Thanks, Alan Greenspan, Hank Paulson and Dumbya's Gangsters! Keep Talking!!!

If you're not spending all of your time thanking Alan Greenspan and the rest of the last decade's (and much longer than that - about 30 years since the Reagan tax cuts (at Greenspan's behest!) benefitting the top 1% of the population who didn't trickle anything but urine down - according to most financial indicators) economic-conspiracy tricksters, you're not really following the new (or is that New World?) guidelines.

Right after the "Thanks!" and their acceptance speeches with all the new market/housing advice for increasing the wealth and well-being for the middle classes comes the election where I hear we will usher these guys right back to the decision tables.

Even the New York Times finally gets it.

Oh! And this is new news to over 30% of the population - who thought they were doing great except for that ridiculous government interference (don't forget to send their Social Security, Disability, Medicare and Medicaid checks on time!).

Wanna job in China or India? I hear they will be hiring us (cheaply!) soon.

Enjoy the Fall! (Emphasis marks added - Ed.)

Less than a month before November elections, the United States is mired in a grim New Normal that could last for years. That has policy makers, particularly the Federal Reserve, considering a range of ever more extreme measures, as noted in the minutes of its last meeting, released Tuesday. Call it recession or recovery, for tens of millions of Americans, there’s little difference.

Born of a record financial collapse, this recession has been more severe than any since the Great Depression and has left an enormous oversupply of houses and office buildings and crippling debt. The decision last week by leading mortgage lenders to freeze foreclosures, and calls for a national moratorium, could cast a long shadow of uncertainty over banks and the housing market.

Put simply, the national economy has fallen so far that it could take years to climb back. The math yields somber conclusions, with implications not just for this autumn’s elections but also — barring a policy surprise or economic upturn — for 2012 as well:

At the current rate of job creation, the nation would need nine more years to recapture the jobs lost during the recession. And that doesn’t even account for five million or six million jobs needed in that time to keep pace with an expanding population. Even top Obama officials concede the unemployment rate could climb higher still.

Median house prices have dropped 20 percent since 2005. Given an inflation rate of about 2 percent — a common forecast — it would take 13 years for housing prices to climb back to their peak, according to Allen L. Sinai, chief global economist at the consulting firm Decision Economics.

Commercial vacancies are soaring, and it could take a decade to absorb the excess in many of the largest cities. The vacancy rate, as of the end of June, stands at 21.4 percent in Phoenix, 19.7 percent in Las Vegas, 18.3 percent in Dallas/Fort Worth and 17.3 percent in Atlanta, in each case higher than last year, according to the data firm CoStar Group.

Demand is inert. Consumer confidence has tumbled as many are afraid or unable to spend. Families are still paying off — or walking away from — debt. Mark Zandi, chief economist of Moody’s Analytics, estimates it will be the end of 2011 before the amount of income that households pay in interest recedes to levels seen before the run-up. Credit card delinquencies are rising.

“No wonder Americans are pessimistic and unhappy,” said Mr. Sinai. “The only way we are going to get in gear is to face up to the reality that we are entering a period of austerity.”

. . . After plummeting in 2009, the stock market has spiraled up, buoying retirement accounts and perhaps the spirits of middle-class Americans. As a measure of economic health, though, that gain is overstated.

Robert Reich, the former labor secretary, notes that the most profitable companies in the domestic stock indexes generate about 40 percent of their revenue from abroad. Few doubt the American economy remains capable of electrifying growth, but few expect that any time soon.

. . . New shocks could push the nation into another recession or deflation. “We are in a situation where our vulnerability to any new problem is great,” said Carmen M. Reinhart, a professor of economics at the University of Maryland.

So troubles ripple outward, as lost jobs, unsold houses and empty offices weigh down the economy and upend lives.

Suzan
_______________

"Only Important Debate Is About How Best To Anesthetize American Workers As Their Jobs Are Offshored" Collapsing Empire Watch Continues

Have you noticed for the last decade or so (almost 30 years for many of these silent jokers) that many political commentators and events have never quite turned out to be what you would have expected (using regular logic and some decent reasoning)? I guess in the land of the free you can publicly announce yourself to be a Liberal while supporting Dumbya's tax and torture policies and a Conservative when . . . ? All the rest of the time?

There's an easy explanation to this national conundrum and it has to do with money: how many people were paid highly enough to change sides while mouthing the same platitudes for the most part, and how much money there was to be given out at the upper level of the wealth-endowed tip of the pyramid to enable many to say anything to obfuscate the issues and confuse the listeners/readers who just accept the labels. (I'd love to see the income figures (with sources included) of all these "neoliberals.")

This essay reminds me once again why I stopped watching MSM (including PBS and listening to NPR for anything except music). The oddest element in this news is that most of the people I know to have supported Dumbya's butchery (both ways) didn't do it to support the poor people of the world. Sorry, but I never quite comprehended before that tax-cheating, job-outsourcing billionaires had such tender hearts. And it's good to know that they are "saving the world's poor by sacrificing America's middle class," isn't it? And this guy is OUR Marx?

At least we get this inside info before the election!

As if that'll help turn around the dumbfounded (and dismayed) before they vote heartily for final collapse. (Emphasis marks added - Ed.)

The Bankruptcy of New Democrat Ideology

A Washington Post columnist and radio host pretends that liberals are choosing "American people" over "people"

Are critics of the Chinese dictatorship’s mercantilist trade strategy the unwitting enemies of the poor people of the world? Are multinational corporations that transfer production from unionized American workplaces to a low-wage country where independent unions are illegal and dissident democrats like Liu Xiaobao and his wife are jailed the true benefactors of humanity? The answer is yes, according to Matt Miller, a veteran of the Clinton administration who is a senior fellow at the Center for American Progress, a columnist for the Washington Post and the host of the public radio show "Left, Right and Center."

Miller, who at different times describes himself as a centrist or a progressive, wrote an Op-Ed for the Post last week titled "Liberalism’s moral crisis on trade."

Here's my question for American progressives: If you're for the little guy, are you just for American little guys? Or are you for poor underdogs even if they happen to have been born in India or China?

….[T]he trade debate will bring special agony for progressives who see themselves as fighting liberals at home and as global humanists abroad. We're at a hinge in history when it's no longer possible to pretend there's no tension between the two.

Whose side are liberals on? The American people? Or people?

The claim that progressives are the real enemies of the poor at home and abroad is a cliché of conservative rhetoric. In domestic policy, conservatives and libertarians pose as champions of the black poor by claiming that the welfare state is a "welfare plantation" that enslaves blacks, and that the best way to help black unemployment is to eliminate the minimum wage - arguments that have persuaded few black Americans. In trade policy, conservatives and libertarians argue that child labor laws and environmental regulations in developing countries will only hurt the global poor, and that the offshoring of industry from the U.S. to countries with non-union, low-wage workers is a great benefit to the latter.

Miller repeats this right-wing talking point:

Seen in this light, for example, big business may turn out to be a more "progressive" global force than American labor or government in the next few decades. Why? Because corporate America is generally the strongest voice for the reciprocal free trade and access to markets that poor nations need to thrive.

Matt Miller has enjoyed a successful career in the elite media as the token Democrat who sides with the right on major issues, while maintaining his "centrist" or "progressive" credentials by arguing for slightly higher taxation and universal healthcare in the form of subsidies for private insurance - positions that are compatible with moderate conservatism.

On May 11, 2005, in the New York Times, Miller, describing himself this time as a "liberal," defended George W. Bush’s proposal to gradually whittle away the value of Social Security by what was misleadingly called "progressive indexing": "You’d never guess from the Democratic hysteria that President Bush’s plan to 'progressively index' Social Security is an idea we liberals may one day want to embrace. So farsighted Democrats ... should quit carping about Bush’s evil "cuts" ..." Miller was one of the Democratic pundits who supported the Iraq war.

In 2003 on Wolf Blitzer’s CNN program, Miller declared: "I think capturing Saddam Hussein was a great thing. It’s made America safer and it’s rid the world of this brutal tyrant." According to Robert Kuttner, a genuine progressive, Miller-style neoliberalism is "a recipe for continued shifts to the right. It’s no surprise that Miller is emerging as the conservatives’ favorite liberal."

The project of the New Democrats around Bill Clinton and Robert Rubin was to replace organized labor and the working class with corporate and financial elites and professionals as the social base of the Democratic Party.

Matt Miller is the Marx of the managerial-professional class. One of "Tomorrow’s Destined Ideas" in his recent book "The Tyranny of Dead Ideas" is "Only the (Lower) Upper Class Can Save Us From Inequality." He predicts that the lesser rich, the corporate managers and professionals who insist that they are "middle class" while making $250,000 or $500,000 a year, will rein in the plutocratic excesses of the super-rich. It is not clear why the Lower Upper Class can be counted on to act for the benefit of society as a whole - noblesse oblige, perhaps?

Miller writes that another of "Tomorrow’s Destined Ideas" is that "Only Business Can Save Liberalism" by helping the world’s poor via the offshoring of American manufacturing. In "The Tyranny of Dead Ideas," Miller acknowledges that leading economists, including Ralph Gomory and Dani Rodrik, have established that entire nations as well as individuals can both lose and win from trade. Instead of sharing their conclusion that this justifies rethinking trade policy, Miller calls for offshoring to be rebranded as philanthropy.

According to Miller, the only important debate is about how best to anesthetize American workers as their jobs are offshored - "which tactics can best assure that we have no protectionist backlash in wealthy nations that ultimately hurts the world's poor" (emphasis in original). Miller writes: "Today’s prevailing idea, that 'free trade is good no matter how many people get hurt,' should yield to a new formulation: that free trade is good, provided we have protections in place to make people feel sufficiently secure in times of rapid economic change" (emphasis in original).

Using the italics that are a hallmark of his breathless style, Miller writes:

This is what economists [who denounce the defense of American manufacturing] are really up to. Their redeeming secret is that in hyping the case for free trade, and shielding us from the truth, their ultimate aim is to keep markets open enough for capitalism to work its magic and lift billions of desperate people from grinding poverty in developing countries. (p. 58, italics in original).

Miller’s argument that morality requires Americans to be impartial between the interests of their own people and those of other nations is easily dismissed.

Every practical system of morality, ancient and modern, secular and religious, including the moral philosophy of Adam Smith, permits people to favor their relatives over their neighbors and their neighbors over foreigners. In a world of many communities, public policy would become unworkable if every community had to promote the interest of the entire human race at the expense of its own. How is the interest of the human race, as distinct from that of Tanzania or Taiwan, to be determined by Tanzanian and Taiwanese policymakers? That’s why American liberals have favored anti-colonialism and national self-determination. The Chinese should look after Chinese, Americans after Americans, and diplomacy should resolve any legitimate conflicts.

Miller’s economics are as confused as his ethics. If Miller were truly concerned about barriers to developing-country exports, he would be criticizing the Chinese dictatorship, not American liberals. The victims of Chinese mercantilism include other developing countries in Asia, Africa, Latin American and the Middle East, whose own exports to the West have been harmed by China’s undervaluation of its currency.

What's more, export-led development soon runs into its limits. Small countries like Singapore and Taiwan can develop by turning themselves into export-processing zones for multinationals and selling to giant foreign markets. Large countries cannot. The U.S. and Germany developed in the 19th century on the basis of their giant internal markets. So did Japan after World War II, which, even as it pursued an export-oriented strategy, used non-tariff barriers to reserve the large Japanese market for Japanese-made goods and services.

More than 2 billion Chinese and Indians will never catch up by making goods their people cannot afford to buy for less than a billion affluent Westerners. Not only critics of Chinese mercantilism, but also many Chinese government officials, recognize that China can advance further only on the basis of domestic demand-led growth. Among other things, that means raising the wages of Chinese workers, which have been artificially suppressed in order to finance an overbuilt export sector at the expense of Chinese consumers. While consumption in Brazil, another developing country, makes up 60 percent of GDP, in China between 2001 and 2007 it fell from 44 percent to 36 percent. Such shockingly low consumption numbers are reminiscent of Stalin’s forced industrialization of the Soviet Union at the expense of Soviet workers and farmers.

The truth is there is no genuine conflict between American workers and Chinese and Indian workers. Rejecting export-led development for domestic demand-led growth shared equitably with the workers in every nation is a win-win policy.

But the neoliberal ideology of New Democrats like Matt Miller is all about false choices : “Whose side are liberals on? The American people? Or people?”

It is hardly surprising that someone who argues that progressives must choose between retirees and children, and between teachers’ unions and students, should argue that American liberals must choose between American workers and foreign workers.

The "dead ideas" from whose tyranny Americans must free themselves include ideas like these.

Michael Lind is policy director of the Economic Growth Program at the New America Foundation and author of "Up From Conservatism: Why the Right Is Wrong for America."

Glenn Greenwald completes the argument against the neoliberals by dissecting it. Completely. (And there is some good news about U.S. rankings!) (Emphasis marks added - Ed.)

Collapsing Empire Watch

Glenn Greenwald

It's easy to say and easy to document, but quite difficult to really internalize, that the United States is in the process of imperial collapse. Every now and then, however, one encounters certain facts which compellingly and viscerally highlight how real that is. Here's the latest such fact, from a new study in Health Affairs by Columbia Health Policy Professors Peter A. Muennig and Sherry A. Glied (h/t):

In 1950, the United States was fifth among the leading industrialized nations with respect to female life expectancy at birth, surpassed only by Sweden, Norway, Australia, and the Netherlands. The last available measure of female life expectancy had the United States ranked at forty-sixth in the world. As of September 23, 2010, the United States ranked forty-ninth for both male and female life expectancy combined.

Just to underscore the rapidity of the decline, as recently as 1999, the U.S. was ranked by the World Health Organization as 24th in life expectancy. It's now 49th. There are other similarly potent indicators. In 2009, the National Center for Health Statistics ranked the U.S. in 30th place in global infant mortality rates. Out of 20 "rich countries" measured by UNICEF, the U.S. ranks 19th in "child well-being." Out of 33 nations measured by the OECD, the U.S. ranks 27th for student math literacy and 22nd for student science literacy. In 2009, the World Economic Forum ranked 133 nations in terms of "soundness" of their banks, and the U.S. was ranked in 108th place, just behind Tanzania and just ahead of Venezuela.

There is, however, some good news: the U.S. is now in fifth place in total number of executions, behind only China, Iran, Iraq and Saudi Arabia, and comfortably ahead of Yemen and Sudan, while there are two categories in which the U.S. has been and remains the undisputed champion of the world - this one and this one. And, of course, the U.S. is not just objectively the greatest country on the planet, but the greatest country ever to exist in all of human history - as Dave Roberts put it in response to these life expectancy numbers: "but we're No. 1 in bestness!" - so we're every bit as exceptional as ever.

Just ask the Rethugs!

We're Number 1!!!!

Jim Hightower, as usual, has the final word (emphasis marks added - Ed.):

Apparently, you and I owe an apology to the extravagantly-rich in our society. They're reported to be in a deep pout and a political funk because We the People have hurt their feelings.

This stems from the public's simmering anger over the fact that the Wall Street barons who crashed our economy are back to paying themselves multimillion-dollar bonuses, while the corporate CEOs who keep downsizing and offshoring our middle class opportunities are grabbing bigger paychecks than ever for themselves. The wealthy swells are upset by our anger and feel picked on by us riff-raff – they don't like being blamed for our economic distress, even though they are to blame, and they certainly don't like the rising populist fervor for more economic fairness in our country. So they're mad at us for being mad at them, claiming that they are victims of our "wealth envy."

I'm sure you feel as badly as I do about this, so you'll be glad to know that those living in luxury seem to have found a way to soothe their bad mood: they've gone shopping! Yes, while workaday Americans are scrambling just to cover the rent and buy groceries, the well-heeled are reported to be splurging again, indulging their consumer whims with such pricey pretties as exotic automobiles.

One analyst of trends in the luxury car market concedes that sales of Bentleys, Lamborghinis, Maseratis, and other ultra-priced autos had been down the past couple of years. He explained that, "It didn't feel right buying a $300,000 Rolls-Royce when people were being foreclosed out of their homes." But this year, the elites are saying, "To hell with what the public thinks, I'm gonna get me a new Ferrari 458 Italia, the people be damned!"

How nice for them. But I don't think their conspicuous consumption is going to make anyone feel better about their greed – nor will it quell the public's rising populist fervor.

"Wealthy step up purchases of ultra-luxury cars," www.azcentral.com, September 16, 2010.

Anyone else need a new car? And I don't mean brand new - just one less than 20 years old?

Okay. That would be me. But still!

Suzan
_________________

"Major Banks Are Insolvent & Cannot Be Saved" (If Audited) - Foreclosuregate - Ellen Brown & Righties Get Crazier (D'Souza Outed, Woodward Laughed At)

If you are brave, and read Michael Lewis latest book, The Big Short, like I just did (and it's a slender little thing, easily consumed in an afternoon or two), you will learn exactly how we got to where we are today, and why we are being set up for another even harder fall (and a lot about the one we just came through - badly).

He says that "Everything is correlated," and he is not kidding you. In the slightest.

When I published my book about the financial 1980s, the financial 1980s were supposed to be ending. I received a lot of undeserved credit for my timing. The social disruption caused by the collapse of the savings and loan industry and the rise of hostile takeovers and leveraged buyouts had given way to a brief period of rcriminations. Just as most students at Ohio State University read Liar's Poker as a how-to manual, most TV and radio interviewers read me as a whistleblower. . . . Anti-Wall Street feelings then ran high enough for Rudolph Giuliani to float a political career upon them, and the result felt more like a witch hunt than an honest reappraisal of the financial order. The public lynching of Michael Milken, and then of Salomon Brothers CEO Gutfreund, were excuses for not dealing with the disturbing forces underpinning their rise.

Ditto the cleaning up of Wall Street trading culture. Wall Street firms would soon be frowning upon profanity, forcing their male employees to treat women almost as equals, and firing traders for so much as glancing at a lap dancer. Bear Stearns and Lehman Brothers in 2008 more closely resembled normal corporations with solid, Middle American values than did any Wall Street firm circa 1985.

The changes were camouflage. They helped to distract outsiders from the truly profane event: the growing misalignment of interests between the people who trafficked in financial risk and the wider culture. The surface rippled, but down below, in the depths, the bonus pool remain undisturbed.

. . . There was an umbilical cord running from the belly of the exploded beast back to the financial 1980s. The crisis of 2008 had its roots not just in the subprime loans made in 2005 but in ideas that had hatched in 1985.

Gene Lyons in Salon comments on John Paulson's and many others' role in the shorting documented so ably in The Big Short after Goldman Sachs was finally charged with fraud. I don't agree with his judgment that this was a part of the madness driving the market - after all - the shorters were screaming loudly the whole time about the catastrophe that lay ahead as they tried to ensure that they were seeing the situation clearly before placing their bets (emphasis marks added - Ed.):

How could so many allegedly brilliant people do something so dumb as to gamble the nation's — nay, the world's — financial system on shaky subprime real estate loans to millions of Americans drowning in debt? After all, as Michael Lewis points out in his trenchant book The Big Short, "the people who worked on the relevant Goldman Sachs mortgage bond trading desk were all extremely intelligent. They'd all done amazingly well in school and had gone to Ivy League universities."

How could they not see what an obscure financial advisor named Michael J. Burry, one of several quirky Cassandras profiled by Lewis, warned his clients against in 2003? "The consequences could very easily be a 50% drop in residential real estate in the U.S. ... The collateral damage is likely to be orders of magnitude worse than anyone now considers."

By 2005, Burry, an autodidactic loner with Asperger's syndrome, had grown almost frantic: "Markets ... are erring right now by continuing to float along as if the most significant credit bubble history has ever seen does not exist."

Two weeks ago, Burry, who made a huge fortune by purchasing credit default swaps (a kind of insurance) against mortgage bonds and the investment banks who issued them, wrote a New York Times column asking why, in the second Bush administration, "the Federal Reserve chairman, the Treasury secretary, the president and senior members of Congress repeatedly underestimated the severity of the problem, ultimately leaving themselves with only one policy tool — the epic and unfair taxpayer-financed bailouts."

The short answer is ideology: free-market fundamentalism that obscured their ability to apprehend reality. Not that Democratic politicians stood on street corners preaching against collapse. Instead they, Barack Obama included, were also petitioning Wall Street grandees for campaign contributions.

It's a legitimate criticism of Lewis' book, a witty and highly entertaining work of explanatory journalism, that his contrarian heroes aren't quite as blameless as he implies. By pestering Wall Street to create and sell them credit default swaps for the purpose of "shorting" — betting against — the market, they helped drive speculative frenzy ever higher.

That said, like Burry, Lewis' protagonists were anything but secretive about their intentions. Iconoclastic investor Steve Eisman — his wife says that even by Wall Street standards, "people think he's rude and obnoxious and aggressive" — enjoyed telling smug insiders what chumps they were being.

It was during one such confrontation that Eisman grasped "the madness of the machine . . . There weren't enough Americans with (bleep) credit taking out loans to satisfy investors' appetite for the end product. Wall Street needed his bets in order to synthesize more" speculative financial instruments to sell at ever-higher prices.

By 2007, most CDOs (collateralized debt obligations) sold by Wall Street investment banks were as intrinsically worthless as poker chips — essentially their function. According to Eisman's associates, "the more we looked what a CDO really was, the more we were like, Holy (bleep), that's just (bleeping) crazy. That's fraud. Maybe you can't prove it in a court of law. But it's fraud."

Which brings us to the next question: Was it, in fact, fraud for Goldman Sachs to peddle dud CDOs assembled by contrarian investor John Paulson (not profiled by Lewis, for what now appear to be very shrewd reasons) specifically for him to bet against?

That's what the government has alleged in filing suit against the Wall Street icon: That by concealing Paulson's involvement from the German and British banks who invested in the securities, Goldman also hid its knowledge of their worthlessness — saving its own skin at the expense of its clients.

Warren Buffet commented on the scandal in his annual newsletter to shareholders:

The CEOs and directors of the failed companies, however, have largely gone unscathed. Their fortunes may have been diminished by the disasters they oversaw, but they still live in grand style. It is thebehavior of these CEOs and directors that needs to be changed: If their institutions and the country are harmed by their recklessness, they should pay a heavy price - one not reimbursable by the companies they've damaged nor by insurance. CEOs and, in many cases, directors have long benefitted from oversized financial carrots; some meaningful sticks now need to be part of their employment picture as well.

Andrew Leonard, reviewing for Salon, comments on Buffett's views:

It is instructive to compare Buffett's sense of corporate responsibility with a brief snippet from The Big Short, Michael Lewis' superb new book on the financial crisis.

Lewis devotes much of The Big Short to a short-seller named Steve Eisman who becomes convinced that the entire subprime mortgage industry is a house of cards - with special emphasis on the securitization games being played by the big Wall Street investment banks.

On the surface, these big Wall Street firms appeared robust; below the surface, Eisman was beginning to think, their problems might not be confined to a potential loss of revenue. If they really didn't believe the subprime mortgage market was a problem for them, the subprime mortgage market might be the end of them. He and his team now set about searching for hidden subprime risk: Who was hiding what? "We called it The Great Treasure Hunt," he said.... He'd go to meetings with Wall Street CEOs and ask them the most basic questions about their balance sheets. "They didn't know," he said. "They didn't know their own balance sheets."

As we watch the parade of Wall Street lobbyists and CEOs complain about what new financial regulation will mean for their businesses, we should remember that their own record suggests that they don't have a very good handle on what they're actually doing, and their self-inflicted wounds, absent a government bailout, would have been far more lethal than anything coming out of Washington.

Do yourself a favor and read this slim volume - and vote accordingly.

In a similar (and exactly the same actually) vein, who wants to know what's really going on in the latest foreclosure scandal news? You should, and I know I do as a friend has already had her purchase of a foreclosure delayed until some smoke-and-mirror clearing (if only!) interval occurs.

Ellen Brown at Seeking Alpha does also. And she is hot on the trail. Follow it at the major banks' peril (emphasis marks added - Ed.)

By most reports, it would appear that the voluntary suspension of foreclosures is underway to review simple, careless procedural errors. Errors which the conscientious banks are hastening to correct. Even Gretchen Morgenson in the New York Times characterizes the problem as “flawed paperwork.” But those errors go far deeper than mere sloppiness. They are concealing a massive fraud.

They cannot be corrected with legitimate paperwork, and that was the reason the servicers had to hire “foreclosure mills” to fabricate the documents. These errors involve perjury and forgery - fabricating documents that never existed and swearing to the accuracy of facts not known. Karl Denninger at MarketTicker is calling it “Foreclosuregate.”

Diana Ollick of CNBC calls it “the RoboSigning Scandal.” On Monday, Ollick reported rumors that the government is planning a 90-day foreclosure moratorium to deal with the problem.

Three large mortgage issuers – JPMorgan Chase (JPM), Bank of America (BAC) and GMAC - have voluntarily suspended thousands of foreclosures, and a number of calls have been made for investigations.

Ohio Attorney General Richard Cordray announced on Wednesday that he is filing suit against Ally Financial and GMAC for civil penalties up to $25,000 per violation for fraud in hundreds of foreclosure suits.

These problems cannot be swept under the rug as mere technicalities. They go to the heart of the securitization process itself. The snowball has just started to roll.

You Can’t Recover What Doesn’t Exist

Yves Smith of Naked Capitalism has uncovered a price list from a company called DocX that specializes in “document recovery solutions.” DocX is the technology platform used by Lender Processing Services to manage a national network of foreclosure mills. The price list includes such things as “Create Missing Intervening Assignment,” $35; “Cure Defective Assignment,” $12.95; “Recreate Entire Collateral File,” $95. Notes Smith:

[C]reating . . . means fabricating documents out of whole cloth, and look at the extent of the offerings. The collateral file is ALL the documents the trustee (or the custodian as an agent of the trustee) needs to have pursuant to its obligations under the pooling and servicing agreement on behalf of the mortgage backed security holder. This means most importantly the original of the note (the borrower IOU), copies of the mortgage (the lien on the property), the securitization agreement, and title insurance.

How do you recreate the original note if you don’t have it? And all for a flat fee, regardless of the particular facts or the supposed difficulty of digging them up. All of the mortgages in question were “securitized” – turned into Mortgage Backed Securities (MBS) and sold off to investors. MBS are typically pooled through a type of “special purpose vehicle” called a Real Estate Mortgage Investment Conduit or “REMIC”, which has strict requirements defined under the U.S. Internal Revenue Code (the Tax Reform Act of 1986). The REMIC holds the mortgages in trust and issues securities representing an undivided interest in them.

Denninger explains that mortgages are pooled into REMIC Trusts as a tax avoidance measure, and that to qualify, the properties must be properly conveyed to the trustee of the REMIC in the year the MBS is set up, with all the paperwork necessary to show a complete chain of title. For some reason, however, that was not done; and there is no legitimate way to create those conveyances now, because the time limit allowed under the Tax Code has passed.

The question is, why weren’t they done properly in the first place? Was it just haste and sloppiness as alleged? Or was there some reason that these mortgages could NOT be assigned when the MBS were formed? Denninger argues that it would not have been difficult to do it right from the beginning. His theory is that documents were “lost” to avoid an audit, which would have revealed to investors that they had been sold a bill of goods - a package of toxic subprime loans very prone to default.

The Tranche Problem

Here is another possible explanation, constructed from an illuminating CNBC clip dated June 29, 2007. In it, Steve Liesman describes how Wall Street turned bundles of subprime mortgages into triple-A investments, using the device called “tranches.” It’s easier to follow if you watch the clip (here), but this is an excerpt:

How do you create a subprime derivative? . . . You take a bunch of mortgages . . . and put them into one big thing. We call it a Mortgage Backed Security. Say it’s $50 million worth. . . . Now you take a bunch of these Mortgage Backed Securities and you put them into one very big thing. . . . The one thing about all these guys here [in the one very big thing] is that they’re all subprime borrowers, their credit is bad or there’s something about them that doesn’t make it prime. . . .

Watch, we’re going to make some triple A paper out of this. . . Now we have a $1 billion vehicle here. We’re going to slice it up into five different pieces. Call them tranches. . . . The key is, they’re not divided by “Jane’s is here” and “Joe’s is here.” Jane is actually in all five pieces here.

Because what we’re doing is, the BBB tranche, they’re going to take the first losses for whoever is in the pool, all the way up to about 8% of the losses. What we’re saying is, you’ve got losses in the thing, I’m going to take them and in return you’re going to pay me a relatively high interest rate. . . . All the way up to triple A, where 24% of the losses are below that. Twenty-four percent have to go bad before they see any losses.

Here’s the magic as far as Wall Street’s concerned. We have taken subprime paper and created GE quality paper out of it. We have a triple A tranche here.

The top tranche is triple A because it includes the mortgages that did NOT default; but no one could know which those were until the defaults occurred, when the defaulting mortgages got assigned to the lower tranches and foreclosure went forward. That could explain why the mortgages could not be assigned to the proper group of investors immediately: the homes only fell into their designated tranches when they went into default.

The clever designers of these vehicles tried to have it both ways by conveying the properties to an electronic dummy conduit called MERS (an acronym for Mortgage Electronic Registration Systems), which would hold them in the meantime. MERS would then assign them to the proper tranche as the defaults occurred. But the rating agencies required that the conduit be “bankruptcy remote,” which meant it could hold title to nothing; and courts have started to take notice of this defect. They are concluding that if MERS owns nothing, it can assign nothing, and the chain of title has been irretrievably broken. As foreclosure expert Neil Garfield traces these developments:

First they said it was MERS who was the lender. That clearly didn’t work because MERS lent nothing, collected nothing and never had anything to do with the cash involved in the transaction. Then they started with the servicers who essentially met with the same problem. Then they got cute and produced either the actual note, a copy of the note or a forged note, or an assignment or a fabricated assignment from a party who at best had dubious rights to ownership of the loan to another party who had equally dubious rights, neither of whom parted with any cash to fund either the loan or the transfer of the obligation. . . . Now the pretender lenders have come up with the idea that the “Trust” is the owner of the loan . . . even though it is just a nominee (just like MERS) . . . . They can’t have it both ways.

My answer is really simple. The lender/creditor is the one who advanced cash to the borrower. . . . The use of nominees or straw men doesn’t mean they can be considered principals in the transaction any more than your depository bank is a principal to a transaction in which you buy and pay for something with a check.

So What’s to Be Done?

Garfield’s proposed solution is for the borrowers to track down the real lenders -- the investors. He says:

[I] f you meet your Lender (investor), you can restructure the loan yourselves and then jointly go after the pretender lenders for all the money they received and didn’t disclose as “agent.”

Karl Denninger concurs. He writes:

Those who bought MBS from institutions that improperly securitized this paper can and should sue the securitizers to well beyond the orbit of Mars. . . . [I]f this bankrupts one or more large banking institutions, so be it. We now have "resolution authority", let's see it used.

The resolution authority Denninger is referring to is in the new Banking Reform Bill, which gives federal regulators the power and responsibility to break up big banks when they pose a “grave risk” to the financial system – which is what we have here. CNBC’s Larry Kudlow calls it “the housing equivalent of the credit financial meltdown,” something he says could “go on forever.”

Financial analyst Marshall Auerback suggests calling a bank holiday. He writes:

Most major banks are insolvent and cannot (and should not) be saved. The best approach is something like a banking holiday for the largest 19 banks and shadow banks in which institutions are closed for a relatively brief period. Supervisors move in to assess problems. It is essential that all big banks be examined during the “holiday” to uncover claims on one another. It is highly likely that supervisors will find that several trillions of dollars of bad assets will turn out to be claims big financial institutions have on one another (that is exactly what was found when AIG was examined — which is why the government bail-out of AIG led to side payments to the big banks and shadow banks). . . . By taking over and resolving the biggest 19 banks and netting claims, the collateral damage in the form of losses for other banks and shadow banks will be relatively small.

What we need to avoid at all costs is “TARP II” – another bank bailout by the taxpayers. No bank is too big to fail. The giant banks can be broken up and replaced with a network of publicly-owned banks and community banks, which could do a substantially better job of serving consumers and businesses than Wall Street is doing now.

Go Ellen! I nominate her for one of the top posts in economics in this country. I believe there are plenty of them in need of smart people.

The truth - that no idiocy is too extreme to be taken seriously by the right-wing media establishment anymore - is, indeed, far worse.

Frank Rich

My guess is that facts won't apply to anything the rightwingnuts will say from now on.

The fraudulent rightwingnutter TV scholar Dinesh D'Souza, who made his name originally by outing gays as a College Republican at Dartmouth has finally been outed. But don't hold your breath to see him disappear from all the Sunday Morning Snooze shows.

D'Souza's embarrassing history should've led this book straight to the remainder bin. Instead it made the cover of Forbes. Then Newt Gingrich endorsed it. Then Glenn Beck endorsed it. The book immediately climbed up the Amazon bestseller list.

Now the White House is involved, with Robert Gibbs asking Forbes to retract the numerous factual inaccuracies. All Forbes will say is that facts don't apply in opinion pieces.

And, of course, you already knew about Bob Woodward being the source of the Hillary/Biden switch rumor? That crazy Woodward! You'd think he'd be busy enough spinning the lies that he publishes as facts in all his nonfiction novels, wouldn't you? (Guess after finishing that last book he felt the need to say something else (or he is completely off his leash now).)

But no (emphasis marks added - Ed.).

CNN's John King (USA) started it, of course. He held up Woodward's book, then repeated some of that idle Beltway "gossip" that is usually just made up by pundits wishing to speculate. "You know the talk in town, a lotta people think if the president looks a little weak going into 2012, he'll have to do a switch there, and run with Hillary Clinton as his running mate."

Now, first of all, "a lotta people" do not actually "think" that will happen. It's something pundits like Mark Halperin fantasize about. But wishful thinking is not the same as an actual reasonable prediction of future events.

So, King asks Bob Woodward, America's most famous journalist - the man who speaks to everyone worth speaking to in the corridors of power, who just finished what he always refers to as "hundreds of hours" of interviews with everyone at the White House from the president on down - did he hear anything about a shocking and unprecedented Clinton-Biden switch?

"It's on the table," Woodward said.

Wow! Except, as the Atlantic's Marc Ambinder succinctly tweeted: "No, it's not."

Does the world's most successful political reporter actually not understand politics? That's what Ambinder went on to argue in a piece that was also an amusing parody of Woodward's omniscient third-person prose:

"I can't believe Woodward would say something like that," Ambinder told his editor, Bob Cohn, over coffee in Cohn's Watergate office the next day. "It suggests that he knows next to nothing about the president's actual relationship with his vice president and secretary of state ... or that he has done no reporting on the question at all. Which is absurd, because Woodward is a reporter's reporter."

Then again, Ambinder thought privately, one of the senior policymakers who played a starring role in Woodward's latest book had characterized its conclusions as "60 percent right, 40 percent completely wrong." And that was from a policymaker who came across favorably in the book.

Woodward is notorious for giving favorable coverage in his books to the people who talk to him the most (and for worshiping certain members of the military, especially when they're engaged in policy battles with civilian leadership). But does the guy actually believe what his odious sources tell him in his lovely Georgetown home? Does he buy their lies? Does the guy who took down Nixon think political operatives are trustworthy?

Here's a big red flag: His source on the Biden-Clinton switch was apparently pollster grifter Mark Penn. Penn is a professional liar and nearly every political decision he made while attempting to steer Hillary Clinton's 2008 presidential campaign was epically, historically stupid.

So Woodward was just repeating half-baked speculative nonsense from professional (and inept) Clinton-booster Mark Penn as if it was something serious people in the White House were considering.

So, Mark Penn is why Hillary's campaign was a nonstarter with me? Because I certainly sensed "stoopid" coming from somewhere. And Woodward? I've had no respect for that CIA-schooled machiavellian (who missed or purposely obscured every important story after his take on Watergate) since I read Russ Baker's Bush Family of Secrets. But many people still do, and he will be heard - mainly as a jokester this time, I'm hoping. But wouldn't it be loverly if all the con men (and women) could be exposed this election cycle? It seems to me that the clowns are leading the way - if only the citizens who are left paying for their financial and criminal detritus will demand their exposure. And then we could begin the serious cleaning up of the mess we've been left with after these last 30 years of fraudster leadership.

Suzan
________________

OF COURSE, They Knew All Along: Banks’ Self-Dealing Super-Charged Financial Crisis - Will We Ever "Break the Banks?" Truth About Magnetar

Will We Ever "Break the Banks?"

Ha! Doubtful.

We can't even prosecute lawbreakers.

They only get asked for minimal fines as penance for breaking YOU (US)! The oddest national occurrence is that now that we know the extent of the fraudulent behavior at the top and how they changed the laws specifically to benefit themselves, that no criminal proceedings occur still.

Anywhere.

From (of all sources now . . .) Newsweek (trying to rehabilitate its past image?). (Emphasis marks added - Ed).

As an adult, however, my love of the legal system - a child’s dream of truth and fairness - grew more complicated, gnarled by the understanding that justice isn’t meted out equally after all, especially if you’re an investment banker.

My first inkling of this came as a doctoral student at MIT in the 1980s. I learned that large corporations outspend the government by as much as 100 to 1 in their efforts to shake charges, and many of my professors made millions as expert witnesses for the defense. Later, as a software entrepreneur, I watched as dozens of dotcoms went public, their stock prices inflated by the investment banks that helped them get there. Investors lost everything in the ensuing crash. But the big Wall Street firms escaped criminal prosecution, and the fines they paid were a tiny fraction of their profits.

This pattern - fines, but not prosecutions - has become the norm for offenses that would land ordinary people in jail. For example, earlier this year an Iranian-born U.S. citizen was convicted of operating an illegal money-transfer process, violating trade sanctions by sending $3 million to people and firms in his home country without proper documentation. He got a two-and-a-half-year sentence. Also this year, however, Barclays settled charges that it had processed transactions between banks in Iran, among other sanctioned countries, and U.S. entities. The bank signed a “deferred prosecution agreement,” meaning it “acknowledges responsibility for its conduct,” but the charges will be dismissed after a period of good behavior. It merely paid fines. Since January 2009, two other banks have settled similar criminal charges through fines. Nobody has been arrested.

CEOs Behaving Badly

During the last two decades, major U.S. and European banks have paid fines to settle charges of, among other things, accounting fraud (Fannie Mae, Freddie Mac), assisting Enron’s fraud (Citigroup, J.P. Morgan), assisting people in tax evasion (UBS), using bribery to sell financial products (J.P. Morgan), money laundering (Citicorp), and fraudulently recommending stocks in exchange for business (10 investment banks in the dotcom era). In paying the fines, none of these banks acknowledged wrongdoing.

Now we’re witnessing another round of this shameful routine. President Obama and Attorney General Eric Holder Jr. have said they would hold Wall Street accountable for the crash, warning “unscrupulous executives,” in Holder’s words, that “we will investigate you, we will prosecute you, and we will incarcerate you.”

But despite fraud on a scale possibly unmatched in history, the Justice Department has not charged a single executive or firm. The Securities and Exchange Commission, meanwhile, has extracted only fines from a handful of big banks. Three of the federal judges who oversaw these cases - none of which included an acknowledgment of guilt - protested from the bench, saying the fines are “not enough to deter anyone from doing anything,” the justice is “half baked at best,” and the banks are getting “a free ride.” (Holder has defended his financial-fraud task force, stressing “the totality” of its efforts, including cases against mortgage fraud and insider trading; SEC chairwoman Mary Schapiro has noted that the bulk of its investigations are “not necessarily” done.)

Banks’ Self-Dealing Super-Charged Financial Crisis

"They Created False Demand"

Over the last two years of the housing bubble, Wall Street bankers perpetrated one of the greatest episodes of self-dealing in financial history.

Faced with increasing difficulty in selling the mortgage-backed securities that had been among their most lucrative products, the banks hit on a solution that preserved their quarterly earnings and huge bonuses:

They created fake demand.

A ProPublica analysis shows for the first time the extent to which banks - primarily Merrill Lynch, but also Citigroup, UBS and others - bought their own products and cranked up an assembly line that otherwise should have flagged.

The products they were buying and selling were at the heart of the 2008 meltdown - collections of mortgage bonds known as collateralized debt obligations, or CDOs.

As the housing boom began to slow in mid-2006, investors became skittish about the riskier parts of those investments. So the banks created - and ultimately provided most of the money for - new CDOs. Those new CDOs bought the hard-to-sell pieces of the original CDOs. The result was a daisy chain that solved one problem but created another: Each new CDO had its own risky pieces. Banks created yet other CDOs to buy those.

Individual instances of these questionable trades have been reported before, but ProPublica's investigation, done in partnership with NPR's Planet Money, shows that by late 2006 they became a common industry practice.

An analysis by research firm Thetica Systems, commissioned by ProPublica, shows that in the last years of the boom, CDOs had become the dominant purchaser of key, risky parts of other CDOs, largely replacing real investors like pension funds.

By 2007, 67 percent of those slices were bought by other CDOs, up from 36 percent just three years earlier. The banks often orchestrated these purchases. In the last two years of the boom, nearly half of all CDOs sponsored by market leader Merrill Lynch bought significant portions of other Merrill CDOs.

ProPublica also found 85 instances during 2006 and 2007 in which two CDOs bought pieces of each other's unsold inventory. These trades, which involved $107 billion worth of CDOs, underscore the extent to which the market lacked real buyers. Often the CDOs that swapped purchases closed within days of each other, the analysis shows.

There were supposed to be protections against this sort of abuse. While banks provided the blueprint for the CDOs and marketed them, they typically selected independent managers who chose the specific bonds to go inside them. The managers had a legal obligation to do what was best for the CDO. They were paid by the CDO, not the bank, and were supposed to serve as a bulwark against self-dealing by the banks, which had the fullest understanding of the complex and lightly regulated mortgage bonds.

It rarely worked out that way. The managers were beholden to the banks that sent them the business. On a billion-dollar deal, managers could earn a million dollars in fees, with little risk. Some small firms did several billion dollars of CDOs in a matter of months.

"All these banks for years were spawning trading partners," says a former executive from Financial Guaranty Insurance Company, a major insurer of the CDO market. "You don't have a trading partner? Create one."

From Foreclosure:

The core issue for the economy is the continued cost of a housing bubble made possible only after what Clinton Treasury Secretary Lawrence Summers back then trumpeted as necessary “legal certainty” was provided to derivative packages made up of suspect Alt-A and subprime mortgages.

It was the Commodity Futures Modernization Act, which Senate Republican Phil Gramm drafted and which Clinton signed into law, that made legal the trafficking in packages of dubious home mortgages. In any decent society the creation of such untenable mortgages and the securitization of risk irrationally associated with it would have been judged a criminal scam. But no such judgment was possible because thanks to Wall Street’s sway under Clinton and Bush the bankers got to rewrite the laws to sanction their treachery.

It is Obama’s continued deference to the sensibilities of the financiers and his relative indifference to the suffering of ordinary people that threaten his legacy, not to mention the nation’s economic well-being. There have been more than 300,000 foreclosure filings every single month that Obama has been president, and as The New York Times editorialized, "Unfortunately, there is no evidence that the Obama administration’s efforts to address the foreclosure problem will make an appreciable dent."

The ugly reality that only 398,198 mortgages have been modified to make the payments more reasonable can be traced to the program being based on the hope that the banks would do the right thing. While Obama continued the Bush practice of showering the banks with bailout money, he did not demand a moratorium on foreclosures or call for increasing the power of bankruptcy courts to force the banks, which created the problem, to now help distressed homeowners. ...foreclosures are behind Tuesday’s news that U.S. home sales reached their lowest point in 15 years and that there is unlikely to be an economic recovery without a dramatic turnabout in the housing market.

The Magnetar Trade: How One Hedge Fund Helped Keep the Bubble Going

Inside Job: Bet Against The American Dream!

In late 2005, the booming U.S. housing market seemed to be slowing. The Federal Reserve had begun raising interest rates. Subprime mortgage company shares were falling. Investors began to balk at buying complex mortgage securities. The housing bubble, which had propelled a historic growth in home prices, seemed poised to deflate. And if it had, the great financial crisis of 2008, which produced the Great Recession of 2008-09, might have come sooner and been less severe.

At just that moment, a few savvy financial engineers at a suburban Chicago hedge fund [1] helped revive the Wall Street money machine, spawning billions of dollars of securities ultimately backed by home mortgages.

When the crash came, nearly all of these securities became worthless, a loss of an estimated $40 billion paid by investors, the investment banks who helped bring them into the world, and, eventually, American taxpayers.

Yet the hedge fund, named Magnetar for the super-magnetic field created by the last moments of a dying star, earned outsized returns in the year the financial crisis began.

How Magnetar pulled this off is one of the untold stories of the meltdown. Only a small group of Wall Street insiders was privy to what became known as the Magnetar Trade [3]. Nearly all of those approached by ProPublica declined to talk on the record, fearing their careers would be hurt if they spoke publicly. But interviews with participants, e-mails [4], thousands of pages of documents and details about the securities that until now have not been publicly disclosed shed light on an arcane, secretive corner of Wall Street.

According to bankers and others involved, the Magnetar Trade worked this way: The hedge fund bought the riskiest portion of a kind of securities known as collateralized debt obligations - CDOs. If housing prices kept rising, this would provide a solid return for many years. But that's not what hedge funds are after. They want outsized gains, the sooner the better, and Magnetar set itself up for a huge win: It placed bets that portions of its own deals would fail.

Along the way, it did something to enhance the chances of that happening, according to several people with direct knowledge of the deals. They say Magnetar pressed to include riskier assets in their CDOs that would make the investments more vulnerable to failure. The hedge fund acknowledges it bet against its own deals but says the majority of its short positions, as they are known on Wall Street, involved similar CDOs that it did not own. Magnetar says [5] it never selected the assets that went into its CDOs.

Magnetar says [6] it was "market neutral," meaning it would make money whether housing rose or fell. (Read their full statement. [7]) Dozens of Wall Street professionals, including many who had direct dealings with Magnetar, are skeptical of that assertion. They understood the Magnetar Trade as a bet against the subprime mortgage securities market. Why else, they ask, would a hedge fund sponsor tens of billions of dollars of new CDOs at a time of rising uncertainty about housing?

Key details of the Magnetar Trade remain shrouded in secrecy and the fund declined to respond to most of our questions. Magnetar invested in 30 CDOs from the spring of 2006 to the summer of 2007, though it declined [8] to name them. ProPublica has identified 26 [9].

An independent analysis [10] commissioned by ProPublica shows that these deals defaulted faster and at a higher rate compared to other similar CDOs. According to the analysis, 96 percent of the Magnetar deals were in default by the end of 2008, compared with 68 percent for comparable CDOs. The study [10] was conducted by PF2 Securities Evaluations, a CDO valuation firm. (Magnetar says defaults don't necessarily indicate the quality of the underlying CDO assets.)

From what we've learned, there was nothing illegal in what Magnetar did; it was playing by the rules in place at the time. And the hedge fund didn't cause the housing bubble or the financial crisis. But the Magnetar Trade does illustrate the perverse incentives and reckless behavior that characterized the last days of the boom.

At least nine banks helped Magnetar hatch deals. Merrill Lynch, Citigroup and UBS all did multiple deals with Magnetar. JPMorgan Chase, often lauded for having avoided the worst of the CDO craze, actually ended up doing one of the riskiest deals with Magnetar, in May 2007, nearly a year after housing prices started to decline. According to marketing material and prospectuses [9], the banks didn't disclose to CDO investors the role Magnetar played.

Many of the bankers who worked on these deals personally benefited, earning millions in annual bonuses. The banks booked profits at the outset. But those gains were fleeting. As it turned out, the banks that assembled and marketed the Magnetar CDOs had trouble selling them. And when the crash came, they were among the biggest losers.

Some bankers involved in the Magnetar Trade now regret what they did. We showed one of the many people fired as a result of the CDO collapse a list of unusually risky mortgage bonds included in a Magnetar deal he had worked on. The deal was a disaster. He shook his head at being reminded of the details and said: "After looking at this, I deserved to lose my job."

Magnetar wasn't the only market player to come up with clever ways to bet against housing. Many articles and books, including a bestseller by Michael Lewis [11], have recounted how a few investors saw trouble coming and bet big. Such short bets can be helpful; they can serve as a counterweight to manias and keep bubbles from expanding.

Magnetar's approach had the opposite effect - by helping create investments it also bet against, the hedge fund was actually fueling the market. Magnetar wasn't alone in that: A few other hedge funds also created CDOs they bet against. And, as the New York Times has reported, Goldman Sachs did too. But Magnetar industrialized the process, creating more and bigger CDOs.

Several journalists have alluded to the Magnetar Trade in recent years, but until now none has assembled a full narrative. Yves Smith, a prominent financial blogger who has reported on aspects of the Magnetar Trade, writes in her new book, "Econned," [12] that "Magnetar went into the business of creating subprime CDOs on an unheard of scale. If the world had been spared their cunning, the insanity of 2006-2007 would have been less extreme and the unwinding milder."

Please read the whole essay.

If you have the time and fortitude.

Suzan
________________

Wanna Know How Things Work in DC? “Obama’s Wars” The Story Bob Woodward Won’t Tell - No Clean Elections: How Chamber of Commerce Pays Off China, Et Al

It's beginning to seem that everything you read now (reports on the wars, corruption, and even regular old-fashioned stealing from the poor) is just one more method of money laundering used by the already fabulously wealthy who desperately want to be even wealthier. And they'll tell you about it. Truthfully. And how unfortunate they are if you don't agree and vote for policies that allow them to steal even more of your money. Their previous success at national larceny has bred a class of parasites/pirates who feel entitled to not only enrich themselves at your expense, but to feel that you must be ungrateful if you don't understand how necessary it all is to their worldview of what benefits everyone (and is therefore just and good for all). Absolute fantasyland. Welcome to the USA. God Bless Us Every One!

I always read Who What Why first as Russ Baker is one of the best writer/reporters we have willing to relate the insider's news today bar none.

I know that seems to be a very broad claim but from his published work on the Bush family secrets to what really was behind the Watergate hearings, he is the man to read for the inside dope.

It's no different today as he tells us all about Bob Woodward's gambits: past and present. (Emphasis marks added - Ed.)

“Obama’s Wars” The Real Story Bob Woodward Won’t Tell

Russ Baker

10 Comments

Just one year before the publication of “Obama’s Wars,” Bob Woodward became a player in his own book-in-progress. He morphed into his true identity: Warrior Bob. Actually, there’s an even deeper persona, Agent Woodward — but we’re getting ahead of ourselves.

In June of 2009, Woodward traveled to Afghanistan with General Jim Jones, President Obama’s National Security adviser, to meet with General Stanley McChrystal, then the commander of forces there. Why did Jones allow this journalist to accompany him? Because Jones knew that Woodward could be counted on to deliver the company line — the military line. In fact, Jones was essentially Woodward’s patron.

The New Republic’s Gabriel Sherman wrote [1] at the time that . . . Jones was a guest of Woodward at his wife Elsa Walsh’s fiftieth birthday party held at Sally Quinn and Ben Bradlee’s house. He and Elsa were glued to Jones at the cocktail party before the dinner started . . . .

In September of last year, McChrystal (or someone close to him) leaked to Woodward a document that essentially forced President Obama’s hand. Obama wanted time to consider all options on what to do about Afghanistan. But the leak, publicizing the military’s “confidential” assertion that a troop increase was essential, cast the die, and Obama had to go along.

Nobody was happier than the Pentagon — and, it should be said, its allies in the vast military contracting establishment.

The website Firedoglake chronicled the developments in a pungent essay [2]: Apparently General McChrystal and the Petraeus cabal aren’t willing to wait for their Commander in Chief to set the strategy. Prior to the President’s interviews, McChrystal’s people were already telling journalists that they were “impatient with Obama” as Nancy Youssef reported [3]. This “Power Play [4],” as I mentioned last night, included a veiled threat that McChrystal would resign if he didn’t get his way.

And sure enough, just hours after the Commander in Chief was on the airwaves, somehow McChrystal’s classified report hit the Washington Post [5] … compliments of Bob Woodward no less.

Wow, what a coincidence!

This episode highlights a crucial aspect of Bob Woodward’s career that has been ignored by most of the media. Simply put, Woodward is the military’s man, and always has been.

For almost four decades, under cover of his supposedly “objective” reporting, Woodward has represented the viewpoints of the military and intelligence establishments. Often he has done so in the context of complex inside maneuvering of which he gives his readers little clue. He did it with the book Veil, about CIA director William Casey, in which he relied on Admiral Bobby Ray Inman, a rival of Casey’s, as his key source. (Inman, from Texas, was closely identified with the Bush faction of the CIA.)

The book was based in part on a “deathbed interview” with Casey that Casey’s widow and former CIA guards said never took place. Typically, Woodward uses information he gets from his main sources to gain access to others. He then gets more secrets from them, and so on down the line.

His stature — if that’s the word — as a repository of this inside dope has been key to the relentless success machine that his media colleagues have perpetuated. The New York Times review [6] of his Obama book laid out the formula:

In Obama’s Wars, Mr. Woodward, as usual, eschews analysis and commentary. Instead, he hews to his I Am a Tape Recorder technique, using his insider access to give readers interested in inside-the-Beltway politics lots of granular detail harvested from interviews conducted on background, as well as leaked memos, meeting notes and other documents.

Some of this information is revealing about the interplay of personality and policy and politics in Washington; some of it is just self-serving spin. As he’s done in his earlier books, Mr. Woodward acknowledges that attributions of thoughts, conclusions or feelings to a person were in some cases not obtained directly from that person, but from notes or from a colleague whom the person told — a questionable but increasingly popular method, which means the reader should take the reconstructed scenes with a grain of salt.

And then, thanks to all this attention, and even with that grain of salt, the book went to #1.

But might there be more to Woodward and his oeuvre than just questionable work practices? Well, let’s see.

Woodward granted former CIA director George H.W. Bush a pass by excluding him from accounts of Iran-Contra, which occurred while the notorious intriguer was vice president under the notoriously hands-off Ronald Reagan. (When I asked Woodward about this for my book Family of Secrets, he replied, “Bush was…What was it he said at the time? I was out of the loop?”)

Later Woodward got exclusive access to H.W.’s son. He spent more time with George W. Bush than did any other journalist, writing several largely sympathetic books about his handling of Iraq and Afghanistan before playing catch-up with prevailing sentiment and essentially reversing course.

Now, for a bit of cognitive dissonance. Woodward’s signature achievement - bringing down Richard Nixon - turns out not to be what we all thought.

If that comes as a surprise, you have missed a few books, including bestsellers, that put pieces of this puzzle together. (Family of Secrets has several chapters on the real Watergate story, but there are others that present detailed information, including those by Len Colodny and Robert Gettlin, James Rosen, Jim Hougan and others.)

Here’s the deal: Bob, top secret Naval officer, gets sent to work in the Nixon White House while still on military duty. Then, with no journalistic credentials to speak of, and with a boost from White House staffers, he lands a job at the Washington Post. Not long thereafter he starts to take down Richard Nixon. Meanwhile, Woodward’s military bosses are running a spy ring inside the White House that is monitoring Nixon and Kissinger’s secret negotiations with America’s enemies (China, Soviet Union, etc), stealing documents and funneling them back to the Joint Chiefs of Staff.

They then give what they stole to columnist Jack Anderson and others in the press. That’s not the iconic Woodward of legend, of course — so it takes a while for this notion to settle in the mind.

But there’s more — and it’s even more troubling.

Did you know there was really no Deep Throat, that the Mark Felt story was conjured up as yet another layer of cover in what became a daisy chain of disinformation?

Did you know that Richard Nixon was loathed and feared by the military brass, that they and their allies were desperate to get Nixon out and halt his rapprochement with the Communists?

That a bunch of operatives with direct or indirect CIA/military connections, from E. Howard Hunt to Alexander Butterfield to John Dean — wormed their way into key White House posts, and started up the Keystone Kops operations that would be laid at Nixon’s office door?

Believe me, I understand. It sounds like the “conspiracy theory” stuff that we have been trained to dismiss. But I’ve just spent five years on a heavily documented forensic dig into this missing strata of American history, and I myself have had to come to terms with the enormous gap between reality and the “reality” presented by the media and various establishment gatekeepers who tell us what’s what.

Given this complicity, it’s no surprise that when it comes to Woodward’s latest work, the myth-making machine is on auto pilot. The public, of course, will end up as confused and manipulated as ever. And so things will continue, same as they ever were. Endless war, no substantive reforms. Unless we wake up to our own victimhood.

And try to figure out if the USA is worth saving?

Or going down with.

Speaking of "down." Down With Tyranny tells us another inside story, but it's one you are already more than familiar with as it's in your face every day. Just read your local paper's ads for the Chamber of Commerce's choice of candidates - and figure out how they suddenly became such a major player in elections (and quake with fear)! And then there are those dirty paper deals involving Boehner's young girlfriend . . . (no wonder his tan is so orangey)!

What Would China Pay To Make John Boehner Speaker And To Give The GOP Power Again?

Whatever It Takes... And The Chamber Of Commerce Is The Vehicle

America's enemies have a clear vision for how they want our country run -- and they're willing to pay to implement it.

Communist China knows who its friends are -- and it goes beyond just Ron Johnson who loves the Chinese slave labor model so much that he seems likely to move there if Russ Feingold manages to beat him in November. When Tim Ryan (D-OH) introduced legislation to prevent China from continuing the systematic currency manipulation that has cost Americans hundreds of thousands of jobs, it was lobbyist owned John Boehner and his entire leadership team -- Eric Cantor, Mike Pence, David Dreier, Paul Ryan, Pete Sessions -- who took the side of the Chinese against America.

Even Boehner's own caucus was horrified and most Republicans deserted Boehner and his Communist Chinese allies and crossed the aisle to vote with the Democrats and, for a change, the interests of ordinary American working families.

Yesterday, Think Progress broke the story on just how China and other foreign interests are going about taking over the U.S. government -- using the easily manipulatable Republicans and their reactionary allies at the U.S. Chamber of Commerce. [The FEC has been asked to investigate.]

The largest attack campaign against Democrats this fall is being waged by the U.S. Chamber of Commerce, a trade association organized as a 501(c)(6) that can raise and spend unlimited funds without ever disclosing any of its donors... The Chamber’s spending has dwarfed every other issue group and most political party candidate committee spending. A ThinkProgress investigation has found that the Chamber funds its political attack campaign out of its general account, which solicits foreign funding. And while the Chamber will likely assert it has internal controls, foreign money is fungible, permitting the Chamber to run its unprecedented attack campaign.

According to legal experts consulted by ThinkProgress, the Chamber is likely skirting longstanding campaign finance law that bans the involvement of foreign corporations in American elections.

In recent years, the Chamber has become very aggressive with its fundraising, opening offices abroad and helping to found foreign chapters (known as Business Councils or “AmChams”). While many of these foreign operations include American businesses with interests overseas, the Chamber has also spearheaded an effort to raise money from foreign corporations, including ones controlled by foreign governments. These foreign members of the Chamber send money either directly to the U.S. Chamber of Commerce, or the foreign members fund their local Chamber, which in turn, transfers dues payments back to the Chamber’s H Street office in Washington DC.

These funds are commingled to the Chamber’s 501(c)(6) account which is the vehicle for the attack ads...There are many reasons foreign corporations are seeking to defeat Democratic candidates this November. The Chamber has repeatedly sent out issue alerts attacking Democratic efforts to encourage businesses to hire locally rather than outsource to foreign counties. The Chamber has also bitterly fought Democrats for opposing unfettered free trade deals.

To galvanize foreign businesses, the Chamber has commissioned former Ambassador Frank Lavin -- who served as the McCain-Palin Asia campaign director and has appeared on television multiple times recently saying a Democratic Congress is bad for business -- to speak before various foreign Chamber affiliates to talk about the stakes for the 2010 midterm elections.

Meanwhile, wonderers are wondering if Boehner's lobbyist girlfriend -- who lobbies for PRINTING companies, always looking for cheap coated paper (which China has been DUMPING into the U.S. market) -- has had anything to do with Boehner having sold out the paper companies in his own district, costing hundreds of local jobs.

I think this story will be breaking by the end of the week. We've been talking with some of the paper industry locals who weren't aware of the foreign money flooding into the U.S. Chamber of Commerce to help the GOP capture Congress but are very aware of Boehner's disgraceful behavior when it came to saving American jobs.

Remember, when senior Ohio Republicans Mike Turner and Steven LaTourette signed onto a July 28 letter to President Obama urging him to look into illegal Chinese subsidies of the coated paper dumping Boehner's girlfriend lobbyists was pumping for -- so to speak -- Boehner opposed it.

Arab money, Communist Chinese money, Russian money... every shady government on earth would like to see John Boehner and the GOP in control of Congress... and thanks to a corrupt, corporate Supreme Court ruling they are flooding cash into the political system to make sure they get what they want. Inserting implausible laughing stocks inside the U.S. government -- clowns like Rand Paul, Christine O'Donnell, Daniel "Taliban Dan" Webster, Sharron Angle, Joe Miller, Linda McMahon, Ken Buck, Carly Fiorina, Mike Lee, Marco Rubio, and, of course, their very own Ron Johnson -- would be a dream come true for this country's enemies.

NYTimes Notices All Those Yuan And Rubles Showing Up At Ad Agencies

Probably too late to stop now, but the U.S. Chamber of Commerce is clearly a criminal enterprise that should be shut down.

What can we do as citizens? If you see an ad by the Chamber of Commerce, understand that it's being funded by another country with interests antithetical to our own. If the ad is anti-Candidate A, vote for that candidate. Keep China from taking over America through John Boehner.

Read it all here.

And then notice that even the New York Times thinks they can publish (at long last) a story on this continuing and worsening travesty without explaining how they've let this type of activity go unreported for the last 30 years (remember the payoffs to the Rayguns for Iran/Contra aid?) as a silent partner to crime until now. And, oh yes, one more item of interest - remember all the Bush/Cheney appointees moved into good government/civil service jobs from political ones which had no background checks? I'm guessing that many of them are in the IRS as it's quit functioning on this level. On purpose. Not to mention the Supreme Court! (Emphasis marks inserted - Ed.)

Clean and Open American Elections

October 5, 2010

For at least 44 years, it has been illegal for foreign corporations, countries and individuals to make political contributions in the United States for any election, either directly or indirectly. It is even against the law to solicit such contributions. But in this Wild West year of political money, that longstanding ban is being set aside. The United States Chamber of Commerce — one of the biggest advertisers in midterm races around the country — is actively soliciting foreign money, and government enforcers seem to be doing nothing to stop it.

According to a report issued Tuesday by the Center for American Progress, a liberal policy group in
Washington, the Chamber is getting “dues” payments of tens of thousands of dollars from foreign companies in countries such as Bahrain, India and Egypt, and then mingling the money with its fund to advocate for or against candidates in the midterm races.

The Chamber firmly denies the charge, saying its internal accounting rules prevent any foreign money from being used for political purposes. Money, however, is fungible, and it is impossible for an outsider to know whether the group is following its rules. The Chamber has vowed to spend more than $75 million before the November election, and it has already run 8,000 ads, most of which support Republican candidates. The ads do not urge a vote for or against a specific candidate, but when they accuse Senator Barbara Boxer of California of “destroying jobs,” or call Richard Blumenthal of Connecticut “the worst attorney general in the nation,” no one can mistake the intent. (The two candidates, both Democrats, are in tight Senate races.)

Because the United States Chamber is organized as a 501(c)(6) business league under the federal tax code, it does not have to disclose its donors, so the full extent of foreign influence on its political agenda is unknown. But Tuesday’s report sheds light on how it raises money abroad. Its affiliate in Abu Dhabi, for example, the American Chamber of Commerce, says it has more than 450 corporate and individual members in the United Arab Emirates who pay as much as $8,500 a year to join.

Because of a series of court decisions that culminated in the Supreme Court’s Citizens United ruling earlier this year, these and similar 501(c) nonprofits have become huge players in the year’s election, using unlimited money from donors who have no fear of disclosure. (Not surprisingly, the Chamber has been a leading opponent of legislation to require disclosure.) One such group, American Crossroads, organized by Karl Rove, announced on Tuesday a $4.2 million ad buy to support Republican candidates, bringing the group’s total spending to about $18 million so far.

The possible commingling of secret foreign money into these groups raises fresh questions about whether they are violating both the letter and spirit of the campaign finance laws. The Federal Election Commission, which has been rendered toothless by its Republican members, should be investigating possible outright violations of the Federal Election Campaign Act by foreign companies and the Chamber.

The Internal Revenue Service, which is supposed to ensure that these nonprofit groups are not primarily political, has fallen down on the job. Last week, Senator Max Baucus, Democrat of Montana and chairman of the Senate Finance Committee, demanded that the I.R.S. look into whether the tax code was being misused for political purposes, and, on Tuesday, two watchdog groups made the same request of the agency. The government needs to make sure that the tax code — and American control of American elections — is not being violated.

Right.

Because that's never happened before.

Does anyone else notice that this corruption is getting so deep that it's almost undeniable - even among the clown candidates? I'm guessing that Mrs. Palin and Boo-Hoo Boy Beck will soon be upon us to explain how patriotic the Chamber of Commerce (and all their fine members throughout the world) really are.

And 30% of the population will buy it.

And speaking of a small portion of our population running the show (please click on the link for the full essay):

"How the U.S. Military Became Specialists in Quagmires"

(From Tom Dispatch) . . . what’s happened so far may be only the beginning. In his new book, Bob Woodward reports that Obama administration officials, military and civilian, were eager to do something more in Pakistan as early as the fall of 2009. As Dennis Blair, the Director of National Intelligence, put it obliquely but clearly enough to the Pakistani ambassador at the time, if his country didn’t agree to a “strategic partnership,” essentially by moving against militant networks in North Waziristan, “[W]e will have to do what we must to protect U.S. interests.” Last Sunday, Greg Miller of the Washington Post reported that the administration's Afghan War “review” back then had actually “centered largely on the need to eliminate insurgent sanctuaries in Pakistan.” He also noted that Afghan War commander General David Petraeus is now advocating “a more aggressive posture with Pakistan, and [has] been particularly supportive of the CIA drone effort.”

If one passage in recent news reports raised a warning flag, however, it’s this eerie one from Saturday's Wall Street Journal, which should give any reader the creeps: “U.S. officials say a successful terrorist strike against the West emanating from Pakistan could force the U.S. to take unilateral military action -- an outcome all parties are eager to avoid.” Such a strike would “force” the U.S. “to take unilateral military action”? Think about that for a moment. Amid a sudden drumbeat of announcements of possible strikes by Pakistani-based terrorist groups in Europe, there may, in fact, be a growing contingent of U.S. military and civilian officials so frustrated with the disastrous war in Afghanistan that they are ready to expand the war significantly in Pakistan, and are only awaiting the necessary excuse to do so.

Talk about playing with fire. Pakistan isn’t Afghanistan. Further major escalations of the American war in that country -- flailing responses to ongoing failure -- would be asking for trouble of every sort. Ask long enough, and it will come. With that in mind, consider the assessment Andrew Bacevich, author of the bestselling Washington Rules: America’s Path to Permanent War, offers of the first nine years of war in Afghanistan (and Pakistan). To catch Bacevich discussing how the U.S. military became specialists in quagmires in a Timothy MacBain TomCast audio interview click here or, to download it to your iPod, here.

Suzan
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