We Rule - You Don't. Get Over It! (And Get Ready for the Little Ones)

Heard in the public library. "He knows his Mama don't play."

Of course, to put this in perspective, we now live in a thoroughly ramped-up atmosphere in which "American national security" — defined to include just about anything unsettling that occurs anywhere on Earth — is the eternal preoccupation of a vast national security bureaucracy. Its bread and butter increasingly seems to be worst-case scenarios (perfect for our 24/7 media to pounce on) in which something truly catastrophic is always about to happen to us, and every "situation" is a "crisis." In the hothouse atmosphere of Washington, the result can be a feeding frenzy in which doomsday scenarios pour out. Though we don’t recognize it as such, this is a kind of everyday extremism.

Tom Engelhardt, author and founder of TomDispatch relates that what we have here is a failure to communicate (an "Empathy Gap"). As one of the best writers on foreign policy today, he is a source of information that I have trusted for many years without any regrets. I think you also will want to bookmark his site. (Emphasis marks were added - Ed.)

A front-page New York Times headline last week put the matter politely indeed: "In Pakistan, U.S. Courts Leader of Opposition." And nobody thought it was strange at all. In fact, it’s the sort of thing you can read just about any time when it comes to American policy in Pakistan or, for that matter, Afghanistan. It’s just the norm on a planet on which it’s assumed that American civilian and military leaders can issue pronunciamentos about what other countries must do; publicly demand various actions of ruling groups; opt for specific leaders, and then, when they disappoint, attempt to replace them; and use what was once called "foreign aid," now taxpayer dollars largely funneled through the Pentagon, to bribe those who are hard to convince. Last week as well, in a prime-time news conference, President Obama said of Pakistan: "We want to respect their sovereignty, but we also recognize that we have huge strategic interests, huge national security interests in making sure that Pakistan is stable and that you don’t end up having a nuclear-armed militant state." To the extent that this statement was commented on, it was praised here for its restraint and good sense. Yet, thought about a moment, what the president actually said went something like this: When it comes to U.S. respect for Pakistan’s sovereignty, this country has more important fish to fry. A look at the historical record indicates that Washington has, in fact, been frying those "fish" for at least the last four decades without particular regard for Pakistani sensibilities. In a week in which the presidents of both Pakistan and Afghanistan have, like two satraps, dutifully trekked to the U.S. capital to be called on the carpet by Obama and his national security team, Washington officials have been issuing one shrill statement after another about what U.S. media reports regularly term the "dire situation" in Pakistan. Of course, to put this in perspective, we now live in a thoroughly ramped-up atmosphere in which "American national security" — defined to include just about anything unsettling that occurs anywhere on Earth — is the eternal preoccupation of a vast national security bureaucracy. Its bread and butter increasingly seems to be worst-case scenarios (perfect for our 24/7 media to pounce on) in which something truly catastrophic is always about to happen to us, and every "situation" is a "crisis." In the hothouse atmosphere of Washington, the result can be a feeding frenzy in which doomsday scenarios pour out. Though we don’t recognize it as such, this is a kind of everyday extremism. Being Hysterical in Washington As the recent release of more Justice Department torture memos (which were also, in effect, torture manuals) reminds us, we’ve just passed through eight years of such obvious extremism that the present everyday extremity of Washington and its national security mindset seems almost a relief. We naturally grasp the extremity of the Taliban — those floggings, beheadings, school burnings, bans on music, the medieval attitude toward women’s role in the world — but our own extremity is in no way evident to us. So Obama’s statement on Pakistani sovereignty is reported as the height of sobriety, even when what lies behind it is an expanding "covert" air war and assassination campaign by unmanned aerial drones over the Pakistani tribal lands, which has reportedly killed hundreds of bystanders and helped unsettle the region. Let’s stop here and consider another bit of news that few of us seem to find strange. Mark Lander and Elizabeth Bumiller of the New York Times offered this tidbit out of an overheated Washington last week: "President Obama and his top advisers have been meeting almost daily to discuss options for helping the Pakistani government and military repel the [Taliban] offensive." Imagine that. Almost daily. It’s this kind of atmosphere that naturally produces the bureaucratic equivalent of mass hysteria. In fact, other reports indicate that Obama’s national security team has been convening regular "crisis" meetings and having "nearly nonstop discussions" at the White House, not to mention issuing alarming and alarmist statements of all sorts about the devolving situation in Pakistan, the dangers to Islamabad, our fears for the Pakistani nuclear arsenal, and so on. In fact, Warren Strobel and Jonathan Landy of McClatchy news service quote "a senior U.S. intelligence official" (from among the legion of anonymous officials who populate our nation’s capital) saying: "The situation in Pakistan has gone from bad to worse, and no one has any idea about how to reverse it. I don’t think ‘panic’ is too strong a word to describe the mood here." Now, if it were the economic meltdown, the Chrysler bankruptcy, the bank stress tests, the potential flu pandemic, or any number of close-to-home issues pressing in on the administration, perhaps this would make some sense. But everyday discussions of Pakistan? You know, that offensive in the Lower Dir Valley. That’s near the Buner District. You remember, right next to the Swat Valley and, in case you’re still not completely keyed in, geographically speaking, close to the Malakand Division. I mean, if the Pakistani government were in crisis over the deteriorating situation in Fargo, North Dakota, we would consider it material for late night jokesters. And yet, in the strange American world we inhabit, nobody finds these practically Cuban-Missile-Crisis-style, round-the-clock meetings the least bit strange, not after eight years of post-9/11 national security fears, not after living with worst-case scenarios in which jihadi atomic bombs regularly are imagined going off in American cities. Keep in mind a certain irony here: We essentially know what those crisis meetings will result in. After all, the U.S. government has been embroiled with Pakistan for at least 40 years and for just that long, its top officials have regularly come to the same policy conclusions — to support Pakistani military dictatorships or, in periods when civilian rule returns, pour yet more money (and support) into the Pakistani military. That military has long been a power unto itself in the country, a state within a state. And in moments like this, part of our weird extremism is that, having spent decades undermining Pakistani democracy, we bemoan its "fragility" in the face of threats and proceed to put even more of our hopes and dollars into its military. (As Strobel and Landy report, "Some U.S. officials say Pakistan’s only hope, and Washington’s, too, at this stage may be the country’s army. That, another senior official acknowledged Wednesday, ‘means another coup.’") In the Bush years, this support added up to at least $10 billion, with next to no idea what the military was doing with it. Another $100 million went into making that country’s nuclear-weapons program, about which there is now such panic, safer from theft or other intrusion, again with next to no idea of what was actually done with those dollars. And now the Obama administration is rushing to create a new Pakistan Counterinsurgency Capability Fund that will be controlled by General David Petraeus, head of U.S. Central Command. If Congress agrees — and in this panic atmosphere, how could it not? — there will be an initial rushed down payment of $400 million to train the Pakistani military, probably outside that country, in counterinsurgency warfare. ("The fund would be similar to those used to train and equip Iraqi and Afghan soldiers and police, Petraeus said.") Doomsday Scenarios Oh, and speaking of extremism, the ur-extreme statement of the last few weeks came from Secretary of State Hillary Clinton and was treated like the most ho-hum news here. In congressional testimony, she insisted that the situation in Pakistan — that Taliban thrust into Swat and the lower Dir Valley — "poses a mortal threat to the security and safety of our country and the world." Umm… Okay, the situation is unnerving — certainly for the Pakistanis, the large majority of whom have not the slightest love for the Taliban, have opted for democracy and against military dictatorship with a passion, and yet strongly oppose the destabilizing American air war in their borderlands. It could even result in the fall of the elected government or of democracy itself — not exactly a rare event in the annals of recent Pakistani history. It’s undoubtedly unnerving as well for the American military, intent on fighting a war in Afghanistan that has spilled disastrously across the open border. (As Pakistan expert Anatol Lieven wrote recently: "The danger to Pakistan is not of a Taliban revolution, but rather of creeping destabilization and terrorism, making any Pakistani help to the U.S. against the Afghan Taliban even less likely than it is at present.") In other words, it’s not a pretty picture. If you happen to live in the tribal borderlands, or Swat, or the Dir Valley, squeezed between the Taliban, the Pakistani Army, whose attacks cause great civilian harm, and those drones cruising overhead, you may be in trouble, if not in flight — or you may simply support the Taliban, as most of the rest of Pakistan does not. If you happen to live in India, you might start working up a sweat over what the future holds on the other side of the border. But all of this is unlikely to be a "mortal threat" even to Islamabad, the Pakistani military, or that nuclear arsenal American national security managers spend so much time fretting about. It is certainly not a "mortal threat to the security and safety of our country." So here’s a little common sense. If Pakistan poses a mortal threat to you in New York, Toledo, or El Paso, well then, get in line. Believe me, it will be a long one and you’ll be toward the back. Despite constant reports that lightly armed Taliban militants are only 60 miles from the "doorstep" of Islamabad, Pakistan’s national capital, and increasing inside-the-Beltway invocations of Ayatollah Khomeini’s 1979 revolution in Iran, you’re unlikely to see a Taliban government in Islamabad anytime soon, or probably ever. As one unnamed expert commented recently in the insider Washington newsletter, the Nelson Report, "I find it troubling that we are hyping the ’security situation’ in Pakistan. Pakistan is not being taken over, the FATA [Federally Administered Tribal Areas] is. This has been happening since 2004." Mind you, when Vice President Joe Biden said something extreme about flu precautions — don’t take the subway! — the media didn’t hesitate to laugh him off stage. When Hillary Clinton said what should be considered the equivalent about Pakistan, everyone treated it as part of a sober national-security conversation. Of course, when it comes to hysteria, nothing helps like a nuclear arsenal, and in recent weeks nuclear doomsday scenarios have broken out like a swine flu pandemic, even though a victorious Taliban regime in Islamabad with a nuclear arsenal would undoubtedly still find the difficulties of planting and detonating such devices in American cities close to insurmountable. By the way, for all our kindly talk about how the poor Pakistanis just can’t get it together democracy-wise, the U.S. has a terrible record when it comes not just to promoting democracy in that country, but to really giving much of a damn about its people. In fact, not to put too kindly a point on things, Washington has, over the past decades, done few favors for ordinary Pakistanis. Having played our version of the imperial Great Game first vis-a-vis the Soviets and, more recently, a bunch of jihadist warriors, we are now waging a most unpopular and destabilizing air war without mercy in parts of that country, and another deeply unpopular war just across its mountainous, porous border. And this brings us to perhaps the most extreme aspect of the mentality of our national security managers — what might be called their empathy gap. They are, it seems, incapable of seeing the situations they deal through the eyes of those being dealt with. They lack, that is, all empathy, which means, in the end, that they lack understanding. They take it for granted that America’s destiny is to "engineer" the fates of peoples half a world away and are incapable of imagining that the United States could, in almost any situation, be part of the problem, not a major part of its solution. This is surely folly of the first order and, year after year, has only made the "situation" in Pakistan worse. . . . To complete our picture of this over-the-top moment, we have to leave the heated confines of Washington and head for California’s China Lake. That’s where the U.S. military tests some of its advanced weapons. On April 20th, Peter Pae of the Los Angeles Times reported the following: "A 5-pound missile the size of a loaf of French bread is being quietly tested in the Mojave Desert north of Los Angeles as the military searches for more deadly and far more precise robotic weapons for modern warfare." This tiny missile called the Spike will someday replace the 100-pound Hellfire missiles mounted on our Predator and more advanced Reaper unmanned aerial drones flying those assassination missions over the tribal lands of Pakistan. New weaponry like this is invariably promoted as being more "precise," and so capable of causing less "collateral damage," than whatever we’ve been using; that is, as an advance for humanity. But in this case, up to 12 of these powerful micro-weapons will someday replace the two Hellfires now capable of being mounted on a Predator, which means a future drone will have to come home far less often as it cruises the badlands of the planet looking for targets. According to Pae, this new development is considered a "milestone" in weaponizing robot planes. Chillingly, he quotes Steven Zaloga, a military analyst with the Teal Group Corporation as saying, "We’re sort of at the same stage as we were in 1914 when we began to arm airplanes." Not only that but the Spike may someday soon be mounted on a new generation of more deadly drones, one of which, General Atomics Aeronautical Systems’ Avenger or Predator C, is already being tested. It will be able to fly 50% faster than the Reaper and at up to 60,000 feet for 20 hours before returning to base. In other words, the decisions to be made in future panicky "crisis" meetings in Washington, when "American security" once again faces a "mortal threat," are already being predetermined in the Mojave desert and elsewhere. In the Pentagon’s eternal arms race of one, a major vote is being cast at China Lake for future Terminator wars. In a crisis mood of desperation, we tend to fall back on what we know. This, too, plays into Washington’s national-security extremism. By now it should be obvious enough that the military approaches to Afghanistan and Pakistan (or the newly merged Af-Pak battlefield) have been in the process of failing for years. Take just our drone wars: they are not only killing significant numbers of civilians, but also destabilizing Pakistan’s tribal lands — military and civilian officials there have long begged us to ground them — and so creating an anti-American atmosphere throughout that country. Recently, former advisor to Gen. David Petraeus and counterinsurgency expert David Kilcullen told Congress: "We need to call off the drones… Since 2006, we’ve killed 14 senior al-Qaeda leaders using drone strikes; in the same time period, we’ve killed 700 Pakistani civilians in the same area. The drone strikes are highly unpopular. They are deeply aggravating to the population. And they’ve given rise to a feeling of anger that coalesces the population around the extremists and leads to spikes of extremism… The current path that we are on is leading us to loss of Pakistani government control over its own population." Sage advice. If President Obama temporarily suspended the Bush-era drone war, which his administration has recently escalated, it would represent a start down a different path, one not already strewn with the skeletons of failed policies. And while he’s at it — and here’s a little touch of extremism by American standards — why not declare a six-month moratorium on all drone research of any sort, a brief period to reconsider whether we really want to pursue such "solutions" ad infinitum? Why not, in fact, call for a six-month moratorium on all weapons research? A long Pentagon holiday. Militarily, the U.S. is in no danger of losing significant military ground globally by shutting down its R&D machine for a time, while reconsidering whether it actually wants to lead the planet into a future filled with Spikes and Avengers. If, however, nothing else was done, at least the president should order his national security team to calm down, skip those crisis meetings on Pakistan, tamp down the doomsday scenarios, and try to take a few minutes to imagine what the world looks like if you’re not in Washington or the skies over our planet. Are there really no solutions anywhere that don’t need to be engineered first in our national capital? [Note: You could easily drown in the tsunami of recent semi-hysterical pieces about the Pakistan or Af-Pak situation. Fortunately, I have Juan Cole's Informed Comment, Paul Woodward's The War in Context, and Antiwar.com to depend on to help me sort through the crucial reportage of this moment. What would I do without them?]

Tom Engelhardt created and runs the Tomdispatch.com website, a project of The Nation Institute where he is a Fellow. He is the author of a highly praised history of American triumphalism in the Cold War, The End of Victory Culture, and of a novel, The Last Days of Publishing, as well as a collection of his Tomdispatch interviews, Mission Unaccomplished. Each spring he is a Teaching Fellow at the Graduate School of Journalism at the University of California, Berkeley.

Thanks to Blue Gal for the link to one of the best antiwar essays I've read recently. Allison Krause's sister, Laurie, has written a totally amazing memorial at her blog about her sister's murder at Kent State which is a subject dear to my heart. I lost my waitressing job in college over the black armband I insisted on wearing after the massacre at Kent State. That night after joining a group who were trying to determine the proper response to the national events, I was recruited to be one of the leaders on the first bus (paid for by the widow of the poet Randall Jarrell) to travel from my NC campus to D.C. to protest this state police action against peacefully marching antiwar students, and to plead with Congressional representatives to stop funding the war in Vietnam. I'll never forget Senator Fritz Hollings (SC) (who was instrumental in desegregating Clemson University (my Father's alma mater) as Governor when others in the South were fighting desperately to remain as all-white institutions) telling me how sorry he was and his personal thoughts about the people who ran the national guards. Fritz later spoke about his "Cambodian moment" that turned him against the war on Iraq. Thank you, Blue Gal. It was wonderful to read Laurie's healing words. In light of the first essay, I thought you might be interested in reading José Miguel Alonso Trabanco's essay in which he attempts to increase our awareness about the "Prospects of a New Cold War" with Russia. And whom do you think would benefit most from that course of action? It's the same group of "the best and the brightest" folks!

"We are not afraid of anything, including the prospect of a new Cold War, but we don’t want one" - Russian President Dmitriy Medvedev In his 1997 book entitled The Grand Chessboard American geostrategist Zbigniew Brzezinski wrote that if Russia ever attempted to launch its own defense pact, it would include, "at most", Belarus and Tajikistan . . . . Twelve years later, his list turned out to be incomplete. Moreover, the attempts being made in order to enhance the Russian-led CSTO's actual power projection capabilities and the efforts undertaken to bring the organization's members closer together is something Brzezinski failed to anticipate and it seems that the latest developments concerning CSTO demonstrate that his triumphalism was premature.

Isn't almost all triumphalism? Suzan ____________________

Financial Comedy Central?

It's Comedy Central on the tubes these days. I guess there's no other way to react to the onslaught of bad news that's just supposed to wash over us like yesterday's cheap red wine as we go off to the unemployment and bread lines. (Click on the links to go straight to their blogs.) The Rude Pundit is always in rare form and his comments on the death throes of the Rethuglicans are especially amusing.

This is the 2009 Republican Party. Everything they do is another step in the long death march they've been on since 2006. No, instead we'll get the usual bullshit pronouncements about abortion rights, about limiting the ability of people to sue, about "judicial activism," one of those meaningless phrases that fools use to make themselves sound smart. They'll say they're standing up for people when all they're doing is pleasuring the base like a Chinese masseuse on happy ending duty at a corporate retreat. Then again, this is a group who actually believes that the future of the party might be named "Bush" or "Palin" or "Romney," the crabs on the crotch of American progress.

Thomas Friedman receives some well-deserved kicks from Ted Rall, and since I'm such a Friedman fan, I'm running a lot of it for your edification (and your opportunity to laugh out loud in outrageous enjoyment). (Emphasis marks were added - Ed.)

Do you believe in "intelligent design"? It's the argument that the universe is so logical that it must have been planned out by a master creator. Thomas Friedman, the New York Times columnist, single-handedly disproves the existence of such a God. Friedman is the nation's most prominent opinion writer. He wins journalistic prizes. Audiences shell out big bucks to hear him speak. Book collections of his columns become bestsellers for months on end. Yet the dude can't write. I'm not talking about his opinions. Friedman doesn't know how to arrange nouns and verbs in a way that is pleasing to readers of the English language. He is to writing what George W. Bush is to oratory. Stranger still is Friedman's role as über barometer of conventional wisdom. When Congress, media tastemakers and thus most Americans bought into Bush's Saddam-has-WMDs story, Friedman did too. When the Iraq War started to go wrong but officially acceptable opinion wanted to stay and "finish the job," so did he. When everyone threw up their hands in disgust, Friedman was there with them. Of course, he was wrong. He's always wrong. But he's always in perfect sync with conventional wisdom - which is almost always wrong. Friedman's prose appears to have barely survived the linguistic equivalent of a harsh interrogation technique: "Because that is when Al Qaeda's remnants will try to throw a Hail Mary pass - that is, try to set off a bomb in a U.S. city - to obscure its defeat by moderate Arabs and Muslims in the heart of its world." Did he get this sports metaphor from some think tank neocon, or was he lame enough to make it up himself? Whether he leads or follows the average mean of the mainstream, Friedman's role as the nation's ultimate bellwether is what makes him worth reading. Which is why it's so disquieting to read Friedman support Obama's refusal to prosecute torturers. Times Tom may be a fool. His logic is certainly hopeless. But the people who matter - Congress, editors and producers at the big papers and broadcast networks and thus most of the public - agree with him. Seven years after accounts of torture by American soldiers and CIA operatives first became public, the revelation that one detainee had been waterboarded 183 times in a single month has struck a Katrina-like nerve. Conventional, mainstream, average, generic U.S. public opinion wants something done about it - an investigation, maybe prosecution of a few of the attorneys who authored the Torture Memos - but nothing close to genuine accountability. Friedman's April 29th column reflects this internal conflict: "Lawrence Wilkerson, former chief of staff to Secretary of State Colin Powell, has testified to Congress that more than 100 detainees died in U.S. custody in Iraq and Afghanistan, with up to 27 percent of these declared homicides by the military. They were allegedly kicked to death, shot, suffocated or drowned. Look, our people killed detainees [Friedman's emphasis], and only a handful of those deaths have resulted in any punishment of U.S. officials." By Friedman's math, the military admits to the torture-murders of 27 people. He's low-balling. He doesn't include detainees murdered by the military in other places like Guantánamo or the Navy's fleet of prison ships, killed by the CIA at secret prisons, or slaughtered by foreign torturers after being "extraordinarily renditioned" by the U.S. Even so, 27 is a lot. No one would suggest letting a serial killer off the hook for 27 torture-murders. Friedman does. "The president's decision to expose but not prosecute those responsible," he writes, is justified. Why? Because "justice taken to its logical end here would likely require bringing George W. Bush, Donald Rumsfeld and other senior officials to trial, which would rip our country apart." "Rip our country apart." Wow. Granting prosecutorial immunity to war criminals like Bush, Cheney, Rumsfeld, Rice and Powell is already "tearing the country apart." First and foremost, it confirms many people's suspicion that there are two systems of justice in America: one for the rich and powerful and another for you and me. If I kidnap a man and hold him overnight, I face the death penalty or life in prison. Bush and his top officials ordered the kidnapping of tens of thousands of men as young as 12 years of age, the torture of thousands and the murder of hundreds. Until America's official mass murderers are treated as harshly as its freelance psychos, Americans will view their justice system as something to be feared rather than respected. Not only does extending executive privilege into retirement - and not even conservatives think there's a legal basis for this - encourage lawless behavior by current and future political leaders, it feeds partisanship. Republicans impeached Bill Clinton for lying about a BJ. He was also disbarred (and rightly so). Nixon, on the other hand, resigned before being impeached and never faced a jury. If Bush and his minions get away with murder, does that mean that only Democrats are subject to the rule of law? If the officials who ordered torture, the legislators who let it happen, the lawyers who justified it and the men and women who carried it out are not held accountable, the message will not be - as Obama seems to believe - that the Bush years represented some weird aberration in American history. Obama will be telling the world that the 2008 election changed nothing, that legal illegality could return at the drop of a hat (or the detonation of a dirty bomb), that his Administration protects the criminals and thus endorses their crimes. Millions of Americans, many of whom voted for him, already feel alienated from a country that expresses values that it doesn't live up to. Refusing to prosecute Bush deepens their cynicism. Cynicism, Mssrs. Friedman and Obama, is what's ripping the guts out of America every second of every day. Only consistent and fair application of the law can begin the healing.

Dave Lindorff argues effectively that the Obama Administration is in danger of "Becoming a Stand-Up Comedy Act." I've got to give this guy props (again) as I only meant to run a paragraph or two to publicize his political writing prowess but I just had to include waaay more. He is goooooooood. (Emphasis marks added - Ed.)

What a joke the Obama administration is becoming, as it keeps trying to prop up failing industry after failing industry. First we had the president becoming First Car Salesman, offering federal guarantees for GM and Chrysler car warrantees so that potential car customers wouldn't turn away from those two companies' showrooms fearing that the manufacturers would go bust and leave them holding the bag. Then he started touting the cars themselves, saying they were "great products" and that people should go out and buy them. Now we have the White House and Treasury Department assuring us that all 19 of the country's biggest banks are going to survive the credit crisis and the economic slump, and that they are all basically sound. Okay, so some of them, like Bank of America which has to come up with $35 billion in new capital, need cash infusions or need their books juggled - a total of $100 billion for all 19 banks - but as Fed Chairman and Chief of Rehabilitation and Promotion (that's CRAP) for the banking industry Ben Bernanke, is assuring us, "All the banks in the stress tests are solvent." Really. Forget about all those troubled assets folks. They are solvent. Honest. These stress tests are really a joke, though. Consider that the government (and in the end each individual American taxpayer) is now a huge stakeholder in every bank that received bailout funds. If one of these stress tests were to honestly report that one of these "too big to fail" banks was insolvent, or that it would become insolvent if the recession got worse, that would cause a collapse in that bank or, at a minimum, a plunge in its share value, with the government being the loser. Do we really think CRAP Bernanke and Treasury Secretary Tim Geithner are going to do that? The only way to do a real stress test would be the way the Fed and the Federal Deposit Insurance Corp. and other bank regulators used to do them: in complete secrecy. Banks, after all, which even under the best of circumstances lend out 10 times their assets, are critically dependent upon the confidence of their depositors. Any sign that a bank is in trouble and the depositors and even business customers like those who maintain credit lines at an institution, start to flee. So what these stress tests are really is not honest evaluations of the financial conditions of these banks, but rather, public relations exercises designed to boost the public's confidence in them. Even then, though, the tests were anything but rigorous. One test was based on an assumption that the nation's unemployment would reach 8.8 percent sometime next year, with housing prices falling another 14 percent in 2009. But official unemployment is already at 8.9 percent and is still rising, and housing prices are falling more than that level. The so called "worst case" stress test assumed unemployment rising to 10.3 percent in 2010 and housing prices losing another 22 percent in 2009, but in fact, things could well be much worse than that, both for unemployment and housing prices, by 2010. So really, the fact that these easy "stress" tests resulted in a conclusion that the 19 banks in question need to raise a total of $100 billion in new capital in six months should be a cause for alarm, not confidence. Add to that the fact that the government's and the banking industry's proposed solution to the capital shortfall, since there are likely to be few investors who will want to shovel new money into these zombie banks, is to convert the money which the government has already loaned to the banks in return for preferred shares in those institutions into common shares, which counts as capital. If you think about it, while this shifting around of money on the banks books may yield better numbers, it doesn't really provide the banks with one dollar more of cash to lend, or to cover bad debts. What it does do is take government money which could conceivably be recovered in the event of a bank failure, and convert it into paper that could easily end up having a value of 0 in the event of a bank failure. If a bank were to go down the tubes, its common shares would have no value at all, and then that's what our TARP funds would also be worth: zero. No wonder Obama and his term of financial "wizards" are touting the alleged strength of these banks! So it has come to this. After getting rid of an inarticulate and know-nothing president and a manipulative, secretive and anti-democratic vice president, we now have a White House filled with comics and hucksters shilling shamelessly for the both the automotive and the banking industry, both of which are candidates for roles in a "Night of the Living Dead" remake. This should not give us confidence about other government claims, like when President Obama and his State Department and Pentagon "wizards" stand up and tell us that they have a plan for the mess in Iraq or the other mess in Afghanistan, or that they even know what they are doing in and to Pakistan. Congress has been a joke for years. Now the White House is becoming a laughing stock. It is, I'm afraid, all starting to look like one big joke, and it's on us.

It's been a tough week. Enjoy the weekend if you can. Suzan ______________________

A Little "Knight" Music ("Magical Math" ) It's All Funny Money Now

First off I just need to say that Driftglass reigns supreme in the "Conservative" deconstruction department (and many, many others as well - so, give yourself a break and once you click on the link, spend a few moments and take in all his "goodness." Impossible, I know - but you gotta try.). Now back to our regularly scheduled outing of frauds.

Bank stocks have surged in recent weeks, a sign that investors are betting the worst of the financial crisis is over. But in reaching this conclusion, the market has chosen to ignore some creative accounting banks are using to bolster their finances. Lots of fuzzy math was trotted out during the just-ending earnings season to goose profits or narrow losses, and it will show up again as banks look to shore up their capital to meet requirements under the government's "stress tests." The tactics are perfectly legal, but they make the banks look healthier than they really are.

Fuzzy math? These guys? Will wonders . . . . (Emphasis marks inserted - Ed.)

There's nothing like a little magical math to make banks' financial woes go away. . . . "Investors who have been pleasantly surprised by the recent results could find themselves equally bothered later on when they discover plenty of unpleasant things," said Martin Weiss, who runs the investment firm Weiss Research Inc. After a year and a half of frightful declines, the Standard & Poor's Financials Index of 80 banks, insurers and investment firms bottomed in early March and has since more than doubled from a 17-year low, according to S&P. Momentum behind the rally grew in April as large banks began reporting mostly better-than-expected first-quarter results. Earnings for the companies in the S&P Financial Index have come in nearly 11 percent ahead of analysts' estimates. That could just be the start of turnaround for the banks, said Kent Engelke, chief economic strategist at Capitol Securities Management in Glen Allen, Va. He thinks there is a 25 percent probability that there will be positive economic growth by the end of the second quarter, which will benefit banks' loan portfolios. "In order to have a healthy economy, we need a healthy banking system," said Engelke, whose investment firm owns bank stocks. "I believe the government will do anything to ensure that will happen." But the recent strength seen in bank earnings didn't come from significant improvements in their core businesses. Instead, accounting maneuvers helped bolster bottom lines. Some banks reduced the amount of money they set aside to cover loan losses, which some analysts say conflicts with the reality of deteriorating loan portfolios. That means if the economy doesn't recover and troubled assets continue to rise, in coming quarters banks might have to boost loss reserves again - which could hurt future earnings. Wells Fargo saw its non-performing assets as a percentage of total assets jump by 40 percent over the previous quarter, yet it only increased its reserves by 5 percent. So even though more of its loans are past due or face foreclosure, it isn't setting aside significantly more cash to deal with potential losses. Earnings at several banks also benefited, counterintuitively, because the value of the banks' own debt was reduced to reflect a decline in the market value of that debt. In accounting-speak, a "credit-value adjustment" allows the banks to book a gain. The logic is that they could buy back the debt for less cash than they received when they issued the debt, so they get to claim a benefit, which many analysts say is illusory. Say a bank had issued debt at 100 cents on the dollar, and it now trades at 60 cents on the dollar. The bank can mark down the value of the debt on their books to 60 cents on the dollar, and take a gain on the 40-cent difference. For Citigroup, that debt adjustment totaled $2.5 billion, which helped narrow its losses for the quarter. The New York-based bank posted a first-quarter loss of $966 million, smaller than analysts expected. "It's not the kind of stuff you'd point to in earnings and say, "now that's sustainable income," said Jack Ciesielski, who writes the newsletter The Analyst's Accounting Observer. "You would want to exclude it from earnings in evaluating how well a company performed." A separate accounting rule change for valuing banks' assets that are available for sale also helped boost bank earnings. Until recently, they were "marked-to-market," meaning they were adjusted to reflect current market prices. But that has become increasingly difficult during the current financial crisis since there has been no trading of the most troubled assets. Under pressure from politicians and banks, accounting rulemakers reversed course in early April and gave corporate managers more discretion in valuing assets in cases when markets are frozen. That helped Wells Fargo cut its unrealized losses on certain securities in half, from $9.9 billion on Dec. 31 to $4.7 billion on March 31. That helped boost profits as a result. San Francisco-based bank reported first-quarter earnings of $2.38 billion compared with a loss of about $3 billion in the final quarter of 2008. Accounting maneuvers also will play a big role in what happens to banks that failed the government's "stress tests," which were done to gauge which financial institutions need more capital to survive a deeper recession. When the government invested billions in U.S. banks over the last six months, it received convertible preferred shares. That gave the banks funds for day-to-day needs, but those preferred shares are counted as debt, not as part of "tangible common equity," the government's currently favored tool for assessing the strength of a bank. If the government converts its preferred shares into common stock, those funds would count as equity capital, making the banks look stronger. Here's the hitch in that plan: The government would have greater influence since common shareholders have voting rights. The conversion would also dilute the ownership of current stockholders. One way around this issue would be to convert the government funds into another kind of preferred share that could also be counted as "tangible common equity." However the bank equity dance plays out, investors don't seem to care about any of the technicalities. They are stuck on the idea of a banking turnaround. They better hope they're right.

If wishes were horses . . . . When you were in school, studying hard to learn the legalities of accepted accounting practices and business ethics, did you ever think you'd hear this reasoning from the people responsible for your money's value? Me neither. Suzan ________________

Fatally Shocked United States of America?

I've been in agreement with Naomi Klein's thesis since I read her book The Shock Doctrine two years ago. She understands well that as far as the bankster bailout goes “the poorest and most vulnerable people in the country are being asked to bail out the most wealthy.”

“It really does fit the thesis of The Shock Doctrine,” she said, referring to her book in which she exposes how governments and powerful corporations use disasters and upheavals to gain even more power. “Here we have just this transfer, this massive transfer of public wealth into private hands,” Klein explained, “and that’s continuing and it’s much, much larger, just on a much larger scale than any of the investments we’re seeing through the stimulus or the budget.” Almost $12 trillion is being spent to bail out the financial sector compared to only about $1 trillion being spent on economic stimulus. “My real concern is — has been my concern from day one — is that the crisis on Wall Street, created by deregulated capitalism, is not actually being solved,” continued Klein. “It’s being moved. A private sector crisis is being turned into a public sector crisis.” “They are already cutting corners,” she told Maddow. “Now Aids funding in Africa is being cut by $6.6 billion. So who is paying for this? This is where the unfairness of it becomes very clear.”

And as Paul Krugman has aptly noted about the ability of the much-touted bank stress tests to actually rate how well the bailout is working (some editing and emphasis marks were added - Ed):

Even before the results were announced, Tim Geithner, the Treasury secretary, told us they would be “reassuring.” But whether you actually should feel reassured depends on who you are: a banker, or someone trying to make a living in another profession. I won’t weigh in on the debate over the quality of the stress tests themselves, except to repeat what many observers have noted: the regulators didn’t have the resources to make a really careful assessment of the banks’ assets, and in any case they allowed the banks to bargain over what the results would say. A rigorous audit it wasn’t. But focusing on the process can distract from the larger picture. What we’re really seeing here is a decision on the part of President Obama and his officials to muddle through the financial crisis, hoping that the banks can earn their way back to health. It’s a strategy that might work. After all, right now the banks are lending at high interest rates, while paying virtually no interest on their (government-insured) deposits. Given enough time, the banks could be flush again. But it’s important to see the strategy for what it is and to understand the risks. Remember, it was the markets, not the government, that in effect declared the banks undercapitalized. And while market indicators of distrust in banks, like the interest rates on bank bonds and the prices of bank credit-default swaps (CDS), have fallen somewhat in recent weeks, they’re still at levels that would have been considered inconceivable before the crisis. As a result, the odds are that the financial system won’t function normally until the crucial players get much stronger financially than they are now. Yet the Obama administration has decided not to do anything dramatic to recapitalize the banks. Can the economy recover even with weak banks? Maybe. Banks won’t be expanding credit any time soon, but government-backed lenders have stepped in to fill the gap. The Federal Reserve has expanded its credit by $1.2 trillion over the past year; Fannie Mae and Freddie Mac have become the principal sources of mortgage finance. So maybe we can let the economy fix the banks instead of the other way around. But there are many things that could go wrong. It’s not at all clear that credit from the Fed, Fannie and Freddie can fully substitute for a healthy banking system. If it can’t, the muddle-through strategy will turn out to be a recipe for a prolonged, Japanese-style era of high unemployment and weak growth. Actually, a multiyear period of economic weakness looks likely in any case. The economy may no longer be plunging, but it’s very hard to see where a real recovery will come from. And if the economy does stay depressed for a long time, banks will be in much bigger trouble than the stress tests — which looked only two years ahead — are able to capture. Finally, given the possibility of bigger losses in the future, the government’s evident unwillingness either to own banks or let them fail creates a heads-they-win-tails-we-lose situation. If all goes well, the bankers will win big. If the current strategy fails, taxpayers will be forced to pay for another bailout. But what worries me most about the way policy is going isn’t any of these things. It’s my sense that the prospects for fundamental financial reform are fading. Does anyone remember the case of H. Rodgin Cohen, a prominent New York lawyer whom The Times has described as a “Wall Street éminence grise”? He briefly made the news in March when he reportedly withdrew his name after being considered a top pick for deputy Treasury secretary. Well, earlier this week, Mr. Cohen told an audience that the future of Wall Street won’t be very different from its recent past, declaring, “I am far from convinced there was something inherently wrong with the system.” Hey, that little thing about causing the worst global slump since the Great Depression? Never mind. Those are frightening words. They suggest that while the Federal Reserve and the Obama administration continue to insist that they’re committed to tighter financial regulation and greater oversight, Wall Street insiders are taking the mildness of bank policy so far as a sign that they’ll soon be able to go back to playing the same games as before. So as I said, while bankers may find the results of the stress tests “reassuring,” the rest of us should be very, very afraid.

I know I am. NOTE: Here's some reporting on whether the infamous (now) off-the-record dinner at the White House caused Krugman (or Joseph Stiglitz) to pull in their horns a bit. Suzan ____________________

Wanna See the Numbers? Back to the Future Recession

So, you'd really like to see the numbers? E. James Welsh thinks you should. Courage. They all appear at the link above. But first you might like to find something to hold on to.

An average of 5,945 bankruptcy petitions were filed each day in March, up 9% from February and 38% from a year ago. The soaring job losses since last September are certainly behind the increase in bankruptcies. The surge in job losses are working their way up the income ladder, with an increasing number of middle income and upper middle income workers being affected. This is pushing many of those who previously were considered prime credit risks over the edge. Two-thirds of mortgages in the U.S. are held by the best credit risk, prime borrowers. According to the American Bankers Association, 5.06% of prime borrowers have missed at least one mortgage payment. Since prime borrowers are such a large group, this represents 1.8 million mortgages. Although the delinquency rate for sub prime mortgages is up to 21.9%, it only accounts for 1.2 million mortgages. In the fourth quarter, a number of states mandated a freeze on foreclosures, and a number of banks, not wanting to be a modern day Mr. Potter during the holidays, voluntarily suspended foreclosures. According to RealtyTrac, foreclosure filings increased to 341,180 in March, up 17% from February, and up 46% from a year ago. After the foreclosure moratorium expired in California, notices of trustee sales, which precede foreclosure sales, climbed more than 80% to 33,178 in March from February. Moody's Economy.com estimates more than 2.1 million homes will be lost this year, up from 1.7 in 2008.

Yes, he may have been a fairly traditional Republican (not Rethuglican) at heart before now, but he's dead on to the failed policies that brought us to this sorry pass and once again, he deserves props. This dissection of the economy is not for the fainthearted. Read it with a refreshing drink. You will need it. (Refill often.) The first section of this essay is, here.

Back to the Future Recession by John Mauldin April 24, 2009 MV=PQ Okay, when you become a central banker, you are taken into a back room and they do a DNA change on you. You are henceforth and forever genetically incapable of allowing deflation on your watch. It becomes the first and foremost thought on your mind: deflation, we can't have it. MV=PQ. This is an important equation, right up there with E=MC2. M (money or the supply of money) times V (velocity - which is how fast the money goes through the system - if you have seven kids it goes faster than if you have one) is equal to P (the price of money in terms of inflation or deflation) times Q (roughly standing for the Quantity of production, or GDP). So what happens is, if we increase the supply of money and velocity stays the same, and if GDP does not grow, that means we'll have inflation, because this equation always balances. But if you reduce velocity (which is happening today) and if you don't increase the supply of money, you are going to see deflation. We are watching, for reasons we'll get into in a minute, the velocity of money slow. People are getting nervous, they are not borrowing as much, either because they can't or the animal spirits that Keynes talked about are not quite there. To fight this deflation (which we saw in this week's Producer and Consumer Price Indexes) the Fed is going to print money. A few thoughts on that. The Fed has announced they intend to print $300 billion (quantitative easing, they call it). That is different than buying mortgages and securitized credit card debt - that money (credit) already exists. When they just print the money and buy Treasuries, as with the $300 billion announced, they can sop that up pretty easily if they find themselves facing inflation down the road. But that problem is a long way off. Sports fans, $300 billion is just a down payment on the "quantitative easing" they will eventually need to do. They can't announce what they are really going to do or the market would throw up. But we are going to get quarterly or semi-annual announcements, saying, we are going to do another $300 billion here, another $500 billion there. Pretty soon it will be a really large total number. When we first started out with TALF and everything, it was a couple hundred billion, and now we just throw the word trillions around and it just drips off of our tongues and we don't even think about it. A trillion is a lot. It's a big number. And the total guarantees and backups and all this stuff we are into - I saw an estimate of $10-12 trillion. That's a lot of money. Understand, the Fed is going to keep pumping money until we get inflation. You can count on it. I don't know what that number is; I'm guessing maybe as much as $2 trillion. I've seen various studies. Ray Dalio of Bridgewater thinks it's about $1.5 trillion. It's some very big number way beyond $300 billion, and they are going to keep at it until we get inflation. Side point: what happens if the $300 billion they put in the system comes back to the Fed's books because banks don't put it into the Libor market because they are worried about credit risks? It does absolutely nothing for the money supply. Okay? It's like, goes here, goes back there - it doesn't help us. The Fed has somehow got to get it into the financial system. They've got to figure out how to create some movement. Will it create an asset bubble in stocks again? I don't know, it could. Dennis [Gartman] talked about being nervous yesterday. I would be nervous about stock markets both on the long side, as I think we are in a bear market rally, but also there is real risk in being short. Bill Fleckenstein will be here tonight. He is a very famous short trader. He closed a short fund a couple of months ago. He says he doesn't have as many good opportunities, and basically he's scared of being short with so much stimulus coming in. So it's going to work, at least in terms of reflation, but the question is, when? A year? Two years? Financial Innovation: The Round Trip Financial innovation is one of the drivers of the velocity of money. We started in approximately 1991 creating the first securitizations and CDOs. It was done at Merrill Lynch, if I remember right. But they started getting copied, and then we went into warp speed, creating all kinds of new CDOs and SIVs that invested in loans, securitized mortgage debt - most of which was rated AAA - banks loans, credit card debt, etc. Without thinking about it, we created a shadow banking system that funded a huge chunk of our total credit markets. It was outside the bailiwick of the normal regulatory authorities. Then in 2007 we began to destroy the shadow banking system. If it was working so well, why did we do that? Because they mismatched their liabilities and assets. They were borrowing short-term and lending long-term, and doing it highly leveraged. They were buying up long-term assets at 4-5-6%, some (or most) of them rated AAA. Then they were selling commercial paper at 1% or 2% - so you get a 2-3% profit spread. A 2-3% spread doesn't really make you anything, you're not really excited about that; so since we're dealing with AAA investments that everyone believes to be absolutely safe, let's leverage it up 6-7-8 times. Now you're talking a 20% return. Now you're talking about making money, real money. And I should note that we were also talking real commissions and monster bonuses. I think one other side note needs to be made here. In hindsight, we can now look back and wonder what the investment banks were thinking. They "must" have known they were pushing bad paper into the system. But their behavior tells us they didn't know. If they really believed they were, there would not have been so much of the toxic debt left on their books. Bear Stearns launched very large funds to buy this debt at obscene leverages and sold it to their best customers. At least some people in management thought there was real value in these securities, which just goes to show how lax or ignored the risk managers were in all parts of the financial industry. Then it all began to implode, because people started paying attention to some of the assets on the balance sheets of the various SIVs and CDOs and suspected they might not be worth what they had originally thought. You have subprime mortgages in your Special Investment Vehicle? Hey, I'm not going to buy your commercial paper. Suddenly, the commercial paper market simply imploded. This was the start of the banking crisis. So we started taking the innovation of securitizations off the table. The innovation that had driven the velocity to new highs was now slowly being pulled off. So, velocity slows down, and it's continuing to slow down with each passing month. Let's survey the economic landscape. We have an unstable economy. Housing doesn't bottom until 2011 or 2012, unless, as I wrote the other day, we give immigrants a green card to come here. We need the immigrants anyway. We need smart immigrants. By the way, I've never had as much response to my letter, both positive and negative. It ran about 60/40 for. Many of the "against" were people outside of the US, saying why are you trying to take our best, we need them. I suppose there is a certain logic to that, but if we could pull a million homes off the market, it would solve a big part of the US credit crisis right now, not to mention, we would have people putting money into our system and it wouldn't cost taxpayers anything. But back to the current scene. Consumer spending is slowing, and it's going to slow for years as savings increase. At one time we were savings 7-8-10% of our incomes, back in the early '80s. We grew from 63% of the economy being consumer spending, to 71% in 2006. We are going back to the mid-to low 60s in terms of the percentage of consumer spending in GDP. We are not doing it all at once, it's going to take years; but, gentle reader, it's the blue screen of death! We are hitting the reset button. Economists have a term for this process. It's called rationalization. We have too many stores to sell "stuff," all sorts of stuff. Too many malls. We have too many factories to build too many cars, too many plants to build too many widgets for an economy where 65% of GDP is consumer spending. When we built all that capacity it was for an economy in which consumer spending was 71%; and because we were enthusiastic and believed we would grow at 3% forever, we probably built it for 73% or 74%. We are watching capacity utilization fall off the table. It is down to 67%, fully 15% below normal. What happens when you see that? You start closing factories. It's just what you have to do. We are going to have fewer restaurants, fewer clothing stores. The survivors will get bigger market shares; that's just what happens. Schumpeter called it creative destruction. And this being a different type of recession - because we are hitting the full credit-cycle reset, it's going to take longer. I think the recession - the actual, honest, mark-to-market numbers - will be negative through 2009. Then we'll start to improve. This current first quarter is going to be ugly again, then it will be a little better in the third quarter. The second quarter - I don't know how bad it's going to be, but it's not looking good. But in 2010 we could start seeing slow growth again, maybe Muddle Through. There might be a sluggish recovery in 2010, but we have to put an asterisk on that possibility because the Democrats are going to push through the largest tax increase in history. First of all, the tax increase is the Republicans' fault.

Find out more along this line here. It's not the progressive viewpoint, but you've got to take it into account when doing your due diligence. Suzan _____________________

Why Believe Much Will Be Different This Time & How Different From Bush Is Obama? (Chomsky)

Professor Chomsky gives the inside scoop to Amy Goodman. Wish I'd been there to hear this dear man answer Amy's questions. He illuminates what happened under Carter also. Remember the firing of Carter's friend and Budget Director, Bert Lance, or the troubles of his Treasury Secretary? No? I hardly can myself and I was paying attention. No wonder the Rethugs can't fathom what's wrong with a little bit of corruption. (Emphasis marks inserted - Ed.)

NOAM CHOMSKY: Well, let's start with G20. If you look at the Financial Times, the world's major business journal, the day before the G20 meeting, they had a section on it, and they pointed out, I think correctly, that the main purpose is to present a picture of harmony and agreement. It doesn't matter what you do, but make it look as if we're all together on this. Now, there are sharp splits about how to approach the issue, but you have to make it look as if we're all together. That's pretty much what happened. Now, in the communiqué, which you read before, the crucial word was "voluntary." So, the countries there are supposed to voluntarily choose to do x, y and z. Well, that means we couldn't make an agreement. So we'll call it voluntary agreement. Now, there was one point on which they agreed: a sharp recapitalization of the International Monetary Fund; pour a lot of money into the IMF. That's a pretty dubious move. I mean, the record of the IMF has—the IMF is more or less a branch of the US Treasury, even though it has a European director. Its past role has been extremely destructive. In fact, its American US executive director captured its role when she described it as "the credit community's enforcer," meaning if a third world dictator incurs a huge debt—people didn't, but the dictator did; say, Suharto in Indonesia—and then the debt defaults, the lenders, who have made plenty of money because it was a risky loan so they get high interest and so on, they have to be protected, meaning not by the dictator, by the people of Indonesia, who are subjected to harsh structural adjustment programs so that they can pay back the debt, which they didn't incur, so that we can be compensated, rich Westerners can be compensated. So that's the IMF, the credit community's enforcer, a very destructive role in the third world. Now it's to be recapitalized. Now, there's discussion about this, and it's interesting. You can read it in the financial pages. The supporters of the recapitalization say, "Well, the IMF has changed its spots. It's going to be different from now on. We realize that it had this terrible role, but now it's going to be different." Well, is there any reason to believe it will be different? In fact, if you look today, it's quite striking to see the advice that the Western powers are following, the programs that they're following, and compare them to the instructions given to the third world. So, say, take Indonesia again. Indonesia had a huge financial crisis about ten years ago, and the instructions were the standard ones: "Here is what you have to do. First, pay off your debts to us. Second, privatize, so that we can then pick up your assets on the cheap. Third, raise interest rates to slow down the economy and force the population to suffer, you know, to pay us back." Those are the regular instructions the IMF is still giving them. What do we do? Exactly the opposite. We forget about the debt, let it explode. We reduce interest rates to zero to stimulate the economy. We pour money into the economy to get even bigger debts. We don't privatize; we nationalize, except we don't call it nationalization. We give it some other name, like "bailout" or something. It's essentially nationalization without control. So we pour money into the institutions. We lectured the third world that they must accept free trade, though we accept protectionism. Take the "too big to fail" principle, which the House committee is discussing today. But what does "too big to fail" mean? "Too big to fail" is an insurance policy. It's a government insurance policy. Government means the public pays, which says, "You can take huge risks and make plenty of profit, and if anything goes wrong, we'll bail you out." That's "too big to fail." Well, that's extreme protectionism. It gives US corporations like Citigroup an enormous advantage over others, like any other kind of protection. But we don't allow the third world to do that. I mean, they've got to privatize, so that we can pick up their assets. Now, these are happening side by side. Now, here's the instructions for you, the poor people; here's the policies for us, the rich people. Exactly the opposite. Is there any reason to think the IMF is going to change it? AMY GOODMAN: Do you think President Obama is any different than President Bush when it comes to the economy? And if you were in the Congress, would you have voted for the bailouts and the stimulus packages? NOAM CHOMSKY: He's different. I mean, first of all, there's a rhetorical difference. But we have to distinguish the first and the second Bush terms. They were different. I mean, the first Bush term was so arrogant and abrasive and militaristic and dismissive of everyone that they offended, they antagonized even allies, close allies, and US prestige in the world plummeted to zero. Now, the second Bush administration was more — moved more toward the center in that respect, not entirely, but more, so some of the worst offenders, like Rumsfeld, Wolfowitz and others, were thrown out. I mean, they couldn't throw out Dick Cheney, because he was the administration, so they couldn't get rid of him. He stayed, but the others, a lot of them, left. And they moved towards a somewhat more normal position. And Obama is carrying that forward. He's a centrist Democrat. He never really pretended to be anything else. And he's moving towards a kind of a centrist position. He's very popular in Europe, not so much because of him, but because he's not Bush. So there is the kind of rhetoric that the European leaders and, in fact, the European population tend to accept. In fact, you know, even in the Middle East, where you'd think people would know better, they accept the illusions. And they are illusions, because there's nothing to back them up. So, yes, he is different from Bush. Same — on the economy, well, you know, the current Obama-Geithner plan is not very different from the Bush-Paulson plan. I mean, somewhat different, but circumstances have changed. So, of course, it's somewhat different. But it's still based on the principle that we have to — somehow, the taxpayer has to rescue the institutions intact. They have to remain intact, including the people who, you know, destroyed the economy. In fact, they are the ones who Obama picked to fix it up. AMY GOODMAN: Explain. NOAM CHOMSKY: Like Larry Summers, for example, who is now his chief economic adviser. I mean, he was Secretary of Treasury under Bill Clinton. His great achievement was to prevent Congress from regulating derivatives, exotic financial instruments. Well, that's one of the main factors that led to the crisis. His kind of senior adviser, one of the first, was Robert Rubin, who was Secretary of Treasury right before Summers. His main achievement — many achievements, like what he did to Indonesia and the third world, but here, his main achievement was to lead the way to revoke the Glass-Steagall legislation from the New Deal, which protected commercial banks from risky investments. It broke down those barriers. Immediately after having done this, he left the government, joined Citigroup as a director, and they began to make huge profits, including him, from picking up insurance companies and so on and making very risky loans, relying on the "too big to fail" doctrine, meaning if we get in trouble, the taxpayer will bail us out, which is just what's happening, taxpayers now pouring tens of billions of dollars into rescuing Citigroup. Well, these are the advisers who were supposed to fix up the system. Tim Geithner was right in the middle of this. He was head of the New York Federal Reserve, so, yes, he was supervising these actions. Now, you know, you can argue about whether they're doing the right thing or the wrong thing, but are these the people who should be fixing up the system? Actually, the business press just had some interesting things to say about this. Bloomberg News, you know, main business press, had an article in which they reviewed the records of the people who Obama invited to his economic summit. I think it must have been last November or December. They just reviewed the record. I think there were a couple dozen of them. People on the — you know, people like, say, Stiglitz, Krugman, they were never even allowed close to it, let alone anyone from the left or labor and so on, given token representation. So they went through the records, and they concluded that these people should not be invited to fix up the economy. Most of them should be getting subpoenas because of their record of accounting fraud, malpractice and so on, and helping bring about the current crisis. AMY GOODMAN: Why do you think Obama chose to surround himself? NOAM CHOMSKY: Because those are his beliefs. I mean, his support comes from the — his constituency is basically the financial institutions. Just take a look at the funding for his campaign. I mean, the final figures haven't come out, but we have preliminary figures, and it seems to be mostly financial institutions. I mean, the financial institutions preferred him to McCain. They are the main funders for both—you know, I mean, core funders for both parties, but considerably more to Obama than McCain. You can learn a lot from campaign contributions. In fact, one of the best predictors of policy around is Thomas Ferguson's investment theory of politics, as he calls it—very outstanding political economist—which essentially—I mean, to say it in a sentence, he describes elections as occasions in which groups of investors coalesce and invest to control the state. And he takes a look at the formation of campaign contributors, and it gives you a surprisingly good prediction of what policies are going to be. It goes back a century, New Deal and so on. So, yeah, it can predict pretty well what Obama is going to do. There's nothing surprising about this. It's the norm in what's called political democracy. AMY GOODMAN: Would you have let Citibank, would you have let Citigroup, would do have let the AIG fail? NOAM CHOMSKY: Well, there are other possibilities. So, the government could just take over the viable parts. And parts of them are functioning; parts are dysfunctional, like the toxic — what they call the toxic asset parts, you know, the financial manipulations. Well, one thing you could do, which has been suggested by a number of economists like Dean Baker, just take over the good parts, essentially nationalize them, put them under public control. And "nationalize" means public control, at least if you have a democracy. Not here, but if you had a functioning democracy, it would mean let them be under public control, and the parts that are responsible for the huge losses, just let them go off by themselves. In fact, that would be the way of taking care of the AIG bonuses that everyone's screaming about. In fact, as Baker pointed out, just spin off the parts that were involved in financial manipulations and caused the crisis, let them go bankrupt and let the executives try to get the bonuses from a bankrupt firm, OK, with no legislation necessary. That's what should be done with Citigroup. And in fact, it's interesting, it's kind of happening. You know, after the breakdown of Glass-Steagall, they did bring in — they made use of it, under Rubin's direction, among others, to take — bring in insurance companies and other risky investors. Now they're divesting them. And they're going in the direction of becoming, you know, commercial bank. Now, incidentally, this is not the first time this has happened. Paul Volcker is on the news today, you know, saying, "Let's slow down," and so on. Well, he's the one who, under Reagan, who helped bail out Citigroup last time they crashed. At that time they were Citibank. They had followed World Bank and IMF instructions and lent huge amounts of money to Latin America and were assured by the World Bank that it's all fine, you know, markets will take care of it, etc. Well, in a crash, Paul Volcker came in. He raised interest rates very sharply. Third world countries, whose payments are tied to US interest rates, couldn't pay their debts. The IMF moved in, took care of it, and essentially recapitalized Citibank. That's the way the system works: you make risky loans, you make a lot of money, and if you get into trouble, we're here to bail you out, namely the taxpayer. AMY GOODMAN: And how do the Republicans differ from the Democrats in this? What do you make of—do you see it as just a minor footnote that Republicans, or some of the governors like Palin, like Jindal— NOAM CHOMSKY: There's a difference. AMY GOODMAN: — are saying they're not going to take stimulus money? NOAM CHOMSKY: There's a difference. I mean, we basically are a kind of a one-party state. I think C. Wright Mills must have pointed this out fifty years ago. It's a business party, but it has factions — Democrats and Republicans — and they're different. They have somewhat different constituencies and different policies. And if you look over the years, the population has — the majority of the population has tended to make out better under Democrats than Republicans; the very wealthy have tended to make out better under Republicans than Democrats. So they're business parties, but they're somewhat different, and the differences can have an effect. However, fundamentally, they're pretty much along the same lines. So take, say, the current financial crisis. Actually, it began under Carter. The late Carter administration is the one that began—was pushing for financialization of the economy, you know, huge growth of speculative financial capital, deregulation, and so on. Reagan carried it much further, and Clinton continued it. And then, with Bush, it kind of went off the rails. So there are differences, but differences within a pretty narrow spectrum. And anyone who's a little off the spectrum, like Nobel laureates in economics who are a couple of millimeters off the spectrum, they're basically on the outside. You can interview them, but they don't show up at the economic summit. AMY GOODMAN: How does the global economy and our own economy relate to the issue of war and US foreign policy? NOAM CHOMSKY: Well, actually, you had a pretty good interview with Joseph Stiglitz about that a couple of months ago, in which he discussed the relationship of — he was talking about the Iraq war. And as you'll recall, he pointed out correctly that the Iraq war, which, first of all, is going to cost trillions of dollars, also had the effect of sharply increasing the price of oil, predictably. And as he pointed out, we could sort of paper that over for a while by a housing bubble, so there was a huge housing bubble which anyone with eyes open could see. I mean, for a century, housing prices had sort of tracked the economy, GDP; then, all of a sudden, they shot way beyond the trend line, which means there's a bubble, and it's going to burst, and you get into trouble. But the housing bubble, which was supervised by Alan Greenspan and with the Democrats — actually, it started under Clinton — it replaced the tech bubble under Clinton, and it gave an illusion of prosperity, which — so you didn't see the effects of the rise in oil prices, which went very high. But if you trace all the connections, yes, there's a clear connection, as he pointed out, between the war and the economic crisis. And in fact, it's deeper than that. The US is just in a class by itself in military expenses. It basically matches the rest of the world, and it's far more advanced. Well, that's drawn from somewhere. You know, that's money that's not being used to develop the economy. Now, in fact, you have to add a footnote here, because part of the very high level of US violation of free trade principles is that the economy itself is based on military spending to a substantial extent. So the modern information revolution — computers, the internet, fancy software and so on — most of that comes straight out of the Pentagon. My own university, MIT, was one of the places where all of this was developed under Pentagon contracts in the 1950s and the 1960s. In fact, that's another critical part of the way the economy works. The public pays the costs and takes the risk of economic development, and if anything works, maybe decades later, it's handed over to private enterprise to make the profits. And that's a core element of the economy. Of course, we don't permit the third world to do that. That's considered a violation of free trade when they do it. But it's the way our economy works. And it's kind of complementary to the "too big to fail" doctrine of protectionism for financial institutions. But the general — we do not have a capitalist economy. We have kind of a state capitalist economy in which the public has a role: pay the costs, take the risks, bail out if they get into trouble. And the private sector has a role: make profit, and then turn to the public if you get into trouble. AMY GOODMAN: Would you extend that to healthcare? NOAM CHOMSKY: Well, healthcare is a dramatic case. I mean, for decades, the healthcare issue has been right at the top of domestic concerns, for very good reasons. The US has the most dysfunctional healthcare system in the industrial world, has about twice the per capita costs and some of the worst outcomes. It's also the only privatized system. And if you look closely, those two things are related. And the privatized system is highly inefficient: a huge amount of administration, bureaucracy, supervision, you know, all kinds of things. It's been studied pretty carefully. Now, the public has had an opinion about this for decades. A considerable majority want a national healthcare system, like other industrial countries have. They usually say a Canadian-style system, not because Canada is the best, but at least you know that Canada exists. Nobody says an Australian-style system, which is much better, because who knows anything about that? But something like what's sometimes called Medicare Plus, like extend Medicare to the population. Well, up until — it's interesting. Up until the year 2004, that idea was described, for example, by the New York Times as politically impossible and lacking political support. So, maybe the public wants it, but that's not what counts as political support. The financial institutions are opposed, the pharmaceutical institutions are opposed, so it's not — no political support. Well, in 2008, for the first time, the Democratic candidates — first Edwards, then the others — began to move in the direction of what the public has wanted, not there, but in that direction. So what happened between 2004 and 2008? Well, public opinion didn't change. It's been this way for decades. What changed is that manufacturing industry, a big sector of the economy, has recognized that it's being severely harmed by the highly inefficient privatized health system. So, General Motors said that it costs them over a thousand dollars more to produce a car in Detroit than across the border in Windsor, Canada. And, you know, when manufacturing industry becomes concerned, then things become politically possible, and they begin to have political support. So, yes, in 2008, there's some discussion of it. Now, you know, this is very revealing insight into how American democracy functions and what is meant by the term "political support" and "politically possible." Again, this should be headlines. Will a proposal come that approaches what the public wants? Well, we're already getting the backlash, strong backlash. And what private healthcare systems are claiming is that this is unfair. The government is so much more efficient that they'll be driven — there's no level playing field if the government gets into it, which is true.

So there. Suzan _____________

Spectre Wins (Presently) But Schechter Triumphs By Exposing Bankster Plans

Can your heart stand the pressure of knowing the truth about the insiders' view of the "Bankster Power Scandal?" Danny Schechter hopes so and he enumerates the ways the citizenry has been yanked back and forth by media misrepresentations (and their Congressional representatives) as to what is really going on with your money (and your future). Only the strong need read on. (That means you.)

Last week, a Zogby poll found that a majority of the public believes the press made things worse by reporting on the economic collapse. Not only is that blaming the messenger, it also overlooks the fact that much of the media was complicit in the crisis by not covering the forces that caused the collapse when it might have done some good. . . . Usually, the people who pull the strings stay in the background to avoid too much public exposure. They rely on lobbyists to do their bidding. They prefer to work in the shadows. They may back certain politicians, but coming from a world of credit default swaps as they do, they hedge their bets by putting money on all the horses. They have so much influence because they have been reengineering the American economy for decades through "financialization," a process by which banks and financial institutions gradually came to dominate economic and political decision-making. Kevin Phillips, a one time Reagan advisor and commentator, says our deepest problem is "the ascendancy of finance in national policymaking (as well as in the gross domestic product), and the complicity of politicians who really don't want to talk about it." . . . The team of Tim Geithner and Larry Summers has been carrying Wall Street's water as Robert Rubin did before them. No wonder that Obama's Attorney General Eric Holder told the Street last February, "We're not going to go on any witch hunts." That was before we learned that Wall Street forced US regulators to delay the release of stress test results for the country's 19 biggest banks until next Thursday, because some of the lenders objected to government demands that they needed to raise more capital. They are trying to rig the results. That was also before the public learned of the obscenely huge bonuses the firms benefiting from the TARP bailout were shelling out to their executives. That was before we saw how the bankers with help from Democrats, including new convert Arlen Spector, managed to kill a bill to help homeowners stop foreclosures. . . . In this past week, we also saw how a few hedge funds undermined the attempt to save Chrysler from bankruptcy by holding out for more money even after the unions and big banks agreed to compromise to save jobs. The President was furious but apparently powerless: "A group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout," Obama said. "They were hoping that everybody else would make sacrifices, and they would have to make none. Some demanded twice the return that other lenders were getting." Explains the blog Naked Capitalism, "the banksters are eagerly, shamelessly, and openly harvesting their pound of flesh from financially stressed average taxpayers, and setting off a chain reaction in the auto industry which has the very real risk of creating even larger scale unemployment than the economy already faces. It's reckless, utterly irresponsible, over-the-top greed." . . . "The Senate on Thursday rejected an effort to stave off home foreclosures by a vote of 51 to 45. It was an overwhelming defeat, with the bill's backers falling 15 votes short - a quarter of the Democratic caucus - of the 60 needed to cut off debate and move to a final vote. Across the United States, the measure is estimated to have been able to prevent 1.69 million foreclosures and preserve $300 billion in home equity." Commented the Center for Responsible Lending, "Instead of defending ordinary Americans, the majority of Senators went with the banks. Yes, the same banks who have benefited so richly from the TARP bailout." . . . Will they be allowed to get away with it? A "captured" Congress is doing their bidding. There is no doubt that class antagonism is stewing, says the editor of the blog. He expressed a fear of a reaction that will go way beyond flag-waving tea parties. . . . "... I am concerned this behavior is setting the stage for another sort of extra-legal measure: violence. I have been amazed at the vitriol directed at the banking classes. Suggestions for punishment have included the guillotine (frequent), hanging, pitchforks, even burning at the stake. Tar and feathering appears inadequate, and stoning hasn't yet surfaced as an idea. And mind you, my readership is educated, older, typically well-off (even if less so than three years ago). The fuse has to be shorter where the suffering is more acute." One is reminded of the title of that movie, "There will be blood." Rather than show contrition or compassion for its own victims, Wall Street is hoping to jack up its salaries and bonuses to pre-2007 levels. The men at the top are oblivious to the pain they helped cause. And so far, they've only occasionally been scolded by politicians that have mostly enabled, coddled, bankrolled, funded, rewarded, and genuflected to their power. Wall Street's behavior may be predictable, but how can we account for the silence of so many organizations that should be out there organizing the outrage that is building? Knock, Knock, Obama supporters, bloggers, trade unionists, out of work workers and fellow Americans. Will we fight back or roll over? Pitchforks anyone?

Read the whole sorry story here by a courageous and gifted writer. William Rivers Pitt, on the other hand is into comedy. (Emphasis marks added - Ed.)

As the news of Arlen Specter's defection to the Democratic Party rolled across the news waves yesterday, I kept hearing Bill Murray from the movie "Meatballs" in my head: "It just doesn't matter! It just doesn't matter! It just doesn't matter!" Which is not entirely true, of course. The fallout after Specter woke up on the left side of the bed on Tuesday has been entirely entertaining, largely hilarious and just significant enough to warrant a little serious attention ... but that's just politics, which is also the entire reason Specter jumped. "I now find my political philosophy more in line with Democrats than Republicans," claimed Specter, but that's a lot of hooey; as a Republican, Specter consistently supported several of the most extreme right-wing pieces of legislation ever presented before the Senate. No, Specter flipped for one simple reason: He was facing an insurmountable primary challenge from his right flank, in the guise of conservative House member and former Club For Growth president Pat Toomey. Down by double digits in the polls, Specter did the simple math, figured his chances of re-election were far stronger if he campaigned under the Democratic banner, and ran into the waiting arms of his colleagues across the ideological aisle. For the GOP and its supporters, the defection brings yet another shock to an already decimated Republican system; this was rough news for them and no mistake about it. A parade of long Republican faces and clenched Republican jaws have been marching across television screen since the announcement to denounce Specter, the Democrats, President Obama, and pretty much anything else that came into their sight. "A lot of people said, well Specter, take McCain with you, and his daughter," growled Rush Limbaugh after the news came out. RNC Chairman Michael Steel said in a statement, "Let's be honest. Senator Specter didn't leave the GOP based on principles of any kind. He left to further his personal political interests because he knew that he was going to lose a Republican primary due to his left-wing voting record." With Specter's departure, goes the media refrain, the last vestiges of so-called "moderate" Republicanism are on the verge of being swept away entirely. But is Arlen Specter actually a moderate, and does his departure actually change anything? "Consider Specter's most significant votes over the last eight years," wrote Salon's Glenn Greenwald on Tuesday, "Ones cast in favor of such definitive right-wing measures as: the war on Iraq, the Military Commissions Act, Patriot Act renewal, confirmation of virtually every controversial Bush appointee, retroactive telecom immunity, warrantless eavesdropping expansions, and Bush tax cuts (several times). Time and again during the Bush era, Specter stood with Republicans on the most controversial and consequential issues." "Arlen Specter," continued Greenwald, "is one of the worst, most soul-less, most belief-free individuals in politics. The moment most vividly illustrating what Specter is: prior to the vote on the Military Commissions Act of 2006, he went to the floor of the Senate and said what the bill 'seeks to do is set back basic rights by some 900 years' and is 'patently unconstitutional on its face.' He then proceeded to vote YES on the bill's passage." Specter's ideological inconsistency even extends to the act of switching parties, as evidenced by his reaction when James Jeffords (I-Vermont) dumped the GOP in 2001 and briefly handed majority control of the Senate to the Democrats. "Specter said then-Vermont Sen. Jim Jeffords' decision to become an independent was disruptive to the functioning of Congress," reported The Los Angeles Times on Wednesday. "He proposed a rule forbidding party switches that had the effect of vaulting the minority to majority status in the middle of a congressional session. 'If somebody wants to change parties, they can do that,' Specter said at the time. 'But that kind of instability is not good for governance of the country and the Senate.'" Pretty funny stuff right there. The supposedly big deal for Democrats is the fact that, once Al Franken finally wends his way past Republican roadblocks and takes his Minnesota Senate seat, the addition of Specter to the Democratic caucus lifts their majority to the much-ballyhooed number 60, which is the number of votes needed to thwart GOP filibusters and pass legislation unimpeded. This would seem to be an important victory for the Democrats - for the first time in 30 years, one party controls the White House and Congress with a supermajority in the Senate - but really, it's just a little more theater for the masses to enjoy and the media to misinterpret. "While the move would create what is likely to be the Senate's 60th Democratic vote, potentially enough to withstand Republican filibusters," reported The Boston Globe on Wednesday, "it would not necessarily change the chamber's legislative dynamics. Democratic successes at expanding their caucus have made it less unified ideologically, and Specter - one of only three Republicans in Congress to back Obama's $787 billion economic stimulus bill - said he expected to defy his new party as readily as he did his old one." Thus, the idea that Democrats have achieved some lofty threshold of power is almost entirely chimerical; Specter is no more likely to caucus with the Democrats just because he is one than he was likely to caucus with the GOP back when he had an "R" after his last name. Even if Specter took some kind of blood oath to always provide that 60th vote for the Democratic caucus, the threshold itself is largely a media/right-wing confabulation. For decades, the filibuster was considered a weapon of last resort; the use or threatened use usually only came into play when the Senate had a controversial Supreme Court nominee up for consideration. During George W. Bush's Reign of Error, the Republican-controlled Congress was able to pass all kinds of insanely anti-constitutional legislation between 2002 and 2006 needing just a simple majority to win, because the Democrats never took the filibuster club out of their bag. Only when majority power in Congress changed hands after the '06 midterms did the filibuster become a daily part of governance on Capitol Hill, because the GOP used it against everything that moved. The news media, with its absolute lack of context and inability to remember anything more than a day old, has acted and spoken ever since with the incorrect idea that only a 60-vote majority can get anything done in the Senate. This is simply nonsense. No, the Democrats have had the power to pass just about whatever they want with 51 votes ever since 2006, but have only recently begun to make noises about doing so now that health care reform is on the table. President Obama, unwilling to deal with the 60-vote-threshold fiction, is pushing his allies in the Senate to do away with the rules that give a 41-member minority the power to gum up the works. Senate Democrats could have done this three years ago, and adding Specter to the equation does not change that arithmetic one bit. Besides, what does it say about a Democratic Party that is so willing to embrace a former Republican who has voted with the far right on so many occasions? "The idea that Specter is a 'liberal' Republican or even a 'moderate' reflects how far to the Right both the GOP and our overall political spectrum has shifted," continued Glenn Greenwald on Tuesday. "Reports today suggest that Democratic officials promised Specter that the party establishment would support him, rather than a real Democrat, in a primary. If true, few events more vividly illustrate the complete lack of core beliefs of Democratic leaders, as well as the rapidly diminishing differences between the parties. Why would Democrats want a full-blooded Republican representing them in the blue state of Pennsylvania? Specter is highly likely to reprise the Joe Lieberman role for Democrats: a 'Democrat' who leads the way in criticizing and blocking Democratic initiatives, forcing the party still further towards Republican policies." Senators Bayh, McCaskill, Nelson, Lieberman and now Specter represent a core problem within the ranks of the Democratic majority in the Senate. These individuals amount to a cadre of faux-"centrists" who have been, and likely will continue to be, the main line of resistance against Obama's legislative agenda and the improved welfare of the American people. They are the ones most empowered when everyone inaccurately believes the Democrats need 60 votes to pass anything. The annihilation of this fiction will go a long way toward removing these obstacles from the path of progress. Let them vote their consciences, if they have such a thing, without allowing them to hold the entire process hostage.

Not really so funny now is it? Read the rest here. And put your head between your legs . . . . Suzan ________________________

Taibbi Strikes Again (Gold!)

Obama had made a big show of not having registered lobbyists working for his campaign and he promised that lobbyists “won’t work in my White House.” The line was a hit and became part of Obama’s stump speech.

. . . But you have to give Goldman credit: they sure are thorough. They literally leave no stone unturned. . . . One has to love the sequence of events here. Back in 2004, then-Goldman chief Hank Paulson goes to then-SEC-chief William Donaldson and petitions to have lending restrictions relaxed for the top-five investment banks. Donaldson rolls over, the restrictions are relaxed, and it’s a disaster, as the top five banks immediately overleverage themselves — two of the five, Bear and Lehman,would actually collapse, at least partially as a result of being insanely overleveraged. In this midst of this disaster, Paulson is named Treasury Secretary. He does nothing about the worsening financial crisis until it is far too late, then allows one of Goldman’s biggest competitors, Lehman, to fail while at the same time intervening on a huge scale to save AIG, which just happens to owe Goldman a ton of money. When AIG is bailed out, its government regulator is not in the room, but the new chief of Goldman, Lloyd Blankfein, is. In fact, Goldman Sachs ultimately receives about $13 billion of the money paid to AIG by the government in the bailout, reportedly getting paid 100 cents on the dollar for its AIG exposure, despite the fact that the bank claimed it wasn’t going to suffer severe losses if AIG collapsed. Later, another former Goldman executive, Ed Liddy, is installed as head of AIG — which just happens to get bailed out twice more, the last time to the tune of an additional $30 billion.

That magic man (writer man) Matt Taibbi has put it all together for us again. When I first saw Paulson talking on the TV last Fall about the need for big bucks from the taxpayers to stave off a banking crisis, all I could think was "Does no one remember where he came from? Why Should Anyone Take This Solution Seriously?" (Yes, I was screaming out that last thought.) Then as the facts dribbled out about AIG's payoffs to Goldman Sachs and all the Goldman execs hired by Obama, I thought "Well, at least I hadn't lost my mind on this one." (Emphasis marks added - Ed.)

So I guess that $45,000 speaking fee from Merrill Lynch wasn’t technically a bribe because Summers wasn’t named to Obama’s Economic Transition Team until November 24 — a full twelve days later. I’m sure Summers had absolutely no inkling whatsoever that he was going to be one of the key advisers to the new administration back on November 12. It likewise makes perfect sense that Merrill Lynch, a company just months removed from having to be rescued from bankruptcy by an eleventh-hour, pseudo-state-subsidized buyout by Bank of America, would decide to spend $45,000 on a speaking appearance by Larry Summers because, well, they really valued his economic expertise and his proven ability to rally the troops with his stirring rhetoric. It certainly had nothing to do with the fact that a) it was eight days after a Democrat was elected to the presidency, and b) Summers had a long history of being one of the key policymakers in Democratic Party politics, and c) Merrill was absolutely not going to survive more than a few more months unless taxpayers forked over another twenty billion or so to cover the giant hole in Merrill’s balance sheet that was, at that time, still being hidden from Bank of America and its shareholders. And how about that $135,000 appearance for Goldman, Sachs back in April, when Summers was already involved with Democratic Party politics again? That wasn’t a surreptitious campaign contribution at all! . . . The last two bailouts of AIG take place after a former Goldman chief, Robert Rubin (who incidentally helped start this mess by ramming through a series of i-banker wet dream deregulatory moves as Treasury Secretary for Clinton in the 90s), is named to the Obama transition team, joining Summers (who has already taken $135K from Goldman that year) and Timothy Geithner (a protege of another Goldman alum, former president and COO and notorious scumbag John Thain). When it comes time for new Treasury Secretary Geithner to name a chief of staff, he chooses Mark Patterson, who is less than a year removed from working as a lobbyist for… Goldman, Sachs. Patterson’s great contribution to society as a Goldman lobbyist was opposing a 2007 measure introduced in the Senate by then-presidential candidate Barack Obama to rein in executive compensation. I remember watching Obama the presidential candidate give a speech in Mason City, Iowa back in 2007. Obama had made a big show of not having registered lobbyists working for his campaign and he promised that lobbyists “won’t work in my White House.” The line was a hit and became part of Obama’s stump speech. I must have heard it two dozen times. A little over a year later, he put a registered lobbyist of a bailed-out investment bank in a job whose primary responsibility is adminstering bailout money. It gets worse. According to a Glenn Greenwald piece I just read, even Gary Gensler is a former Goldman employee. That absolutely blows my mind. Gensler is Obama’s choice to head the Commodities Futures Trading Commission, whose purview is the derivatives market. The CFTC was the battleground where ages ago Rubin, Summers, and then-Rubin-aide Gensler teamed up to whack then CFTC chief Brooksley Born, who had serious concerns about the burgeoning derivatives market, in particular the credit-default swap market. Rubin overturned Born’s recommendations and derivatives were freed from most regulation. That economic Alamo led almost directly to the AIG disaster. Think about this for a moment. A former Goldman chief, Rubin, presses the CFTC to deregulate a type of derivative contract whose chief benefit to an investment bank like Goldman is that it allows it to lend more — the CDS being most useful as a tool to move investment risk off a bank’s balance sheet. Then another Goldman chief, Paulson, pushes for further relaxation of lending limits. Then Goldman jumps head-first into the housing bubble, buying tens of billions in CDS protection to hedge their crazy investments. This massive explosion in lending by banks like Goldman, fueled in part by the use of derivatives like CDS and fueled still more by the 2004 change in rules, puts an enormous strain on the economy, leading to giant holes blown in its hull by the end of 2007 and on through 2008. It follows that when Goldman’s chief partners in those CDS deals, AIG, collapses as part of this wave of crashes, Paulson — now Treasury Secretary — rushes to the rescue, pumping billions in taxpayer money into AIG that is quickly funneled to Goldman. Then a Goldman alum is put in charge of AIG while another bunch of Goldman alums funnels still more bailout money to AIG, and yet another Goldman alum is put in charge of regulating the derivative market that is the focus of most of the bailout efforts. In the midst of all of this, something amazing happens. Goldman Sachs, along with Bank of America, Morgan Stanley, and a host of other “troubled” banks, reports a profit for its first quarter in 2009! How and why that happened is another fascinating story, for another time. For now the only thing to remember is that all the same people who got us into this mess — Rubin, Summers, Goldman in general — are now being put in charge of the cleanup by a president who spent most of 18 months on the campaign trail pledging to end the influence of money in politics. Add this together with the obscene giveaway that is the Toxic Asset program Geither has just devised (Goldman Sachs “expressed interest in participating in the plan as an investor,” according to the WSJ), and you have an amazing situation. Between the Bush and Obama administrations, you have a bailout program that has now figured three ways to funnel money to Goldman, Sachs: via AIG, via TARP, and now via this trillion-dollar “Public-Private Investment Program,” which basically lends huge amounts of money to investors and provides guarantees against heavy losses. It’s free money, state-subsidized profiteering at its most naked. I hear all the time from people who complain that it’s naive to wonder why we put Wall Street executives in charge of policing Wall Street — that this is actually quite a sensible policy, because we need people with experience in that world making these decisions. The reason people say this has nothing to do with reality and everything to do with he fact that the financial markets are intimidatingly complex. When Enron buys a seat at the table to conduct energy policy under the Bush administration, everyone knows what that is. When Reagan hires notorious union-busters to run the NLRB, everyone knows what that is. And when we hire investment bankers to run banking policy, and put investment bankers in charge of handing out bailout money to investment banks, we ought to know what that is. But for some reason we don’t seem to see it the same way, not as clearly. In my mind this officially ends the Obama honeymoon. I can maybe see one or two of these creeps in key positions. But this many — it’s an undeniable pattern. He put William Lynn, a former Raytheon lobbyist, in the Pentagon as Deputy Defense Secretary. A lot of people squawked about Obama’s early lean towards John Brennan as CIA director because of his role in establishing the “enhanced interrogation” policies, but to me more significant was the fact that Brennan was the former chair of INSA (Intelligence and National Security Alliance), which is sort of like the Chamber of Commerce of intelligence contractors. Most importantly, I’m sensing in these economic appointments a kind of drearily cynical parsing of the approval-rating situation here — Obama knows he’s still flying high with the “Yes We Can!” t-shirt crowd, and knows that most people simply are not going to give a shit if he packs his Treasury Department with Goldman alums and lobbyists, despite the fact that he explicitly promised to do otherwise. How are all those CHANGE posters looking now?

I've been asking the same question here for the last three months. Our country thanks you, Matt. Sir Matt. Suzan ____________________