Friday, November 21, 2014

I’ve always thought of Henry Kissinger as the quintessential neocon …and in the purest sense maybe he still is. The reason for my confusion may be that he is pragmatic and as logical as Paul Craig Roberts (who called my attention to the column below). The difference is that neocons presently running the U.S. government are illogical, and literally insane, in their push for a nuclear world war that would destroy themselves together with the rest of the human race.


Kissinger: Ukraine should forget about Crimea and NATO membership

Former U.S. Secretary of State Henry Kissinger spoke about global threats, the secession of Crimea and Ukraine's NATO accession.

Mr. Kissinger said that there currently is an urgent need for a new world order, but its coming into being will be long and complicated. "There are no universally accepted rules," said Mr. Kissinger in an interview with the German magazine Der Spiegel. "There is the Chinese view, the Islamic view, the Western view and, to some extent, the Russian view. And they really are not always compatible."

Speaking of Crimea’s accession to Russia, he noted that this is a special case, as Ukraine and Russia were one country for a long time. In his view, the West must recognize its mistakes. "Europe and America did not understand the impact of these events, starting with the negotiations about Ukraine's economic relations with the European Union and culminating in the demonstrations in Kiev," said Mr. Kissinger. "All these, and their impact, should have been the subject of a dialogue with Russia."

He is sure that Ukraine has always had a special significance for Russia. Failure to understand this was fatal, and the Ukrainian authorities can forget about the Crimean peninsula. "Nobody in the West has offered a concrete program to restore Crimea," said Mr. Kissinger. "Nobody is willing to fight over eastern Ukraine." In his opinion, introducing anti-Russian sanctions was a mistake.

"We have to remember that Russia is an important part of the international system, and therefore useful in solving all sorts of other crises, for example in the agreement on nuclear proliferation with Iran or over Syria," Mr. Kissinger said. "This has to have preference over a tactical escalation in a specific case." He added that Ukraine should not hope to become a member of NATO in the foreseeable future, as the alliance will never vote unanimously for the accession of Ukraine.


Published by: Strategic Culture Foundation on-line journal www.strategic-culture.org.

Monday, November 17, 2014

In the wake of the mid-term election two weeks ago, the despicable "mainstream media" have been busy "explaining" that the reason consistant pre-polling showing Democrats running neck-and-neck with their Republican adversarys or clearly winning yet losing on election day by 4 or 5 percentage points was due to errors made by the pollsters. Anyone who knows anything about statistics knows that random errors should be in both directions. Here election integrity advocate Brad Freeman responds to one such stolen-election-cover-up artist, Nate Silver. Note the vast amount of data Brad cites in making the case that there was massive fraud in this election, all favoring Republican candidates.


The Results Were Skewed Toward Republicans: A Response to Nate Silver

By BRAD FRIEDMAN on 11/7/2014, 6:02am PT 


It's been happening for years now. On the day after elections like last Tuesday's, media figures begin navel gazing to figure out how pre-election polls, created by dozens of independent pollsters using dozens of different methodologies, could all find the same thing but turn out to be so wrong once the election results are in.

The presumption is that the results are always right, and if they don't match the pre-election polling, its the polling that must be wrong, as opposed to the election results.

On Wednesday morning, after Tuesday's mid-term election surprise in which Republicans reportedly won handily in race after race despite pre-election polls almost unanimously predicting much closer races or outright Democratic victories, FiveThirtyEight statistics guru Nate Silver declared "The Polls Were Skewed Toward Democrats".

His analysis of aggregated averages from dozens of different pollsters and polls this year found that the performance of Democrats was overestimated by approximately 4 percentage points in Senate races and 3.4 points in gubernatorial contests. Silver's assessment relies on a "simple average of all polls released in the final three weeks of the campaign," as compared to the (unofficial and almost entirely unverified) election results reported on Tuesday night. He doesn't suggest there was anything nefarious in the polling bias towards Dems this year, simply that the pollsters got it wrong for a number of speculative reasons.

Citing the fact that nearly all of the polls suggested Democrats would do much better than they ultimately did, when compared to the reported election results, Silver asserts it wasn't that the polls were more wrong that usual, per se, but that almost all of them were wrong in a way that appears to have overestimated Democratic performance on Election Day.

"This year's polls were not especially inaccurate," he explains. "Between gubernatorial and Senate races, the average poll missed the final result by an average of about 5 percentage points --- well in line with the recent average. The problem is that almost all of the misses were in the same direction."

Silver is much smarter than I when it comes to numbers; I'm happy to presume he has the basic math right. But he seems to have a blind spot in his presumption that the pre-election polls were wrong and the election results were right. That, despite the lack of verification of virtually any of the results from Tuesday night, despite myriad and widespread if almost completely ignored problems and failures at polls across the country that day, and despite systematic voter suppression and dirty tricks that almost certainly resulted in election results (verified or otherwise) that were skewed toward Republicans...

No doubt you're familiar by now with many of the surprising results Silver cites --- he describes them as "missed 'calls'" and "errors". For example, he notes, pollsters erred in the governor's races "including in Illinois and Kansas and especially in Maryland, where Republican Larry Hogan wound up winning by 9 percentage points despite trailing in every nonpartisan poll released all year."

In Senate contests, he wrote earlier on Wednesday, "Some of the worst misses came in states like Kentucky and Arkansas where the Republican won, but by a considerably larger margin than polls projected. There was also a near-disaster in Virginia. It looks like Democratic incumbent Mark Warner will pull out the race, but the polls had him up by 9 points rather than being headed for a photo finish."

There are many more examples you likely know by now. There were similar surprises in some ballot measures and down-ticket races as well. For example, in Kansas, controversial Republican Sec. of State Kris Kobach was reportedly "tied" with his Democratic challenger last week, according to KSN-TV's SurveyUSA poll. Yet, according to the results on Kobach's own KS Secretary of State site, he "won" the election by a remarkable 18 points. (That's a single poll, not an average of many, but you get the idea.)

Those results, as well as the ones cited by Silver, could, in fact, be correct. The trouble is a) we don't know, because nobody bothers to verify the computer-reported results (even in states which use paper ballots systems that could be verified, unlike states that use touch-screen systems) and b) they ignore all of the problems with voting systems and the ability of voters to even access them in the first place.

While many Americans may be familiar with the surprise of Tuesday's reported results, not nearly as many are aware of the problems that plagued voters across the country. So, here, for those who aren't regular BRAD BLOG readers, are just a few examples of those problems where not all, but most, seemed to skew the election and its results away from Democratic voters and towards the GOP:

• Polling place Photo ID and other voter ID voting restrictions have been shown, over and over again, in study after study and court case after court case, to adversely and disproportionately disadvantage Democratic-leaning voters. Wendy Weiser of NYU Law School's Brennan Center for Justice released a report on Wednesday, asking "how much of a difference did new voting restrictions", making it "harder to vote in 21 states" this year, have on the reported outcome of the elections?

Weiser rounds up up summaries of data in four states suggesting that "in several key races, the margin of victory came very close to the likely margin of disenfranchisement."

In the Kansas gubernatorial race, Weiser explains, Gov. Sam Brownback (R) beat challenger Paul Davis (D) by "less than 33,000 votes". That, despite a strict Photo ID law "put into effect right before the 2012 election, and a new documentary proof of citizenship requirement for voter registration," implemented by Sec. of State Kobach. "We know from the Kansas secretary of state that more than 24,000 Kansans tried to register this year but their registrations were held in 'suspense' because they failed to present the documentary proof of citizenship now required by state law."

Silver cites the pre-election polling average in the state that gave the Democrat Davis a 2.8 point advantage over Brownback in the days leading up to the election. Brownback reportedly won the race on Tuesday --- Silver calls it the "Actual Result" --- by 3.8 points, a 6.6 swing between pre-election polls and election results.

How many voters couldn't vote because they were blocked due to Kobach's scheme to disallow voters who didn't turn in some sort of "proof" of citizenship, even though they'd registered to vote with the national voter registration form that says nothing about a need to supply such documents?

Weiser goes on to cite the Senate race in Virginia, where Democratic U.S. Senator Mark Warner, who had been pegged by pre-election polls to win by 8.5 points, beat Republican challenger Ed Gillespie by just .6, or "just over 12,000 votes". That, despite the state's new Photo ID law, enacted last year, which, according to the Virginia Board of Elections, means that "198,000 'active Virginia voters' did not have acceptable ID this year." Moreover, as Silver himself estimated when he worked for the New York Times (he now works for ESPN), such restrictive voting laws reduce turnout by about 2.4%, meaning, according to Weiser, "a reduction in turnout by more than 52,000 voters" in Virginia.

In Alabama, on the Friday before the election, the state Attorney General quietly issued an edict that Public Housing IDs would no longer be allowable for use in voting there under that state's Photo ID voting law. How many lost their right to vote on Tuesday?

In Arkansas, though the state's Photo ID restriction was struck down by the state Supreme Court after being found a violation of the state's constitution, poll workers were reportedly asking voters for Photo ID anyway, leading the Arkansas Times to declare there were "voter suppression reports from all over" on Election Day and a "steady stream of complaints...from voters who say election officials around Arkansas demanded a photo ID before they could vote today."

In that state, pre-election polls predicted that Democratic Sen. Mark Pryor was likely to lose to Republican Tom Cotton by 4.7 points. The results show him as having lost by 17.

In Texas, reportedly, "the number of provisional ballots cast more than doubled since the last mid-term election in 2010." That, after the U.S. Supreme Court allowed a strict polling place Photo ID law to be implemented this year, and despite a U.S. District Court finding, after a full trial, that the GOP law was "purposefully discriminatory", an "unconstitutional poll tax" and could disenfranchise as many as 600,000 disproportionately minority and poor registered voters.

The Government Accountability Office (GAO) found in a study earlier this year that polling place Photo ID restrictions in Kansas and Tennessee had decreased voter turnout in those states by 2 to 3% after they were enacted in 2012, and at even higher rates for minority and young voters.

While we'll have to wait to learn more about the specific effect of Photo ID restrictions on voters this year --- and we'll never know how many didn't even bother to show up, knowing that they lacked the specific type of Photo ID now needed to vote --- is it too early to consider how all of that voter suppression affect the reported election results this year in TX, AR, AL, KS and VA? More or less than the "Democratic bias" Silver finds in almost all of the pre-election polling averages?

• The Electronic Voter ID system went down for still unknown reasons in Florida in the Democratic stronghold of Broward County, resulting in voters who were unable to vote on Election Day. Gov. Rick Scott (R) is said to have defeated former Gov. Charlie Crist (D) there by just over 1%. Moreover, as Weiser notes, a host of new voting restrictions enacted by Florida Republicans over the last several years, included "a decision by Scott and his clemency board to make it virtually impossible for the more than 1.3 million Floridians who were formerly convicted of crimes but have done their time and paid their debt to society to have their voting rights restored." Might any of that had an adverse effect on the Democrats' results in the Sunshine State Tuesday night, an effect that wasn't picked up on in pre-election polls?

• Mysterious robocalls over the weekend before the election resulted in 2,000 election judges failing to show up for work at all in Illinois' Democratic stronghold of Chicago on Tuesday morning. The failure of one-fifth of the city's judges to show up resulted in many polls being short-handed during the morning rush or unable to open at all. Might that have affected the reported results in the Illinois Governor's race where the incumbent Democrat Pat Quinn was expected to win by .3, according to Silver's aggregated poll averages, but ended up losing instead by almost 5 points?

• Touchscreen votes were reported as flipping Democratic to Republican in Texas, Tennessee, Pennsylvania, Virginia and elsewhere, including in North Carolina where 100% unverifiable touch-screen votes reportedly flipped from incumbent Sen. Kay Hagan (D) to her challenger Thom Tillis (R). She was predicted to win by a small margin in the pre-election poll average --- and even, reportedly, according to Election Day exit polls late in the day --- but she ended up reportedly losing by almost 2 points or about 48,000 votes.

North Carolina voters also faced the most extreme voter suppression law since the Jim Crow era this year. Hundreds of voters are known to have been disenfranchised during the much smaller turnout during the state's primary election in April. As Weiser reports, during "the last midterms in 2010, 200,000 voters cast ballots during the early voting days now cut" by the new Republican law, a huge number of them were minority voters who tend to vote Democratic. Moreover, same-day registration for voters was nixed this year by the same law. Additionally, she writes, "7,500 voters cast their ballots outside of their home precincts" in 2012, but this year, the U.S. Supreme Court allowed all of those provisions of the new GOP law to be implemented, even after the U.S. 4th Circuit Court of Appeals had struck them down, finding "that African-American voters disproportionately used those electoral mechanisms and that House Bill 589 restricted those mechanisms and thus disproportionately impacts African-American voters."

Might any of those issues have resulted a Republican skew in the election results, many of which are based on ballots cast that were cast and registered --- either correctly or incorrectly, we can never know --- on 100% unverifiable electronic voting systems?

(For the record, unverifiable touch-screen votes also reportedly flipped in either unknown directions or from Republicans to Democrats in Arkansas, Illinois, Virginia and Maryland. Though reports of D to R flips are historically much more common, they also flip from R to D as well on occasion, a factor not accounted for at all in pre-election polling or in Silver's analysis of results.)

• Registration issues plagued voters in a number of states. I've already mentioned the thousands of Kansas voters unable to vote in state elections this year, but what of those 50,000 voter registrations in Georgia collected during a progressive registration drive there? It's alleged they were never entered into the system by the state's Republican Sec. of State. Might that have had an impact on the perceived "Democratic bias" in the polls compared to the results collected on the state's 100% unverifiable touch-screen voting system in the race for Georgia's open U.S. Senate seat between Democrat Michelle Nunn and Republican David Perdue? In that contest, the pre-election poll average projected a 6.4% better result for the Democrat than the one ultimately reported by the computer tabulators.

In New Mexico and in Louisiana, where there were important races for Governor and the U.S. Senate respectively, the GOP-controlled states are accused of undermining voter registration by failing to properly implement National Voter Registration Act requirements to offer voter registration opportunities to residents via social services outlets, such as those applying for drivers licenses or medicaid or food stamps.

Across the nation, as Greg Palast reported at Al-Jazeera last week, millions of voters were threatened with disenfranchisement in some 20 states, thanks to an "Interstate Crosscheck" database created by Kansas' Kobach with a number of other GOP-run states. The database, while secretly implemented, is supposed to check for possible multiple registrations by voters in those states. Palast reports, however, that the system is plagued with errors, disproportionately targets minority voters, and might have resulted in unknown numbers of voters inappropriately removed from the voting rolls entirely and/or challenged at the polls on Election Day.

• Not enough paper ballots left voters unable to vote verifiably in Ferguson, MO and elsewhere in St. Louis County, as well as the city of St. Louis. The jurisdictions scrambled to print and deliver new ballots throughout the day, but many voters were effected, particularly during the morning rush and late in the day, when lines grew long and polls had to stay open to accommodate those who could afford to wait. At one polling place in Florissant, a town just adjacent to Ferguson, a poll supervisor reported that when they opened the polling place in the morning "they only had five of one of the paper ballots when they typically need about 300 of that version."

Could the difficulty voters had casting a vote in the predominantly African-American areas of St. Louis served to skew final results in favor of Republicans there?

We could go on. And on. And on. And on. There were many more problems across the country, and undoubtedly others yet to come to light, but you get the idea. And, of course, none of that takes into account whether any of the reported results themselves were accurately tabulated by the oft-failed computer systems which tabulate almost all our nation's ballots.

How much impact did all of those factors --- and more we haven't mentioned and more still rolling in --- have on the results? We don't yet know. But to simply presume the independent pre-election polls by dozens of different pollsters, each using their own unique methodology, were all simply wrong (skewed towards Democrats) seems presumptuous at best, at this hour, and recklessly misleading from someone like Silver (whose work, I should add, I generally admire).

Perhaps a question that he might better be able to help us all answer is: "What are the statistical odds of so many races all skewing towards the GOP?"

Am I suggesting that elections were stolen by the Republicans? There is no doubt it was a good year for Republicans. But there is also no doubt that it was GOP voter suppression laws that affected turnout and the ability of many voters to be able to cast their votes at all, so that could certainly have swung a number of contests. On the other hand, stealing that many elections wholesale in that many states via electronic voting systems, without leaving evidence behind --- particularly on our nation's hodge-podge of different types of systems --- would be a very difficult feat, most likely requiring a very large conspiracy. In such cases, it's usually difficult to keep such a large conspiracy quiet. There are a few ways it could be done with a somewhat smaller conspiracy of insiders, but we'll leave that discussion for another day.

Whether races would have had a different winner is ultimately unknown, but all of the items mentioned above could have had an effect on the polling averages versus the reported election results.

While Silver's focus on polling and reported results is understandable, the analysis he offered is itself a skewed picture of what actually happened on Tuesday. It presumes that election results reported on our terrible electronic voting and tabulation systems, amidst voter suppression efforts unprecedented since the Jim Crow era, are accurate, while it was the pollsters who must have got it all wrong --- and wrong, by a remarkable coincidence, in a way that supposedly overestimated Democratic turnout in almost every case.

While an analysis of such numbers is interesting media bait --- particularly for those to whom elections are little more than a horse race, rather than an exercise of the fundamental right which supposedly protects all others in this nation --- it offers Americans a skewed and misleading story. It suggests, without any evidence to support such a broad assumption, that the results were "right" and the pollsters were "wrong."

That may be an easy to story to tell, but it just isn't an accurate or helpful one. It serves only to skew our nation and our media even further from a once-great representative democracy to little more than a biennial ESPN Sports Center extravaganza.

* * *
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Sunday, November 16, 2014

Wonder which direction the U.S. economy is headed? Then turn to Paul Craig Roberts, Ph.D. in economics and practical experience as Assistant Secretary of the Treasury and associate editor of the Wall Street Journal. Here are some his remarks in this post: "As most Americans, if not the financial media, are aware, Quantitative Easing (a euphemism for printing money) has failed to bring back the US economy." "In the US QE caused inflation in stock and bond prices as most of the liquidity provided went into financial markets instead of into consumers’ pockets." "The extent of financial corruption involving collusion between the mega-banks and the financial authorities is unfathomable. The Western financial system is a house of cards resting on corruption."


A Global House Of Cards — Paul Craig Roberts

November 14, 2014 | Original Here                                            Go here to sign up to receive email notice of this news letter

A Global House Of Cards

Paul Craig Roberts

As most Americans, if not the financial media, are aware, Quantitative Easing (a euphemism for printing money) has failed to bring back the US economy.

So why has Japan adopted the policy? Since the heavy duty money printing began in 2013, the Japanese yen has fallen 35% against the US dollar, a big cost for a country dependent on energy imports. Moreover, the Japanese economy has shown no growth in response to the QE stimulus to justify the rising price of imports.

Despite the economy’s lack of response to the stimulus, last month the Bank of Japan announced a 60% increase in quantitative easing–from 50 to 80 trillion yen annually. Albert Edwards, a strategist at Societe Generale, predicts that the Japanese printing press will drive the yen down from 115 yen to the dollar to 145.

This is a prediction, but why risk the reality? What does Japan have to gain from currency depreciation? What is the thinking behind the policy?

An easy explanation is that Japan is being ordered to destroy its currency in order to protect the over-printed US dollar. As a vassal state, Japan suffers under US political and financial hegemony and is powerless to resist Washington’s pressure.

The official explanation is that, like the Federal Reserve, the Bank of Japan professes to believe in the Phillips Curve, which associates economic growth with inflation. The supply-side economic policy implemented by the Reagan administration disproved the Phillips Curve belief that economic growth was inconsistent with a declining or a stable rate of inflation. However, establishment economists refuse to take note and continue with the dogmas with which they are comfortable.

In the US QE caused inflation in stock and bond prices as most of the liquidity provided went into financial markets instead of into consumers’ pockets. There is more consumer price inflation than the official inflation measures report, as the measures are designed to under-report inflation, thereby saving money on COLA adjustments, but the main effect of QE has been unrealistic stock and bond prices.

The Bank of Japan’s hopes are that raw material and energy import prices will rise as the exchange value of yen falls, and that these higher costs will be passed along in consumer prices, pushing up inflation and stimulating economic growth. Japan is betting its economy on a discredited theory.

The interesting question is why financial strategists expect the yen to collapse under QE, but did not expect the dollar to collapse under QE. Japan is the world’s third largest economy, and until about a decade ago was going gangbusters despite the yen rising in value. Why should QE affect the yen differently from the dollar?

Perhaps the answer lies in the very powerful alliance between the US government and the banking/financial sector and on the obligation that Washington imposes on its vassal states to support the dollar as world reserve currency. Japan lacks the capability to neutralize normal economic forces. Washington’s ability to rig markets has allowed Washington to keep its economic house of cards standing.

The Federal Reserve’s announcement that QE is terminated has improved the outlook for the US dollar. However, as Nomi Prins makes clear, QE has not ended, merely morphed. http://www.nomiprins.com/thoughts/2014/11/10/qe-isnt-dying-its-morphing.html
 

The Fed’s bond purchases have left the big banks with $2.6 trillion in excess cash reserves on deposit with the Fed. The banks will now use this money to buy bonds in place of the Fed’s purchases. When this money runs out, the Fed will find a reason to restart QE. Moreover, the Fed has announced that it intends to reinvest the interest and returning principle from its $4.5 trillion in holdings of mortgage backed instruments and Treasuries to continue purchasing bonds. Possibly also, interest rate swaps can be manipulated to keep rates down. So, despite the announced end of QE, purchases will continue to support high bond prices, and the high bond prices will continue to encourage purchases of stocks, thus perpetuating the house of cards.

As Dave Kranzler and I (and no doubt others) have pointed out, a stable or rising dollar exchange value is the necessary foundation to the house of cards. Until three years ago, the dollar was losing ground rapidly with respect to gold. Since that time massive sales of uncovered shorts in the gold futures market have been used to drive down the gold price.

That gold and silver bullion prices are rigged is obvious. Demand is high, and supply is constrained; yet prices are falling. The US mint cannot keep up with the demand for silver eagles and has suspended sales. The Canadian mint is rationing the supply of silver maple leafs. Asian demand for gold, especially from China, is at record levels.

The third quarter, 2014, was the 15th consecutive quarter of net purchases of gold by central banks. Dave Kranzler reports that in the past eight months, 101 tonnes have been drained from GLD, an indication that there is a gold shortage for delivery to physical purchasers. The declining futures price, which is established in a paper market where contracts are settled in cash, not in gold, is inconsistent with rising demand and constrained supply and is a clear indication of price rigging by US authorities.

The extent of financial corruption involving collusion between the mega-banks and the financial authorities is unfathomable. The Western financial system is a house of cards resting on corruption.

The house of cards has stood longer than I thought possible. Can it stand forever or are there so many rotted joints that some simultaneous collection of failures overwhelms the manipulation and brings on a massive crash? Time will tell.



Thursday, November 13, 2014

In regard to the meetings this week in Beijing, the redoubtable Michael Hudson tells it like it is. Here are a few selected passages taken from the transcript of this don't-miss video. "Mr. Obama also said that the United States was going to cut back carbon emissions. But at the same time, he's still pushing for the XL Pipeline … to bring Alberta tar sands oil into the United States. That, of course, is the single most high pollution activity on the entire planet." "Mr. Obama has looked very uncomfortable at these meetings because he knows that he hasn't gotten anything that he wants.” In Brisbane "... you're going to see … Europe being completely left out. The sanctions that the United States and NATO have insisted that Europe impose on Russia means don't trade with Russia. So Russia has put on the counter-sanctions against French and Baltic and European exports to Russia. French farmers are already demonstrating.” “The Baltic states are screaming because Europe, France, Latvia, and even Germany had been looking to the one growing market since the last few years is Russia, and the United States says, don't deal with Russia ... Europe is left in a position of economic stagnation and shrinking.”


                                                                                         Original Here





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President Putin Pledges to Increase Trade with China and Asia to Rebuke Sanctions

The $400 billion, 40 year oil and gas deal between China and Russia is a response to the new cold war pressure and sanctions on Russia, says economist Michael Hudson - November 13, 14

http://youtu.be/8vRVbjDlsxc

Bio                                                                                                                                           .

Michael Hudson is a Distinguished Research Professor of Economics at the University of Missouri, Kansas City. His two newest books are The Bubble and Beyond and Finance Capitalism and its Discontents. His upcoming book is titled Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy.

Tuesday, November 11, 2014

Yesterday’s re-post of an article by Paul Craig Roberts revealed the German people to have finally become so fed up with their “mainstream media’s” repeating blatant lies promulgated by the CIA, that they have stopped buying the print versions and are now even shunning their web sites. In the present re-post PCR exposes the many egregious lies wrapped up in “our” government’s Latest Jobs Report. How much longer will it take for the Americans to catch up with the Germans? PCR: “The propaganda that Americans are fed is more extreme than the propaganda of Big Brother in George Orwell’s 1984.”


More Lies from “Our” Government: The Latest Jobs Report

November 10, 2014 | Original Here                                            Go here to sign up to receive email notice of this news letter

More Lies from “Our” Government: The Latest Jobs Report

Paul Craig Roberts

Just as the German media has destroyed its credibility with lies, the US government is consistently destroying Washington’s credibility both with its own citizens and the rest of the world.

Russia and China, the other two significant nuclear powers, no longer believe anything Washington says or any agreement that the US government signs. The Russian and Chinese governments have observed that Washington does not obey its own statutory law, much less international law and treaties that Washington has signed. Russian President Vladimir Putin has criticized Washington for acting as if its will was the only law.

Europeans know that they and their governments are Washington’s vassals and that Europeans are impotent to do anything about it.

Some percentage of the 99 percent understand that Washington is aligned with the one percent against them and that their incomes and economic prospects will continue to decline.

Economists, or rather the few who haven’t sold their souls, know that the government’s economic data are pulled out of a magician’s hat and massaged to produce numbers contradicted by reality. Unemployment is measured according to methodologies designed to prevent its discovery. Inflation is measured according to methodologies designed to deny its existence. Jobs are reported that don’t exist, and GDP growth rates are announced that declines in real median family incomes and consumer credit make impossible.The poverty level income is set artificially low in order to minimize welfare spending.

The lies that Washington and the powerful private interest groups that control the US government tell us go unchallenged by the print and TV media and by NPR. The propaganda that Americans are fed is more extreme than the propaganda of Big Brother in George Orwell’s 1984.

In last Friday’s report the Bureau of Labor Statistics (BLS) tells us that the unemployment rate has declined to 5.8% and that 214,000 new jobs were created in October. Once again let me explain these lies to you. The unemployment rate is low because the one that the government and financial media emphasize does not count those millions of Americans who have become so discouraged from looking for jobs that do not exist, that they have quit looking. If you give up and stop searching for a job, the US government does not count you as a member of the work force. You are unemployed but not counted as unemployed.

The uncounted unemployed can be measured in the sharp 21st century decline in the labor force participation rate. The labor force participation rate has declined because there are no jobs to participate in. But Washington, the financial media, and the bought and paid for economists lie. They say the participation rate is down because the baby boomers are retiring. However, as John Titus, Dave Kranzler, and I documented with the government’s own data in a recent column, the participation rate of baby boomers is the highest of all and the only one that is rising. http://www.paulcraigroberts.org/2014/09/04/lie-serves-rich-roberts-titus-kranzler/

The reason is that with the Federal Reserves sole concern with the welfare of a small handful of mega-banks–the ones that sit on the board of the New York Federal Reserve Bank–real interest rates are negative. Therefore, retirees have no income from their retirement savings. (Generally speaking, retirees avoid stock investments, because they can lose a great deal from a major correction, and it can take more years than they have left for stocks to recover.) To supplement their Social Security pensions (a rigged CPI prevents or minimizes cost-of-living increases), retirees take the temporary, lowly paid jobs that are all that the US economy can produce. These jobs do not provide sufficient income with which to form a household.

As I have pointed out for a decade, or longer, the US economy no longer creates First World jobs. The US economy creates jobs for waitresses and bartenders, hospital orderlies, and retail clerks. The fact that the complexion of the US work force is becoming Third World is not considered a notable problem by the media or financial press, and economists seem immune to the facts.

Let’s look, once again, at the BLS payroll jobs report for October 2014: http://www.bls.gov/news.release/empsit.t17.htm
 

There are 209 thousand private jobs created and 5 thousand government jobs created.

Where are the private jobs?

Almost all of them–181,000–are in lowly paid private services.

Retail trade with 27,100 jobs, wholesale trade with 8,500 jobs, and transportation and warehousing with 13,300 jobs and 48,900 jobs. With middle class retail stores closing and even dollar stores failing and with consumer income (except for the rich) and credit (except for student loans) shrinking, do you really believe that consumer spending supported almost 50,000 new jobs in October?

Where is the money coming from?

The vast amount of money that the Fed has created has gone into the handful of mega-banks to support the banks. The banks are not buying consumer goods.

The BLS reports that 37,000 new jobs were created in October in professional and business services. Employment services, such as temporary help services, account for 24,000 or 65% of these jobs.

Another old standby is education and health care services, which provided 41,000 new jobs. Health care and social assistance provided 27,200 of these jobs and home health care services provided 7,400 of these jobs. Together lowly paid services provided 84% of the jobs in health care services.

Now we come to the major jobs sector in America: waitresses and bartenders. Waitresses and bartenders are classified under “leisure and hospitality,” which claims 52,000 new jobs in October of which 41,800 or 80 percent are waitresses and bartenders.

If you look at the jobs that the BLS reports the US is creating, they are third world jobs. How is the US “the world’s only superpower” when it cannot create a middle class job.

Amidst the media hype of 214,000 new October jobs, here are some very disturbing facts: In October job cuts rose 68% from the previous month and 12 percent from the previous year. So far there have been 414,591 job eliminations in 2014 with 51,183 of these coming in October.

Where are the job cuts? Retail store closings have produced 38,948 retail job reductions in 2014 with 6,874 of those coming in October. Yet, the BLS reports consistent job growth in retail jobs.

Hewlett Packard cut 5,000 jobs in October, bringing its year’s total to 21,000 lost jobs.

Microsoft eliminated 6,509 jobs in October for a year to date layoff of 55,511, a rise of 92 % from 2013.

In October the electronics industry cut 1,648 jobs, bringing the year to date loss to 18,153.

The telecommunications industry cut 5,217 jobs, bringing the year to date loss to 20,038, an increase of 81% from 2013.

According to Wolf Richter, US job losses in the tech sector have risen 97 % from the previous year. http://wolfstreet.com/2014/11/07/layoffs-explode-in-big-old-american-tech/

My point is: how does consumer demand grow in order to propel the economy when good jobs are replaced by low-paying jobs?

Perhaps one day economists will notice the problem.





Monday, November 10, 2014

How the German mainstream media became puppets of the CIA and how the German people became angered over their hugely biased coverage of Russia. Unlike the American sheeple, the Germans have now stopped reading their "mainstream" newspapers and journals. In fact now even their websites are all going down.


News Report from Russia Insider

November 10, 2014 | Original Here                                            Go here to sign up to receive email notice of this news letter

German Newspapers Have Destroyed Themselves By Being The CIA’s Puppets

Germans Abandon Major News Sites in Anger Over Slanted Russia Coverage
Triggered by reader disaffection, internet traffic has collapsed for half a dozen major German media websites

What’s going on in the German media is huge. It is one of the most popular subjects on our site.  The US and UK media have been hugely biased in their coverage of Russia, but German media has been far, far, worse, to the point which strains credulity. 

Now it turns out that part of the reason is CIA fiddling with German media outlets.  Coming on the heels of the Snowden revelations, this has Germans seriously ticked-off.  Here’s the latest revelation from our correspondent in Germany.

They call it the Ulfkotte-effect. And it’s beginning to resemble an avalanche.

Since the publication of Udo Ulfkotte’s “Gekaufte Journalisten“ in September – now a #1 Amazon bestseller, in which he charges that the CIA regularly bribes top German journalists, himself included, – German readers’ disaffection towards their mainstream media appears to have crossed a point of no return.

Granted, sales of newspapers and magazines have fallen everywhere, not just in Germany. But this is different. This is a boycott that is affecting web traffic. Germans are steering clear of mainstream media websites.

Many Germans have not been too shy to announce their intention on social networks. Some have uploaded videos calling for a boycott on YouTube. Others have created groups calling for the same on Facebook.

The other visible result of reader disaffection has been that throughout September the number of unique visitors to six major German newspapers and magazines was falling steadily.

In October, it simply sank.

Yet up until early summer these same websites had been generating a large and stable amount of traffic. This is an unprecedented trend, and one that is wholly distinct from the fall in newspaper sales generally.
 

[Google analytics provided by Alexa, a company that specializes in analytics for the web, shows a collapse of readership for spiegel.de, zeit.de, stern.de, welt.de, faz.net, and focus.de.]  Six different media sites – and they are all going down.


The Spiegel’s infamous “Stoppt Putin Jetzt” July 29 cover apparently played a key role in incensing public opinion. An official readers’ complaint against Der Spiegel’s cover was upheld in August by the German Press Council. The latter ruled that the pictures of MH17 victims on the cover had been “instrumentalized in the context of a political statement.”

Germany’s print media was warned even before that, on April 28, when Cicero, a leading German monthly, published a column titled: “Pride after the Fall”. The captions read: “Newspapers die. The reason: they go against their readers. The current Russia reporting is an example. That’s not the way to engage with readers.“

The author, Alexander Kissler wrote: “Every quarter the newspapers sector grieves. This is when plummeting circulation figures are released. The curve travels from top left to bottom right, in fact it is not a curve anymore, but a straight line, unstoppable on its way to Zero.“

German media was quick to go on an offensive against Russia over the Ukraine crisis, but just as quickly found itself on the defensive against its readers.

Now, after a further worsening of circulation figures during the spring, web traffic has declined as well.

And it still looks like just the beginning. Has the time come to print a book titled: “2019: The Last Copy of Der Spiegel?” – if the German print media will survive even until then, that is.

http://russia-insider.com/en/germany_politics_ukraine_media_watch/2014/11/07/11-10-08am/germans_abandon_major_news_sites_anger




Saturday, November 08, 2014

A valiant whistle blower exposes banksters' criminality, resulting in what might have seemed to be a very large fine. However, a significant part of the fine was legally deducted from corporate taxes ...and NO PERP WENT TO JAIL. Indeed, for his part in the crimes, Jamie Dimon was later awarded a 74% increase in salary! N.B. You may like to watch the interviews with Alayne Fleischmann and Matt Taibbi on Democracy Now (link below).

http://www.democracynow.org/2014/11/7/matt_taibbi_and_bank_whistleblower_on

The $9 Billion Witness: Meet JPMorgan Chase's Worst Nightmare

Chase whistle-blower Alayne Fleischmann risked it all.                                                   Photo: Andrew Querner














Meet the woman JPMorgan Chase paid one of the largest fines in American history to keep from talking

By Matt Taibbi | November 6, 2014

She tried to stay quiet, she really did. But after eight years of keeping a heavy secret, the day came when Alayne Fleischmann couldn't take it anymore.

"It was like watching an old lady get mugged on the street," she says. "I thought, 'I can't sit by any longer.'"

Fleischmann is a tall, thin, quick-witted securities lawyer in her late thirties, with long blond hair, pale-blue eyes and an infectious sense of humor that has survived some very tough times. She's had to struggle to find work despite some striking skills and qualifications, a common symptom of a not-so-common condition called being a whistle-blower.


Jamie Dimon (photo Bloomberg/Getty)
Fleischmann is the central witness in one of the biggest cases of white-collar crime in American history, possessing secrets that JPMorgan Chase CEO Jamie Dimon late last year paid $9 billion (not $13 billion as regularly reported – more on that later) to keep the public from hearing.

Back in 2006, as a deal manager at the gigantic bank, Fleischmann first witnessed, then tried to stop, what she describes as "massive criminal securities fraud" in the bank's mortgage operations.

Thanks to a confidentiality agreement, she's kept her mouth shut since then. "My closest family and friends don't know what I've been living with," she says. "Even my brother will only find out for the first time when he sees this interview."

Six years after the crisis that cratered the global economy, it's not exactly news that the country's biggest banks stole on a grand scale. That's why the more important part of Fleischmann's story is in the pains Chase and the Justice Department took to silence her.

She was blocked at every turn: by asleep-on-the-job regulators like the Securities and Exchange Commission, by a court system that allowed Chase to use its billions to bury her evidence, and, finally, by officials like outgoing Attorney General Eric Holder, the chief architect of the crazily elaborate government policy of surrender, secrecy and cover-up. "Every time I had a chance to talk, something always got in the way," Fleischmann says.

This past year she watched as Holder's Justice Department struck a series of historic settlement deals with Chase, Citigroup and Bank of America. The root bargain in these deals was cash for secrecy. The banks paid big fines, without trials or even judges – only secret negotiations that typically ended with the public shown nothing but vague, quasi-official papers called "statements of facts," which were conveniently devoid of anything like actual facts.

And now, with Holder about to leave office and his Justice Department reportedly wrapping up its final settlements, the state is effectively putting the finishing touches on what will amount to a sweeping, industrywide effort to bury the facts of a whole generation of Wall Street corruption. "I could be sued into bankruptcy," she says. "I could lose my license to practice law. I could lose everything. But if we don't start speaking up, then this really is all we're going to get: the biggest financial cover-up in history."

Alayne Fleischmann grew up in Terrace, British Columbia, a snowbound valley town just a brisk 18-hour drive north of Vancouver. She excelled at school from a young age, making her way to Cornell Law School and then to Wall Street. Her decision to go into finance surprised those closest to her, as she had always had more idealistic ambitions. "I helped lead a group that wrote briefs to the Human Rights Chamber for those affected by ethnic cleansing in Bosnia-Herzegovina," she says. "My whole life prior to moving into securities law was human rights work."

But she had student loans to pay off, and so when Wall Street came knocking, that was that. But it wasn't like she was dragged into high finance kicking and screaming. She found she had a genuine passion for securities law and felt strongly she was doing a good thing. "There was nothing shady about the field back then," she says. "It was very respectable."

In 2006, after a few years at a white-shoe law firm, Fleischmann ended up at Chase. The mortgage market was white-hot. Banks like Chase, Bank of America and Citigroup were furiously buying up huge pools of home loans and repackaging them as mortgage securities. Like soybeans in processed food, these synthesized financial products wound up in everything, whether you knew it or not: your state's pension fund, another state's workers' compensation fund, maybe even the portfolio of the insurance company you were counting on to support your family if you got hit by a bus.

As a transaction manager, Fleischmann functioned as a kind of quality-control officer. Her main job was to help make sure the bank didn't buy spoiled merchandise before it got tossed into the meat grinder and sold out the other end.

A few months into her tenure, Fleischmann would later testify in a DOJ deposition, the bank hired a new manager for diligence, the group in charge of reviewing and clearing loans. Fleischmann quickly ran into a problem with this manager, technically one of her superiors. She says he told her and other employees to stop sending him e-mails. The department, it seemed, was wary of putting anything in writing when it came to its mortgage deals.
 


"If you sent him an e-mail, he would actually come out and yell at you," she recalls. "The whole point of having a compliance and diligence group is to have policies that are set out clearly in writing. So to have exactly the opposite of that – that was very worrisome." One former high-ranking federal prosecutor said that if he were taking a criminal case to trial, the information about this e-mail policy would be crucial. "I would begin and end my opening statement with that," he says. "It shows these people knew what they were doing and were trying not to get caught."

In late 2006, not long after the "no e-mail" policy was implemented, Fleischmann and her group were asked to evaluate a packet of home loans from a mortgage originator called GreenPoint that was collectively worth about $900 million. Almost immediately, Fleischmann and some of the diligence managers who worked alongside her began to notice serious problems with this particular package of loans.

For one thing, the dates on many of them were suspiciously old. Normally, banks tried to turn loans into securities at warp speed. The idea was to go from a homeowner signing on the dotted line to an investor buying that loan in a pool of securities within two to three months. Thus it was a huge red flag to see Chase buying loans that were already seven or eight months old.

What this meant was that many of the loans in the GreenPoint deal had either been previously rejected by Chase or another bank, or were what are known as "early payment defaults." EPDs are loans that have already been sold to another bank and have been returned after the borrowers missed multiple payments. That's why the dates on them were so old.

In other words, this was the very bottom of the mortgage barrel. They were like used cars that had been towed back to the lot after throwing a rod. The industry had its own term for this sort of loan product: scratch and dent. As Chase later admitted, it not only ended up reselling hundreds of millions of dollars worth of those crappy loans to investors, it also sold them in a mortgage pool marketed as being above subprime, a type of loan called "Alt-A." Putting scratch-and-dent loans in an Alt-A security is a little like putting a fresh coat of paint on a bunch of junkyard wrecks and selling them as new cars. "Everything that I thought was bad at the time," Fleischmann says, "turned out to be a million times worse." (Chase declined to comment for this article.)

When Fleischmann and her team reviewed random samples of the loans, they found that around 40 percent of them were based on overstated incomes – an astronomically high defect rate for any pool of mortgages; Chase's normal tolerance for error was five percent. One mortgage in particular that sticks out in Fleischmann's mind involved a manicurist who claimed to have an annual income of $117,000. Fleischmann figured that even working seven days a week, this woman would have needed to work 488 days a year to make that much. "And that's with no overhead," Fleischmann says. "It wasn't possible."

But when she and others raised objections to the toxic loans, something odd started happening. The number-crunchers who had been complaining about the loans suddenly began changing their reports. The process she describes is strikingly similar to the way police obtain false confessions: The interrogator verbally abuses the target until he starts producing the desired answers. "What happened," Fleischmann says, "is the head diligence manager started yelling at his team, berating them, making them do reports over and over, keeping them late at night." Then the loans started clearing.


As late as December 11th, 2006, diligence managers had marked a full 33 percent of one loan sample as "stated income unreasonable for profession," meaning that it was nearly inevitable that there would be a high number of defaults. Several high-ranking executives were copied on this report.

Then, on December 15th, a Chase sales executive held a lengthy meeting with reps from GreenPoint and the diligence team to examine the remaining loans in the pool. When they got to the manicurist, Fleischmann remembers, one of the diligence guys finally caved under the pressure from the sales executive. "He had his hands up and just said, 'OK,' and he cleared it," says Fleischmann, adding that he was shaking his head "no" even as he was saying yes. Soon afterward, the error rate in the pool had magically dropped below 10 percent – a threshold that itself had just been doubled to clear the way for this deal.

After that meeting, Fleischmann testified, she approached a managing director named Greg Boester and pleaded with him to reconsider. She says she told Boester that the bank could not sell the high-risk loans as low-risk securities without committing fraud. "You can't securitize these loans without special disclosure about what's wrong with them," Fleischmann told him, "and if you make that disclosure, no one will buy them."

A former Olympic ski jumper, Boester was such an important executive at Chase that when he later defected to the Chicago-based hedge fund Citadel, Dimon cut off trading with Citadel in retaliation. Boester eventually returned to Chase and is still there today despite his role in this affair.

This moment illustrates the most basic element of the case against Chase: The bank knowingly peddled products stuffed with scratch-and-dent loans to investors without disclosing the obvious defects with the underlying loans.

Years later, in its settlement with the Justice Department, Chase would admit that this conversation between Fleischmann and Boester took place (though neither was named; it was simply described as "an employee . . . told . . . a managing director") and that her warning was ignored when the bank sold those loans off to investors.
 
Photo: Illustration by Victor Juhasz

 A few weeks later, in early 2007, she sent a long letter to another managing director, William Buell. In the letter, she warned Buell of the consequences of reselling these bad loans as securities and gave detailed descriptions of breakdowns in Chase's diligence process.

Fleischmann assumed this letter, which Chase lawyers would later jokingly nickname "The Howler" after the screaming missive from the Harry Potter books, would be enough to force the bank to stop selling the bad loans. "It used to be if you wrote a memo, they had to stop, because now there's proof that they knew what they were doing," she says. "But when the Justice Department doesn't do anything, that stops being a deterrent. I just didn't know that at the time."

In February 2008, less than two years after joining the bank, Fleischmann was quietly dismissed in a round of layoffs. A few months later, proof would appear that her bosses knew all along that the boom-era mortgage market was rotten. That September, as the market was crashing, Dimon boasted in a ball-washing Fortune article titled "Jamie Dimon's SWAT Team" that he knew well before the meltdown that the subprime market was toast. "We concluded that underwriting standards were deteriorating across the industry." The story tells of Dimon ordering Boester's boss, William King, to dump the bank's subprime holdings in October 2006. "Billy," Dimon says, "we need to sell a lot of our positions. . . . This stuff could go up in smoke!"

In other words, two full months before the bank rammed through the dirty GreenPoint deal over Fleischmann's objections, Chase's CEO was aware that loans like this were too dangerous for Chase itself to own. (Though Dimon was talking about subprime loans and GreenPoint was technically an Alt-A pool, the Fortune story shows that upper management had serious concerns about industry-wide underwriting problems.)
 


In January 2010, when Dimon testified before the Financial Crisis Inquiry Commission, he told investigators the exact opposite story, portraying the poor Chase leadership as having been duped, just like the rest of us. "In mortgage underwriting," he said, "somehow we just missed, you know, that home prices don't go up forever."

When Fleischmann found out about all of this years later, she was shocked. Her confidentiality agreement at Chase didn't bar her from reporting a crime, but the problem was that she couldn't prove that Chase had committed a crime without knowing whether those bad loans had been sold.

As it turned out, of course, Chase was selling those rotten dog-meat loans all over the place. How bad were they? A single lawsuit by a single angry litigant gives some insight. In 2011, Chase was sued over massive losses suffered by a group of credit unions. One of them had invested $135 million in one of the bank's mortgage--backed securities. About 40 percent of the loans in that deal came from the GreenPoint pool.

The lawsuit alleged that in just the first year, the security suffered $51 million in losses, nearly 50 times what had been projected. It's hard to say how much of that was due to the GreenPoint loans. But this was just one security, one year, and the losses were in the tens of millions. And Chase did deal after deal with the same methodology. So did most of the other banks. It's theft on a scale that blows the mind.

In the spring of 2012, Fleischmann, who'd moved back to Canada after leaving Chase, was working at a law firm in Calgary when the phone rang. It was an investigator from the States. "Hi, I'm from the SEC," he said. "You weren't expecting to hear from me, were you?"

A few months earlier, President Obama, giving in to pressure from the Occupy movement and other reformers, had formed the Residential Mortgage-Backed Securities Working Group. At least superficially, this was a serious show of force against banks like Chase. The group would operate like a kind of regulatory Justice League, combining the superpowers of investigators from the SEC, the FBI, the IRS, HUD and a host of other federal agencies. It included noted anti-corruption- investigator and New York Attorney General Eric Schneiderman, which gave many observers reason to hope that finally something would be done about the crimes that led to the crash. That makes the fact that the bank would skate with negligible cash fines an even more extra-ordinary accomplishment. 


In January 2010, when Dimon testified before the Financial Crisis Inquiry Commission, he told investigators the exact opposite story, portraying the poor Chase leadership as having been duped, just like the rest of us. "In mortgage underwriting," he said, "somehow we just missed, you know, that home prices don't go up forever."

When Fleischmann found out about all of this years later, she was shocked. Her confidentiality agreement at Chase didn't bar her from reporting a crime, but the problem was that she couldn't prove that Chase had committed a crime without knowing whether those bad loans had been sold.

As it turned out, of course, Chase was selling those rotten dog-meat loans all over the place. How bad were they? A single lawsuit by a single angry litigant gives some insight. In 2011, Chase was sued over massive losses suffered by a group of credit unions. One of them had invested $135 million in one of the bank's mortgage--backed securities. About 40 percent of the loans in that deal came from the GreenPoint pool.

The lawsuit alleged that in just the first year, the security suffered $51 million in losses, nearly 50 times what had been projected. It's hard to say how much of that was due to the GreenPoint loans. But this was just one security, one year, and the losses were in the tens of millions. And Chase did deal after deal with the same methodology. So did most of the other banks. It's theft on a scale that blows the mind.

In the spring of 2012, Fleischmann, who'd moved back to Canada after leaving Chase, was working at a law firm in Calgary when the phone rang. It was an investigator from the States. "Hi, I'm from the SEC," he said. "You weren't expecting to hear from me, were you?"

A few months earlier, President Obama, giving in to pressure from the Occupy movement and other reformers, had formed the Residential Mortgage-Backed Securities Working Group. At least superficially, this was a serious show of force against banks like Chase. The group would operate like a kind of regulatory Justice League, combining the superpowers of investigators from the SEC, the FBI, the IRS, HUD and a host of other federal agencies. It included noted anti-corruption- investigator and New York Attorney General Eric Schneiderman, which gave many observers reason to hope that finally something would be done about the crimes that led to the crash. That makes the fact that the bank would skate with negligible cash fines an even more extra-ordinary accomplishment.

New York Attorney General Eric Schneiderman (L) speaks whille Attorney General Eric Holder listens during a news conference at the Justice Department on January 27th, 2012. (Photo: Mark Wilson/Getty)


By the time the working group was set up, most of the applicable statutes of limitations had either expired or were about to expire. "A conspiratorial way of looking at it would be to say the state waited far too long to look at these cases and is now taking its sweet time investigating, while the last statutes of limitations run out," says famed prosecutor and former New York Attorney General Eliot Spitzer.

It soon became clear that the SEC wasn't so much investigating Chase's behavior as just checking boxes. Fleischmann received no follow-up phone calls, even though she told the investigator that she was willing to tell the SEC everything she knew about the systemic fraud at Chase. Instead, the SEC focused on a single transaction involving a mortgage company called WMC. "I kept trying to talk to them about GreenPoint," Fleischmann says, "but they just wanted to talk about that other deal."

The following year, the SEC would fine Chase $297 million for misrepresentations in the WMC deal. On the surface, it looked like a hefty punishment. In reality, it was a classic example of the piecemeal, cherry-picking style of justice that characterized the post-crisis era. "The kid-gloves approach that the DOJ and the SEC take with Wall Street is as inexplicable as it is indefensible," says Dennis Kelleher of the financial reform group Better Markets, which would later file suit challenging the Chase settlement. "They typically charge only one offense when there are dozens. It would be like charging a serial murderer with a single assault and giving them probation."

Soon Fleischmann's hopes were raised again. In late 2012 and early 2013, she had a pair of interviews with civil litigators from the U.S. attorney's office in the Eastern District of California, based in Sacramento.

One of the ongoing myths about the financial crisis is that the government is outmatched by the legal talent representing the banks. But Fleischmann was impressed by the lead attorney in her case, a litigator named Richard Elias. "He sounded like he had been a securities lawyer for 10 years," she says. "This actually looked like his idea of fun – like he couldn't wait to run with this case."

She gave Elias and his team detailed information about everything she'd seen: the edict against e-mails, the sabotaging of the diligence process, the bullying, the written warnings that were ignored, all of it. She assumed that it wouldn't be long before the bank was hauled into court.


Instead, the government decided to help Chase bury the evidence. It began when Holder's office scheduled a press conference for the morning of September 24th, 2013, to announce sweeping civil-fraud charges against the bank, all laid out in a detailed complaint drafted by the U.S. attorney's Sacramento office. But that morning the presser was suddenly canceled, and no complaint was filed. According to later news reports, Dimon had personally called Associate Attorney General Tony West, the third-ranking official in the Justice Department, and asked to reopen negotiations to settle the case out of court.

It goes without saying that the ordinary citizen who is the target of a government investigation cannot simply pick up the phone, call up the prosecutor in charge of his case and have a legal proceeding canceled. But Dimon did just that. "And he didn't just call the prosecutor, he called the prosecutor's boss," Fleischmann says. According to The New York Times, after Dimon had already offered $3 billion to settle the case and was turned down, he went to Holder's office and upped the offer, but apparently not by enough.

A few days later, Fleischmann, who had by then moved back to Vancouver and was looking for work, was at a mall when she saw a Wall Street Journal headline on her iPhone: JPMorgan Insider Helps U.S. in Probe. The story said that the government had a key witness, a female employee willing to provide damaging testimony about Chase's mortgage operations. Fleischmann was stunned. Until that moment, she had no idea that she was a major part of the government's case against Chase. And worse, nobody had bothered to warn her that she was about to be effectively outed in the newspapers. "The stress started to build after I saw that news," she says. "Especially as I waited to see if my name would come out and I watched my job possibilities evaporate."

Fleischmann later realized that the government wasn't interested in having her testify against Chase in court or any other public forum. Instead, the Justice Department's political wing, led by Holder, appeared to be using her, and her evidence, as a bargaining chip to extract more hush money from Dimon. It worked. Within weeks, Dimon had upped his offer to roughly $9 billion.

In late November, the two sides agreed on a settlement deal that covered a variety of misbehaviors, including the fraud that Fleischmann witnessed as well as similar episodes at Washington Mutual and Bear Stearns, two companies that Chase had acquired during the crisis (with federal bailout aid). The newspapers and the Justice Department described the deal as a "$13 billion settlement," hailing it as the biggest white-collar regulatory settlement in American history. The deal released Chase from civil liability. And, in what was described by The New York Times as a "major victory for the government," it left open the possibility that the Justice Department could pursue a further criminal investigation against the bank.

But the idea that Holder had cracked down on Chase was a carefully contrived fiction, one that has survived to this day. For starters, $4 billion of the settlement was largely an accounting falsehood, a chunk of bogus "consumer relief" added to make the payoff look bigger. What the public never grasped about these consumer--relief deals is that the "relief" is often not paid by the bank, which mostly just services the loans, but by the bank's other victims, i.e., the investors in their bad mortgage securities.

Moreover, in this case, a fine-print addendum indicated that this consumer relief would be allowed only if said investors agreed to it – or if it would have been granted anyway under existing arrangements. This often comes down to either forgiving a small portion of a loan or giving homeowners a little extra time to pay up in full. "It's not real," says Fleischmann. "They structured it so that the homeowners only get relief if they would have gotten it anyway." She pauses. "If a loan shark gives you a few extra weeks to pay up, is that 'consumer relief'?"

The average person had no way of knowing what a terrible deal the Chase settlement was for the country. The terms were even lighter than the slap-on-the-wrist formula that allowed Wall Street banks to "neither admit nor deny" wrongdoing – the deals that had helped spark the Occupy protests. Yet those notorious deals were like the Nuremberg hangings compared to the regulatory innovation that Holder's Justice Department cooked up for Dimon and Co.

Instead of a detailed complaint naming names, Chase was allowed to sign a flimsy, 10-and-a-half-page "statement of facts" that was: (a) so short, a first-year law student could read it in the time it takes to eat a tuna sandwich, and (b) so vague, a halfway intelligent person could read it and not know anyone had done anything wrong.


The ink was barely dry on the deal before Chase would have the balls to insinuate its innocence. "The firm has not admitted to violations of the law," said CFO Marianne Lake. But the deal's most brazen innovation was the way it bypassed the judicial branch. Previously, federal regulators had had bad luck with judges when trying to dole out slap-on-the-wrist settlements to banks. In a pair of celebrated cases, an unpleasantly honest federal judge named Jed Rakoff had rejected sweetheart deals worked out between banks and slavish regulators and had commanded the state to go back to the drawing board and come up with real punishments.

Seemingly not wanting to deal with even the possibility of such a thing happening, Holder blew off the idea of showing the settlement to a judge. The settlement, says Kelleher, "was unprecedented in many ways, including being very carefully crafted to bypass the court system. . . . There can be little doubt that the DOJ and JP-Morgan were trying to avoid disclosure of their dirty deeds and prevent public scrutiny of their sweetheart deal." Kelleher asks a rhetorical question: "Can you imagine the outcry if [Bush-era Attorney General] Alberto Gonzales had gone into the backroom and given Halliburton immunity in exchange for a billion dollars?"

The deal was widely considered a good one for both sides, but Chase emerged with barely a scratch. First, the ludicrously nonspecific language surrounding the settlement put you, me and every other American taxpayer on the hook for roughly a quarter of Chase's check. Because most of the settlement monies were specifically not called fines or penalties, Chase was allowed to treat some $7 billion of the settlement as a tax write-off.

Couple this with the fact that the bank's share price soared six percent on news of the settlement, adding more than $12 billion in value to shareholders, and one could argue Chase actually made money from the deal. What's more, to defray the cost of this and other fines, Chase last year laid off 7,500 lower-level employees. Meanwhile, per-employee compensation for everyone else rose four percent, to $122,653. But no one made out better than Dimon. The board awarded a 74 percent raise to the man who oversaw the biggest regulatory penalty ever, upping his compensation package to about $20 million.



While Holder was being lavishly praised for releasing Chase only from civil liability, Fleischmann knew something the rest of the world did not: The criminal investigation was going nowhere.

In the days leading up to Holder's November 19th announcement of the settlement, the Justice Department had asked Fleischmann to meet with criminal investigators. They would interview her very soon, they said, between December 15th and Christmas.

But December came and went with no follow-up from the DOJ. She began to wonder: If she was the government's key witness, how was it possible that they were still pursuing a criminal case without talking to her? "My concern," she says, "was that they were not investigating."

The government's failure to speak to Fleischmann lends credence to a theory about the Holder-Dimon settlement: It included a tacit agreement from the DOJ not to pursue criminal charges in earnest. It sounds outrageous, but it wouldn't be the first time that the government used a wink and a nod to dispose a bank of major liability without saying so publicly. Back in 2010, American Lawyer revealed Goldman Sachs wanted a full release from liability in a dozen crooked mortgage deals, while the SEC didn't want to give the bank such a big public victory. So the two sides quietly agreed to a grimy compromise: Goldman agreed to pay $550 million to settle a single case, and the SEC privately assured the bank that it wouldn't recommend charges in any of the other deals.

As Fleischmann was waiting for the Justice Department to call, Chase and its lawyers had been going to tremendous lengths to keep her muzzled. A number of major institutional investors had sued the bank in an effort to recover money lost in investing in Chase's fraud-ridden home loans. In October 2013, one of those investors – the Fort Worth Employees' Retirement Fund – asked a federal judge to force Chase to grant access to a series of current and former employees, including Fleischmann, whose status as a key cooperator in the federal investigation had made headlines in The Wall Street Journal and other major media outlets. 


Photo: Spencer Platt/Getty

In response, Dorothy Spenner, an attorney representing Chase, told the court that Fleischmann was not a "relevant custodian." In other words, she couldn't testify to anything of importance. Federal Magistrate Judge James C. Francis IV took Chase's lawyers at their word and rejected the Fort Worth retirees' request for access to Fleischmann and her evidence.

Other investors bilked by Chase also tried to speak to Fleischmann. The Federal Home Loan Bank of Pittsburgh, which had sued Chase, asked the court to force Chase to turn over a copy of the draft civil complaint that was withheld after Holder's scuttled press conference. The Pittsburgh litigants also specified that they wanted access to the name of the state's cooperating witness: namely, Fleischmann.

In that case, the judge actually ordered Chase to turn over both the complaint and Fleischmann's name. Chase stalled. Later in the fall, the judge ordered the bank to produce the information again; it stalled some more.

Then, in January 2014, Chase suddenly settled with the Pittsburgh bank out of court for an undisclosed amount. Months after being ordered to allow Fleischmann to talk, they once again paid a stiff price to keep her testimony out of the public eye.

Chase's determination to hide its own dirt while forcing Fleischmann to keep her secret was becoming more and more absurd. "It was a hard time to look for work," she says. All that prospective employers knew was that she had worked in a department that had just been dinged with what was then the biggest regulatory fine in the history of capitalism. According to the terms of her confidentiality agreement, she couldn't even tell them that she'd tried to keep the bank from committing fraud.

Despite it all, Fleischmann still had faith that the Justice Department or some other federal agency would make things right. "I guess I was just a trusting person," she says. "I wasn't cynical. I kept hoping."

One day last spring, Fleischmann happened across a video of Holder giving a speech titled "No Company Is Too Big to Jail." It was classic Holder: full of weird prevarication, distracting eye twitches and other facial contortions. It began with the bold rejection of the idea that overly large financial institutions would receive preferential treatment from his Justice Department.

Then, within a few sentences, he seemed to contradict himself, arguing that one must apply a special sort of care when investigating supersize banks, tweaking the rules so as not to upset the world economy. "Federal prosecutors conducting these investigations," Holder said, "must go the extra mile to coordinate closely with the regulators who oversee these institutions' day-to-day operations." That is, he was saying, regulators have to agree not to allow automatic penalties to kick in, so that bad banks can stay in business.


Fleischmann winced. Fully fluent in Holder's three-faced rhetoric after years of waiting for him to act, she felt that he was patting himself on the back for having helped companies survive crimes that otherwise might have triggered crippling regulatory penalties. As she watched in mounting outrage, Holder wrapped up his address with a less-than-reassuring pronouncement: "I am resolved to seeing [the investigations] through." Doing so, he added, would "reaffirm" his principles.

Or, as Fleischmann translates it: "I will personally stay on to make sure that no one can undo the cover-up that I've accomplished."

That's when she decided to break her silence. "I tried to go on with the things I was doing, but I just stopped sleeping and couldn't eat," she says. "It felt like I was trying to keep this secret and my body was literally rejecting it."

Ironically, over the summer, the government contacted her again. A new set of investigators interviewed her, appearing to have restarted the criminal case. Fleischmann won't comment on that investigation. Frustrated as she has been by the decisions of the higher-ups in Holder's Justice Department, she doesn't want to do anything to get in the way of investigators who might be working the case. But she emphasizes she still has reason to be deeply worried that nothing will be done. Even if the investigators build strong cases against executives who oversaw Chase's fraud, Holder or whoever succeeds him can still make the whole thing disappear by negotiating a soft landing for the company. "That's the thing I'm worried about," she says. "That they make the whole thing disappear. If they do that, the truth will never come out."

In September, at a speech at NYU, Holder defended the lack of prosecutions of top executives on the grounds that, in the corporate context, sometimes bad things just happen without actual people being responsible. "Responsibility remains so diffuse, and top executives so insulated," Holder said, "that any misconduct could again be considered more a symptom of the institution's culture than a result of the willful actions of any single individual."

In other words, people don't commit crimes, corporate culture commits crimes! It's probably fortunate that Holder is quitting before he has time to apply the same logic to Mafia or terrorism cases.

Fleischmann, for her part, had begun to find the whole situation almost funny.

"I thought, 'I swear, Eric Holder is gas-lighting me,' " she says.

Ask her where the crime was, and Fleischmann will point out exactly how her bosses at JPMorgan Chase committed criminal fraud: It's right there in the documents; just hand her a highlighter and some Post-it notes – "We lawyers love flags" – and you will not find a more enthusiastic tour guide through a gazillion-page prospectus than Alayne Fleischmann.

She believes the proof is easily there for all the elements of the crime as defined by federal law – the bank made material misrepresentations, it made material omissions, and it did so willfully and with specific intent, consciously ignoring warnings from inside the firm and out.

She'd like to see something done about it, emphasizing that there still is time. The statute of limitations for wire fraud, for instance, has not run out, and she strongly believes there's a case there, against the bank's executives. She has no financial interest in any of this, no motive other than wanting the truth out. But more than anything, she wants it to be over.

In today's America, someone like Fleischmann – an honest person caught for a little while in the wrong place at the wrong time – has to be willing to live through an epic ordeal just to get to the point of being able to open her mouth and tell a truth or two. And when she finally gets there, she still has to risk everything to take that last step. "The assumption they make is that I won't blow up my life to do it," Fleischmann says. "But they're wrong about that."

Good for her, and great for her that it's finally out. But the big-picture ending still stings. She hopes otherwise, but the likely final verdict is a Pyrrhic victory.

Because after all this activity, all these court actions, all these penalties (both real and abortive), even after a fair amount of noise in the press, the target companies remain more ascendant than ever. The people who stole all those billions are still in place. And the bank is more untouchable than ever – former Debevoise & Plimpton hotshots Mary Jo White and Andrew Ceresny, who represented Chase for some of this case, have since been named to the two top jobs at the SEC. As for the bank itself, its stock price has gone up since the settlement and flirts weekly with five-year highs. They may lose the odd battle, but the markets clearly believe the banks won the war. Truth is one thing, and if the right people fight hard enough, you might get to hear it from time to time. But justice is different, and still far enough away.
 

From The Archives Issue 1222: November 20, 2014

Read more: http://www.rollingstone.com/politics/news/the-9-billion-witness-20141106#ixzz3IUmnqWY2
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