Monday, February 16, 2009

Large U.S. Banks on Brink of Insolvency, Experts Say

By Steve Lohr

February 13, 2009, International Herald Tribune -- Some of the large banks in the United States, according to economists and other finance experts, are like dead men walking.

A sober assessment of the growing mountain of losses from bad bets, measured in today's marketplace, would overwhelm the value of the banks' assets, they say. The banks, in their view, are insolvent.

None of the experts' research focuses on individual banks, and there are certainly exceptions among the 50 largest banks in the country. Nor do consumers and businesses need to fret about their deposits, which are insured by the U.S. government. And even banks that might technically be insolvent can continue operating for a long time, and could recover their financial health when the economy improves.

But without a cure for the problem of bad assets, the credit crisis that is dragging down the economy will linger, as banks cannot resume the ample lending needed to restart the wheels of commerce. The answer, say the economists and experts, is a larger, more direct government role than in the Treasury Department's plan outlined this week.

The Treasury program leans heavily on a sketchy public-private investment fund to buy up the troubled mortgage-backed securities held by the banks. Instead, the experts say, the government needs to plunge in, weed out the weakest banks, pour capital into the surviving banks and sell off the bad assets.

It is the basic blueprint that has proved successful, they say, in resolving major financial crises in recent years. Such forceful action was belatedly adopted by the Japanese government from 2001 to 2003, by the Swedish government in 1992 and by Washington in 1987 to 1989 to overcome the savings and loan crisis.

"The historical record shows that you have to do it eventually," said Adam Posen, a senior fellow at the Peterson Institute for International Economics. "Putting it off only brings more troubles and higher costs in the long run."

Of course, the Obama administration's stimulus plan could help to spur economic recovery in a timely manner and the value of the banks' assets could begin to rise.

Absent that, the prescription would not be easy or cheap. Estimates of the capital injection needed in the United States range to $1 trillion and beyond. By contrast, the commitment of taxpayer money is the $350 billion remaining in the financial bailout approved by Congress last fall.

Meanwhile, the loss estimates keep mounting.

Nouriel Roubini, a professor of economics at the Stern School of Business at New York University, has been both pessimistic and prescient about the gathering credit problems. In a new report, Roubini estimates that total losses on loans by American financial firms and the fall in the market value of the assets they hold will reach $3.6 trillion, up from his previous estimate of $2 trillion.

Of the total, he calculates that American banks face half that risk, or $1.8 trillion, with the rest borne by other financial institutions in the United States and abroad.

"The United States banking system is effectively insolvent," Roubini said.

For its part, the banking industry bridles at such broad-brush analysis. The industry defines solvency bank by bank, and uses the value of a bank's assets as they are carried on its books rather than the market prices calculated by economists.

"Our analysis shows that the banks have varying degrees of solvency and does not reveal that any institution is insolvent," said Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable, a trade group whose members include the largest banks.

Edward Yingling, president of the American Bankers Association, called claims of technical insolvency "speculation by people who have no specific knowledge of bank assets."

Roubini's numbers may be the highest, but many others share his rising sense of alarm. Simon Johnson, a former chief economist at the International Monetary Fund, estimates that the United States banks have a capital shortage of $500 billion. "In a more severe recession, it will take $1 trillion or so to properly capitalize the banks," said Johnson, an economist at the Massachusetts Institute of Technology.

At the end of January, the IMF raised its estimate of the potential losses from loans and other credit securities originated in the United States to $2.2 trillion, up from $1.4 trillion last October. Over the next two years, the IMF estimated, United States and European banks would need at least $500 billion in new capital, a figure more conservative than those of many economists.

Still, these numbers are all based on estimates of the value of complex mortgage-backed securities in a very uncertain economy. "At this moment, the liabilities they have far exceed their assets," said Posen of the Peterson institute. "They are insolvent."

Yet, as Posen and other economists note, there are crucial issues of timing and market psychology that surround the discussion of bank solvency. If one assumes that current conditions reflect a temporary panic, then the value of the banks' distressed assets could well recover over time. If not, many banks may be permanently impaired.

"We won't know what the losses are on these mortgage-backed securities, and we won't until the housing market stabilizes," said Richard Portes, an economist at the London Business School.

Raghuram Rajan, a professor of finance and an economist at the University of Chicago graduate business school, draws the distinction between "liquidation values" and those of calmer times, or "going concern values." In a troubled time for banks, Rajan said, analysts are constantly scrutinizing current and potential losses at the banks, but that is not the norm.

"If they had to sell these securities today, the losses would be far beyond their capital at this point," he said. "But if the prices of these assets will recover over the next year or so, if they don't have to sell at distress prices, the banks could have a new lease on life by giving them some time."

That sort of breathing room is known as regulatory forbearance, essentially a bet by regulators that time will help heal banking troubles. It has worked before.

In the 1980s, during the height of the Latin American debt crisis, the total risk to the nine money-center banks in New York was estimated at more than three times the capital of those banks. The regulators, analysts say, did not force the banks to value those loans at the fire-sale prices of the moment, helping to avert a disaster in the banking system.

In the current crisis, experts warn, banks need to get rid of bad assets quickly. The Treasury's public-private investment fund is an effort to do that.

But many economists and other finance experts say that the government may soon have to move in and take on troubled assets itself to resolve the credit crisis. Then, they say, the government could have the patience to wait for the economy to improve.

Initially, that would put more taxpayer money on the line, but in the end it might reduce overall losses. That is what happened during the savings and loan crisis, when the troubled assets, mostly real estate, were seized by the Resolution Trust Corporation, a government-owned asset management company, and sold over a few years.

The eventual losses, an estimated $130 billion, were far less than if the hotels, office buildings and residential developments had been sold immediately.

"The taxpayer money would be used to acquire assets, and behind most of those securities are mortgages, houses, and we know they are not worthless," Portes said.


It would appear that a Resolution Trust Corporation (RTC) kind of vehicle should be formed which could acquire all of the toxic assets that mega banks have on their books; hoping to sell them later for a higher price--a variation of the original TARP bill which was abandoned by the Bush/Paulson Treasury. This would objectively identify the quantity of total toxic debt involved since at present no one seems to know for certain how much exists--estimated conservatively at several trillion dollars perhaps much more. Nothing positive can be gained for the country by waiting. Further delay only aids the financial elites who still hope to be made all or partially whole despite their poor financial decisions while the masses are made to suffer for their indiscretions.

In addition, a temporary moratorium on housing foreclosures should be strongly considered without any equity for residential housing passing to the federal government or its agents. This would help stop the downward spiral we are currently experiencing.

--Dr. J. P. Hubert

Israel ready to launch a military offensive against Iran

In the wake of Gaza, can the world afford to live with a nuclear Israel?

By Lech Biegalski
Global Research,
February 14, 2009

On February 14, Australian News Agency “The Age” reported:

A SENIOR Israeli diplomat has warned that Israel is ready to launch a military offensive against Iran to prevent it from developing nuclear weapons.

In an interview with The Age, Dan Gillerman, who was Israel's permanent representative at the United Nations from 2003 until last September, said time for diplomatic efforts to stop Iran acquiring a nuclear capability might have already expired.

“The world cannot afford to live with a nuclear Iran,” Mr Gillerman said.

The truth is that, after witnessing Israeli war crimes in Lebanon and in the illegally occupied Palestinian territories, the world cannot afford to live with nuclear Israel. As opposed to Iran, Israel has secretly developed hundreds of nuclear warheads and delivery weapons outside of any supervision by international community. Iran continues to run its nuclear program in cooperation with the UN's International Atomic Energy Agency (IAEA).

According to the Press TV report of February 13,

The new chief of US intelligence has confirmed the findings of a 2007 intelligence report that Iran has no nuclear weapons program.

Dennis Blair told the Senate Intelligence Committee that his organization has assessed that Tehran does not have nuclear weapons design and weaponization work.

A National Intelligence Estimate (NIE), issued in November 2007 by the sixteen US intelligence agencies, clarified that Iran was not pursuing a nuclear weapons program.

The 2007 intelligence report was widely seen as a setback for Bush administration efforts to pressure Iran and halt its nuclear program.

The UN nuclear watchdog, which has carried out the highest number of inspections in its history on Iranian nuclear sites, has also found nothing to indicate that the program has diverted toward weaponization.

In the meantime, both US and Israeli governments continue to press the issue of suspected development of military nuclear technology in Iran, slapping three rounds of sanctions against Tehran. Israel openly threatens to attack Iran in order to destroy its nuclear and scientific facilities.

The real problem, as we all know by now, is this:

Unlike the US and Israel, Iran has not attacked other countries in recent history. There is enough documented evidence indicating that the US planned the oil wars long ago and that Iran was one of the targets. Strong Iran is also an obstacle for Israeli territorial expansion in Arab countries. In this situation, EVEN IF Iran was trying to develop an effective nuclear deterrence capability IN SELF-DEFENCE, it would be perfectly understandable and perfectly justifiable.

If the US and Israel want other countries to give up their nuclear programs, they should give an example by doing same first. This, however, will not happen because these two “partners” believe that they can unilaterally bully other nations into submission. The clear pattern here is: disarm, so that we can take over your resources and your territories, or else we will attack you!

By the way, nobody has yet explained why “the world cannot live with a nuclear Iran”. The world lives with nuclear America, with nuclear Russia, nuclear China, and India, and Pakistan, and nuclear France, and United Kingdom, with nuclear Israel, and probably a host of other nuclear countries - and nobody threatens a war against them for this reason. Somehow, the world is safer, when countries have nuclear deterrence capabilities. Nobody questions their rights to develop nuclear programs for peaceful or military purposes. So why Iran? I think I have already answered that naive question.

Interestingly, Russia is not using their veto power in the UN Security Council to block the sanctions against Iran. Maybe Russia wants us to step into this mess and stretch ourselves flat? I wouldn't be surprised. Russia is extremely good at diplomacy and at long-term chess games.


US Secretary of State, Hillary Clinton, stated late Tuesday that the Obama administration might reconsider plans for a missile defense system in Europe, if Iran stops what U.S. officials believe is a drive for nuclear weapons. (Source)

This was a direct ultimatum addressed to Russia. “Help us bully Iran, or we will set up our rockets on your border”. Again, the real question is, “If the European missile defence system is to prevent Iranian nuclear warheads from reaching America, why are they being placed in Poland instead of Germany, the UK or France? Or in Iceland? Or, in Canada?” Obviously, the European missile defence system in Poland threatens Russia and this is why it became a bargaining chip in the geopolitical game for the Middle East and Caucasus. Hillary (who allegedly has an extensive experience in politics) has finally admitted it.

Surely, Mr. Lavrov is working on an appropriate move in response to this “invitation”. Perhaps, the answer should be, “In the spirit of cooperation and pending the UN investigation into Israel's war crimes in Gaza, if the US helps us force Israel to eliminate its nuclear weapons and to accept international inspections of its nuclear facilities, we will help you deal with Iran.”


I disagree with the author's suggestion that nuclear deterrence is something to be attained or that the world is safer when countries have nuclear deterrent capabilities. While some nuclear weapons capable countries "might" conceivably be saved from attack (a debatable point itself), the world in the aggregate experiences increasing risk of annihilation every time an additional nuclear warhead becomes operational. It is clearly immoral to create weapons which are designed to kill hundreds if not millions of innocent people at once. Nor could they ever be utilized in a morally licit and defensive way. The latter is true even for battlefield (tactical) nuclear weapons.

Moreover the idea that these weapons will never be used is not credible. We are fortunate that they were used only twice--tragically by the United States. Our doing so represented crimes against humanity. In the annals of war, no weapon once in existence has ever not been used and that includes nuclear weaponry. In the absence of a credible global nuclear disarmament effort--they will be used again. It is only a matter of time given the fallen nature of human beings--as history amply demonstrates. Nuclear weapons categorically violate the Just War Doctrinal Corpus on multiple accounts.

I do agree that Israel is currently more dangerous to the world than Iran especially in view of the fact that no credible evidence exists that Iran has or is close to developing a nuclear weapon (see the latest relevant NIE for example). Israel is reported to possess several hundred nuclear weapons none of which have ever been inspected by the IAEA or any other credible body. In that regard, Israel has refused to sign the NP--for obvious reasons. Given the crimes against humanity which Israel perpetrated in Lebanon (2007) and in Gaza (12/08) she cannot be trusted with a nuclear capability. In that regard, neither can the United States given our immoral invasion of Iraq.

All the nuclear weapon's states should actively/cooperatively reduce their arsenal's to zero in exchange for the non-nuclear weapon's states continuing to remain non-nuclear as the NPT demands. The United States is a signatory and is currently in violation of the treaty which by the way is also part of US law. This should be widely publicized and debated in the hope of changing national nuclear weapon's policy.

--Dr. J. P. Hubert

Sunday, February 15, 2009

The Oligarchy's Bailout Ball

You know what they say -- half a million dollars just doesn't go as far as it used to

By Michael Winship

February 14, 2009 "Consortiumnews " -- -- News from the White House that $500,000 was the cap the government wants to put on executive salaries at the banks receiving bailout cash had some on Wall Street and along the plush corridors of Manhattan's swank Upper East Side hollering "Unfair!" (But without those unsightly street demonstrations and picket lines, of course.)

"You Try to Live on 500K in This Town" was the tongue-in-cheek headline in last Sunday's New York Times.

Just add up private school tuition, mortgage payments, maintenance fees and wages for the nanny and you're already up to more than $250,000 a year - and that's pre-taxes, assuming you're paying any. Then tote up payments and upkeep on vacation and weekend homes, charity balls, car and driver - pretty soon you're maxing out your American Express Black Card.

But they work hard for their multi-million dollar salaries and bonuses, perks and solid gold benefits, complained some of the financiers. Besides, executive headhunters say, the money giants just can't get good help for anything less.
Good help? Spare us the kind of moguls who helped us straight into the current deep, dirty hole we're trying to climb out of.

"Like spoiled, petulant children," is how Washington Post columnist Steven Pearlstein described them. "These guys won't be happy until the government agrees to relieve them of every last one of their lousy loans and investments at inflated prices, recapitalize every major bank and brokerage and insurance company on sweetheart terms and restore them to the glory days, so they can once again earn inflated profits and obscene pay packages by screwing over their customers and their shareholders."

Pearlstein was reacting after the five percent dive that stock prices took following freshly minted Treasury Secretary Timothy Geithner's announcement of the Obama Administration's Financial Stability Plan. It's the latest iteration of the bank bailout plan intended to go hand-in-hand with the economic stimulus package. Combined, as much as $3 trillion may be at stake.

The plan immediately was attacked by many as too vague and ineffective. Part of the trouble, critics say, is that Geithner isn't part of the solution, he's part of the problem -- former head of the Federal Reserve in New York and a protégé of Clinton Treasury Secretary Robert Rubin, who last month retired as senior counselor at Citigroup.

That's the bank the government agreed to insure against projected losses of $306 billion, on top of bailouts totaling $45 billion. In other words, Geithner's a player.

The New York Times reported that in preparing the Financial Stability Plan, Geithner opposed tougher conditions on investment firms sought by others in the White House.

Geithner, the Times wrote, "successfully fought against more severe limits on executive pay for companies receiving government aid... resisted those who wanted to dictate how banks would spend their rescue money. And he prevailed over top administration aides who wanted to replace bank executives..."

This week, on The Baseline Scenario, a blog he co-founded, MIT professor of global economics and management and former International Monetary Fund chief economist Simon Johnson wrote, "There comes a time in every economic crisis, or more specifically, in every struggle to recover from a crisis, when someone steps up to the podium to promise the policies that -- they say -- will deliver you back to growth.

“The person has political support, a strong track record, and every incentive to enter the history books. But one nagging question remains. Can this person, your new economic strategist, really break with the vested elites that got you into this much trouble?"

That question caught the attention of my colleague Bill Moyers, who interviewed Johnson on the current edition of Bill Moyers Journal on public television.

The problem, Johnson told him, is that via millions spent for political contributions and lobbying efforts, the revolving door that sees elites shuttle between jobs in government and business, and by creating a situation in which technical knowledge is limited to a privileged few, the banking and financial services industry has become a kind of ruling oligarchy that stifles attempts to shake up the status quo and make the real change necessary to get us out of the current crisis.

"Either you break the power," Johnson said, "or we're stuck for a long time with this arrangement...

"The policy that we seem to be pursuing, of being nice to the banks, is a mistake. Both from a technical/economic point of view, and from a deeper political point of view... [The banks] think that we're going to pay out 10 or 20 percent of GDP to basically make them whole. It's astonishing."

Johnson has written on The Baseline Scenario blog what he thinks needs to be done: "Reboot the financial system. Find out immediately which banks are insolvent using market prices. Allow private owners to fully recapitalize, if they can. Have the FDIC, the Federal Deposit Insurance Corporation, take over all banks that cannot raise enough private capital, and try to re-privatize those banks quickly, while making sure the taxpayer has strong participation in the upside."

Unfortunately, Johnson fears the oligarchy will prevail.

"My intuition is that this is going to get a lot worse,"
he told Moyers. "It's going to cost us a lot more money. And we are going down a long, dark, blind alley...
"Eventually, of course, the economy will turn around. Things will get better. The banks will be worth a lot of money and they will cash out.... We and our children will be paying higher taxes so those people could have those bonuses. That's not fair. It's not acceptable. It's not even good economics."

Johnson doubts the political will exists to do what needs to be done.
(Editor's emphasis throughout)

According to Tuesday's Boston Herald, last August, another former Treasury Secretary and Rubin pal, Lawrence Summers, now chairman of the of the National Economic Council, hitched a ride back from the Democratic National Convention on board a Citigroup corporate jet -- "the same type that... Citigroup infamously wanted to replace last month with a new $50 million French jet."

Summers didn't pay for the trip, but Citi said it has paid the appropriate taxes. The Herald reported that the plane "was the same one former Citi chief executive Sandy Will took on vacation to Mexico last month, it reportedly includes a full bar, crystal stemware and 'pillows made from Hermès scarves.'"

When you've got it, flaunt it, Larry. Why go to hell in a handbasket when you can fly there executive class, leaning back on a French silk pillow? It's good to be part of an oligarchy.

Israel’s Rationale for Murder: No One is Innocent

By M. Junaid Levesque-Alam

February 14, 2009 "Dissident Voice"

-- When we have settled the land, all the Arabs will be able to do about it will be to scurry around like drugged cockroaches in a bottle.

– Israeli Army Chief of Staff Raphael Eitan, 1983

Before [the Palestinians] very eyes we are possessing the land and the villages where they, and their ancestors, have lived… We are the generation of colonizers, and without the steel helmet and the gun barrel we cannot plant a tree and build a home.

– Famous Israeli Army Commander Moshe Dayan

Israel’s official excuses for extinguishing over 1,300 Palestinian lives—half of them civilian and one-third of them children— are oft-repeated by its apologists: Hamas’ rocket fire made the invasion unavoidable, and its tactics made civilian casualties inevitable.

Do these positions dovetail with—or decapitate—history? Are they logical? Are they moral? Or are they smokescreens, designed to disguise troublesome facts about both Israel’s strategy and its very origins?

The reality behind the rockets

Israel’s first argument about Hamas’ rockets fails on several levels.

It neatly—and falsely—posits Hamas as the attacker and Israel as the defender. The only problem with this pleasant fiction is that Israel has been expelling, occupying, and imprisoning Palestinians long before Hamas even came into existence.

As Israeli journalist Amira Hass wrote in January, “Gaza is not a military power that attacked its tiny, peace-loving neighbor, Israel. Gaza is a territory that Israel occupied in 1967, along with the West Bank. Its residents are part of the Palestinian people, which lost its land and its homeland in 1948.”

But how did it “lose” its homeland? After unearthing their country’s declassified archives, honest Israeli scholars have pointed to an Israeli campaign of rape, murder, and ethnic cleansing that entered full swing in 1947. Israel’s first prime minister, David Ben-Gurion, said to a colleague shortly after Israel’s expulsion of 750,000 Palestinians, “They only see one thing: we have come here and stolen their country. Why should they accept that?”

Why indeed? For one country to rain down rockets on another is an unprovoked crime. But for a people without a country to fire rockets on those who forcibly took their country—and who then corralled them into camps, isolated them from the world, and regularly slaughter them with weapons far deadlier than unguided projectiles—is a rather different matter.

Just as we would not begin a 10-minute tape of a batterer abusing his wife at the nine-minute mark where she may have struck back, we cannot skip through decades of Israeli ethnic cleansing, occupation, and bombardment and finger Hamas rocket fire as the starting point.

Quite apart from historical considerations, the invasion cannot be justified by rocket fire because scarcely any rockets were being fired before Israel’s own escalation. According to the Israeli military, in the ceasefire months of July, August, September, and October, the numbers of rockets fired from Gaza were one, eight, one, and two, respectively. Even those few rockets were likely fired by smaller militant groups not under Hamas’ control. In short, Hamas abided by the truce—a fact Israel recognized during those months. On November 5th, Israel itself broke the truce by launching a military operation that killed six Hamas gunmen.

On the moral level, too, the terror Israel unleashed on the Palestinian population is indefensible. A total of 23 Israelis were killed by Palestinian rockets from November 2001 to June 2008, according to a pro-Israel website. During the Gaza “war,” a total of three Israeli civilians were killed by rockets. If Israel’s recent rapid-fire slaughter of 600 civilians is “justified” by rockets that caused the death of a small number of Israeli civilians, then—applying Israel’s own logic—is Hamas not now more “justified” in continuing to launch those rockets than ever before?

How can the Israeli establishment claim the moral high ground if it borrows from the Hamas formula but ups its application of the deadly dosage one-hundred fold?

Blaming the victim

Israel’s apologists would respond here with their second argument: it is not Israel, but Hamas, that is responsible for Israel’s killing.

This, too, is specious.

Perhaps it is quaint to insist on ideas that slip out of fashion at convenient intervals, but it should be an accepted principle that those who do the killing should be held responsible for it. Israel’s partisans insist Israel is an exception (is Israel ever not an exception?) because Hamas “hides among civilians” or “uses civilians as shields” or “fires from civilian areas,” thus absolving the attacker of culpability for civilian deaths.

The force of historical truth again intercedes. The people living in Gaza’s squalid refugee camps are not there by choice or because of Hamas: they are trapped by Israel. Ethnically cleansed when Israel stole their lands in 1948, they fled to the tiny strip, which borders the sea. Then Gaza, too, was captured by Israel in 1967, leaving the people occupied by the Israeli military and surrounded by radical Jewish settlers who took the stolen land.

When this occupation “ended” in 2005 after decades of humiliation, the jailer simply moved from inside to outside the cell to better manage the inmates. Most of the Jewish settlers relocated to more stolen Palestinian land in the West Bank and Israel imposed a full-scale siege on Gaza itself as a form of collective punishment when Gazans elected Hamas, as the alternative choice, Fatah, was hopelessly venal.

The siege destroyed the economy and was never lifted even during the ceasefire. Israel barred Palestinians entry into Israel for employment, closed the sea route, and shut off fuel and food aid at will, inducing widespread suffering in one of the most densely-populated spaces on earth. One Israeli official boasted of the devastating effect in 2006, “The idea is to put the Palestinians on a diet, but not to make them die of hunger.” Let them suffer, the Israelis said at the time, but do not let them die. That would come later.

Even the Vatican, not often inclined to pro-Muslim utterances, was recently moved to describe Gaza as a “concentration camp.”

Thus while Israel’s apologists argue that Israel should be cleared of responsibility for civilian deaths because Hamas “chose” to engage in “civilian areas”, the truth is that the Palestinians had no choice of any areas—they are trapped within the confines of the cage Israel kicked them into by dint of ethnic cleansing, occupation, and the siege.

Even on the street level, Israel has herded Palestinian civilians for easy killing. Several extended families in one part of Gaza, Zeitoun, tell the same story: soldiers forced family members to congregate in one building, fired at it, and massacred the fleeing inhabitants even as they emerged with white flags in hand. Breaking army orders, one Israeli soldier who was in Zeitoun confessed to a British newspaper that his unit had been instructed to “fire on anything that moves.” The unit was told to “shoot first and ask questions later,” he said.

Israel did not provide Hamas with an empty meadow in Switzerland on which to duel. It did not bestow Hamas with its state-of the-art American weaponry to even the odds. It did not give civilians any exit avenues before, during, or after the “fighting.” It even began its bombardment mid-day when children were out in the open switching classes. Israel, far from concerning itself with the fate of civilians, created a dense killing corridor over a period of decades and took advantage of it.

One can argue that even in the most difficult circumstances, militant groups should do their best to avoid mingling with the civilian population during active fighting. If the majority of Palestinian civilian casualties had occurred because Hamas was grabbing civilians left and right to use as shields, there should be abundant evidence.

But where is this evidence?
For all its sophisticated spying equipment, satellites, reconnaissance drones, and cameras, the Israeli government has never produced any compelling proof of such a pattern. In fact, Israel officially banned reporters from even entering Gaza during its operation. Why hide the horrific practices of Hamas from the world’s eyes?

The answer, of course, is that Israel was hiding its own horrors instead. In the few cases where this was not possible—where international institutions, such as the UN, independent relief agencies, and Reuters reporters, were involved—a pattern of a different kind emerged: Israel blew up civilians and civilian supplies, agency officials decried the attack, and Israel accused Hamas of having fired from nearby. Each time, agency representatives emphatically stated that Hamas was not operating in the area and demanded proof of Israel’s claims. None was ever forthcoming.

Only in one case—the killing of 40 civilians taking shelter at a UN building—did Israel confidently claim that it had proof of Hamas fighters firing rockets nearby. But the Israeli military soon changed its story and was forced to invent a new excuse.

As if that weren’t enough, it turns out that Israel itself repeatedly used Palestinian civilians as human shields.

Even in these specific cases where Israel should have exercised restraint for sheer public-relations purposes, it displayed absolutely none. Such is the arrogance afforded overwhelming power. We can only imagine under what cruel circumstances most Palestinians, far removed from international institutions or Western journalists, were ground to dust.

This combination of history and ground reality demolishes the credibility of Israel’s excuse. For a bully to blame the victim is one thing—commonplace, even, among colonizers. But for Israel to expel its victims from their homes, force them into inhuman camps, and then fault them for dying en masse when Israel decided to kill them in a cramped cage of its own design—this is a truly novel achievement in the sphere of cruelty.

Israel is therefore no less responsible for killing civilians than slaughterhouse machinery is responsible for processing cattle.

Killing civilians as a strategy

The mountain of excuses offered by Israel strikes the honest observer as too tortuous to trek and too steep to scale. Puzzling and poring over its rationalizations is an endeavor that yields diminishing returns.

It is time to consider an obvious alternative to the official line: Israel did not “accidentally” kill hundreds of Palestinian civilians while “targeting” Hamas for launching aimless rockets. Rather, Israel purposely targeted all Palestinians because it wanted to teach them a severe lesson for not being defeated after 60 years of ongoing brutalization. The pile of civilian corpses produced by the invasion was not accidental—it was integral—to the administration of this lesson.

Advocating and applauding this approach last month was Thomas Friedman, who occasionally comments on Middle East affairs to puff and pout on Israel’s behalf from his privileged perch.

Responding to the growing perception that Israel’s stated aim of destroying Hamas outright was not feasible, Friedman defended Israel’s Gaza strategy in a January 14th New York Times column by approvingly pointing to the example of Lebanon.

In Friedman’s view, the 2006 Lebanon campaign, during which Israel killed about 1,000 Lebanese civilians and 250 Hezbollah fighters, convinced Hezbollah that trading blows with Israel was a bad idea.

To dismantle Friedman’s fantasies about Lebanon—what he smugly calls “the education of Hezbollah”—would require another article. What is important for our purposes is to see how this “education” was carried out.

Hezbollah, Friedman asserts, “challenged Israel to inflict massive civilian casualties in order to hit Hezbollah fighters.” These civilians, he continues, were “intertwined” with Hezbollah, and were also, by the way, “the families and employers of the militants.”

Translation: the guilty mingled with the innocent and the innocent were practically guilty.

Therefore, concludes Friedman, “the only long-term source of deterrence was to exact enough pain on the civilians…” Israel was forced to inflict “substantial property damage and collateral casualties on Lebanon at large” in order to faze Hezbollah.

Translation: the only thing Israel could do—“it was not pretty, but it was logical”, Friedman avers—was to strike at civilian populations and buildings in order to teach those Arabs a lesson (“educate”) about the consequences of raising their heads.

This refreshing way of thinking neatly solves any moral problems Israel’s actions might pose.

The innocent, as we have seen, were not really innocent: they were somehow related to the militants or related to someone who might have employed militants at the local bakery. Therefore, it was permissible to kill women and children as part of a careful calculation to inflict “enough pain” and make militants think twice about future resistance.

Yes, the “education” of the Arabs is not “pretty”—but who said tuition was free?

That Israel intentionally terrorizes and kills civilians should not surprise honest observers. Giora Eiland, the former head of Israel’s National Security Council, bluntly stated what Friedman, with his penchant for unctuous prose, could not bring himself to openly say about the 2006 war:

“The only good thing that happened in the last war was the relative damage caused to Lebanon’s population…The destruction of thousands of homes of ‘innocents’ preserved some of Israel’s deterrent power. The only way to prevent another war is to make it clear that should one break out, Lebanon may be razed to the ground.”

Can any honest person describe Eiland’s logic of mass terror as “self-defense?”

That this logic was also applied in Gaza was confirmed by the news side of the New York Times. In an elliptical January 18th analysis, Times’ correspondent Ethan Bronner, a pro-Israel journalist, writes about Hamas’ tactical caution during the fighting:

“The caution is at least in part because Hamas wants to keep ruling in Gaza, not return to its previous role as a pure resistance movement. Therefore, Israeli officials say, an offensive that caused average people to suffer put pressure on Hamas in real and specific ways.”

This can easily be rephrased as, “Israeli officials launched an offensive that caused average people to suffer in order to put pressure on Hamas in real and specific ways.” Friedman’s prayers were answered—and Eiland’s ideology, implemented.

The Times also quotes an anonymous top Israeli military official as saying, “Hamas is the dominant organization in Gaza. They are the regime and feel very connected to the people. They do not want to lose that connection to the people.”

How does one make Hamas lose “that connection to the people” in an offensive that “caused average people to suffer?” The question answers itself: kill the people.

Bronner writes that the logic behind the punishing offensive is popularly referred to within Israel as the Hebrew equivalent of “the boss has lost it”—a kind of “calculated rage” that “evokes the image of a madman who cannot be controlled.”

It is an “image” that long ago consumed Israel proper.

A madman is by definition someone who has gone insane. Israel is a state founded on ethnic cleansing—a massive attack on civilians. Instead of confronting its original sin, it has simply repeated the same crime in various ways, each time believing that it will crush the Palestinians once and for all. Repeating the same action over and over again while expecting a different result is the very definition of insanity.

The reality of a “madman who cannot be controlled” is a traumatic one. The madman declares civilians and combatants alike guilty and subjects them all to “education” through indiscriminate killing. Though the madman arrogates the right to determine the guilt of others for acts that are both in response to and dwarfed by his own far greater atrocities, the madman himself goes unquestioned. Like a convicted batterer presiding over the trial and sentencing of his victims, the Israeli “madman” judges and punishes the very people it has brutalized and dispossessed.(editor's emphasis throughout)

Unfortunately, the prevailing attitude of allowing Israel to rain down its “calculated rage” on Palestinians is applauded not only by the Israeli military and Times newspaper columnists, but also by many American liberals, whose moral senses are conveniently swallowed up by the same serpent that slips away with their spines whenever the subject of the Israeli settler-state presents itself.

Who, then, will stand up for the Palestinians? Who will control the madman?