Whose Iraq is it? – 21st Century Colonialism in Iraq

July 27, 2009 by admin1  
Filed under Featured, News

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One of the earliest metaphors President George W. Bush and some of his top officials wielded in their post-invasion salad days in Iraq involved bicycles. The question was: Should we take the “training wheels” off the Iraqi bike (of democracy)? Then-Secretary of Defense Donald Rumsfeld, for example,commented smugly on the way getting Iraq “straightened out” was like teaching your kid to ride a bike:

“They’re learning, and you’re running down the street holding on to the back of the seat. You know that if you take your hand off they could fall, so you take a finger off and then two fingers, and pretty soon you’re just barely touching it. You can’t know when you’re running down the street how many steps you’re going to have to take. We can’t know that, but we’re off to a good start.”

That image (about as patronizingly colonial as they come) of the little pedaling Iraqi child with an American parent running close behind, was abandoned when around the first corner, as it turned out, was an insurgent with an rocket-propelled grenade. Many years and many disasters later, though, Americans, whether in the Obama administration, the Washington punditocracy, or the media are still almost incapable of not being patronizing when it comes to Iraq. Take a typical recent piece of “news analysis” in the New York Times by a perfectly sharp journalist, Alissa J. Rubin. It was headlined in print “America’s New Role in Iraq Prompts a Search for Means of Influence” and focused, in part, on Vice President Joe Biden’s recent trip there supposedly to “assuage” Iraqi feelings that they are being “moved to the bottom shelf.”

Rubin writes (and this sort of thing has been written countless times before) that the Americans are now in search of a “new tone” for their dealings in that country. (In the Bush years, this was often called — in another strange imperial metaphor — “putting an Iraqi face” on things.) “They have,” she comments, “a reputation for being heavy-handed, for telling Iraqis what to do rather than asking what they want.” But of course, as the piece makes clear, whatever his tone, Biden arrived in Iraq to tell Iraqis what they should do — or as she puts it, to try to “solve” the “troubles… that stymied three previous ambassadors and President George W. Bush”: continuing sectarian animosities, the passage of an Iraqi oil law, and the Kurdish problem.

These, it seems, are still our burden and we really can’t imagine it any other way. As the Iraqis quoted in Rubin’s piece make clear, the dominant role played by the U.S. is resented by the occupied — especially the elite — who have contempt for the occupiers, even if they find it hard to imagine life without them.

I mention this only because the tone of American writing and thought on Iraq has always been tinged with what Michael Schwartz, TomDispatch regular and author of a superb study, War Without End: The Iraq War in Context, says is a deeper colonial urge, one that unfortunately may not be fading, even as discussion of a U.S. military withdrawal from Iraq grows. (Catch a TomDispatch audio interview with Schwartz by clicking here.) Tom


Colonizing Iraq

The Obama Doctrine?
By Michael Schwartz

Here’s how reporters Steven Lee Myers and Marc Santora of the New York Timesdescribed the highly touted American withdrawal from Iraq’s cities last week:

“Much of the complicated work of dismantling and removing millions of dollars of equipment from the combat outposts in the city has been done during the dark of night. Gen. Ray Odierno, the overall American commander in Iraq, has ordered that an increasing number of basic operations — transport and re-supply convoys, for example — take place at night, when fewer Iraqis are likely to see that the American withdrawal is not total.”

Acting in the dark of night, in fact, seems to catch the nature of American plans for Iraq in a particularly striking way. Last week, despite the death of Michael Jackson, Iraq made it back into the TV news as Iraqis celebrated a highly publicized American military withdrawal from their cities. Fireworks went off; some Iraqis gathered to dance and cheer; the first military parade since Saddam Hussein’s day took place (in the fortified Green Zone, the country’s ordinary streets still being too dangerous for such things); the U.S. handed back many small bases and outposts; and Prime Minister Nouri al-Maliki proclaimed a national holiday — “sovereignty day,” he called it.

All of this fit with a script promisingly laid out by President Barack Obama in his 2008 presidential campaign. More recently, in his much praised speech to the students of Egypt’s Cairo University, he promised that the U.S. would keep no bases in Iraq, and would indeed withdraw its military forces from the country by the end of 2011.

Unfortunately, not just for the Iraqis, but for the American public, it’s what’s happening in “the dark” — beyond the glare of lights and TV cameras — that counts. While many critics of the Iraq War have been willing to cut the Obama administration some slack as its foreign policy team and the U.S. military gear up for that definitive withdrawal, something else — something more unsettling — appears to be going on.

And it wasn’t just the president’s hedging over withdrawing American “combat” troops from Iraq – which, in any case, make up as few as one-third of the 130,000 U.S. forces still in the country — now extended from 16 to 19 months. Nor was it the re-labeling of some of them as “advisors” so they could, in fact, stay in the vacated cities, or the redrawing of the boundary lines of the Iraqi capital, Baghdad, to exclude a couple of key bases the Americans weren’t about to give up.

After all, there can be no question that the Obama administration’s policy is indeed to reduce what the Pentagon might call the U.S. military “footprint” in Iraq. To put it another way, Obama’s key officials seem to be opting not for blunt-edged, Bush-style militarism, but for what might be thought of as an administrative push in Iraq, what Vice President Joe Biden has called “a much more aggressive program vis-à-vis the Iraqi government to push it to political reconciliation.”

An anonymous senior State Department official described this new “dark of night” policy recently to Christian Science Monitor reporter Jane Arraf this way: “One of the challenges of that new relationship is how the U.S. can continue to wield influence on key decisions without being seen to do so.”

Without being seen to do so. On this General Odierno and the unnamed official are in agreement. And so, it seems, is Washington. As a result, the crucial thing you can say about the Obama administration’s military and civilian planning so far is this: ignore the headlines, the fireworks, and the briefly cheering crowds of Iraqis on your TV screen. Put all that talk of withdrawal aside for a moment and — if you take a closer look, letting your eyes adjust to the darkness — what is vaguely visible is the silhouette of a new American posture in Iraq. Think of it as the Obama Doctrine. And what it doesn’t look like is the posture of an occupying power preparing to close up shop and head for home.

As your eyes grow accustomed to the darkness, you begin to identify a deepening effort to ensure that Iraq remains a U.S. client state, or, as General Odierno described it to the press on June 30th, “a long-term partner with the United States in the Middle East.” Whether Obama’s national security team can succeed in this is certainly an open question, but, on a first hard look, what seems to be coming into focus shouldn’t be too unfamiliar to students of history. Once upon a time, it used to have a name: colonialism.

Colonialism in Iraq

Traditional colonialism was characterized by three features: ultimate decision-making rested with the occupying power instead of the indigenous client government; the personnel of the colonial administration were governed by different laws and institutions than the colonial population; and the local political economy was shaped to serve the interests of the occupying power. All the features of classic colonialism took shape in the Bush years in Iraq and are now, as far as we can tell, being continued, in some cases even strengthened, in the early months of the Obama era.

The U.S. embassy in Iraq, built by the Bush administration to the tune of $740 million, is by far the largest in the world. It is now populated by more than 1,000 administrators, technicians, and professionals — diplomatic, military, intelligence, and otherwise — though all are regularly, if euphemistically, referred to as “diplomats” in official statements and in the media. This level of staffing — 1,000 administrators for a country of perhaps 30 million — is well above the classic norm for imperial control. Back in the early twentieth century, for instance, Great Britain utilized fewer officials to rule a population of 300 million in its Indian Raj.

Such a concentration of foreign officialdom in such a gigantic regional command center — and no downsizing or withdrawals are yet apparent there — certainly signals Washington’s larger imperial design: to have sufficient administrative labor power on hand to ensure that American advisors remain significantly embedded in Iraqi political decision-making, in its military, and in the key ministries of its (oil-dominated) economy.

From the first moments of the occupation of Iraq, U.S. officials have been sitting in the offices of Iraqi politicians and bureaucrats, providing guidelines, training decision-makers, and brokering domestic disputes. As a consequence, Americans have been involved, directly or indirectly, in virtually all significant government decision-making.

In a recent article, for example, the New York Times reported that U.S. officials are “quietly lobbying” to cancel a mandated nationwide referendum on the Status of Forces Agreement (SOFA) negotiated between the United States and Iraq — a referendum that, if defeated, would at least theoretically force the immediate withdrawal of all U.S. troops from the country. In another article, the Times reported that embassy officialshave “sometimes stepped in to broker peace between warring blocs” in the Iraqi Parliament. In yet another, the military newspaper Stars and Stripes mentioned in passing that an embassy official “advises Iraqis running the $100 million airport” just completed in Najaf. And so it goes.

Segregated Living

Most colonial regimes erect systems in which foreigners involved in occupation duties are served (and disciplined) by an institutional structure separate from the one that governs the indigenous population. In Iraq, the U.S. has been building such a structure since 2003, and the Obama administration shows every sign of extending it.

As in all embassies around the world, U.S. embassy officials are not subject to the laws of the host country. The difference is that, in Iraq, they are not simply stamping visas and the like, but engaged in crucial projects involving them in myriad aspects of daily life and governance, although as an essentially separate caste within Iraqi society. Military personnel are part of this segregated structure: the recently signed SOFA insures that American soldiers will remain virtually untouchable by Iraqi law, even if they kill innocent civilians.

Versions of this immunity extend to everyone associated with the occupation. Private security, construction, and commercial contractors employed by occupation forces are not protected by the SOFA agreement, but are nonetheless shielded from the laws and regulations that apply to normal Iraqi residents. As an Iraq-based FBI official told the New York Times, the obligations of contractors are defined by “new arrangements between Iraq and the United States governing contractors’ legal status.” In a recent case in which five employees of one U.S. contractor were charged with killing another contractor, the case was jointly investigated by Iraqi police and “local representatives of the FBI,” with ultimate jurisdiction negotiated by Iraqi and U.S. embassy officials. The FBI has established a substantial presence in Iraq to carry out these “new arrangements.”

This special handling extends to enterprises servicing the billions of dollars spent every month in Iraq on U.S. contracts. A contractor’s prime responsibility is to follow “guidelines the U.S. military handed down in 2006.” In all this, Iraqi law has a distinctly secondary role. In one apparently typical case, a Kuwaiti contractor hired to feed U.S. soldiers was accused of imprisoning its foreign workers and then, when they protested, sending them home without pay. This case was handled by U.S. officials, not the Iraqi government.

Beyond this legal segregation, the U.S. has also been erecting a segregated infrastructure within Iraq. Most embassies and military bases around the world rely on the host country for food, electricity, water, communications, and daily supplies. Not the U.S. embassyor the five major bases that are at the heart of the American military presence in that country. They all have their own electrical generating and water purification systems, their own dedicated communications, and imported food from outside the country. None, naturally, offer indigenous Iraqi cuisine; the embassy imports ingredients suitable for reasonably upscale American restaurants, and the military bases feature American fast food and chain restaurant fare.

The United States has even created the rudiments of its own transportation system. Iraqis often are delayed when traveling within or between cities, thanks to an occupation-created (and now often Iraqi-manned) maze of checkpoints, cement barriers, and bombed-out streets and roads; on the other hand, U.S. soldiers and officials in certain areas can move around more quickly, thanks to special privileges and segregated facilities.

In the early years of the occupation, large military convoys transporting supplies or soldiers simply took temporary possession of Iraqi highways and streets. Iraqis who didn’t quickly get out of the way were threatened with lethal firepower. To negotiate sometimes hours-long lines at checkpoints, Americans were given special ID cards that “guaranteed swift passage… in a separate lane past waiting Iraqis.” Though the guaranteed “swift passage” was supposed to end with the signing of the SOFA, the system is still operating at many checkpoints, and convoys continue to roar through Iraqi communities with “Iraqi drivers still pulling over en masse.”

Recently, the occupation has also been appropriating various streets and roads for its exclusive use (an idea that may have been borrowed from Israel’s 40-year-old occupation of the West Bank). This innovation has made unconvoyed transportation safer for embassy officials, contractors, and military personnel, while degrading further the Iraqi road system, already in a state of disrepair, by closing useable thoroughfares. Paradoxically, it has also allowed insurgents to plant roadside bombs with the assurance of targeting only foreigners. Such an incident outside Falluja illustrates what have now become Obama-era policies in Iraq:


“The Americans were driving along a road used exclusively by the American military and reconstruction teams when a bomb, which local Iraqi security officials described as an improvised explosive device, went off. No Iraqi vehicles, even those of the army and the police, are allowed to use the road where the attack occurred, according to residents. There is a checkpoint only 200 yards from the site of the attack to prevent unauthorized vehicles, the residents said.”

It is unclear whether this road will be handed back to the Iraqis, if and when the base it services is shuttered. Either way, the larger policy appears to be well established — the designation of segregated roads to accommodate the 1,000 diplomats and tens of thousands of soldiers and contractors who implement their policies. And this is only one aspect of a dedicated infrastructure designed to facilitate ongoing U.S. involvement in developing, implementing, and administering political-economic policies in Iraq.

Whose Military Is It?

One way to “free up” the American military for withdrawal would, of course, be if the Iraqi military could manage the pacification mission alone. But don’t expect that any time soon. According to media reports, if all goes well, this isn’t likely to occur for at least a decade. One telltale sign of this is the pervasive presence of American military advisors still embedded in Iraqi combat units. First Lt. Matthew Liebal, for example, “sits every day beside Lt. Col Mohammed Hadi,” the commander of the Iraqi 43rd Army Brigade that patrols eastern Baghdad.

When it comes to the Iraqi military, this sort of supervision won’t be temporary. After all,the military the U.S. helped create in Iraq still lacks, among other things, significant logistical capability, heavy artillery, and an air force. Consequently, U.S. forces transport and re-supply Iraqi troops, position and fire high-caliber ordnance, and supply air support when needed. Since the U.S. military is unwilling to allow Iraqi officers to command American soldiers, they obviously can’t make decisions about firing artillery, launching and directing U.S. Air Force planes, or sending U.S. logistical personnel into war zones. All major Iraqi missions are, then, fated to be accompanied by U.S. advisors and support personnel for an unknown period to come.

The Iraqi military is not expected to get a wing of modern jet fighters (or have the trained pilots to fly them) until at least 2015. This means that, wherever U.S. air power might be stationed, including the massive air base at Balad north of Baghdad, it will, in effect, be the Iraqi air force for the foreseeable future.

Even the simplest policing functions of the military might prove problematic without the American presence. Typically, when an Iraqi battalion commander was asked by New York Times reporter Steven Lee Myers “whether he needed American backup for a criminal arrest, he replied simply, ‘Of course.’” John Snell, an Australian advisor to the U.S. military, was just as blunt, telling an Agence France Presse reporter that, if the United States withdrew its troops, the Iraqi military “would rapidly disintegrate.”

In a World Policy Journal article last winter, John A. Nagl, a military expert and former advisor to General David Petraeus, expressed a commonly held opinion that an independent Iraqi military is likely to be at least a decade away.

Whose Economy Is It?

Terry Barnich, a victim of the previously discussed Falluja roadside bombing,personified the economic embeddedness of the occupation. As the U.S. State Department’s Deputy Director of the Iraq Transition Assistance Office and the top adviser to Iraq’s Electricity Minister, when he died he was “returning from an inspection of a wastewater treatment plant being built in Falluja.”

His dual role as a high official in the policy-making process and the “top advisor” to one of Iraq’s major infrastructural ministries catches the continuing U.S. posture toward Iraq in the early months of the Obama era. Iraq remains, however reluctantly, a client government; significant aspects of ultimate decision-making power still reside with the occupation forces. Note, by the way, that Barnich was evidently not even traveling with Iraqi officials.

The intrusive presence of the Baghdad embassy extends to the all-important oil industry, which today provides 95% of the government’s funds. When it comes to energy, the occupation has long sought to shape policy and transfer operational responsibility from Iraqi state-owned enterprises of the Saddam Hussein years to major international oil companies. In one of its most successful efforts, in 2004, the U.S. delivered an exclusive $1.2 billion contract to reconstruct Iraq’s decrepit southern oil transport facilities (which handle 80% of its oil flow) to KBR, the notorious former subsidiary of Halliburton. Supervision of that famously mismanaged contract, still uncompleted five years later, wasallocated to the U.S. Inspector General for Iraq Reconstruction.

The Iraqi government, in fact, still exerts remarkably little control over “Iraqi” oil revenues. The Development Fund for Iraq (whose revenues are deposited in the Federal Reserve Bank of New York) was established under U.N. auspices just after the invasion and receives 95% of the proceeds from Iraq’s oil sales. All government withdrawals are then overseen by the U.N.-sanctioned International Advisory and Monitoring Board, a U.S.-appointed panel of experts drawn mainly from the global oil and financial industries. The transfer of this oversight function to an Iraqi-appointed body, which was supposed to take place in this January, has been delayed by the Obama administration, which claims that the Iraqi government is not yet ready to take on such a responsibility.

In the meantime, the campaign to transfer administration of core oil operations to the major oil companies continues. Despite the resistance of Iraqi oil workers, the administrators of the two national oil companies, a majority bloc in parliament, and public opinion, the U.S. has continued to pressure the al-Maliki administration to enact an oil law that would mandate licensing devices called production-sharing agreements (PSAs).

If enacted, these PSAs would, without transferring permanent ownership, grant oil companies effective control over Iraq’s oil fields, giving them full discretion to exploit the country’s oil reserves from exploration to sales. U.S. pressure has ranged from ongoing “advice” delivered by American officials stationed in relevant Iraqi ministries to threats to confiscate some or all of the oil monies deposited in the Development Fund.

At the moment, the Iraqi government is attempting to take a more limited step: auctioning management contracts to international oil companies in an effort to increase production at eight existing oil and natural gas fields. While the winning companies would not gain the full discretion to explore, produce, and sell in some of the world’s potentially richest fields, they would at least gain some administrative control over upgrading equipment and extracting oil, possibly for as long as 20 years.

If the auction proves ultimately successful (not at all a certainty, since the first round produced only one as-yet-unsigned agreement), the Iraqi oil industry would become more deeply embedded in the occupation apparatus, no matter what officially happens to American forces in that country. Among other things, the American embassy would almost certainly be responsible for inspecting and guiding the work of the contract-winners, while the U.S. military and private contractors would become guarantors of their on-the-ground security. Fayed al-Nema, the CEO of the South Oil Company, spoke for most of the opponents of such deals when he told Reuters reporter Ahmed Rasheed that the contracts, if approved, would “put the Iraqi economy in chains and shackle its independence for the next 20 years.”

Who Owns Iraq?

In 2007, Alan Greenspan, former head of the Federal Reserve, told Washington Postreporter Bob Woodward that “taking Saddam out was essential” — a point he made in his book The Age of Turbulence — because the United States could not afford to be “beholden to potentially unfriendly sources of oil and gas” in Iraq. It’s exactly that sort of thinking that’s still operating in U.S. policy circles: the 2008 National Defense Strategy, for example, calls for the use of American military power to maintain “access to and flow of energy resources vital to the world economy.”

After only five months in office, the Obama administration has already provided significant evidence that, like its predecessor, it remains committed to maintaining that “access to and flow of energy resources” in Iraq, even as it places its major military bet on winning the expanding war in Afghanistan and Pakistan. There can be no question that Washington is now engaged in an effort to significantly reduce its military footprint in Iraq, but without, if all goes well for Washington, reducing its influence.

What this looks like is an attempted twenty-first-century version of colonial domination, possibly on the cheap, as resources are transferred to the Eastern wing of the Greater Middle East. There is, of course, no more a guarantee that this new strategy — perhaps best thought of as colonialism lite or the Obama Doctrine — will succeed than there was for the many failed military-first offensives undertaken by the Bush administration. After all, in the unsettled, still violent atmosphere of Iraq, even the major oil companies have hesitated to rush in and the auctioning of oil contracts has begun to look uncertain, even as other “civilian” initiatives remain, at best, incomplete.

As the Obama administration comes face-to-face with the reality of trying fulfill General Odierno’s ambition of making Iraq into “a long-term partner with the United States in the Middle East” while fighting a major counterinsurgency war in Afghanistan, it may also encounter a familiar dilemma faced by nineteenth-century colonial powers: that without the application of overwhelming military force, the intended colony may drift away toward sovereign independence. If so, then the dreary prediction of Pulitzer Prize-winning military correspondent Thomas Ricks — that the United States is only “halfway through this war” — may prove all too accurate.

A professor of sociology at Stony Brook State University, Michael Schwartz is the author of War Without End: The Iraq War in Context (Haymarket Books), which explains how the militarized geopolitics of oil led the U.S. to dismantle the Iraqi state and economy while fueling a sectarian civil war. Schwartz’s work on Iraq has appeared in numerous academic and popular outlets. He is a regular at TomDispatch.com. (An audio interview with him on the situation in Iraq is available by clicking here.) His email address is m@optonline.net.

[Michael Schwartz's Note on Further Reading: For daily regular and reliable information about the now hard-to-keep-track-of situation in Iraq, you should go to Juan Cole's indispensable Informed CommentAntiwar.com, and Truthout. They all get you the news of the day and much more. For more focused and often in-depth information on specific topics, keep track of what is posted on Dahr Jamail's website, on Ben Lando's ever useful Iraq Oil Report, and read anything by Patrick Cockburn at the (London) Independent. Two of my favorite, though only occasional, commentators on things Iraqi are Badger at Missing Link and Reider Visser at Historiae. Both seem to have information and offer analyses that don't appear elsewhere.]

Obama’s not-so-new Latin America policy

July 22, 2009 by admin1  
Filed under Featured, News

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Bolivian President Evo Morales (Sebastian Baryli)

President Barack Obama declared at the Summit of the Americas meeting in Trinidad and Tobago in April that there would no longer be junior and senior partners in the Americas–but his actions are sending a different message.

The most egregious case is Honduras, where the U.S. has played ball with the coup-makers who overthrew democratically elected President Manuel Zelaya earlier this month. The Obama administration also failed to speak out against last month’s Peruvian police massacre of more than 50 indigenous people in the Peruvian Amazon who were protesting the incursion of petroleum transnational corporations into their territory.

In Bolivia, too, Obama failed another important test. On June 30, the Obama administration rejected renewal of the Andean Trade Promotion and Drug Eradication Act (ATPDEA) for Bolivia, citing the country’s alleged failure to cooperate in drug eradication efforts.

With this pronouncement, the administration ratified George W. Bush’s decision last November to suspend the trade agreement with Bolivia on the basis of supposed non-cooperation in counter-narcotics operations. In reality, the suspension was one of a series of tit-for-tat moves that began when Bolivian President Evo Morales declared U.S. Ambassador Philip Goldberg persona non grata after he advised opposition politicians plotting a coup last September.

Bush overrode the decision of Congress to extend the agreement for six months just a few weeks after Morales announced that the Drug Enforcement Agency was no longer welcome in Bolivia. A few months earlier, Morales had supported the decision of coca growers in the Chapare region, where Morales was a union leader before becoming president, to expel the United States Agency for International Development from the area.

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THE U.S. allegation that Bolivia has failed to cooperate in the “drug war” carries serious economic penalties under the terms of the 1991 Andean Trade Preferencelatin-america Act.

According to the Office of the U.S. Trade Representative, the law was intended to help Colombia, Ecuador, Peru and Bolivia “in their fight against drug production and trafficking by expanding their economic alternatives. To this end, the ATPA provided reduced-duty or duty-free treatment to most of these countries’ exports to the United States.” It was renewed in 2002 under the ATPDEA name.

The criteria for continued participation fall into four categories: investment policies, trade policies, counter-narcotics operations and workers’ rights.

While the decision cited Bolivia’s supposed failure to meet its counter-narcotics commitments as the reason for non-renewal, it is clear from the text of the U.S. Trade Representative’s report that Bolivia had offended the U.S. in other areas as well. The report cites Bolivia’s nationalization of hydrocarbons, the country’s withdrawal from the International Center for Settlement of Investment Disputes, a “difficult investment climate,” and increased tariffs. These are described in matter-of-fact language–but it’s clear that the U.S. is none too pleased.

In the area of counter-narcotics, the trade representative’s report claims that the “loss of the DEA presence and its information network has severely diminished Bolivia’s interdiction capacity in both the short and the long term.”

The report concedes that the Bolivian government has “maintained its support for interdiction efforts” and that “interdiction of drugs and precursor chemicals continues to rise,” and that “the Bolivian counter-narcotics police and other CN [counter-narcotics] units have improved coordination effectiveness.” Yet even Bolivia’s success in these efforts is seen as a problem–the U.S. report concludes that Bolivia’s increased drug interdiction is evidence of “increased cocaine production and transshipment.”

While it appears that cocaine production has, in fact, increased in Bolivia, this is being used as an excuse for the U.S. to punish a government that is challenging American interference within its borders.

If the U.S. government was truly concerned with stopping the production and distribution of illegal drugs, and believed that ending trade preference agreements could have such an effect, it would refuse to extend trade preferences to U.S. ally Colombia, a country at the heart of cocaine production.

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Columbia led the increase in coca production, and retains favored status with the US.

According to the Andean Information Network, coca production has risen in three of the four Andean countries participating in the ATPDEA: Colombia, Peru and Bolivia. The United Nations Office on Drugs and Crime reported that land area under coca cultivation in the region grew by 16 percent from 2006 to 2007. Colombia led the way with a 27 percent increase, while growth in Bolivia was 5 percent and in Peru 4 percent. “Overall, Colombia accounted for 85 percent of the net 24,700 hectare increase region-wide, while Peru accounted for 9 percent and Bolivia for 6 percent,” the UN agency reported.

Despite this region-wide spike in cocaine production, only Bolivia faces non-renewal of trade preferences. The U.S. recently renewed the ATPDEA for Peru and Colombia, and renewed it for Ecuador the same day it denied renewal to Bolivia.

The suspension of preferred trade status as of December 2008 had already led to a 14 percent decline in Bolivian sales to the U.S. and the loss of more than 2,000 jobs in the country’s largest textile exporter. The textile industry had benefited the most from trade preference and is being hit the hardest by its suspension.

According to AmericaEconomic.com, “Bolivian exports to the U.S., in large part due to the ATPDEA, reached $171,920,000 dollars in the first five months of 2008. In the same period in 2009, exports fell 19.5 percent to $138,370,000. The textile industry has protested that the suspension of the ATPDEA will lose the sector close to 9,000 jobs.”

The Agencia de Noticias Fides (ANF) estimates that 46,000 jobs will be lost nationally and between 5,000 and 7,000 businesses will be affected in the department (region) of La Paz alone. The Santa Cruz Chamber of Exporters estimates that exports from its department to the U.S. will decline 60 percent by the end of the year.

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IN THE lead-up to the decision on ATPDEA, President Morales appealed to the U.S. to renew the agreement, even sending a delegation to the U.S. to make the case. “If President Obama wants to have good relations,” Morales said, “I want to publicly tell him that hopefully he can mend the ways of ex-President Bush.”

When Obama followed Bush’s lead and refused to renew Bolivia’s status as a cooperating government in anti-drug efforts, Morales said the decision was “clearly political.” “I feel deceived by the suspension of the ATPDEA because the Obama government has lied and made slanderous and false accusations against the Bolivian government to suspend the trade preferences,” he told reporters.

So much for the Obama administration’s stated aim of improving relations with Latin America by establishing mutual respect and cooperation. Rather, recent events indicate that Obama is committed to re-establishing U.S. hegemony in the region in order to counter the “pink tide” of center-left governments that have been elected from Central America to the Southern Cone.

Morales put it well:

In the U.S., the appearance of the leaders has changed, but the politics of empire have not. When he told us in Trinidad and Tobago that they are no longer senior and junior partners, President Obama lied to Latin America. Now there is not only a senior partner, there is a patron [boss], a policeman…

They told me not to trust Obama–that the empire is the empire. To those who made this recommendation to me, I thank you. Truly, the empire is the empire. But thankfully, the battle will continue with the consciousness of not only the Bolivian people, but all of the peoples of Latin America.

In a discussion with a New York audience in May, Uruguayan author Eduardo Galleano urged Obama, instead of restoring U.S. “leadership” in the region, to leave Latin America alone. While Obama would win a lot more favor with Latin American governments and populations were he to follow this advice, all signs point to an empire that is gearing up to reassert control in what it has long considered its backyard.

But the increasing consciousness, organization and mobilization of Latin America’s popular classes–there to see on the streets of Honduras in recent weeks–means that the U.S. won’t be able to re-establish hegemony in Latin America without a fight.

Sarah Hines writes from Bolivia
Originally Appeared on Socialistworker.org: http://socialistworker.org/2009/07/22/obamas-latin-america-policy

The Great American Bubble Machine – The Fraud of Goldman Sachs

July 17, 2009 by admin1  
Filed under Featured, News

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From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression – and they’re about to do it again

Matt Taibbi

Posted Jul 13, 2009 1:49 PM

sachs-bubblesThe first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who’s Who of Goldman Sachs graduates.

By now, most of us know the major players. As George Bush’s last Treasury secretary, former Goldman CEO Henry Paulson was the architect of the bailout, a suspiciously self-serving plan to funnel trillions of Your Dollars to a handful of his old friends on Wall Street. Robert Rubin, Bill Clinton’s former Treasury secretary, spent 26 years at Goldman before becoming chairman of Citigroup — which in turn got a $300 billion taxpayer bailout from Paulson. There’s John Thain, the asshole chief of Merrill Lynch who bought an $87,000 area rug for his office as his company was imploding; a former Goldman banker, Thain enjoyed a multibilliondollar handout from Paulson, who used billions in taxpayer funds to help Bank of America rescue Thain’s sorry company. And Robert Steel, the former Goldmanite head of Wachovia, scored himself and his fellow executives $225 million in goldenparachute payments as his bank was selfdestructing. There’s Joshua Bolten, Bush’s chief of staff during the bailout, and Mark Patterson, the current Treasury chief of staff, who was a Goldman lobbyist just a year ago, and Ed Liddy, the former Goldman director whom Paulson put in charge of bailedout insurance giant AIG, which forked over $13 billion to Goldman after Liddy came on board. The heads of the Canadian and Italian national banks are Goldman alums, as is the head of the World Bank, the head of the New York Stock Exchange, the last two heads of the Federal Reserve Bank of New York — which, incidentally, is now in charge of overseeing Goldman — not to mention …

But then, any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything. What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain — an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.

The bank’s unprecedented reach and power have enabled it to turn all of America into a giant pumpanddump scam, manipulating whole economic sectors for years at a time, moving the dice game as this or that market collapses, and all the time gorging itself on the unseen costs that are breaking families everywhere — high gas prices, rising consumercredit rates, halfeaten pension funds, mass layoffs, future taxes to pay off bailouts. All that money that you’re losing, it’s going somewhere, and in both a literal and a figurative sense, Goldman Sachs is where it’s going: The bank is a huge, highly sophisticated engine for converting the useful, deployed wealth of society into the least useful, most wasteful and insoluble substance on Earth — pure profit for rich individuals.

They achieve this using the same playbook over and over again. The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased. They’ve been pulling this same stunt over and over since the 1920s — and now they’re preparing to do it again, creating what may be the biggest and most audacious bubble yet.

If you want to understand how we got into this financial crisis, you have to first understand where all the money went — and in order to understand that, you need to understand what Goldman has already gotten away with. It is a history exactly five bubbles long — including last year’s strange and seemingly inexplicable spike in the price of oil. There were a lot of losers in each of those bubbles, and in the bailout that followed. But Goldman wasn’t one of them.

BUBBLE #1 The Great Depression

bubble1Goldman wasn’t always a too-big-to-fail Wall Street behemoth, the ruthless face of kill-or-be-killed capitalism on steroids — just almost always. The bank was actually founded in 1869 by a German immigrant named Marcus Goldman, who built it up with his soninlaw Samuel Sachs. They were pioneers in the use of commercial paper, which is just a fancy way of saying they made money lending out shortterm IOUs to smalltime vendors in downtown Manhattan.

You can probably guess the basic plotline of Goldman’s first 100 years in business: plucky, immigrantled investment bank beats the odds, pulls itself up by its bootstraps, makes shitloads of money. In that ancient history there’s really only one episode that bears scrutiny now, in light of more recent events: Goldman’s disastrous foray into the speculative mania of precrash Wall Street in the late 1920s.

This great Hindenburg of financial history has a few features that might sound familiar. Back then, the main financial tool used to bilk investors was called an “investment trust.” Similar to modern mutual funds, the trusts took the cash of investors large and small and (theoretically, at least) invested it in a smorgasbord of Wall Street securities, though the securities and amounts were often kept hidden from the public. So a regular guy could invest $10 or $100 in a trust and feel like he was a big player. Much as in the 1990s, when new vehicles like day trading and etrading attracted reams of new suckers from the sticks who wanted to feel like big shots, investment trusts roped a new generation of regularguy investors into the speculation game.

Beginning a pattern that would repeat itself over and over again, Goldman got into the investmenttrust game late, then jumped in with both feet and went hogwild. The first effort was the Goldman Sachs Trading Corporation; the bank issued a million shares at $100 apiece, bought all those shares with its own money and then sold 90 percent of them to the hungry public at $104. The trading corporation then relentlessly bought shares in itself, bidding the price up further and further. Eventually it dumped part of its holdings and sponsored a new trust, the Shenandoah Corporation, issuing millions more in shares in that fund — which in turn sponsored yet another trust called the Blue Ridge Corporation. In this way, each investment trust served as a front for an endless investment pyramid: Goldman hiding behind Goldman hiding behind Goldman. Of the 7,250,000 initial shares of Blue Ridge, 6,250,000 were actually owned by Shenandoah — which, of course, was in large part owned by Goldman Trading.

The end result (ask yourself if this sounds familiar) was a daisy chain of borrowed money, one exquisitely vulnerable to a decline in performance anywhere along the line. The basic idea isn’t hard to follow. You take a dollar and borrow nine against it; then you take that $10 fund and borrow $90; then you take your $100 fund and, so long as the public is still lending, borrow and invest $900. If the last fund in the line starts to lose value, you no longer have the money to pay back your investors, and everyone gets massacred.

In a chapter from The Great Crash, 1929 titled “In Goldman Sachs We Trust,” the famed economist John Kenneth Galbraith held up the Blue Ridge and Shenandoah trusts as classic examples of the insanity of leveragebased investment. The trusts, he wrote, were a major cause of the market’s historic crash; in today’s dollars, the losses the bank suffered totaled $475 billion. “It is difficult not to marvel at the imagination which was implicit in this gargantuan insanity,” Galbraith observed, sounding like Keith Olbermann in an ascot. “If there must be madness, something may be said for having it on a heroic scale.”

BUBBLE #2 Tech Stocks

bubble2Fast-forward about 65 years. Goldman not only survived the crash that wiped out so many of the investors it duped, it went on to become the chief underwriter to the country’s wealthiest and most powerful corporations. Thanks to Sidney Weinberg, who rose from the rank of janitor’s assistant to head the firm, Goldman became the pioneer of the initial public offering, one of the principal and most lucrative means by which companies raise money. During the 1970s and 1980s, Goldman may not have been the planet-eating Death Star of political influence it is today, but it was a topdrawer firm that had a reputation for attracting the very smartest talent on the Street.

It also, oddly enough, had a reputation for relatively solid ethics and a patient approach to investment that shunned the fast buck; its executives were trained to adopt the firm’s mantra, “longterm greedy.” One former Goldman banker who left the firm in the early Nineties recalls seeing his superiors give up a very profitable deal on the grounds that it was a longterm loser. “We gave back money to ‘grownup’ corporate clients who had made bad deals with us,” he says. “Everything we did was legal and fair — but ‘longterm greedy’ said we didn’t want to make such a profit at the clients’ collective expense that we spoiled the marketplace.”

But then, something happened. It’s hard to say what it was exactly; it might have been the fact that Goldman’s cochairman in the early Nineties, Robert Rubin, followed Bill Clinton to the White House, where he directed the National Economic Council and eventually became Treasury secretary. While the American media fell in love with the story line of a pair of babyboomer, Sixtieschild, Fleetwood Mac yuppies nesting in the White House, it also nursed an undisguised crush on Rubin, who was hyped as without a doubt the smartest person ever to walk the face of the Earth, with Newton, Einstein, Mozart and Kant running far behind.

Rubin was the prototypical Goldman banker. He was probably born in a $4,000 suit, he had a face that seemed permanently frozen just short of an apology for being so much smarter than you, and he exuded a Spock-like, emotion-neutral exterior; the only human feeling you could imagine him experiencing was a nightmare about being forced to fly coach. It became almost a national clichè that whatever Rubin thought was best for the economy — a phenomenon that reached its apex in 1999, when Rubin appeared on the cover of Time with his Treasury deputy, Larry Summers, and Fed chief Alan Greenspan under the headline The Committee To Save The World. And “what Rubin thought,” mostly, was that the American economy, and in particular the financial markets, were over-regulated and needed to be set free. During his tenure at Treasury, the Clinton White House made a series of moves that would have drastic consequences for the global economy — beginning with Rubin’s complete and total failure to regulate his old firm during its first mad dash for obscene short-term profits.

The basic scam in the Internet Age is pretty easy even for the financially illiterate to grasp. Companies that weren’t much more than potfueled ideas scrawled on napkins by uptoolate bongsmokers were taken public via IPOs, hyped in the media and sold to the public for mega-millions. It was as if banks like Goldman were wrapping ribbons around watermelons, tossing them out 50-story windows and opening the phones for bids. In this game you were a winner only if you took your money out before the melon hit the pavement.

It sounds obvious now, but what the average investor didn’t know at the time was that the banks had changed the rules of the game, making the deals look better than they actually were. They did this by setting up what was, in reality, a two-tiered investment system — one for the insiders who knew the real numbers, and another for the lay investor who was invited to chase soaring prices the banks themselves knew were irrational. While Goldman’s later pattern would be to capitalize on changes in the regulatory environment, its key innovation in the Internet years was to abandon its own industry’s standards of quality control.

“Since the Depression, there were strict underwriting guidelines that Wall Street adhered to when taking a company public,” says one prominent hedge-fund manager. “The company had to be in business for a minimum of five years, and it had to show profitability for three consecutive years. But Wall Street took these guidelines and threw them in the trash.” Goldman completed the snow job by pumping up the sham stocks: “Their analysts were out there saying Bullshit.com is worth $100 a share.”

The problem was, nobody told investors that the rules had changed. “Everyone on the inside knew,” the manager says. “Bob Rubin sure as hell knew what the underwriting standards were. They’d been intact since the 1930s.”

Jay Ritter, a professor of finance at the University of Florida who specializes in IPOs, says banks like Goldman knew full well that many of the public offerings they were touting would never make a dime. “In the early Eighties, the major underwriters insisted on three years of profitability. Then it was one year, then it was a quarter. By the time of the Internet bubble, they were not even requiring profitability in the foreseeable future.”

Goldman has denied that it changed its underwriting standards during the Internet years, but its own statistics belie the claim. Just as it did with the investment trust in the 1920s, Goldman started slow and finished crazy in the Internet years. After it took a littleknown company with weak financials called Yahoo! public in 1996, once the tech boom had already begun, Goldman quickly became the IPO king of the Internet era. Of the 24 companies it took public in 1997, a third were losing money at the time of the IPO. In 1999, at the height of the boom, it took 47 companies public, including stillborns like Webvan and eToys, investment offerings that were in many ways the modern equivalents of Blue Ridge and Shenandoah. The following year, it underwrote 18 companies in the first four months, 14 of which were money losers at the time. As a leading underwriter of Internet stocks during the boom, Goldman provided profits far more volatile than those of its competitors: In 1999, the average Goldman IPO leapt 281 percent above its offering price, compared to the Wall Street average of 181 percent.

How did Goldman achieve such extraordinary results? One answer is that they used a practice called “laddering,” which is just a fancy way of saying they manipulated the share price of new offerings. Here’s how it works: Say you’re Goldman Sachs, and Bullshit.com comes to you and asks you to take their company public. You agree on the usual terms: You’ll price the stock, determine how many shares should be released and take the Bullshit.com CEO on a “road show” to schmooze investors, all in exchange for a substantial fee (typically six to seven percent of the amount raised). You then promise your best clients the right to buy big chunks of the IPO at the low offering price — let’s say Bullshit.com’s starting share price is $15 — in exchange for a promise that they will buy more shares later on the open market. That seemingly simple demand gives you inside knowledge of the IPO’s future, knowledge that wasn’t disclosed to the daytrader schmucks who only had the prospectus to go by: You know that certain of your clients who bought X amount of shares at $15 are also going to buy Y more shares at $20 or $25, virtually guaranteeing that the price is going to go to $25 and beyond. In this way, Goldman could artificially jack up the new company’s price, which of course was to the bank’s benefit — a six percent fee of a $500 million IPO is serious money.

Goldman was repeatedly sued by shareholders for engaging in laddering in a variety of Internet IPOs, including Webvan and NetZero. The deceptive practices also caught the attention of Nicholas Maier, the syndicate manager of Cramer & Co., the hedge fund run at the time by the now-famous chattering television asshole Jim Cramer, himself a Goldman alum. Maier told the SEC that while working for Cramer between 1996 and 1998, he was repeatedly forced to engage in laddering practices during IPO deals with Goldman.

“Goldman, from what I witnessed, they were the worst perpetrator,” Maier said. “They totally fueled the bubble. And it’s specifically that kind of behavior that has caused the market crash. They built these stocks upon an illegal foundation — manipulated up — and ultimately, it really was the small person who ended up buying in.” In 2005, Goldman agreed to pay $40 million for its laddering violations — a puny penalty relative to the enormous profits it made. (Goldman, which has denied wrongdoing in all of the cases it has settled, refused to respond to questions for this story.)

Another practice Goldman engaged in during the Internet boom was “spinning,” better known as bribery. Here the investment bank would offer the executives of the newly public company shares at extra-low prices, in exchange for future underwriting business. Banks that engaged in spinning would then undervalue the initial offering price — ensuring that those “hot” opening-price shares it had handed out to insiders would be more likely to rise quickly, supplying bigger firstday rewards for the chosen few. So instead of Bullshit.com opening at $20, the bank would approach the Bullshit.com CEO and offer him a million shares of his own company at $18 in exchange for future business — effectively robbing all of Bullshit’s new shareholders by diverting cash that should have gone to the company’s bottom line into the private bank account of the company’s CEO.

In one case, Goldman allegedly gave a multimillion-dollar special offering to eBay CEO Meg Whitman, who later joined Goldman’s board, in exchange for future i-banking business. According to a report by the House Financial Services Committee in 2002, Goldman gave special stock offerings to executives in 21 companies that it took public, including Yahoo! cofounder Jerry Yang and two of the great slithering villains of the financial-scandal age — Tyco’s Dennis Kozlowski and Enron’s Ken Lay. Goldman angrily denounced the report as “an egregious distortion of the facts” — shortly before paying $110 million to settle an investigation into spinning and other manipulations launched by New York state regulators. “The spinning of hot IPO shares was not a harmless corporate perk,” then-attorney general Eliot Spitzer said at the time. “Instead, it was an integral part of a fraudulent scheme to win new investment-banking business.”

Such practices conspired to turn the Internet bubble into one of the greatest financial disasters in world history: Some $5 trillion of wealth was wiped out on the NASDAQ alone. But the real problem wasn’t the money that was lost by shareholders, it was the money gained by investment bankers, who received hefty bonuses for tampering with the market. Instead of teaching Wall Street a lesson that bubbles always deflate, the Internet years demonstrated to bankers that in the age of freely flowing capital and publicly owned financial companies, bubbles are incredibly easy to inflate, and individual bonuses are actually bigger when the mania and the irrationality are greater.

Nowhere was this truer than at Goldman. Between 1999 and 2002, the firm paid out $28.5 billion in compensation and benefits — an average of roughly $350,000 a year per employee. Those numbers are important because the key legacy of the Internet boom is that the economy is now driven in large part by the pursuit of the enormous salaries and bonuses that such bubbles make possible. Goldman’s mantra of “long-term greedy” vanished into thin air as the game became about getting your check before the melon hit the pavement.

The market was no longer a rationally managed place to grow real, profitable businesses: It was a huge ocean of Someone Else’s Money where bankers hauled in vast sums through whatever means necessary and tried to convert that money into bonuses and payouts as quickly as possible. If you laddered and spun 50 Internet IPOs that went bust within a year, so what? By the time the Securities and Exchange Commission got around to fining your firm $110 million, the yacht you bought with your IPO bonuses was already six years old. Besides, you were probably out of Goldman by then, running the U.S. Treasury or maybe the state of New Jersey. (One of the truly comic moments in the history of America’s recent financial collapse came when Gov. Jon Corzine of New Jersey, who ran Goldman from 1994 to 1999 and left with $320 million in IPO-fattened stock, insisted in 2002 that “I’ve never even heard the term ‘laddering’ before.”)

For a bank that paid out $7 billion a year in salaries, $110 million fines issued half a decade late were something far less than a deterrent — they were a joke. Once the Internet bubble burst, Goldman had no incentive to reassess its new, profit-driven strategy; it just searched around for another bubble to inflate. As it turns out, it had one ready, thanks in large part to Rubin.

BUBBLE #3 The Housing Craze

bubble3Goldman’s role in the sweeping global disaster that was the housing bubble is not hard to trace. Here again, the basic trick was a decline in underwriting standards, although in this case the standards weren’t in IPOs but in mortgages. By now almost everyone knows that for decades mortgage dealers insisted that home buyers be able to produce a down payment of 10 percent or more, show a steady income and good credit rating, and possess a real first and last name. Then, at the dawn of the new millennium, they suddenly threw all that shit out the window and started writing mortgages on the backs of napkins to cocktail waitresses and excons carrying five bucks and a Snickers bar.

None of that would have been possible without investment bankers like Goldman, who created vehicles to package those shitty mortgages and sell them en masse to unsuspecting insurance companies and pension funds. This created a mass market for toxic debt that would never have existed before; in the old days, no bank would have wanted to keep some addict ex-con’s mortgage on its books, knowing how likely it was to fail. You can’t write these mortgages, in other words, unless you can sell them to someone who doesn’t know what they are.

Goldman used two methods to hide the mess they were selling. First, they bundled hundreds of different mortgages into instruments called Collateralized Debt Obligations. Then they sold investors on the idea that, because a bunch of those mortgages would turn out to be OK, there was no reason to worry so much about the shitty ones: The CDO, as a whole, was sound. Thus, junkrated mortgages were turned into AAArated investments. Second, to hedge its own bets, Goldman got companies like AIG to provide insurance — known as creditdefault swaps — on the CDOs. The swaps were essentially a racetrack bet between AIG and Goldman: Goldman is betting the excons will default, AIG is betting they won’t.

There was only one problem with the deals: All of the wheeling and dealing represented exactly the kind of dangerous speculation that federal regulators are supposed to rein in. Derivatives like CDOs and credit swaps had already caused a series of serious financial calamities: Procter & Gamble and Gibson Greetings both lost fortunes, and Orange County, California, was forced to default in 1994. A report that year by the Government Accountability Office recommended that such financial instruments be tightly regulated — and in 1998, the head of the Commodity Futures Trading Commission, a woman named Brooksley Born, agreed. That May, she circulated a letter to business leaders and the Clinton administration suggesting that banks be required to provide greater disclosure in derivatives trades, and maintain reserves to cushion against losses.

More regulation wasn’t exactly what Goldman had in mind. “The banks go crazy — they want it stopped,” says Michael Greenberger, who worked for Born as director of trading and markets at the CFTC and is now a law professor at the University of Maryland. “Greenspan, Summers, Rubin and [SEC chief Arthur] Levitt want it stopped.”

Clinton’s reigning economic foursome — “especially Rubin,” according to Greenberger — called Born in for a meeting and pleaded their case. She refused to back down, however, and continued to push for more regulation of the derivatives. Then, in June 1998, Rubin went public to denounce her move, eventually recommending that Congress strip the CFTC of its regulatory authority. In 2000, on its last day in session, Congress passed the now-notorious Commodity Futures Modernization Act, which had been inserted into an 11,000-page spending bill at the last minute, with almost no debate on the floor of the Senate. Banks were now free to trade default swaps with impunity.

But the story didn’t end there. AIG, a major purveyor of default swaps, approached the New York State Insurance Department in 2000 and asked whether default swaps would be regulated as insurance. At the time, the office was run by one Neil Levin, a former Goldman vice president, who decided against regulating the swaps. Now freed to underwrite as many housingbased securities and buy as much credit-default protection as it wanted, Goldman went berserk with lending lust. By the peak of the housing boom in 2006, Goldman was underwriting $76.5 billion worth of mortgagebacked securities — a third of which were subprime — much of it to institutional investors like pensions and insurance companies. And in these massive issues of real estate were vast swamps of crap.

Take one $494 million issue that year, GSAMP Trust 2006S3. Many of the mortgages belonged to secondmortgage borrowers, and the average equity they had in their homes was 0.71 percent. Moreover, 58 percent of the loans included little or no documentation — no names of the borrowers, no addresses of the homes, just zip codes. Yet both of the major ratings agencies, Moody’s and Standard & Poor’s, rated 93 percent of the issue as investment grade. Moody’s projected that less than 10 percent of the loans would default. In reality, 18 percent of the mortgages were in default within 18 months.

Not that Goldman was personally at any risk. The bank might be taking all these hideous, completely irresponsible mortgages from beneath-gangster-status firms like Countrywide and selling them off to municipalities and pensioners — old people, for God’s sake — pretending the whole time that it wasn’t gradeD horseshit. But even as it was doing so, it was taking short positions in the same market, in essence betting against the same crap it was selling. Even worse, Goldman bragged about it in public. “The mortgage sector continues to be challenged,” David Viniar, the bank’s chief financial officer, boasted in 2007. “As a result, we took significant markdowns on our long inventory positions … However, our risk bias in that market was to be short, and that net short position was profitable.” In other words, the mortgages it was selling were for chumps. The real money was in betting against those same mortgages.

“That’s how audacious these assholes are,” says one hedgefund manager. “At least with other banks, you could say that they were just dumb — they believed what they were selling, and it blew them up. Goldman knew what it was doing.”

I ask the manager how it could be that selling something to customers that you’re actually betting against — particularly when you know more about the weaknesses of those products than the customer — doesn’t amount to securities fraud.

“It’s exactly securities fraud,” he says. “It’s the heart of securities fraud.”

Eventually, lots of aggrieved investors agreed. In a virtual repeat of the Internet IPO craze, Goldman was hit with a wave of lawsuits after the collapse of the housing bubble, many of which accused the bank of withholding pertinent information about the quality of the mortgages it issued. New York state regulators are suing Goldman and 25 other underwriters for selling bundles of crappy Countrywide mortgages to city and state pension funds, which lost as much as $100 million in the investments. Massachusetts also investigated Goldman for similar misdeeds, acting on behalf of 714 mortgage holders who got stuck holding predatory loans. But once again, Goldman got off virtually scot-free, staving off prosecution by agreeing to pay a paltry $60 million — about what the bank’s CDO division made in a day and a half during the real estate boom.

The effects of the housing bubble are well known — it led more or less directly to the collapse of Bear Stearns, Lehman Brothers and AIG, whose toxic portfolio of credit swaps was in significant part composed of the insurance that banks like Goldman bought against their own housing portfolios. In fact, at least $13 billion of the taxpayer money given to AIG in the bailout ultimately went to Goldman, meaning that the bank made out on the housing bubble twice: It fucked the investors who bought their horseshit CDOs by betting against its own crappy product, then it turned around and fucked the taxpayer by making him pay off those same bets.

And once again, while the world was crashing down all around the bank, Goldman made sure it was doing just fine in the compensation department. In 2006, the firm’s payroll jumped to $16.5 billion — an average of $622,000 per employee. As a Goldman spokesman explained, “We work very hard here.”

But the best was yet to come. While the collapse of the housing bubble sent most of the financial world fleeing for the exits, or to jail, Goldman boldly doubled down — and almost single-handedly created yet another bubble, one the world still barely knows the firm had anything to do with.

BUBBLE #4 $4 a Gallon

bubble4By the beginning of 2008, the financial world was in turmoil. Wall Street had spent the past two and a half decades producing one scandal after another, which didn’t leave much to sell that wasn’t tainted. The terms junk bond, IPO, subprime mortgage and other once-hot financial fare were now firmly associated in the public’s mind with scams; the terms credit swaps and CDOs were about to join them. The credit markets were in crisis, and the mantra that had sustained the fantasy economy throughout the Bush years — the notion that housing prices never go down — was now a fully exploded myth, leaving the Street clamoring for a new bullshit paradigm to sling.

Where to go? With the public reluctant to put money in anything that felt like a paper investment, the Street quietly moved the casino to the physical-commodities market — stuff you could touch: corn, coffee, cocoa, wheat and, above all, energy commodities, especially oil. In conjunction with a decline in the dollar, the credit crunch and the housing crash caused a “flight to commodities.” Oil futures in particular skyrocketed, as the price of a single barrel went from around $60 in the middle of 2007 to a high of $147 in the summer of 2008.

That summer, as the presidential campaign heated up, the accepted explanation for why gasoline had hit $4.11 a gallon was that there was a problem with the world oil supply. In a classic example of how Republicans and Democrats respond to crises by engaging in fierce exchanges of moronic irrelevancies, John McCain insisted that ending the moratorium on offshore drilling would be “very helpful in the short term,” while Barack Obama in typical liberal-arts yuppie style argued that federal investment in hybrid cars was the way out.

But it was all a lie. While the global supply of oil will eventually dry up, the shortterm flow has actually been increasing. In the six months before prices spiked, according to the U.S. Energy Information Administration, the world oil supply rose from 85.24 million barrels a day to 85.72 million. Over the same period, world oil demand dropped from 86.82 million barrels a day to 86.07 million. Not only was the shortterm supply of oil rising, the demand for it was falling — which, in classic economic terms, should have brought prices at the pump down.

So what caused the huge spike in oil prices? Take a wild guess. Obviously Goldman had help — there were other players in the physicalcommodities market — but the root cause had almost everything to do with the behavior of a few powerful actors determined to turn the oncesolid market into a speculative casino. Goldman did it by persuading pension funds and other large institutional investors to invest in oil futures — agreeing to buy oil at a certain price on a fixed date. The push transformed oil from a physical commodity, rigidly subject to supply and demand, into something to bet on, like a stock. Between 2003 and 2008, the amount of speculative money in commodities grew from $13 billion to $317 billion, an increase of 2,300 percent. By 2008, a barrel of oil was traded 27 times, on average, before it was actually delivered and consumed.

As is so often the case, there had been a Depression-era law in place designed specifically to prevent this sort of thing. The commodities market was designed in large part to help farmers: A grower concerned about future price drops could enter into a contract to sell his corn at a certain price for delivery later on, which made him worry less about building up stores of his crop. When no one was buying corn, the farmer could sell to a middleman known as a “traditional speculator,” who would store the grain and sell it later, when demand returned. That way, someone was always there to buy from the farmer, even when the market temporarily had no need for his crops.

In 1936, however, Congress recognized that there should never be more speculators in the market than real producers and consumers. If that happened, prices would be affected by something other than supply and demand, and price manipulations would ensue. A new law empowered the Commodity Futures Trading Commission — the very same body that would later try and fail to regulate credit swaps — to place limits on speculative trades in commodities. As a result of the CFTC’s oversight, peace and harmony reigned in the commodities markets for more than 50 years.

All that changed in 1991 when, unbeknownst to almost everyone in the world, a Goldmanowned commoditiestrading subsidiary called J. Aron wrote to the CFTC and made an unusual argument. Farmers with big stores of corn, Goldman argued, weren’t the only ones who needed to hedge their risk against future price drops — Wall Street dealers who made big bets on oil prices also needed to hedge their risk, because, well, they stood to lose a lot too.

This was complete and utter crap — the 1936 law, remember, was specifically designed to maintain distinctions between people who were buying and selling real tangible stuff and people who were trading in paper alone. But the CFTC, amazingly, bought Goldman’s argument. It issued the bank a free pass, called the “Bona Fide Hedging” exemption, allowing Goldman’s subsidiary to call itself a physical hedger and escape virtually all limits placed on speculators. In the years that followed, the commission would quietly issue 14 similar exemptions to other companies.

Now Goldman and other banks were free to drive more investors into the commodities markets, enabling speculators to place increasingly big bets. That 1991 letter from Goldman more or less directly led to the oil bubble in 2008, when the number of speculators in the market — driven there by fear of the falling dollar and the housing crash — finally overwhelmed the real physical suppliers and consumers. By 2008, at least three quarters of the activity on the commodity exchanges was speculative, according to a congressional staffer who studied the numbers — and that’s likely a conservative estimate. By the middle of last summer, despite rising supply and a drop in demand, we were paying $4 a gallon every time we pulled up to the pump.

What is even more amazing is that the letter to Goldman, along with most of the other trading exemptions, was handed out more or less in secret. “I was the head of the division of trading and markets, and Brooksley Born was the chair of the CFTC,” says Greenberger, “and neither of us knew this letter was out there.” In fact, the letters only came to light by accident. Last year, a staffer for the House Energy and Commerce Committee just happened to be at a briefing when officials from the CFTC made an offhand reference to the exemptions.

“I had been invited to a briefing the commission was holding on energy,” the staffer recounts. “And suddenly in the middle of it, they start saying, ‘Yeah, we’ve been issuing these letters for years now.’ I raised my hand and said, ‘Really? You issued a letter? Can I see it?’ And they were like, ‘Duh, duh.’ So we went back and forth, and finally they said, ‘We have to clear it with Goldman Sachs.’ I’m like, ‘What do you mean, you have to clear it with Goldman Sachs?’”

The CFTC cited a rule that prohibited it from releasing any information about a company’s current position in the market. But the staffer’s request was about a letter that had been issued 17 years earlier. It no longer had anything to do with Goldman’s current position. What’s more, Section 7 of the 1936 commodities law gives Congress the right to any information it wants from the commission. Still, in a classic example of how complete Goldman’s capture of government is, the CFTC waited until it got clearance from the bank before it turned the letter over.

Armed with the semi-secret government exemption, Goldman had become the chief designer of a giant commodities betting parlor. Its Goldman Sachs Commodities Index — which tracks the prices of 24 major commodities but is overwhelmingly weighted toward oil — became the place where pension funds and insurance companies and other institutional investors could make massive longterm bets on commodity prices. Which was all well and good, except for a couple of things. One was that index speculators are mostly “long only” bettors, who seldom if ever take short positions — meaning they only bet on prices to rise. While this kind of behavior is good for a stock market, it’s terrible for commodities, because it continually forces prices upward. “If index speculators took short positions as well as long ones, you’d see them pushing prices both up and down,” says Michael Masters, a hedgefund manager who has helped expose the role of investment banks in the manipulation of oil prices. “But they only push prices in one direction: up.”

Complicating matters even further was the fact that Goldman itself was cheerleading with all its might for an increase in oil prices. In the beginning of 2008, Arjun Murti, a Goldman analyst, hailed as an “oracle of oil” by The New York Times, predicted a “super spike” in oil prices, forecasting a rise to $200 a barrel. At the time Goldman was heavily invested in oil through its commoditiestrading subsidiary, J. Aron; it also owned a stake in a major oil refinery in Kansas, where it warehoused the crude it bought and sold. Even though the supply of oil was keeping pace with demand, Murti continually warned of disruptions to the world oil supply, going so far as to broadcast the fact that he owned two hybrid cars. High prices, the bank insisted, were somehow the fault of the piggish American consumer; in 2005, Goldman analysts insisted that we wouldn’t know when oil prices would fall until we knew “when American consumers will stop buying gas-guzzling sport utility vehicles and instead seek fuel-efficient alternatives.”

But it wasn’t the consumption of real oil that was driving up prices — it was the trade in paper oil. By the summer of 2008, in fact, commodities speculators had bought and stockpiled enough oil futures to fill 1.1 billion barrels of crude, which meant that speculators owned more future oil on paper than there was real, physical oil stored in all of the country’s commercial storage tanks and the Strategic Petroleum Reserve combined. It was a repeat of both the Internet craze and the housing bubble, when Wall Street jacked up presentday profits by selling suckers shares of a fictional fantasy future of endlessly rising prices.

In what was by now a painfully familiar pattern, the oil-commodities melon hit the pavement hard in the summer of 2008, causing a massive loss of wealth; crude prices plunged from $147 to $33. Once again the big losers were ordinary people. The pensioners whose funds invested in this crap got massacred: CalPERS, the California Public Employees’ Retirement System, had $1.1 billion in commodities when the crash came. And the damage didn’t just come from oil. Soaring food prices driven by the commodities bubble led to catastrophes across the planet, forcing an estimated 100 million people into hunger and sparking food riots throughout the Third World.

Now oil prices are rising again: They shot up 20 percent in the month of May and have nearly doubled so far this year. Once again, the problem is not supply or demand. “The highest supply of oil in the last 20 years is now,” says Rep. Bart Stupak, a Democrat from Michigan who serves on the House energy committee. “Demand is at a 10-year low. And yet prices are up.”

Asked why politicians continue to harp on things like drilling or hybrid cars, when supply and demand have nothing to do with the high prices, Stupak shakes his head. “I think they just don’t understand the problem very well,” he says. “You can’t explain it in 30 seconds, so politicians ignore it.”

BUBBLE #5 Rigging the Bailout

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People demonstrate in the financial district in front of AIG headquarters April 3, 2009 in New York City. Photo: Tama/Getty

After the oil bubble collapsed last fall, there was no new bubble to keep things humming — this time, the money seems to be really gone, like worldwide-depression gone. So the financial safari has moved elsewhere, and the big game in the hunt has become the only remaining pool of dumb, unguarded capital left to feed upon: taxpayer money. Here, in the biggest bailout in history, is where Goldman Sachs really started to flex its muscle.

It began in September of last year, when then-Treasury secretary Paulson made a momentous series of decisions. Although he had already engineered a rescue of Bear Stearns a few months before and helped bail out quasi-private lenders Fannie Mae and Freddie Mac, Paulson elected to let Lehman Brothers — one of Goldman’s last real competitors — collapse without intervention. (“Goldman’s superhero status was left intact,” says market analyst Eric Salzman, “and an investmentbanking competitor, Lehman, goes away.”) The very next day, Paulson greenlighted a massive, $85 billion bailout of AIG, which promptly turned around and repaid $13 billion it owed to Goldman. Thanks to the rescue effort, the bank ended up getting paid in full for its bad bets: By contrast, retired auto workers awaiting the Chrysler bailout will be lucky to receive 50 cents for every dollar they are owed.

Immediately after the AIG bailout, Paulson announced his federal bailout for the financial industry, a $700 billion plan called the Troubled Asset Relief Program, and put a heretofore unknown 35yearold Goldman banker named Neel Kashkari in charge of administering the funds. In order to qualify for bailout monies, Goldman announced that it would convert from an investment bank to a bankholding company, a move that allows it access not only to $10 billion in TARP funds, but to a whole galaxy of less conspicuous, publicly backed funding — most notably, lending from the discount window of the Federal Reserve. By the end of March, the Fed will have lent or guaranteed at least $8.7 trillion under a series of new bailout programs — and thanks to an obscure law allowing the Fed to block most congressional audits, both the amounts and the recipients of the monies remain almost entirely secret.

Converting to a bank-holding company has other benefits as well: Goldman’s primary supervisor is now the New York Fed, whose chairman at the time of its announcement was Stephen Friedman, a former co-chairman of Goldman Sachs. Friedman was technically in violation of Federal Reserve policy by remaining on the board of Goldman even as he was supposedly regulating the bank; in order to rectify the problem, he applied for, and got, a conflictofinterest waiver from the government. Friedman was also supposed to divest himself of his Goldman stock after Goldman became a bankholding company, but thanks to the waiver, he was allowed to go out and buy 52,000 additional shares in his old bank, leaving him $3 million richer. Friedman stepped down in May, but the man now in charge of supervising Goldman — New York Fed president William Dudley — is yet another former Goldmanite.

The collective message of all this — the AIG bailout, the swift approval for its bankholding conversion, the TARP funds — is that when it comes to Goldman Sachs, there isn’t a free market at all. The government might let other players on the market die, but it simply will not allow Goldman to fail under any circumstances. Its edge in the market has suddenly become an open declaration of supreme privilege. “In the past it was an implicit advantage,” says Simon Johnson, an economics professor at MIT and former official at the International Monetary Fund, who compares the bailout to the crony capitalism he has seen in Third World countries. “Now it’s more of an explicit advantage.”

Once the bailouts were in place, Goldman went right back to business as usual, dreaming up impossibly convoluted schemes to pick the American carcass clean of its loose capital. One of its first moves in the postbailout era was to quietly push forward the calendar it uses to report its earnings, essentially wiping December 2008 — with its $1.3 billion in pretax losses — off the books. At the same time, the bank announced a highly suspicious $1.8 billion profit for the first quarter of 2009 — which apparently included a large chunk of money funneled to it by taxpayers via the AIG bailout. “They cooked those firstquarter results six ways from Sunday,” says one hedgefund manager. “They hid the losses in the orphan month and called the bailout money profit.”

Two more numbers stand out from that stunning first-quarter turnaround. The bank paid out an astonishing $4.7 billion in bonuses and compensation in the first three months of this year, an 18 percent increase over the first quarter of 2008. It also raised $5 billion by issuing new shares almost immediately after releasing its firstquarter results. Taken together, the numbers show that Goldman essentially borrowed a $5 billion salary payout for its executives in the middle of the global economic crisis it helped cause, using halfbaked accounting to reel in investors, just months after receiving billions in a taxpayer bailout.

Even more amazing, Goldman did it all right before the government announced the results of its new “stress test” for banks seeking to repay TARP money — suggesting that Goldman knew exactly what was coming. The government was trying to carefully orchestrate the repayments in an effort to prevent further trouble at banks that couldn’t pay back the money right away. But Goldman blew off those concerns, brazenly flaunting its insider status. “They seemed to know everything that they needed to do before the stress test came out, unlike everyone else, who had to wait until after,” says Michael Hecht, a managing director of JMP Securities. “The government came out and said, ‘To pay back TARP, you have to issue debt of at least five years that is not insured by FDIC — which Goldman Sachs had already done, a week or two before.”

And here’s the real punch line. After playing an intimate role in four historic bubble catastrophes, after helping $5 trillion in wealth disappear from the NASDAQ, after pawning off thousands of toxic mortgages on pensioners and cities, after helping to drive the price of gas up to $4 a gallon and to push 100 million people around the world into hunger, after securing tens of billions of taxpayer dollars through a series of bailouts overseen by its former CEO, what did Goldman Sachs give back to the people of the United States in 2008?

Fourteen million dollars.

That is what the firm paid in taxes in 2008, an effective tax rate of exactly one, read it, one percent. The bank paid out $10 billion in compensation and benefits that same year and made a profit of more than $2 billion — yet it paid the Treasury less than a third of what it forked over to CEO Lloyd Blankfein, who made $42.9 million last year.

How is this possible? According to Goldman’s annual report, the low taxes are due in large part to changes in the bank’s “geographic earnings mix.” In other words, the bank moved its money around so that most of its earnings took place in foreign countries with low tax rates. Thanks to our completely fucked corporate tax system, companies like Goldman can ship their revenues offshore and defer taxes on those revenues indefinitely, even while they claim deductions upfront on that same untaxed income. This is why any corporation with an at least occasionally sober accountant can usually find a way to zero out its taxes. A GAO report, in fact, found that between 1998 and 2005, roughly twothirds of all corporations operating in the U.S. paid no taxes at all.

This should be a pitchforklevel outrage — but somehow, when Goldman released its post-bailout tax profile, hardly anyone said a word. One of the few to remark on the obscenity was Rep. Lloyd Doggett, a Democrat from Texas who serves on the House Ways and Means Committee. “With the right hand out begging for bailout money,” he said, “the left is hiding it offshore.”

BUBBLE #6 Global Warming

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CFTC chief Gary Gensler and fellow Goldman Sachs alumn and current Treasury chief of staff Mark Patterson are helping the investment bank get back to its old business Goldman Sachs successfully navigated the bailout era.

Fast-forward to today. It’s early June in Washington, D.C. Barack Obama, a popular young politician whose leading private campaign donor was an investment bank called Goldman Sachs — its employees paid some $981,000 to his campaign — sits in the White House. Having seamlessly navigated the political minefield of the bailout era, Goldman is once again back to its old business, scouting out loopholes in a new government-created market with the aid of a new set of alumni occupying key government jobs.

Gone are Hank Paulson and Neel Kashkari; in their place are Treasury chief of staff Mark Patterson and CFTC chief Gary Gensler, both former Goldmanites. (Gensler was the firm’s cohead of finance.) And instead of credit derivatives or oil futures or mortgage-backed CDOs, the new game in town, the next bubble, is in carbon credits — a booming trillion dollar market that barely even exists yet, but will if the Democratic Party that it gave $4,452,585 to in the last election manages to push into existence a groundbreaking new commodities bubble, disguised as an “environmental plan,” called cap-and-trade.

The new carboncredit market is a virtual repeat of the commodities-market casino that’s been kind to Goldman, except it has one delicious new wrinkle: If the plan goes forward as expected, the rise in prices will be government-mandated. Goldman won’t even have to rig the game. It will be rigged in advance.

Here’s how it works: If the bill passes, there will be limits for coal plants, utilities, natural-gas distributors and numerous other industries on the amount of carbon emissions (a.k.a. greenhouse gases) they can produce per year. If the companies go over their allotment, they will be able to buy “allocations” or credits from other companies that have managed to produce fewer emissions. President Obama conservatively estimates that about $646 billion worth of carbon credits will be auctioned in the first seven years; one of his top economic aides speculates that the real number might be twice or even three times that amount.

The feature of this plan that has special appeal to speculators is that the “cap” on carbon will be continually lowered by the government, which means that carbon credits will become more and more scarce with each passing year. Which means that this is a brand new commodities market where the main commodity to be traded is guaranteed to rise in price over time. The volume of this new market will be upwards of a trillion dollars annually; for comparison’s sake, the annual combined revenues of all electricity suppliers in the U.S. total $320 billion.

Goldman wants this bill. The plan is (1) to get in on the ground floor of paradigmshifting legislation, (2) make sure that they’re the profitmaking slice of that paradigm and (3) make sure the slice is a big slice. Goldman started pushing hard for capandtrade long ago, but things really ramped up last year when the firm spent $3.5 million to lobby climate issues. (One of their lobbyists at the time was none other than Patterson, now Treasury chief of staff.) Back in 2005, when Hank Paulson was chief of Goldman, he personally helped author the bank’s environmental policy, a document that contains some surprising elements for a firm that in all other areas has been consistently opposed to any sort of government regulation. Paulson’s report argued that “voluntary action alone cannot solve the climatechange problem.” A few years later, the bank’s carbon chief, Ken Newcombe, insisted that capandtrade alone won’t be enough to fix the climate problem and called for further public investments in research and development. Which is convenient, considering that Goldman made early investments in wind power (it bought a subsidiary called Horizon Wind Energy), renewable diesel (it is an investor in a firm called Changing World Technologies) and solar power (it partnered with BP Solar), exactly the kind of deals that will prosper if the government forces energy producers to use cleaner energy. As Paulson said at the time, “We’re not making those investments to lose money.”

The bank owns a 10 percent stake in the Chicago Climate Exchange, where the carbon credits will be traded. Moreover, Goldman owns a minority stake in Blue Source LLC, a Utahbased firm that sells carbon credits of the type that will be in great demand if the bill passes. Nobel Prize winner Al Gore, who is intimately involved with the planning of cap-and-trade, started up a company called Generation Investment Management with three former bigwigs from Goldman Sachs Asset Management, David Blood, Mark Ferguson and Peter Harris. Their business? Investing in carbon offsets. There’s also a $500 million Green Growth Fund set up by a Goldmanite to invest in greentech … the list goes on and on. Goldman is ahead of the headlines again, just waiting for someone to make it rain in the right spot. Will this market be bigger than the energyfutures market?

“Oh, it’ll dwarf it,” says a former staffer on the House energy committee.

Well, you might say, who cares? If cap-and-trade succeeds, won’t we all be saved from the catastrophe of global warming? Maybe — but capandtrade, as envisioned by Goldman, is really just a carbon tax structured so that private interests collect the revenues. Instead of simply imposing a fixed government levy on carbon pollution and forcing unclean energy producers to pay for the mess they make, cap-and-trade will allow a small tribe of greedy-as-hell Wall Street swine to turn yet another commodities market into a private taxcollection scheme. This is worse than the bailout: It allows the bank to seize taxpayer money before it’s even collected.

“If it’s going to be a tax, I would prefer that Washington set the tax and collect it,” says Michael Masters, the hedgefund director who spoke out against oilfutures speculation. “But we’re saying that Wall Street can set the tax, and Wall Street can collect the tax. That’s the last thing in the world I want. It’s just asinine.”

Cap-and-trade is going to happen. Or, if it doesn’t, something like it will. The moral is the same as for all the other bubbles that Goldman helped create, from 1929 to 2009. In almost every case, the very same bank that behaved recklessly for years, weighing down the system with toxic loans and predatory debt, and accomplishing nothing but massive bonuses for a few bosses, has been rewarded with mountains of virtually free money and government guarantees — while the actual victims in this mess, ordinary taxpayers, are the ones paying for it.

It’s not always easy to accept the reality of what we now routinely allow these people to get away with; there’s a kind of collective denial that kicks in when a country goes through what America has gone through lately, when a people lose as much prestige and status as we have in the past few years. You can’t really register the fact that you’re no longer a citizen of a thriving first-world democracy, that you’re no longer above getting robbed in broad daylight, because like an amputee, you can still sort of feel things that are no longer there.

But this is it. This is the world we live in now. And in this world, some of us have to play by the rules, while others get a note from the principal excusing them from homework till the end of time, plus 10 billion free dollars in a paper bag to buy lunch. It’s a gangster state, running on gangster economics, and even prices can’t be trusted anymore; there are hidden taxes in every buck you pay. And maybe we can’t stop it, but we should at least know where it’s all going.

Watch Matt Taibbi break down the Great American Bubble Machine in our exclusive video, and for more on how Wall Street is taking over Washington, read an excerpt from his “The Big Takeover.”

Originally appeared on Rollingstone.com

http://www.rollingstone.com/politics/story/29127316/the_great_american_bubble_machine/

Gil Scott Heron’s Winter in America

July 14, 2009 by admin1  
Filed under Featured, Media

Following video was put together by ‘Show Live’ before the 2004 election. Timely words for tough times.

Ward Churchill Vindicated

April 24, 2009 by admin1  
Filed under News

On April 2nd, 2009, A jury returned a decision stating that Ward Churchill had been wrongfully fired from his position as a tenured professor at Colorado University. The cause stemmed from the publication of his now infamous essay ‘The Ghosts of 9-1-1: Reflections on History, Justice and Roosting Chickens’. After its initial publication, three years passed until a section of the esay entitled ‘Some People Push Back’ was brought to light by a college newspaper reporter that the essay came under public criticism and caused the circumstances under which Churchill was subsequently fired.

In the full text, Churchill contends that the events of September 11th, 2001 were made inevitable by a foreign policy that puts the rights of corporations inexorably in front of the rights of people, histories or environments, and that the systemic amnesia engendered and perpetuated within the system is its own form of culpability.

Citing the failures of popular movements to cease the sanctions in Iraq during the 1990s, abolish the WTO or its colluding powers at the IMF/World Bank, he charges the left with acquiescing to state powers in deference to that which is comfortable and secure. The phrase, ‘Little Eichmans’ is largely credited for having drawn attention to the essay, a curious objection as the phrase itself was borrowed from a John Zerzan article, published in 1997.

The jury found for Churchill’s suit and held CU liable for the costs of his legal team and an additional one dollar.

The proceedings come at a time of increased scrutinity of college professors. From Norman Finkelstein’s being denied tenure, to Dr. Cornell West’s somewhat fiery departure from Harvard for Princeton, the high halls of academia have held witness to more power struggles than usual of late. The common thread underlying them all though would seem to be a charge of anti-zionism leveled at all the actors involved here. Finkelstein wrote ‘Beyond Ghutspa: On the Misuse of Anti-Semitism and the Abuse of History’ and West chose to leave Harvard after a public row with Larry Summers, a man who equates Anti-Zionism, the refusal of the State of Israel to exist, and Anti-Semitism, the racist bigotry towards a Jewish person. All three, Churchill, Finkelstein and West are all outspoken critics of US Foreign policy, vis-a-vis Palestine. All three have faced massive scrutiny that others in their fields are hardly ever subject to.

The case in point, Churchill was a tenured professor, but was abruptly demonized at the hint of equivalency of complicity of those who oversaw speculative investing and those who who punched tickets for Auschwitz victims. To be sure, there is a very real difference between the two, but what of those who ran the books for the SS? What of those who currently oversee the World Bank funding of dams that have flooded out perhaps 60 million people in India. Tens of thousands of these were farmers who have now committed suicide. What of the one million farmers displaced by US agribusiness in Mexico in the last 8 years who have no choice but to leave their villages and either enter a sweatshop or take the uncertain road north? The US does not send any of these people to be incinerated, but what level of collusion is acceptably equivalent? At what point will the American or even the progressive voices in America cease being voices and become actions in solidarity against such practices? Until Americans, and in particular those Americans who know something is wrong, answer this question, there will continue to be rhetoric, but no response, and the chickens are still out in the field, waiting to come home.

For Churchill, he has been proved triumphant against the school system that fired him. Unrelenting, he is now seeking the school to either reinstate him or award him one million dollars in damages. A Denver District Court Judge will decide within 30 days of the ruling whether additional damages will be awarded.

Weekend Update #12 – Self Esteem

March 22, 2009 by Russell Means Freedom  
Filed under Commentaries

This week Russell talks to us about self-esteem and how important it is that we rebuild a strong sense of self-worth in the Children now growing up on the Reservations. We are given a first-hand glimpse of how the charitable act of one man really made the day for some kids here at the Porcupine School. He also illustrates the two-faced nature of our sicko, wacked-out USA Government by revealing how the fabulous “new school” is just a fascist coverup for what really goes on here on the Pine Ridge Sioux Indian Reservation.

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