giovedì 15 dicembre 2011

Where is the Sea Devil?

Where is the Sea Devil?

Tuesday, December 13, 2011
The two-grand-a-night call girls are wandering lonely and disconsolate through the Wynn casino, victims of the recession. Badpenny, dressed full-on Bond Girl, is losing nickels in the slots and humming Elvis tunes.
Badpenny’s assigned job here is to look good and get information. She’s good at her job. A tipsy plaintiffs’ lawyer is telling her, “A woman as beautiful as you should be told she’s beautiful every five minutes.” His nose dips slowly toward her cleavage...
Introduction by Razorcakes' Chris Pepus

If you don’t read Greg Palast’s investigative reports, you don’t know what’s going on in America. Palast is the journalist who discovered election thefts in the U.S., the real reason behind Bush II’s invasion of Iraq, and other vital information on the class war that the rich wage every day.
In his new book, Vultures’ Picnic, Palast presents the inside story of how the financial elite loots public treasuries and passes the bill on to you. He also writes about recent and upcoming environmental catastrophes. In this excerpt for Razorcake, the Palast team starts investigating the 2010 British Petroleum disaster in the Gulf of Mexico.They follow a trail of corporate-induced destruction that stretches back to another infamous case: the 1989 Exxon Valdez oil spill in Alaska.
For the holidays, get signed gifts, including copies of Vultures' PicnicIn Pursuit of Petroleum Pigs, Power Pirates, and High-Finance Carnivores.  Support the work of the Palast Investigative Fund.
Las Vegas

The two-grand-a-night call girls are wandering lonely and disconsolate through the Wynn casino, victims of the recession. Badpenny [a member of the Palast investigative team], dressed full-on Bond Girl, is losing nickels in the slots and humming Elvis tunes.
Badpenny’s assigned job here is to look good and get information. She’s good at her job. A tipsy plaintiffs’ lawyer is telling her, “A woman as beautiful as you should be told she’s beautiful every five minutes.” His nose dips slowly toward her cleavage. I didn’t know there were guys who still talked like that. Well, good. Take notes, Penny.
My own assignment is to hook up with Daniel Becnel. Becnel is just about the best trial lawyer in the United States. He doesn’t have an office in Vegas or New York. He puts out his shingle at the ass end of Louisiana, at the far end of the bayous, where he defends Cajuns like himself, and that includes the wildcatters out on the Gulf Coast oil rigs.
I have just come back from the Amazon jungle, where I was tracking Chevron’s operations. Chevron Petroleum monopolizes deepwater drilling in the Gulf of Mexico. Maybe Becnel and I could trade information. It’s April 20, 2010. Hitler’s birthday and my ex-wife’s.
I found Becnel—far from the gaming tables and looking unpleasantly sober.
There was an explosion back home. A rig blew out and was burning. The Coast Guard called him. They want his permission to open an emergency safety capsule they’d found floating in the Gulf. The Guard assumed maybe a dozen of his clients who had been working on the Deepwater Horizon platform were inside, cooked alive.
The sound on the TV above the bar is off. The high, black rolls of smoke rising out of the BP oil rig remind me of my own office when it burned.
Something is very wrong in this picture. All I can see are a couple of fireboats pointlessly shpritzing the methane-petroleum blaze with water. What the hell? Where are the Vikoma Ocean Packs and the RO-Boom? Where is the Sea Devil?
Because of my screwy career path, I happen to know a lot about oil spill containment. And I know a lot about bullshit. This isn’t spill containment, this is bullshit.Here is a skyscraper on fire, and the firemen show up with two bottles of seltzer.
How could they do this? How could British Petroleum, the oil company with the green gas stations, with the solar panels on the cover of their annual report, that kissed environmental groups full on the mouth by breaking ranks with Exxon to decry global warming . . . how could Green BP savage and slime our precious Gulf Coast?
The answer: BP had lots of practice.
By the next day, CNN’s Anderson Cooper and an entire flock of reporters ran down to the Gulf to take close-ups of greased birds and to interview that mush-mouthed fraud, Louisiana Governor Bobby Jindal.
But I know something the other reporters don’t know: The real story about the BP blowout is in the opposite direction, eight thousand miles north.
I have in my files a highly confidential four-volume investigation on the grounding of the Exxon Valdezin Alaska, written two decades ago. The report concluded, I have a copy because I wrote it."Despite the name ‘Exxon’ on the ship, the real culprit in destroying the coastline of Alaska is British Petroleum."
That was my last job. The job that defeated me: after years as a detective-economist, investigator of corporate fraud and racketeering, this was the case that ruined the game for me.
The important thing, the hidden story calling me north, is that the Deepwater Horizon disaster was born right there on the Alaska tanker route. Here’s why: BP did the crime but didn’t do the time. Exxon got away pretty cheap, sure, but BP walked away stone free, not one dime from its treasury, not one drop of oil blotting its green reputation. So I quit.
But for now, from the casino, Badpenny is booking me a flight on Alaska Airlines and calling around for a Cessna Apache to charter to theTatitlekVillage on BlighIsland. The network would have to trust me on this. I know that the key to exposing the cause of the Gulf spill is there in the Tatitlek Native Village. I need to speak with Chief Kompkoff.
Tatitlek Village, Bligh Island, Alaska
Chief Gary Kompkoff stood on the beach, watching the Very Large Crude Carrier VLCC Exxon Valdezbearing down on Bligh Reef. Kompkoff was wondering, What the hell?
It was near midnight, starlit and clear. As the ship’s shadow loomed, the whole village joined him on the beach, wondering, What the hell?
Kompkoff told me he thought it was some kind of dumb-ass drill. Even a drunk couldn’t miss the turning halogen warning beam lighting up their faces every nine seconds.
It wasn’t a drill.
Now, don’t get the idea that these were just a bunch of dumb Indians stunned by the appearance of the white man’s supertanker. They didn’t have televisions, but they did have training in oil spill containment.
Containing an oil spill on water isn’t rocket science. Whether it’s a busted tanker or a blown well, you do two things: First you put a rubber skirt around it. The skirt is called a “boom”. Then you bring in a skimmer barge with a big sucker hose hanging off it and suck up the oil within the rubber corral; or you can sink it (“disperse” it with chemicals); or you tow it away and set it on fire. There are lunatic variants of course, most employed by BP. In 1967, the TorreyCanyon, in the English Channel, took a shortcut meant for fishing boats and broke up. It was the largest tanker spill ever. British Petroleum called in the Royal Air Force, which bombed the hell out of the slick as it floated across the Channel to France. The RAF was as effective on the floating oil as they are on the Taliban. Oil Slick: 1. RAF: 0.
Here’s a dirt-simple illustration of how you contain an oil slick from a busted tanker.
It’s roughly the same for a well blowout. You see in this photo a small cartoon tug dragging the rubber skirt, called a Vikoma Ocean Pack, around the ship, while the other little boat, a Sea Devil skimmer, sucks up the blotch, the floating oil.
Here’s the irony, or the crime, take your pick: I obtained this diagram from Alyeska, the company responsible for containing and cleaning up oil spills on Alaskan waters, no matter who owns the tanker. Alyeska is a combine of companies and the politically helpful cover name for its senior owner, British Petroleum. Exxon is junior. Some junior.
The tanker spill illustration is from the BP-Exxon official OSRP (Oil Spill Response Plan) for Prince William Sound, Alaska, published two years before the Exxon Valdez grounding at BlighIsland, Tatitlek. The oil companies’ top executives swore to this plan under oath before Congress.
It was, I admit, a beautiful plan.
It had everything: suckers and rubbers all over the place, and round-the-clock emergency crews ready to roll.
Simple simple: Surround with rubber and suck. The Tatitlek Natives could have done that lickety-split and you would have never heard of the Exxon Valdez.
But could have are the two most heartbreaking words in the English language.
The Natives were the firemen with the equipment. It was right in the plan. They just stood there.
During my investigation right after the Exxon spill, Henry Makarka (“Little Bird”), the Eyak elder, flew me over to the village of Nuciiq, abandoned now. He told me, “I had to watch an otter rip out its own eyes trying to get out the oil.” Henry’s a sweet guy, eighty now. But in case I missed the point, he added, “If I had a machine gun, I’d kill every one of them white sons of bitches.”
He didn’t say, “white.” He used the unkind Alutiiq phrase, isuwiqsomething, bleached seal.
I needed him to tell me straight, no BS, what the hell happened in those meetings between the Chugach chiefs and the oil company chiefs twenty years earlier, to back up my suspicions, or to tell me I had hit another dead end. It was not a conversation he was happy to have, especially with a bleached seal investigator.
The Eyak, Tatitlek, and other Chugach Natives have lived in the Sound for three thousand years, maybe more, the very last Americans to live off what they could catch, gather, hunt. It was March 24, four minutes after midnight, 1989, when Kompkoff witnessed the moment when three thousand years of Chugach history came to an end, the moment when Satan collected his due for the Natives’ complicity, especially Makarka’s.
Greg Palast is the author of Vultures' Picnic: In Pursuit of Petroleum Pigs, Power Pirates and High-Finance Carnivores, released in the US and Canada by Penguin.
You can read Vultures' Picnic, "Chapter 1: Goldfinger," or download it, at no charge: click here.
Subscribe to Palast's Newsletter and podcasts.
Follow Palast on Facebook and Twitter.

Condannato il prof. Ferdinando Superti Furga

Crac Hdc, sette anni a Crespi assoluzione per Confalonieri
Il sondaggista condannato: «Difenderò la mia buona fede»
Il Messaggero

MILANO - L’ex sondaggista Luigi Crespi è stato condannato a 7 anni di reclusione per il crac da 40milioni dell’Hdc. Assolti il presidente di Mediaset Fedele Confalonieri e il parlamentare del Pdl Alfredo Messina. I giudici della seconda sezione penale del Tribunale di Milano, oltre a Luigi Crespi, interdetto in perpetuo dai pubblici uffici, hanno condannato a quattro anni di reclusione il fratello Ambrogio, anche lui ex componente del Cda della holding della comunicazione poi fallita; a 2 anni e 6 mesi Ferdinando Superti Furga in qualità di presidente del collegio sindacale della società dal 2001 al 2003; e a 2 anni Fulvio Pravadelli, ex consigliere delegato dell’area amministrazione e finanza di Publitalia ’80. «L’ammontare della pena mi sorprende - commenta Crespi -  perché la considero non coerente con la censura delle mie responsabilità, ammesse fin dal primo momento».

lunedì 12 dicembre 2011

Names Of Indians With Swiss Bank Accounts

"Whistle-Blower" Threatens To Leak Names Of Indians With Swiss Bank Accounts

Tom Burroughes
Group Editor in London

Hindustan Times
6 December 2011

News Analysis
Julian Assange, founder of the website WikiLeaks, said he might reveal names of Indians holding secret Swiss bank accounts next year, media reports said.
In particular, Assange said the information would "affect India" and replied "yes" when asked if he would reveal names of Indians holding Swiss accounts, reports said.
But he refused to divulge more details because Rudolf Elmer, the former Julius Baer banker who allegedly provided Assange with relevant information, is already facing legal action.
"For that [Rudolf Elemer] reason, unfortunately, I cannot speak about information related to Swiss accounts in great detail... we must protect our people," Assange said.
His activities have raised questions about the security of data held in private banks in Switzerland and other locations. (To view an article about the broader issues raised by Assange’s activities and the Rudolf Elmer case, click here).
He also, in the words of one news report in the International Business Times of India, made some “further astonishing revelations about Swiss secrets and the 'hacking' and 'hijacking' of data," when talking about India's National Technical Research Organization - a group he compared with the US National Security Agency.

Goldman Sachs o' Beat - Mr. Saxobeat spoof

domenica 11 dicembre 2011

Bankers pleased with Russian Revolution

London & NY bankers pleased with Russian Revolution

New York bankers believed bankers in London must have known
about the revolution 24 hours before they did, due to an increase
in Russian exchange transactions, "and found satisfaction in it."

In the same edition of The New York Times it was claimed the news of the
revolution came to New York from Germany, and that that "this news was
by no means unwelcome in more important banking quarters."

venerdì 9 dicembre 2011

The Euro: That Procrustean Bed...

The Euro: That Procrustean Bed...
Published: 09 December, 2011
AFP Photo / Joel Saget
AFP Photo / Joel Saget

Efforts by European leaders to shoe-horn a range of diverse countries into a rigid financial cage are doomed to fail. But that’s all part of a long-term plan for a global super-currency which can only bring more hardship to ordinary working people.
A question that more and more people are asking nowadays is, “What on Earth were the Europeans thinking when they agreed to have just one currency for all of Europe?”
In Greek mythology, Procrustes was the son of Poseidon, God of the deep blue seas. He built an iron bed of a size that suited him, and then forced everybody who passed by his abode to lie on it. If the passerby was shorter than his bed, then Procrustes would stretch him, breaking bones, tendons and sinews until the victim fitted; if he was taller, then Procrustes would chop off feet and limbs until the victim was the “right” size…
This ancient story of “one size fits all” seems to have made its 21st Century comeback when Europeans were coaxed into imposing upon themselves an oxymoron; a blatant and conceptual contradiction they call “the euro”.
This common supranational currency invented by the French and Germans, boycotted by the UK, ignored by the Swiss, managed by the Germans and accepted by the rest of Europe in blissful ignorance, has finally dropped its mask to reveal its ugly face: an impossible mechanism that only serves the elite bankers but not the working people.
It masked gross contradictions as large, far-reaching and varied as the relative sizes, strengths, profiles, styles, histories, econometrics, labor policies, pension plans, industries, and human and natural resources of the 17 eurozone nations, ranging from Germany and France at one end of the scale, to Greece, Portugal and Ireland at the other.
As we said in a recent article, the euro carries an expiry date; perhaps the eurocrats who were its midwives a decade ago expected that it would live a little longer, maybe even come of age… But they certainly knew that, sooner or later, the euro would die; that it was meant to die.
Because the euro is not an end in itself, but rather a transition, a bridge, an experiment in supranational currency earmarked for replacement by a far more ambitious and powerful global currency issued by a global central bank, controlled by a cabal of global private bankers, obeying a New World Order blueprint emanating from a private Global Power Elite.
The problem today is that what impacted Europe as a financial ripple effect in 2008 has now grown into a veritable financial tsunami threatening to swamp the whole euro system… And more big trouble lies ahead!
In fact, today’s euro-troubles are nothing more than one of many variations of sovereignty-troubles. Because when a country’s leaders irresponsibly cede a part or all of its sovereignty – whether monetary, political, financial, economic, judicial or military – it had better take a really good look at what it is doing and what the implications are for the medium and long term.
Ceding national sovereignty means that somebody else, somewhere else, will be taking decisions based on other people’s interests. Now, as long as everyone’s interests coincide, then we are OK. But as soon as the different parties’ interests diverge, then you are confronted with a power struggle. And power struggles have one simple thing in common: the more powerful win; the weaker lose.
Now, we have a huge power struggle inside the eurozone. Who do you think will win? Who will impose new policies – Germany or Greece? France or Portugal? Britain or Spain? Germany or Italy?
And that is just on the public scene. You also need to look at the more subtle, less media-highlighted private scene, which is where the real global power decisions are made.
Will the new Italian PM, Mario Monti, cater for the needs of the Italian people or for the mega-bankers’ lodge sitting on the powerful Trilateral Commission of which he himself is European chairman? The same question goes for Greek president Lucas Papademos, also a Trilateral member. The same question goes for all the governments of the EU member states where the real power brokers are the major bankers, industrialists and media moguls sitting on the Trilateral, Bilderberg, World Economic Forum and Chatham House think-tanks and private lobbies.
Global elites will do everything to keep the euro on its transitional path towards a global currency that will eventually replace both the euro and the US dollar. This entails engineering the controlled collapse of both currencies, whilst preparing the yellow brick road for a “Global Dollar” or some such new oxymoron.
The US dollar will be easy to collapse: all that is needed is for the mainstream media to yell, “The dollar is hyper-inflated!!” and the Naked Emperor Dollar will fall swiftly. The euro, in turn, will simply break up as its member nations revert to the old days of pesetas, lire, francs, escudos and drachmas…
Is the time ripe for that? Maybe not… yet. So, no doubt we will still see more “emergency treatment,” more “financial chemotherapy” to “bail out the euro” just as we’ve seen them “bail out the banks,” even though most banks and the Oxymoron Euro cannot be salvaged but just kept artificially alive, like the “Living Dead…”
So, here’s a question for Greeks, Italians, Spaniards, Portuguese, Irish, even the French and Germans: will you accept the invitation by your Procrustean Leaders in Brussels to lie down on their bed?
Adrian Salbuchi for RT
Adrian Salbuchi is a political analyst, author, speaker and radio/TV commentator in Argentina.

Greenpeace poisoned me

Greenpeace poisoned me

Thursday, December 8, 2011
by Kert Davies, Research Director, Greenpeace USA

Read the Greenpeace blog and listen to the Greenpeace Radio Podcast with Greg Palast, author of Vultures' Picnic: In pursuit of petroleum pigs, power pirates and high-finance carnivores.

Then read this.  It's my soul on a plate.  Then pass it on so others can taste it.
-- gp

"Occupy," Big Oil and the U.S. Media
with Muckraking Journalist Greg Palast
By Kevin J. Kelley [12.07.11]
Seven Days Magazine
Greg Palast was floating in a kayak off the Alaska coast in 1997 when he had an epiphany. He was working at the time as an investigator for the Chugach native people, whose lands had been slimed by the 1989 Exxon Valdez oil spill. In the course of his study, Palast uncovered information about Exxon’s culpability for the disaster, but he had no way of publicizing it. So he decided to become a journalist.
It’s proven a successful second career for Palast, 59, who studied business at the University of Chicago under right-wing economist Milton Friedman. He’s won six Project Censored awards for reporting important stories ignored by the mainstream press. He’s also the author of two international best sellers,Armed Madhouse and The Best Democracy Money Can Buy.
A native Californian, Palast reports regularly for Britain’s Guardian newspaper and for the BBC. Nation magazine writer Jim Hightower calls Palast “a cross between Sam Spade and Sherlock Holmes.” Corporate executives he’s outed as wrongdoers call Palast other things.
Palast spoke with Seven Days in advance of his scheduled talk next week at Burlington’s Main Street Landing Film House.
Seven Days: You must be sympathetic to Occupy Wall Street. Do you think it will have a lasting impact on U.S. politics?
Greg Palast: It’s not a setback for Occupy to no longer be occupying. No one gives a shit about Wall Street. It’s just a piece of tarmac. It was never the point of the movement.
The point has been to expose the 1 percent, the movers and shakers who are moving and shaking us, all those rich motherfuckers. Now we know their names, where they live, how they made their billions.
So yeah, the impact has been huge. And it’s just starting. I’m deeply involved with Occupy.
SD: You’ve got a new book out: Vultures’ Picnic: In Pursuit of Petroleum Pigs, Power Pirates, and High- Finance Carnivores. Can you summarize what it’s about?
GP: Vultures are financial speculators who seize the assets of the poorest nations by claiming these countries owe money that the speculators try to collect through intimidation, bribery and theft. One guy associated with this is Paul Singer; he’s Mitt Romney’s top economic adviser. I’ve been investigating how Romney’s “job creator” makes his money, and that’s a story Singer doesn’t want you to hear.
By the way, I’m totally nonpartisan. Even though Singer owns the Republican Party, I point out that he rents the Democratic Party.
Most of the book is a five-continent investigation of British Petroleum. I’m bringing you the stuff you don’t get from CNN or the Petroleum Broadcasting System.
BP’s blowout in the Gulf in 2010 was actually the second big disaster it had. There was also a blowout in the Caspian Sea in Azerbaijan in 2008, but BP covered it up with a combination of bribery, beatings and blow jobs. [Azerbaijani officials] kept their lips closed and their zippers open.
SD: So your talk in Burlington is part of a book tour?
GP: I’m on a troublemaking tour. My talks are platforms for Occupy activists in their transition away from their fixation with real estate.
SD: You obviously come at stories from a left-wing perspective. Do you ever worry that your ideology might blind you to facts?
GP: I don’t have an ideology. There’s really only the truth and the not-truth. I’m just an old-fashioned gumshoe reporter.
The worst fucking thing about American journalism, by the way, is its “on-the-one-hand-this, on-the-other-that” approach. It really distorts or omits truth.
I exposed [Florida Secretary of State] Katherine Harris for purging thousands of black voters from the electoral rolls. That cost [Al] Gore the 2000 election. It was stolen from him. I documented it.
I could not get that story into the U.S. media. There was a total news blackout of what had happened. It finally got picked up by the L.A. Times, and they played the story as “Democrats accuse Republicans of removing black voters from the rolls; the Republicans deny that.”
Jesus Christ! We don’t have balanced news in the United States; it doesn’t fucking exist. News here isn’t reporting; it’s repeating.
SD: Hang on. You write mostly for British outlets. Are you saying the British press is less influenced by corporate interests than the American press? The same financial dynamics are at work, right?
GP: Wrong. The Guardian is owned by a not-for-profit charitable trust. That’s allowed it to become the most influential English-language paper in the world.
SD: More influential than the New York Times?
GP: The New York Times is influential in New York. People elsewhere see that it’s — what shall we say? — incomplete.
The BBC is the gold standard of journalism. It’s important to know it’s neither corporate owned nor government owned. It’s owned by subscribers, the people who pay £100 a year for a TV license.
SD: Yeah, but Britain doesn’t have a First Amendment or a Freedom of Information Act.
GP: That’s true, but the Brits could borrow our First Amendment, because we’re not using it. And have you tried using FOIA lately? Good luck.
It’s also true that I don’t have any legal protection for stories in the British press. The resulting degree of self-censorship by some reporters is just astonishing.
But it’s still not as bad as it is here. The entire front page of the Guardian last week had my coverage of Singer, Romney’s biggest funder. There wasn’t one mention of his role in the U.S. press.
SD: Staying with journalism for a minute, do you have a journalist hero? George Orwell, maybe?
GP: Only Christopher Hitchens is pompous enough to compare himself with Orwell. My model is Jack Anderson [a Pulitzer Prize-winning modern muckraker who broke scandals involving both Democrats and Republicans].
I also always admired Ron Ridenhour, the soldier who revealed the My Lai massacre [in which 500 Vietnamese villagers were killed by U.S. troops on March 16, 1968]. Ridenhour was the greatest investigative reporter of the last century. He died way too young [of a heart attack in 1998 at age 52].
The TV show “Columbo” had a big influence on me, too. I learned a lot from it about how to do investigations. Lt. Columbo was just totally dogged.
SD: How about Hunter Thompson? You’ve got an image like his.
GP: People make that connection all the time because we have Rolling Stone in common. But Thompson was a brilliant social analyst, and I’m just a gumshoe guy.
SD: You do look like an old-school reporter with that Humphrey Bogart hat of yours.
GP: I wear the hat because I’m bald and I’ll get painfully sunburned otherwise.

SD: Matt Drudge wears the same kind of hat.
GP: Yeah, some people say I’m a left-wing Matt Drudge, but there’s a big difference: Drudge is full of shit, and I’m full of information.
SD: You must be embarrassed that one of the first things on Google for “Greg Palast” is a 2009 piece you wrote saying what a great job Obama is doing.
GP: It was right after he took office. And it was nice to see him acting for one week like a real president.

SD: So what happened?
GP: Obama was reminded of who elected him. He brought into power guys like Tim Geithner and Larry Summers — Wall Street operatives and protégés of Robert Rubin, who was Clinton’s Treasury secretary [and a Goldman Sachs and Citigroup executive].
Remember, it wasn’t Bush who destroyed the economy; it was a guy named Bill Clinton.
They put the arm on Obama. They reminded him he’s just a tenant.
SD: Do you worry about your safety?
GP: I very much fear for the safety of my sources. Some of them do end up in jail and/or beaten up. It’s insanely dangerous for some of them to talk to me. One of my great sources was just charged with sedition. These guys are insanely courageous. But please don’t give the impression that your life will be threatened if you become my source. That wouldn’t be helpful.
SD: You’re talking about incidents in other countries, right? You haven’t had sources jailed or beaten up in the U.S., have you?
GP: Look at Bradley Manning, America’s most heroic political prisoner [the U.S. Army soldier accused of supplying a cache of secret diplomatic cables to WikiLeaks]. Lots of Americans are facing the ruin of their careers for whistle-blowing.
Greg Palast will talk about “Why We Occupy: How Wall Street Picks the Bones of America,” onDecember 12 at 7 p.m. in Burlington’s Main Street Landing Film House. Palast's One-Percent Tourtravels this week to Houston on Thursday, Baltimore Friday and next week to Burlington VT (Monday), and Atlanta (Thursday).
Greg Palast is the author of Vultures' Picnic: In Pursuit of Petroleum Pigs, Power Pirates and High-Finance Carnivores, released in the US and Canada by Penguin.
You can read Vultures' Picnic, "Chapter 1: Goldfinger," or download it, at no charge: click here.
Subscribe to Palast's Newsletter and podcasts.
Follow Palast on Facebook and Twitter.

Guide to Kulchur

Guide to Kulchur, by Ezra Pound, 1938

lunedì 5 dicembre 2011

The Absurd Zombie Lie About the Economy

The Absurd Zombie Lie About the Economy Right-Wingers Desperately Cling To -- And Why It's Totally Wrong

Home loans didn't bring on the recession; gimmicky financial instruments bloated to 100 times their value are what caused all this pain.

Wall Street turned a few million home-loans into what Warren Buffet called "economic weapons of mass destruction," cratered the global economy and then, when the bubble burst, turned around and insisted on a massive bailout courtesy of the American tax-payer.
That rightly infuriated most Americans, but it has nonetheless become something of an article of faith among conservatives that Wall Street bears little blame for the Great Recession. The dominant narrative on the right today is that "big government" is ultimately responsible for the crash. In the words of one of Andrew Breitbart's bloggers, Democratic lawmakers like Barney Frank and Chris Dodd “brought down the banking industry by forcing banks to give loans to people who couldn’t afford them.”
That such a ludicrous claim could gain such wide traction is a testament to the intellectual debasement of modern conservative discourse. No bank was ever “forced” – or coerced or incentivized by the government in any way – to make a bad loan.
But the claim falls apart even before one digs into the particulars, for the simple reason that people's mortgages didn't bring down the banking system in the first place.
The entire subprime mortgage market was worth only $1.4 trillion in the fall of 2007and that includes loans that were up-to-date. As former Goldman Sachs trader Nomi Prins noted in her book, It Takes a Pillage: Behind the Bailouts, Bonuses, and Backroom Deals from Washington to Wall Streetthe federal government could have bought up every single residential mortgage in the country – good, bad and in between – and it would have cost a trillion less than the bailouts.
Short of that, notes Prins, if the crisis were really about people buying McMansions that they couldn't afford, “we could have solved it much more cheaply in a couple of days in late 2008, by simply providing borrowers with additional capital to reduce their loan principals. It would have cost about 3 percent of what the entire bailout wound up costing, with comparatively similar risk.”
What brought down the global economy was as much as $140 trillion worth of financial gimmickery built on top of the mortgage industry. It was the alphabet soup of the credit meltdown – the CDOs, default swaps and other derivitaves that made less than a trillion dollars of foreclosed loans into an economic weapon of mass destruction that would cost the American economy alone $14 trillion in lost wealth.
A fair criticism of the government's role is that it didn't “meddle” in the free market sufficiently to protect borrowers, investors and the public – that $140 trillion house of cards was built in an environment created by decades of deregulation. But that situation is also the fault of Wall Street rather than an indication of the perfidy of "big government." It was bought at great cost by the banking lobby (and as powerful chairs of congressional banking committees, the right's bogeymen, Barney Frank and Chris Dodd, are two of the financial industry's top recipients).
One could argue that the meltdown began with a chance meeting in 1997 in a line for coffee at Bank of America's Chicago headquarters. According to the Financial Times' Gillian Tett, a chance encounter brought together people working in BofA's derivatives group with another team that was packaging mortgages into securities. From that meeting, as Tett wrote, “a new game was born: bankers began to use subprime loans to create these bundles of loan default risk, now called collateralized debt obligations (CDOs) on an explosively large scale.”
Present at that meeting was Robert Reoch, a trader who had come over from JPMorgan. In the mid-1990s, JPMorgan had found itself holding an abundance of loans on its books, which made it difficult to maintain the reserves required by banking regulators. They had come up with the idea of selling some of the risk of those loans off to investors, by bundling them into mortgage-backed securities. This had two consequencs that would eventually lead to the almost universally loathed Wall Street bailouts, a massive drop in employment, the forcelosure crisis and a skyrocketing deficit.
But the real origin of the crisis took place several years earlier. In 1994, some of the first derivatives – which allowed investors to gamble on interest rates – produced massive losses when currency markets began fluctuating wildly. Calls to regulate this shadowy field of financial speculation followed, but, as Tett noted, “the International Swaps and Derivatives Association fought back furiously, arguing that a regulatory clampdown would not only run counter to the spirit of capital markets, but also crush creativity.”
On the board of ISDA – whose lobbying expenditures more than doubled in 2010 to $2.4 million, as new rules on derivatives were being hammered out by federal regulators -- sits managing directors of JPMorgan Chase, Morgan Stanley, Goldman Sachs, Citigroup and Bank of America Merrill Lynch, among other financial firms.
Its successful campaign against regulations on derivatives in the mid-1990s was only one battle in a long campaign to deregulate investment banking that dated back to the 1960s, when lobbyists reportedly bragged that the effort was putting their kids through college. Their primary target was the Glass-Steagall Act, a depression-era law that created a firewall between investment banking and the commercial banks that hold deposits and make loans. Their first victory came in 1986, when, under intense lobbying from Wall Street, the Federal Reserve reinterpreted a key section of the act, deciding that commercial banks could make up to 5 percent of their gross revenues from investment banking. After the board heard arguments from Citicorp, J.P. Morgan and Bankers Trust, it loosened the restrictions further – in 1989, the limit was raised to 10 percent of revenues; in 1996, they hiked it up to 25 percent.
According to a report by PBS Frontline, “in the 1997-98 election cycle, the finance, insurance, and real estate industries (known as the FIRE sector), spends more than $200 million on lobbying and makes more than $150 million in political donations. Campaign contributions are targeted to members of congressional banking committees and other committees with direct jurisdiction over financial services legislation.”
In 1999, after 12 unsuccessful attempts, Glass-Steagall, which would have made the crash of 2007-2009 impossible, was finally repealed. And it was only then that the explosion in shaky mortgage-backed securities began. “Subprime” loans made up 5 percent of the total the year before repeal, but skyrocketed to 30 percent of all mortgages at the time of the crash.
Fanny, Freddie and the Community Reinvestment Act
Jeb Hensarling, a notably obtuse Republican lawmaker from Texas, wrote that “the conservative case [against the government] is simple”:
The [Community Reinvestment Act] compelled banks to relax their traditional underwriting practices in favor of more “flexible” criteria. These subjective standards were then applied to all borrowers, not just low-income individuals, leading to a surge in lower-quality loans....Blame should [also be] directed at Fannie [Mae] and Freddie [Mac], and their thirst for weaker underwriting to help meet their federally mandated “affordable housing” goals...
This tale has everything a conservative could want: Big Government overreach and well-intentioned but out-of-touch liberals causing devastating unanticipated consequences with their social tinkering.
But, contrary to the conservative spin, University of Michigan law professor Michael Barr told a congressional committee that although there was in fact quite a bit of irresponsible lending in low-income communities in the late 1990s and the early 2000s, “More than half of subprime loans were made by independent mortgage companies not subject to comprehensive federal supervision; another 30 percent of such originations were made by affiliates of banks or thrifts, which are not subject to routine examination or supervision, and the remaining 20 percent were made by banks and thrifts [subject to CRA standards].” Barr concluded, “The worst and most widespread abuses occurred in the institutions with the least federal oversight."
The reality is that no bank has ever been “forced to comply with government mandates about mortgage lending” – it's a bald-faced lie.
There are no “government mandates,” and there never were. In order to qualify for government-backed deposit insurance—a benefit that banks aren’t forced to accept but enjoy having—the Community Reinvestment Act – and similar measures designed to prevent discrimination in lending (to qualified individuals) – only encourage banks to lend in all of the areas where they do business. And Section 802 (b) of the Act stresses that all loans must be “consistent with safe and sound operations”—it’s the opposite of requiring that lenders write risky mortgages.
There are no penalties for noncompliance with CRA guidelines. The only “stick” hanging over banks that fail to meet those standards is that their refusal might be taken into account by regulators when they want to open new branches or merge with other financial institutions. What’s more, there are no defined standards for CRA compliance, and within the banking community, the loose guidelines are considered to be somewhat of a joke.
As Sheila Blair, the chairwoman of the FDIC, asked in a December 2008 speech, “Where in the CRA does it say: make loans to people who can’t afford to repay? Nowhere! And the fact is, the lending practices that are causing problems today were driven by a desire for market share and revenue growth...pure and simple.”
Fannie and Freddie: Tempted by Easy Profits
Fannie Mae and Freddie Mac were created by an act of Congress, but they are (or were, until being taken over in the wake of the housing crash) private, for-profit entities whose dual mandate was to increase the availability of mortgages to moderate- and low-income families, and at the same time turn a profit for their shareholders. Fannie and Freddie did end up with a very large portfolio of subprime loans, with a high rate of default, but they didn’t get into the market early, or because the government mandated it. They dived in deep because there were profits to be made as the housing bubble expanded. As Mary Kane, a finance reporter for the Washington Independent, put it:
Neither the Community Reinvestment Act—the law most cited as the culprit—nor other affordable housing goals set by the government forced Fannie, Freddie or any other lender to make loans they didn’t want to. The lure of the subprime market was high yields and healthy profit margins—it’s as simple as that.
Creating a Market
None of this is to suggest that millions of Americans didn’t bite off more than they would eventually be able to chew in the housing market. A lot of people looking to turn a quick buck by capturing the booming value of real estate in the mid- to late-2000s bought property with “teaser” loans that offered very low rates for the first few years; the investors assumed they’d be able to turn a tidy profit before higher interest rates kicked in. Many of those individuals have since found themselves “under water”—owing more on their homes (and investment properties) than they’re worth.
Yet as Salon business reporter Andrew Leonard wrote, beginning in the 1990s, “The incentive for everyone to behave this way came from Wall Street...where the demand for (debt-backed securities) simply couldn’t be satisfied. Wall Street was begging the mortgage industry to reach out to the riskiest borrowers it could find, because it thought it had figured out a way to make any level of risk palatable.” He added, “Wall Street traders, hungry for more risk, fixed the real economy to deliver more risk, by essentially bribing the mortgage originators and ratings agencies to...make bad loans on purpose. That supplied (Wall Street) speculators the raw material they needed for their bets, but as a consequence threw the integrity of the whole housing sector into question.”
The bankers’ hard sell created so much demand that lenders wrote loans to just about anybody for just about anything; loans, after all, were the raw material for the alphabet soup of exotic investment vehicles: the “collateralized debt obligations (CDOs),” “credit default swaps,” and other innovative products that turned “toxic” toward the end of the decade. Wall Street had little to lose by giving investors more of these fancy new bets. Wall Street traders made their fees, and as long as the housing market—the hard assets underpinning all of the theoretical wealth that was created—held up, everyone was happy.
The most important point here is that the bankers knew they were playing with fire. The Los Angeles Times reported, “Before Washington Mutual collapsed in the largest bank failure in U.S. history, its executives knowingly created a ‘mortgage time bomb’ by making subprime loans they knew were likely to go bad and then packaging them into risky securities.”
According to the Wall Street Journal, U.S. prosecutors are, as of this writing, investigating whether Morgan Stanley misled investors about mortgage-derivatives deals it helped design and sometimes bet against.” And the Securities and Exchange Commission charged Goldman Sachs with “defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter.”
They needed some help laundering the risk out of those shaky loans, and they got it. According to a Senate investigation concluded earlier this year S&P and Moody's, the two dominant ratings agencies, “issued the AAA ratings that made ... mortgage backed securities ... seem like safe investments, helped build an active market for those securities, and then, beginning in July 2007, downgraded the vast majority of those AAA ratings to junk status.” And when they did so, it “precipitated the collapse of the [mortgage-backed securities] markets and, perhaps more than any other single event, triggered the financial crisis (PDF)."
According to the Senate investigation, in the years leading up to crash, “warnings about the massive problems in the mortgage industry” — including internal warnings from their own analysts — had been ignored because of “the inherent conflict of interest arising from the system used to pay for credit ratings.” The big “rating agencies were paid by the Wall Street firms” that were making a fortune selling that glossed-up garbage to credulous investors. This, again, was Wall Street's doing rather than a result of some public policy passed by Congress.
This isn't about ideology; it's about pushing back on some notably dangerous historical revisionism. Because there is one thing that’s as sure as death and taxes: Big Finance’s lobbyists will continue to resist calls to re-regulate the financial sector. And absent effective regulation of the financial markets, we can expect to continue to suffer through an endless series of booms and busts, while the fat cats of Wall Street continue to get fatter.
Joshua Holland is an editor and senior writer at AlterNet. He is the author of The 15 Biggest Lies About the Economy: And Everything else the Right Doesn't Want You to Know About Taxes, Jobs and Corporate America. Drop him an email or follow him on Twitter.