Editor's NOTE:
What's wrong with this picture? How can a nation which is effectively bankrupt, facing over 14 trillion dollars in national debt (the highest in the world), think it can spend in excess of 1 trillion dollars annually on its national security state? This represents over 66% of the annual discretionary budget of the United States, most of which is in truth not only unnecessary but immoral!
The situation increasingly resembles the last dieing days of the Roman Empire. Colonel L. Fletcher Prouty was correct over 25 years ago when he wrote his book; The Secret Team: The CIA and Its Allies in Control of the United States and the World which was apparently censored by the CIA. At that time he indicated that the United States had been taken over by a "high cabal" on November 22, 1963 and it has undoubtedly been in control ever since.
Americans citizens must--through the use of all available non-violent means--try to stop the permament US warfare state before it is literally too late. Failure to do so makes us complicit in the immoral actions of our nation carried out in our names and with our tax dollars. Write your Congressional delegations and the President and express your strong opposition today.
I salute the courage and moral commitment of Ray McGovern for doing what we should all be doing. Please read his piece below.
--Dr. J. P. Hubert
Standing Up to War and Hillary Clinton
By Ray McGovern
Consortiumnews
February 23, 2011
It was not until Secretary of State Hillary Clinton walked to the George Washington University podium last week to enthusiastic applause that I decided I had to dissociate myself from the obsequious adulation of a person responsible for so much death, suffering and destruction.
I was reminded of a spring day in Atlanta almost five years earlier when then-Defense Secretary Donald Rumsfeld strutted onto a similar stage to loud acclaim from another enraptured audience.
Introducing Rumsfeld on May 4, 2006, the president of the Southern Center for International Policy in Atlanta highlighted his “honesty.” I had just reviewed my notes for an address I was scheduled to give that evening in Atlanta and, alas, the notes demonstrated his dishonesty.
I thought to myself, if there’s an opportunity for Q & A after his speech I might try to stand and ask a question, which is what happened. I engaged in a four-minute impromptu debate with Rumsfeld on Iraq War lies, an exchange that was carried on cable TV.
That experience leaped to mind on Feb. 15, as Secretary Clinton strode onstage amid similar adulation.
The fulsome praise for Clinton from GW’s president and the loud, sustained applause also brought to mind a phrase that – as a former Soviet analyst at CIA – I often read in Pravda. When reprinting the text of speeches by high Soviet officials, the Communist Party newspaper would regularly insert, in italicized parentheses: “Burniye applaudismenti; vce stoyat” — Stormy applause; all rise.
With the others at Clinton’s talk, I stood. I even clapped politely. But as the applause dragged on, I began to feel like a real phony. So, when the others finally sat down, I remained standing silently, motionless, wearing my "Veterans for Peace" T-shirt, with my eyes fixed narrowly on the rear of the auditorium and my back to the Secretary.
I did not expect what followed: a violent assault in full view of madam secretary by what we Soviet analysts used to call the “organs of state security.” The rest is history, as they say. A short account of the incident can be found here.
Callous Aplomb
As the video of the event shows, Secretary Clinton did not miss a beat in her speech as she called for authoritarian governments to show respect for dissent and to refrain from violence. She spoke with what seemed to be an especially chilly sang froid, as she ignored my silent protest and the violent assault which took place right in front of her.
The experience gave me personal confirmation of the impression that I reluctantly had drawn from watching her behavior and its consequences over the past decade. The incident was a kind of metaphor of the much worse violence that Secretary Clinton has coolly countenanced against others.
Again and again, Hillary Clinton – both as a U.S. senator and as Secretary of State – has demonstrated a nonchalant readiness to unleash the vast destructiveness of American military power. The charitable explanation, I suppose, is that she knows nothing of war from direct personal experience.
And that is also true of her husband, her colleague Robert Gates at the Defense Department, President Barack Obama, and most of the White House functionaries blithely making decisions to squander the lives and limbs of young soldiers in foreign adventures — conflicts that even the top brass admit cannot be won with weapons.
The analogy to Vietnam is inescapable. As White House tapes from the 1960s show, President Lyndon Johnson knew that the Vietnam War could not be “won” in any meaningful way.
Nonetheless, Johnson kept throwing hundreds of thousands into the battle lest someone accuse him of being soft on communism. I had an inside seat watching Johnson do that. And I did nothing.
Now, with an even more jittery president, a hawkish Secretary of State, the much-acclaimed field marshal David Petraeus, and various Republican presidential hopefuls – all jockeying for political position as the 2012 election draws near – the country is in even deeper trouble today.
No one on this political merry-go-round can afford to appear weak on terrorism. So, they all have covered their bets. And we all know who pays the price for these political calculations.
This time, I would NOT do nothing.
My colleagues in Veterans for Peace and I have known far too many comrades-in-arms and their families whose lives have been shattered or ended as a result of such crass political maneuvering.
Many of us veterans know more than we wish to know about war and killing. But — try as we may with letters and other appeals — we cannot get through to President Obama. And Secretary Clinton turns her own deaf ear to our entreaties and those from others who oppose unnecessary warfare, a pattern that she also followed in her days as a U.S. senator from New York.
See No Evil
In the summer of 2002, as the Senate was preparing to conduct hearings about alleged weapons of mass destruction (WMD) in Iraq and the possibility of war, former Chief Weapons Inspector in Iraq and U.S. Marine Major, Scott Ritter, came down to Washington from his home in upstate New York to share his first-hand knowledge with as many senators as possible.
To those that let him in the door, he showed that the “intelligence” adduced to support U.S. claims that Iraq still had WMD was fatally flawed. This was the same “intelligence” that Senate Intelligence Committee chair Jay Rockefeller later branded “unsubstantiated, contradicted, or even non-existent.”
Sen. Hillary Clinton would not let Ritter in her door. Despite his unique insights as a U.N. inspector and his status as a constituent, Sen. Clinton gave him the royal run-around. Her message was clear: “Don’t bother me with the facts.” She had already made up her mind.
I had a direct line into her inner circle at the time, and was assured that several of my op-eds and other commentaries skeptical of George W. Bush’s planned invasion were given to Clinton, but no matter.
Sen. Clinton reportedly was not among the handful of legislators who took the trouble to read the National Intelligence Estimate on WMD in Iraq that was issued on Oct. 1, 2002, just ten days before she voted to authorize war.
In short, she chose not to perform the due diligence required prior to making a decision having life-or-death consequences for thousands of Americans and hundreds of thousands of Iraqis. She knew whom she needed to cater to, and what she felt she had to do.
But, bright as she is, Hillary Clinton is prone to huge mistakes — political, as well as strategic. In dissing those of us who were trying to warn her that an attack on Iraq would have catastrophic consequences, she simply willed us to be wrong.
Clearly, her calculation was that she had to appear super-strong on defense in order to win the Democratic nomination and then the presidency in 2008. Just as clearly, courting Israel and the Likud Lobby was also important to her political ambitions.
Blair Admits Israeli Role
Any lingering doubt that Israel played a major role in the U.S.- U.K. decision to attack Iraq was dispelled a year ago when former Prime Minister Tony Blair spoke publicly about the Israeli input into the all-important Bush-Blair deliberations on Iraq in Crawford, Texas, in April 2002.
Inexplicably, Blair forgot his usual discretion when it comes to disclosing important facts to the public and blurted out some truth at the Chilcot hearings in London regarding the origins of the Iraq War:
“As I recall that [April 2002] discussion, it was less to do with specifics about what we were going to do on Iraq or, indeed, the Middle East, because the Israel issue was a big, big issue at the time. I think, in fact, I remember, actually, there may have been conversations that we had even with Israelis, the two of us [Bush and Blair], whilst we were there. So that was a major part of all this.”
According to Philip Zelikow – a former member of the President's Foreign Intelligence Advisory Board, the executive director of the 9/11 Commission, and later counselor to Secretary of State Condoleezza Rice – the "real threat" from Iraq was not to the United States.
Zelikow told an audience at the University of Virginia in September 2002, the "unstated threat" from Iraq was the "threat against Israel.” He added, "The American government doesn't want to lean too hard on it rhetorically, because it is not a popular sell."
But it wasn’t as though leading Israelis were disguising their war aims. The current Israeli Prime Minister Benyamin Netanyahu published a pre-invasion piece titled “The case for Toppling Saddam” in the Wall Street Journal.
"Today nothing less than dismantling his regime will do," Netanyahu declared. "I believe I speak for the overwhelming majority of Israelis in supporting a pre-emptive strike against Saddam's regime."
The Israeli newspaper Ha'aretz reported in February 2003, "the military and political leadership yearns for war in Iraq.”
As a retired Israeli general later put it, "Israeli intelligence was a full partner to the picture presented by American and British intelligence regarding Iraq's non-conventional [WMD] capabilities."
In the United States, neoconservatives also pushed for war thinking that taking out Saddam Hussein would make Israel more secure.
These Israeli leaders and their neocon allies got their wish on March 19, 2003, with the U.S.-U.K. invasion.
Of course, pressure from Israel and its Lobby was not the only factor behind the invasion of Iraq — think also oil, military bases, various political ambitions, revenge, etc. — but the Israeli factor was critical.
A Calculating Senator
I’m afraid, though, that these calculations aimed at enhancing Israeli security may ultimately have the opposite effect. The Iraq War and the anti-Americanism that it has engendered across the Middle East seem sure to make Israel’s position in the region even more precarious.
If the Iraq War does end up making the region more dangerous for Israel, the fault will lie with Israel’s hard-line leaders, as well as with those American officials (and media pundits) who so eagerly clambered onboard for the attack on Iraq.
One of those U.S. officials was the calculating senator from New York.
In a kind of poetic justice, Clinton’s politically motivated warmongering became a key factor in her losing the Democratic presidential nomination to Barack Obama, who as a young state senator in Illinois spoke out against the war.
Though she bet wrong in 2002-03, Clinton keeps doubling down in her apparent belief that her greater political vulnerability comes from being perceived as “weak” against U.S. adversaries. So, she’s emerged as one of the Obama administration’s leading hawks on Afghanistan and Iran.
I suspect she still has her eye on what she considers the crucial centers of financial, media and other power that could support a possible future run for president, whether in 2012 if the Obama administration unravels or in 2016.
Another explanation, I suppose, could be that the Secretary of State genuinely believes that the United States should fight wars favored by right-wing Israelis and their influential supporters in the U.S.
Whichever interpretation you prefer, there’s no doubt that she has put herself in the forefront of American leaders threatening Iran over its alleged “nuclear weapons” program, a “weapons” program that Iran denies exists and for which the U.S. intelligence community has found little or no evidence.
Bête Noire Iran
As a former CIA analyst myself, it strikes me as odd that Clinton’s speeches never reflect the consistent, unanimous judgment of the 16 U.S. intelligence agencies, issued formally (and with “high confidence”) in November 2007 that Iran stopped working on a nuclear weapon in the fall of 2003 and had not yet decided whether or not to resume that work.
Less than two weeks ago (on Feb. 10), in a formal appearance before the House Intelligence Committee, National Intelligence Director James Clapper testified:
“We continue to assess Iran is keeping open the option to develop nuclear weapons in part by developing various nuclear capabilities that better position it to produce such weapons, should it choose to do so. We do not know, however, if Iran will eventually decide to build nuclear weapons…."
“We continue to judge Iran’s nuclear decisionmaking is guided by a cost-benefit approach, which offers the international community opportunities to influence Tehran.”
Who’s in Charge Here?
Yet, in her determination to come across as hard-line, Clinton has undercut promising initiatives that might have constrained Iran from having enough low-enriched uranium to even be tempted to build a nuclear arsenal.
Last year, when – at the urging of President Obama – the leaders of Turkey and Brazil worked out an agreement with Iran, under which Iran agreed to ship about half of its low-enriched uranium (LEU) out of country, Clinton immediately rejected it in favor of more severe economic sanctions.
Turkish Prime Minister Recep Tayyip Erdogan and Brazilian President Luiz Inácio Lula da Silva were left wondering who exactly was in charge in Washington — Hillary and her pro-Israeli friends, or Obama.
Brazil released a three-page letter that Obama had sent to Lula da Silva a month earlier in which Obama said the proposed uranium transfer “would build confidence and reduce regional tensions by substantially reducing Iran’s” stockpile of low-enriched uranium.
The contrast between Obama’s support for the initiative and the opposition from various hardliners (including Clinton) caused “some puzzlement,” one senior Brazilian official told the New York Times. After all, this official said, the supportive “letter came from the highest authority and was very clear.”
It was a particularly telling episode. Clinton basked in the applause of Israeli leaders and neocon pundits for blocking the uranium transfer and securing more restrictive U.N. sanctions on Iran – and since then Iran appears to have dug in its heals on additional negotiations over its nuclear program.
Secretary Clinton is almost as assiduous as Netanyahu in never missing a chance to paint the Iranians in the darkest colors – even if that ends up painting the entire region into a more dangerous corner.
More Hypocrisy
On Feb. 15, Clinton continued giving hypocrisy a bad name, with her GW speech regarding the importance of governments respecting peaceful dissent.
Five short paragraphs after she watched me snatched out of the audience Blackwater-style, she said, “Iran is awful because it is a government that routinely violates the rights of its people.” It was like something straight out of Franz Kafka.
Today, given the growing instability in the Middle East – and Netanyahu’s strident talk about Iran’s dangerous influence – it may take yet another Herculean effort by Joint Chiefs Chairman Mike Mullen to disabuse Netanyahu of the notion that Israel can somehow provoke the kind of confrontation with Iran that would suck Obama into the conflict on Israel’s side.
At each such turning point, Secretary Clinton predictably sides with the hard-line Israeli position and shows remarkably little sympathy for the Palestinians or any other group that finds itself in Israel’s way.
It is now clear, not only from the WikiLeaks documents, but even more so from the “Palestine Papers” disclosed by Al Jazeera, that Washington has long been playing a thoroughly dishonest “honest-broker” role between Israel and the Palestinians.
But those documents don’t stand alone. Clinton also rejected the Goldstone Report’s criticism of Israel’s bloody attack on Gaza in 2008-09; she waffled on Israel’s fatal commando raid on a Turkish relief flotilla on its way to Gaza in 2010; and she rallied to the defense of Egyptian dictator Hosni Mubarak this month when Israeli leaders raised alarms about what might follow him.
Just last week, Clinton oversaw the casting of the U.S. veto to kill a U.N. Security Council resolution calling on Israel to stop colonizing territories it occupied in 1967. That vote was 14 to 1, marking the first such veto by the Obama administration. Netanyahu was quick to state that he “deeply appreciated” the U.S. stance.
Silent Witness
In the face of such callous disregard for what the Founders called “a decent respect for the opinions of mankind,” words failed me — literally — on Feb. 15.
The op-eds, the speeches, the interviews that I and others have done about needless war and feckless politicians may have done some good but, surely, they have not done enough. And America’s Fawning Corporate Media (FCM) is the embodiment of a Fourth Estate that is dead in the water.
I counted about 20 TV cameras at the Clinton speech and reporters galore. Not one thought to come outside to watch what was happening to me, and zero reporting on the incident has found its way into the FCM, save a couple of brief and misleading accounts.
A Fox News story claimed that “a heckler interrupted” Clinton’s speech and then “was escorted from the room.” Fox News added that I "was, perhaps, trying to hold up a sign." CNN posted a brief clip with a similar insistence that I had “interrupted” Clinton’s speech, though the video shows me saying nothing until after I’m dragged away (or “escorted”) when I say, “So this is America.” There also was no sign.
Disappointing, but not surprising. I guess I really do believe that the good is worth doing because it is good. It shouldn’t matter that there is little or no guarantee of success — or even a truthful recounting of what happened.
One of my friends, in a good-natured attempt to make light of my arrest and brief imprisonment, commented that I must be used to it by now.
I thought of how anti-war prophet, Fr. Dan Berrigan, responded to that kind of observation in his testimony at the Plowshares Eight trial 31 years ago. I feel blessed by his witness and fully identify with what he said about “the push of conscience”:
“With every cowardly bone in my body, I wished I hadn’t had to do it. That has been true every time I have been arrested. My stomach turns over. I feel sick. I feel afraid. I hate jail. I don’t do well there physically.
“But I have read that we must not kill. I have read that children, above all, are threatened by this. I have read that Christ our Lord underwent death rather than inflict it. And I’m supposed to be a disciple."
“The push of conscience is a terrible thing.”
As Fr. Berrigan clearly understood, the suffering of the victims of war is so much worse than the shock and discomfort of arrest.
For her part, Sen. and/or Secretary Clinton seems never to have encountered a war that she didn’t immediately embrace on behalf of some geopolitical justification, apparently following Henry Kissinger’s dictum that soldiers are “just dumb stupid animals to be used as pawns in foreign policy.”
And beyond even the human suffering of those caught up in war, there’s what’s in store for the rest of us. As recent rhetoric and disclosures of leaked documents have made clear, what lies ahead is a permanent warfare state, including occupation of foreign lands and new military bases around the globe -- unless we have the courage to stand up this time.
Also to be expected will be the curtailment of our rights at home. “A state of war only serves as an excuse for domestic tyranny,” wrote Aleksandr Solzhenitsyn — one who knew.
Perhaps we need to bear in mind that we are part of a long line of those who have taken a stand on these issues.
As for those of us who have served abroad to protect the rights of U.S. citizens — well, maybe we have a particular mandate to do what we can to keep protecting them.
For us Veterans for Peace, we’ve been there, done that. And so, enough already!
Friday, February 25, 2011
The Security Budget vs. the Necessities of Americans.
By Kevin Zeese
Global Research
February 22, 2011
President Obama and the Congress have taken 66% of discretionary spending in the federal budget off the table –the SecurityBudget – while proposing a freeze to the rest of the budget and deep cuts to some programs that provide necessities for the American people. His budget crystalizes a choice that U.S. presidents have been making since President Eisenhower warned of the military-industrial complex – investment in the military vs. investment in the civilian economy.
The bloated and sacrosanct security budget – the military, domestic security and intelligence budgets –all saw rapid growth under President Bush when the DoD doubled its budget. Under President Obama the trend has continued with record military, intelligence and domestic security budgets.
And, while the so-called recovery has only been a recovery for Wall Street and big business, the administration and congress are focused more on the deficit then on re-starting the economy for the rest of us. But there is more talk of cutting Social Security and Medicare than cutting the security budget. In fact, these two items are called entitlements because they are a contract with working Americans who pay for them in every paycheck. For this reason they should not even be considered part of the deficit. Payrolltaxes fund these two programs that are essential for older Americans in their retirement years. Both face budget challenges but can be fixed, indeed Social Security has more than $2.5 trillion in Treasury Notes in reserve.
President Obama has proposed the largest DoD budget since World War II, $553 billion (not including war funding and nuclear weapons funding in the Department of Energy). Much attention has been shined on Secretary of Defense Gates’proposal to “cut” $78 billion inthe Pentagon budget. Those “cuts” take place over five years with reductions taking place after the 2012 election in 2014 and 2015. And, the “cuts” do not include the cost of wars. The Afghanistan war alone could eat up projected “savings” and if the CIA’s war in Pakistan escalates that will be an even bigger budget item. Further, we have not seen what the continuing U.S. military footprint in Iraq will cost. These projected cuts are more image than reality.
How does military spending impact Americans? President Reagan’s former assistant secretary of defense Lawrence Korb describes the military budget as “an annual tax of more than $7,000 on every household in the country.”While increasing the security budget, Obama and the Democrats have proposed widespread cuts to critical programs from a 50% cut in low-income heating assistance to nearly a 30% cut to the clean drinking water fund. They have also proposed a 25% cut ($1.3 billion) to the community development block grants used to fund local community development including affordable housing, anti-poverty programs, and infrastructure development. These are essential services needed for Americans health, safety and economic security.Of course, Republican cuts in the House budget are even more extreme but Obama set the table for them by making the debate about deficits and both parties will not touch the security budget. Military analyst, William Hartung, writes “These cuts will be painful, and they will be felt in every middle- and lower-income household in America.”
Cities and states are cutting essential services to balance their budgets. U.S. taxpayers will spend $737 billion for Pentagon spending for FY2011 (including war funding). To get a sense of what this means, for the same amount of money tax payers could provide funding for 11.3 million elementary school teachers for one year or 93.5 million scholarships for university students for one year or restart the economy by providing 166.9 million households with renewable electricity - solar photovoltaic for one year. Instead all these programs face cutbacks, while military spending grows.
To get a sense of the absurdity of protecting all military spending, the federal government spends $500 million each year for military marching bands. In comparison it spends $430 million a year on public broadcasting. More than half of all Americans use PBS each year, 170 million people, but PBS faces cutbacks while military bands are protected from budget cuts.
The greater damage will be in the failure to restart the economy. Economists like Nobel Prize winner, Paul Krugman and former Labor Secretary Robert Reich, are convincingly urging more spending. Big business is sitting on $2 trillion in cash stifling job creation and a real economic recovery. There are no signs of inflation because the recovery – if you can even it call it a recovery – is non-existent for working Americans and the unemployed/underemployed whose consumer purchases are needed to drive the economy. Obama risks a 1937 mistake – cutting spending too soon and causing another collapse.
Cutting $1 trillion from the federal budget is the goal of the Obama administration deficit plan. All of these cuts could come from military spending and still leave the U.S. militarily dominant. In fact, since the administration has projected an increase in spending of $6.5 trillion from 2011 to 2020, even a trillion would be a slowing of growth more than a real cut. Lawrence Korb lays out a five point plan to reduce military spending by $1 trillion without jeopardizing national security and thereby protecting U.S. economic security.
He is not alone, the Sustainable Defense Task Force provides specific cuts without harming U.S. national security including:
•The $238 billion Joint Strike Fighter program: Cancelling the program and relying instead on upgraded versions of current aircraft would save almost $50 billion over ten years.
•The MV-22 Osprey: Replacing this dangerous, overpriced, and underperforming aircraft with cheaper alternatives would save over $10 billion over ten years.
•Reducing the number of U.S. troops in Europe and Asia to 100,000 from current levels of 150,000 would save $80 billion over a decade.
•Reforming Pentagon health care systems so that retirees pay modest, reasonable premiums could save $60 billion over a decade.
•Scaling back missile defense and space weapons programs could save over $50 billion over a decade.
•Further reductions in the U.S. nuclear arsenal, including deployment of fewer ballistic-missile launching submarines, could save over $100 billion in a ten year period, much of it in operating costs.
•Reducing the size of the Navy from 286 to 230 ships would save over $125 billion over ten years.
If you combine these recommendations of the five point plan of Lawrence Korb, which includes items like bringing home 50,000 of the 150,000 troops stationed in Asia and Europe, reducing the size of the Army and Marine Corps to their pre-Iraq invasion level and reducing nuclear weapons from 1,968 to the 311 the Military War College says is needed for defense, the U.S. would save another $200 billion.
For many, these would only be the starting points of correctly prioritizing military spending. President Eisenhower warned about the military industrial complex 50 year ago. During that time, U.S. spending on the military adjusted for inflation has more than doubled and we have moved to a permanent war state. Columbia University’s Seymour Melman, a professor of industrial engineering, pointed out that “Industrial productivity, the foundation of every nation’s economic growth, is eroded by the relentlessly predatory effects of the military economy.” In fact, we have seen – as we see in the Obama budget – a constant conflict between the military economy and the civilian economy. The civilian economy is losing that battle.
Thomas Woods, Jr. recently wrote in the American Conservative that military spending is parasitic as it feeds off the economy rather than grows it. The scale of resources used by the military is exorbitant, Woods writes: “To train a single combat pilot, for instance, costs between $5 million and $7 million. Over a period of two years, the average U.S. motorist uses about as much fuel as does a single F-16 training jet in less than an hour. The Abrams tank uses up 3.8 gallons of fuel in traveling one mile. Between 2 and 11 percent of the world’s use of 14 important minerals, from copper to aluminum to zinc, is consumed by the military, as is about 6 percent of the world’s consumption of petroleum. The Pentagon’s energy use in a single year could power all U.S. mass transit systems for nearly 14 years.”
To get a sense of the competition between the civilian and military economy, the Department of Commerce estimated the value of the nation’s plants, equipment, and infrastructure (capital stock) at just over $7.29 trillion in 1985; and from 1947 to 1987 the military spent the equivalent, $7.62 trillion in capital resources.
With the long record of the ascendency of military spending it is not surprising to see the U.S. economy in collapse, industry disappearing and the infrastructure crumbling. Not only has the U.S. failed to win a major war since World War II, but the cost of the standing army has become a burden on all of us and a drag on the economy. Some describe the U.S. Empire in decline and others see a collapse as possible at any moment.
The failure of President Obama to confront military spending in this time of economic collapse and perceived deficit crisis, when tax dollars are needed to restart the domestic economy, is not only a short term budget failure but does not face up to the long-term damaging economic impact of the American military empire.
Global Research
February 22, 2011
President Obama and the Congress have taken 66% of discretionary spending in the federal budget off the table –the SecurityBudget – while proposing a freeze to the rest of the budget and deep cuts to some programs that provide necessities for the American people. His budget crystalizes a choice that U.S. presidents have been making since President Eisenhower warned of the military-industrial complex – investment in the military vs. investment in the civilian economy.
The bloated and sacrosanct security budget – the military, domestic security and intelligence budgets –all saw rapid growth under President Bush when the DoD doubled its budget. Under President Obama the trend has continued with record military, intelligence and domestic security budgets.
And, while the so-called recovery has only been a recovery for Wall Street and big business, the administration and congress are focused more on the deficit then on re-starting the economy for the rest of us. But there is more talk of cutting Social Security and Medicare than cutting the security budget. In fact, these two items are called entitlements because they are a contract with working Americans who pay for them in every paycheck. For this reason they should not even be considered part of the deficit. Payrolltaxes fund these two programs that are essential for older Americans in their retirement years. Both face budget challenges but can be fixed, indeed Social Security has more than $2.5 trillion in Treasury Notes in reserve.
President Obama has proposed the largest DoD budget since World War II, $553 billion (not including war funding and nuclear weapons funding in the Department of Energy). Much attention has been shined on Secretary of Defense Gates’proposal to “cut” $78 billion inthe Pentagon budget. Those “cuts” take place over five years with reductions taking place after the 2012 election in 2014 and 2015. And, the “cuts” do not include the cost of wars. The Afghanistan war alone could eat up projected “savings” and if the CIA’s war in Pakistan escalates that will be an even bigger budget item. Further, we have not seen what the continuing U.S. military footprint in Iraq will cost. These projected cuts are more image than reality.
How does military spending impact Americans? President Reagan’s former assistant secretary of defense Lawrence Korb describes the military budget as “an annual tax of more than $7,000 on every household in the country.”While increasing the security budget, Obama and the Democrats have proposed widespread cuts to critical programs from a 50% cut in low-income heating assistance to nearly a 30% cut to the clean drinking water fund. They have also proposed a 25% cut ($1.3 billion) to the community development block grants used to fund local community development including affordable housing, anti-poverty programs, and infrastructure development. These are essential services needed for Americans health, safety and economic security.Of course, Republican cuts in the House budget are even more extreme but Obama set the table for them by making the debate about deficits and both parties will not touch the security budget. Military analyst, William Hartung, writes “These cuts will be painful, and they will be felt in every middle- and lower-income household in America.”
Cities and states are cutting essential services to balance their budgets. U.S. taxpayers will spend $737 billion for Pentagon spending for FY2011 (including war funding). To get a sense of what this means, for the same amount of money tax payers could provide funding for 11.3 million elementary school teachers for one year or 93.5 million scholarships for university students for one year or restart the economy by providing 166.9 million households with renewable electricity - solar photovoltaic for one year. Instead all these programs face cutbacks, while military spending grows.
To get a sense of the absurdity of protecting all military spending, the federal government spends $500 million each year for military marching bands. In comparison it spends $430 million a year on public broadcasting. More than half of all Americans use PBS each year, 170 million people, but PBS faces cutbacks while military bands are protected from budget cuts.
The greater damage will be in the failure to restart the economy. Economists like Nobel Prize winner, Paul Krugman and former Labor Secretary Robert Reich, are convincingly urging more spending. Big business is sitting on $2 trillion in cash stifling job creation and a real economic recovery. There are no signs of inflation because the recovery – if you can even it call it a recovery – is non-existent for working Americans and the unemployed/underemployed whose consumer purchases are needed to drive the economy. Obama risks a 1937 mistake – cutting spending too soon and causing another collapse.
Cutting $1 trillion from the federal budget is the goal of the Obama administration deficit plan. All of these cuts could come from military spending and still leave the U.S. militarily dominant. In fact, since the administration has projected an increase in spending of $6.5 trillion from 2011 to 2020, even a trillion would be a slowing of growth more than a real cut. Lawrence Korb lays out a five point plan to reduce military spending by $1 trillion without jeopardizing national security and thereby protecting U.S. economic security.
He is not alone, the Sustainable Defense Task Force provides specific cuts without harming U.S. national security including:
•The $238 billion Joint Strike Fighter program: Cancelling the program and relying instead on upgraded versions of current aircraft would save almost $50 billion over ten years.
•The MV-22 Osprey: Replacing this dangerous, overpriced, and underperforming aircraft with cheaper alternatives would save over $10 billion over ten years.
•Reducing the number of U.S. troops in Europe and Asia to 100,000 from current levels of 150,000 would save $80 billion over a decade.
•Reforming Pentagon health care systems so that retirees pay modest, reasonable premiums could save $60 billion over a decade.
•Scaling back missile defense and space weapons programs could save over $50 billion over a decade.
•Further reductions in the U.S. nuclear arsenal, including deployment of fewer ballistic-missile launching submarines, could save over $100 billion in a ten year period, much of it in operating costs.
•Reducing the size of the Navy from 286 to 230 ships would save over $125 billion over ten years.
If you combine these recommendations of the five point plan of Lawrence Korb, which includes items like bringing home 50,000 of the 150,000 troops stationed in Asia and Europe, reducing the size of the Army and Marine Corps to their pre-Iraq invasion level and reducing nuclear weapons from 1,968 to the 311 the Military War College says is needed for defense, the U.S. would save another $200 billion.
For many, these would only be the starting points of correctly prioritizing military spending. President Eisenhower warned about the military industrial complex 50 year ago. During that time, U.S. spending on the military adjusted for inflation has more than doubled and we have moved to a permanent war state. Columbia University’s Seymour Melman, a professor of industrial engineering, pointed out that “Industrial productivity, the foundation of every nation’s economic growth, is eroded by the relentlessly predatory effects of the military economy.” In fact, we have seen – as we see in the Obama budget – a constant conflict between the military economy and the civilian economy. The civilian economy is losing that battle.
Thomas Woods, Jr. recently wrote in the American Conservative that military spending is parasitic as it feeds off the economy rather than grows it. The scale of resources used by the military is exorbitant, Woods writes: “To train a single combat pilot, for instance, costs between $5 million and $7 million. Over a period of two years, the average U.S. motorist uses about as much fuel as does a single F-16 training jet in less than an hour. The Abrams tank uses up 3.8 gallons of fuel in traveling one mile. Between 2 and 11 percent of the world’s use of 14 important minerals, from copper to aluminum to zinc, is consumed by the military, as is about 6 percent of the world’s consumption of petroleum. The Pentagon’s energy use in a single year could power all U.S. mass transit systems for nearly 14 years.”
To get a sense of the competition between the civilian and military economy, the Department of Commerce estimated the value of the nation’s plants, equipment, and infrastructure (capital stock) at just over $7.29 trillion in 1985; and from 1947 to 1987 the military spent the equivalent, $7.62 trillion in capital resources.
With the long record of the ascendency of military spending it is not surprising to see the U.S. economy in collapse, industry disappearing and the infrastructure crumbling. Not only has the U.S. failed to win a major war since World War II, but the cost of the standing army has become a burden on all of us and a drag on the economy. Some describe the U.S. Empire in decline and others see a collapse as possible at any moment.
The failure of President Obama to confront military spending in this time of economic collapse and perceived deficit crisis, when tax dollars are needed to restart the domestic economy, is not only a short term budget failure but does not face up to the long-term damaging economic impact of the American military empire.
Thursday, February 24, 2011
Obama Joins Likud Party in Veto of UN Settlement Resolution: Zionist Lobby in Control of US/Israeli Foreign Policy
Editor's NOTE:
If there was any doubt that the radical Zionist Lobby is in complete control of US/Israeli foreign policy vis a vis the illegal and immoral Israeli Occupation of and illegal Israeli settlement builing in the West Bank, the US veto of Friday's UN Settlement Resolution should once and for all put it to rest.
It is completely absurd and absolutetly unnacceptable to all rational and right thinking Americans that the Obama administration (as did it's predecessors) continues to support Israeli Settlement building in the West Bank by refusing to tie all American foreign aid to Israel (over 3 billion US dollars per year) to its immediate and permanent cessation. Voting yes on the UN resolution would have helped rectify that situation.
The United States in "carrying water for Israel" is guilty of flouting the international laws of war given that all treaties to which the US is a signatory and which Congress has approved are part of US Federal law as well.
Every American of good will should be outraged and must register their objection to respective Congressional Delegations and the White House! Please do so today.
--Dr. J. P. Hubert
A False Friend in the White House
By Stephen M. Walt
February 23, 2011 "FP" -- Last Friday the United States vetoed a U.N. Security Council Resolution condemning Israel's continued expansion of settlements in the occupied territory of the West Bank. The resolution didn't question Israel's legitimacy, didn't declare that "Zionism is racism," and didn't call for a boycott or sanctions. It just said that the settlements were illegal and that Israel should stop building them, and called for a peaceful, two-state solution with "secure and recognized borders. The measure was backed by over 120 countries, and 14 members of the security council voted in favor. True to form, only the United States voted no.
There was no strategic justification for this foolish step, because the resolution was in fact consistent with the official policy of every president since Lyndon Johnson. All of those presidents has understood that the settlements were illegal and an obstacle to peace, and each has tried (albeit with widely varying degrees of enthusiasm) to get Israel to stop building them.
Yet even now, with the peace process and the two-state solution flat-lining, the Obama administration couldn't bring itself to vote for a U.N. resolution that reflected the U.S. government's own position on settlements. The transparently lame explanation given by U.S. officials was that the security council isn't the right forum to address this issue. Instead, they claimed that the settlements issue ought to be dealt with in direct talks between Israel and the Palestinians, and that the security council should have nothing to say on the issue.
This position is absurd on at least two grounds. First, the expansion of settlements is clearly an appropriate issue for the security council to consider, given that it is authorized to address obvious threats to international peace and security. Second, confining this issue to "direct talks" doesn't make much sense when those talks are going nowhere. Surely the Obama administration recognizes that its prolonged and prodigious effort to get meaningful discussions going have been a complete bust? It is hard to believe that they didn't recognize that voting "yes" on the resolution might be a much-needed wake-up call for the Israeli government, and thus be a good way to get the peace process moving again? Thus far, all that Obama's Middle East team has managed to do in two years is to further undermine U.S. credibility as a potential mediator between Israel and the Palestinians, and to dash the early hopes that the United States was serious about "two states for two peoples." And while Obama, Mitchell, Clinton, Ross, and the rest of the team have floundered, the Netanyahu government has continued to evict Palestinian residents from their homes, its bulldozers and construction crews continuing to seize more and more of the land on which the Palestinians hoped to create a state.
Needless to say, the United States is all by its lonesome on this issue. Our fellow democracies -- France, Germany, Great Britain, Brazil, South Africa, India, and Colombia -- all voted in favor of the resolution, but not the government of the Land of the Free. And it's not as if Netanyahu deserved to be rewarded at this point, given how consistently he has stiffed Obama and his Middle East team.
For more on this latest sad chapter in the annals of American Middle East diplomacy, see M.J Rosenberg here and here, the Magnes Zionist here and here, and Gideon Levy here ("With Settlement Resolution Veto, Obama Has Joined Likud").
As these commentators recognize, the real reason for Obama's misguided decision was the profound influence of the Israel lobby. Indeed, few observers have missed this simple and obvious fact. One can only conclude that Barack Obama and Hillary Clinton's repeated claims that they are "friends of Israel" and devoted to its security are nothing more than empty, politically expedient rhetoric. Whatever they may say, the policies they are pursuing -- including this latest veto -- are in fact harmful to Israel's long-term future. The man who declared in Cairo on June 4, 2009 that a two-state solution was "in the "Israel's interest, the Palestinians' interest, America's interest, and the world's interest" must have changed his mind, because his actions ever since have merely hastened the moment when creating two viable states will be impossible (if that is not already the case). Then remember what former Israeli Prime Minister Ehud Olmert said in 2007, "if the two-state solution fails, Israel will face a South African style struggle for political rights." And "once that happens," he warned, "the state of Israel is finished."
If Obama were a true friend of Israel, in short, he'd be doing whatever he could to keep it from expanding its ruinous occupation and making the Zionist vision unsustainable. And given that Congress remains hopeless on this issue, he could have shown he was a true friend by instructing his U.N. Ambassador, Susan Rice, to vote for the resolution, as a diverse array of foreign policy experts had suggested. He would also have devoted some portion of his first two years in office to explaining to the American people why some "tough love" was needed on both sides (i.e., not just the Palestinians), and he would have recruited America's democratic allies in a genuine effort to bring the Israeli-Palestinian conflict to a fair and stable end. Had he done these things, most Americans would have supported him. Instead, his lame actions are just enabling the occupation, and for the most cynical domestic political reasons (like safeguarding his re-election prospects in 2012). Even worse, he did it at a moment when the Arab world is in ferment, and when the voice of the Arab street is beginning to be heard. But instead of aligning itself with international law, basic principles of justice, and its own stated position, the Obama administration caved. Again.
If the United States hopes to be on the right side of history, it is time to start thinking about what its policy should be when everybody finally acknowledges that "two states for two peoples" is no longer a practical possibility. This is going to happen sooner or later, and anyone who is still advocating for a two-state solution at that point is going to sound like an ignorant fool. Not because of the flaws in that option, but simply because it will be impossible to implement. What alternative solution will the president and secretary of state support then? Ethnic cleansing? A binational, liberal democracy in which all inhabitants of Israel/Palestine have equal civil and political rights? Or permanent apartheid, in the form of disconnected Palestinian Bantustans under de facto Israeli control? That awkward reality may not be apparent while Obama is president (which is probably what he is hoping), but it will be a damning legacy to leave to his successor, as well as a tragedy for two peoples who have already known more than their share.
Postscript: Some readers may think I am being too defeatist here, and they might cite in evidence Bernard Avishai's New York Times Magazine essay detailing the alleged "near-miss" peace talks between Olmert and Palestinian president Mahmoud Abbas in 2008. Avishai's account portrays the two leaders as close to a deal and suggests that it would not be that hard to resurrect a similar deal today. It's an interesting article, but there are at least four problems with his optimistic account. First, Olmert was the lamest of lame ducks by 2008, because he was due to be indicted on corruption charges and everyone knew it, so the talks themselves were something of a side-show. Second, even had this not been the case, it is by no means clear that Olmert could have sold the Israeli public on the proposed deal. Third, it is not even clear that the two sides were that close to an agreement, given Olmert's insistence that Israel could not withdraw from Ariel and Maale Adumim (two settlement blocs that thrust deep inside the West Bank). Fourth, and probably most important, political trends in Israel are headed the other way (among other things, Avigdor Lieberman wasn't foreign minister back then), which makes the Olmert/Abbas talks even less relevant. For excellent critical responses to Avishai's piece, see Noam Sheizaf, Matthew Taylor, and Ilene Cohen.
Stephen M. Walt is the Robert and Renée Belfer professor of international relations at Harvard University.
If there was any doubt that the radical Zionist Lobby is in complete control of US/Israeli foreign policy vis a vis the illegal and immoral Israeli Occupation of and illegal Israeli settlement builing in the West Bank, the US veto of Friday's UN Settlement Resolution should once and for all put it to rest.
It is completely absurd and absolutetly unnacceptable to all rational and right thinking Americans that the Obama administration (as did it's predecessors) continues to support Israeli Settlement building in the West Bank by refusing to tie all American foreign aid to Israel (over 3 billion US dollars per year) to its immediate and permanent cessation. Voting yes on the UN resolution would have helped rectify that situation.
The United States in "carrying water for Israel" is guilty of flouting the international laws of war given that all treaties to which the US is a signatory and which Congress has approved are part of US Federal law as well.
Every American of good will should be outraged and must register their objection to respective Congressional Delegations and the White House! Please do so today.
--Dr. J. P. Hubert
A False Friend in the White House
By Stephen M. Walt
February 23, 2011 "FP" -- Last Friday the United States vetoed a U.N. Security Council Resolution condemning Israel's continued expansion of settlements in the occupied territory of the West Bank. The resolution didn't question Israel's legitimacy, didn't declare that "Zionism is racism," and didn't call for a boycott or sanctions. It just said that the settlements were illegal and that Israel should stop building them, and called for a peaceful, two-state solution with "secure and recognized borders. The measure was backed by over 120 countries, and 14 members of the security council voted in favor. True to form, only the United States voted no.
There was no strategic justification for this foolish step, because the resolution was in fact consistent with the official policy of every president since Lyndon Johnson. All of those presidents has understood that the settlements were illegal and an obstacle to peace, and each has tried (albeit with widely varying degrees of enthusiasm) to get Israel to stop building them.
Yet even now, with the peace process and the two-state solution flat-lining, the Obama administration couldn't bring itself to vote for a U.N. resolution that reflected the U.S. government's own position on settlements. The transparently lame explanation given by U.S. officials was that the security council isn't the right forum to address this issue. Instead, they claimed that the settlements issue ought to be dealt with in direct talks between Israel and the Palestinians, and that the security council should have nothing to say on the issue.
This position is absurd on at least two grounds. First, the expansion of settlements is clearly an appropriate issue for the security council to consider, given that it is authorized to address obvious threats to international peace and security. Second, confining this issue to "direct talks" doesn't make much sense when those talks are going nowhere. Surely the Obama administration recognizes that its prolonged and prodigious effort to get meaningful discussions going have been a complete bust? It is hard to believe that they didn't recognize that voting "yes" on the resolution might be a much-needed wake-up call for the Israeli government, and thus be a good way to get the peace process moving again? Thus far, all that Obama's Middle East team has managed to do in two years is to further undermine U.S. credibility as a potential mediator between Israel and the Palestinians, and to dash the early hopes that the United States was serious about "two states for two peoples." And while Obama, Mitchell, Clinton, Ross, and the rest of the team have floundered, the Netanyahu government has continued to evict Palestinian residents from their homes, its bulldozers and construction crews continuing to seize more and more of the land on which the Palestinians hoped to create a state.
Needless to say, the United States is all by its lonesome on this issue. Our fellow democracies -- France, Germany, Great Britain, Brazil, South Africa, India, and Colombia -- all voted in favor of the resolution, but not the government of the Land of the Free. And it's not as if Netanyahu deserved to be rewarded at this point, given how consistently he has stiffed Obama and his Middle East team.
For more on this latest sad chapter in the annals of American Middle East diplomacy, see M.J Rosenberg here and here, the Magnes Zionist here and here, and Gideon Levy here ("With Settlement Resolution Veto, Obama Has Joined Likud").
As these commentators recognize, the real reason for Obama's misguided decision was the profound influence of the Israel lobby. Indeed, few observers have missed this simple and obvious fact. One can only conclude that Barack Obama and Hillary Clinton's repeated claims that they are "friends of Israel" and devoted to its security are nothing more than empty, politically expedient rhetoric. Whatever they may say, the policies they are pursuing -- including this latest veto -- are in fact harmful to Israel's long-term future. The man who declared in Cairo on June 4, 2009 that a two-state solution was "in the "Israel's interest, the Palestinians' interest, America's interest, and the world's interest" must have changed his mind, because his actions ever since have merely hastened the moment when creating two viable states will be impossible (if that is not already the case). Then remember what former Israeli Prime Minister Ehud Olmert said in 2007, "if the two-state solution fails, Israel will face a South African style struggle for political rights." And "once that happens," he warned, "the state of Israel is finished."
If Obama were a true friend of Israel, in short, he'd be doing whatever he could to keep it from expanding its ruinous occupation and making the Zionist vision unsustainable. And given that Congress remains hopeless on this issue, he could have shown he was a true friend by instructing his U.N. Ambassador, Susan Rice, to vote for the resolution, as a diverse array of foreign policy experts had suggested. He would also have devoted some portion of his first two years in office to explaining to the American people why some "tough love" was needed on both sides (i.e., not just the Palestinians), and he would have recruited America's democratic allies in a genuine effort to bring the Israeli-Palestinian conflict to a fair and stable end. Had he done these things, most Americans would have supported him. Instead, his lame actions are just enabling the occupation, and for the most cynical domestic political reasons (like safeguarding his re-election prospects in 2012). Even worse, he did it at a moment when the Arab world is in ferment, and when the voice of the Arab street is beginning to be heard. But instead of aligning itself with international law, basic principles of justice, and its own stated position, the Obama administration caved. Again.
If the United States hopes to be on the right side of history, it is time to start thinking about what its policy should be when everybody finally acknowledges that "two states for two peoples" is no longer a practical possibility. This is going to happen sooner or later, and anyone who is still advocating for a two-state solution at that point is going to sound like an ignorant fool. Not because of the flaws in that option, but simply because it will be impossible to implement. What alternative solution will the president and secretary of state support then? Ethnic cleansing? A binational, liberal democracy in which all inhabitants of Israel/Palestine have equal civil and political rights? Or permanent apartheid, in the form of disconnected Palestinian Bantustans under de facto Israeli control? That awkward reality may not be apparent while Obama is president (which is probably what he is hoping), but it will be a damning legacy to leave to his successor, as well as a tragedy for two peoples who have already known more than their share.
Postscript: Some readers may think I am being too defeatist here, and they might cite in evidence Bernard Avishai's New York Times Magazine essay detailing the alleged "near-miss" peace talks between Olmert and Palestinian president Mahmoud Abbas in 2008. Avishai's account portrays the two leaders as close to a deal and suggests that it would not be that hard to resurrect a similar deal today. It's an interesting article, but there are at least four problems with his optimistic account. First, Olmert was the lamest of lame ducks by 2008, because he was due to be indicted on corruption charges and everyone knew it, so the talks themselves were something of a side-show. Second, even had this not been the case, it is by no means clear that Olmert could have sold the Israeli public on the proposed deal. Third, it is not even clear that the two sides were that close to an agreement, given Olmert's insistence that Israel could not withdraw from Ariel and Maale Adumim (two settlement blocs that thrust deep inside the West Bank). Fourth, and probably most important, political trends in Israel are headed the other way (among other things, Avigdor Lieberman wasn't foreign minister back then), which makes the Olmert/Abbas talks even less relevant. For excellent critical responses to Avishai's piece, see Noam Sheizaf, Matthew Taylor, and Ilene Cohen.
Stephen M. Walt is the Robert and Renée Belfer professor of international relations at Harvard University.
Wednesday, February 23, 2011
Bombshell: US CIA Agent Suspected of Supplying Al Qaeda with Nuclear Material and Biological Weapons
Editor's NOTE:
If this allegation is true, then another False Flag attack is underway similar to the Fictitious Gulf of Tonkin incident that allowed Lyndon Johnson to mire the United States in the completely immoral, illegal and totally unnecessary Vietnam War.
This is a very worrisome development and must be further investigated by the alternative media. Please be diligent in following it up. It is clear that only a "power to the people" movement can reign in the Regime's/MIMIC'S increasingly destructive global activities.
--Dr. J. P. Hubert
"CIA spy" Davis was giving nuclear bomb material to Al-Qaeda, says report
By ANI | ANI – Sun, Feb 20, 2011 12:18 PM IST
London, Feb 20(ANI): Double murder-accused US official Raymond Davis has been found in possession of top-secret CIA documents, which point to him or the feared American Task Force 373 (TF373) operating in the region, providing Al-Qaeda terrorists with "nuclear fissile material" and "biological agents," according to a report.
Russia's Foreign Intelligence Service (SVR) is warning that the situation on the sub-continent has turned "grave" as it appears that open warfare is about to break out between Pakistan and the United States, The European Union Times reports.
The SVR warned in its report that the apprehension of 36-year-old Davis, who shot dead two Pakistani men in Lahore last month, had fuelled this crisis.
According to the report, the combat skills exhibited by Davis, along with documentation taken from him after his arrest, prove that he is a member of US' TF373 black operations unit currently operating in the Afghan War Theatre and Pakistan's tribal areas, the paper said.
While the US insists that Davis is one of their diplomats, and the two men he killed were robbers, Pakistan says that the duo were ISI agents sent to follow him after it was discovered that he had been making contact with al Qaeda, after his cell phone was tracked to the Waziristan tribal area bordering Afghanistan, the paper said.
The most ominous point in this SVR report is "Pakistan's ISI stating that top-secret CIA documents found in Davis's possession point to his, and/or TF373, providing to al Qaeda terrorists "nuclear fissile material" and "biological agents", which they claim are to be used against the United States itself in order to ignite an all-out war in order to re-establish the West's hegemony over a Global economy that it warned is just months away from collapse," the paper added. (ANI) (Editor's bold emphasis throughout)
_________________________________________________
The NYT's Journalistic Obedience
By Glenn Greenwald
February 22, 2011 "Salon" - - - Earlier today, I wrote in detail about new developments in the case of Raymond Davis, the former Special Forces soldier who shot and killed two Pakistanis on January 27, sparking a diplomatic conflict between the U.S. (which is demanding that he be released on the ground of "diplomatic immunity") and Pakistan (whose population is demanding justice and insisting that he was no "diplomat"). But I want to flag this new story separately because it's really quite amazing and revealing.
Yesterday, as I noted earlier, The Guardian reported that Davis -- despite Obama's description of him as "our diplomat in Pakistan" -- actually works for the CIA, and further noted that Pakistani officials believe he worked with Blackwater. When reporting that, The Guardian noted that many American media outlets had learned of this fact but deliberately concealed it -- because the U.S. Government told them to: "A number of US media outlets learned about Davis's CIA role but have kept it under wraps at the request of the Obama administration."
Now it turns out that The New York Times -- by its own shameless admission -- was one of those self-censoring, obedient media outlets. Now that The Guardian published its story last night, the NYT just now published a lengthy article detailing Davis' work -- headlined: "American Held in Pakistan Shootings Worked With the C.I.A." -- and provides a few more details:
The American arrested in Pakistan after shooting two men at a crowded traffic stop was part of a covert, C.I.A.-led team of operatives conducting surveillance on militant groups deep inside the country, according to American government officials. . . . Mr. Davis has worked for years as a C.I.A. contractor, including time at Blackwater Worldwide, the controversial private security firm (now called Xe) that Pakistanis have long viewed as symbolizing a culture of American gun slinging overseas.
But what's most significant is the paper's explanation for why they're sharing this information with their readers only now:
The New York Times had agreed to temporarily withhold information about Mr. Davis’s ties to the agency at the request of the Obama administration, which argued that disclosure of his specific job would put his life at risk. Several foreign news organizations have disclosed some aspects of Mr. Davis's work with the C.I.A.. On Monday, American officials lifted their request to withhold publication, though George Little, a C.I.A. spokesman, declined any further comment.
In other words, the NYT knew about Davis' work for the CIA (and Blackwater) but concealed it because the U.S. Government told it to. Now that The Guardian and other foreign papers reported it, the U.S. Government gave permission to the NYT to report this, so now that they have government license, they do so -- only after it's already been reported by other newspapers which don't take orders from the U.S. Government.
It's one thing for a newspaper to withhold information because they believe its disclosure would endanger lives. But here, the U.S. Government has spent weeks making public statements that were misleading in the extreme -- Obama's calling Davis "our diplomat in Pakistan" -- while the NYT deliberately concealed facts undermining those government claims because government officials told them to do so. That's called being an active enabler of government propaganda. While working for the CIA doesn't preclude holding "diplomatic immunity," it's certainly relevant to the dispute between the two countries and the picture being painted by Obama officials. Moreover, since there is no declared war in Pakistan, this incident -- as the NYT puts it today -- "inadvertently pulled back the curtain on a web of covert American operations inside Pakistan, part of a secret war run by the C.I.A." That alone makes Davis' work not just newsworthy, but crucial.
Worse still, the NYT has repeatedly disseminated U.S. Government claims -- and even offered its own misleading descriptions --without bothering to include these highly relevant facts. See, for instance, its February 12 report ("The State Department has repeatedly said that he is protected by diplomatic immunity under the Vienna Convention and must be released immediately"); this February 8 article (referring to "the mystery about what Mr. Davis was doing with this inventory of gadgets"; noting "the Pakistani press, dwelling on the items in Mr. Davis’s possession and his various identity cards, has been filled with speculation about his specific duties, which American officials would not discuss"; and claiming: "Mr. Davis's jobs have been loosely defined by American officials as 'security' or 'technical,' though his duties were known only to his immediate superiors"); and this February 15 report (passing on the demands of Obama and Sen. John Kerry for Davis' release as a "diplomat" without mentioning his CIA work). They're inserting into their stories misleading government claims, and condescendingly summarizing Pakistani "speculation" about Davis' work, all while knowing the truth but not reporting it.
Following the dictates of the U.S. Government for what they can and cannot publish is, of course, anything but new for the New York Times. In his lengthy recent article on WikiLeaks and Julian Assange, NYT Executive Editor Bill Keller tried to show how independent his newspaper is by boasting that they published their story of the Bush NSA program even though he has "vivid memories of sitting in the Oval Office as President George W. Bush tried to persuade [him] and the paper's publisher to withhold the eavesdropping story"; Keller neglected to mention that the paper learned about the illegal program in mid-2004, but followed Bush's orders to conceal it from the public for over a year -- until after Bush was safely re-elected.
And recently in a BBC interview, Keller boasted that -- unlike WikiLeaks -- the Paper of Record had earned the praise of the U.S. Government for withholding materials which the Obama administration wanted withheld, causing Keller's fellow guest -- former British Ambassador to the U.N. Carne Ross -- to exclaim: "It's extraordinary that the New York Times is clearing what it says about this with the U.S. Government." The BBC host could also barely hide his shock and contempt at Keller's proud admission:
HOST (incredulously): Just to be clear, Bill Keller, are you saying that you sort of go to the Government in advance and say: "What about this, that and the other, is it all right to do this and all right to do that," and you get clearance, then?
Obviously, that's exactly what The New York Times does. Allowing the U.S. Government to run around affirmatively depicting Davis as some sort of Holbrooke-like "diplomat" -- all while the paper uncritically prints those claims and yet conceals highly relevant information about Davis because the Obama administration told it to -- would be humiliating for any outlet devoted to adversarial journalism to have to admit. But it will have no such effect on The New York Times. With some noble exceptions, loyally serving government dictates is, like so many American establishment media outlets, what they do; it's their function: hence the name "establishment media." ...
If this allegation is true, then another False Flag attack is underway similar to the Fictitious Gulf of Tonkin incident that allowed Lyndon Johnson to mire the United States in the completely immoral, illegal and totally unnecessary Vietnam War.
This is a very worrisome development and must be further investigated by the alternative media. Please be diligent in following it up. It is clear that only a "power to the people" movement can reign in the Regime's/MIMIC'S increasingly destructive global activities.
--Dr. J. P. Hubert
"CIA spy" Davis was giving nuclear bomb material to Al-Qaeda, says report
By ANI | ANI – Sun, Feb 20, 2011 12:18 PM IST
London, Feb 20(ANI): Double murder-accused US official Raymond Davis has been found in possession of top-secret CIA documents, which point to him or the feared American Task Force 373 (TF373) operating in the region, providing Al-Qaeda terrorists with "nuclear fissile material" and "biological agents," according to a report.
Russia's Foreign Intelligence Service (SVR) is warning that the situation on the sub-continent has turned "grave" as it appears that open warfare is about to break out between Pakistan and the United States, The European Union Times reports.
The SVR warned in its report that the apprehension of 36-year-old Davis, who shot dead two Pakistani men in Lahore last month, had fuelled this crisis.
According to the report, the combat skills exhibited by Davis, along with documentation taken from him after his arrest, prove that he is a member of US' TF373 black operations unit currently operating in the Afghan War Theatre and Pakistan's tribal areas, the paper said.
While the US insists that Davis is one of their diplomats, and the two men he killed were robbers, Pakistan says that the duo were ISI agents sent to follow him after it was discovered that he had been making contact with al Qaeda, after his cell phone was tracked to the Waziristan tribal area bordering Afghanistan, the paper said.
The most ominous point in this SVR report is "Pakistan's ISI stating that top-secret CIA documents found in Davis's possession point to his, and/or TF373, providing to al Qaeda terrorists "nuclear fissile material" and "biological agents", which they claim are to be used against the United States itself in order to ignite an all-out war in order to re-establish the West's hegemony over a Global economy that it warned is just months away from collapse," the paper added. (ANI) (Editor's bold emphasis throughout)
_________________________________________________
The NYT's Journalistic Obedience
By Glenn Greenwald
February 22, 2011 "Salon" - - - Earlier today, I wrote in detail about new developments in the case of Raymond Davis, the former Special Forces soldier who shot and killed two Pakistanis on January 27, sparking a diplomatic conflict between the U.S. (which is demanding that he be released on the ground of "diplomatic immunity") and Pakistan (whose population is demanding justice and insisting that he was no "diplomat"). But I want to flag this new story separately because it's really quite amazing and revealing.
Yesterday, as I noted earlier, The Guardian reported that Davis -- despite Obama's description of him as "our diplomat in Pakistan" -- actually works for the CIA, and further noted that Pakistani officials believe he worked with Blackwater. When reporting that, The Guardian noted that many American media outlets had learned of this fact but deliberately concealed it -- because the U.S. Government told them to: "A number of US media outlets learned about Davis's CIA role but have kept it under wraps at the request of the Obama administration."
Now it turns out that The New York Times -- by its own shameless admission -- was one of those self-censoring, obedient media outlets. Now that The Guardian published its story last night, the NYT just now published a lengthy article detailing Davis' work -- headlined: "American Held in Pakistan Shootings Worked With the C.I.A." -- and provides a few more details:
The American arrested in Pakistan after shooting two men at a crowded traffic stop was part of a covert, C.I.A.-led team of operatives conducting surveillance on militant groups deep inside the country, according to American government officials. . . . Mr. Davis has worked for years as a C.I.A. contractor, including time at Blackwater Worldwide, the controversial private security firm (now called Xe) that Pakistanis have long viewed as symbolizing a culture of American gun slinging overseas.
But what's most significant is the paper's explanation for why they're sharing this information with their readers only now:
The New York Times had agreed to temporarily withhold information about Mr. Davis’s ties to the agency at the request of the Obama administration, which argued that disclosure of his specific job would put his life at risk. Several foreign news organizations have disclosed some aspects of Mr. Davis's work with the C.I.A.. On Monday, American officials lifted their request to withhold publication, though George Little, a C.I.A. spokesman, declined any further comment.
In other words, the NYT knew about Davis' work for the CIA (and Blackwater) but concealed it because the U.S. Government told it to. Now that The Guardian and other foreign papers reported it, the U.S. Government gave permission to the NYT to report this, so now that they have government license, they do so -- only after it's already been reported by other newspapers which don't take orders from the U.S. Government.
It's one thing for a newspaper to withhold information because they believe its disclosure would endanger lives. But here, the U.S. Government has spent weeks making public statements that were misleading in the extreme -- Obama's calling Davis "our diplomat in Pakistan" -- while the NYT deliberately concealed facts undermining those government claims because government officials told them to do so. That's called being an active enabler of government propaganda. While working for the CIA doesn't preclude holding "diplomatic immunity," it's certainly relevant to the dispute between the two countries and the picture being painted by Obama officials. Moreover, since there is no declared war in Pakistan, this incident -- as the NYT puts it today -- "inadvertently pulled back the curtain on a web of covert American operations inside Pakistan, part of a secret war run by the C.I.A." That alone makes Davis' work not just newsworthy, but crucial.
Worse still, the NYT has repeatedly disseminated U.S. Government claims -- and even offered its own misleading descriptions --without bothering to include these highly relevant facts. See, for instance, its February 12 report ("The State Department has repeatedly said that he is protected by diplomatic immunity under the Vienna Convention and must be released immediately"); this February 8 article (referring to "the mystery about what Mr. Davis was doing with this inventory of gadgets"; noting "the Pakistani press, dwelling on the items in Mr. Davis’s possession and his various identity cards, has been filled with speculation about his specific duties, which American officials would not discuss"; and claiming: "Mr. Davis's jobs have been loosely defined by American officials as 'security' or 'technical,' though his duties were known only to his immediate superiors"); and this February 15 report (passing on the demands of Obama and Sen. John Kerry for Davis' release as a "diplomat" without mentioning his CIA work). They're inserting into their stories misleading government claims, and condescendingly summarizing Pakistani "speculation" about Davis' work, all while knowing the truth but not reporting it.
Following the dictates of the U.S. Government for what they can and cannot publish is, of course, anything but new for the New York Times. In his lengthy recent article on WikiLeaks and Julian Assange, NYT Executive Editor Bill Keller tried to show how independent his newspaper is by boasting that they published their story of the Bush NSA program even though he has "vivid memories of sitting in the Oval Office as President George W. Bush tried to persuade [him] and the paper's publisher to withhold the eavesdropping story"; Keller neglected to mention that the paper learned about the illegal program in mid-2004, but followed Bush's orders to conceal it from the public for over a year -- until after Bush was safely re-elected.
And recently in a BBC interview, Keller boasted that -- unlike WikiLeaks -- the Paper of Record had earned the praise of the U.S. Government for withholding materials which the Obama administration wanted withheld, causing Keller's fellow guest -- former British Ambassador to the U.N. Carne Ross -- to exclaim: "It's extraordinary that the New York Times is clearing what it says about this with the U.S. Government." The BBC host could also barely hide his shock and contempt at Keller's proud admission:
HOST (incredulously): Just to be clear, Bill Keller, are you saying that you sort of go to the Government in advance and say: "What about this, that and the other, is it all right to do this and all right to do that," and you get clearance, then?
Obviously, that's exactly what The New York Times does. Allowing the U.S. Government to run around affirmatively depicting Davis as some sort of Holbrooke-like "diplomat" -- all while the paper uncritically prints those claims and yet conceals highly relevant information about Davis because the Obama administration told it to -- would be humiliating for any outlet devoted to adversarial journalism to have to admit. But it will have no such effect on The New York Times. With some noble exceptions, loyally serving government dictates is, like so many American establishment media outlets, what they do; it's their function: hence the name "establishment media." ...
Tuesday, February 22, 2011
Wisconsin: The First Stop in An American Uprising?
It took awhile, but Wisconsin shows that the poor and middle class of the U.S. may be ready to push back. Madison may be only the beginning.
By Sarah van Gelder
February 19, 2011 "YES! Magazine" -- - The uprising that swept Tunisia, Egypt, and parts of Europe is showing signs of blossoming across the United States.
In Wisconsin, public employees and their supporters are drawing the line at Governor Scott Walker’s plan to eliminate collective bargaining and unilaterally cut benefits. School teachers, university students, firefighters, and others descended on the capital in the tens of thousands, and even the Superbowl champion Green Bay Packers have weighed in against the bill. Protests against similar anti-union measures are ramping up in Ohio.
Meanwhile, another protest movement aimed at protecting the poor and middle class is in the works. Cities around the country are preparing for a February 26 Day of Action, “targeting corporate tax dodgers.”
Learning from the UK
The strategy picks up on the UK Uncut campaign, begun when a group at a London pub—a firefighter, a nurse, a student, and others—came up with an idea that is part flash mob, part sit-in. In an article published in the Nation, reporter Johann Hari tells the story of the group’s frustration about government cutbacks. If Vodafone, one corporation with a huge back-tax bill, paid up, the cutbacks wouldn’t be needed. The group spread the word over social media, and held loud, impolite demonstrations. The idea quickly went viral, and flash mobs/sit-ins materialized at retail outlets across Britain, shutting many of them down.
Now, a US Uncut group has formed and announced a February 26 Day of Action here to coincide with UK Uncut's planned protests on the same day. Already, a dozen local events are planned. Some groups are keeping quiet about their targets, but several are targeting Bank of America. The goal, according to a statement on the US Uncut website, is “to draw attention to the fact that Bank of America received $45 billion in government bailout funds while funneling its tax dollars into 115 offshore tax havens [...] And to highlight the fact that the poor and middle class are now paying for this largess through drastic government cuts.”
The Politics of Class Warfare
It took some time for a political response to coalesce. The Tea Party movement was able to direct discontent away from the Wall Street titans who brought the economy to its knees. Funding from the Koch brothers’ petro-fortune along with fawning attention from Fox News helped get the libertarian movement off the ground. But progressives remained fragmented and few built active, organized bases. Many waited for President Obama to act.
The tide may now be turning. Inspired by people-power movements around the world, people in the United States are beginning push back. The poor and middle class, those who didn't cause the collapse but have felt the most pain from the poor economy, are now being asked to sacrifice again.
Politicians are scurrying to cut spending, but fewer than one in five Americans say the federal budget deficit is their chief worry about the economy, according to a new poll by the Pew Research Center; 44 percent say they're most worried about jobs. Polls show that Americans also want spending for education, investment in infrastructure, and environmental protection. Yet spending in all these areas is up for drastic cuts in state and federal budgets.
Likewise, on the tax side, 59 percent of Americans opposed extending the Bush tax cuts for the wealthiest, according to a Bloomberg poll. Congress cut the taxes anyway, and the package will cost $800 billion over just two years.
Until now, polls have been one of the few places where anger at government policies that favor the rich while cutting service to the middle-class has been visible. But the crowds in Madison and the momentum of US Uncut tell us that may be about to change.
As a statement on the US Uncut website puts it: “We demand that before the hard-working, tax-paying families of this country are once again forced to sacrifice, the corporations who have so richly profited from our labor, our patronage, and our bailouts be compelled to pay their taxes and contribute their fair share to the continued prosperity of our nation. We will organize, we will mobilize, and we will NOT be quiet!”
Across the country, the poor and middle class have suffered from the economic collapse: jobs disappeared, mortgages sank underneath debt, and opportunities for a college education evaporated. Much of the bailout that was supposed to fix the economy went to the very institutions that caused the collapse. Many of these institutions are now using tax loopholes and offshore tax shelters to avoid paying taxes.
By Sarah van Gelder
February 19, 2011 "YES! Magazine" -- - The uprising that swept Tunisia, Egypt, and parts of Europe is showing signs of blossoming across the United States.
In Wisconsin, public employees and their supporters are drawing the line at Governor Scott Walker’s plan to eliminate collective bargaining and unilaterally cut benefits. School teachers, university students, firefighters, and others descended on the capital in the tens of thousands, and even the Superbowl champion Green Bay Packers have weighed in against the bill. Protests against similar anti-union measures are ramping up in Ohio.
Meanwhile, another protest movement aimed at protecting the poor and middle class is in the works. Cities around the country are preparing for a February 26 Day of Action, “targeting corporate tax dodgers.”
Learning from the UK
The strategy picks up on the UK Uncut campaign, begun when a group at a London pub—a firefighter, a nurse, a student, and others—came up with an idea that is part flash mob, part sit-in. In an article published in the Nation, reporter Johann Hari tells the story of the group’s frustration about government cutbacks. If Vodafone, one corporation with a huge back-tax bill, paid up, the cutbacks wouldn’t be needed. The group spread the word over social media, and held loud, impolite demonstrations. The idea quickly went viral, and flash mobs/sit-ins materialized at retail outlets across Britain, shutting many of them down.
Now, a US Uncut group has formed and announced a February 26 Day of Action here to coincide with UK Uncut's planned protests on the same day. Already, a dozen local events are planned. Some groups are keeping quiet about their targets, but several are targeting Bank of America. The goal, according to a statement on the US Uncut website, is “to draw attention to the fact that Bank of America received $45 billion in government bailout funds while funneling its tax dollars into 115 offshore tax havens [...] And to highlight the fact that the poor and middle class are now paying for this largess through drastic government cuts.”
The Politics of Class Warfare
It took some time for a political response to coalesce. The Tea Party movement was able to direct discontent away from the Wall Street titans who brought the economy to its knees. Funding from the Koch brothers’ petro-fortune along with fawning attention from Fox News helped get the libertarian movement off the ground. But progressives remained fragmented and few built active, organized bases. Many waited for President Obama to act.
The tide may now be turning. Inspired by people-power movements around the world, people in the United States are beginning push back. The poor and middle class, those who didn't cause the collapse but have felt the most pain from the poor economy, are now being asked to sacrifice again.
Politicians are scurrying to cut spending, but fewer than one in five Americans say the federal budget deficit is their chief worry about the economy, according to a new poll by the Pew Research Center; 44 percent say they're most worried about jobs. Polls show that Americans also want spending for education, investment in infrastructure, and environmental protection. Yet spending in all these areas is up for drastic cuts in state and federal budgets.
Likewise, on the tax side, 59 percent of Americans opposed extending the Bush tax cuts for the wealthiest, according to a Bloomberg poll. Congress cut the taxes anyway, and the package will cost $800 billion over just two years.
Until now, polls have been one of the few places where anger at government policies that favor the rich while cutting service to the middle-class has been visible. But the crowds in Madison and the momentum of US Uncut tell us that may be about to change.
As a statement on the US Uncut website puts it: “We demand that before the hard-working, tax-paying families of this country are once again forced to sacrifice, the corporations who have so richly profited from our labor, our patronage, and our bailouts be compelled to pay their taxes and contribute their fair share to the continued prosperity of our nation. We will organize, we will mobilize, and we will NOT be quiet!”
Across the country, the poor and middle class have suffered from the economic collapse: jobs disappeared, mortgages sank underneath debt, and opportunities for a college education evaporated. Much of the bailout that was supposed to fix the economy went to the very institutions that caused the collapse. Many of these institutions are now using tax loopholes and offshore tax shelters to avoid paying taxes.
Obama to Teachers: "Drop Dead"
By Mike Whitney
February 21, 2011 "Information Clearing House" ---Teachers. These are the people who put Obama in office. They handed out the pamphlets, went from door to door, stuffed the envelopes, and manned the phone banks. They buttonholed people outside grocery stores, waved posters atop freeway overpasses, and organized neighborhood get-togethers. They spread the word, attended the rallies and drew whatever they could from their meager paychecks to support the man who promised change and inspired hope. They did everything a candidate could ask of his supporters and more. And what have they gotten in return? A bigger war in Afghanistan, a renewal of the Patriot Act, a porno-scanning system at the airports, more blank checks for Wall Street, and a lot of empty posturing about Guantanamo.
And when their pay and pensions and their jobs were on the line, Obama was no where to be found.
Poof! The vanishing president.
Name one thing that Obama has done for working people?
Health care? That fetid trillion dollar giveaway to big pharma?
That just doesn't cut it.
Obama has called for a spending freeze. Government workers pay for the next 5 years while renewing the $700 billion Bush tax cuts at the same time. That's a feat that even Reagan couldn't have managed without igniting a revolt in the ranks. But smooth-talking Obama pulled it off without a hitch. In fact, his devotees are more ga-ga over him than ever.
Two weeks ago, Obama wrote an op-ed for the Wall Street Journal promising to reduce "burdensome" regulations for his friends in big finance. He figured that the trillions they'd already been given wasn't quite enough to keep them happy, so he decided he'd find more rules that he could eliminate.
Then he slithered over to the Chamber of Commerce to assure them that he'd do whatever he could to "change the tone" at the White House to help them increase profitability. Just days later, Obama delivered an entirely different message to striking Wisconsin teachers. He told them that everyone would have to "make sacrifices" to make up for state budget shortfalls. Everyone except his rich friends, that is.
Recently, Obama appointed bank tycoon William Daley as his new chief of staff, and GE's "outsourcing" Jeffrey Immelt to lead his new jobs creation program. Then he finished off the month by throwing his support behind the latest labor-crushing free trade bill, this time with South Korea. According to the Oakland Business Journal: "The proposed trade deal with South Korea would cost 159,000 U.S. jobs over seven years and hurt some of the highest paying industries in the U.S., including motor vehicles and parts, electronics equipment and metal products, according to the Economic Policy Institute." Big labor is against the bill. Obama is for it. What a surprise.
Obama's new budget calls for big cuts to government subsidies for home heating oil for needy families, but allocates $5 million to anti-Chavez groups in Venezuela via the State Department. What makes this so ironic, is that Hugo Chavez has been providing hundreds of thousands of gallons of free heating oil to needy American families across the US. So, while the president of Venezuela is trying to make sure that poor people in America don't freeze to death in the dark, Obama is doing whatever he can to make sure that they do.
Obama has abandoned any effort to reduce unemployment, lower tuition costs, increase welfare, minimize foreclosures, or decrease homelessness. If you are part of the growing number of working-poor in America, don't except help from the Obama team. You're outta luck.
This is from the World Socialist Web Site:
"Two and half years since the eruption of the financial crisis, more than 26 million workers cannot find a full-time job. State governments, under both Democrats and Republicans, are responding to budget deficits by closing schools, libraries, clinics and other public facilities, and carrying out attacks on state and municipal employees.
Meanwhile, Wall Street share values have fully recovered since the crash of 2008 and the corporations and their top executives are richer than ever. President Obama has refused to provide a penny of relief to workers losing their jobs, homes and life savings. Instead he has outlined plans to slash a trillion dollars from vitally needed social services, to pay for the bailout of Wall Street, the extension of the Bush era tax cuts for the rich and the Pentagon war machine. And this is only the beginning....
(In Wisconsin) workers are fighting for their very livelihoods. They cannot live with what amounts to a 20 percent pay cut and devastating cuts in public education and state universities for their children." ("The struggle of Wisconsin workers enters a new stage", World Socialist Web Site)
The strike has entered its second week and still no sign of Obama. Thousands of workers and students from across the state have braved the freezing temperatures and joined in the demonstrations while closing down much of the school system.
The entire country is watching. Many people are wondering how the GOP crackdown will affect their own jobs. They're worried about their future and the future of the country.
Obama could simply fly into Madison, deliver a few words of support for the strikers, and assure himself of a landslide victory in 2012. But he won't do that, because he's not the man that people thought he was. He won't lift a finger to help his friends even when they're embroiled in the biggest fight of their lives. He won't support the people who supported him.
Obama's message to the teachers, "Drop dead!"
February 21, 2011 "Information Clearing House" ---Teachers. These are the people who put Obama in office. They handed out the pamphlets, went from door to door, stuffed the envelopes, and manned the phone banks. They buttonholed people outside grocery stores, waved posters atop freeway overpasses, and organized neighborhood get-togethers. They spread the word, attended the rallies and drew whatever they could from their meager paychecks to support the man who promised change and inspired hope. They did everything a candidate could ask of his supporters and more. And what have they gotten in return? A bigger war in Afghanistan, a renewal of the Patriot Act, a porno-scanning system at the airports, more blank checks for Wall Street, and a lot of empty posturing about Guantanamo.
And when their pay and pensions and their jobs were on the line, Obama was no where to be found.
Poof! The vanishing president.
Name one thing that Obama has done for working people?
Health care? That fetid trillion dollar giveaway to big pharma?
That just doesn't cut it.
Obama has called for a spending freeze. Government workers pay for the next 5 years while renewing the $700 billion Bush tax cuts at the same time. That's a feat that even Reagan couldn't have managed without igniting a revolt in the ranks. But smooth-talking Obama pulled it off without a hitch. In fact, his devotees are more ga-ga over him than ever.
Two weeks ago, Obama wrote an op-ed for the Wall Street Journal promising to reduce "burdensome" regulations for his friends in big finance. He figured that the trillions they'd already been given wasn't quite enough to keep them happy, so he decided he'd find more rules that he could eliminate.
Then he slithered over to the Chamber of Commerce to assure them that he'd do whatever he could to "change the tone" at the White House to help them increase profitability. Just days later, Obama delivered an entirely different message to striking Wisconsin teachers. He told them that everyone would have to "make sacrifices" to make up for state budget shortfalls. Everyone except his rich friends, that is.
Recently, Obama appointed bank tycoon William Daley as his new chief of staff, and GE's "outsourcing" Jeffrey Immelt to lead his new jobs creation program. Then he finished off the month by throwing his support behind the latest labor-crushing free trade bill, this time with South Korea. According to the Oakland Business Journal: "The proposed trade deal with South Korea would cost 159,000 U.S. jobs over seven years and hurt some of the highest paying industries in the U.S., including motor vehicles and parts, electronics equipment and metal products, according to the Economic Policy Institute." Big labor is against the bill. Obama is for it. What a surprise.
Obama's new budget calls for big cuts to government subsidies for home heating oil for needy families, but allocates $5 million to anti-Chavez groups in Venezuela via the State Department. What makes this so ironic, is that Hugo Chavez has been providing hundreds of thousands of gallons of free heating oil to needy American families across the US. So, while the president of Venezuela is trying to make sure that poor people in America don't freeze to death in the dark, Obama is doing whatever he can to make sure that they do.
Obama has abandoned any effort to reduce unemployment, lower tuition costs, increase welfare, minimize foreclosures, or decrease homelessness. If you are part of the growing number of working-poor in America, don't except help from the Obama team. You're outta luck.
This is from the World Socialist Web Site:
"Two and half years since the eruption of the financial crisis, more than 26 million workers cannot find a full-time job. State governments, under both Democrats and Republicans, are responding to budget deficits by closing schools, libraries, clinics and other public facilities, and carrying out attacks on state and municipal employees.
Meanwhile, Wall Street share values have fully recovered since the crash of 2008 and the corporations and their top executives are richer than ever. President Obama has refused to provide a penny of relief to workers losing their jobs, homes and life savings. Instead he has outlined plans to slash a trillion dollars from vitally needed social services, to pay for the bailout of Wall Street, the extension of the Bush era tax cuts for the rich and the Pentagon war machine. And this is only the beginning....
(In Wisconsin) workers are fighting for their very livelihoods. They cannot live with what amounts to a 20 percent pay cut and devastating cuts in public education and state universities for their children." ("The struggle of Wisconsin workers enters a new stage", World Socialist Web Site)
The strike has entered its second week and still no sign of Obama. Thousands of workers and students from across the state have braved the freezing temperatures and joined in the demonstrations while closing down much of the school system.
The entire country is watching. Many people are wondering how the GOP crackdown will affect their own jobs. They're worried about their future and the future of the country.
Obama could simply fly into Madison, deliver a few words of support for the strikers, and assure himself of a landslide victory in 2012. But he won't do that, because he's not the man that people thought he was. He won't lift a finger to help his friends even when they're embroiled in the biggest fight of their lives. He won't support the people who supported him.
Obama's message to the teachers, "Drop dead!"
Monday, February 21, 2011
Unanswered Questions as Obama Anoints George H W Bush
Editor's NOTE:
This piece is a kind of short summary of Baker's book, Family of Secrets: the Bush Dynasty, America’s Invisible Government, and the Hidden History of the Last Fifty Years which has become quite controversial especially among JKF Assassination Conspiracy advocates. For example, Professor James H. Fetzer who has written extensively on the subject, in an interview with Baker on his Real Deal Radio Program wholeheartedly embraced the work.
Jim De Eugenio however, also a JFK Assassination Conspiracy authority has been critical of Family of Secrets particularly with respect to the material on G H W Bush.
Readers should be aware that this debate exists. Please investigate the evidence for yourselves.
--Dr. J. P. Hubert
Unanswered Questions as Obama Anoints George H W Bush
By Russ Baker
February 19, 2011
WhoWhatWhy
Pres. Obama gives Medal of Freedom to George H. W. Bush
On February 15, President Obama bestowed the Medal of Freedom, the United States’ highest award, to a group of people which includes former president George H.W. Bush. Having spent five years researching the elder Bush and discovering a staggering array of secrets to the man’s life—none of them favorable, I was curious why Obama gave Bush the medal.
Officially, it goes to individuals “who have made especially meritorious contributions to the security or national interests of the United States, to world peace, or to cultural or other significant public or private endeavors.”
Since that covers just about anything, there’s no real need to justify giving the award to “Bush 41.” In fact, the group being honored this year includes the cellist Yo-Yo Ma, baseball great Stan “the Man” Musial, the German Chancellor Angela Merkel, author Maya Angelou and investor Warren Buffett. Over the years, it has gone to every president from JFK (some posthumously)—through Reagan, who got it from his former veep: George H.W. Bush. They skipped Nixon, so obviously there’s nothing mandatory about giving the award to presidents—especially not when a president is ousted before serving out his term. Clinton did not give it to the elder Bush, nor did the younger Bush give it to his father, and so when it came to be Obama’s turn to hand out medals, perhaps the pressure was intense.
Notwithstanding the inevitability of the process, President Obama needed to trot out some explanation or other as to why each recipient was deserving. In remarks at the ceremony, he said that H.W.’s “His life is a testament that public service is a noble calling….his humility and his decency reflects the very best of the American spirit.” And he referred to Mr. Bush’s “extraordinary life of service and of sacrifice.”
His life has certainly been extraordinary. Though whether “decency” is the right term, or whether his activities “reflect the very best of the American spirit,” or whether his has been a “life…of sacrifice” seem to be debatable.
There’s another side to the elder Bush, and it is hard to believe that Obama is completely unaware of any of this. It goes to the heart of Bush’s purported “humility,” and whether it is truly humility—or his need to hide so many secrets. Especially as it relates, remarkably, to the assassination of another president, John F. Kennedy.
Here are some questions that should have been asked of George H.W. Bush before concluding that his life is an open book, or that whatever he did to deserve the Medal of Freedom is based on commonly understood events. These questions are based on revelations from my book, Family of Secrets: the Bush Dynasty, America’s Invisible Government, and the Hidden History of the Last Fifty Years, of which the Obama White House is aware, and copies of which can be found in major American bookstores and libraries, including the Library of Congress. The underlying points are all documented and footnoted—and some of these questions have appeared before in an earlier post on this site and others.
-Former president Bush, we all know that you served for a single year as director of the Central Intelligence Agency. What about the fact trail suggesting that, just like the Russian leader Vladimir Putin, you actually spent your entire adult life prior to becoming vice president working in covert operations—but unlike Putin, have not admitted that? What about documentation showing that, as far back as the early 1950s, your small but hyperactive company, Zapata Offshore, was commercial cover for super-secret ops?
-Some years ago you claimed not to remember where you were on the morning of Nov. 22, 1963? Have you since been able to recall?
-Can you tell us about your decades-long friendship with George de Mohrenschildt, the man who was in and out of Lee Harvey Oswald’s house on almost a daily basis in the year before the Kennedy assassination?
-Did you, as characterized in an FBI memo, work as a CIA officer in tandem with Cuban exiles at the time of the Kennedy assassination?
-Why have you never spoken publicly about the documented call you made to the FBI on Nov 22, 1963, in which you identified yourself fully and claimed to have information on a possible suspect in Kennedy’s death? What was the purpose of that call, in which you mentioned your whereabouts at the time of the call, 1:45pm, as Tyler, Texas, i.e. about 99 miles away but just a short flight on the private plane on which you were traveling? Why did you tell the FBI that you were en route next to Dallas and would stay at the Sheraton there when you had already been at the Sheraton the night before — and right after that call flew to Dallas but only to switch planes and fly back immediately to Houston? Why were you giving the FBI the impression you would be staying in Dallas the night after the assassination instead of letting them know you had stayed there the night before the assassination?
-Why was your own assistant at the home of the man you would finger as a suspect in the shooting, and why did he end up providing the man with an alibi? Was the ultimate purpose of that call was not to cause the alleged suspect any permanent harm, but merely to use the call as an excuse to state in government files that you were in a place other than Dallas?
-Since you claimed not to remember where you were when Kennedy was killed, how is it that after these FBI memos surfaced, your wife Barbara suddenly found and published an old letter placing you and her in Tyler, Texas shortly after the shooting?
-On the day of the assassination, were you in touch with your friend and Republican running mate Jack Crichton, a military intelligence figure who was connected to figures forcing their way into the pilot car of Kennedy’s motorcade? The same Crichton who controlled the man who served as the interpreter between Oswald’s wife and police and reframed her words so as to implicate Oswald in Kennedy’s shooting? The same Crichton who was working out of a secret underground communications bunker below the streets of Dallas? The same Crichton whose secret military intelligence unit counted dozens of men who simultaneously held jobs as Dallas police officers? The same Crichton who did secret oil industry intelligence work in the Middle East while you did intelligence related oil industry work via your company, Zapata Offshore?
-Finally, do you know people who consider the events of November 22, 1963 to, in their minds, “reflect the very best of the American spirit?” You say almost nothing, ever, about the Kennedy assassination, even skipping over it in your own memoir, which details much more trivial events of the same year. Why is that? And why then, in your eulogy for former President Ford, a member of the increasingly-discredited Warren Commission, did you go out of your way to oddly praise him for promoting the increasingly-discredited “single bullet theory?” You said:
“After a deluded gunman assassinated President Kennedy, our nation turned to Gerald Ford and a select handful of others to make sense of that madness. And the conspiracy theorists can say what they will, but the Warren Commission report will always have the final definitive say on this tragic matter. Why? Because Jerry Ford put his name on it and Jerry Ford’s word was always good.”
Why did you, so bizarrely, smile when you uttered those words?
Now, with your Medal of Freedom, given you by a Democratic president who ran as an agent of change, you truly seem to be enjoying the last laugh.
This piece is a kind of short summary of Baker's book, Family of Secrets: the Bush Dynasty, America’s Invisible Government, and the Hidden History of the Last Fifty Years which has become quite controversial especially among JKF Assassination Conspiracy advocates. For example, Professor James H. Fetzer who has written extensively on the subject, in an interview with Baker on his Real Deal Radio Program wholeheartedly embraced the work.
Jim De Eugenio however, also a JFK Assassination Conspiracy authority has been critical of Family of Secrets particularly with respect to the material on G H W Bush.
Readers should be aware that this debate exists. Please investigate the evidence for yourselves.
--Dr. J. P. Hubert
Unanswered Questions as Obama Anoints George H W Bush
By Russ Baker
February 19, 2011
WhoWhatWhy
On February 15, President Obama bestowed the Medal of Freedom, the United States’ highest award, to a group of people which includes former president George H.W. Bush. Having spent five years researching the elder Bush and discovering a staggering array of secrets to the man’s life—none of them favorable, I was curious why Obama gave Bush the medal.
Officially, it goes to individuals “who have made especially meritorious contributions to the security or national interests of the United States, to world peace, or to cultural or other significant public or private endeavors.”
Since that covers just about anything, there’s no real need to justify giving the award to “Bush 41.” In fact, the group being honored this year includes the cellist Yo-Yo Ma, baseball great Stan “the Man” Musial, the German Chancellor Angela Merkel, author Maya Angelou and investor Warren Buffett. Over the years, it has gone to every president from JFK (some posthumously)—through Reagan, who got it from his former veep: George H.W. Bush. They skipped Nixon, so obviously there’s nothing mandatory about giving the award to presidents—especially not when a president is ousted before serving out his term. Clinton did not give it to the elder Bush, nor did the younger Bush give it to his father, and so when it came to be Obama’s turn to hand out medals, perhaps the pressure was intense.
Notwithstanding the inevitability of the process, President Obama needed to trot out some explanation or other as to why each recipient was deserving. In remarks at the ceremony, he said that H.W.’s “His life is a testament that public service is a noble calling….his humility and his decency reflects the very best of the American spirit.” And he referred to Mr. Bush’s “extraordinary life of service and of sacrifice.”
His life has certainly been extraordinary. Though whether “decency” is the right term, or whether his activities “reflect the very best of the American spirit,” or whether his has been a “life…of sacrifice” seem to be debatable.
There’s another side to the elder Bush, and it is hard to believe that Obama is completely unaware of any of this. It goes to the heart of Bush’s purported “humility,” and whether it is truly humility—or his need to hide so many secrets. Especially as it relates, remarkably, to the assassination of another president, John F. Kennedy.
Here are some questions that should have been asked of George H.W. Bush before concluding that his life is an open book, or that whatever he did to deserve the Medal of Freedom is based on commonly understood events. These questions are based on revelations from my book, Family of Secrets: the Bush Dynasty, America’s Invisible Government, and the Hidden History of the Last Fifty Years, of which the Obama White House is aware, and copies of which can be found in major American bookstores and libraries, including the Library of Congress. The underlying points are all documented and footnoted—and some of these questions have appeared before in an earlier post on this site and others.
-Former president Bush, we all know that you served for a single year as director of the Central Intelligence Agency. What about the fact trail suggesting that, just like the Russian leader Vladimir Putin, you actually spent your entire adult life prior to becoming vice president working in covert operations—but unlike Putin, have not admitted that? What about documentation showing that, as far back as the early 1950s, your small but hyperactive company, Zapata Offshore, was commercial cover for super-secret ops?
-Some years ago you claimed not to remember where you were on the morning of Nov. 22, 1963? Have you since been able to recall?
-Can you tell us about your decades-long friendship with George de Mohrenschildt, the man who was in and out of Lee Harvey Oswald’s house on almost a daily basis in the year before the Kennedy assassination?
-Did you, as characterized in an FBI memo, work as a CIA officer in tandem with Cuban exiles at the time of the Kennedy assassination?
-Why have you never spoken publicly about the documented call you made to the FBI on Nov 22, 1963, in which you identified yourself fully and claimed to have information on a possible suspect in Kennedy’s death? What was the purpose of that call, in which you mentioned your whereabouts at the time of the call, 1:45pm, as Tyler, Texas, i.e. about 99 miles away but just a short flight on the private plane on which you were traveling? Why did you tell the FBI that you were en route next to Dallas and would stay at the Sheraton there when you had already been at the Sheraton the night before — and right after that call flew to Dallas but only to switch planes and fly back immediately to Houston? Why were you giving the FBI the impression you would be staying in Dallas the night after the assassination instead of letting them know you had stayed there the night before the assassination?
-Why was your own assistant at the home of the man you would finger as a suspect in the shooting, and why did he end up providing the man with an alibi? Was the ultimate purpose of that call was not to cause the alleged suspect any permanent harm, but merely to use the call as an excuse to state in government files that you were in a place other than Dallas?
-Since you claimed not to remember where you were when Kennedy was killed, how is it that after these FBI memos surfaced, your wife Barbara suddenly found and published an old letter placing you and her in Tyler, Texas shortly after the shooting?
-On the day of the assassination, were you in touch with your friend and Republican running mate Jack Crichton, a military intelligence figure who was connected to figures forcing their way into the pilot car of Kennedy’s motorcade? The same Crichton who controlled the man who served as the interpreter between Oswald’s wife and police and reframed her words so as to implicate Oswald in Kennedy’s shooting? The same Crichton who was working out of a secret underground communications bunker below the streets of Dallas? The same Crichton whose secret military intelligence unit counted dozens of men who simultaneously held jobs as Dallas police officers? The same Crichton who did secret oil industry intelligence work in the Middle East while you did intelligence related oil industry work via your company, Zapata Offshore?
-Finally, do you know people who consider the events of November 22, 1963 to, in their minds, “reflect the very best of the American spirit?” You say almost nothing, ever, about the Kennedy assassination, even skipping over it in your own memoir, which details much more trivial events of the same year. Why is that? And why then, in your eulogy for former President Ford, a member of the increasingly-discredited Warren Commission, did you go out of your way to oddly praise him for promoting the increasingly-discredited “single bullet theory?” You said:
“After a deluded gunman assassinated President Kennedy, our nation turned to Gerald Ford and a select handful of others to make sense of that madness. And the conspiracy theorists can say what they will, but the Warren Commission report will always have the final definitive say on this tragic matter. Why? Because Jerry Ford put his name on it and Jerry Ford’s word was always good.”
Why did you, so bizarrely, smile when you uttered those words?
Now, with your Medal of Freedom, given you by a Democratic president who ran as an agent of change, you truly seem to be enjoying the last laugh.
Sunday, February 20, 2011
Why Isn't Wall Street in Jail?
Financial crooks brought down the world's economy — but the feds are doing more to protect them than to prosecute them
By Matt Taibbi
February 17, 2011 "Rolling Stone" -- Over drinks at a bar on a dreary, snowy night in Washington this past month, a former Senate investigator laughed as he polished off his beer.
"Everything's fucked up, and nobody goes to jail," he said. "That's your whole story right there. Hell, you don't even have to write the rest of it. Just write that."
I put down my notebook. "Just that?"
"That's right," he said, signaling to the waitress for the check. "Everything's fucked up, and nobody goes to jail. You can end the piece right there."
Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world's wealth — and nobody went to jail. Nobody, that is, except Bernie Madoff, a flamboyant and pathological celebrity con artist, whose victims happened to be other rich and famous people.
The rest of them, all of them, got off. Not a single executive who ran the companies that cooked up and cashed in on the phony financial boom — an industrywide scam that involved the mass sale of mismarked, fraudulent mortgage-backed securities — has ever been convicted. Their names by now are familiar to even the most casual Middle American news consumer: companies like AIG, Goldman Sachs, Lehman Brothers, JP Morgan Chase, Bank of America and Morgan Stanley. Most of these firms were directly involved in elaborate fraud and theft. Lehman Brothers hid billions in loans from its investors. Bank of America lied about billions in bonuses.
Goldman Sachs failed to tell clients how it put together the born-to-lose toxic mortgage deals it was selling. What's more, many of these companies had corporate chieftains whose actions cost investors billions — from AIG derivatives chief Joe Cassano, who assured investors they would not lose even "one dollar" just months before his unit imploded, to the $263 million in compensation that former Lehman chief Dick "The Gorilla" Fuld conveniently failed to disclose. Yet not one of them has faced time behind bars.
Instead, federal regulators and prosecutors have let the banks and finance companies that tried to burn the world economy to the ground get off with carefully orchestrated settlements — whitewash jobs that involve the firms paying pathetically small fines without even being required to admit wrongdoing. To add insult to injury, the people who actually committed the crimes almost never pay the fines themselves; banks caught defrauding their shareholders often use shareholder money to foot the tab of justice. "If the allegations in these settlements are true," says Jed Rakoff, a federal judge in the Southern District of New York, "it's management buying its way off cheap, from the pockets of their victims."
To understand the significance of this, one has to think carefully about the efficacy of fines as a punishment for a defendant pool that includes the richest people on earth — people who simply get their companies to pay their fines for them. Conversely, one has to consider the powerful deterrent to further wrongdoing that the state is missing by not introducing this particular class of people to the experience of incarceration. "You put Lloyd Blankfein in pound-me-in-the-ass prison for one six-month term, and all this bullshit would stop, all over Wall Street," says a former congressional aide. "That's all it would take. Just once."
But that hasn't happened. Because the entire system set up to monitor and regulate Wall Street is fucked up.
Just ask the people who tried to do the right thing.
Here's how regulation of Wall Street is supposed to work. To begin with, there's a semigigantic list of public and quasi-public agencies ostensibly keeping their eyes on the economy, a dense alphabet soup of banking, insurance, S&L, securities and commodities regulators like the Federal Reserve, the Federal Deposit Insurance Corp. (FDIC), the Office of the Comptroller of the Currency (OCC) and the Commodity Futures Trading Commission (CFTC), as well as supposedly "self-regulating organizations" like the New York Stock Exchange. All of these outfits, by law, can at least begin the process of catching and investigating financial criminals, though none of them has prosecutorial power.
The major federal agency on the Wall Street beat is the Securities and Exchange Commission. The SEC watches for violations like insider trading, and also deals with so-called "disclosure violations" — i.e., making sure that all the financial information that publicly traded companies are required to make public actually jibes with reality.
But the SEC doesn't have prosecutorial power either, so in practice, when it looks like someone needs to go to jail, they refer the case to the Justice Department. And since the vast majority of crimes in the financial services industry take place in Lower Manhattan, cases referred by the SEC often end up in the U.S. Attorney's Office for the Southern District of New York. Thus, the two top cops on Wall Street are generally considered to be that U.S. attorney — a job that has been held by thunderous prosecutorial personae like Robert Morgenthau and Rudy Giuliani — and the SEC's director of enforcement.
The relationship between the SEC and the DOJ is necessarily close, even symbiotic. Since financial crime-fighting requires a high degree of financial expertise — and since the typical drug-and-terrorism-obsessed FBI agent can't balance his own checkbook, let alone tell a synthetic CDO from a credit default swap — the Justice Department ends up leaning heavily on the SEC's army of 1,100 number-crunching investigators to make their cases. In theory, it's a well-oiled, tag-team affair: Billionaire Wall Street Asshole commits fraud, the NYSE catches on and tips off the SEC, the SEC works the case and delivers it to Justice, and Justice perp-walks the Asshole out of Nobu, into a Crown Victoria and off to 36 months of push-ups, license-plate making and Salisbury steak.
That's the way it's supposed to work. But a veritable mountain of evidence indicates that when it comes to Wall Street, the justice system not only sucks at punishing financial criminals, it has actually evolved into a highly effective mechanism for protecting financial criminals. This institutional reality has absolutely nothing to do with politics or ideology — it takes place no matter who's in office or which party's in power. To understand how the machinery functions, you have to start back at least a decade ago, as case after case of financial malfeasance was pursued too slowly or not at all, fumbled by a government bureaucracy that too often is on a first-name basis with its targets.
Indeed, the shocking pattern of nonenforcement with regard to Wall Street is so deeply ingrained in Washington that it raises a profound and difficult question about the very nature of our society: whether we have created a class of people whose misdeeds are no longer perceived as crimes, almost no matter what those misdeeds are. The SEC and the Justice Department have evolved into a bizarre species of social surgeon serving this nonjailable class, expert not at administering punishment and justice, but at finding and removing criminal responsibility from the bodies of the accused.
The systematic lack of regulation has left even the country's top regulators frustrated. Lynn Turner, a former chief accountant for the SEC, laughs darkly at the idea that the criminal justice system is broken when it comes to Wall Street. "I think you've got a wrong assumption — that we even have a law-enforcement agency when it comes to Wall Street," he says.
In the hierarchy of the SEC, the chief accountant plays a major role in working to pursue misleading and phony financial disclosures. Turner held the post a decade ago, when one of the most significant cases was swallowed up by the SEC bureaucracy. In the late 1990s, the agency had an open-and-shut case against the Rite Aid drugstore chain, which was using diabolical accounting tricks to cook their books. But instead of moving swiftly to crack down on such scams, the SEC shoved the case into the "deal with it later" file. "The Philadelphia office literally did nothing with the case for a year," Turner recalls. "Very much like the New York office with Madoff."
The Rite Aid case dragged on for years — and by the time it was finished, similar accounting fiascoes at Enron and WorldCom had exploded into a full-blown financial crisis. The same was true for another SEC case that presaged the Enron disaster. The agency knew that appliance-maker Sunbeam was using the same kind of accounting scams to systematically hide losses from its investors. But in the end, the SEC's punishment for Sunbeam's CEO, Al "Chainsaw" Dunlap — widely regarded as one of the biggest assholes in the history of American finance — was a fine of $500,000. Dunlap's net worth at the time was an estimated $100 million. The SEC also barred Dunlap from ever running a public company again — forcing him to retire with a mere $99.5 million. Dunlap passed the time collecting royalties from his self-congratulatory memoir. Its title: Mean Business.
The pattern of inaction toward shady deals on Wall Street grew worse and worse after Turner left, with one slam-dunk case after another either languishing for years or disappearing altogether. Perhaps the most notorious example involved Gary Aguirre, an SEC investigator who was literally fired after he questioned the agency's failure to pursue an insider-trading case against John Mack, now the chairman of Morgan Stanley and one of America's most powerful bankers.
Aguirre joined the SEC in September 2004. Two days into his career as a financial investigator, he was asked to look into an insider-trading complaint against a hedge-fund megastar named Art Samberg. One day, with no advance research or discussion, Samberg had suddenly started buying up huge quantities of shares in a firm called Heller Financial. "It was as if Art Samberg woke up one morning and a voice from the heavens told him to start buying Heller," Aguirre recalls. "And he wasn't just buying shares — there were some days when he was trying to buy three times as many shares as were being traded that day." A few weeks later, Heller was bought by General Electric — and Samberg pocketed $18 million.
After some digging, Aguirre found himself focusing on one suspect as the likely source who had tipped Samberg off: John Mack, a close friend of Samberg's who had just stepped down as president of Morgan Stanley. At the time, Mack had been on Samberg's case to cut him into a deal involving a spinoff of the tech company Lucent — an investment that stood to make Mack a lot of money. "Mack is busting my chops" to give him a piece of the action, Samberg told an employee in an e-mail.
A week later, Mack flew to Switzerland to interview for a top job at Credit Suisse First Boston. Among the investment bank's clients, as it happened, was a firm called Heller Financial. We don't know for sure what Mack learned on his Swiss trip; years later, Mack would claim that he had thrown away his notes about the meetings. But we do know that as soon as Mack returned from the trip, on a Friday, he called up his buddy Samberg. The very next morning, Mack was cut into the Lucent deal — a favor that netted him more than $10 million. And as soon as the market reopened after the weekend, Samberg started buying every Heller share in sight, right before it was snapped up by GE — a suspiciously timed move that earned him the equivalent of Derek Jeter's annual salary for just a few minutes of work.
The deal looked like a classic case of insider trading. But in the summer of 2005, when Aguirre told his boss he planned to interview Mack, things started getting weird. His boss told him the case wasn't likely to fly, explaining that Mack had "powerful political connections." (The investment banker had been a fundraising "Ranger" for George Bush in 2004, and would go on to be a key backer of Hillary Clinton in 2008.)
Aguirre also started to feel pressure from Morgan Stanley, which was in the process of trying to rehire Mack as CEO. At first, Aguirre was contacted by the bank's regulatory liaison, Eric Dinallo, a former top aide to Eliot Spitzer. But it didn't take long for Morgan Stanley to work its way up the SEC chain of command. Within three days, another of the firm's lawyers, Mary Jo White, was on the phone with the SEC's director of enforcement. In a shocking move that was later singled out by Senate investigators, the director actually appeared to reassure White, dismissing the case against Mack as "smoke" rather than "fire." White, incidentally, was herself the former U.S. attorney of the Southern District of New York — one of the top cops on Wall Street.
Pause for a minute to take this in. Aguirre, an SEC foot soldier, is trying to interview a major Wall Street executive — not handcuff the guy or impound his yacht, mind you, just talk to him. In the course of doing so, he finds out that his target's firm is being represented not only by Eliot Spitzer's former top aide, but by the former U.S. attorney overseeing Wall Street, who is going four levels over his head to speak directly to the chief of the SEC's enforcement division — not Aguirre's boss, but his boss's boss's boss's boss. Mack himself, meanwhile, was being represented by Gary Lynch, a former SEC director of enforcement.
Aguirre didn't stand a chance. A month after he complained to his supervisors that he was being blocked from interviewing Mack, he was summarily fired, without notice. The case against Mack was immediately dropped: all depositions canceled, no further subpoenas issued. "It all happened so fast, I needed a seat belt," recalls Aguirre, who had just received a stellar performance review from his bosses. The SEC eventually paid Aguirre a settlement of $755,000 for wrongful dismissal.
Rather than going after Mack, the SEC started looking for someone else to blame for tipping off Samberg. (It was, Aguirre quips, "O.J.'s search for the real killers.") It wasn't until a year later that the agency finally got around to interviewing Mack, who denied any wrongdoing. The four-hour deposition took place on August 1st, 2006 — just days after the five-year statute of limitations on insider trading had expired in the case.
"At best, the picture shows extraordinarily lax enforcement by the SEC," Senate investigators would later conclude. "At worse, the picture is colored with overtones of a possible cover-up."
Episodes like this help explain why so many Wall Street executives felt emboldened to push the regulatory envelope during the mid-2000s. Over and over, even the most obvious cases of fraud and insider dealing got gummed up in the works, and high-ranking executives were almost never prosecuted for their crimes. In 2003, Freddie Mac coughed up $125 million after it was caught misreporting its earnings by $5 billion; nobody went to jail. In 2006, Fannie Mae was fined $400 million, but executives who had overseen phony accounting techniques to jack up their bonuses faced no criminal charges. That same year, AIG paid $1.6 billion after it was caught in a major accounting scandal that would indirectly lead to its collapse two years later, but no executives at the insurance giant were prosecuted.
All of this behavior set the stage for the crash of 2008, when Wall Street exploded in a raging Dresden of fraud and criminality. Yet the SEC and the Justice Department have shown almost no inclination to prosecute those most responsible for the catastrophe — even though they had insiders from the two firms whose implosions triggered the crisis, Lehman Brothers and AIG, who were more than willing to supply evidence against top executives.
In the case of Lehman Brothers, the SEC had a chance six months before the crash to move against Dick Fuld, a man recently named the worst CEO of all time by Portfolio magazine. A decade before the crash, a Lehman lawyer named Oliver Budde was going through the bank's proxy statements and noticed that it was using a loophole involving Restricted Stock Units to hide tens of millions of dollars of Fuld's compensation. Budde told his bosses that Lehman's use of RSUs was dicey at best, but they blew him off. "We're sorry about your concerns," they told him, "but we're doing it." Disturbed by such shady practices, the lawyer quit the firm in 2006.
Then, only a few months after Budde left Lehman, the SEC changed its rules to force companies to disclose exactly how much compensation in RSUs executives had coming to them. "The SEC was basically like, 'We're sick and tired of you people fucking around — we want a picture of what you're holding,'" Budde says. But instead of coming clean about eight separate RSUs that Fuld had hidden from investors, Lehman filed a proxy statement that was a masterpiece of cynical lawyering. On one page, a chart indicated that Fuld had been awarded $146 million in RSUs. But two pages later, a note in the fine print essentially stated that the chart did not contain the real number — which, it failed to mention, was actually $263 million more than the chart indicated. "They fucked around even more than they did before," Budde says. (The law firm that helped craft the fine print, Simpson Thacher & Bartlett, would later receive a lucrative federal contract to serve as legal adviser to the TARP bailout.)
Budde decided to come forward. In April 2008, he wrote a detailed memo to the SEC about Lehman's history of hidden stocks. Shortly thereafter, he got a letter back that began, "Dear Sir or Madam." It was an automated e-response.
"They blew me off," Budde says.
Over the course of that summer, Budde tried to contact the SEC several more times, and was ignored each time. Finally, in the fateful week of September 15th, 2008, when Lehman Brothers cracked under the weight of its reckless bets on the subprime market and went into its final death spiral, Budde became seriously concerned. If the government tried to arrange for Lehman to be pawned off on another Wall Street firm, as it had done with Bear Stearns, the U.S. taxpayer might wind up footing the bill for a company with hundreds of millions of dollars in concealed compensation. So Budde again called the SEC, right in the middle of the crisis. "Look," he told regulators. "I gave you huge stuff. You really want to take a look at this."
But the feds once again blew him off. A young staff attorney contacted Budde, who once more provided the SEC with copies of all his memos. He never heard from the agency again.
"This was like a mini-Madoff," Budde says. "They had six solid months of warnings. They could have done something."
Three weeks later, Budde was shocked to see Fuld testifying before the House Government Oversight Committee and whining about how poor he was. "I got no severance, no golden parachute," Fuld moaned. When Rep. Henry Waxman, the committee's chairman, mentioned that he thought Fuld had earned more than $480 million, Fuld corrected him and said he believed it was only $310 million.
The true number, Budde calculated, was $529 million. He contacted a Senate investigator to talk about how Fuld had misled Congress, but he never got any response. Meanwhile, in a demonstration of the government's priorities, the Justice Department is proceeding full force with a prosecution of retired baseball player Roger Clemens for lying to Congress about getting a shot of steroids in his ass. "At least Roger didn't screw over the world," Budde says, shaking his head.
Fuld has denied any wrongdoing, but his hidden compensation was only a ripple in Lehman's raging tsunami of misdeeds. The investment bank used an absurd accounting trick called "Repo 105" transactions to conceal $50 billion in loans on the firm's balance sheet. (That's $50 billion, not million.) But more than a year after the use of the Repo 105s came to light, there have still been no indictments in the affair. While it's possible that charges may yet be filed, there are now rumors that the SEC and the Justice Department may take no action against Lehman. If that's true, and there's no prosecution in a case where there's such overwhelming evidence — and where the company is already dead, meaning it can't dump further losses on investors or taxpayers — then it might be time to assume the game is up. Failing to prosecute Fuld and Lehman would be tantamount to the state marching into Wall Street and waving the green flag on a new stealing season.
The most amazing noncase in the entire crash — the one that truly defies the most basic notion of justice when it comes to Wall Street supervillains — is the one involving AIG and Joe Cassano, the nebbishy Patient Zero of the financial crisis. As chief of AIGFP, the firm's financial products subsidiary, Cassano repeatedly made public statements in 2007 claiming that his portfolio of mortgage derivatives would suffer "no dollar of loss" — an almost comically obvious misrepresentation. "God couldn't manage a $60 billion real estate portfolio without a single dollar of loss," says Turner, the agency's former chief accountant. "If the SEC can't make a disclosure case against AIG, then they might as well close up shop."
As in the Lehman case, federal prosecutors not only had plenty of evidence against AIG — they also had an eyewitness to Cassano's actions who was prepared to tell all. As an accountant at AIGFP, Joseph St. Denis had a number of run-ins with Cassano during the summer of 2007. At the time, Cassano had already made nearly $500 billion worth of derivative bets that would ultimately blow up, destroy the world's largest insurance company, and trigger the largest government bailout of a single company in U.S. history. He made many fatal mistakes, but chief among them was engaging in contracts that required AIG to post billions of dollars in collateral if there was any downgrade to its credit rating.
St. Denis didn't know about those clauses in Cassano's contracts, since they had been written before he joined the firm. What he did know was that Cassano freaked out when St. Denis spoke with an accountant at the parent company, which was only just finding out about the time bomb Cassano had set. After St. Denis finished a conference call with the executive, Cassano suddenly burst into the room and began screaming at him for talking to the New York office. He then announced that St. Denis had been "deliberately excluded" from any valuations of the most toxic elements of the derivatives portfolio — thus preventing the accountant from doing his job. What St. Denis represented was transparency — and the last thing Cassano needed was transparency.
Another clue that something was amiss with AIGFP's portfolio came when Goldman Sachs demanded that the firm pay billions in collateral, per the terms of Cassano's deadly contracts. Such "collateral calls" happen all the time on Wall Street, but seldom against a seemingly solvent and friendly business partner like AIG. And when they do happen, they are rarely paid without a fight. So St. Denis was shocked when AIGFP agreed to fork over gobs of money to Goldman Sachs, even while it was still contesting the payments — an indication that something was seriously wrong at AIG. "When I found out about the collateral call, I literally had to sit down," St. Denis recalls. "I had to go home for the day."
After Cassano barred him from valuating the derivative deals, St. Denis had no choice but to resign. He got another job, and thought he was done with AIG. But a few months later, he learned that Cassano had held a conference call with investors in December 2007. During the call, AIGFP failed to disclose that it had posted $2 billion to Goldman Sachs following the collateral calls.
"Investors therefore did not know," the Financial Crisis Inquiry Commission would later conclude, "that AIG's earnings were overstated by $3.6 billion."
"I remember thinking, 'Wow, they're just not telling people,'" St. Denis says. "I knew. I had been there. I knew they'd posted collateral."
A year later, after the crash, St. Denis wrote a letter about his experiences to the House Government Oversight Committee, which was looking into the AIG collapse. He also met with investigators for the government, which was preparing a criminal case against Cassano. But the case never went to court. Last May, the Justice Department confirmed that it would not file charges against executives at AIGFP. Cassano, who has denied any wrongdoing, was reportedly told he was no longer a target.
Shortly after that, Cassano strolled into Washington to testify before the Financial Crisis Inquiry Commission. It was his first public appearance since the crash. He has not had to pay back a single cent out of the hundreds of millions of dollars he earned selling his insane pseudo-insurance policies on subprime mortgage deals. Now, out from under prosecution, he appeared before the FCIC and had the enormous balls to compliment his own business acumen, saying his atom-bomb swaps portfolio was, in retrospect, not that badly constructed. "I think the portfolios are withstanding the test of time," he said.
"They offered him an excellent opportunity to redeem himself," St. Denis jokes.
In the end, of course, it wasn't just the executives of Lehman and AIGFP who got passes. Virtually every one of the major players on Wall Street was similarly embroiled in scandal, yet their executives skated off into the sunset, uncharged and unfined. Goldman Sachs paid $550 million last year when it was caught defrauding investors with crappy mortgages, but no executive has been fined or jailed — not even Fabrice "Fabulous Fab" Tourre, Goldman's outrageous Euro-douche who gleefully e-mailed a pal about the "surreal" transactions in the middle of a meeting with the firm's victims. In a similar case, a sales executive at the German powerhouse Deutsche Bank got off on charges of insider trading; its general counsel at the time of the questionable deals, Robert Khuzami, now serves as director of enforcement for the SEC.
Another major firm, Bank of America, was caught hiding $5.8 billion in bonuses from shareholders as part of its takeover of Merrill Lynch. The SEC tried to let the bank off with a settlement of only $33 million, but Judge Jed Rakoff rejected the action as a "facade of enforcement." So the SEC quintupled the settlement — but it didn't require either Merrill or Bank of America to admit to wrongdoing. Unlike criminal trials, in which the facts of the crime are put on record for all to see, these Wall Street settlements almost never require the banks to make any factual disclosures, effectively burying the stories forever. "All this is done at the expense not only of the shareholders, but also of the truth," says Rakoff. Goldman, Deutsche, Merrill, Lehman, Bank of America ... who did we leave out? Oh, there's Citigroup, nailed for hiding some $40 billion in liabilities from investors. Last July, the SEC settled with Citi for $75 million. In a rare move, it also fined two Citi executives, former CFO Gary Crittenden and investor-relations chief Arthur Tildesley Jr. Their penalties, combined, came to a whopping $180,000.
Throughout the entire crisis, in fact, the government has taken exactly one serious swing of the bat against executives from a major bank, charging two guys from Bear Stearns with criminal fraud over a pair of toxic subprime hedge funds that blew up in 2007, destroying the company and robbing investors of $1.6 billion. Jurors had an e-mail between the defendants admitting that "there is simply no way for us to make money — ever" just three days before assuring investors that "there's no basis for thinking this is one big disaster." Yet the case still somehow ended in acquittal — and the Justice Department hasn't taken any of the big banks to court since.
All of which raises an obvious question: Why the hell not?
Gary Aguirre, the SEC investigator who lost his job when he drew the ire of Morgan Stanley, thinks he knows the answer.
Last year, Aguirre noticed that a conference on financial law enforcement was scheduled to be held at the Hilton in New York on November 12th. The list of attendees included 1,500 or so of the country's leading lawyers who represent Wall Street, as well as some of the government's top cops from both the SEC and the Justice Department.
Criminal justice, as it pertains to the Goldmans and Morgan Stanleys of the world, is not adversarial combat, with cops and crooks duking it out in interrogation rooms and courthouses. Instead, it's a cocktail party between friends and colleagues who from month to month and year to year are constantly switching sides and trading hats. At the Hilton conference, regulators and banker-lawyers rubbed elbows during a series of speeches and panel discussions, away from the rabble. "They were chummier in that environment," says Aguirre, who plunked down $2,200 to attend the conference.
Aguirre saw a lot of familiar faces at the conference, for a simple reason: Many of the SEC regulators he had worked with during his failed attempt to investigate John Mack had made a million-dollar pass through the Revolving Door, going to work for the very same firms they used to police. Aguirre didn't see Paul Berger, an associate director of enforcement who had rebuffed his attempts to interview Mack — maybe because Berger was tied up at his lucrative new job at Debevoise & Plimpton, the same law firm that Morgan Stanley employed to intervene in the Mack case. But he did see Mary Jo White, the former U.S. attorney, who was still at Debevoise & Plimpton. He also saw Linda Thomsen, the former SEC director of enforcement who had been so helpful to White. Thomsen had gone on to represent Wall Street as a partner at the prestigious firm of Davis Polk & Wardwell.
Two of the government's top cops were there as well: Preet Bharara, the U.S. attorney for the Southern District of New York, and Robert Khuzami, the SEC's current director of enforcement. Bharara had been recommended for his post by Chuck Schumer, Wall Street's favorite senator. And both he and Khuzami had served with Mary Jo White at the U.S. attorney's office, before Mary Jo went on to become a partner at Debevoise. What's more, when Khuzami had served as general counsel for Deutsche Bank, he had been hired by none other than Dick Walker, who had been enforcement director at the SEC when it slow-rolled the pivotal fraud case against Rite Aid.
"It wasn't just one rotation of the revolving door," says Aguirre. "It just kept spinning. Every single person had rotated in and out of government and private service."
The Revolving Door isn't just a footnote in financial law enforcement; over the past decade, more than a dozen high-ranking SEC officials have gone on to lucrative jobs at Wall Street banks or white-shoe law firms, where partnerships are worth millions. That makes SEC officials like Paul Berger and Linda Thomsen the equivalent of college basketball stars waiting for their first NBA contract. Are you really going to give up a shot at the Knicks or the Lakers just to find out whether a Wall Street big shot like John Mack was guilty of insider trading? "You take one of these jobs," says Turner, the former chief accountant for the SEC, "and you're fit for life."
Fit — and happy. The banter between the speakers at the New York conference says everything you need to know about the level of chumminess and mutual admiration that exists between these supposed adversaries of the justice system. At one point in the conference, Mary Jo White introduced Bharara, her old pal from the U.S. attorney's office.
"I want to first say how pleased I am to be here," Bharara responded. Then, addressing White, he added, "You've spawned all of us. It's almost 11 years ago to the day that Mary Jo White called me and asked me if I would become an assistant U.S. attorney. So thank you, Dr. Frankenstein."
Next, addressing the crowd of high-priced lawyers from Wall Street, Bharara made an interesting joke. "I also want to take a moment to applaud the entire staff of the SEC for the really amazing things they have done over the past year," he said. "They've done a real service to the country, to the financial community, and not to mention a lot of your law practices."
Haw! The line drew snickers from the conference of millionaire lawyers. But the real fireworks came when Khuzami, the SEC's director of enforcement, talked about a new "cooperation initiative" the agency had recently unveiled, in which executives are being offered incentives to report fraud they have witnessed or committed. From now on, Khuzami said, when corporate lawyers like the ones he was addressing want to know if their Wall Street clients are going to be charged by the Justice Department before deciding whether to come forward, all they have to do is ask the SEC.
"We are going to try to get those individuals answers," Khuzami announced, as to "whether or not there is criminal interest in the case — so that defense counsel can have as much information as possible in deciding whether or not to choose to sign up their client."
Aguirre, listening in the crowd, couldn't believe Khuzami's brazenness. The SEC's enforcement director was saying, in essence, that firms like Goldman Sachs and AIG and Lehman Brothers will henceforth be able to get the SEC to act as a middleman between them and the Justice Department, negotiating fines as a way out of jail time. Khuzami was basically outlining a four-step system for banks and their executives to buy their way out of prison. "First, the SEC and Wall Street player make an agreement on a fine that the player will pay to the SEC," Aguirre says. "Then the Justice Department commits itself to pass, so that the player knows he's 'safe.' Third, the player pays the SEC — and fourth, the player gets a pass from the Justice Department."
When I ask a former federal prosecutor about the propriety of a sitting SEC director of enforcement talking out loud about helping corporate defendants "get answers" regarding the status of their criminal cases, he initially doesn't believe it. Then I send him a transcript of the comment. "I am very, very surprised by Khuzami's statement, which does seem to me to be contrary to past practice — and not a good thing," the former prosecutor says.
Earlier this month, when Sen. Chuck Grassley found out about Khuzami's comments, he sent the SEC a letter noting that the agency's own enforcement manual not only prohibits such "answer getting," it even bars the SEC from giving defendants the Justice Department's phone number. "Should counsel or the individual ask which criminal authorities they should contact," the manual reads, "staff should decline to answer, unless authorized by the relevant criminal authorities." Both the SEC and the Justice Department deny there is anything improper in their new policy of cooperation. "We collaborate with the SEC, but they do not consult with us when they resolve their cases," Assistant Attorney General Lanny Breuer assured Congress in January. "They do that independently."
Around the same time that Breuer was testifying, however, a story broke that prior to the pathetically small settlement of $75 million that the SEC had arranged with Citigroup, Khuzami had ordered his staff to pursue lighter charges against the megabank's executives. According to a letter that was sent to Sen. Grassley's office, Khuzami had a "secret conversation, without telling the staff, with a prominent defense lawyer who is a good friend" of his and "who was counsel for the company." The unsigned letter, which appears to have come from an SEC investigator on the case, prompted the inspector general to launch an investigation into the charge.
All of this paints a disturbing picture of a closed and corrupt system, a timeless circle of friends that virtually guarantees a collegial approach to the policing of high finance. Even before the corruption starts, the state is crippled by economic reality: Since law enforcement on Wall Street requires serious intellectual firepower, the banks seize a huge advantage from the start by hiring away the top talent. Budde, the former Lehman lawyer, says it's well known that all the best legal minds go to the big corporate law firms, while the "bottom 20 percent go to the SEC." Which makes it tough for the agency to track devious legal machinations, like the scheme to hide $263 million of Dick Fuld's compensation.
"It's such a mismatch, it's not even funny," Budde says.
But even beyond that, the system is skewed by the irrepressible pull of riches and power. If talent rises in the SEC or the Justice Department, it sooner or later jumps ship for those fat NBA contracts. Or, conversely, graduates of the big corporate firms take sabbaticals from their rich lifestyles to slum it in government service for a year or two. Many of those appointments are inevitably hand-picked by lifelong stooges for Wall Street like Chuck Schumer, who has accepted $14.6 million in campaign contributions from Goldman Sachs, Morgan Stanley and other major players in the finance industry, along with their corporate lawyers.
As for President Obama, what is there to be said? Goldman Sachs was his number-one private campaign contributor. He put a Citigroup executive in charge of his economic transition team, and he just named an executive of JP Morgan Chase, the proud owner of $7.7 million in Chase stock, his new chief of staff. "The betrayal that this represents by Obama to everybody is just — we're not ready to believe it," says Budde, a classmate of the president from their Columbia days. "He's really fucking us over like that? Really? That's really a JP Morgan guy, really?"
Which is not to say that the Obama era has meant an end to law enforcement. On the contrary: In the past few years, the administration has allocated massive amounts of federal resources to catching wrongdoers — of a certain type. Last year, the government deported 393,000 people, at a cost of $5 billion. Since 2007, felony immigration prosecutions along the Mexican border have surged 77 percent; nonfelony prosecutions by 259 percent. In Ohio last month, a single mother was caught lying about where she lived to put her kids into a better school district; the judge in the case tried to sentence her to 10 days in jail for fraud, declaring that letting her go free would "demean the seriousness" of the offenses.
So there you have it. Illegal immigrants: 393,000. Lying moms: one. Bankers: zero. The math makes sense only because the politics are so obvious. You want to win elections, you bang on the jailable class. You build prisons and fill them with people for selling dime bags and stealing CD players. But for stealing a billion dollars? For fraud that puts a million people into foreclosure? Pass. It's not a crime. Prison is too harsh. Get them to say they're sorry, and move on. Oh, wait — let's not even make them say they're sorry. That's too mean; let's just give them a piece of paper with a government stamp on it, officially clearing them of the need to apologize, and make them pay a fine instead. But don't make them pay it out of their own pockets, and don't ask them to give back the money they stole. In fact, let them profit from their collective crimes, to the tune of a record $135 billion in pay and benefits last year. What's next? Taxpayer-funded massages for every Wall Street executive guilty of fraud?
The mental stumbling block, for most Americans, is that financial crimes don't feel real; you don't see the culprits waving guns in liquor stores or dragging coeds into bushes. But these frauds are worse than common robberies. They're crimes of intellectual choice, made by people who are already rich and who have every conceivable social advantage, acting on a simple, cynical calculation: Let's steal whatever we can, then dare the victims to find the juice to reclaim their money through a captive bureaucracy. They're attacking the very definition of property — which, after all, depends in part on a legal system that defends everyone's claims of ownership equally. When that definition becomes tenuous or conditional — when the state simply gives up on the notion of justice — this whole American Dream thing recedes even further from reality.
This article appears in the March 3, 2011 issue of Rolling Stone. The issue is available now on newsstands and will appear in the online archive February 18.
By Matt Taibbi
February 17, 2011 "Rolling Stone" -- Over drinks at a bar on a dreary, snowy night in Washington this past month, a former Senate investigator laughed as he polished off his beer.
"Everything's fucked up, and nobody goes to jail," he said. "That's your whole story right there. Hell, you don't even have to write the rest of it. Just write that."
I put down my notebook. "Just that?"
"That's right," he said, signaling to the waitress for the check. "Everything's fucked up, and nobody goes to jail. You can end the piece right there."
Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world's wealth — and nobody went to jail. Nobody, that is, except Bernie Madoff, a flamboyant and pathological celebrity con artist, whose victims happened to be other rich and famous people.
The rest of them, all of them, got off. Not a single executive who ran the companies that cooked up and cashed in on the phony financial boom — an industrywide scam that involved the mass sale of mismarked, fraudulent mortgage-backed securities — has ever been convicted. Their names by now are familiar to even the most casual Middle American news consumer: companies like AIG, Goldman Sachs, Lehman Brothers, JP Morgan Chase, Bank of America and Morgan Stanley. Most of these firms were directly involved in elaborate fraud and theft. Lehman Brothers hid billions in loans from its investors. Bank of America lied about billions in bonuses.
Goldman Sachs failed to tell clients how it put together the born-to-lose toxic mortgage deals it was selling. What's more, many of these companies had corporate chieftains whose actions cost investors billions — from AIG derivatives chief Joe Cassano, who assured investors they would not lose even "one dollar" just months before his unit imploded, to the $263 million in compensation that former Lehman chief Dick "The Gorilla" Fuld conveniently failed to disclose. Yet not one of them has faced time behind bars.
Instead, federal regulators and prosecutors have let the banks and finance companies that tried to burn the world economy to the ground get off with carefully orchestrated settlements — whitewash jobs that involve the firms paying pathetically small fines without even being required to admit wrongdoing. To add insult to injury, the people who actually committed the crimes almost never pay the fines themselves; banks caught defrauding their shareholders often use shareholder money to foot the tab of justice. "If the allegations in these settlements are true," says Jed Rakoff, a federal judge in the Southern District of New York, "it's management buying its way off cheap, from the pockets of their victims."
To understand the significance of this, one has to think carefully about the efficacy of fines as a punishment for a defendant pool that includes the richest people on earth — people who simply get their companies to pay their fines for them. Conversely, one has to consider the powerful deterrent to further wrongdoing that the state is missing by not introducing this particular class of people to the experience of incarceration. "You put Lloyd Blankfein in pound-me-in-the-ass prison for one six-month term, and all this bullshit would stop, all over Wall Street," says a former congressional aide. "That's all it would take. Just once."
But that hasn't happened. Because the entire system set up to monitor and regulate Wall Street is fucked up.
Just ask the people who tried to do the right thing.
Here's how regulation of Wall Street is supposed to work. To begin with, there's a semigigantic list of public and quasi-public agencies ostensibly keeping their eyes on the economy, a dense alphabet soup of banking, insurance, S&L, securities and commodities regulators like the Federal Reserve, the Federal Deposit Insurance Corp. (FDIC), the Office of the Comptroller of the Currency (OCC) and the Commodity Futures Trading Commission (CFTC), as well as supposedly "self-regulating organizations" like the New York Stock Exchange. All of these outfits, by law, can at least begin the process of catching and investigating financial criminals, though none of them has prosecutorial power.
The major federal agency on the Wall Street beat is the Securities and Exchange Commission. The SEC watches for violations like insider trading, and also deals with so-called "disclosure violations" — i.e., making sure that all the financial information that publicly traded companies are required to make public actually jibes with reality.
But the SEC doesn't have prosecutorial power either, so in practice, when it looks like someone needs to go to jail, they refer the case to the Justice Department. And since the vast majority of crimes in the financial services industry take place in Lower Manhattan, cases referred by the SEC often end up in the U.S. Attorney's Office for the Southern District of New York. Thus, the two top cops on Wall Street are generally considered to be that U.S. attorney — a job that has been held by thunderous prosecutorial personae like Robert Morgenthau and Rudy Giuliani — and the SEC's director of enforcement.
The relationship between the SEC and the DOJ is necessarily close, even symbiotic. Since financial crime-fighting requires a high degree of financial expertise — and since the typical drug-and-terrorism-obsessed FBI agent can't balance his own checkbook, let alone tell a synthetic CDO from a credit default swap — the Justice Department ends up leaning heavily on the SEC's army of 1,100 number-crunching investigators to make their cases. In theory, it's a well-oiled, tag-team affair: Billionaire Wall Street Asshole commits fraud, the NYSE catches on and tips off the SEC, the SEC works the case and delivers it to Justice, and Justice perp-walks the Asshole out of Nobu, into a Crown Victoria and off to 36 months of push-ups, license-plate making and Salisbury steak.
That's the way it's supposed to work. But a veritable mountain of evidence indicates that when it comes to Wall Street, the justice system not only sucks at punishing financial criminals, it has actually evolved into a highly effective mechanism for protecting financial criminals. This institutional reality has absolutely nothing to do with politics or ideology — it takes place no matter who's in office or which party's in power. To understand how the machinery functions, you have to start back at least a decade ago, as case after case of financial malfeasance was pursued too slowly or not at all, fumbled by a government bureaucracy that too often is on a first-name basis with its targets.
Indeed, the shocking pattern of nonenforcement with regard to Wall Street is so deeply ingrained in Washington that it raises a profound and difficult question about the very nature of our society: whether we have created a class of people whose misdeeds are no longer perceived as crimes, almost no matter what those misdeeds are. The SEC and the Justice Department have evolved into a bizarre species of social surgeon serving this nonjailable class, expert not at administering punishment and justice, but at finding and removing criminal responsibility from the bodies of the accused.
The systematic lack of regulation has left even the country's top regulators frustrated. Lynn Turner, a former chief accountant for the SEC, laughs darkly at the idea that the criminal justice system is broken when it comes to Wall Street. "I think you've got a wrong assumption — that we even have a law-enforcement agency when it comes to Wall Street," he says.
In the hierarchy of the SEC, the chief accountant plays a major role in working to pursue misleading and phony financial disclosures. Turner held the post a decade ago, when one of the most significant cases was swallowed up by the SEC bureaucracy. In the late 1990s, the agency had an open-and-shut case against the Rite Aid drugstore chain, which was using diabolical accounting tricks to cook their books. But instead of moving swiftly to crack down on such scams, the SEC shoved the case into the "deal with it later" file. "The Philadelphia office literally did nothing with the case for a year," Turner recalls. "Very much like the New York office with Madoff."
The Rite Aid case dragged on for years — and by the time it was finished, similar accounting fiascoes at Enron and WorldCom had exploded into a full-blown financial crisis. The same was true for another SEC case that presaged the Enron disaster. The agency knew that appliance-maker Sunbeam was using the same kind of accounting scams to systematically hide losses from its investors. But in the end, the SEC's punishment for Sunbeam's CEO, Al "Chainsaw" Dunlap — widely regarded as one of the biggest assholes in the history of American finance — was a fine of $500,000. Dunlap's net worth at the time was an estimated $100 million. The SEC also barred Dunlap from ever running a public company again — forcing him to retire with a mere $99.5 million. Dunlap passed the time collecting royalties from his self-congratulatory memoir. Its title: Mean Business.
The pattern of inaction toward shady deals on Wall Street grew worse and worse after Turner left, with one slam-dunk case after another either languishing for years or disappearing altogether. Perhaps the most notorious example involved Gary Aguirre, an SEC investigator who was literally fired after he questioned the agency's failure to pursue an insider-trading case against John Mack, now the chairman of Morgan Stanley and one of America's most powerful bankers.
Aguirre joined the SEC in September 2004. Two days into his career as a financial investigator, he was asked to look into an insider-trading complaint against a hedge-fund megastar named Art Samberg. One day, with no advance research or discussion, Samberg had suddenly started buying up huge quantities of shares in a firm called Heller Financial. "It was as if Art Samberg woke up one morning and a voice from the heavens told him to start buying Heller," Aguirre recalls. "And he wasn't just buying shares — there were some days when he was trying to buy three times as many shares as were being traded that day." A few weeks later, Heller was bought by General Electric — and Samberg pocketed $18 million.
After some digging, Aguirre found himself focusing on one suspect as the likely source who had tipped Samberg off: John Mack, a close friend of Samberg's who had just stepped down as president of Morgan Stanley. At the time, Mack had been on Samberg's case to cut him into a deal involving a spinoff of the tech company Lucent — an investment that stood to make Mack a lot of money. "Mack is busting my chops" to give him a piece of the action, Samberg told an employee in an e-mail.
A week later, Mack flew to Switzerland to interview for a top job at Credit Suisse First Boston. Among the investment bank's clients, as it happened, was a firm called Heller Financial. We don't know for sure what Mack learned on his Swiss trip; years later, Mack would claim that he had thrown away his notes about the meetings. But we do know that as soon as Mack returned from the trip, on a Friday, he called up his buddy Samberg. The very next morning, Mack was cut into the Lucent deal — a favor that netted him more than $10 million. And as soon as the market reopened after the weekend, Samberg started buying every Heller share in sight, right before it was snapped up by GE — a suspiciously timed move that earned him the equivalent of Derek Jeter's annual salary for just a few minutes of work.
The deal looked like a classic case of insider trading. But in the summer of 2005, when Aguirre told his boss he planned to interview Mack, things started getting weird. His boss told him the case wasn't likely to fly, explaining that Mack had "powerful political connections." (The investment banker had been a fundraising "Ranger" for George Bush in 2004, and would go on to be a key backer of Hillary Clinton in 2008.)
Aguirre also started to feel pressure from Morgan Stanley, which was in the process of trying to rehire Mack as CEO. At first, Aguirre was contacted by the bank's regulatory liaison, Eric Dinallo, a former top aide to Eliot Spitzer. But it didn't take long for Morgan Stanley to work its way up the SEC chain of command. Within three days, another of the firm's lawyers, Mary Jo White, was on the phone with the SEC's director of enforcement. In a shocking move that was later singled out by Senate investigators, the director actually appeared to reassure White, dismissing the case against Mack as "smoke" rather than "fire." White, incidentally, was herself the former U.S. attorney of the Southern District of New York — one of the top cops on Wall Street.
Pause for a minute to take this in. Aguirre, an SEC foot soldier, is trying to interview a major Wall Street executive — not handcuff the guy or impound his yacht, mind you, just talk to him. In the course of doing so, he finds out that his target's firm is being represented not only by Eliot Spitzer's former top aide, but by the former U.S. attorney overseeing Wall Street, who is going four levels over his head to speak directly to the chief of the SEC's enforcement division — not Aguirre's boss, but his boss's boss's boss's boss. Mack himself, meanwhile, was being represented by Gary Lynch, a former SEC director of enforcement.
Aguirre didn't stand a chance. A month after he complained to his supervisors that he was being blocked from interviewing Mack, he was summarily fired, without notice. The case against Mack was immediately dropped: all depositions canceled, no further subpoenas issued. "It all happened so fast, I needed a seat belt," recalls Aguirre, who had just received a stellar performance review from his bosses. The SEC eventually paid Aguirre a settlement of $755,000 for wrongful dismissal.
Rather than going after Mack, the SEC started looking for someone else to blame for tipping off Samberg. (It was, Aguirre quips, "O.J.'s search for the real killers.") It wasn't until a year later that the agency finally got around to interviewing Mack, who denied any wrongdoing. The four-hour deposition took place on August 1st, 2006 — just days after the five-year statute of limitations on insider trading had expired in the case.
"At best, the picture shows extraordinarily lax enforcement by the SEC," Senate investigators would later conclude. "At worse, the picture is colored with overtones of a possible cover-up."
Episodes like this help explain why so many Wall Street executives felt emboldened to push the regulatory envelope during the mid-2000s. Over and over, even the most obvious cases of fraud and insider dealing got gummed up in the works, and high-ranking executives were almost never prosecuted for their crimes. In 2003, Freddie Mac coughed up $125 million after it was caught misreporting its earnings by $5 billion; nobody went to jail. In 2006, Fannie Mae was fined $400 million, but executives who had overseen phony accounting techniques to jack up their bonuses faced no criminal charges. That same year, AIG paid $1.6 billion after it was caught in a major accounting scandal that would indirectly lead to its collapse two years later, but no executives at the insurance giant were prosecuted.
All of this behavior set the stage for the crash of 2008, when Wall Street exploded in a raging Dresden of fraud and criminality. Yet the SEC and the Justice Department have shown almost no inclination to prosecute those most responsible for the catastrophe — even though they had insiders from the two firms whose implosions triggered the crisis, Lehman Brothers and AIG, who were more than willing to supply evidence against top executives.
In the case of Lehman Brothers, the SEC had a chance six months before the crash to move against Dick Fuld, a man recently named the worst CEO of all time by Portfolio magazine. A decade before the crash, a Lehman lawyer named Oliver Budde was going through the bank's proxy statements and noticed that it was using a loophole involving Restricted Stock Units to hide tens of millions of dollars of Fuld's compensation. Budde told his bosses that Lehman's use of RSUs was dicey at best, but they blew him off. "We're sorry about your concerns," they told him, "but we're doing it." Disturbed by such shady practices, the lawyer quit the firm in 2006.
Then, only a few months after Budde left Lehman, the SEC changed its rules to force companies to disclose exactly how much compensation in RSUs executives had coming to them. "The SEC was basically like, 'We're sick and tired of you people fucking around — we want a picture of what you're holding,'" Budde says. But instead of coming clean about eight separate RSUs that Fuld had hidden from investors, Lehman filed a proxy statement that was a masterpiece of cynical lawyering. On one page, a chart indicated that Fuld had been awarded $146 million in RSUs. But two pages later, a note in the fine print essentially stated that the chart did not contain the real number — which, it failed to mention, was actually $263 million more than the chart indicated. "They fucked around even more than they did before," Budde says. (The law firm that helped craft the fine print, Simpson Thacher & Bartlett, would later receive a lucrative federal contract to serve as legal adviser to the TARP bailout.)
Budde decided to come forward. In April 2008, he wrote a detailed memo to the SEC about Lehman's history of hidden stocks. Shortly thereafter, he got a letter back that began, "Dear Sir or Madam." It was an automated e-response.
"They blew me off," Budde says.
Over the course of that summer, Budde tried to contact the SEC several more times, and was ignored each time. Finally, in the fateful week of September 15th, 2008, when Lehman Brothers cracked under the weight of its reckless bets on the subprime market and went into its final death spiral, Budde became seriously concerned. If the government tried to arrange for Lehman to be pawned off on another Wall Street firm, as it had done with Bear Stearns, the U.S. taxpayer might wind up footing the bill for a company with hundreds of millions of dollars in concealed compensation. So Budde again called the SEC, right in the middle of the crisis. "Look," he told regulators. "I gave you huge stuff. You really want to take a look at this."
But the feds once again blew him off. A young staff attorney contacted Budde, who once more provided the SEC with copies of all his memos. He never heard from the agency again.
"This was like a mini-Madoff," Budde says. "They had six solid months of warnings. They could have done something."
Three weeks later, Budde was shocked to see Fuld testifying before the House Government Oversight Committee and whining about how poor he was. "I got no severance, no golden parachute," Fuld moaned. When Rep. Henry Waxman, the committee's chairman, mentioned that he thought Fuld had earned more than $480 million, Fuld corrected him and said he believed it was only $310 million.
The true number, Budde calculated, was $529 million. He contacted a Senate investigator to talk about how Fuld had misled Congress, but he never got any response. Meanwhile, in a demonstration of the government's priorities, the Justice Department is proceeding full force with a prosecution of retired baseball player Roger Clemens for lying to Congress about getting a shot of steroids in his ass. "At least Roger didn't screw over the world," Budde says, shaking his head.
Fuld has denied any wrongdoing, but his hidden compensation was only a ripple in Lehman's raging tsunami of misdeeds. The investment bank used an absurd accounting trick called "Repo 105" transactions to conceal $50 billion in loans on the firm's balance sheet. (That's $50 billion, not million.) But more than a year after the use of the Repo 105s came to light, there have still been no indictments in the affair. While it's possible that charges may yet be filed, there are now rumors that the SEC and the Justice Department may take no action against Lehman. If that's true, and there's no prosecution in a case where there's such overwhelming evidence — and where the company is already dead, meaning it can't dump further losses on investors or taxpayers — then it might be time to assume the game is up. Failing to prosecute Fuld and Lehman would be tantamount to the state marching into Wall Street and waving the green flag on a new stealing season.
The most amazing noncase in the entire crash — the one that truly defies the most basic notion of justice when it comes to Wall Street supervillains — is the one involving AIG and Joe Cassano, the nebbishy Patient Zero of the financial crisis. As chief of AIGFP, the firm's financial products subsidiary, Cassano repeatedly made public statements in 2007 claiming that his portfolio of mortgage derivatives would suffer "no dollar of loss" — an almost comically obvious misrepresentation. "God couldn't manage a $60 billion real estate portfolio without a single dollar of loss," says Turner, the agency's former chief accountant. "If the SEC can't make a disclosure case against AIG, then they might as well close up shop."
As in the Lehman case, federal prosecutors not only had plenty of evidence against AIG — they also had an eyewitness to Cassano's actions who was prepared to tell all. As an accountant at AIGFP, Joseph St. Denis had a number of run-ins with Cassano during the summer of 2007. At the time, Cassano had already made nearly $500 billion worth of derivative bets that would ultimately blow up, destroy the world's largest insurance company, and trigger the largest government bailout of a single company in U.S. history. He made many fatal mistakes, but chief among them was engaging in contracts that required AIG to post billions of dollars in collateral if there was any downgrade to its credit rating.
St. Denis didn't know about those clauses in Cassano's contracts, since they had been written before he joined the firm. What he did know was that Cassano freaked out when St. Denis spoke with an accountant at the parent company, which was only just finding out about the time bomb Cassano had set. After St. Denis finished a conference call with the executive, Cassano suddenly burst into the room and began screaming at him for talking to the New York office. He then announced that St. Denis had been "deliberately excluded" from any valuations of the most toxic elements of the derivatives portfolio — thus preventing the accountant from doing his job. What St. Denis represented was transparency — and the last thing Cassano needed was transparency.
Another clue that something was amiss with AIGFP's portfolio came when Goldman Sachs demanded that the firm pay billions in collateral, per the terms of Cassano's deadly contracts. Such "collateral calls" happen all the time on Wall Street, but seldom against a seemingly solvent and friendly business partner like AIG. And when they do happen, they are rarely paid without a fight. So St. Denis was shocked when AIGFP agreed to fork over gobs of money to Goldman Sachs, even while it was still contesting the payments — an indication that something was seriously wrong at AIG. "When I found out about the collateral call, I literally had to sit down," St. Denis recalls. "I had to go home for the day."
After Cassano barred him from valuating the derivative deals, St. Denis had no choice but to resign. He got another job, and thought he was done with AIG. But a few months later, he learned that Cassano had held a conference call with investors in December 2007. During the call, AIGFP failed to disclose that it had posted $2 billion to Goldman Sachs following the collateral calls.
"Investors therefore did not know," the Financial Crisis Inquiry Commission would later conclude, "that AIG's earnings were overstated by $3.6 billion."
"I remember thinking, 'Wow, they're just not telling people,'" St. Denis says. "I knew. I had been there. I knew they'd posted collateral."
A year later, after the crash, St. Denis wrote a letter about his experiences to the House Government Oversight Committee, which was looking into the AIG collapse. He also met with investigators for the government, which was preparing a criminal case against Cassano. But the case never went to court. Last May, the Justice Department confirmed that it would not file charges against executives at AIGFP. Cassano, who has denied any wrongdoing, was reportedly told he was no longer a target.
Shortly after that, Cassano strolled into Washington to testify before the Financial Crisis Inquiry Commission. It was his first public appearance since the crash. He has not had to pay back a single cent out of the hundreds of millions of dollars he earned selling his insane pseudo-insurance policies on subprime mortgage deals. Now, out from under prosecution, he appeared before the FCIC and had the enormous balls to compliment his own business acumen, saying his atom-bomb swaps portfolio was, in retrospect, not that badly constructed. "I think the portfolios are withstanding the test of time," he said.
"They offered him an excellent opportunity to redeem himself," St. Denis jokes.
In the end, of course, it wasn't just the executives of Lehman and AIGFP who got passes. Virtually every one of the major players on Wall Street was similarly embroiled in scandal, yet their executives skated off into the sunset, uncharged and unfined. Goldman Sachs paid $550 million last year when it was caught defrauding investors with crappy mortgages, but no executive has been fined or jailed — not even Fabrice "Fabulous Fab" Tourre, Goldman's outrageous Euro-douche who gleefully e-mailed a pal about the "surreal" transactions in the middle of a meeting with the firm's victims. In a similar case, a sales executive at the German powerhouse Deutsche Bank got off on charges of insider trading; its general counsel at the time of the questionable deals, Robert Khuzami, now serves as director of enforcement for the SEC.
Another major firm, Bank of America, was caught hiding $5.8 billion in bonuses from shareholders as part of its takeover of Merrill Lynch. The SEC tried to let the bank off with a settlement of only $33 million, but Judge Jed Rakoff rejected the action as a "facade of enforcement." So the SEC quintupled the settlement — but it didn't require either Merrill or Bank of America to admit to wrongdoing. Unlike criminal trials, in which the facts of the crime are put on record for all to see, these Wall Street settlements almost never require the banks to make any factual disclosures, effectively burying the stories forever. "All this is done at the expense not only of the shareholders, but also of the truth," says Rakoff. Goldman, Deutsche, Merrill, Lehman, Bank of America ... who did we leave out? Oh, there's Citigroup, nailed for hiding some $40 billion in liabilities from investors. Last July, the SEC settled with Citi for $75 million. In a rare move, it also fined two Citi executives, former CFO Gary Crittenden and investor-relations chief Arthur Tildesley Jr. Their penalties, combined, came to a whopping $180,000.
Throughout the entire crisis, in fact, the government has taken exactly one serious swing of the bat against executives from a major bank, charging two guys from Bear Stearns with criminal fraud over a pair of toxic subprime hedge funds that blew up in 2007, destroying the company and robbing investors of $1.6 billion. Jurors had an e-mail between the defendants admitting that "there is simply no way for us to make money — ever" just three days before assuring investors that "there's no basis for thinking this is one big disaster." Yet the case still somehow ended in acquittal — and the Justice Department hasn't taken any of the big banks to court since.
All of which raises an obvious question: Why the hell not?
Gary Aguirre, the SEC investigator who lost his job when he drew the ire of Morgan Stanley, thinks he knows the answer.
Last year, Aguirre noticed that a conference on financial law enforcement was scheduled to be held at the Hilton in New York on November 12th. The list of attendees included 1,500 or so of the country's leading lawyers who represent Wall Street, as well as some of the government's top cops from both the SEC and the Justice Department.
Criminal justice, as it pertains to the Goldmans and Morgan Stanleys of the world, is not adversarial combat, with cops and crooks duking it out in interrogation rooms and courthouses. Instead, it's a cocktail party between friends and colleagues who from month to month and year to year are constantly switching sides and trading hats. At the Hilton conference, regulators and banker-lawyers rubbed elbows during a series of speeches and panel discussions, away from the rabble. "They were chummier in that environment," says Aguirre, who plunked down $2,200 to attend the conference.
Aguirre saw a lot of familiar faces at the conference, for a simple reason: Many of the SEC regulators he had worked with during his failed attempt to investigate John Mack had made a million-dollar pass through the Revolving Door, going to work for the very same firms they used to police. Aguirre didn't see Paul Berger, an associate director of enforcement who had rebuffed his attempts to interview Mack — maybe because Berger was tied up at his lucrative new job at Debevoise & Plimpton, the same law firm that Morgan Stanley employed to intervene in the Mack case. But he did see Mary Jo White, the former U.S. attorney, who was still at Debevoise & Plimpton. He also saw Linda Thomsen, the former SEC director of enforcement who had been so helpful to White. Thomsen had gone on to represent Wall Street as a partner at the prestigious firm of Davis Polk & Wardwell.
Two of the government's top cops were there as well: Preet Bharara, the U.S. attorney for the Southern District of New York, and Robert Khuzami, the SEC's current director of enforcement. Bharara had been recommended for his post by Chuck Schumer, Wall Street's favorite senator. And both he and Khuzami had served with Mary Jo White at the U.S. attorney's office, before Mary Jo went on to become a partner at Debevoise. What's more, when Khuzami had served as general counsel for Deutsche Bank, he had been hired by none other than Dick Walker, who had been enforcement director at the SEC when it slow-rolled the pivotal fraud case against Rite Aid.
"It wasn't just one rotation of the revolving door," says Aguirre. "It just kept spinning. Every single person had rotated in and out of government and private service."
The Revolving Door isn't just a footnote in financial law enforcement; over the past decade, more than a dozen high-ranking SEC officials have gone on to lucrative jobs at Wall Street banks or white-shoe law firms, where partnerships are worth millions. That makes SEC officials like Paul Berger and Linda Thomsen the equivalent of college basketball stars waiting for their first NBA contract. Are you really going to give up a shot at the Knicks or the Lakers just to find out whether a Wall Street big shot like John Mack was guilty of insider trading? "You take one of these jobs," says Turner, the former chief accountant for the SEC, "and you're fit for life."
Fit — and happy. The banter between the speakers at the New York conference says everything you need to know about the level of chumminess and mutual admiration that exists between these supposed adversaries of the justice system. At one point in the conference, Mary Jo White introduced Bharara, her old pal from the U.S. attorney's office.
"I want to first say how pleased I am to be here," Bharara responded. Then, addressing White, he added, "You've spawned all of us. It's almost 11 years ago to the day that Mary Jo White called me and asked me if I would become an assistant U.S. attorney. So thank you, Dr. Frankenstein."
Next, addressing the crowd of high-priced lawyers from Wall Street, Bharara made an interesting joke. "I also want to take a moment to applaud the entire staff of the SEC for the really amazing things they have done over the past year," he said. "They've done a real service to the country, to the financial community, and not to mention a lot of your law practices."
Haw! The line drew snickers from the conference of millionaire lawyers. But the real fireworks came when Khuzami, the SEC's director of enforcement, talked about a new "cooperation initiative" the agency had recently unveiled, in which executives are being offered incentives to report fraud they have witnessed or committed. From now on, Khuzami said, when corporate lawyers like the ones he was addressing want to know if their Wall Street clients are going to be charged by the Justice Department before deciding whether to come forward, all they have to do is ask the SEC.
"We are going to try to get those individuals answers," Khuzami announced, as to "whether or not there is criminal interest in the case — so that defense counsel can have as much information as possible in deciding whether or not to choose to sign up their client."
Aguirre, listening in the crowd, couldn't believe Khuzami's brazenness. The SEC's enforcement director was saying, in essence, that firms like Goldman Sachs and AIG and Lehman Brothers will henceforth be able to get the SEC to act as a middleman between them and the Justice Department, negotiating fines as a way out of jail time. Khuzami was basically outlining a four-step system for banks and their executives to buy their way out of prison. "First, the SEC and Wall Street player make an agreement on a fine that the player will pay to the SEC," Aguirre says. "Then the Justice Department commits itself to pass, so that the player knows he's 'safe.' Third, the player pays the SEC — and fourth, the player gets a pass from the Justice Department."
When I ask a former federal prosecutor about the propriety of a sitting SEC director of enforcement talking out loud about helping corporate defendants "get answers" regarding the status of their criminal cases, he initially doesn't believe it. Then I send him a transcript of the comment. "I am very, very surprised by Khuzami's statement, which does seem to me to be contrary to past practice — and not a good thing," the former prosecutor says.
Earlier this month, when Sen. Chuck Grassley found out about Khuzami's comments, he sent the SEC a letter noting that the agency's own enforcement manual not only prohibits such "answer getting," it even bars the SEC from giving defendants the Justice Department's phone number. "Should counsel or the individual ask which criminal authorities they should contact," the manual reads, "staff should decline to answer, unless authorized by the relevant criminal authorities." Both the SEC and the Justice Department deny there is anything improper in their new policy of cooperation. "We collaborate with the SEC, but they do not consult with us when they resolve their cases," Assistant Attorney General Lanny Breuer assured Congress in January. "They do that independently."
Around the same time that Breuer was testifying, however, a story broke that prior to the pathetically small settlement of $75 million that the SEC had arranged with Citigroup, Khuzami had ordered his staff to pursue lighter charges against the megabank's executives. According to a letter that was sent to Sen. Grassley's office, Khuzami had a "secret conversation, without telling the staff, with a prominent defense lawyer who is a good friend" of his and "who was counsel for the company." The unsigned letter, which appears to have come from an SEC investigator on the case, prompted the inspector general to launch an investigation into the charge.
All of this paints a disturbing picture of a closed and corrupt system, a timeless circle of friends that virtually guarantees a collegial approach to the policing of high finance. Even before the corruption starts, the state is crippled by economic reality: Since law enforcement on Wall Street requires serious intellectual firepower, the banks seize a huge advantage from the start by hiring away the top talent. Budde, the former Lehman lawyer, says it's well known that all the best legal minds go to the big corporate law firms, while the "bottom 20 percent go to the SEC." Which makes it tough for the agency to track devious legal machinations, like the scheme to hide $263 million of Dick Fuld's compensation.
"It's such a mismatch, it's not even funny," Budde says.
But even beyond that, the system is skewed by the irrepressible pull of riches and power. If talent rises in the SEC or the Justice Department, it sooner or later jumps ship for those fat NBA contracts. Or, conversely, graduates of the big corporate firms take sabbaticals from their rich lifestyles to slum it in government service for a year or two. Many of those appointments are inevitably hand-picked by lifelong stooges for Wall Street like Chuck Schumer, who has accepted $14.6 million in campaign contributions from Goldman Sachs, Morgan Stanley and other major players in the finance industry, along with their corporate lawyers.
As for President Obama, what is there to be said? Goldman Sachs was his number-one private campaign contributor. He put a Citigroup executive in charge of his economic transition team, and he just named an executive of JP Morgan Chase, the proud owner of $7.7 million in Chase stock, his new chief of staff. "The betrayal that this represents by Obama to everybody is just — we're not ready to believe it," says Budde, a classmate of the president from their Columbia days. "He's really fucking us over like that? Really? That's really a JP Morgan guy, really?"
Which is not to say that the Obama era has meant an end to law enforcement. On the contrary: In the past few years, the administration has allocated massive amounts of federal resources to catching wrongdoers — of a certain type. Last year, the government deported 393,000 people, at a cost of $5 billion. Since 2007, felony immigration prosecutions along the Mexican border have surged 77 percent; nonfelony prosecutions by 259 percent. In Ohio last month, a single mother was caught lying about where she lived to put her kids into a better school district; the judge in the case tried to sentence her to 10 days in jail for fraud, declaring that letting her go free would "demean the seriousness" of the offenses.
So there you have it. Illegal immigrants: 393,000. Lying moms: one. Bankers: zero. The math makes sense only because the politics are so obvious. You want to win elections, you bang on the jailable class. You build prisons and fill them with people for selling dime bags and stealing CD players. But for stealing a billion dollars? For fraud that puts a million people into foreclosure? Pass. It's not a crime. Prison is too harsh. Get them to say they're sorry, and move on. Oh, wait — let's not even make them say they're sorry. That's too mean; let's just give them a piece of paper with a government stamp on it, officially clearing them of the need to apologize, and make them pay a fine instead. But don't make them pay it out of their own pockets, and don't ask them to give back the money they stole. In fact, let them profit from their collective crimes, to the tune of a record $135 billion in pay and benefits last year. What's next? Taxpayer-funded massages for every Wall Street executive guilty of fraud?
The mental stumbling block, for most Americans, is that financial crimes don't feel real; you don't see the culprits waving guns in liquor stores or dragging coeds into bushes. But these frauds are worse than common robberies. They're crimes of intellectual choice, made by people who are already rich and who have every conceivable social advantage, acting on a simple, cynical calculation: Let's steal whatever we can, then dare the victims to find the juice to reclaim their money through a captive bureaucracy. They're attacking the very definition of property — which, after all, depends in part on a legal system that defends everyone's claims of ownership equally. When that definition becomes tenuous or conditional — when the state simply gives up on the notion of justice — this whole American Dream thing recedes even further from reality.
This article appears in the March 3, 2011 issue of Rolling Stone. The issue is available now on newsstands and will appear in the online archive February 18.
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