquieting option. Unthinkable but possible under the current US administration and which ever new one succeeds it. More conceivable given a shaky world economy and how that distracts away from politics. Even the most destructive kind. Allowing democracy to be lost without even noticing.

Unlikely? Who back in summer 2007 imagined the kind of financial crisis that emerged. A potential economic armageddon. An unprecedented situation with no rules around to address. The possibility that nothing can stop a meltdown. And if it happens that democracy may go with it.

Preventing a similar Latin America outcome is crucial. Confronting the region's dark forces to stop them. Understanding, as Petras states, that "you cannot 'make deals' with fascists." You don't defeat them "through elections and concessions to their big property-owning paymasters." You confront them head on. Forcefully. Expose and denounce them. Ally with a democratic constituency and beat down their threat that's real, menacing and must be stopped or its heading everywhere. Maybe sooner than anyone imagines.

Some hopeful signs, however, are present, and maybe more will follow. In mid-September, nine South American presidents held a crisis summit in Santiago, Chile and expressed "their full and firm support for the constitutional government of President Evo Morales (and) reject(ed) and will not recognize any situation that attempts a civil coup (or) rupture of (Bolivia's) territorial integrity." Let's hope they mean what they say and will back their words with resoluteness. Except for Chavez away on foreign tour, they met again on September 24 at the UN in New York to continue discussions.

In addition, on September 17, the National Coalition for Change (CONALCAM indigenous, campesino and urban movements) signed a pact with the Bolivian Workers Central (COB) to "defend the unity of the homeland that is being threatened by a civil coup lead by terrorists and fascists" directed out of Washington.

Events are fast-moving. They affect Venezuela and the region, and Roger Burbach, Director of the Center for the Study of the Americas (CENSA), reports that 20,000 miners, peasants and coca growers marched on Santa Cruz. The "bastion of the right wing rebellion" against Morales. He calls it a "popular upheaval" sweeping the country. But it's too soon to predict an outcome, and much to worry about given Morales' weak-kneed approach and reluctance to be as resolute as his supporters. Burbach calls it "restraint." For Petras, it's capitulation, surrender, and a doomed strategy.

But not if mass protests can help it with Joel Guarachi, head of the National Confederation of Peasant Workers, saying 600,000 protesters are located throughout the 16 Santa Cruz provinces alone. Venezuelans share a common interest and may react the same way if Bolivarianism and their president are threatened.

Let's hope so. With a few months left in office, the Bush administration may be unleashing its last hurrah in Latin America. A "hail Mary" effort to reclaim the region. Remove its weak democracies in countries like Bolivia and strong ones in Venezuela. And do it in the face of overwhelming domestic problems at home and lost wars abroad. Will it work? Not if Bolivians and Venezuelans have anything to say about it, and they're saying plenty. Stay tuned.

Stephen Lendman is a Research Associate of the Centre for Research on Globalization. He lives in Chicago and can be reached

Also visit his blog site at and listen to The Global Research News Hour on Republic Mondays from 11AM - 1PM US Central time for cutting-edge discussions with distinguished guests. All programs are archived for easy listening.

Monday, September 22, 2008

Remembering Edward Said Five Years On

Remembering Edward Said Five Years On - by Stephen Lendman

Born in West Jerusalem in 1935. Exiled in December 1947. Said was diagnosed with chronic lymphocytic leukemia in 1991, a malignant cancer of the bone marrow and blood. At 6:45AM on September 25, 2003, he succumbed (at age 67) after a painful courageous 12 year struggle. Tributes followed and resumed a year later. In a testimony to his teacher, Professor Moustafa Bayoumi called him "indefatigable, incorruptible, a humanist and devastatingly charming....leav(ing behind) legions of followers and fans in every corner of the world. I am lost without him....I miss him so."

Chomsky called his death an "incalculable loss." A year later, Ilan Pappe said "his absence seems to me still incomprehensible. What would have happened if we still had Edward with us in this last year....another terrible (one) for the values (he) represented and causes he defended." Tariq Ali referred to his "indomitable spirit as a fighter, his will to live, (my) long-standing friend and comrade," and described his ordeal:

"Over the last eleven years one had become so used to his illness - the regular hospital stays, the willingness to undergo trials with the latest drugs, the refusal to accept defeat - that (we thought) him indestructible." Leukemia kills, and in response to Ali's questions, his doctor said there was "no medical explanation for (his) survival." No doubt Dr. Kanti Rai made a difference. Said spoke of him reverentially - of his "redoubtable medical expertise and remarkable humanity" that kept him going during his darkest times, and there were many. He later described months in and out of the hospital, "painful treatments, blood transfusions, endless tests, hours and hours of unproductive time spent staring at the ceiling, draining fatigue and infection, inability to do normal work, and thinking, thinking, thinking."

Yet, as Ali recounted, in the end the "monster (overpowered him), devouring his insides (but when) the cursed cancer finally took him the shock was intense." Palestinians had lost their "most articulate (and powerful) voice....(he's) irreplaceable."

Veteran Palestinian-American journalist Ramzy Baroud agrees. He called 2003 a bad time for Palestinians to lose one their iconic best and described him like many others: He "stood for everything that is virtuous. His moral stance was even more powerful than (his) essays, books and music (as critic, scholar and consummate artist)....He was an extraordinary intellectual, thoughtful....inimitable" and never silent or compromising in his beliefs or virtue. No "wonder he....was adored by (his) people (and) detested by the" forces he opposed.

Phyllis Bennis called him "one of the great internationalist intellectuals of our time....a hero of the Palestinian people (and) the global peace and justice movement as well....(my) great mentor, a challenging collaborator, a remarkable friend....his passion, vision, wit (and fury against injustice) will be terribly missed."

Daniel Barenboim called him a "fighter and a compassionate defender. A man of logic and passion. An artist and a critic....a visionary (who) fought for Palestinian rights while understanding Jewish suffering." In 1999, they jointly founded the West-East Divan - an orchestra for young Arabs and Jews who collaboratively "understood that before Beethoven we all stand as equals....Palestinians have lost a formidable defender, the Israelis a no less formidable adversary, and I a soulmate."

Rashid Khalidi is the Edward Said Professor of Arab Studies at Columbia where Said taught for nearly 40 years as a Professor of English and Comparative Literature. He called him "a man of vast erudition and learning, of extraordinary versatility and remarkable (interdisciplinary) expertise." We've lost "one of the most profound, original and influential thinkers of the past half-century (and) a fearless independent voice speaking truth to the entrenched powers that dominate the Middle East."

On September 30, 2003, Columbia University paid tribute as well. It mourned the passing of its "beloved and esteemed university professor." Called him one of the world's most influential scholars, and said "the world has lost a brilliant and beautiful mind, a big heart, and a courageous fighter."

When he learned of his illness and its seriousness, Said decided to write (from memory) a biographical account of his childhood, upbringing and early years in Palestine, Lebanon and Egypt. Titled "Out of Place, A Memoir," he called it "a record of an essentially lost or forgotten world....a subjective account of (his life) in the Arab world" of his birth and formative years. Then in America where he attended boarding school, Princeton for his bachelor's and master's degrees, and Harvard for his doctorate.

He began "Out of Place" in 1994 while recovering from three early rounds of chemotherapy and continued to completion with the help and "unstinting kindness and patience" of the "superb nurses" who spent months caring for him as well as his family and friends whose support helped him finish.

He recounted a young man's coming of age. Of coming to terms with being displaced. An American. A Christian. A Palestinian. An outsider, and ultimately the genesis of an intellectual giant. An uncompromising opponent of imperialism and oppression, and an advocate for his peoples' struggle for justice and self-determination. No one made the case more powerfully or with greater clarity than he did - in his books, articles, opinion pieces, and wherever he spoke around the world. He made hundreds of appearances and became a target of pro-Israeli extremists. They threatened him and his family. Once burned his Columbia University office, but never silenced him or ever could. Nor did the FBI in spite of over 30 years of surveillance the way it monitors all prominent outspoken activists and intellectuals and many of lesser stature.

Said's great writings include Orientalism (1978) in which he explained a pattern of western misinterpretation of the East, particularly the Middle East. In Culture and Imperialism (1993), he broadened Orientalism's core argument to show the complex relationships between East and West. Colonizers and the colonized, "the familiar (Europe, West, us) and the strange (the Orient, East, them)."

His writings showed the breath of his scholarship, interests and activism - on comparative literature, literary criticism, culture, music and his many works on Israeli-Palestinian history and conflict - combining scholarship, passion and advocacy for his people in contrast to the West's one-sided view of Arabs and Islam. He championed equity and justice. Denounced imperialism, and believed Israel has a right to exist but not exclusively for Jews at the expense of indigenous Palestinians.

The 1967 war and illegal occupation changed everything for him. It radicalized him. Set the course of his intellectual career and activism, and made him the Palestinians' leading spokesperson for the next 37 years until his death. He advocated a one-state solution and wrote in 1999: "The beginning is to develop something entirely missing from both Israeli and Palestinian realities today: the idea and practice of citizenship, not of ethnic or racial community, as the main vehicle of coexistence."

In a lengthy January 1999 New York Times op-ed he elaborated: "Palestinian self-determination in a separate state is unworkable (after years earlier believing otherwise). The question (now isn't separation) but to see whether it is possible for (Jews and Palestinians) to live together (in the same land) as fairly and peacefully as possible. What exists now is a disheartening...bloody impasse. There is no way for Israel to get rid of Palestinians or for Palestinians to wish Israelis away....I see no other way than to begin now to speak about sharing the land that has thrust us together, sharing it in a truly democratic way, with equal rights for each citizen."

This diminishes life and aspirations for neither side. It affirms self-determination for them both together in the same land where they once lived peacefully. But it doesn't mean "special status for one people at the expense of the other." For millennia, Palestine was the homeland for many peoples, predating the Ottomans and Romans. It's "multicultural, multiethnic, multireligious." There's no "historical justification for homogeneity" or for "notions of national or ethnic and religious purity....The alternatives (today) are unpleasantly simple: either the war continues (with its unacceptable costs)" or an equitable way out is found, obstacles notwithstanding.

Oslo wasn't the answer, and Said denounced it in its run-up and weeks later in a London Review of Books piece titled "The Morning After." In stinging language, he referred to "the fashion-show vulgarities of the White House ceremony, the degrading spectacle of Yasser Arafat thanking everyone for the suspension of most of his people's rights, and the fatuous solemnity of Bill Clinton's performance, like a 20th century Roman emperor shepherding two vassal kings through rituals of reconciliation and obeisance (and) the truly astonishing proportions of the Palestinian capitulation."

For him, Oslo was plainly and simply "an instrument of Palestinian surrender, a Palestinian Versailles," and worst of all is that a better deal could have been had without so many "unilateral concessions to Israel." The same goes for the 1978 Camp David Accords and every "peace" negotiation to the present except the "permanent status" 2000 Camp David "generous" and "unprecedented" offer that Arafat turned down and was unfairly pilloried for spurning peace for conflict.

Said was on top of everything to the end as reflected in "The Last Interview" - a documentary film less than a year before his death. After a decade of illness, he agreed to a final film interview at a time he was drained, weakened and dying, yet found it "very difficult to turn (himself) off." It was a casual conversation between himself and journalist Charles Glass reflecting on his childhood, upbringing, writing, scholarship, involvement with Yasser Arafat, and strong opinions and activism on Palestinian issues.

It was in all his writings and outspokenness - so powerful, passionate, virtuous and a testimony to his uncompromising principles. He described "Sharonian evil." His blind destructiveness. His terrorism in ordering the massacring of children, then congratulating one pilot for his great success. The patently dishonest media. Its one-sided support for Israel. Its suppressing other views. Its turning a blind eye to the grossest crimes against humanity, day after day after day. Of relegating public discourse to repetitive official propaganda. Of subverting truth in support of power and privilege.

Of turning Palestine into an isolated prison. Suffocating an entire people of their existence. Of impoverishing, starving and slaughtering them. Of attacking defenseless civilians with tanks and F-16s. Of blaming victims for their own terror. Of creating a vast wasteland of destruction and human misery. Of sanctioning torture and targeted assassinations as official policy. Of committing every imaginable human indignity and degradation against people whose only crime is their faith, ethnicity, and presence. Whose only defense is their will and redoubtable spirit. Of enlisting world support for the most unspeakable, unrelenting campaign of terror and genocide.

Of pursuing an endless "cycle of violence" and consigning Palestinians to a "slow death" in defense of imperial interests and the national security state. Of pursuing peace as a scheme for "pacification." Of placing the onus for it "squarely on Palestinian shoulders." Of "putting an end to the (Palestinian) problem." Of placing huge demands on Palestinians and making no concessions in return. Of calling resistance "terrorism" while ignoring oppressive occupation as the fundamental problem. Of seeing Palestinians endure and survive in spite of every imaginable assault, affront and indignity. Of piling on even more and seeing an even greater will to survive and prevail.

Said was passionate on all this and more. He was uncompromisingly anti-war and denounced America's "war on terror." The country "hijacked by a small cabal of individuals....unelected and unresponsive to public pressure." The Democrats supporting them "in a gutless display of false patriotism." The entire power structure characterizing Muslims as enemies. Passing repressive laws. Creating the obscenity of Guantanamo and other prisons like it.

Their self-righteous sophistry of so-called "just wars" and evil of Islam. The near omnipotence of the Zionist Lobby, Christian fascists, and military-industrial complex. Their hostility to Arabs and claim to be "on the side of the angels." Their inexorable pursuit of war and power. The media in lockstep supporting "hypocritical lies" masquerading as "absolute truth." The silencing of dissent. Of mocking and betraying democracy. Of making a total sham of decency, humanity and justice. Of letting a few extremists create their own "fantasy world" to run the country for their own corrupted self-interest.

Said said it all, and ended one opinion piece as follows: "Jonathan Swift, thou shouldst be living at this hour." But even he might have blanched in disbelief considering the current state and potential horror of its consequences. Said understood. He's sorely missed when we need him most.

Stephen Lendman is a Research Associate of the Centre for Research on Globalization. He lives in Chicago and can be reached at

Also visit his blog site at and listen to The Global Research News Hour on Mondays from 11AM - 1PM US Central time for cutting-edge discussions with distinguished guests. All programs are archived for easy listening.

Thursday, September 18, 2008

Reviewing Danny Schechter's "Plunder"

Reviewing Danny Schechter's "Plunder: Investigating Our Economic Calamity and the Subprime Scandal" - by Stephen Lendman

Danny Schechter is a media activist, critic, independent filmmaker, TV producer as well as an author of 10 books and lecturer on media issues. Some call him "The News Dissector," and that's the name of his popular blog on media issues. He's also co-founder of Media It covers the "political, cultural and social impacts of the media," and provides information unavailable in the mainstream.

Schechter's books include Media Wars; Embedded - weapons of Mass Deception; The Death of Media; The More You Watch The Less You Know; and his newest and subject of this review, Plunder. Subtitled: Investigating Our Economic Calamity and the Subprime Scandal, Schechter examines the fallout from the current economic and financial crisis. What the mainstream media (MSM) suppresses:

-- decades of wealth transfers to the rich;

-- the economy in recession;

-- the result of multiple imploding bubbles: housing, mortgage finance, and an alphabet soup of SDOs, SIVs, SPVs, and a whole menu of levered-up, high-risk securitized assets amounting to financial alchemy; largely outright fraud;

-- the risk things may worsen;

-- from drowning in debt and speculative excess;

-- bankrupt by some measures;

-- huge amounts of corruption;

-- government hiding how bad it is; complicit in it as well;

-- over one million homeowners foreclosed since summer 2007;

-- another million are 90 days past due on payments; foreclosures about to go out on them;

-- three million more potentially in coming months with up to five million total at risk over the next few years in the worst housing crisis since the Great Depression and too little government help provided too late;

-- rising unemployment;

-- failing banks;

-- rising inflation; and

-- consumers maxed out on credit and strapped by indebtedness the way Schechter portrayed them in his 2006 film titled "In Debt We Trust."

Schechter's book is timely, important, and frightening. He does a masterful job deconstructing a complicated subject. One covered up in the mainstream. Its dark side papered over suppressed.

Schechter explains it fully and clearly for lay readers to understand. It's essential they do it because it touches everyone. No one knows how bad it may get, but the current crisis has legs. The worst of it may be ahead, and before it ends millions may feel it painfully. "Plunder" provides ammunition. A blueprint of what's unfolding. Explaining that government help won't be forthcoming, so we're responsible for making the best of a very bad situation.

It begins with understanding the scandalous dilemma unfolding. The complicity of government and Wall Street behind it. The dominant media promoting it. What author Kevin Phillips calls the "rise of big finance" and "global crisis of American capitalism;" "Frankenstein finance;" and a problem so potentially grave that "there may no longer be a plausible way out."

Schechter calls it "financialization" to describe "the kind of control (a Credit and Loan Complex) exert(s) over society every bit as insidious as the Military-Industrial Complex." Made up of Wall Street; big banks; an array of finance, credit card and related companies preying on middle-America and the poor and transferring enormous wealth to the rich. A regulatory environment allowing it. Creating an open field for fraud. Taking full advantage because so-called "watchdogs" are part of the problem. The administration and Federal Reserve as well. The entire power structure allied against working people. A shameful and potentially disastrous situation as a result.

Schechter envisions a different future and dedicates his book to one "free of debt and a world where markets serve the public interest." Light years from what "Credit Card Nation" author Robert Manning writes in the Preface:

-- industrial employment ravaged by neoliberal "free trade" and corporate outsourcing;

-- malls replacing factories as the economy's engine;

-- declining wages in the face of soaring expenses;

-- most families dependent on credit to survive;

-- the calamitous effects of banking deregulation;

-- a corrupted "symbiotic financial-industrial complex" called "financialization;"

-- a new Gilded Age exalting greed;

-- turning consumers into debt slaves; and

-- making the country "perilously dependent" on foreign capital sources for economic security.

Schechter continues in his prologue:

-- sinking markets from a "full-blown credit/debt crisis;"

-- "waves of layoffs," bankruptcies and foreclosures;

-- distorted media coverage on causes and solutions;

-- fear that the worst is ahead;

-- the infectious effect of the spreading "subprime crisis;"

-- trillions of dollars being lost;

-- millions of homeowners at risk; millions of working people also;

-- a Ponzi scheme writ large; the bigger they are, the harder they implode; what PIMCO's Managing Director and economist Paul McCulley calls a "Minsky Moment" that derives from economist Hyman Minsky's analysis; the unwinding of excess exuberance; deflating euphoria; proving market bubbles always burst, and their downward momentum is far more severe and faster than their upside; and

-- a "calculated crime" putting America and the global economy at risk; Schechter says "This is an angry book (because) so many of us are in denial or unaware of the importance of economic forces in shaping our future;" he also rails at his colleagues who've done "such a poor job reporting on the run-up to this disaster."

Schechter chronicles what happened. The threat of depression. Alerting people to the possibility. Highlighting concern about the victims. Challenging the media and chastising their ignoring and distorting the story. Telling us that "democracy must have an economic underpinning and a commitment to fairness." Offering ways to achieve it. Explain how debt restructured the economy and created "a burden that many will never crawl out of." Exposing "shameless profiteers" and calling for an investigation of their crimes and prosecution. Asking for debt relief for Americans. "Urging citizens to get involved and (demand) politicians respond." Getting upset and aroused enough to act.

"It's the Economy Stupid," according to Schechter in his introduction, and, of course, it always is but especially when times are hard. What Senator Chris Dodd calls "a 50-state Katrina," but these waters are rising and uncertainty remains on whether something far more calamitous is coming.

Corruption is pervasive. The public uneasy but largely uninformed. The worst of what's going on is hidden. A vast shady network of "interconnected institutions working through highly legalized and poorly understood systems." Moving unimaginable sums around the world in seconds. Seducing people into the most outrageous schemes involving unrepayable debt. Then having to borrow more to service amounts already unaffordable. Heading for what money manager Jeremy Grantham calls a "slow motion trainwreck"- the inevitability that bubbles always burst. His advice in the current environment. What he calls the "first truly global bubble:" hunker down and "take as little risk as possible" because "I for one am officially scared."

The Origins of the Scandal

When it began, "subprime lending" wasn't a term in common usage, let alone understood outside financial circles. One of its late 1990s originators was Obama campaign finance chairperson Penny Pritzker when she served on the Board of the failed family-owned Hinsdale, IL Superior Bank. It cost the FDIC $700 million and depositors another $65 million, while Pritzker made millions on predatory lending now called "subprime" mortgage schemes. One definition is as follows: "the practice of making loans to borrowers who do not qualify for the best market interest rates because of their deficient credit history." Another in the recent environment was to force-feed them to the largest number of homebuying prospects possible.

There's lots of them, and predatory lenders took full advantage until things erupted into scandal, and the economy headed south. Only then did regulators take notice and decide to investigate - into how "banks, credit rating firms, and lenders value and disclose complex mortgage-backed securities." Three areas specifically, according to Reuters: "the securitization process, the origination process and the retail area." Also insider trading, a common illegal practice that's rarely caught or even looked for. However, the scope of the investigation would be narrow, and its aim was "deterrence." Of what, asked Schechter, now that the horse is out of the barn, and investors and mortgage holders are left holding the bag?

When it's too late to matter, they agree, along with critics, that "inadequate disclosure (or lack of transparency) was at the root of the problem." According to a Senate report, it began in 1997 when house prices began appreciating and registered a 124% gain by 2006. Housing was driving the economy with seven million subprime mortgage loans. Business boomed. Underwriting standards deteriorated, while banks and other lenders invented new ways to make money - "fast" and easy.

In the 1980s, state usury rate ceilings were lifted, creating a whole new market for people who previously couldn't qualify. At higher interest rates, fees, and other add-ons they did. Most borrowers got so-called "2/28" and "3/27" hybrid adjustable rate mortgages (ARMs). They originated with low fixed "teaser" rates, good for a two-year period. Afterwards, they're reset semi-annually based on an interest-rate benchmark, or the current going rate. For many holders, payments soared 30% and became unaffordable, and by 2004, 90% of subprime loans were these type ARMs. It was well-known in the industry that "these borrowers (are) most likely to default or become delinquent (and) face foreclosure." The idea was to cash in and let holders take the pain.

Here's how the scheme worked. "So-called 'intermediaries,' unregulated and often unscrupulous mortgage brokers, hustled their way into the housing market" and took over. Using a range of tactics, including "deceptive advertising to block-to-block solicitations to get people to buy and sell, always promising more than they (could) deliver."

So-called "birddogs" were used to get prospects, and all kinds of practices were employed - "abusive, illegal and predatory." They pushed, "enticed...seduced (even) threatened." According to the Joint Economic Report, "For 2006, Inside Mortgage Finance estimates that 63.3% of all subprime originations came through brokers....19.4% through retail channels (and) 17.4% through correspondent share increas(ed steadily) from 2003 through 2006." These companies aren't regulated and pretty much operate freely. By 2005, the percent of securitized subprime mortgages reached "a peak value of more than 81%...."

Housing sales were on a roll, and so was Wall Street, quick to see a lucrative new income stream and ready to cash in. "Now they could make fees originating loans and even more money selling the paper into (the) secondary market, where mortgages could be securitized and sold again for even more money as investments."

The Finmanac financial blog explained its origination:

-- when Solomon Brothers launched Mortgage-Based Securities (MBS) in the 1980s - "bonds with bundles of mortgages, bought from bank lenders, as collateral;"

-- they used a "special purpose vehicle known as Collateralized Mortgage Obligation (CMO);"

-- monthly installments were used to pay interest; and

-- others were quick to cash in on the scheme.

The secondary market became a marriage between "the most reputable financial organizations and the sleaziest grass-roots operators. As is often the case, sleaze moved upwards" because the potential profits were huge but so are the risks.

"Since anyone can originate a loan and sell it to the Investment Banks (to package and sell as MBS), it tempts originators (to write) risky loans (without) worry(ing) about payback(s):"

-- slicing MBS into tranches by risk profile handles the problem;

-- so does having different maturity dates;

-- they're rated by S & P, Fitch and other agencies for legitimacy;

-- hedge and some pension funds bought the most risky paper;

-- risks were discounted because the potential returns were huge as long as economic conditions stayed sound and/or markets continued to rise; and

-- it always helps to have friendly Fed chairmen like Alan Greenspan fueling bubbles.

At the height of the 2000 one he said: "Lofty equity prices have reduced the cost of capital. The result has been a veritable explosion of (high-tech) spending (and) I see nothing to suggest that these opportunities will peter out anytime soon." A week later the Nasdaq peaked. Dropped 78% to its bottom. The S & P 500 49%, and retail investors lost out while Greenspan was busy engineering another bubble now unwinding at the cost of trillions of dollars, millions of people hurt, and the "Maestro" assuming none of the blame.

Economist Anna Schwartz said otherwise and called the Federal Reserve the main cause of today's trouble. She told The Sunday Telegraph: "There never would have been a sub-prime mortgage crisis if the Fed had been alert. This is something Alan Greenspan must answer for." The US Treasury also as one of its senior officials warned subprime lenders about it but was ignored. Even worse, despite state efforts to ban predatory practices, the Bush administration blocked attempts to curtail them and bears major responsibility.

Schechter refers to "an unholy trinity of private players, Wall street firms, and non-regulating regulators" who saw a way to profit hugely. Do it with shady practices, and thus partner in a "criminal conspiracy" to rip off millions of working Americans. "It was the largest robbery in history - not a bank heist but a heist by banks."

The Real Capital of America (and the World)

Wall Street, of course - a city with "a history of causing disasters from its earliest days." Succeeding ones keep getting bigger, but unaffected most often are the powerful banks and investment houses. "Masters of the universe," according to author Tom Wolfe. Well insulated in their luxury board rooms with power, incomes and privileges afforded royalty. Treated like them also in a culture that "rewards clever and devious strategies" within or outside the law. No one is guilty unless caught. Rarely ever does it happen, and when it does the penalties are inconsequential compared to enormous ill-gotten gains. Incentive enough for players to invent new schemes, and they do.

This time, however, they may have been too smart by half. They overreached and are themselves hurt by the fallout. Some won't survive. Bear Stearns and Lehman Brothers already. Others barely hanging on. Merrill Lynch forced to sell out cheap to Bank of America. The Fed bailing out AIG, and it's anyone's guess who or what's next or if the worst is yet to come. When trouble first surfaced, "only a handful of writers and analysts" understood what was going on - chickens coming home to roost, "a crime in progress, a white collar crime wave" involving trillions of dollars, from working people to the rich. The Wall Street crowd. Mortgage brokers, banks and investment houses, rating agencies and appraisers who overvalued homes for higher fees. Well-designed schemes to let the devil take the hindmost, and they are but so are the perpetrators. Schechter is right calling this "a big story - one of the biggest" and from which "consumers and citizens" have to learn how to cope. It won't be easy.

The Unspoken Context

Crime writ large, and in early 2008 the FBI announced 14 unnamed mortgage companies were being investigated. Ones engaged in predatory lending. That may have deliberately steered customers to more expensive loans and concealed hidden payments and fees. In some cases unfairly jacked up for even higher profits. Targeting the most vulnerable. A 2008 Inner City Press/Fair Finance Watch study confirmed these practices. It called mortgage brokers "the wild, wild west of Capitalism."

Shadowy operators using aggressive, unethical marketing in ghetto and low-income neighborhoods. Making phone solicitations. Door-to-door canvassing. Posing as debt consolidation experts with home improvement schemes and foreclosure "rescue" services. Merchants of sleaze cornering victims and entrapping them in unrepayable debt. Criminal fraud involving respectable bankers as well. Willing to engage in dirty practices because the profits were so tempting and the market so huge. Too big to pass up so it wasn't.

From 2004 to 2006, Collateralized Debt Obligations (CDOs) mushroomed from $157 billion to $559 billion, and 10 investment banks underwrote 70% of $486 billion in 2006 securitizations. Players made millions and top executives far more. A gravy train, and collectively in 2006, at the cycle's peak, the big banks earned $130 billion. It looked like more ahead, and their schemes were perfectly legal in an unregulated environment permitting them. They still are short of future regulatory reform that may or may not come but never will be close to what's needed. Not when both parties embrace a pro-corporate agenda and won't allow it.

The Charleston Observer published a flow chart on how predatory lending typically works:

-- low income, minority and the elderly are targets;

-- loan originators contact and high-pressure them to sign up;

-- brokers arrange loans between targets and lenders;

-- appraisers inflate property values for higher fees and new business;

-- lenders may "bundle" new loans to sell off to other institutions; and

-- Wall Street sits atop this enormous pyramid; in the "catbird seat;" orchestrating the process; and redistributing millions of loan bundles into pools to back up investments worldwide.

Borrowers have no idea how they're being used and set up to be scammed by future mortgage resets. Unaffordable so that millions will lose everything in foreclosure. "Where are the prosecutors," asks Schechter? A Congressional probe. Indictments to go after the guilty. Faint hope along with any chance for redress for victims. No chance either for most people to understand an "opaque and unregulated global financial system" with obscure terminology, according to economist Nouriel Roubini. A highly levered "financial monster that eventually leads to uncertainty, panic, market seizure, liquidity crunch, systemic risk and economic hard landing."

In spring 2006, over a year before things began unravelling, Schechter wrote about inadequate and deceptive media coverage in an article titled "Investigating the Nation's Exploding Credit Squeeze." He examined losers and winners and suggested concrete approaches for responsible reporting:

-- doing it regularly and truthfully about a serious growing problem;

-- identifying the key corporate institutions involved;

-- spotlighting how special interests and lobbyists influence Congress for favorable policies and deregulation;

-- credit card companies also and how their ad dollars affect media coverage of their practices;

-- predatory lending methods in poor neighborhoods; crimes committed against vulnerable working people;

-- what people can do to fight back; and

-- getting people involved at state and local levels; enlisting attorney generals to file class action lawsuits; and pressuring key legislators.

Strong material but the response was "tepid" as well as to a follow-up email campaign with tens of thousands of requests for more media coverage of a vital national issue - well before the crisis hit and a public spotlight might have cooled it. Big Media prefer a sanitized world of market "ups and downs" and one-sided Wall Street and Washington views - unrelated to the real world, what affects most people, and it got Schechter to ask: "where's the outrage?"

Chronicling the Implosion, 2007

In his blogs, newsletters, and articles, Schechter "tracked the evolution of the crisis by week" - a story still evolving about "an economy that is....still unraveling," It began in July 2007 when Dusseldorf-based IKB surprised markets with a profit warning. It set off sharp falls in other German bank shares, and ended up with IKB needing $11.8 billion in bailout aid to survive. Cracks also began showing up in the multi-trillion dollar US securitization markets. They created a crisis for two Bear Stearns (BS) hedge funds. Like IKB, they were heavily into subprime mortgages, highly levered, and it forced BS to sell out to JP Morgan Chase for pennies on the dollar.

Things then began spreading, and it was soon apparent the trouble was systemic, growing, and could touch down wherever outsized risks were taken. According to Business Week, what began as subprime now affected other kinds of debt as well and far more seriously than originally thought. Involving "real money" and danger, "the kind that terrifies bankers and the elite."

The Dow Average topped out in early October and headed down while government jawboning and Fed interest rate cuts and huge liquidity injections didn't help. They still haven't as markets remain volatile, and no one for sure knows what's coming. So jitters remain high and with good reason. The economy is far from healthy. Contagion is spreading offshore. Unemployment is rising. So are foreclosures. Inflation also, and hundreds of billions of bailout dollars haven't helped.

None of this should have happened, and warning signs should have been heeded early on. Schechter chronicled it daily as events unfolded and explained that things were pretty bad and getting worse. Bankers were debating how to handle record losses. Desperation and even panic began surfacing. And America's debt crunch became a personal crisis for millions.

His book reviewed events as they unfolded:

-- jawboning after Wall Street and bankers began reacting and "blaming everybody but themselves;"

-- pundits then "calling for higher standards of transparency;"

-- bailouts involving real money in the hundreds of billions; first the Fed, then major central banks around the world;

-- the result: very little; continued panic; more lending companies imploded; 247 up to April 2008;

-- then interest rate cuts and still no relief; mortgage rates rose as banks are reluctant to lend and want higher returns when they do; after the government's Fannie and Freddie takeover, 30-year fixed-rates fell from 6.26% to 5.88%, but with the economy weak and consumers strapped it's not clear how much this will help, at least in the short term;

-- multi-billions in writedowns continue, likely more coming ahead, and "bear in mind," Schechter observes: "the banks created these problems by lowering their standards and working in collusion with the alchemists at the rating agencies that turned their junk into gold." And government regulators looked the other way and let it happen.

Throughout the crisis, real analysis and understanding was missing - like the 50 million "Missing Americans" Bill Moyers profiled on PBS. The ones Michael Harrington called "The Other America" in which he documented the country's poverty and influenced policy debate in Washington as a result. Today's victims are largely above the poverty line but just barely with two wage-earners and one or both having multiple (low-paying) jobs. They became predatory lending targets, but practically nothing is being done to help them. Billions for the perpetrators. Lip service only for the vulnerable.

What Happens Now?

Crucial to understand is that the current economic crisis "is an outgrowth of the very corporatist policies that will haunt this country for decades." Plus our costly wars. "Obscenely high levels of corruption," and many other characteristics of a nation off its moorings and in trouble. This one in "the quicksand of debt and delusion." Proving unfettered capitalism doesn't work. At a time Business Week magazine suggested "an irresistible force (is) meet(ing) an immovable object." The force is the economy and object an unrepayable wall of debt.

Despite billions of Fed-injected liquidity, the crisis persists and may be worsening. No one knows for sure or how or when it will end. Trillions have been lost. More still to come. Serious talk about a depression. The middle class is shrinking. People are entrapped by debt. Worldwide respect for the country plummeted, and 81% of the public believes things are headed in the wrong direction. Banks are failing. Real estate hit the wall, and in February the Economist magazine wrote that "The world had a weekend to save it from collapsing."

Contagion is spreading everywhere affecting Wall Street, large and smaller banks, investment firms, insurance companies, hedge funds, non-bank lenders, and the greater economy dependent on them. Experts believe fixing things could take years and would require a vast overhaul of a clearly failed system. Establishing workable regulation. Reinstating Glass-Steagall to separate commercial from investment banks. Curbing speculation, and ending the whole range of predatory lending practices. Under a two-party duopoly, chances for that are practically nil.

Debt As A Global Issue

For better or worse, a global economic system interlocks nations and markets. When the US catches cold, pneumonia threatens the world, and it shows in what the Vigilant Investor website reported: that in one week months back the Fed, ECB, and Japanese and Australian central banks injected $458 billion into the markets "to allow the big players to avoid selling off otherwise healthy assets to cover for heavy losses related to the unfolding housing debacle in the US, led over the cliff by subprimes." And in America, the combination of credit card and other debt remains a ticking time bomb some see as another eventual bubble to burst.

They're worried about what author Kevin Phillips calls "a house of cards" built on "reckless finance." And longtime Wall Street economist Henry Kaufman blames years of irresponsible federal banking for "allowing the expansion of credit in huge magnitudes" and calling today's crisis a "global calamity." Former Fed director of monetary affairs and its policy-making panel secretary, Vincent Reinhart, compares today to "the great contraction" of the 1930s and "the great inflation of the 1970s."

Little of this gets media attention or is addressed in political discourse. Never mind huge structural problems, an economy in crisis, millions in duress, and barely a sign of remedial help coming for the vulnerable. As conditions worsen "when will the American people realize how badly they have been had and turn on the plunderers," asks Schechter? The politicians and regulators also who allowed it.

How did it happen:

-- "warnings were ignored;" for example from Bruce Marks, the Neighborhood Assistance Corporation of America (NACA) CEO; in 2000, he testified before Congress and warned about Fannie Mae and Freddie Mac engaging in predatory subprime lending; all for naught;

-- "the (Alan Greenspan) Fed encourag(ing) the securitization of mortgages calling it 'financial innovation;' " and

-- "Wall Street firms ignor(ing) worries (from) their own risk managers (and engaging in) shadowy underground banking....They made a fortune - until they didn't."

Hundreds of small players have been indicted but only a few symbolic "truly fat cats" and none of the fattest. The way it always is.

Last Words

Capitalism is characterized by economic ups and downs, speculative frenzies, and panics. But, as Schechter observes, "Few have posed such a serious threat to the entire financial system, (yet most media) coverage has been relegated to not widely read business sections (and) the fortunes of CEOs and business enterprises, not citizens, consumers and most of all homeowners" who've lost or may lose their homes and livelihoods.

Even worse, "many newspapers and TV outlets were complicit." They got huge amounts of ad revenue (often deceptive) from "shady mortgage lenders and credit card companies that encouraged readers and viewers to accept more debt. Some major newspapers are connected with local real estate syndicates and get kickbacks from sales tied to their extensive advertising of homes for sale." Worse still is that coverage (once it began) "may have missed the truly criminal aspects of this crisis" even though there's plenty of evidence around and the FBI is currently investigating 14 mortgage companies.

Overall reporting largely supports business and hesitates being critical. It builds confidence instead, stays upbeat, generates more heat than light, and engages in what Schechter calls "Investotainment" as their specialty. Well layered with deception and boosterism as well.

They ignored victims dating back to the 1990s and even warnings from people like David Walker, the Comptroller of the Currency (OCC) and Government Accounting Office (GEO) head. For years, he was a voice in the wilderness about our growing debt burden that could lead to a sudden collapse and threaten national security. The National Association of Business Economists as well saying: "The combined threat of subprime loan defaults and excessive indebtedness has supplanted terrorism and the Middle East as the biggest short-term threat to the US economy."

And John Kenneth Galbraith in his 1961 classic, "The Great Crash 1929," now prophetic: "The fact was that American enterprise in the twenties had opened its hospitable arms to an exceptional number of promoters, grafters, swindlers, impostors, and frauds. This, in the long history of such activities, was a kind of flood tide of corporate larceny."

Writer Mike Whitney updates it in one of his commentaries saying: "The financial system has been handed over to scam-artists and fraudsters who've created a multi-trillion dollar inverted pyramid of shaky, hyper-inflated, subprime slop that they've sold around the world, with the tacit support of the ratings agencies and the US political establishment."

The story has legs. Banks are in serious trouble. By mid-summer, seven had failed, others since, and many dozens more are at risk. Worldwide as well as contagion spreads everywhere. Huge write-downs have been taken. Unknown amounts more may follow. The Fed has injected over $900 billion to stabilize things with little idea if it will. Then add in lost homes, lender foreclosure costs, falling property prices, equity losses, multiple deflating bubbles, and hundreds of billions for wars and debt service, and the picture is grim, frightening, and according to some experts in the early innings.

Consider a recent "truly stunning but not widely reported" Bank of America study on current "Credit Crisis" losses - $7.7 trillion dollars in equity value globally since the October market peak. Affecting nations everywhere, B of A called it "one of the most vicious (crises) in financial history." Investor George Soros calls it a "systemic crisis," the result of "easy credit, financial innovation and contagion." And economist Ludwig von Misses once said: "There is no means of avoiding the final collapse of a boom brought on by credit expansion. The question is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

Schechter concludes by adding: "Bubbles are rarely foreseen (or want to be seen), as investors scramble into opportunities delivering high returns....self-interest and money-making are the real drivers in the world of finance." They also drive politics, and now at a time of crisis, it's "hard to believe that as the house of cards comes tumbling down, there seems to be a trifecta of failure. The government is unwilling to act decisively. The Congress prevaricates. And the media (engages in) boosterism" and keeps the public uninformed "at the very time when exposure might have stopped these practices before they became too deep and/or expensive to 'fix.' "

Little wonder 81% of the public believes the country is headed in the wrong direction. George Bush's approval rating fluctuates from the low to high 20s. And the July Rasmussen Reports gave Congress its lowest ever rating at 9% with only 2% of respondents calling its performance excellent. Imagine future poll numbers if the economy crashes, millions more become unemployed, lose their homes, and hundreds of billions keep being spent on fruitless wars by whomever becomes president and whichever party controls Washington. Imagine also how people affected will respond or should.

Stephen Lendman is a Research Associate of the Centre for Research on Globalization. He lives in Chicago and can be reached at

Also visit his blog site at and listen to The Global Research News Hour on Mondays from 11AM - 1PM US Central time for cutting-edge discussions with distinguished guests. All programs are archived for easy listening.